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HomeMy WebLinkAboutMINUTES - 07281998 - C126 (3) ............... _ _....... _...._.._ _ __... ............._.. _............._.......... ..........._........... ......................_... _.....__. ......... ......... ............__.... RECEIVED ca �c c TRUSTINDENTURE Between COUNTY OF CONTRA COSTA and U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee $17,000,000] County of Contra Costa Multifamily Housing Revenue Bonds (Bollinger Crest Apartments Project) 1998 Series C Dated as of August 1, 1998 DOCSSF1:269332.3 40511-107-ADI-07/22!98 6.44 PM TABLE OF CONTENTS (continued) RECITALS ..............................................................I...........I.........-.1.....................I................ SECTION 1, INCORPORATION OF RECITALS;DEFINITIONS AND INTERPRETATION ....................................................... ................ ........ -6. Section 1.1 Incorporation of Recitals........................................... ..................................6 Section 1.2 Definitions; Terms Defined In Financing Agreement............. ......................6 Section 1.3 Rules of Construction..................... .....................................--........... 23 Section 1.4 Content of Certificates and Opinions..........................................................24 Section1.5 Interpretation............ .................................................................... ...........25 Section1.6 Effective Date............................................................................................ 25 Section 1.7 Construction Phase Financing Agreement; Assignment of Rights to Construction Phase Credit Facility Provider............................................... 25 Section 1.7(l) Assignment of Rights...... ...................... ................................. 25 Section 1.7(2) Amounts Owed to Construction Credit Facility Provider..............25 Section 1.7(3) Release of Letter of Credit................. ................................... ..... 25 Section 1.8 Termination of References ..... ................ .................................................. 26 SECTION2. THE BONDS................... ...................................... ..................... ....... ................26 Section 2.1 Issuance of Bonds ...................................................................... ............... 26 Section 2.2 Authorized Amount of Bonds..................................................................... 26 Section 2.3 Registered Bonds; Authorized Denomination;Numbering......... .............-26 Section2.4 Terms of Bonds........ ..................... ................................. ......................... 26 Section 2.4(1) Interest Rates;Principal Maturity.................................................26 Section 2.4(2) Accrual of Interest. .... ........ ........................... ........---26 Section 2.4(3) Payment of Principal and Interest................... ........ ....... ... 27 Section 2.4(4) Sources for Payments of Principal and Interest............................. 27 Section 2.4(5) Failure to Satisfy Conditions to Conversion.................................28 Section 2.4(6) Designation of Paying Agent.......................................................28 Section2.5 Form of Bonds ............................... ........................................................... 28 Section2.6 Execution..................... ................ ............................................................ 28 Section 2.7 Authentication...... .......................................................... ....................28 Section2.8 Temporary Bonds........................................................... ............. .............28 Section 2.9 Mutilated, Lost, Stolen or Destroyed Bonds................................................29 Section 2.14 Bond Registrar;Exchange and Transfer of Bonds;Persons Treated asthe Bondholders.....................................................................................29 Section 2.10(1) Bond Registrar,Bond Register...... ................. ............... ............29 Section 2.10(2) Transfers.................................. ................................... ............... 29 Section 2.10(3) Exchanges................................ ...................................................29 Section 2.10(4) Exceptions to Transfers and Exchanges........................................ 30 DOCSSFI:2693323 -i- 40511-107-ADI-07/22/98 6.37 PM TABLE OF CONTENTS (continued) Section2.10(5) Charges........................................................................................ 30 Section 2.10(6) Recognized Owners..................................................................... 30 Section 2.10(7) Bonds Protected............................................ ........................... 30 Section 2.10(8) Issuer's Reliance .......................................................................... 30 Section 2.11 Cancellation..................................................................!............................ 30 Section 2.12 Ratably Secured ......................................................................................... 30 Section 2.13 Book-Entry System.................................................................................... 30 Section 2.13(1) Registration in the Book-Entry System........................................30 Section 2.13(2) Exculpation.................................................................................. 31 Section 2.13(3) Payments/Notices with Respect to Bonds Registered in the Book-Entry System................................... ............................ 31 Section 2.13(4) Substitution of Nominee .............................................................. 31 Section 2.13(5) Successor Securities Depository; Transfers Outside Book-Entry System...................................................................... 31 Section 2.14 Conditions for Delivery of Bonds............................................................... 32 Section 2.15 Fannie Mae Pass-Through Certificate Delivery; Fannie Mae Pass- Through Certificate Delivery Requirements ............................................... 33 Section 2.15(1) Fannie Mae Pass-Through Certificate Delivery............................ 33 Section 2.15(2) Fannie Mae Pass-Through Certificate Delivery Requirements............................................................................... 34 SECTION 3. REDEMPTION OF BONDS .................................................................................35 Section 3.1 Redemption................................................................................................. 35 Section 3.2 Optional Redemption ................................................................................. 35 Section 3.2(1) Optional Redemption On and After the Conversion Date............. 35 Section 3.2(2) Available Moneys Requirement................................................... 36 Section 3.2(3) Conditions to Optional Redemption Based on Prepayment of the Mortgage Loan............................................... 36 Section 3.2(4) Timing of Payments After the Fannie Mae Pass-Through Certificate Delivery Date............................................................. 36 Section 3.3 Mandatory Redemption.............................................................................. 36 Section 3.3(l) Special Mandatory Redemption in Connection with Conversion.......................................... ..... 36 Section 3.3(2) Special Mandatory Redemption After the Fannie Mae Pass-Through Certificate Delivery Date From Certain Fannie Mae Pass-Through Certificate Distributions ..................... 38 Section 3.3(3) Special Mandatory Redemption After the Fannie Mae Pass-Through Certificate Delivery Date Upon*Purchase of Fannie Mae Pass-Through Certificate........._.......................... 38 Section 3.3(4) Mandatory Sinking Fund Redemption..........................................38 Section 3.3(4)(1) Term Bonds.................................................................... 38 DOCSSF1:269332.3 -11- 40511-107-ADI-07122/98 6:37 PM . .. .....................................................................................I....... ..................................................... ......................................................... TABLE OF CONTENTS (continued) Section 3.3(4)(2)Adjustment for Redemptions From Other Than Sinking Fund Installments............................................... 39 Section 3.3(5) Special Mandatory Redemption from Excess Cash Flow Distributions.............................................................................- 39 Section 3.4 Notice of Redemption................................................................................. 39 Section 3.4(1) Notice Requirement..................... ............................................... 39 Section 3.4(2) Content of Notice.................................... ....................................40 Section 3.4(3) Additional Notice........................................................ ................ 41 Section 3.4(4) Validity of Proceedings for the Redemption of Bonds..................42 Section 3.4(5) Revocation of Notice; Cancellation of Redemption .....................42 Section 3,4(6) Copies to Fannie Mae.................................................................. 42 Section 3.5 Redemption Payments................................................................................ 42 Section 3.6 Cancellation of Bonds................................................................................43 Section 3.7 Selection of Bonds to be Redeemed Upon Partial Redemption of Bonds.........................................................................................................43 Section 3.8 Purchase of Bonds In Lieu of Redemption.................................................. 43 Section 3.9 Special Purchase in Lieu of Redemption..................................................... 44 Section 3.9(1) Purchase Option........................................................................... 44 Section 3.9(2) Purchased Bonds..........................................................................44 Section 3.9(3) Notice.... .....................................................................................44 Section 3.9(4) Payments Under the Credit Facility.............................................. 44 Section 3.9(5) Purchased Bonds Remain Outstanding.........................................45 Section 3.9(6) Rights of Fannie Mae....... ...........................................................45 Section 3.9(7) Limitations on Transfer of Purchased Bonds................................ 45 SECTION 4. FUNDS AND ACCOUNTS...................................................................................45 Section 4.1 Creation of Funds and Accounts................................................................. 45 Section4.2 Initial Deposits...........................................................................................45 Section 4.3 The Mortgage Loan Fund..................................................... ..................... 46 Section 4.3(1) Deposit;Disbursement................................................................. 46 Section 4.3(2) Disbursements.............................................................................46 Section 4.3(2)(1)Requisitions....................................................................46 Section 4.3(2)(2)Timing............................................................................ 46 Section 4.3(3) Transfers to Effect Certain Special Mandatory Redemptions of Bonds................................................................. 46 Section 4.3(4) Investment Income on Mortgage Loan Fund................................47 Section 4.4 The Revenue Fund .................I............. ................................................ 47 Section4.4(1) General........................................................................................ 47 Section 4.4(2) Aging of Moneys..... ...................................................................47 3OCSSFI:2693323 40511-107-ADI-07/22/""7 PM TABLE OF CONTENTS (,continued) Section 4.4(3) Deposits.into the Accounts of the Revenue Fund......... ...............47 Section 4.4(3)(1)Deposits Into the General Receipts and Disbursements Account..................................................47 Section 4.4(3)(2)Deposits Into the Redemption Account...........................48 Section 4.4(3)(3)Deposits Into the Credit Facility Account........................49 Section 4.4(3)(4)Deposits into the Fees Account.......... ............................ 50 Section 4.4(4) Disbursements From the Accounts of the Revenue Fund.............. 50 Section 4.4(5) Transfers Within the Revenue Fund............................................. 51 Section 4.4(6) Remittance of Facility Fee to Fannie Mae.................................... 51 Section 4.4(7) Funds Transfers to Facilitate Purchases........................................ 51 Section 4.4(8) Investment Income on Revenue Fund........................................... 52 Section 4.5 The Costs of Issuance Fund.......................................... .......................... 52 Section 4.5(1) Deposits Into Costs of Issuance Fund........................................... 52 Section 4.5(2) Disbursements from the Costs of Issuance Fund........................... 52 Section 4.5(3) Disposition of Remaining Amounts .................,............................ 52 Section 4.5(4) Investment Income on Casts of Issuance Fund............................. 52 Section4.6 The Rebate Fund........................................................................................ 52 Section 4.6(1) Deposits; Administration............................................................. 52 Section4.6(2) Records........................................................................................ 53 Section4.6(3) Exception..................................................................................... 53 Section 4.7 Moneys to be Held in Trust........................................................................ 53 Section4.8 Records...................................................................................................... 53 Section 4.9 Reports From the Trustee........................................................................... 53 Section 4.103 Nonpresentment of Bonds.......................................................................... 54 Section 4.11 Moneys Held for Particular Bonds.............................................................. 54 SECTION5. INVESTMENTS ...................................................................................................54 SECTION6. SECURITY...........................................................................................................55 Section 6.1(1) Security;Pledge of Trust Estate; Compliance with Law............... 55 Section 6.2 Preservation of Security................................................. ......................... 57 Section6.3 Payment of Bonds...................................................................................... 57 Section 6.4 Performance of Covenants............................................. ......................... 57 Section6.5 Enforcement.................................................................. ......................... 57 Section 6.6 Limitations on Liability.............................................................................. 57 Section 6.7 Further Assurances........................................................ ......................... 58 Section 6.8 Possession of the Mortgage Note and Mortgage......................................... 58 DOCSSFI.269332.3 -iv- 40511-107-ADI-67122/18 6:37 PM TABLE OF CONTENTS (continued) Section 6.9 No Disposition of Mortgage Note or Mortgage Prior to the Fannie Mae Pass-Through Certificate Delivery Date;Excepted', Assignments; Substitution........................................... ............................ 58 Section 6.9(1) No Disposition of Mortgage Note or Mortgage Prior to the Fannie Mae Pass-Through Certificate Delivery(late; Excepted Assignments.................................. ............................ 58 Section 6.9(2) Substitution.................................................................................. 59 Section 6.10 Books, Records and Accounts.................................................................... 60 Section 6.10(1) Books, Records and Accounts......................................................60 Section 6.10(2) List of Bondholders ...................................... .........................60 Section 5.11 Compliance with Rating Agency Requests...................I............................. 60 Section 6.12 Enforcement of Obligations........................................................................ 60 Section 6.12(1) Enforcement by the Trustee......................................................... 60 Section 6.12(2) Notification of Non-Payment Under the Fannie Mae Pass-Through Certificate.............................................................. 61 Section 6.13 Maintenance of Lien on Trust Estate.............................,.............................61 Section 6.14 No Modification of Security;No Additional Indebtedness..........................61 Section 6.15 Tax Covenants ............................................................ ........................... 61 Section 6.15(l) Issuer's Covenants....................................................................... 61 Section 6.15(2) Trustee's Covenants..................................................................... 62 Section 6.15(3) Definitions.............__................................. ................................ 63 Section 6.16 Preservation of Revenues ........................................................................... 63 Section 6.17 Request and Indemnification...................................................................... 63 SECTION 7. THE CREDIT FACILITY ....................................................... ...........................63 Section 7.1 The Collateral Agreement .......................................................................... 63 Section 7.1(1) No Disposition of Collateral Agreement......................................63 Section 7.1(2) No Disposition of Pledged Collateral...........................................63 Section 7.1(3) Payment Under the Collateral Agreement .................................... 64 Section 7.1(3)(1)Required Notices; Application of Moneys....................... 64 Section 7.1(3)(2)Deposit of Moneys Derived from the Collateral Agreement...................................................................... 64 Section 7.1(3)(3)Return of Payments Under the Collateral Agreement...................................................................... 64 Section 7.1(3)(4)Enforcement of Collateral Agreement............................. 64 Section 7.1(3)(5)Certain Rights of Fannie Mae..........................................64 Section 7.1(4) Transfer of Collateral Agreement..................................................64 Section 7.1(5) Certain Notices to Fannie Mae.....................................................64 Section 7.1(6) Assignment of Mortgage; Liability of Fannie Mae....................... 65 I)OCSSF1:269332.3 _v_ 40511-107-AM-07122198 6:37 PM TABLE OF CONTENTS (continued) Section 7.1(7) Termination of Trustee's Interest in the Collateral Agreement.................................................... ............................ 65' Section 7.2 The Fannie Mae Pass-Through Certificate.................................................. 65 Section 7.2(1) Issuance of the Fannie Mae Pass-Through Certificate.................. 65 Section 7.2(2) Disposition; Substitution or Replacement of the Fannie Mae Pass-Through Certificate....................... . ............................67' Section 7.2(2)(1)Disposition...................................................................... 67 Section 7.2(2)(2) Substitution...................................... ............................67 Section 7.2(2)(3)Return of the Fannie Mae Pass-Through Certificate........................................ ........................... 68' Section 7.3 Requirement of Credit Facility ...................................................................69 SECTION8, DISCHARGE OF LIEN.........................................................................................69 Section 8.1 Discharge of Lien and Security Interest...................................................... 69 Section8.1(1) General......................................................... ........................... 69' Section8.1(2) Fannie Mae................................................... ........................... 69 Section8.1(3) Default.......................................................... ........................... 69 Section 8.1(4) Construction Phase Credit Facility Provider.................................69 Section8.1(5) Issuer............................................................ ............................ 70 Section 8.1(6) Conveyance of Trust Estate ......................................................... 70 Section 8.1(7) Additional Fannie Mae Pass-Through Certificate Distributions.................................................. ........................... 70 Section 8.1(8) Survival of Rights and Powers..................................................... 70 Section 8.2 Limitation on Transfer or Release of Mortgage Loan.................................. 70 Section8.3 Defeasance................... ............................................ ........................... 71 Section 8.3(1) Provision for Payment of Bonds................................................... 71 Section 8.3(2) Defeased Bonds No Longer Outstanding...................................... 71 Section 8.3(3) Investment Limitations Not Applicable........................................ 72 Section 8.3(4) Particular Bonds............................................ .......................... 72 Section 8.3(5) Restrictions on Amendments........................... ............................ 72 Section 8.3(6) Discharge of this Indenture..........................................................72 SECTION 9. DEFAULT PROVISIONS AND REMEDIES .......................................................72 Section 9.1 Events of Default;Preliminary Notice........................................................ 72 Section 9.1(1) Events ofDefault........................................... .......................... 72 Section 9.1(2) Preliminary Notice......................................... .......................... 73 Section 9.1(3) Non-Default and Prohibition of Mandatory Redemption Upon Event of Taxability............................................................. 73 Section 9.2 Remedies;Rights of Bondholders................................. .......................... 73 Section9.2(1) General.......................................................... .......................... 73 DOCSSF1:269332.3 vi- 90511-107-ADI-07/227.!98 6:37 PM TABLE OF CONTENTS (continued) Section 9.2(2) Acceleration;Rescission of Acceleration.....................................74 Section 9.2(2)(1)Acceleration Prior to the Fannie Mae Pass- Through Certificate Delivery Date.... .............................74 Section 9,2(2)(2)Acceleration On or After the Fannie Mae Pass- Through Certificate Delivery Date.................................. 74 Section 9.2(2)(3)Notice.............................................. ...........................75 Section 9.2(2)(4)Rescission of Acceleration..............................................75 Section9.3 Other Remedies.......................................................................................... 75 Section 9.4 Remedies Not Exclusive.............................................. ........................... 76 Section9.5 Waiver........................................................................ ........................... 76 Section 9.6 Limited Effect of Waiver............................... ......................................... 76 Section 9.7 Delay or Omission...................................................................................... 76 Section 9.8 Enforcement of Financing Agreement........................................................ 77 Section 9.9 Rights of Fannie Mae and the Bondholders To Direct Proceedings; Rights and Limitations Applicable to Bondholders, Issuer and Trustee....................................................................................................... 77 Section 9.9(1) Rights to Direct Proceedings.......................... ........................ 77 Section 9.9(2) Limitations on Bondholders'Rights............................................. 77 Section 9.9(3) Obligation of Issuer To Pay and Right of Bondholders to PaymentWhen Due........................................ ............................ 77 Section 9.9(4) Non-Interference and Dion-Impairment of Mortgage Loan........... 77 Section 9.10 Discontinuance of Proceedings.................................................................... 78 Section 9.11 Action by Trustee......................................................... .......................... 78 Section 9.12 Accounting and Examination of Records After Default. ............................ 78 Section 9.13 Application of Moneys................................................. .......................... 79 Section 9.14 Mortgage Loan; Issuer's and Trustee's Acknowledgements with Respect to the Mortgage Loan.................................................................... 80 SECTION10. THE TRUSTEE.........................................................................................I...........80 Section 10.1 Appointment of Trustee;Duties.................................... ..........................80 Section 10.2 Receipt of Fannie Mae Pass-Through Certificate............'............................ 84 Section10.3 Representation............................................................................................ 84 Section 10.4 Fees;Expenses............................................................. ....,,.................... 84 Section 10.5 Merger; Consolidation................................................................................ 84 Section 10.6 Intervention in Litigation............................................... .......................... 84 Section 10.7 Resignation of Trustee................................................... .......................... 85 Section 10,8 Removal of Trustee....................................................... .......................... 85 Section 10.9 Appointment of Successor Trustee............................................................. 85 Section 10.10 Transfer of Rights and property to Successor Trustee..... ........................... 85 UUCSSF1:269332.3 vii- 40511-147-AI)1-07122198 6.37 PM TABLE OF CONTENTS (continued) Section 10.11 Instruments of Bondholders........................................................................ 86' Section 10.12 Power To Appoint Co-Trustees and Separate Trustees.. ............I................ 86 Section 10.12(1)Appointment of Co-Trustees........................................................ 86 Section 10.12(2)Effect of Death, Incapacity, Resignation or Removal of Co-Trustee or Separate Trustee.................................................... 87 Section 10.12(3)Approval of the Issuer.................................... ............................. 87 Section 10.13 Filing of Financing Statements................................................................... 87 Section 10.14 Servicing the Mortgage Loan ..................................................................... 88' Section 10,15 Requests from Rating Agency..................................... ........................... 88 Section 10.16 Disclosure Agreement................................................. ........................... 88 SECTION 11. SUPPLEMENTAL INDENTURES; AMENDMENTS.........................................:88 Section 11.1 Supplemental Indentures Not Requiring Bondholder Consent..................... 88 Section 11.2 Supplemental Indentures Requiring Bondholder Consent........................... 90 Section 11.3 Amendments to Financing Agreement Not.Requiring Bondholder Consent....................................................................... ........................... 91 Section 11.4 Amendments to Financing Agreement and Other Documents Requiring Bondholder Consent...................................... ...........................92 Section 11.5 Amendments, Changes and Modifications to the Collateral Agreement and the Regulatory Agreement................... . ...........................92 Section 11.5(1) The Collateral Agreement............................................................ 92 Section 11.5(2) The Regulatory Agreement.......................................................... 93 Section 11.6 Amendments to Mortgage Loan Documents Not Requiring BondholderConsent..................................................... ..........................93 Section 11.7 Amendments to Mortgage and Mortgage Note Requiring BondholderConsent................................................................................... 94 Section 11.8 Notice to and Consent of Bondholders........................................................ 94 Section11.9 Waivers........................................................................ .......................... 94 Section 11.10 Required Approvals.................................................. ................................. 94 Section 11.11 Opinions of Counsel...................................................................................95 Section 11.12 Certificate of Borrower................................................ .......................... 95 Section 11.13 Notation of Modification on Bonds;Preparation of New Bonds ................. 95 SECTION 12. MISCELLANEOUS..............................................................................................95 Section 12,1 Consents, Etc., of Bondholders...................................... .......................... 95 Section 12.2 Limitation of Rights...................................................... .......................... 96 Section12.3 Severability................................................................... . .......................... 96 Section12.4 Notices.......................................................................... ..........................96 Section 12.5 Limitations on Rights of Fannie Mae.............................. ........................... 98 Section 12.6 Action Required to be taken on a Non-Business Day...... ...........................98 DOCSSFI;269332.3 -viii- 40511-107-ADI.07/2"8 6:37 PM I....................11...I..'',.''''... ..................................................................... ......................................................... ..............I............................................ .......................................................... ............ TABLE OF CONTENTS (continued) Section12.7 Binding Effect............................................................................................ 99 Section12.8 Governing Law .......................................................................................... 99 Section 12.9 No Personal Liability;No Recourse........................................................... 99 Section12.10 Captions...................................................................... ............................. 99 Section12.11 Counterparts............................................................................................. 100 DOCSSF1:269332.3 -ix- 40511-107-AD1-07M195 6:37 PM ........................ ...... TABLE OF CONTENTS (continued) EX 03IT A—Bond Form EDIT B —Trustee Assignment of Mortgage Loan EDIT C— Servicer Assignment of Mortgage Loan EBIT D —Form of Requisition—Mortgage Loan Fund EXHIBIT E —Form of Requisition—Costs of Issuance Fund DOCSSr+2:269332.3 40521_107-ADI-07/22/99 6:37 PM TRUST INDENTURE THIS TRUST INDENTURE(the"Indenture"),dated as of August 1, 1998,is made and entered into by and between the COUNTY OF CONTRA COSTA,a political subdivision of the State of California (together with its successors and assigns,the "Issuer"),and U.S. BANK TRUST NATIONAL ASSOCIATION (together with its successors and assigns,the"Trustee"),a national banking association with its corporate trust office located in San Francisco, California,which is duly authorized to accept and exercise trust powers under this Indenture,not in its individual or corporate capacity,but solely as trustee. (The meaning of capitalized terms can be determined by reference to Section 1.2 of this Indenture.) RECITALS A. The Issuer is authorized,by and pursuant to the Act,to issue revenue bonds for the purpose of financing,among other things,the acquisition, construction and development of multifamily rental housing for persons of low and moderate income. B. The Borrower will acquire and construct the Project. C. The Borrower has(a)requested that the Issuer provide a portion of the total financing needed for the Project by issuing the Bonds and by making the Net Bond Proceeds available to the Borrower in the form of a loan,specifically,the Mortgage Loan,and(b)agreed to secure the Mortgage Loan by placing the Mortgage on the Project. D. The Issuer has determined that the issuance and sale of the Bonds and the application of the Net Bond Proceeds to fund the Mortgage Loan will facilitate the financing of the Project and will accomplish a valid public purpose of the Issuer. In order to carry out that determination and to provide the funds necessary to enable the Issuer to fund the Mortgage Loan,the Issuer has,pursuant to the Act, authorized(a)the issuance of the Bonds pursuant to this Indenture for the purpose of providing financing for the Project by making the Net Bond Proceeds available to fund the Mortgage Loan to the Borrower in the principal amount of $[7,000,000],(b)the execution and delivery of this Indenture to establish the terms of the Bonds and the security for the Bonds and(c)the execution and delivery of the Financing Agreement to provide for and establish certain terms and conditions of the Mortgage Loan. Pursuant to the Act and this Indenture,the Issuer is issuing the Bonds and applying the proceeds of the Bonds to fund the Mortgage Loan. E. Pursuant to the Act,the Bond Resolution and this Indenture,the Issuer is issuing and selling the Bonds and directing the application of the proceeds of the Bonds to fund the Mortgage Loan. Upon issuance and sale of the Bonds,the Issuer will deposit the Net Bond Proceeds with the Trustee,to be used by the Trustee to fund the Mortgage Loan. The proceeds of the Mortgage Loan will be applied, together with other fluids,to the financing of the Project. F. The Issuer,the Trustee,the Borrower and the Servicer are concurrently entering into the Financing Agreement with respect to the Mortgage Loan and the Project. G. Fannie Mae has issued the Fannie Mae Commitment,dated July , 1998,to the Servicer, accepted by the Servicer on such date,pursuant to which Fannie Mae has agreed, subject to satisfaction of the terms and conditions of the Fannie Mae Commitment,to(a)provide credit enhancement for the Mortgage Loan pursuant to,and subject to the limitations of,the Collateral Agreement, and(b)acquire DO"Sn-269332.3 40511-107-ADI-07122198 6:43 PM the Mortgage Loan in exchange for a Fannie Mae Pass-Through Certificate if,and at such time as,the Fannie Mae Pass-Through Certificate Delivery Requirements set forth in this Indenture(including,but not limited to,issuance of the Conversion Notice by the Servicer prior to the Termination Date evidencing that each of the Conditions to Conversion set forth in the Fannie Mae Commitment has been satisfied or,to the extent that any Condition to Conversion has not been satisfied prior to the Termination Date, such Condition to Conversion has been waived in writing by Fannie Mae prior to the Termination Date)are satisfied such that the Trustee will issue the Fannie Mae Pass-Through Certificate Delivery Notice. H. The Mortgage Loan will be(a)made pursuant to the Financing Agreement in accordance with the requirements of Fannie Mae and subject to the terms and conditions of the Fannie Mae Commitment,(b)originated by the Issuer, (c)evidenced by the Mortgage Note,(d)secured by the Mortgage and(e)otherwise evidenced and secured by the other Mortgage Loan Documents. 1. The Issuer,Fannie Mae,the Servicer and the Borrower understand and intend and the Trustee understands that the financing of the Project through the issuance of the Bonds and the funding of the Mortgage Loan will be structured in the following manner. (i) the Issuer will issue the Bonds under the Act and pursuant to the Bond Resolution and this Indenture; (ii) on the Closing Date,the Issuer will originate the Mortgage Loan to the Borrower pursuant to the terms and provisions of the Financing Agreement,the Mortgage Nate,the Mortgage and the other Mortgage Loan Documents(provided that such other Mortgage Loan Documents may,pursuant to authority contained in the Fannie Mae Commitment,the Assignment and the Collateral Agreement,be entered into by the Servicer)and subject to the terms of the Construction Phase Credit Documents; (iii) the Mortgage Note and the Mortgage will be executed by the Borrower in favor of the Issuer; (iv) the Mortgage Loan will be funded with the Net Bond Proceeds; (v) pursuant to the Assignment,the Issuer will,concurrently with the origination of the Mortgage Loam,assign all of its rights(other than its Reserved Rights),title and interests in and to,and deliver,the Mortgage Loan,including the Mortgage Note and the Mortgage,to the Trustee and Fannie Mae, as their interests may appear(except that the Issuer will reserve and retain the Reserved Rights),to provide security for,respectively,the owners of the Bonds and Fannie Mae,subject to Fannie Mae's rights,as provided in the Collateral Agreement,to direct the Trustee to assign its interest in the Mortgage Loan,including the Mortgage Note and the Mortgage,to Fannie Mae; (vi) as provided in the Assignment,the Issuer will assign to(a)the Trustee certain rights to payments under the Mortgage Note and(b)Fannie Mae certain of its rights and interests under the Mortgage Note,the Mortgage and each of the other Mortgage Loan Documents,all such assignments to be made on and subject to the terms provided in the Assignment and the Collateral Agreement; (vii) at the request of the Servicer,Fannie Mae will enter into the Collateral Agreement to provide credit enhancement for the Mortgage Loan; DOCssF1:269332.3 40511-107-AD {Y1122/98 6:37 PM 2 (viii) at the request of the Borrower,the Construction Phase Credit Facility.Provider will(a)enter into the Construction Phase Credit:Reimbursement Agreement with the Borrower, (b)enter into the Construction Phase Financing Agreement with Fannie Mae;and the Servicer and (c)issue or arrange for the issuance of the Letter of Credit to Fannie Mae;and (ix) aatthe direction of the Borrower,the proceeds of the Mortgage Loan will be applied to the financing of the Project. If the Conversion Notice is issued by the Servicer prior to the Termination Bate,the Mortgage Loan will convert from the Construction Phase to the Permanent Phase and,at such time as the Fannie Mae Pass- Through Certificate Delivery Requirements are satisfied,such that the Trustee will issue the Fannie Mae Pass-Through Certificate Delivery Notice,Fannie Mae will acquire the Mortgage Loan in exchange for a Fannie Mae Pass-Through Certificate under the terms of which Fannie Mae will make distributions of principal and interest to or for the benefit of the Trustee corresponding to payments of principal and interest on the Mortgage Loan;Fannie Mae's distributions of principal and interest on the Fannie Mae Pass-Through Certificate will be guaranteed by Fannie Mae regardless of whether corresponding payments on the Mortgage Loan are paid when due. Fannie Mae's acquisition of the Mortgage Loan will be accomplished as follows:the Trustee will assign all of its rights,title and interest in and to the Mortgage Loan to the Servicer pursuant to the Trustee Assignment and,concurrently,;will endorse the Mortgage Note to the Servicer,in each instance,without recourse, and the Servicer,concurrently,will assign all such right,title and interest to Fannie Mae pursuant to the Servicer Assignment and, concurrently,will endorse the Mortgage Note to Fannie Mae,in each instance,without recourse,in exchange for the Fannie Viae Pass-Through Certificate which will,on the order of the Servicer,be delivered to or for the benefit of the Trustee and held by the Trustee to secure payment of the Bonds; upon its delivery,the Fannie Mae Pass-Through Certificate will be substituted for the;Mortgage Loan and the Collateral Agreement and thereafter serve as security for the Bonds, subject to any continuing obligations of Fannie Mae under the Collateral Agreement. The Trustee will not assign its right,title and interest in and to the Mortgage Loan to the Servicer and the Servicer will not,therefore,assign such interest to Fannie Mae,unless the Fannie Mae Pass-Through Certificate Delivery Requirements are satisfied, such that Fannie Mae will acquire the remaining interests in the Mortgage Loan. It is anticipated that Fannie Mae's acquisition of the remaining interests in the Mortgage Loan will coincide with Conversion to the Permanent Phase. If the Conversion Notice is not issued prior to the Termination Date,for whatever reason,then(a)Conversion will not occur,(b)the Bonds will be subject to special mandatory redemption unless the Brands are purchased by or for the account of the Construction Phase Credit Facility Provider in accordance with the terms and conditions of this Indenture,(c)the Collateral Agreement will terminate in accordance with its terms and(d)Fannie Mae will have no obligation to acquire the Mortgage Loan or to issue the Fannie Mae Pass-Through Certificate. J. The Bonds will be secured by,arnong other property comprising the Trust Estate and the security for the Bonds,the following: (a) prior to Fannie Mae Pass Through Certificate Delivery,(1)the Mortgage Loan, (2)Fannie Mae's credit enhancement of the Mortgage Loan pursuant to the Collateral Agreement, (3)the Net Bond Proceeds,to the extent not disbursed to the Borrower,(4)the Revenues and any other moneys received by the Trustee for the payment of the principal of and interest on the Bonds,(5)amounts otherwise on deposit in the Funds and Accounts(other than moneys on deposit from time to time,in the Rebate Fund,the Costs of Issuance Fund and the Fees Account) all of which(in the foregoing clauses(a)(1)through(a)(5))will be invested in Permitted Investments, and(6)Investment Income(excluding Investment Income earned on amounts on deposit in the Rebate Fund and certain Investment Income earned on amounts on deposit in the Costs of Issuance Fund)and DOCssF1:269332.3 40511-109-AI11-07122198 6:37 PM 3 (b) upon Fannie Mae Vass-Through Certificate Delivery, (l)the Fannie Mae Pass- Through Certificate, (2)the Revenues,including distributions under the Fannie Mae Pass- Through Certificate,and any other moneys received by the Trustee for the payment of the principal of and interest on the Bonds, (3)amounts otherwise on deposit in the Funds and Accounts(other than moneys on deposit from time to time, in the Rebate Fund and the Fees Account),all of which will(in the foregoing clauses(a)(I)through(a)(3))be invested in Permitted Investments,and(4)Investment Income(excluding Investment Income earned on amounts on deposit in the Rebate Fund). K. The development and operation of the Project will be regulated by,among other documents,the terms of the Financing Agreement and the Regulatory Agreement. L. The Issuer has authorized the execution and delivery of this Indenture in order to secure the payment of the principal of,premium,if any,and interest on the Bonds. M. The execution and delivery of this Indenture by the Issuer and the issuance and sale of the Bonds have been in all respects duly and validly authorized by the Bond Resolution. N. The Issuer has determined that all things necessary to make the Bonds,when executed by the Issuer and authenticated by the Trustee and issued in accordance with this Indenture,the valid, binding and legal obligations of the Issuer and to constitute this Indenture a valid assignment and pledge of the Revenues and all other amounts pledged to the payment of the principal of,premium,if any,on, and interest on,the Bonds and a valid and binding agreement for the uses and purposes set forth in this Indenture,have been duly taken,and the creation,execution and delivery of this Indenture and the creation,execution and delivery of the Bonds, subject to the terms of this Indenture have been duly authorized in all respects. 0. The Trustee has trust powers and the power and authority to enter into this Indenture,to accept trusts generally and to accept and execute the trust created by this Indenture;the Trustee has accepted the trust so created,and to evidence such acceptance,has joined in the execution of this Indenture. GRANT On the basis of the foregoing recitals,and in consideration of the premises,the acceptance by the Trustee of its obligations under this Indenture,and for other good and valuable consideration,the receipt and sufficiency of which are acknowledged,in order to secure the payment of the principal of,redemption premium, if any,and interest on,the Bonds according to their tenor and effect,and to secure,on a parity basis, all obligations owed to Fannie Mae under the Credit Facility Agreement and the Mortgage Loan Documents,and further to secure the performance and observance by the Issuer of all the covenants expressed or implied in this Indenture and in the Bonds,subject to the provisions of the Assignment,the Issuer collaterally assigns and grants a security interest to the Trustee and its successors in trust for the benefit of the Bondholders,and to Fannie Mae,and its successors and assigns,as their interests may appear,on a parity basis,in and to the following property,subject only to the Reserved Rights and the provisions of this Indenture permitting the application of such property to the purposes and on the terms and conditions set forth in this Indenture(all such property comprising,together with the Mortgage Loan Documents to be delivered by the Issuer to the Trustee,and being referred to in this Indenture, collectively,as the"Trust Estate'): (i) all right,title and interest of the Issuer in and to the Financing Agreement,the Regulatory Agreement,the Mortgage Loan,including the Mortgage Note,the Mortgage and the other DO S3F1;269332.3 405511-107-ADD-07122/"6:37 PM 4 Mortgage Loan Documents,further including,but not limited to,all rights to<receive payments on the Mortgage Note and under the ether Mortgage Loan Documents,including all proceeds of insurance or condemnation awards,but subject to the provisions of the Assignment and the Collateral Agreement,including the right of Fannie Mase,as provided in the Collateral Agreement,to direct the Trustee to assign the Mortgage Loan to Fannie Mae, including within such assignment the Mortgage Neste and the Mortgage, and all amendments,modifications, supplements,renewals and restatements of the foregoing,reserving,however the Reserved Rights, (ii) all right,title and interest of the Issuer in and to the Net Bond Proceeds and accrued interest,if any,derived from the sale of the Bonds and all Funds and Accounts under this Indenture(including,without limitation,moneys,documents,securities,investments,instruments and general intangibles on deposit,or otherwise held by the Trustee under this Indenture), including Investment Income,but excluding moneys on deposit from time to time in the Fees Account,the Rebate Fund and the Casts of Issuance Fund(including within such exclusion Investment Income retained in the Costs of Issuance Fund); (iii) all Revenues; (iv) all funds,moneys and securities and any and all other rights and interests in property, whether tangible or intangible,from time to time hereafter by delivery or by writing of any kind conveyed, mortgaged,pledged,assigned or transferred as and for additional security under this Indenture for the Bands by the Issuer,or by anyone on its behalf,or with its written consent,to the Trustee,which is authorized to receive any and all such property at any and all times,and to hold and apply the same subject to the terms of this Indenture;and (v) all of the proceeds of the foregoing,including,without limitation,Permitted investments and Investment Income; to have and to hold all the same with all privileges and appurtenances conveyed and assigned by this Indenture,or agreed or intended to be so assigned,to the Trustee,and its successors its trust,and to Fannie Mae,and its successors and assigns,as their interests may appear,subject to the provisions of the Assignment,vesting certain rights in Fannie Mae,and the Collateral Agreement,vesting in Fannie Mae the right to direct the Trustee to assign the Mortgage Lorin.to Fannie Mae in certain events,including within any such assignment the Mortgage Note and the Mortgage; in trust,nevertheless,upon the terms and trusts set forth in this Indenture for the equal and proportionate benefit,security and protection(subject to the terms of this Indenture)of(a)all registered owners of the Bonds,without privilege,priority or distinction as to the lien or otherwise of any of the Bonds over any of the others of the Bonds and(b)Fannie Mae to secure the payment of all amounts owed to Fannie Mae under the Financing Agreement,the Credit Facility Agreement and the Mortgage Loan Documents, rovi ed,how*v r,that,as set forth in the Assignment,the Issuer has further specifically assigned certain rights and interests under and with respect to the Mortgage Lean and the Mortgage Loan Documents exclusively to Fannie Mae(it being understood that under the Collateral Agreement such rights are subject to reassignment to the Trustee in certain events),and,subject to the provisions of the Assignment and the Collateral Agreement,certain rights and interests under and with respect to the Mortgage Loan and the Mortgage Loan Documents exclusively to the Trustee,provided,further, that, under the Collateral Agreement,Fannie Mae may direct the Trustee to(a)assign its interest in the Mortgage Loan,including the Mortgage Note,the Mortgage and,subject to the provisions of the DOCssF1;269332.3 40511-107-Art1-07122/98 6:37 PM S Assignment and the Collateral Agreement, the ether Mortgage Loan Documents,to Fannie Mae,at any time,subject to reassignment to the Trustee,as provided in the Collateral Agreement,and(b)assign its interest m the Mortgage Loan,including the Mortgage Note,the Mortgage and the other Mortgage Loan Documents and the Financing Agreement(other than the Reserved Rights)and all amendments, modifications, supplements and restatements of the Financing Agreement,to Fannie Mae,as provided in the Collateral Agreement,upon payment in full of all amounts due under the Financing Agreement and the Mortgage Loan,including,but not limited to,the fees and expenses of the Issuer and the Trustee,it being understood that upon assignment of the Financing Agreement under this clause(b),the Issuer and the Trustee shall have no further liability or obligations under the Financing Agreement; rrovi;dg fuer,however,that if the Issuer or its successors or assigns shall pay or cause to be paid to the registered owners of the Bonds the principal,redemption premium,if any,and interest to become due on the Bonds at the times and in the manner provided in this Indenture,and if no amount shall be owing by the Borrower to the Issuer or the Trustee under the Financing Agreement or to Fannie Mae under the Credit Facility Agreement or any Mortgage Loan Document,and if the Issuer shall beep, perform and observe,or cause to be kept,performed and observed,all of its covenants,warranties and agreements contained in this Indenture,this Indenture and the estate and rights granted by this Indenture shall terminate and be discharged in accordance with the terms of this Indenture,upon which the Trustee shall execute and deliver to the issuer such instruments in writing as shall be necessary to satisfy the lien of this Indenture,and,subject to Section 8.1 of ibis Indenture, shall,as provided in Section 8.1 of this Indenture, reconvey to the Issuer any property at the time subject to the lien of this Indenture which may then be in its possession,except amounts held by the Trustee for the payment of principal of;redemption premium,if any,and interest on the Bonds,or moneys held in the Rebate Fund for payment to the United States Government or moneys held in the Fees Account for the payment of accrued and unpaid Fees; otherwise this Indenture shall be and remain in full force and effect,upon the trusts and subject to the covenants and conditions set forth in this Indenture;and it is expressly declared,that all Bands issued and secured under this Indenture are to be issued, authenticated and delivered,and all property,rights and interests,including,without limitation,the amounts payable under the Financing Agreement and any other amounts assigned and pledged by this Indenture are to be dealt with and disposed of under,upon and subject to,the terms,conditions, stipulations,covenants,agreements,trusts,uses and purposes expressed in this Indenture,and the issuer has agreed and covenanted,and agrees and covenants with the Trustee and with the respective owners of the Bonds as follows: Section 1. Incorporation of Recitals; Definitions and Interpretation. Section 1.1 IngtrrgQlration of Recitals. The Recitals to this Indenture are,by this reference,incorporated into and deemed a part of this Indenture. Section 1.2 Definitions-,Tgrms Define,4 In Fingmcing A re m xlt. All Capitalized terms used in this Indenture shall have the meanings given to those terms in this Section 1.2 or elsewhere in this indenture unless the context clearly indicates a different meaning. In addition,certain capitalized terms used m this Indenture are defined m the Financing Agreement. "Accounts"means all Accounts established within the Funds created by Section 4.1 of this Indenture. "Act"means of Chapter 7 of Part S of Division 31 ofthe California Health and Safety Code,as the same may be amended. noCssF1:269332.3 4ff11-107-AD1-O7a2/"5:37 PM 6 "Assignment"means the Assignment of Mortgage Loan,dated as of August 1, 1998, from the Issuer to the Trustee and Fannie Mae,as their interests may appear,as it may be amended,modified, supplemented or restated from time to time. "Authorized Attesting Officer"means the Clerk of the Board of Supervisors,or such other officer or official of the Issuer who, in accordance with the laws of the State,the bylaws or other governing documents of the Issuer,or practice or custom,regularly attests or certifies official acts and records of the Issuer,and includes any assistant or deputy officer to the principal officer or officers exercising such responsibilities. "Authorized Borrower Representative" means,with respect to the Borrower,any person who, at any time and from time to time,is designated as the Borrower's authorized representative by written certificate furnished to the Issuer,the Servicer,Fannie Mae and the Trustee containing the specimen signature of such person and signed on behalf of Borrower by or on behalf of any authorized general partner of the Borrower(including any successor or assign)if the Borrower is a general partnership or a limited partnership,any authorized managing member of the Borrower(including any successor or assign)if the Borrower is a limited liability company, or by any authorized officer of Borrower (including any successor or assign)if the Borrower is a corporation,which certificate may designate an alternate or alternates,or,in the event that such term shall refer to successors or assigns of the Borrower, any authorized general partner if the successor or assignee is a general partnership or a limited partnership,any authorized managing member if the successor or assignee is a limited liability company, or any authorized officer if the successor or the assignee is a corporation. The Trustee may conclusively presume that a Person designated in a written certificate filed with it as an Authorized Borrower Representative is an Authorized Borrower Representative until such time as the Borrower files with it and with the Issuer,the Servicer and Fannie Mae a written certificate identifying a different Person or Persons to act in such capacity. "Authorized Construction Please Credit Facility Provider Representative"means any person from time to time designated to act on behalf of the Construction Phase Credit Facility Provider by written certificate furnished to the Trustee and the Issuer containing the specimen signature of such person and authorized to act by resolution or other appropriate action of the Board of Directors of the Construction Phase Credit Facility Provider or by its bylaws. Such resolution or other appropriate action may designate an alternate or alternates who shall have the same authority,duties and powers as the Authorized Construction Phase Credit Facility Provider Representative. The Trustee may conclusively presume that a Person designated in a written certificate filed with it as an Authorized Construction Phase Credit Facility Provider Representative is an Authorized Construction Phase Credit Facility Provider Representative until such time as such Provider files with it and with the Issuer,the Servicer and Fannie Mae a written certificate identifying a different Person or Persons to act in such capacity. "Authorized Denomination"means$5,004 or any integral multiple of$5,004. "Authorized Issuer Representative"means any Authorized Officer of the Issuer or any other person from time to time duly authorized to perform a specified act,to sign a specified document,or to act generally,on behalf of the Issuer with respect to the Bonds by a written certificate furnished to the Trustee,which certificate is signed by an Authorized Officer and contains the specimen signature of such authorized person;such authorization and approval may designate are alternate or alternates who shall have the same authority,duties and powers as such authorized person. The Trustee may conclusively presume that a Iverson designated in a written certificate filed with it as an Authorized Issuer Representative is an Authorized Issuer Representative until such time as the Issuer files with it a written certificate "identifying a different Person or Persons to act in such capacity. DOCSSF1:269332.3 40511-107-ADI-07122/98 6:37 PM 7 "Authorized Officer" means the [Chairman or Vice Chairman of the Board of Supervisors,the County Administrative Officer or the Director of Redevelopment] of the Issuer,and any other officer or employee of the Issuer designated to perform a specified act,to sign a specified,document or to act generally,on behalf of the Issuer by a written certificate furnished to the Trustee,which certificate is signed by an Authorized Officer and contains the specimen signature of such other officer or employee of the Issuer. "Available Moneys"means(a)the proceeds of the Bonds, (b)moneys received by the Trustee pursuant to the Credit Facility,including distributions under the Fannie Mae Pass-Through Certificate if and when issued,and either payments by Fannie Mae pursuant to this Indenture,(c)aantounts with respect to which the Trustee has received,at or prior to the time such amounts are deposited with the Trustee,an Opinion of Bond Counsel or an Opinion of Counsel provided by nationally-recognized counsel experienced in bankruptcy matters,acceptable to the Rating Agency,to the effect that(1)the use of such amounts to make payments on the Bonds would not violate Section 362(x)of the Bankruptcy Code or that relief from the automatic stay provisions of such Section 362(x)would be available from a bankruptcy court or(2)payments of such amounts to the Bondholders would not be avoidable as preferential payments under Section 547 of the Bankruptcy Code should the Issuer,the Borrower or any general partner or,guarantor of the Borrower, if applicable,become a debtor in proceedings commenced under the Bankruptcy Code and(d)Investment income derived from the investment of moneys described in clause (a), (b)or(c). Amounts received by the Trustee for deposit into the Revenue Fund,if not otherwise Available Moneys,may become Available Moneys upon and as of the elate of delivery to the Trustee of the legal opinion set forth in clause(e)above. "Bankruptcy Code" means Title I I of the United States Code, entitled"Bankruptcy,"as in effect now and in the future, or any successor statute. "Beneficial Owner"means (a)when used with respect to a Bond held in book-entry form, the person or entity whose name is shown on the records of a Participant,pursuant to the arrangements for book-entry determination of ownership applicable to the Securities Depository,as the beneficial owner of the Bond,and(b)when used with respect to a Bond held in certificated form,the registered owner of the Bond. "Bond" or"Bonds" means the Issuer's Multifamily Housing Revenue Bonds(Bollinger Crest Apartments Project) 1998 Series C in the original aggregate principal amount of$[7,000,000]. "Bond Counsel"means(a)on the Closing Date,the law firm or law firms delivering the approving opinion with respect to the valid issuance of the Bonds and the exclusion from gross income, for federal income tax purposes,of the interest payable on the Bonds or(b)after the Closing Date,any law firm selected by the issuer,acceptable to Fannie Mae,of nationally recognized standing in matters pertaining to the excludability from gross income,for federal income tax purposes,of interest payable on bonds issued by states and political subdivisions. "Bond Documents" means this Indenture,the Financing Agreement,the Regulatory Agreement, the Bonin.Purchase Agreement and the Tax Certificate. "Bondholder," "holder," "Owner,""owner,""Registered Owner"or"registered owner" means,with respect to any Bond,the registered owner of the Bond. "Beim!Payment Date"means any(a)Interest Payment Date,(b)other date on which interest is payable,including any Redemption Date,each Maturity Date and the date of acceleration of the Bonds and(c)date on which principal of the Bonds is payable. DOCSSF2;269332.3 4011-207-ADi-07122M 5:44 PM 8 "Bond Purchase Agreement"means the Bond Purchase Agreement,dated July_, 1998,by and among the underwriter,the Issuer and the Borrower. "Bernd Register" means the bond register maintained by the Trustee pursuant to Section 2.10(1) of this Indenture. "Bond Registrar"means the Trustee or its designee as keeper of the Bond Register. "Band Resolution"means the bond resolution adopted by the Issuer on July 28, 1998, authorizing and approving the issuance and sale of the Bonds and authorizing and approving the execution and delivery of this Indenture,the Financing Agreement,the Regulatory Agreement,the Bond Purchase Agreement,the Assignment,the Tax Certificate and certain other documents,making certain appointments and determining certain details with respect to the Bonds. "Bond Year"means the period of twelve consecutive months ending on August[13]in any year in which Bonds are or will be Outstanding,.provided that the first Bond Year shall commence on the Closing Date and end on August[13], 1999. "Bonk-Entry Bonds"means any Bonds which are issued in book-entry form, as evidenced by a single certificate for each stated principal maturity of the Bonds,and registered in the;name of and delivered to a Securities Depository. "Book-Entry System"means that system in which the clearance and settlement of securities transactions is made through electronic book-entry changes,in that way eliminating the need of physical movement of securities. "Borrower"means Bollinger Crest Apartments Investors,LLC,a California limited partnership. "Business Day"means: (i) on or before the Fannie Mae Pass-Through Certificate Delivery Date,any day other than: (A) a Saturday,a Sunday or a legal holiday; or (B) any day on which banking institutions located in the city or cities in which the Principal Office of the Trustee is located are required or authorized by law or executive order to close;or (C) a day on which Fannie Mae is closed;or (D) on and after the Conversion Date,a day on which the Principal Office of the Servicer is required or authorized by law or executive order to close;or (E) solely with respect to issuance of the Fannie Mae Pass-Through Certificate, a day on which the Federal Reserve Bank of New York is closed;and (ii) after the Fannie Mae Pass-Through Certificate Delivery Date,any day other than: (A) a day excluded under subparagraphs(A),(B), (C)or(D)of paragraph(i)above; DOCssF1:259332.3 40511-207-ADI-07="5:37 PM 9 (B) solely with respect to distributions to be made under the Fannie Mae Pass- Through Certificate,a day on which the Federal Reserve Batik of New York is closed;or (C) a day on which the New York Stock Exchange is closed. "Cash Flaw Projection" means a cash flow projection prepared by an independent firm of certified public accountants,a financial advisory firm or other independent third party qualified and experienced in the preparation of cash flow projections for mortgage loans,designated by the Borrower and acceptable to Fannie Mae and the Rating Agency,establishing the sufficiency of>(a)the(1) scheduled payments due under the Mortgage Note(together with and after taking into account the Initial Debt Service Deposit)up to and including the Issue Date and(2)scheduled distributions due under the Fannie Mae Pass-Through Certificate after the Fannie Mae Pass-Through Certificate:Delivery Date and (b)Investment income with respect to the General Receipts and Disbursements Account,to pay the principal of and interest on the Bonds and the Fees,in each instance,when due and payable,including, without limitation,any cash flow projection prepared in connection with(A)the initial issuance and delivery of the Bonds,as provided in paragraph(xi)of Section 2.14 of this Indenture,(B)issuance of the Fannie Mae Pass-Through Certificate on the Fannie Mae Pass-Through Certificate Delivery Bate,if it occurs,as provided in paragraph(i)of Section 7.2(1)of this Indenture and in paragraph(vi)of Section 2.15(2)of this Indenture, (C)a partial prepayment of the Mortgage Loan and a corresponding partial redemption of Bonds pursuant to Section 3.2,3.3(1)or 3.3(2)of this Indenture,as provided in Section 3.7 of this Indenture,or(D)substitution of the Fannie Mae Pass-Through Certificate,as provided in paragraph(ii)of Section 7.2(2)(2)of this Indenture. "Closing Date" means the date on which the Bonds are issued and delivered to or upon the order of the Underwriter. "Code"means the internal Revenue Code of 1986;each reference to the Code shall be deemed to include(a)any successor internal revenue law and(b)the applicable regulations whether final,temporary or proposed under the Code or such successor law;any reference to a particular provision of the Code shall be deemed to include(a)any successor provision of any successor internal revenue law and(b)the applicable regulations,whether.final,temporary or proposed,under such successor provision. "Collateral Agreement"means the Collateral Agreement,dated as of August 1, 1998,between Fannie Mae and the Trustee. "Completion Date"means the date on which the Project is completed,as evidenced by a certification of the Servicer delivered to the Trustee,Fannie Mae,the Construction Phase Credit Facility Provider and the Borrower,which certification shall recite that the Borrower has satisfied the requirements of the Fannie Mae Commitment. "Computation Lute" means the last day of each Bond Year,commencing August[13], 1999, and the date on which the final payment in full of all Outstanding Bonds is made. "Conditions to Conversion"has the meaning given to that term in the Fannie Mae Commitment. "Construction Phase"has the meaning given to that term in the Fannie Mae Commitment. "Construction Phase Credit Documents"means,individually and collectively,the Construction.Phase Financing Agreement,the Construction Phase Credit Facility,the Construction Phase Credit Reimbursement Agreement and all other documents evidencing,securing or otherwise relating to DOCSSF1:269332.3 40511-107-ADI-012V"6:37 PM 10 the Construction Phase Credit Facility,including all amendments,modifications, supplements and restatements of such:documents. "Construction Phase Credit Facility"means the Letter of Credit,dated its date of delivery,to be delivered as provided in the Construction Phase Financing Agreement,by the Construction Phase Credit Facility Provider to Fannie Mae. "Construction Please Credit Facility Provider"means, so long as the Construction Phase Credit Facility is in effect,the Letter of Credit Bank. "Construction Phase Credit Reimbursement Agreement"means the Construction Credit Facility Reimbursement Agreement,dated as of August 1, 1998,between the Borrower and the Construction Phase Credit Facility Provider,as such agreement may be amended,modified,supplemented or restated from time to time. "Construction Phase Financing Agreement"means the Construction Phase Financing Agreement,dated as of August 1, 1998,between Fannie Mae,the Servicer and the Construction Phase Credit Facility Provider,as such agreement may be amended,modified, supplemented or restated from time to time. "Conversion" means the conversion of the Mortgage Loan from the Construction Phase to the Permanent Phase. "Conversion bate"means the effective date of Conversion specified by the Servicer in the Conversion Notice as the"Conversion bate,"which date shall be the first day of the month following the month in which the Conversion Notice is issued by the Servicer,provided that if the Fannie Mae Pass- Through Certificate Delivery Bate will occur in the same month in which the Conversion Notice is issued by the Servicer,"Conversion Date"will mean the first day of the month in which the Conversion Notice is issued by the Servicer. "Conversion Notice"means a written notice by the Servicer to the Issuer,the Trustee,the Borrower,the Construction Phase Credit Facility Provider and Fannie Mae,given prior to the Termination nate,stating that each of the Conditions to Conversion has been satisfied;prior to the Termination Irate or,if any Condition to Conversion has not been satisfied prior to the Termination Date, has been waived in writing by Fannie Mae,prior to the Termination Date,and specifying the Conversion Date. "Cost,""Costs"or"Costs of the Project"means,with respect to the Project,the costs chargeable to the Project in accordance with generally accepted accounting principles,including,without limitation,the cost of acquisition,construction,reconstruction,restoration,repair,alteration, improvement and extension of any building,stricture,facility or other improvement;stored materials for construction work in progress;the cost of machinery and equipment;the cost of the Lend,rights-in-lands, easements,privileges,agreements,franchises,utility extensions,disposal facilities,access roads and site development necessary or useful and convenient for the Project or in connection therewith;financing costs,including,but not limited to,the Costs of Issuance,engineering and inspection costs,fees paid to the developer of the Project;organization,administrative,insurance,legal,operating,letter of credit and other expenses of the Borrower actually incurred prior to and during acquisition or construction;and all such other expenses as may be necessary or incidental to the financing,acquisition,construction or completion of the Project or any part of it, including,but not limited to,the amount of interest expense incurred with respect to the Mortgage Loan incurred prior to the Completion Date;insurance premiums payable by the Borrower and taxes and other governmental charges levied on the Project, DUCSSFI:269332.3 40511-107-ADI-07122198 6:37 PM l l "Costs of Issuance"means(a)the fees, costs and expenses of(1)the Issuer,the Issuer's counsel and the Issuer's financial advisor,if any,(2)the Underwriter,including discounts to the Underwriter or other purchasers of the Bonds(other than original issue discount)incurred in the issuance and sale of the Bonds,and the Underwriter's counsel, (3)Bond Counsel,(4)the Trustee and the Trustee's counsel, (5) the Servicer and the gerivicer's counsel,(6)Fannie Mae and Fannie Mae's counsel, (7)the Borrower's counsel and the Borrower's financial advisor,if any,and(8)the Rating Agency,(b)the costs of preparing the initial'Cash Flow Projection and the initial Verification Report,(c)castsof printing the offering documents relating to the sale of the Bands and(d)all other fees,costs and expenses directly associated with the authorization, issuance, sale and delivery of the Bonds, including,without limitation,printing costs,costs of reproducing documents,filing and recording fees,and any fees,costs and expenses required to be paid to the Servicer in connection with the Mortgage Loan. "Costs of Issuance Deposit"means the deposit required by the Financing Agreement,to be made by the Borrower with the Trustee on the Closing Date,which deposit shall equal S "Casts of Issuance Fund"means the Costs of issuance Fund created by Section 4.1 of this Indenture. "Credit Facility"means(a)the Collateral Agreement, (b)on and after the Fannie Mae Pass- Through Certificate Delivery Date,the Fannie Mae Pass Through Certificate, effective as of the Issue Date or(c)any other credit enhancement facility provided at any time by Fannie Mae'. "Credit Facility Account"means the Credit Facility Account established within the Revenue Fund created by Section 4.1 of this Indenture. "Credit Facility Agreement" means,individually or collectively,the Reimbursement Agreement,and all other agreements and other documents securing Fannie Mae or otherwise relating to the provision of the Collateral Agreement, as any such agreement may be amended, modified, supplemented or restated from time to time. "Dated Date"means the date designated as such on the face of the Bonds. "Disclosure Agreement"means the Continuing Disclosure Agreement,elated as of August 1, 1998,between the Borrower and the Trustee. "Distribution Date"means,with respect to distributions to be made under the Fannie Mae Pass- Through Certificate,the twenty-fifth(25th)day of each month beginning with the twenty-fifth(25th)day of the month following the month of the Issue hate,or,if such twenty-fifth(25th)day is not a Business Day,the Business Day immediately fallowing. "DTC"means The Depository Trust Company and any successor or any nominee thereof. "DTC Participant"has the meaning given to that term in Section 2.13(2)of this Indenture. "DTC System"has the meaning given to that term in Section 2.13(1)of this Indenture. "Electronic Deans"means telecopy,facsimile transmission or other similar electronic means of communication approved in writing by Fannie Mae,including a telephonic communication confirmed by writing or written transmission. DOCSSF1.269332.3 40311-107-ADl-07122198 6;37 PM 12 "End Period Payment"means,with respect to any optional redemption of Bonds Pursuant to Section 3.2 of this Indenture,the premium due on the Bonds,if any,and interest due on the Bonds from the date of prepayment of the Mortgage Loan to the Redemption Bate,including that portion of the interest payable to the Bondholders on the Redemption Date which is not(a)held or received by the Trustee as Available Moneys or(b)included in any distribution by Fannie Mae(of an optional prepayment of the Mortgage Loan) under the Fannie Mae Pass-Through Certificate. "Event of Default"means any of the events specified in Section 9.1 of this Indenture. "Facility Fee"means the Facility Fee provided for in the Reimbursement Agreement. "Fannie Mae"means the Fannie Mae,a corporation duly organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C., § 1716 et seq.,and its successors and assigns. "Fannie.Mae Commitment" means Fannie Mae's Commitment,dated July, _, 1998,accepted by the Servicer on such date,pursuant to which Fannie Mae has agreed,upon satisfaction of the terms and conditions set forth in the Fannie Mae Commitment,to provide credit enhancement for the Mortgage Loan and,upon issuance of the Fannie Mae Pass-Through Certificate Delivery Notice;to acquire the Mortgage Loan from the Servicer by issuance of and exchange for the Fannie Mae Pass-Through Certificate,as the Fannie Mae Commitment may be amended,modified,supplemented or restarted from time to time. "Fannie Mae Pass-Through Certificate"means the Fannie Mae Guaranteed Mortgage Pass- Through Certificate to be issued by Fannie Mae pursuant to the Fannie Mae Trust Indenture,if the Fannie Mae Pass-Through Certificate Delivery Notice is issued,to be dated as of its Issue Date,to evidence the beneficial interest in the Mortgage Loan held in trust for Fannie Mae and to bear interest at the Fannie Mae Pass-Through Certificate Rate,or in the event a Substitute Fannie Mae Pass Through Certificate is delivered to the Trustee pursuant to Section 7.2(2)(2)of this Indenture,the Substitute Fannie Mae Pass- Through Certificate. "Fannie Mae Pass-Through Certificate Delivery"means the substitution of the Fannie Mase Pass-Through Certificate for the Collateral Agreement as the Credit Facility for the kinds. "Fannie Mae Pass-Through Certificate Delivery Date"means the date on which the Fannie Mae Pass-Through Certificate is actually delivered,electronically,in book-entry form,to, or to a custodian for the benefit of,the Trustee. "Fannie Mae Pass-Through Certificate Delivery Notice"means a written notice by the Trustee to the Issuer,the Servicer,Fannie Mae and the Borrower stating that each of the Fannie Mae Pass- Through Certificate Delivery Requirements set forth in Section 2.15(2)of this Indenture has been satisfied and specifying the Fannie Mae Pass-Through Certificate Delivery Daae. "Fannie.Mae Pass-Through Certificate Delivery Requirements"means the requirements set forth in Section 2.15(2)of this Indenture. "Fannie Mae Pass-Through Certificate Rate"means the interest rate per annum to be borne by the Fannie Mae Pass-Through Certificate,which shall be percent(ala)per annum from and including its IssueDate to,but not including,its maturity date. DOCSSFI:269332.3 40511-107-ADI-07122/"6:37 PM 13 "Fannie Mae Trust Indenture"means,collectively,the(a)Trust Indenture for Guaranteed Mortgage Pass-Through Certificates,evidencing undivided beneficial interests in Pols of Fixed:Rate Residential Mortgage Loans dated November 1, 1981,as amended and supplemented,between Fannie Mae in its corporate capacity and in its capacity as trustee and(b)Issue Supplement identifying and establishing the mortgage loan pool for the Mortgage Loan and the Fannie Mae Pass-Through Certificate related to such pool. "Fees"means,individually or collectively,as the context shall require,the(a)Issuer's Annual Fee, (b)Trustee's Annual Fee and(c)Rebate Analyst's Annual Fee,if any,included in the Pass-Through Rate under the Mortgage Note,all of which will,upon issuance of the Fannie Mae Pass-Through Certificate,be included in the Fannie Mae Pass-Through Certificate Rate. "Fees Account"means the Fees Account of the Revenue Fund created by Section 4.1 of this Indenture. "Financing Agreement"means the Financing Agreement,dated as of August 1, 1998,among the Issuer,the Trustee,the Borrower and the Servicer,as amended,modified,supplemented or restated from time to time to the extent permitted by this Indenture. "Fully Prepaid Mortgage Loan"has the meaning given to that term in the Fannie Mae Trust Indenture. By way of illustration,and not limitation,in respect of a mortgage loan,such term generally means (a)payment of the entire principal balance of the mortgage loan prior to the final maturity of the mortgage loan, (b)receipt by Fannie Mae of cash in connection with the liquidation of the mortgage loan, whether through insurance or guaranty proceeds,condemnation awards,proceeds of any sale of the project encumbered by the mortgage loan or otherwise(and whether or not such cash is equal to the unpaid principal amount of the mortgage loan and all interest accrued on the mortgage loan)in an amount determined by Fannie Mae in its reasonable judgment to be the full amount finally recoverable on account of the mortgage loan or(c)the mortgage loan is deemed by Fannie Mae,at its option,to be a Fully Prepaid Mortgage Loan because,for example,(1)the mortgage loan has become delinquent,in whole or in part,as to Four consecutive monthly installments of interest or principal and interest,(2)Fannie Mae or any other party entitled to do so shall have declared the principal balance of the mortgage loan to be immediately due and payable in accordance with the terms of the mortgage note or the mortgage and such principal balance shall not have been paid within ten days after such declaration, (3)the project or any interest in the borrower has been transferred,or is proposed to be transferred,under circumstances in which Fannie Mae is legally permitted or reasonably believes that it is legally permitted,to accelerate the maturity of the mortgage loan pursuant to the terms of any"due-on-sale"or like clause contained in the documentation of the mortgage loan,(4)Fannie Mae has acquired the project through foreclosure, deed- in-lieu of foreclosure or comparable conversion of the mortgage loan or(5)there has been a material breach of warranty by the Servicer or a material defect in the mortgage loan documentation. "Funds"means all Funds created by Section 4.1 of this Indenture. "General;Receipts and Disbursements Account"means the General Receipts and Disbursements Account of the Revenue Fund created.by Section 4.1 of this Indenture.' "Government Obligations"means direct obligations of,and obligations on which the full and timely payment of principal and interest is unconditionally guaranteed by,the full faith and credit of the United States of America. "Highest Rating Category"means an S&P rating category of"A-1+"for instruments having a term of one year or less and"AAA"for instruments having a term greater than one year,and'a Moody's nocssr1.269332.3 40511-107-ADI-07122M 6.31 PM 14 rating category of`°P-l"for instruments having a term of one year or less and"Aaa"for instruments having a term greater than one year. "Improvements"means,with respect to the Project,the improvements made or to be made upon the Land. "Indenture"means this Trust Indenture,dated as of August 1, 1998,as amended,modified, supplemented or restated from time to time as permitted by this Indenture. "Indirect Participant"has the meaning given to that term in Section 2.13(2)of this Indenture. "Ineligible Moneys Account"means the Ineligible Moneys Account of the Revenue Fund created by Section 4.1 of this Indenture. "Initial Debt Service Deposit"means the initial debt service deposit to be made on the Closing Date by the Borrower with the Trustee,as provided in Section 4.5 of Financing Agreement and deposited by the Trustee,pursuant to paragraph(iv)of Section 4.2 of this Indenture,into the General Receipts and Disbursements Account,which deposit shall equal the sum of$ "Interest Payment Date"means April 1 and October l of each year beginning April 1, 1999, each Redemption Date, each Maturity Date and the date of acceleration of the Bonds. "Investment Agreement"means any investment agreement with respect to amounts on deposit in any Fund or Account,or any substitute investment agreement with respect to amounts on deposit in any Fund or Account, as described in paragraph(vii)of the definition of Permitted Investments. "Investment Income"means the earnings and profits derived from the investment of moneys pursuant to Section 5 of this Indenture. "Issue Date"means, with respect to the Fannie Mae Pass-Through Certificate,the first day of the month in which the Fannie Mae Pass-Through Certificate Delivery Date occurs;the Issue Date may correspond to the Conversion Date. "Issue Date Principal Balance"means,with respect to the Mortgage Loan,the principal balance of the Mortgage Loan as of the Issue Date. "Issuer"means County of Contra Costa,apolitical subdivision of the State,and its successors and assigns. "Issuer"s Annual Fee"means the Issuer's annual fee equal to .125%of the original par amount of the Bonds,payable by the Borrower annually in advance pursuant to paragraph(i)of Section 4.3 of the Financing Agreement,commencing October 1, 1999 and continuing through the Qualified Project Period (as defined in the Regulatory Agreement)to be remitted by the Trustee to the Issuer pursuant to paragraph (v)of Section 4.4(4)of this Indenture. "Issue Supplement"means any instrument amending or supplementing the Fannie Mae Trust Indenture. "Land"means,with respect to the Project,the real property(as described in the Mortgage),that will serve.as the site of the Improvements. UUCSSF1:261332.3 40511-107-Anl-07n2/"6:37 PM 15 "Letter of Credit"means the Letter of Credit to be issued by the Letter of Credit Bank in accordance with the terms and conditions of Construction Phase Financing Agreement,as such Letter of Credit may be amended or replaced in accordance with the Construction Phase Financing Agreement, and including any confirming Letter of Credit issued in accordance with the terms and conditions of the Construction Phase Financing Agreement. "Letter of Credit Bank"means,initially,Wells Fargo Bank,National Association,and any substitute letter of credit bank permitted under the terms of the Construction Phase Financing Agreement. "Letter of Representations"has the meaning given to that terra in Section 2.13(1)of this Indenture. "Maturity Date"means any maturity date shown in Section 2.4(1)of this Indenture. "Moody's"means Moody's Investors Service,Inc., a Delaware corporation,and its successors and assigns, or if it shall be dissolved or shall no longer assign credit ratings to long term debt,then any other nationally recognized statistical rating agency,designated by Fannie Mae,as shall assign credit ratings to long term debt. "Mortgage" means,with respect to the Mortgage.Loan,the Multifamily Deed of Trust, Assignment of Rents and Security Agreement,dated as of August 1, 1998,together with all riders, securing the Mortgage Note,to be executed by the Borrower with respect to the Project,as it may be amended,modified, supplemented or restated from time to time. "Mortgage Loan"means the mortgage loan made by the Issuer to the Borrower pursuant to the terms and provisions of the Financing Agreementfor the purpose of providing funds to the Borrower to finance the acquisition,construction and equipping of the Project. "Mortgage Loan Documents"has the meaning given to that term in the Financing Agreement. "Mortgage Loan Fund"means the Mortgage Loan Fund created by Section 4.1 of this Indenture. "Mortgage Note"means,with respect to the Mortgage Loan,the Multifamily Note,dated as of August 1, 1998,executed by the Borrower in favor of the Issuer,evidencing the Borrower's financial obligations under the Mortgage Loan as the same may be amended,modified, supplemented or restated from time to time, or any mortgage note executed in substitution therefor in accordance with the terms of the Band Documents, as such substitute note may be amended,modified, supplemented or restated from time to time. "Mortgage Note Rate"has the meaning given to that term in the Financing.Agreement. "Net Bond Proceeds"means the net proceeds derived from the issuance,sale and delivery of the Bonds,exclusive of(a)the accrued interest on the Bonds paid by the Underwriter and(b)the premium,if any,paid by the Underwriter as part of the purchase price of the Bonds. "Officer's Certificate"means a certificate signed by an Authorized Officer or,if such certificate pertains to Official Action taken by the Issuer or official records of the Issuer,a certificate signed by an Authorized Attesting Officer. DOCSSF1:2693323 40511-107-Aril-07/22198 6:37 PM 16 "Official Action"means the expression of intent or commitment of the Issuer with respect to the Project,within time meaning of United States Treasury Regulation Section 1.103-8. "Opinion of Bond Counsel"means a written opinion of Bond Counsel addressed to the Issuer, the Trustee and,at its request,Fannie Mae, and in form and substance acceptable to the Issuer,and,in all events,Fannie Mae. "Opinion of Counsel"means a written opinion of legal counsel acceptable to the recipients of the opinion(and if the opinion is with respect to an interpretation of federal tax laws or regulations,or bankruptcy,such legal counsel shall also be an attorney or firm of attorneys experienced in such matters), including any opinion issued by the Fannie Mae Legal Department. "Outstanding"means,when used with reference to the Bonds at any date as of which the amount of Outstanding Bonds is to be determined,all Bonds which have been authenticated and delivered hereunder except: (a) Bonds canceled or delivered for cancellation at or prior to such date, (b) Bonds deemed to be paid in accordance with Section 8 of this Indenture;and (c) Bonds in lieu of which others have been authenticated under Sections 2.8, 2.9 or 2.10 of this Indenture. In determining whether the owners of a requisite aggregate principal amount of Outstanding Bonds have concurred in any request,demand,authorization,direction,notice,consent or waiver under the provisions of this Indenture,Bonds which are owned or held by or for the account of the Borrower shall be disregarded and deemed not to be Outstanding under this Indenture for the purpose of any such determination unless all Bonds are owned or held by or for the account of the Borrower. In determining whether the Trustee shall be protected in relying upon any such request,demand,authorization,direction, notice,consent or waiver,only Bonds which are registered in the name of or known by the Trustee to be held for time account of the Borrower shall be disregarded. "Participant"means a broker-dealer,bank or other financial institution for which DTC holds Bonds as Securities Depository. "Pass-Through Rate"has the meaning given to that term in the Mortgage Note. "Pass-Through Rahe Subaccount"means the Pass-Through Rate Subaccoulit of the Credit Facility Account established within the Revenue Fund created by Section 4.1 of this.Indenture. "Paying Agent"means the entity authorized to remit principal and/or interest,payments to Bondholders,as provided in Section 2.4(6)of this Indenture. "Payment Source"has the meaning given to that term in Section 3.9(1)of this Indenture "Permanent Phase"has the meaning given to that term in the Fannie Mae Commitment. "Permanent Phase Mortgage Loan Amount"has the meaning given to that term in the Fannie Mae Commitment. Di3CSSF1:269332.3 40511-197-ADI-O 22M 6:37 I'M 17 "Permitted Investments"means,to the extent authorized by law for the investment of moneys of the Issuer: (i) Government Obligations; (ii) direct obligations of,and obligations on which the full and timely payment of principal and interest is unconditionally guaranteed by, any agency or instrumentality of the United States of America(other than the Federal Home Loan Mortgage Corporation)or direct obligations of the World Bank,provided that such obligations are assigned a credit rating by S&P and Moody's in the Highest Rating Category of S&P and of Moody's; (iii) obligations of the State or any other state or territory of the United States of America,or obligations of any agency,instrumentality,authority or political subdivision of the State or of such state or territory,or obligations of any public benefit or municipal corporation the principal of and interest on which are guaranteed by the State or such other state or political subdivision and the interest on which is payable on a current basis,and which obligations are rated in the Highest Rating Category of S&P and of Moody's; (iv) any written repurchase agreement entered into with a Qualified Financial Institution whose unsecured short-term obligations are rated in the Highest Rating Category of S&P and of Moody's; (v) commercial paper rated in the Highest Rating Category of S&P and of Moody's; (vi) (a) interest-bearing negotiable certificates of deposit,interest-bearing time deposits,interest-bearing savings accounts or bankers'acceptances,issued by a Qualified Financial Institution whose unsecured short-term obligations are rated in the Highest Rating Category of S&P and of Moody's,or(b)interest-bearing negotiable certificates of deposit, interest-bearing time deposits or interest-bearing savings accounts,issued by a Qualified Financial Institution,if such deposits or accounts are fully insured by the Federal Deposit Insurance Corporation; (`vii) an,agreement for the investment of moneys at a guaranteed rate(an"Investment Agreement°)held by the Trustee with: (A) a Qualified Financial Institution whose unsecured longterm obligations are rated in the Highest Rating Category of S&P and of Moody's,or whose obligations are unconditionally guaranteed or insured by a Qualified Financial Institution whose unsecured long-term obligations are rated in the Highest Rating Category of S&P and of Moody's,provided that notice of the Investment Agreement shall be provided to the Rating Agency prior to the execution and delivery of the Investment Agreement, provided,further,that the Investment Agreement shall be in a form acceptable to an authorized representative of Fannie Mae,and provided,further,that the Investment Agreement shall include,without limitation,the following restrictions; (1) the invested funds shall be available for withdrawal without penalty or premium at any time that(a)the Trustee is required to pay:moneys from the Fund(s)established under this Indenture or(b)any Dating.Agency indicates that it will lower,suspend or withdraw or actually lowers,suspends or withdraws the rating on the Bonds on account of the rating of the Qualified nocssF 2623 40511-1frr.Ani-aW22r9$6:57 PM 18 Financial Institution providing,guaranteeing or insuring,as applicable, the Investment Agreement; (2) the Investment Agreement shall be the unconditional andd general obligation of,and shall not be subordinated to any other obligation of,the provider and,if applicable,the guarantor or insurer,of the Investment Agreement; (3) the Trustee shall receive an Opinion of Counsel that the Investment Agreement is legal,valid,binding and enforceable upon the provider and,if applicable,the guarantor or insurer,of the Investment Agreement in accordance with its terms;and (4) the Investment Agreement shall provide that,if during its term the rating of the Qualified Financial institution providing,guaranteeing or insuring,as applicable,the Investment Agreement,by either S&P or Moody's is withdrawn or suspended or falls below the Highest Rating Category,the provider must,at the written direction of the Trustee(given after receipt of written notice of such rating withdrawal,suspension or downgrade),within 10 days following receipt of such direction,either: (a)collateralize the Investment Agreement(if the Investment Agreement is not already collateralized)with Permitted Investments described in paragraphs(i)or(ii)above by depositing such collateral with the Trustee or a third party custodian, such collateralization to be effected in a manner and in an amount sufficient to maintain(i)the integrity of the Cash Flow Projection most recently provided with respect to the Bonds and(2)the then current rating of the Bonds,or,if the Investment Agreement is already collateralized, increase the collateral with Permitted Investments described in paragraphs(i)or(ii)above by depositing such collateral with the Trustee or a third party custodian,such collateralization to be effected in a manner and in an amount sufficient to maintain the integrity of the recent Cash Flow Projection then current rating of the Bonds,or(b)unless waived by the"Trustee,repay the principal of and accrued but unpaid interest on the investment,in either case with no penalty or premium to the Trustee unless required by law(the choice of(1)or (2)shall be that of the"Trustee);or (B) Fannie Mae; (viii) money market mutual funds(including those of the Trustee and its affiliates) registered under the Investment Company Act of 1940 that have been rated"AAAm,-U'or "AAAm"by S&P and"Aaa"by Moody's,provided that the portfolio of such money market mutual fiend is limited to obligations described in(x)paragraph(i)above and to agreements to repurchase such obligations or(y)paragraphs(ii)or(iii)above and approved in writing by Fannie Mae;and (ix) any other investment authorized by the laws of the State if such investments are approved in writing by Fannie Mae and the Rating Agency and,prior to the Conversion Date,the Construction Phase Credit Facility provider; provided that Permitted.investments shall not include the following: (1)any investments with a final maturity or any agreements with a tern greater than 365 days from the date of the investment(except(a) obligations that provide for the optional or mandatory tender,at par,by the holder of such obligations at DOCSSF1:269332.3 +10511-107-Atte-{#'7122/'996:37 PM 19 least once within 365 days of the date of purchase, (b)Government Obligations irrevocably deposited with the Trustee for payment of Bonds pursuant to Section 8 of this indenture,and(c)agreements or investments listed in paragraphs(vii)and(ix)above),(2)any obligation(other than obligations described in paragraphs(i)and(ii)above)with a purchase price greater or less than the par value of such obligation, (3)mortgage-backed securities,real estate mortgage investment conduits or collateralized mortgage obligations, (4)interest-only or principal-only stripped securities,(5)obligations bearing interest at inverse floating rates,(6)any investment which may be prepaid or called at a price less than their purchase price prior to stated maturity,(7)any investment described in paragraph(iv)or(vii)above with a Qualified Financial Institution(as defined in clause(d)of the definition of"Qualified Financial Institution")if the Qualified Financial Institution does not agree to submit to jurisdiction,venue and service of process in the United States of America in the investment Agreement and(s)any investment the interest rate on which is variable,and is established other than by reference to a single interest rate index plus a single fixed spread,if any,and which interest rate moves proportionately with that index; provided further that if any such investment described in paragraphs(i)through(ix)above is required to be rated,such rating requirement will not be satisfied if an"r"highlighter or a"C highlighter is affixed to its rating or is otherwise applicable. If an Investment Agreement is entered into which does not require the provider to post collateral as described in paragraph(vii)above upon a downgrade in the rating of the provider,the yield on the Investment Agreement above the minimum yield permitted by the Rating Agency(presently 2.5%per annum)shall not be taken into account in any Cash FlowProjection delivered to the Rating Agency in connection with its rating of the Bonds. "Person"means any natural person,fun,partnership,association,limited liability company, corporation,company or public body. "Pledged Collateral"shall have the meaning given to that term in the Collateral Agreement. "Principal Amount"means$7,000,000,the original principal amount of the Bonds on the Closing Date. "Principal Office"of the Trustee means the corporate trust office of the Trustee at the address set forth in Section 12.4 of this Indenture,or such other address as may be specified in writing by the Trustee,as provided in Section 12.4 of this Indenture,provided,however,for transfer,registration, exchange,payment and surrender of bonds"Principal Office"means the corporate trust office or agency of the Trustee in St.Paul,Minnesota or such tither address as may be specified in writing by the Trustee, as provided in Section 12.4'of this Indenture; "Principal Office"of the Servicer means the office of the Servicer at the address set forth in Section 12.4 of this Indenture or such other address;as may be specified in writing by the Servicer,as provided in Section 12.4 of this Indenture. "Principal Subaccount"means the Principal Subaccount of the Credit Facility Account established within the Revenue Fund created by Section 4.1 of this Indenture. "Project"means the multifamily residential housing development identified in the Fannie Mae Commitment,including the Land and the Improvements to the Land. "Purchase Date"has the meaning given to that term in Section 3.9(l)of this Indenture. "Purchased Bonds"has the meaning given to that term in Section 3.9(1)of this Indenture. "Purchase Price"has the meaning given to that term in Section 3.9(1)of this Indenture. DOCssFi:269332.3 44511-107-Aai-07n2i98 6:37 PM 20 "Qualified Financial Institution" means any of the following having a senior unsecured dent rating in the Highest Rating Category of S&P and Moody's,and approved by Fannie Mae:a(a)bank or trust company organized under the laws of any state of the United States of America,I(b)national banking association,(c)savings bank,a savings and loan association,or an insurance company or association chartered or organized under the laves of any State of the United States of America, (d)federal branch or agency pursuant to the International Banking Act of 1978 or any Successor provisions of law or a domestic branch or agency of a foreign bank which branch or agency is duly licensed or authorized to do business under the laws of any state or territory of the United States of America, (e)government,bond dealer reporting to,trading with,and recognized as a primary dealer by the Federal Reserve Bank of New York,and(f)securities dealer approved in writing by Fannie Mae the liquidation of which is subject to the Securities Investors Protection Corporation or other similar corporation. "Rating Agency"means any national rating agency then maintaining a rating on the Bonds. "Rating Category"means one of the generic rating categories of the Rating Agency. "Rebate Analyst"means a fum of independent certified public accountants or other firm or organization designated by the Borrower and reasonably acceptable to the Issuer and Fannie Mae,and qualified and experienced in the calculation of rebatable arbitrage under Section 148 of the Code and in compliance with the regulations promulgated under the Code,and then providing rebate calculation services. "Rebate Analyst's Annual Fee" means the annual fee of the Rebate Analyst,if any,in the amount of$,__for its rebate calculation services. "Rebate Fund"means the Rebate Fund created by Section 4.1 of this Indenture. "Record Bate"means,with respect to any Interest Payment Date,the fifteenth day of month preceding the month in which such Interest Payment Date falls. "Redemption Account"means the Redemption Account of the Revenue Fund created by Section 4.1 of this Indenture. "Redemption Date" means any date designated as a date upon which Bonds are to be redeemed pursuant to this Indenture. "Regulatory Agreement"means,with respect to the Project,the Regulatory Agreement and Declaration of Restrictive Covenants,elated as of August 1, 1998,by and among the Issuer,the Trustee, and the Borrower,as amended;modified,supplemented or restated from time to time to the extent permitted by this Indenture. "Reimbursement Agreement"means the Reimbursement Agreement,dated as of August 1, 1998,between Fannie Mae and the Borrower,as amended,modified,supplemented or restated from time to time or any agreement entered into in substitution therefor. "Requisition"means,with respect to the Mortgage Loan Fund,the requisition in the form of Exhibit D to this Indenture required to be submitted in connection with disbursements from the Mortgage Loan Fund,and with respect to the Costs of Issuance Fund,the requisition in the form of Exluibit E to this Indenture required to be submitted in connection with disbursements from the Costs of Issuance Fund. DOCSSF1:269332.3 4011-107-ADI-07122198 6;39 PM 21 "Reserved Rights"means those certain rights ofthe Issuer under the Financing Agreement to indemnification and to payment or reimbursement of fees and expenses of the Issuer,including the Issuer's Annual Fee as well as the fees and expenses of counsel,assumption fees and indemnity payments, its right to give and receive notices and to enforce notice and reporting requirements and restrictions on transfer of ownership,its right to inspect and audit the books,records and premises of the Borrower and of Project,its right to collect attorneys'fees and related expenses,its right to specifically enforce the Borrower's covenant to comply with applicable federal tax law and State law (including the Act and the rules and regulations of the Issuer),its right to receive notices under the Financing Agreement and its rights to give or withhold consent to amendments,changes,modifications and alterations to the Financing Agreement. "Responsible Officer" means any officer of the Trustee assigned to administer the duties of the Trustee under this Indenture,the Financing Agreement,the Regulatory Agreement,the Disclosure Agreement and the Collateral Agreement. "Revenue Fund"means the Revenue Fund created by Section 4.1 of this Indenture,comprising the Accounts and subaccounts created within the Revenue Fund. "Revenues" means all(a)Investment Income(other than Investment Income earned from moneys on deposit in the Rebate Fund and the Costs of Issuance Fund,except to the extent Investment Income earned from moneys on deposit in the Costs of issuance Fund is transferred to the General Receipts and Disbursements Account), (b)prior to the Fannie hilae Pass-Through Certificate Delivery Date,all payments made under the Mortgage Note, (c)all payments made under the Collateral Agreement and(d)on and after the Fannie Mae Pass-Through Certificate Delivery Date, all distributions made by Fannie Mae under the Fannie Mae Pass-Through Certificate. "Securities Depository" means,initially,The Depository Trust Company,New York,New York,and its successors and assigns,and any replacement securities depository appointed under this Indenture. "Security"means the Trust Estate and the Credit Facility. "Servicer"means Washington Capital DUS,Inc.,a Delaware corporation,as servicer of the Mortgage Loan,and any successor servicer appointed by Fannie Mae. "Servicer Assignment" means the Assignment of'Mortgage Loan(Servicer Assignment),to be delivered by the Servicer to Fannie Mae as a condition to Fannie Mae Pass-Through Certificate Delivery. "Sinking Fund Redemption Date"means each mandator bond sinking fund redemption date provided for in Section 3.3(5)of this Indenture. "S&P"means Standard.&Poor`s,a Division of The McGraw--Hill Companies Inc.,and its successors and assigns,or if it shall be dissolved or shall no longer assign credit ratings to long term debt, then any other nationally recognized statistical rating agency, designated by the Borrower and acceptable to Fannie Mae and the Issuer,as shall assign credit ratings to long term debt. "State" means the State of California. "Stated Principal Balance"has the meaning given to that term in the Fannie Mae Trust Indenture. DOCssF1:269332.3 40513-107-ADI-07/22M 6:37 PM 22 "Substitute Fannie Mae Pass-Through Certificate"has the meaning given to that term in Section 7.2(2)(2)of this Indenture. "Supplemental Indenture"means any indenture duly authorized and entered into between the Issuer and the Trustee amending or supplementing this Indenture in accordance with the provisions of this Indenture. "Tax Certificate"means the Tax Certificate and Agreement dated the Closing Date,executed and delivered by the Issuer and the Borrower,together with a Certificate ofthe Underwriter,a Certificate of Fannie Mae and a Certificate of the Construction Phase Credit Facility Provider,as amended,modified, supplemented or restarted from time to time. "Term Bonds"means the Bonds having a Maturity Date of April 1,2011,April 1, 2021 and April 1, 2031. "Termination Date"means February[13], 2000,unless extended by Fannie Mae at the request of the Servicer. "Trustee" means U.S. Bank Trust National Association,a national banking association duly organized and existing under the laws of the United States of America,or its successors or assigns,or any other corporation or association resulting from or surviving any consolidation or merger to which it or its successors may be a party and any successor trustee at any time serving as successor trustee under this Indenture. "Trustee Assignment"means the Assignment of Mortgage Loan(Trustee Assignment),to be delivered by the Trustee to the Servicer as a condition to Fannie Mae Pass-Through Certificate Delivery. "Trust Estate"means the property,rights,money,securities and other amounts pledged and assigned pursuant to this Indenture. "Trustee's Annual Fee"means the annual ongoing trust administration fee of the Trustee equal to_.,,...%per annum of the principal amount of the Bonds Outstanding as provided in paragraph(i)(B)of Section 4.3(1)of the Financing Agreement,computed and paid semiannually in arrears on each Interest Payment Bate. "U.C.C."means the Uniform Commercial Code of the State as now or hereafter amended, whether or not such Uniform Commercial Code is applicable to the parties or the transactions. "Underwriter"means PaineWebber Incorporated. "Verification Agent"means an independent firm of certified public accountants,an independent financial advisory firm or ether independent third party qualified and experienced in the verification of the mathematical accuracy of scheduled cash flaws and other funds to pay the principal of and interest on bonds and fees,designated by the Borrower and acceptable to Fannie Mae,preparing a Verification Report. "Verification Report"means a report prepared by a Verification Agent verifying the mathematical accuracy of a Cash Flow Projection. Section 1.3 Rules of Cgustructign. The following rules of construction shad apply: D("SFiz269337.3 40511-1m-AW-o7rzzr5"6537 PM 23 (i) the singuW form of any word used in this Indenture,including the terms defined in Section 1.2,shall include the plural,and vice versa,unless the context otherwise requires;the use herein of a pronoun of any gender shall include correlative words of the other genders; (ii) all references in this Indenture to"Sections"and other subdivisions of this Indenture are to the corresponding Sections or subdivisions of this Indenture as originally executed; (iii) the headings or titles of the Sections and other subdivisions of this Indenture, and any table of contents appended to copies of this Indenture,shall be solely for convenience of reference and shall not limit or otherwise affect the meaning,construction or effect of this Indenture or describe the scope or intent of any provisions of this Indenture; (iv) all accounting terms not otherwise defined in this Indenture have the meanings assigned to them in accordance with applicable generally accepted accounting principles as in effect from time to time; "request" "order," "demand," "direction," K (v) every request, order, demand, direction, application,YS `;appointment,"``notice,""statement,""certificate,""consent,"or similar action under this Indenture by any party shall,unless the form of such instrument is specifically provided,be in writing signed by a duly authorized representative of such party with a duly authorized signature; (vi) if any provision of this Indenture calls for the approval or consent of Fannie Mae,whether Stated as "consent,""written consent,""prior written consent,""approval," ``written approval,""prior written approval'or otherwise,or any waiver by Fannie Mase, and if a basis for Fannie Mae granting such approval,consent or waiver is not otherwise stated,;then it is understood and agreed that such approval, consent or waiver will be given by Fannie Mae in its discretion; (vii) whenever Fannie Mae shall have the right or option in this Indenture to exercise any discretion,to determine any matter,to accept any presentation or to consent to or approve any matter or to grant any waiver, such exercise,determination,acceptance,consent, approval or waiver shall,without exception,be in Fannie Maes sole and absolute discretion;and (vin) all references in this Indenture to"counsel fees,""attorneys fees"or the like shall mean and include fees and disbursements of in-house or outside counsel,whether or not sunt is instituted, and including fees and disbursements preparatory to and during trial and appeal and in any bankruptcy or arbitration.proceeding. Section 1.4 Content of Cerjificates and tnnfans. Every certificate or opinion with respect to compliance by or on behalf of the Issuer with a condition or covenant provided for in this Indenture or the Financing Agreement shall include: (i) a statement that the person or persons providing or giving the certificate or opinion have read the covenant or condition and the definitions in this Indenture relating to the covenant or condition; (ii) a brief statement as to the nature and scope of the exammatioin or investigation upon which the statements or opinions contained in the certificate or opinion are based; DOCSSF1.269332.3 40511-187-AD2-07/2M 6.37 PM 24 (iii) a statement that,in the opinion of the signers,they have made or caused to be made such examination or investigation as is necessary to enable them to express an informed opinion as to whether or not the covenant or condition has been complied with;and (iv) a statement as to whether,in the opinion of the signers,the condition or covenant has been complied with. Any such certificate or opinion provided or given by an officer of any party may be based,insofar as it relates to legal matters,upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opiixion or representation with respect to any matter upon which his or her certificate or opinion may be based is erroneous,or in the exercise of reasonable can should have known that the same is erroneous. Any certificate or opinion provided or given by counsel may be based,insofar as it relates to factual matters(with respect to which information is in the possession of a party),upon the certificate or opinion of or representation by an officer of the party, unless such counsel knows that the certificate or opinion or representation with respect to the matter upon which his or her opinion may be based is erroneous,or in the exercise of reasonable etre should have known that the same is erroneous. Section 1.5 Tnker, ltio . The parties to this Indenture acknowledge,that each party,the Borrower,the Servicer and Fannie Mae and their respective counsel have participated in the drafting of this Indenture. Accordingly,the parties agree that any rule of construction;to the effect that ambiguities are to be resolved against the drafting party shall not apply in the interpretation of this Indenture or any amendment,modification,supplement or restatement of this Indenture or of any exhibit to this Indenture. Section 1.6 Effective Bate. The provisions of this Indenture shall be effective on and as of the Closing Date. Section 1.7 Con structign Ph a Financing A r m n :Assignment,gf R_ipbtsto CongtrLiSlion Phase Credit Facilita Provider. Section 1.7(l)Assi&nment of Rights. The Issuer and the Trustee acknowledge that,prior to the Conversion Date,and subject to the applicable terms and conditions of the Constriction Phase Financing Agreement,the Construction Phase Credit Facility Provider may,by assignment from Fannie Mae,succeed to the interests of Fannie Mae under this Indenture and the other Bond Documents (except for the Credit Facility Agreement)and the Mortgage Loans Documents with the authority to exercise the rights otherwise granted to Fannie Mae under the Bond Documents and the Mortgage Loan Documents,subject,however,to the provisions of Section 3.9(6)ofthis Indenture. Section 1«7(2)Amounts Owed to-Constructs n Credit Fa il` ftavider. Any references in this indenture to amounts owed to Fannie Mae under the Credit Facility Agreement shall,following the assignment referred in Section 1.7(i),be deemed to refer to amounts owed to the Construction Phase Credit Facility Provider under the Construction Phase Credit Documents. Section 1.7(3)Reftase of Letter,ff Crtd t. Notwithstanding any other provision of this Indenture or the other Bond Documents,the Mortgage Loan Documents or the Construction Phase Credit Documents to the contrary,the Constriction Credit Facility Provider shall be entitled to the release and return of the Letter of Credit by Fannie Mae upon issuance by the Servicer of the Conversion Notice,indicating,inter alis,that the Conditions to Conversion set forth in the Fannie Mae Commitment have been satisfied. DOCSSFs:269332.3 4051 1-1 07-ADI-07122198 6:37 FM 25 Section 1.8 Termination of Rei Egnees. All references in this Indenture to the Construction Phase Credit Facility Provider and the Letter of Credit Bank shall be of no further force or effect and shall be disregarded for all purposes of this Indenture from and after the Conversion Bate or if the Construction Phase Credit Facility Provider shall fail to perform its obligations as.and when due under the Construction Phase Financing Agreement. Section 2. The nds. Section 2.1 Issuance of Bonds. The Bonds are authorized to be issued pursuant to and in accordance with this Indenture and shall(a)be designated"County of Contra Costa Multifamily Housing Revenue Bonds(Bollinger Crest.Apartments Project) 1998 Series C,"(b)be issued in the Principal Amount,(c)be dated the Dated Date,(d)bear interest from the Dated Date at the rate or rates provided in Section 2.4(l)of this Indenture,until maturity or earlier redemption,payable on each Interest Payment Date and on each other Bond Payment Date on which interest is payable,until the Bonds are paid in full and(e)mature,subject to redemption prior to maturity as provided in Section 3 of this Indenture,on the dates and in the principal amounts set forth in Section 2.4(1)of this Indenture. Section 2.2 Authorized Amount of Bonds. No Bonds may be issued under the provisions of this indenture except as provided in Section 2.1. The total principal amount of Bonds that may be issued and outstanding under this Indenture is expressly limited to the Principal Amount. No additional bonds shall be issued under this Indenture. Section 2.3 Reptistered Bonds; Authorized.Denomination: Numbering. The Bonds shall be issued as registered bonds without coupons. Each Bond shall be issued in an Authorized Denomination. The Bonds shall be numbered consecutively from 1 upwards,bearing umbers not then contemporaneously outstanding(in order of issuance)according to the Band Register. The Bands shall be issued initially as Book-Entry Bonds,in the Book-Entry System,as provided in Section 2.13 of this Indenture. Section 2.4 Terms of Bonds. Suction 2.4(1)Interest Ratest Principal Maturity. The Bands shall bear interest at the rate(s)per annum and shall mature(subject to redemption prior to maturity,including sinking fund redemption)on the dates and in the principalamounts,stated immediately below. Maturity Date Principal Amount Maturing Ipterest Rhe Interest shall be calculated on the basis of a 3611-day year consisting of twelve 30-day months. Section 2.4(2)Accrugl of Interest. The Bonds shall bear interest from the Interest Payment Date next preceding the date of authentication of the Bonds,provided that if the date of authentication is an Interest'Payment Date for which interest has been paid or is after the Record Date,but prior to the next Interest Payment Date,the Bonds shall bear interest from.such Interest Payment Date, provided further that if the date of authentication is on or before the Record Date for the first Interest Payment Date,the Bonds shall bear interest from the Dated Date of the Bonds. Notwithstanding the foregoing,if at the time of authentication of any Bond,interest on the Bond is in default,the Bond shall nOCSSF1e2693323 40811-197-AW-OW21/98 6;37 PM 26 bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment,or if no interest has theretofore been paid on the Bond,from the Dated Date of the Bond. Section 2,4(3)Pment of Pripcipal and Int erL The principal of and the interest on the Bonds shall be payable in lawful money of the United States of America to the persons in whose names the Bonds are registered on the Bond Register at the close of business on the.applicable Record Date. Payment of the: (i) interest on the Bonds shall be made to the Registered Owners of the Bonds(as determined at the close of business on the Record Date next preceding the applicable Interest Payment Date)by check mailed by first class mail,postage prepaid,on the Interest Payment Date to the addresses of such Registered Owners as they appear on the Bond Register maintained by the Trustee as Bond Registrar or to such other address as may be furnished in writing by any Registered Owner to the Trustee prior to the applicable Record Date;and (ii) principal amount of any Bond and premium,if any,together with interest payable on any Bond Payment Date other than a regularly scheduled Interest Payment>Date,'shall be made by check only upon presentation and surrender of Band on or after its maturity date or date fixed for redemption or other payment at the office of the Trustee designated by the Trustee for that purpose; provided,however,that payment of principal of,premium,if any,and interest on any Bond shall be made by wire transfer to any account within the United States of America designated by a Registered Owner owning$1,000,000 or:more in aggregate principal amount of Bonds if a written request for wire transfer is delivered to the Trustee by such a Registered Owner not less than five days prior to the applicable Bond Payment Date and if such Registered Owner otherwise complies with the reasonable requirements of the Trustee(such request may specify that it is effective with respect to all succeeding payments of principal, premium,if any,and interest and will be so effective unless and until rescinded in writing by the Registered Owner at least five days prior to the Record Date for the Bond Payment Date to which such rescission is designated to apply). Notwithstanding the foregoing,payments of the principal of and interest on any Bonds that are subject to the Book-Entry System shall be made in accordance with the rules,regulations and procedures established by the Securities Depository in connection with the Book- Entry System. If interest on the Bonds is in default,the Trustee shall,prior to the payment of interest, establish a special record date(the"Special Record Date")for such payment,which Special Record(tate shall be not more than fifteen(15)nor less than ten(10)days prior to the date of the proposed payment. Payment of such defaulted interest shall then be made by check or wire transfer,as permitted above, mailed or remitted to the persons in whose names the Bonds are registered on the Special Record Date at the addresses or accounts of such persons shown on the Bond Register. Section 2.4(4)Sourgmfgr Payments of EduciggI and Int r s The Bonds are payable from Revenues,from amounts held in the Funds and Accounts(specifically including the Revenue Fund,and specifically excluding amounts from time to time on deposit in the Rebate Fund,the Costs of Issuance Fund and the Fees Account)and from Investment Income(excluding Investment Income earned on amounts on deposit in the'Rebate Fund and the Costs of Issuance Fund,other than Investment Income earned on amounts on Net Bond Proceeds deposited into the Costs of Issuance Fund and Investment Income on such Investment Income and transferred to the General Receipts and Disbursements Account). Section 2.4(5)failure tq SaUsfy Conditions tQ Conversion. If the Conversion Notice is not issued prior to the Termination Late,(a)Conversion shall not occur, (b)the Bonds shall be subject to special mandatory redemption pursuant to paragraph(ii)(B)of Section 3.3(1)of DOCSSF1:269332.3 40511-107-ADI-W/nM 6.37 FM 27 this Indenture not later than twenty(20)days after the Termination Date unless the Bunds are purchased by or for the account of the Construction Please Credit Facility Provider pursuant to Section 3.9 of this Indenture,(c)the Collateral Agreement will terminate in accordance with its terms and(d)Fannie Mae will have no obligation to acquire the Mortgage Lean or to issue the Fannie Mae Pass-Through Certificate. Section 2.4(6)Designgtion of Paying Ate»t. The Trustee is designated as the Paying Agent for the Bonds. Section 2.5 Form of Bonds. The Bonds,the certificate of authentication on the Bonds and the form of assignment on the Bands shall be in substantially the forms set forth inill�'tt_A to this Indenture with such appropriate variations,omissions,substitutions and insertions as are permitted or required by this Indenture or are required by law,and may have such letters,numbers or other marks of identification and such legends and endorsements placed on the Bonds as may be required to comply with any applicable laws or rules or regulations,or as may,consistent with this Indenture,be determined by the officers executing such Bonds,as evidenced by their execution of the Bonds. Certificated Bonds may be typewritten,printed, engraved,lithographed or otherwise reproduced. Any portion of the text of any Bond may be set forth on the reverse side of the Bond,with an appropriate reference to such text on the face of such Bond or on one or more pages without a reverse side. Section 2.6 Execution. The Bonds shall be executed on behalf of the Issuer by the manual or facsimile signature of its Authorized Officer and attested by the manual or facsimile signature of its Authorized Attesting Officer under the official seal of the Issuer(whether affixed,imprinted, impressed,engraved or otherwise reproduced). Any facsimile signatures shall have the same force and effect as if the Authorized Officers had manually signed and attested the Bonds. In case any officer whose signature or a facsimile of whose signature shall appear on any Bonds shall cease to be such officer before the delivery of such Bonds,such signature or such facsimile shall nevertheless be valid and sufficient for all purposes as if such officer had remained in office until delivery. Section 2.7 Auth 1dicatian. Only such Bonds as shall have endorsed on them a certificate of authentication substantially in the form set forth in Exhibit A to this Indenture duly executed by the Trustee, as Bored Registrar,shall be entitled to any right or benefit under this Indenture. No Bond shall be valid or obligatory for any purpose unless and until such certificate of authentication shall have been manually executed by the Trustee;and such executed certificate upon any such Bond shall be conclusive evidence that such Bond has been authenticated and delivered under this Indenture. The Trustee's certificate of authentication on any Bond shall be deemed to have been executed by it if signed by an authorized representative of the Trustee,but it shall not be necessary that the same person sign the certificates of authentication on all of the Bonds. Section 2.8 T�Bonds. If definitive Bonds are not ready for delivery on the Closing Bate,there may be executed,and upon the request of the Issuer,the Trustee,as Bond Registrar, shall authenticate and deliver,in lieu of definitive Bonds,one or more temporary typewritten,printed or lithographed Bonds,in any Authorized Denomination,in fully registered form,and in substantially the tenor set forth above and with such appropriate omissions, insertions and variations as may be required. If temporary Bonds shall be issued,the Issuer stall prepare and deliver to the Trustee a.supply of blank forms of the Bonds,executed by facsimile signatures and bearing the Issuer's official seal imprinted or impressed on the forms,for issuance upon subsequent transfers or in the event of partial redemption. In the event that such supply of blank form shall be insufficient to meet the requirements of the Trustee,the Trustee shall order printed,at the Borrow'er's expense,an additional supply of blank forms and request their execution by manual or facsimile signature of an Authorized Officer of the Issuer then duly qualified and acting and attested by an Authorized Attesting Officer of the Issuer under the official seal of the I OCSUF1:269332.3 40511-107-A}.I3 07/22/986:37 PM 28 Issuer. The Issuer shall cause definitive Bonds to be prepared and to be executed and delivered to the Trustee,and the Trustee,upon presentation to it of any temporary Bond,shall cancel the same and authenticate and deliver in exchange therefor,without charge to the owner of such Ba Ei,a definitive Boyd or Bands of an equal aggregate principal amount of Authorized Denominational of the same maturity and series,and bearing interest at the same rate as the temporary Bond surrendere& Until so exchanged,the temporary Bonds shall in all respects be entitled to the same benefit and security of this Indenture as the definitive Bands to be issued and authenticated under this Indenture. Interest on temporary Bonds,when due and payable,if the definitive Bonds shall not be ready,shall be paid on presentation of such temporary Bonds for notation of such payment on such Bonds by the Trustee. Section 2.9 Mutilated,Lost Stolen gr T1 stroved Bonds. If any Bond is mutilated, last,stolen or destroyed,the Issuer may execute and the Trustee may authenticate and deliver a new Bond of the same maturity,interest rate,principal amount, Series Cud tenor in lieu of and in substitution for the Bond mutilated,lost, stolen or destroyed;provided that in the case of any mutilated Bond,the mutilated Bond shall first be surrendered to the Trustee,and in the case of any lost,stolen or destroyed Bond,there shall be first furnished to the Trustee evidence satisfactory to it of the ownership of the Bond,and of the lass,theft or destruction,together with indemnity satisfactory to the Trustee and the Issuer and compliance with such other reasonable requirements as the Issuer and the Trustee may prescribe. If any such Fond shall have matured or be about to mature(i.e.,will mature within;the ensuing 60 day period), or if such Bond shall have been called for redemption or a redemption date pertaining,to such Bond shall have passed,instead of replacing the:Bond,the Trustee may,upon receipt of such indemnity,pay the Bond. Any mutilated Bond surrendered to the Trustee shall be canceled by it. In connection with any such payment,the Issuer and the Trustee may charge the holder of such Bond with their reasonable fees and expenses, including attorneys fees and expenses. Section 2:10 B n ' tr r• zchan a and > s e f' n =lt'er reate as the Roadholdens. Except as otherwise provided below with respect to Bonds subject to the Book- Entry System.,the provisions of this Section 2.10 shall govern the transfer and exchange of the Bonds. Section 2.10(1) Boad Resistsr:Band Rig ter. The Trustee is,by this Indenture,constituted and appointed the Bond Registrar for the Bands. The Trustee shall keep the Bond.Register for the registration of the Bonds and for the registration of'transfer oft the Bonds. Section 2.10(2) Transfers. Subject to the express limitations contained in this Section 2.10,any Bondholder or its attorney duly authorized in writing may transfer title to such Bond on the Bond Register kept by the Trustee,upon surrender of the Bond at the office of the Trustee designated by the Trustee for that purpose,together with a written instrument of transfer(in substantially the foam of assignment,including signature guarantee,attached to the Band)satisfactory to the Trustee executed by the Bondholder or its attorney duly authorized in writing,and upon surrender for registration of transfer of any Bond,the Issuer shall execute and the Trustee shall authenticate and deliver in the name of the transferee or transferees a new Band or Bonds of same aggregate principal amount,rate of interest,maturity, Series Cnd tenor as the Bond surrendered and of any Authorized Denomination. Transfers of an interest in the Bonds shall be in principal amounts equal to any Authorized Denomination. Section 2.10(3) Exch, a . Subject to the express limitations contained in this Section 2.10,Bonds may be exchanged upon surrender of such Bonds at the office of the Trustee designated by the Trustee for that purpose together with a written instrument of transfer(in substantially the form of assignment,including signature guarantee,'attached to the Bond)satisfactory to the Trustee, executed by the Bondholder or its attorney duly authorized in writing,for an equal aggregate principal amount of Bonds of the same aggregate principal amount,rate of interest,maturity,Series Cnd tenor as the Bonds being exchanged and of any Authorized Renomination. The Issuer shall execute and the DOCSSFI-2693a23 40511-1417-AD2-07/2219 6:37 PM 29 Trustee shall authenticate and deliver Bonds which the Bondholder making the exchange is entitled to receive,bearing numbers not contemporaneously then outstanding. Section 2.10(4) Exggpt gns to Tonsfers and E_= `ages. The Trustee shall not be required to register any transfer or exchange of any Bond(or portion of any Bond)called for redemption. Section 2.10(5) it Registrations oftransfers or exchanges of Bonds shall be without charge to the Bondholders,but any taxes or other governmental charges required to be paid with respect to a transfer or exchange shall be paid by any Bondholder requesting the registration of transfer or exchange as a condition precedent to the exercise of such privilege. Any service charge made by the Trustee for any such registration,transfer or exchange shall be paid by the Borrower. Section 2.10(6) HMgnized wners. The person in whose name any Bond is registered on the Bond Register shall be deemed and regarded as the absolute',owner of such Bond for all purposes,and payment of or on account of either principal or interest shall be made only to or upon the order of such person or its attorney duly authorized in writing,but such registration may be changed as providedabove in this Indenture. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sutra or sums so paid. Section 2.18(7) Booms Protected. All Bonds issued upon any registration of transfer or exchange of Bands shall be legal,valid and binding limited obligations of the Issuer,evidencing the same debt,and entitled to the same security and benefits under this Indenture,as the Bonds surrendered upon such transfer or exchange. Section 2.10(8) Issuer's Reliance. tri executing any Bond upon any exchange or registration of transfer provided for in this Section 2.10,the Issuer may rely conclusively on a representation of the Trustee that such execution is required. Section 2.11 Cnctflat on. All Bonds which have been surrendered pursuant to Section 2.4(3)or Section 3 of this Indenture for payment upon maturity or redemption prior to maturity shall be canceled by the Trustee and shall not be reissued. Canceled Bands shall be destroyed by the Trustee unless the Trustee receives contrary instructions from the Issuer with respect to the disposition of such canceled Bunds. Section 2.12 Ratably Secured. All Bonds issued under this Indenture are and are to be,to the extent provided in this Indenture,equally and ratably secured by this Indenture without preference,priority or distinction on account of the actual time or times of the authentication or delivery or maturity of the Bonds so that all Bonds at any time Outstanding under this Indenture shall have the same right, lien and preference under and by virtue of this Indenture and shall all be equally and ratably secured by this Indenture with like effect as if they had all been executed,authenticated and delivered simultaneously on the Bated hate,whether the same,or any of them,shall actually be!disposed'of at such date,or whether they,or any of them,shall be disposed of at some future date. Section 2.13 F&A-F Wry System. Section 2.13(1) Rgaistration in the Book Erttry Svsteln. It is intended that the Bonds be registered so as to participate in a securities depository system,with a Securities Depository. The initial Securities Depository is DTC,and the initial securities depository system is the DTC system(the"DTC System"), as set forth in this Indenture. The Issuer and the Trustee are authorized to execute and deliver such letters to or agreements with DTC as shall be necessary to effectuate the DTC tsst~1:269332.3 40511407-ADI-07)22M 6.37 PM 30 System,inclining a letter of representations in the form required by DTC(the"Letter of Representations'). In the event of any conflict between the terms of any such letter or agreement, including the Letter of Representations,and the terms of this.Indenture,the terms of this Indenture shall control. DTC may exercise the rights of a Bondholder only in accordance with the terms of this Indenture applicable to the exercise of such rights. The Bonds shall be initially issued in the form of a separate single fully registered Bond for each of the maturities of the Bonds. The Bonds shall be registered in the name of Cede&Co.,as nominee of DTC. Section 2.13(2) Exculyation. With respect to Bonds registered in the Bond Register in the name of Cede&Co.,as nominee of DTC,the Issuer,the Trustee,Fannie Mae,the Servicer and Borrower shall have no responsibility or obligation to any broker-dealer,bank or other financial institution for which DTC holds Bonds from time to time as securities depository(each such broker-dealer,bank or other financial institution being referred to in this Indenture as a"DTC Participant')or to any person on behalf of whom such a DTC Participant directly or indirectly holds an interest in the Bonds(each such person being referred to in this Indenture as an"Indirect Participant!). Without limiting the immediately preceding sentence,the Issuer,the Trustee,Fannie Mae,the Servicer and Borrower shall have no responsibility or obligation with respect to(a)the accuracy of the records of DTC,Cede&Co. or any DTC Participant with respect to any ownership interest in the Bonds,(b)the delivery to any DTC Participant or any Indirect Participant or any other person,other than Cede&Co.,as nominee of DTC,as Bondholder on the Bond Register,of any notice with respect to the Bonds,including any notice of redemption,(c)the payment to any DTC Participant or Indirect Participant or any other Person,other than Cede&Co.,as nominee of DTC,as Bondholder on the Bond Register,of any amount with respect to principal of,premium,if any,or interest on,the Bonds or(d)any consent given by Cede& Co.,as nominee of DTC as registered owner. So long as certificates for the Bonds are not issued pursuant to Section 2.13(5)of this Indenture and the Bonds are registered to DTC,the Issuer,the Borrower,Fannie Mae,the Servicer and:the Trustee shall treat DTC or any successor securities depository as,and deem DTC or any successor securities depository to be,the absolute owner of the Bands for all purposes whatsoever, including without limitation(i)the payment of principal and interest on the Bonds, (ii)giving notice of redemption and other matters with respect to the Bonds,(iii)registering transfers with respect to the Bonds and(iv)the selection of Bonds for redemption. While in the DTC System,no person other than Cede&Co.,or any successor to it,as nominee for DTC,shall receive a'Bond certificate with respect to any Bond. Section 2.13(3) pamentoRgces with Rgsgect to onds Regi tered in the Boob Entry Svstetn. Notwithstanding any other provision of this Indenture to the contrary, so long as any of the Bands are registered in the name of Cede&Co.,as nominee of DTC,all payments with respect to principal of,premium,if any,and interest on such Bonds.and all notices with respect to such Bonds shall be made and given, respectively,in the manner provided in the Letter of Representations. Section 2.13(4) Spbstitgtign gf NominUpon delivery by DTC to the Trustee of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede&Co.,and subject to the provisions in this Indenture with respect to interest checks being mailed to the registered,owner at the close of business on the Record Date applicable to any Interest Payment Date, the name"Cede&:Co."in this Indenture shall refer to such new nominee of DTC. Section .13(5) SMSce or S__gM!jtk1 De osita nsfers 0 tside Book-Entry System. DTC may determine to discontinue providing its services with respect to the Bands at any time by giving written notice to the Issuer and the Trustee and discharging its responsibilities with respect to the Bonds under applicable law. The Issuer may determine that continuation of the DTC System is not in the best interests of the Bondholders. The Trustee,with the consent of the Issuer,but without the consent of any other person,may terminate the services of DTC with respect to the Bonds. noCs8F2:264332.3 40511-107-ADI-0782/48 6-37 PM 31 Upon the discontinuance or termination of the services of DTC with respect to the Bonds pursuant to the foregoing'provisions,unless a substitute securities depository is appointed to undertake the functions of DTC under this Indenture,the Trustee,at the expense of the Borrower,is obligated to deliver Bond certificates to the'Beneficial Owners of the Bonds,as described in this Indenture,and the Bonds shall no longer be restricted to being registered in the Bond Register in the name of Cede&Co.as nominee of DTC,but may be registered in whatever name or names the registered owners transferring or exchanging Bonds shall designate to the Trustee in writing,in accordance with the provisions of this Indenture. The Trustee may determine that the:Bonds shall be registered in the name of and deposited with a successor depository operating,a securities depository system,qualified to act as such under Section 17(a)of the Securities Exchange Act of 1934,as amended,as may be acceptable to the Issuer,or such depository's agent or designee. Section 2.14 Conditions for Delivery of Bonds. The Issuer shall execute and deliver the Bonds to the Trustee, and the Trustee shall authenticate the Beds and deliver therm to or for the account of the Underwriter or to such persons as the Underwriter shall specify,in each case as directed by the Issuer;provided,however,that prior to delivery of the Bonds to the Underwriter there shall be delivered to the Trustee the following: (i) a certified copy of the Bernd Resolution; (ii) the Original Mortgage Note and executed original counterparts of the Bernd Documents,the Mortgage,the Assignment,the Collateral Agreement,the Reimbursement Agreement,the Disclosure Agreement,Construction Phase Credit Documents'and Mortgage Loan Documents to be executed and delivered on the Closing Bate by the parties to those documents; (iii) an opinion of Band Counsel to the effect that the Bonds constitute valid and binding obligations of the Issuer;that the interest payable on the Bonds is excludable from gross income for federal income tax purposes;and that this Indenture has been duly executed and delivered by the Issuer and constitutes the valid and binding obligation of the Issuer,subject to customary qualifications on enforceability; (iv) a written request of an Authorized Officer of the Issuer to the Trustee to authenticate and deliver the Bonds to or for the account of the Underwriter upon receipt from the Underwriters of the purchase price set forth in such request; (v) receipt from the Underwriter of such purchase price; (vi) receipt from the Borrower of the Costs of Issuance Deposit to be deposited into the Costs of Issuance Fund; (vii) receipt from the Borrower of the Initial Debt Service Deposit to be deposited into the General Receipts and Disbursements Account; (viii) evidence, acceptable to Fannie Mae and the Servicer,of proper recordation of the Mortgage or a title insurance binder acceptable to Fannie Mae and the Servicer insuring the"gap„ in a manner acceptable to Fannie Mae and the Servicer,such acceptability to W evidenced by the execution and delivery of the Collateral Agreement;and (ix) written evidence that the Bonds have been assigned a rating in the Highest Rating Category by S&P; DOCss1''1:2693323 40511-187-,WI-07127/98 6:37 PM 32 ( ) a copy of the Cash Flow Projection required by S&P;and (xi) the Verification Report. Section 2.15 Fannie M e Pass-Through Certifi to De ive • Fannie Mae PVs Through!Certificgg Dglivea Reauirements. Section 2.15(1) F nig Mae PassJ[hrourti-Certificate DdWvemy. Notwithstanding any ether provision of this Indenture to the contrary,if the Trustee determines that each of the Fannie Mae Pass-Through Certificate Delivery Requirements set forth in Section 2.15(2)of this Indenture has been satisfied,then the Trustee shall,following consultation with Fannie Mae and-the Servicer,(1)coordinate the timing of the issuance of the Fannie Mae Pass-1brough Certificate, (2) establish the Fannie Mae Pass-Through Certificate Delivery Date:,and(3)issue the Frig Mae Pass- Through Certificate Delivery Notice,as a result of which,the following shall occur on the Fannie Mae Pass-Through Certificate Delivery Date: (i) the Trustee shall(a)assign all of its right,title and interest in and to the Mortgagee Loan,including the Mortgage Nate and the Mortgage,to the Servicer,effective as of Issue Date,without recourse,pursuant to the Trustee Assignment in the farm attached to this Indenture as Exhibit B or in such other form as shall be acceptable to the Trustee,the Servicer and Fannie Mae,in either case, in appropriate form for recordation,and(b)endorse the Mortgage Note to the Servicer,without recourse; (ii) the Servicer shall(a)assign all of its right,title and interest in and to the Mortgage Loan acquired pursuant to the Trustee Assignment, including the Mortgage Note and the Mortgage,to Fannie Mae,effective as of the Issue Date,without recourse,pursuant to the Servicer Assignment substantially in the form attached to this Indenture as Exhibit C or in such other farm as shall be acceptable to the Servicer and Fannie Mae,in either case,in appropriate form for recordation,and(b)endorse the Mortgage Note to Fannie Mae,without recourse; (iii) Fannie Mae shall issue the Fannie Mae Pass-Through Certificate as provided in Section 7.2(I)of this Indenture and an Issue Supplement to the Fannie Mae Trust Indenture which has attached to it a Mortgage Loan Schedule specifying the Mortgage Loan(and no other mortgage loan)as the Mortgage Loan constituting the Pool(as defined in the Fannie Mae Trust. Indenture); (iv) at the request of the Servicer,the Legal Department of Fannie Mae shall issue and deliver to the Trustee an Opinion of Counsel to the effect that the Fannie Mae Pass-Through Certificate constitutes a valid and binding obligation of Fannie Mae,entitled to the benefits of the Fannie Mae Trust Indenture, subject to any applicable bankruptcy,insolvency,,reorganization and other laws of general applicability relating to or affecting creditors'rights from time,to time in effect and to general equity principles; (v) the Trustee shall relinquish all of its rights and interests in the Collateral Agreement effective as of the expiration or earlier termination of the Collateral Agreement in accordance with its terms;and (vi) all other agreements,documents,instruments,certificates(including an update of the Tax Certificate,dated as of the Issue Date)and opinions as the Issuer,the Trustee,the Servicer or Fannie Mae shall require,in their respective discretion,to effect Fannie Mae Pass- Through Certificate Delivery shall be delivered. DOCCSSFI:269332.3 48N11-187-AD1-87/22/98 6:37 PM 33 The Trustee shall,not later than three(3)Business Days following issuance of the Fannie Mae Pass- Through Certificate Delivery Notice,give written notice of the pending Fannie Mae Pass-Through Certificate Delivery to the Bondholders,but Fannie Mae Pass-Through Certificate Delivery shall not require,and shall be effective without,the consent of the Bondholders. The Trustee's notice to the Bondholders shall state the anticipated Fannie Mae Pass Through Certificate Delivery Irate and,provided that the Trustee shall have received written confirmation from the Rating Agency of the rating to be in effect with respect to the Bonds on and after the Fannie Mae Pass-Through Certificate Delivery Mate, such.rating. The Trustee and the Issuer acknowledge and agree that the Trustee,acting for and on behalf of the Issuer,in consideration of the execution and delivery of the Trustee Assignment to the Servicer and the concurrent execution and delivery of the Servicer Assignment to Fannie Mae in exchange for the Fannie Mae Pass-Through Certificate,will acquire the Fannie latae Pass-Through Certificate as provided in and subject to the terms and conditions set forth in this Indenture. Section 2.15(2) Fannil,Mme pas -Thr h GtdfflfJ&W P-Llkylry RReget uir tntn„t,1. The requirements for the Trustee to issue the Fannie Mae Pass-Through Cettificate Delivery Notice are the following. (i) the Servicer shall have issued the Conversion Notice to the Trustee prior to the Termination Date; (ii) the Servicer shall have confirmed in writing to the Trustee that the Servicer has ordered the Fannie Mae Pass-Through Certificate(a)in a principal amount equal to the Issue Date Principal Balance and(b)with an interest rate equal to the Fannie Mae bass-Through Certificate Rate; (iii) the Trustee shall have received written confirmation from the Servicer that the Servicer has received confirmation from Fannie Mae that Fannie Mae intends to issue the Fannie Mae Pass ThroughCertificate; (iv) the Trustee shall have received written confirmation from Fannie Mae that Fannie Mae will,on the Fannie Mae Pass-Through Certificate Delivery Date,deliver to the Trustee an Issue Supplement to the Fannie Mae Trust Indenture,which will have attached to it a Mortgage Loan Schedule specifying the Mortgage Loan(and no other mortgage loan)as the Mortgage Loan constituting the Pool(as defined in the Fannie Mae Trust indenture); (v) the Servicer shall have confirtned in writing to the Trustee that the Servicer has received confimation from Fannie Mae that the Fannie Mae Legal Department will issue to the Trustee on the Fannie Mae Pass Through Certificate Delivery Date,an Opinion of Counsel to the effect that the Fannie Mae Pass-Through Certificate conaitutes a valid and binding obligat on of Fannie Mae,entitled to the benefits of the Fannie Mae"frust Indenture,subject to any applicable bankruptcy,insolvency,reorganization and,other laws of general applicability:relating to or affecting creditors' rights from time to time in effect and to general equity principles, (vi) the Trustee,the Servicer,the Issuer,the Borrower,Fannie Mae and the Rating Agency shall have received either(a)a written confirmation of the original Cash Flow Projection from the Verification Agent or(b)a theta current Cash Flow Projection,in the latter instance accompanied'by a Verification Report,showing that the scheduled payments to be made under the Mortgage Loan and the corresponding distributions to be Heade under the Fannie Mae Pass- Through Certificate,together with other Revenues,will be sufficient to timely pay the principal of and interest on the Bonds and the Fees when the same shall become due and payable; DOCssR1:269332.3 40511-107-ADI-O 22M 6:37 PM 34 (viz) the Trustee shall have received from Band Counsel the form of,and written confirmation from Bond Counsel that, subject to satisfaction of the Fannie Mae Pass-Through Certificate Delivery Requirements,Band Counsel will issue to the Trustee,Fannie Mac,the Servicer and the Issuer on the Fannie Mae Pass-Through Certificate Delivery Date,a then current Opinion of Bond Counsel to the effect that,absent a change in law or materialfact bearing on the matters covered in the form'of Opinion of Bond Counsel,the substitution of the Fannie Mae Pass- Through Certificate for the Collateral Agreement is permitted by this Indenture and will not affect the excludability from grass income,for federal income tax purposes,>of the interest payable on the Bonds; (viii) the Trustee shall have received all other agreements,documents,instruments, certificates(including an update of the Tax Certificate,dated as of the Conversion Date)and opinions as the Issuer,the Trustee or Fannie Mae shall require,in their respective discretion,to effect Fannie Mae Pass-Through Certificate Delivery have been prepared,agreed upon and accepted as to form and content by the intended recipients of such agreements,documents, instruments,certificates and opinions; (ix) the Trustee shall have received written confirmation from the Rating Agency that the Bonds will be assigned a rating,or will maintain a rating,not less than the rating in effect prior to the Fannie Mae Pass-Through Certificate Delivery Date; (x) the Borrower shall have deposited with the Trustee moneys sufficient to pay all fees,costs and expenses(including attorneys'fees and expenses)necessary to,effectuate the terms and conditions of this Section 2.15;and (xi) if the Issue Date will coincide with the Conversion Bate,any special mandatory redemption pursuant to paragraph(i)(A)of Section 3.3(1)or paragraph(ii)(C)'of Section 3.3(1) shall have occurred or notice thereof shall have been given,as the case may be. Section 3. Redewtiop of Bonds. Section 3.1 Redemption. The Bonds are subject to redemption prior to maturity only as set forth in this Section 3. Section 3.2 ORtlonal Redemption. The Bonds are not subject to optional redemption prior to the Conversion Date. Section 3.2(1)Optional Redemption On and After the Cgtsversion Date On and after the Conversion Date,the Bonds shall,to the extent optional prepayment ofthe'Mortgage Loan in whole is'made pursuant to and as permitted by the terms of the Mortgage Loan Documents(it being understood and agreed that the right to optionally prepay the Mortgage Loan prior to the Fannie Mae - Pass-Through Certificate Delivery Date other than wholly with Available Moneys shall be subject to,and evidenced by,the prior written consent of Fannie Mae provided to the Trustee,on which the Trustee may conclusively rely),be subject to corresponding,optional redemption on the first day of any month on or after October 1,2008,in whale and not in part. Redemption pursuant to this Section 31 12(l)shall be made on any date for which timely notice of redemption can be given during the periods set forth immediately below,at the respective redemption prices set forth below(expressed as percentages of the principal amounts of the Bonds called for redemption),plus accrued interest,if any,to the Redemption Date: DOCssFI.269332.3 40511-107-A1)1-07t22M 6:37 PM 35 .................................................................................1.11,11,111,11111, . ............................................................................................. ..................................................................................... .................................................................... ....................... Redemption Period Redemption Pric (Bath Dates inclusive) (Expressed as a haiz October 1,2008 through September 30, 2009 101% October 1,2009 and thereafter 100 Section 3.2(2)Available Moneys Reagiremont. Unless Fannie Mae provides" -_' its prior written consent to an optional prepayment of the Mortgage Loan prior to the Falidie Mae Ra'v, --- I I Through Certificate Delivery Date other than wholly with Available Moneys{as provi&din'��tibf-v.- p:eA. . 'd it), 3.2(1)of this Indenture,optional redemption pursuant to Section 3.2(l)shall not d unless sur ' redemption is effected solely with Available Moneys. Notwithstanding any other piALkion oft,"this Indenture to the contrary,the Optional redemption of the Bonds arising from the optional,Vcepa. yment of the Mortgage Loan at anytime shall not be made,and notice of any redemption anismi _�A_ theopt`614 prepayment of the Mortgage Loan shall not be given to Bondholders,unless and un (30)di: Wr prior to the Redemption Date,the Trustee has on hand Available Moneys in an amount sufficitnt to pay the End Period Payment. Neither the Issuer,Fannie Mae nor the Servicer shall have any respi mibilit� or, liability to provide funds to be included in the End Period Payment. T Section 3.2(3)Conditions,to-Optional Re&mption Based.on Prenavment of the Mortgage Loan. Under the Financing Agreement,the Borrower is required to pr' to the V.Ar- the Servicer and Fannie Mae written notice Of the optional prepayment of the Mo n than sixty(60)days prior to the date of such prepayment. As soon as practicable after receipt Of such notice,the Trustee shall send notice of redemption of the Bonds in accordance with Section 3.4 of this Indenture to the Bondholders,Fannie Mae and the Rating Agency. Under the Mortgae, 4W _pt, prepayment of the Mortgage Loan must be made on the last Business Day of a month, f,. I Orton, day immediately preceding a scheduled payment date under the Mortgage Note. Section 3.2(4)Timing ofPa_ments After the Fannie Mae 11'ms-Throuffh� Certificate Delivery Date. If Fannie Mae Pass-Through Certificate Delivery has occq—R—�'tq;j#0— prepayment of the Mortgage Loan will be distributed by Fannie Mae on the DistributiS.Dati,mi -the month following the month in which the prepayment is made by the Borrower;becau the timing of, the distribution of the prepayment of the Mortgage Loan under the Fannie Mae Pass.' the Redemption Date of any such optional redemption shall be the first day of the month lfoilswing the month in which falls the Distribution Date on which Fannie Mae will distribute the preR.ikynxft of the Mortgage Loan. Section 3.3 Mandatory R Section 3.3(1)Special Mandatory Rtftmgtion in ConnegfiW_ Conversion. The Bonds are subject to special mandatory redemption,in whole or in 9.4%:: (i) in the event,and to the extent that: (A) amounts remaining in the Mortgage Loan Fund ow*�jpa ts_ferrf2-d'.`t�q.` Redemption Account pursuant to the second sentence of Section 4.3(&Y this�In6 w.--: --: , for application to the redemption of Bonds;or (B) proceeds of insurance from any casualty to,or pr W' e&of award from any condemnation or any award as part of a settlement in lieu of condemnation of,the Project are not applied in accordance with the Mortgage I Loan DOCSSF1.2693323 40511-107-ADI-07122/98 6.37 PM 36 ......................... .................................................................. ...........................................................................- I -,''''I.-...11.11...................... . ................................................................................................................. ........... .......................... ............................................... ........... Redemption Period Redemption Prices (Both Dates Inclusive) {Expressed as-a.-Percolae) October 1,2008 through September 30,2009 101% October 1,2009 and thereafter 100 Section 3.2(2)Available Mogels Ryguirewwt. Unless Fannie Mae provides its prior written consent to an optional prepayment of the Mortgage Loan prior to the Fannie Mae Pass- Through Certificate Delivery Date other than wholly with Available Money$(as provided in Section 3.2(1)of this Indenture,optional redemption pursuant to Section 3.2(1)shall not be permitted unless such redemption is effected solely with Available Moneys. Notwithstanding any other provision of this Indenture to the contrary,the optional redemption of the Bonds arising front the optional prepayment of the Mortgage Loan at any time shall not be made,and notice of any redemption aris' from the optional Ing prepayment of the Mortgage Loan shall not be given to Bondholders,unless and until.thirty(30)days prior to the Redemption Date,the Trustee has on hand Available Moneys in an amount sufficient to pay the End Period Payment. Neither the Issuer,Fannie Mae nor the Servicer shall have any responsibility or liability to provide funds to be included in the End Period Payment. Section 3.2(3)Conditions to Optional Redemption Based Qn h:egaymeat of the,Mortgage Lawn. Under the Financing Agreement the Borrower is required to provideI to the Trustee, the Servicer and Fannie Mae written notice of the optional prepayment of the Mortgage Loan,not less than sixty(60)days prior to the date of such prepayment. As soon as practicable after receipt of such notice,the Trustee shall send notice of redemption of the Bonds in accordance with Section 3.4 of this Indenture to the Bondholders,Fannie Mae and the Rating Agency. Under the Mortgage Note, prepayment of the Mortgage Loan must be made on the last Business Day of a month,and therefore on a day immediately preceding a scheduled payment date under the Mortgage Note. Section 3.2(4)Timing of P_a_yMents After the Fannie MH Pass-Through Certificate Delivery Date. If Fannie Mae Pass-Through Certificate Delivery has occurred,an optional prepayment of the Mortgage Loan will be distributed by Fannie Mae on the Distribution Date in the month following the month in which the prepayment is made by the Borrower,because of the timing of the distribution of the prepayment of the Mortgage Loan under the Fannie Mae Pass-Through Certificate, the Redemption Date of any such optional redemption shall be the first day of the mouth following the month in which falls the Distribution Date on which Fannie Mae will distribute the prepayment of the Mortgage Loan. Section 3.3 Mandatory Redemption. Section 3.3(1)Spe Si:jd Mgndgka RedtMRfiogn in Connection with Conversion. The Bonds are subject to special mandatory redemption,in whole or in part: (i) in the event,and to the extent that: (A) amounts remaining in the Mortgage Loan Fund are transferred to the Redemption Account pursuant to the second sentence of Section 4.3(3)of this Indenture for application to the redemption of Bonds;or (B) proceeds of insurance from any casualty to,or proceeds of any award from any condemnation or any award as part of a settlement in lieu of condemnation Of,the Project are not applied in accordance with the Mortgage Loan DOCSSF1:269332.3 40511-107-ADI-07f22M 6:37 PM 36 ....................... ..............I.......... .............................................................. ....................................................................... ................__............................................. Documents to the rebuilding,restoration or replacement of the Project or,with the prior written consent of Fannie We,otherwise used for improvements to the Project,or applied to the reimbursement of amounts owed to Fannie Mae pursuant to the Reimbursement Agreement fallowing(1)the involuntary destruction,for loss of the Project in its entirety or nearly in its entirety as a result of casualty or,condemnation,such special mal3datory redemption of Bonds to be a redemption of all of the Brands Oumiziding and,therefore,in a principal amount equal to the unpaid principal balance of the Mortgage Note,provided further that the Trustee shall be entitled to payment under the Collateral Agreement,in accordance with its terms,to the extent the insurance or condemnation proceeds,as applicable,applied to the payment of the Mortgage Note,and moneys,if any,on deposit in the Funds and Accounts(other than the Rebate Fund)are less than the unpaid principal balance of the Mortgage Note and are,therefore, insufficient to redeem all of the Bonds Outstanding and(2)the partial'destruction or condemnation of the Project,such special mandatory redemption of Bonds to be a redemption of Bonds Outstanding in a principal amount equal to the insurance or condemnation proceeds received with respect to the Project,and (ii) at the written direction or with the prior written consent of Fannie Mae to the Trustee and in the amount specified by Fannie Mae: (A) as soon as the notice requirements of Section 3.4 permit,following (1)any event of default under the Mortgage Loan,including any default under the Mortgage Note,the Mortgage or any other Mortgage Loan.Document or any"Event of Default"under and as defined in the Reimbursement Agreement or the Financing Agreement(including any Event of Default under,and as defined in,the Reimbursement Agreement or the Financing Agreement caused by a default under the Mortgage Note,the Mortgage or any other Mortgage Loan Document)or(2)the occurrence of a"Borrower Default"or a"Direction to Draw" under,and as each such term is defined in,the Construction Phase Financing Agreement,or (B) on or after the Termination Date,as soon as the notice requirements of Section 3.4 permit,if the Conversion Notice is not issued by the Servicer prior to the Termination Date; or (C) on or after the Conversion Date, as soon as the notice requirements of Section 3.4 permit, if,and to the extent that,the Borrower has prepaid the Mortgage Note in part pursuant to Section 9 of the Mortgage Note in order to equalize the Mortgage Loan Amount to the Permanent Phase Mortgage Loan Amount(as such term is defined in,and determined in accordance with the terms and conditions of,the Fannie Mae Commitment). A special mandatory redemption pursuant to this Section 3.3(l)shall be effected on the earliest practicable Redemption.Date for which timely notice of redemption can be given pursuant to Section 3.4 of this indenturefollowing the occurrence of any of the events described in this Section 3.3(1),at a redemption price equal to 100%of the principal amount of the Bonds to be redeemed plus accrued interest on the Brands to the Redemption Daae. Section 3,3(2)Special Mandatory edea► tion After he nie Mae P s- Throe h ertificate VLelivga D&tg F m Certain Fannie Ma Pass-Through Cerfirkate Distributions. The Bonds are subject to special mandatory redemption in whole or in part after the Fannie Mae Pass-Through Certificate Delivery Date and prior to their stated maturity at a redemption DOCSSFI X69332.3 40511-307-ADI-V/22M 6:37 PM 37 .............................................................................111111111 ............................................................................................. ............................................................................................... ................................................................................ .................................... price equal to 100%of the principal amount of the Bonds to be redeemed plus accrued interest to the Redemption Date,but without premium,in each case from and to the extent that the Trustee receives a distribution under the Fannie Mae Pass-Through Certificate resulting from: (i) Fannie Mae's determination that the Mortgage Loan is or is to be deemed a Fully Prepaid Mortgage Loan(other than by reason of optional prepayment of the entire principal balance of the Mortgage Loan prior to final maturity,causing an optional redemption of the Bonds pursuant to Section 3.2 of this Indenture);or (ii) other moneys received by Fannie Mae on account of the Mortgage Loan (other than by reason of optional prepayment of the entire unpaid principal balance of the Mortgage Loan prior to final maturity, causing an optional redemption of the Bonds pursuant to Section 3.2 of this Indenture),including,without limitation,prepayment as a result of a casualty or condemnation affecting the Project,or a default under the Mortgage Loan;, provided,however,that at the direction of Fannie Mae,all or part of the proceeds of such a prepayment of the Mortgage Loan shall be used, in lieu of redeeming Bonds,to acquire a Substitute Fannie Mae Pass- Through Certificate pursuant to Section 7.2(2)(2)of this Indenture. Because of the timing of the distribution under the Fannie Mae Pass-Through Certificati%the Redemption Date of any such special mandatory redemption shall be the first day of the month following the month in which falls the Distribution Date on which Fannie Mae will make such distribution. Section 3.3(3)Special M.4nd& Through CSrtificlLe Deliver Lory em an After ftfawk Mae Pass- y Date Upon Purchase of Fannie-M-Ae Pasl-Through er ,fificaft. In the event that Fannie Mae is in default of its payment obligations under the Fannie Mae Pass-Through Certificate,the Trustee is authorized to accept from Fannie Mae an offer to purchase the Fannie Mae Pass-Through Certificate from the Trustee at a purchase price not less than the aggregate Stated Principal Balance(as defined in the Fannie Mae Trust Indenture)of the Mortgage Loan plus accrued interest. If such a purchase occurs,the Trustee shall thereafter immediately call all of the Outstanding Bonds for redemption on the first day for which the requisite notice of redemption can be given but in no event more than ten(10)days after the Trustee receives the purchase price from Fannie Mae,and shall apply the proceeds received from Fannie Mae in respect of purchase of the Fannie Mae Pass-Through Certificate, together with Available Moneys held by the Trustee,to the payment of the redemption price of the Bonds. No such offer from Fannie Mae shall be accepted by the Trustee unless the Available Moneys held by the Trustee under this Indenture,together with the amounts to be paid by Fannie Mae in respect of the purchase of the Fannie Mae Pass-Through Certificate,are sufficient to pay in full the principal amount of the Bonds Outstanding and interest accrued and to accrue on the Outstanding Bonds to the Redemption Date. Any redemption of Bonds pursuant to this Section 3.3(3)shall be at a redemption price equal to 100%of the principal amount of the Bonds to be redeemed plus accrued and unpaid interest on the Bonds to the Redemption Date,but without premium. Section 3.3(4) Mandatory Sinking Fund Rede ration. Section 3.3(4)(1) Term Bonds, The Tenn Bonds shall be subject to mandatory sinking fund redemption in part,by lot,prior to maturity,from sinking fund installments on each Sinking Fund Redemption Date of April I and October 1,commencing October 1, 2001,at a redemption price equal to 100%of the principal amount of Bonds to be redeemed,plus accrued interest to the Redemption Date,but without premium,in the years and in the amounts set forth immediately below: DOCSSPI.2,69332.3 40511-107-ADI-07122)"6:37 PM 38 ...................................................................... ..................................................................................- .. ..........---....................................................... Sinking Fund Sinking Fuad Pro Redemption.Date Principal A= Rgdention Date Amc�nt *Maturity Section 3.3(4)(2) Adiustment for Redemptigns From Other Than Sinking Fund Installments. If less than all of the Bonds of a specific maturity shall have been redeemed other than from sinking fund installments applicable to such Bonds,the principal amount of the Bonds of such maturity to be redeemed in each year from sinking fund installments shall be decreased pro rata among all sinking fund installments applicable to such Bonds or,if Fannie Mae Pass-Through Certificate Delivery has occurred,by an amount,in proportion,as nearly as practicable,to the decrease in the distributions under the Fannie.Mae Pass-Through Certificate in such year or,if there is no decrease in the distributions under the Fannie Mae Pass-Through Certificate,pro rata among all such sinking fund installments. Any such proportional redemption shall be confirmed in writing to the Trustee by the Servicer. Section 3.3(5) Uecial Mandatory Redem tion fr m Excess Cash Flow Di tribut ons. The Bonds are subject to special mandataryredemption after the Conversion Date,in whole or in part,prior to their stated maturity, at a redemption price equal to 100%ofthe principal amount of the Bonds to be redeemed,plus accrued interest to the Redemption Date,but without premium, in Authorized Denominations, on the next succeeding Interest Payment Date for which notice of redemption can be given pursuant to Section 3.4 of this Indenture,from funds transferred to the Redemption Account pursuant to subparagraph(B)of paragraph(vi)of Section 4.4(4)of this Indenture. Bonds redeemed pursuant to this Section 3.3(5)shall be redeemed in inverse order of maturity. Section 3.4 Notice of Redemption. Section 3.4(l)Nonce RMuirement. Notice of the call for redemption of any Bonds shall be given by the Trustee in the name and on behalf of the Issuer not less than 30 nor more than 45 days prior to the anticipated Redemption Date by mailing such notice,first class mail,postage prepaid, to the Registered Owner of each Bernd to be redeemed at the address of such Registered'Owner as shown on the Bond Register,provided that notice of any optional redemption pursuant to Section 3.2 of this Indenture or any special mandatory redemption pursuant to Section 3.3(1),Section 3.3(2)or Section 3.3(3)of this Indenture may be given not less than 15 nor more than 20 days prior to the date fixed for such redemption. Notwithstanding the foregoing,so long as the Book Entry System is,maintained in effect,notice of redemption shall be given to the entity designated in the Letter of Representations DO"SFI:269332.3 40511-107-AW-07122M 6:37 PM 39 executed among the Issuer,the Trustee and DTC in connection with the issuance and sale of the Bands, and the Trustee shall not be required to give any other notice of redemption. In the event of(a)a prepayment that will give rise to an optional redemption under Section 3.2,(b)a special mandatory redemption under Section 3.3(1), (c) prepayment of amounts payable to the Trustee under the Fannie Mae Dass-Through Certificate that will give rise to a special mandatory redemption under Section 3.3(2) of this Indenture or(d)apurchase by Fannie Mae of the Fannie Viae Pass-Through Certificatethat will give rise to a special mandatory redemption under Section 3.3(3)of this indenture,the Trustee, (1) immediately following receipt of notice of a prepayment that will give rise to a Fannie Mae Pass-Through Certificate distribution that in turn will give rise to an optional redemption under Section 3.2 of this Indenture, or(2)immediately following receipt of funds from Fannie Mae with respect to a special mandatory redemption under Section 3.3(1)of this indenture or(3)immediately following receipt of notice of a Fannie Mae Pass-Through Certificate distribution that will give rise to a special mandatory redemption under Section 3.3(2)of this Indenture or(4)immediately following receipt by the Trustee of notice from Fannie Mae that a purchase is to be made in the case of a special mandatory redemption under Section 3.3(3)of this Indenture,shall select the Bonds to be redeemed pursuant to Section 3.2, Section 3.3(1),Section 3;3(2)or Section 3.3(3)of this Indenture,as the case may be,and notify the Securities Depository by Electronic Means of the redemption of Bonds on the date fixed for redemption of Bonds in accordance with Section 3.2,Section 3.3(1), Section 3.3(2)or Section 3.3(3)of this Indenture,as the case may be. Whenever possible,the Trustee shall try to provide notice of any redemption to the Securities Depository,at least 30 days prior to the Redemption Date(15 days in the case of a redemption under Section 3.2,Section 3.3(l), Section 3.3(2)or Section 3.3(3)of this Indenture). With respect to any redemption that takes place at any time that the Bonds are not subject to the Boole Entry System,the Trustee shall cause a second notice of redemption to be sent by first class mail,postage prepaid,on or about the 45th day following the Redemption Bate,to any Bondholder who has not submitted its.Bond to the Trustee for payment on or before the 45th day following the Redemption Date. Notice of redemption may be given by the Trustee prior to the receipt of all funds necessary to l effect the redemption,provided that a special mandatory redemption under Section 3.3(1)of this Indenture shall not occur unless and until the Trustee has on deposit and available or,if applicable,has received from Fannie Mae,all of the funds necessary to effect such special mandatory redemption,and such special mandatory redemption shall be canceled if,as of the date fixed for redemption,the Trustee does not have on deposit and available or,if applicable, shall not have received from Fannie Mae,all of the funds necessary to effect such special mandatory redemption. A copy of the notice of any special mandatory redemption under Section 3.3(1)of this Indenture shall be given to the Construction Phase Credit Facility Provider. Section 3.4(2)Con fent of Notice. Each notice of redemption shall state: (i) the date of the redemption notice; (ii) the date of issue of the Bonds as originally issued and the complete official name of the Bonds,including the series designation; (iii) the numbers of the Bonds to be redeemed,by giving the individual certificate number of each Bond to be redeemed(or stating that all Bands between two staffed certificate numbers,both inclusive,are to be redeemed,or that all or a stated portion of the Bonds of one or more maturities have been called for redemption); (iv) the-CUSIP numbers of all Bands being redeemed; (v) in the case of a partial redemption of Brands,the principal amount of each Bond being redeemed; DOCssF1:269332.3 409 1-iar-Ant-annarge 6:37 Pay 40 (vi) the rate or rates of interest borne by each Bond being redeemed; (vii) the maturity date of each Bond being redeemed; (viii) the place or places where amounts due upon such redemption will be payable; (ix) the Redemption Date and redemption price of each Bond being redeemed; (x) the name,address and telephone number at the office of the Trustee with respect to such redemption; (xi) that all Bonds to be redeemed are required to be surrendered at the office of the Trustee designated by the Trustee for that purpose for redemption at the redemption price; (xii) that interest on such Bonds will not accrue from and after the.Redemption Date; and (xiii) if applicable,as provided in Section 3.4(5)of this Indenture,that redemption is conditional upon receipt by the Trustee of sufficient Available Moneys to redeem the Bonds. Section 3.4(3)Additigns.l Notice. Notice of redemption also shall be sent by the Trustee by first class mail,postage prepaid,or by overnight delivery service or other secure overnight means,charges prepaid,at the same time notice is mailed to the Registered Owners pursuant to Section 3.4(1)of this Indenture to(a)the Rating Agency,(b)if Bonds are not subject to the Book:Entry System,any Registered Owner of$1,000,000 or more in aggregate principal amount of Bonds to be redeemed,(c)if the Bonds are not subject to the Book-Entry System,certain municipal registered Securities Depositories(described below),which are known to the Trustee on the second Business Day prior to the date the notice of redemption is mailed to the Bondholders to be holding Bunds,and(d)at least two(2)of national information services(described below)that disseminate securities redemption notices. For this purpose: (i) Securities Depositories include:The Depository Trust Company,711 Stewart Avenue,Garden City,New York 11530,Fax-(516).227-4039 or 4190;Philadelphia Depository Trust Company,Reorganization Division, 1900 Market Street,Philadelphia, Pennsylvania 19103,Attention:Bond Department,Fax-(215)3496-5058;or,in accordance with the then current guidelines of the Securities and Exchange Commission,such other addresses and/or such other securities depositories or any such other depositories as the Issuer may designate in writing to the Trustee;and (ii) Information Services include:Financial Information,Inc. "Daily Called Bond Service,"30 Montgomery Street, 10th Floor,Jersey City,New Jersey 07302,Attention: Editor; Kenny Information Services, "Called Bond Service,"65 Broadway, 16th Floor,New York,New York 10004;Moody's Investors Service"Municipal and Government,"99 Church Street, 8th Floor,New York,New York 10007,Attention.: Municipal News Reports;and Standard and Poor's Ratings Group"Called Bond Record,"25Broadway,New York,New Fork 10004;or, in accordance with then current guidelines of Securities and Exchange Commission,such other addresses and/or such other services providing information with respect to called bonds,or any other such services as the Issuer may designate in writing to the'Trustee. Section 3.4(4)Validity orf Er_oceeliirtes for the&Aem tion of Bonds. Neither failure to give or receive any notice described in Sections 3.4(1)or 3.4(3)of this Indenture, DOCssF1:269332.3 46511-107-AD1-07122198 6:37 PM 41 failure to give notice timely nor any defect in any notice(or in its content,as required by Section 3.4(2)of this Indenture or in the manner in which notice is given)shall affect the validity or sufficiency of any proceedings for the redemption of Bands to be redeemed. Sections 3.4(5)Ftewoca ion of 1-ytiee• Cancellation ofRe g tion Any notice of optional redemption under Section 3.2 of this Indenture given as provided in this Section 3.4 shall be revoked by the Trustee by notice given in the same manner as provided in this Section 3.4 for the giving of notice of redemption or by Electronic Means,confirmed in writing,and the redemption canceled,if Available Moneys or,with Fannie Maes prior written consent,moneys other than Available Moneys,sufficient to effect such redemption have not been received by,or are not on hand with,the Trustee at least five days prior to the Redemption Date. Section 3.4(6)Caies to Fannie Mae. The Trustee shall provide to Fannie Mae copies of all notices given under this Section 3.4 and of all cancellations of notices,but neither the failure to,give such notice to Fannie Mae nor any defect in such notice shall affect the validity of any proceedings for the redemption of the Bonds. Section 3.5 Redemption FEMents. If notice of redemption of Bonds has been given pursuant to Section 3.4 of this Indenture and it on the Redemption Date, ,Available Moneys or, with Fannie Mae's prior written consent,moneys tither than Available Moneys, in an amount sufficient (including,principal,interest and premium,if any)to effect the redemption of the Bonds to be redeemed are held by the Trustee for the purpose of effecting the redemption of such Bonds,the Bonds called for redemption shall become due and payable on the Redemption bate,interest on those Bonds shall cease to accrue on the Redemption Date and the called Bonds shall no longer b deemed Outstanding;the Available Moneys or,with Fannie Mae's prior written consent,moneys other i'han Available Moneys,on deposit with the Trustee shall be used to pay,and the Trustee is authorized and directed to apply such funds to the payment of,the Bonds or portions of the Bonds called for redemption,together with accrued interest on such Bonds to the.Redemption Date;the Registered Owners of the Bonds so called for redemption shall thereafter no longer have any security or benefit under this Indentureexcept to receive payment of the redemption price for such Bunds upon surrender of such Bonds to the Trustee. Except during any period in which the Bonds are subject to the Book Entry System: (i) no payment shall be made by the Trustee upon any Bond or portion of a Bond called,for redemption until such Bond or portion shall have been presented and surrendered for payment or cancellation or the Trustee shall have received the items required by Section 2.9 of this Indenture with respect to any mutilated, hast, stolen or destroyed Bond;and (ii) if there shall be so called for redemption less than the entire principal amount of a Bond,the Issuer shall execute,and the Trustee shall authenticate and deliver,upon the surrender of such Bond to the Trustee,without charge by the Issuers or the Trustee to the Bondholder,in exchange for the unredeemed principal amount of such Band,a new Bond or Bonds of the same interest rate,maturity and term,in any Authorized Denomination,in aggregate;principal amount equal to the unredeemed balance of the principal amount of the Bond so surrendered. During any period in which the Bonds are subject to the Book Entry System,the rules, regulations and practices,governing the Book Entry System shall govern whether and the extent to which the Trustee shall make payments on any Bond called for redemption with or without surrender of the Bond(or portion of the.Bond)to be redeemed,and the circumstances(if any)under which the Issuer shall be required to execute,and the Trustee shall authenticate and deliver,a new Bond in exchange for the unredeemed portion of any Bond called for redemption in part. All moneys held by or on behalf ofthe UOCssF'1:26"32.3 48511_107-ADI-07/22/98 6:37 PM 42 Trustee for the redemption of particular Bonds shall be held in trust for the account of the holders of the Bands to be redeemed,as provided in and in accordance with Section 4.10 of this Indenture.. Section 3.6 C i ellation oaf Bunds. All Bonds which have been redeemed,paid, retired or delivered to the Trustee for exchange shall not be reissued but shall be canceled and destroyed by the Trustee as provided in Section 2.11 of this Indenture. Section 3.7 Sol ion of Bonds to be Rett ed rMon Partial Redemmp 'on of Bon s. 1f less than all of the Outstanding Bonds are to be called for redemption,Bonds to be redeemed shall be selected by the Trustee on a reasonably proportionate basis,in minimum amounts of$5,000,from among all the then existing maturities of the Bonds Outstanding,such reasonably proportionate basis to be determined and effectuated as nearly as practicable by multiplying the total amount of money available to redeemBonds by the ratio which the principal amount of Bonds Outstanding in each maturity bears to the principal amount of all of the Bonds Outstanding,and within a'maturity by lot,prrsvided that with respect to any redemption of Bonds pursuant to Section 3.2,3.3(l)or 3.3(2)of this Indenture,the sufficiency of the scheduled cash flow from the monthly payments to be made under the Mortgage Note or the scheduled cash flaw from the monthly distributions to be made under the Fannie Mac Pass- Through Certificate,as the case may be,and Investment Income with respect to the General Receipts and Disbursements Account to pay the principal of and interest on the Bonds and the Fees'when due and payable after such redemption, shall be established by a then current Cash Flow Projection which shall be verified by a Verification Report(upon each of which the Trustee may rely),each prepared and delivered to the Trustee and Fannie Mae, at the Borrower's expense,at least 15 days prior to the Redemption Date. 1n the event that any Bonds of the same maturity are to be redeemed in part,the Trustee shall assign to each Bond then Outstanding a instinctive number for each$5,000 of the principal amount of such Bond and from the numbers so assigned to such Bonds,the Trustee shall randomly select as many numbers as, at$5,000 for each number,shall equal the principal amount of such Bonds to be redeemed. The Bonds within a maturity that are to be redeemed shall be the Bonds to which are assigned the numbers selected by the Trustee,but only so much of the principal amount of each such Bond of a denomination of more than$5,000 shall be redeemed as shall equal$5,000 for each number assigned to it and so selected. Bonds may be redeemed only in Authorized Denominations. Notwithstanding the foregoing, so long as the Bonds remain in the Boob-Entry System,the Bonds to be redeemed shall be selected by DTC,or any successor Securities Depository,and the DTC Participant through such selection process as is applicable at such time. for the purposes of this Section 3.7,Bonds which have theretofore been selected'for redemption shall not be deemed Outstanding. Section 3.8 Purchase of Blinds In Lieu of R:edemntion. Unless otherwise expressly provided in this Indenture,and subject to the provisions of Section 3.9 of-this Indenture,if at any, time moneys are held in any Fund or Account to be used to redeem Bunds,in lieu.of such redemption the Borrower may direct the Trustee to use part or all of such moneys to purchase Bonds which would otherwise be subject to redemption from such moneys. The purchase price of such Bonds(excluding accrued interest,but including any brokerage and other charges)shall not exceed the applicable redemption price of the Bands which would be redeemed but for the operation of this Section 3.8 (accrued interest to be paid from the same Fund or Account from which accrued interest would be paid upon the redemption of such Bonds). Any such purchase must be completed prior to the time notice would otherwise be required to be given to redeem the Bonds and may not occur,without the consent of the Trustee, after a Record Date. All Bonds so purchased shall be canceled by the Trustee and the face amount of the Bonds so purchased shall be applied as a credit against the Issuer's obligation to redeem such Bonds from such moneys. Savings resulting from the purchase of Bonds at less than their respective redemption prices shall be used to purchase or redeem additional Bonds to the extent permitted by the provisions of this Indenture. The Borrower,as its own expense,may direct the Trustee to request the submission of tenders following notice to Bondholders requesting such submission prior to making the r►ocssFI,269332.3 40511-107-ADI-07122M 6:37 PM 43 purchases authorized by this Section 3.8. Notice of acceptance of tenders shall be given by first-class mail,postage prepaid,to all registered Bondholders, or in the case of Book-Entry Bonds,to DTC,or any successor Securities Depository. The Borrower may,at its own expense,specify the mr axirnum and minimum period of time which shall transpire between the date upon which such notice is to be given and the date upon which such tenders are to be accepted. No tenders shall be considered or accepted at any price exceeding the price specified in this Section 3.8. The Trustee shall accept bids with the lowest price and in the event the moneys available for purchase pursuant to such tenders are not sufficient to permit acceptance of all tenders and if there shall be tenders at an equal price above the amount of moneys available for purchase,then the Trustee shall select by lot,in such manner as it shall determine in its discretion,the Bonds tendered which shall be purchased. Section 3,9 S11 l Purchase in Lieu of Redemption. Section 3.9(1)PprShpn Qgtion. Subject to the satisfaction of all applicable terms and conditions set forth in this Section 3.9,if all Bonds Outstanding are called for redemption under paragraph (ii)(A)or paragraph(ii)(B)of Section 3.3(l)of this Indenture,such Bonds may be purchased ("Purchased Bonds")in whole,but not in part,on the date such Bunds are otherwise scheduled to be redeemed(the"Purchase Bate'),at the purchase price specified below(the"Purchase Price'),and from the source of funds specified below(the"Payment Source'),by the Trustee at the written direction of the Construction Phase Credit Facility Provider and for the account of'the Construction Phase Credit Facility Provider. The Payment Source shall consist solely of funds to be delivered by Fannie,Mae under the Collateral Agreement in connection with such redemption together with funds otherwise available under the Indenture to pay the redemption price of Bonds as directed by Fannie Mae, The Purchase Price shall be equal to the principal amount of the Bonds otherwise subject to redemption,plus accrued interest, if any, on such.Bonds to the Purchase Date. Section 3.9(2)Purchased Bonds. Bonds to be purchased under Section 3.9(1) of this Indenture which are not delivered to the Trustee on the Purchase hate shall be deemed to have been so purchased and not redeemed on the Purchase Date and shall cease to accrue interest as to the former owner on the Purchase Date. Purchased Bonds shall be registered in the name,and delivered upon the order,of the Construction Phase Credit Facility Provider or any third party designated by such party. Following such purchase,the registered owner of the Purchased Bonds shall be the owner of such Bonds for all purposes under this Indenture and interest accruing on such Bonds from and after the Purchase Date shall be payable solely to the registered owner of such Purchased Bonds, Section 3.9(3)Nice. Notice of election by the Construction Phase Credit Facility Provider to purchase Bonds otherwise called for redemption in accordance with Section 3.9(1)of this Indenture shall be delivered in writing to the Trustee,Fannie Mae and the Rating Agency at least fifteen(15)days prior to the date otherwise scheduled for redemption of the Bonds. The Trustee shall cancel the proposed purchase of the Bands if funds constituting the Payment Source sufficient to pay the Purchase Price are not on deposit with the Trustee on or before the Purchase Bate and the Bonds shall instead be redeemed as required under this Indenture. Section 3.9(4)Pa-Y�i s Under the Credit Facility. The Trustee shall proceed to take such action as is required under Section 7.1(3)of this Indenture and the Collateral Agreement to receive payments from Fannie Mae under the Collateral Agreement as if the Bonds were to be redeemed pursuant to paragraph(ii)(A)or paragraph(ii)(B)of Section 3.3(l)in order to pay the Purchase Price of the Bands which would be subject to such special mandatory redemption on or before the Purchase Date. DOCSSF'1:269332.3 44511447-AD147/22M 6:37 PM 44 Section 3.9(5)Purchased>B ds Remain QytstlMdin . It is the intention of the Issuer that the purchase of Bonds pursuant to this Section 3.9 shall not constitute a merger or extinguishment of the indebtedness of the Issuer evidenced by the Bunds so purchased or ofthe Borrower and that such Purchased Bonds shall for all purposes be regarded as Outstanding under this Indenture, except as otherwise expressly provided in this Section 3,9 and in this Indenture. Upon the purchase of any Bondpursuant to this Section 3.9,the notice of redemption previously given with respect to such Bond shall be deemed to be a notice of mandatory tender of such Bond. Section 3.9(6)BILhts of Fannie Mae. Notwithstanding anything contained in this Indenture to the contrary,in no event shall the Collateral Agreement(or any funds'derived from the Collateral Agreement)directly or indirectly secure,or provide a source of payment of amounts due from time to time with respect to,the Purchased Bonds. From and after the Purchase Date and until the Collateral Agreement Termination Bate(as defined in the Collateral Agreement) Fannin Mae'shall continue to be entitled to all rights,privileges,benefits and security granted to Fannie hoe under this Indenture and the other Bond Documents and the Mortgage Loan Documents. In no event shall Fannie Mae be deemed to be the owner of any Bond or Purchased Bond whether pursuant to this Section 3.9 or otherwise unless any Bonds are transferred to,and registered in name of,Fannie Viae in accordance With the provisions of Section 2.10 of this Indenture(provided that no such transfer shall be effective unless accompanied by the written consent of the General Counsel and the Controller of Fannie Mae). Section 3.9(7),Limitations a Transfer of—Pa-ribmd Bonds. Notwithstanding Section 2.10 of this indenture,Bonds registered in the name of the Construction Phase Credit Facility Provider pursuant to Section 3.9 may not be transferred to another registered owner without the written approval of the Issuer and only in compliance with all applicable securities'laws; provided,however,that such approval shall not be required if at the time of such transfer,the Bonds have a current rating of"A"or better from the Rating Agency. Any such approved transfer must be of all of the Outstanding Bonds to a single registered owner. Section 4. Funds and Accounts. Section 41 Creation of FundsandAccounts. There is hereby created by the Issuer and established with the Trustee the following Funds and Accounts to be held and administered by the Trustee in accordance with the provisions of this Indenture: (i) the,Mortgage Loan Fund; (ii) the Revenue Fund and within the Revenue Fund,the General Receipts and Disbursements Account,the Credit Facility Account(and within the Credit Facility Account,a Pass-Through Rate Subaccount and.a Principal Subaccount),the Redemption Account,the Ineligible Moneys Account and the Fees Account; (iii) the Costs of Issuance Fund;and (iv) the Rebate Fund. Section 4.2 initial Deposits. On the Closing Date.the Trustee shall make the following deposits: (i) $ .representing the Net Bond Proceeds,shall be deposited into the Mortgage Loan Fund; DOCSSF1:2693323 40511-107-AD1-07T22M 6:37 PM 45 ,representing accrued interest on the Bands,shall be deposited into the General Receiptsand Disbursements Account, (iii) $ received from the Borrower,representing the Initial Debt Service Deposit,shall be deposited into the General Receipts and Disbursements Account;and (tv) $ received from the Borrower,representing the Costs of Issuance Deposit, shall be deposited into the Costs of Issuance Fund. Section 4.3 The Mortgage Loan„ nd. Section 4.3(l) Degosit 'l-ishmrsement. The Trustee shalt receive the Net Bond Proceeds and deposit[such portion of]the Net Bond Proceeds [as set forth in Section 4.2(i)] into the Mortgage Loan Fund as provided in paragraph(i)of Section 4.2 of this Indenture. Section 4.3(2) Disbursements. Amounts on deposit in the Mortgage Loan Fund shall be disbursed from time to time by the Trustee to fund the Mortgage Loan for the sole purpose of paying Costs of the Project approved by the terms,conditions and provisions of the Constriction Phase Credit Facility Provider pursuant to the Construction Phase Credit Documents. [Will there be capitalized interest:?] Section 4.3(2)(1) Requisitions: The Trustee shall make disbursements from the Mortgage Loan Fund only upon the receipt of Requisitions,each in the form of Exhibit D attached to this Indenture, signed by an Authorized Borrower Representative and countersigned by an Authorized Construction Phase Credit Facility Provider Representative(signifying the approval of the Requisition by the Construction Phase Credit Facility Provider). The Trustee shall have no duty to determine whether any requested disbursement from the Mortgage Loan Fund complies with the terms, conditions and provisions of the Construction Phase Credit Documents,but shall make each such disbursement upon receipt of a Requisition signed by the Authorized Borrower Representative and countersigned by the signature of an Authorized Construction Phase Credit Facility Provider Representative. The countersignature of the Authorized Construction Phase Credit Facility Provider Representative on a Requisition shall be deemed a certification and,insofar as the Trustee and the Issuer are concerned, constitute conclusive evidence,that all of the terms, conditions and requirements of Construction Phase Credit Documents applicable to such disbursement have been fully satisfied. The Trustee shall,immediately upon each receipt of a completed Requisition signed by the Authorized Borrower Representative and countersigned by an Authorized Construction Phase Credit Facility Provider Representative,initiate procedures with the provider of Investment Agreement applicable to the Mortgage Loan Fund,if any,to make withdrawals under that Investment Agreement as necessary to fund the Requisition. The Trustee shall immediately notify the Construction Credit Phase Facility Provider if there are not sufficient funds available to snake the transfers as and when required by this subsection 4.3(2)(1). Section 4:3(2}(2) TImin , If a Requisition signed by the Authorized Borrower Representative and countersigned by an Authorized Construction Phase Credit Facility Provider Representative is received by the Trustee after noon, California time,on any given Business Day,the requested disbursement shall be paid by the Trustee within eight calendar days Upon final disbursement of all amounts on deposit in the Mortgage Loan Fund,the Trustee shall close the Mortgage Loan Fund. Section 4.3(3)Transfers to Effect Certain Special Mandstttrry Redemptions f Ronds. Immediately prior to any special mandatary redemption of Bonds pursuant to(a)paragraph (i)(B)(1)of Section 3.3(l)of this Indenture or(b)paragraph(ii)of Section 3.3(1)of this Indenture(or any DOCSSF1-269332.3 40511-107-Aril-0'7/22/48 6:37 PM 46 purchase of Bunds pursuant to Section 3.9(1)ofthis Indenture in lieu of special mandatory redemption under paragraph(ii)(A)or(ii)(B)of Section 3.3(l)of this Indenture),as the case may be,any amounts then remaining in the Mortgage Loan Fund shall,at the written direction of Fannie Mae,be transferred to the Redemption Account of the Revenue Fund to be applied to such redemption of Bonds. Any amounts remaining on deposit in the Mortgage Loan Fund upon the earlier of(a)the Conversion Date and not required to pay Costs of the Project not yet due and payable or being contested in good faith,in each case under this clause(a)determined under the Construction Phase Credit Documents,or(b)the Termination Date,whichever occurs first,shall be transferred to the Redemption Account of the Revenue Fund and applied to the redemption of Bands pursuant to paragraph(i)(A)of Section 3.3(1)of this Indenture, provided that if the Termination Date occurs prior to the Conversion Date or if the Trustee purchases the Bands for the account of the Construction Phase Credit Facility Provider pursuant to Section 3.9 of this Indenture,such transfer shall occur three(3)years after the Closing Date. Section 4.3(4)Inve Ment Income on Mortgage LganFun Amounts on deposit in the Mortgage Loan Fund shall be invested as provided in Section 5 of this Indenture: All Investment Income earned on amounts on deposit in the Mortgage Loan Fund shall be retainedin and credited to and become apart of the amounts on deposit in the Mortgage Loan Fund. Section 4.4 The Revenue Fund, Section 4.4(1)Genml. Moneys in the Revenue Fund shall be used solely for the purposes sex forth in Section 4.4(4)of this Indenture. Section 4.4(2)AF-ing of Monevs. Notwithstanding anything contained in this Indenture to the contrary,all moneys deposited to the credit of the Revenue Fund which'do not constitute Available Moneys at the time of such deposit,shall be held in the Ineligible Moneys Account of the Revenue Fund until such time as the same constitute Available Moneys under this Indenture,provided that,in each case,after such moneys shall became Available Moneys(or of the same at the time of deposit are Available Moneys),such moneys shall be transferred to the General Receipts and Disbursements Account or the Redemption Account of the Revenue Fund,as appropriate,and provided further that this Section 4.4(2)shall have no applicability to(a)the Initial Debt Service Deposit, (b)any payment received by the Trustee which constitutes a Required Mortgage Payment(as defined in the Collateral Agreement), (c)any moneys from time to time on deposit in the Fees Account,or(d)Investment Income arising out of the investment of any Required Mortgage Payment. The Trustee shall establish separate subaccounts for all such moneys so as to ensure the separate identity of moneys received on a given date from each discrete source for the credit of such account from moneys received on any other date from each discrete source for the credit of such account and to separately identify moneys intended by the Borrower for eventual transfer to the General Receipts and Disbursements Account or the Redemption Account of the Revenue Fund. Section 4.4(3)DeR2sits Into the Accounts of the Revanue Fund. :Section 4.4(3)(1) Deposits into the General Rer.,eipts and,, Disbpr, emEents Account. The Trustee shall deposit each of the following amounts into the General Receipts and Disbursements Account of the Revenue Fund: (i) on the Closing Date,the accrued interest on the Bonds, as provided in paragraph(ii) of Section 4.2,of this Indenture; DOC35F1:20132.3 40511-107-Aui-07aM 6:37 Par 47 .................................................................................... 11 ............................................................................ .............................................. (H) on the Closing Date,the Initial Debt Service Deposit, as provided in paragraph(iii)of Section 4.2 of this Indenture; (iii) prior to the Fannie Mae Pass-Through Certificate Delivery Date, any transfer from the Credit Facility Account pursuant to paragraph(i)or(ii)of Section 4.4(5)of this Indenture; (iv) prior to the Conversion Date, all moneys transferred from the Mortgage Loan Fund pursuant to Section 4,3(2)of this Indenture to pay interest on the Bonds; (v) prior to the Fannie Mae Pass-Through Certificate Delivery Date, all regularly scheduled payments of principal, if any, and interest on the Mortgage Loan; (vi) prior to the Fannie Mae Pass-Through Certificate Delivery Date, any transfer from the Credit Facility Account pursuant to paragraph(i) of Section 4.4(5)of this Indenture; (vii) prior to the Fannie Mae Pass-Through Certificate Delivery Date, interest paid in connection with a mandatory prepayment of the Mortgage Loan; (viii) after the Fannie Mae Pass-Through Certificate Delivery Date,upon receipt, all distributions of principal and interest under the Fannie Mae Pass- Through Certificate; (ix) after the Fannie Mae Pass-Through Certificate Delivery Date, the interest component of any prepayment of the Fannie Mae Pass-Through Certificate(but not including the principal component of any prepayment of the Fannie Mae Pass-Through Certificate, which principal component shall, as provided in paragraph(v)of Section 4.4(3)(2)of this Indenture,, be deposited into the Redemption Account); (x) all Investment Income on the Funds and Accounts(except that Investment Income earned on amounts on deposit in the Mortgage Loan Fund shall be credited to and be retained in the Mortgage Loan Fund,Investment Income earned on accounts on deposit in the Rebate Fund shall be credited to and be retained in the Rebate Fund and Investment Income earned on amounts on deposit in the Costs of Issuance Fund which is not attributable to Net Bond Proceeds shall be credited to and retained in the Costs of Issuance Fund); (xi) from time to time,upon receipt, Available Moneys provided by or on behalf of the Borrower pursuant to Section 3.2(2)of this Indenture to fund the interest portion of any End-Period Payment; and (xi) any other moneys made available for deposit into the General Receipts and Disbursements Account from any other source, including, without limitation, moneys held in the Ineligible Moneys Account of the Revenue Fund DOCSSFI:20332.3 40511-107-ADI-07122M 6:37 PM 48 .......................... .............................................- ................................................................................... ....................................................................... I '­­­­­­.­.,..................... and transferred to the General Receipts and Disbursements Account, provided that such moneys shall be transferred to the General Receipts and Disbursements Account only after they shall have become Available Moneys. Section 4.4(3)(2) Deposits Into the_Redemption!Account. The Trustee shall deposit each of the following amounts into the Redemption Account of the Revenue Fund: (i) prior to the Fannie Mae Pass Through Certificate Delivery Date, any prepayment of principal of the Mortgage Loan,and any premium on the Bonds to be paid in connection with such prepayment; (ii) prior to the Fannie Mae Pass-Through Certificate Delivery Date,that portion of any other deposit or transfer of funds representing principal corresponding to the principal to be paid on any optional or special mandatory redemption of the Bonds; (iii) prior to the Fannie Mae Pass-Through Certificate Delivery Date,any other moneys to be transferred to the Redemption Account pursuant to any provision of this Indenture; (iv) any amounts required to be transferred to the Redemption Account pursuant to Section 4.3(3)of this Indenture; (v) after the Conversion Date,the amounts provided for in subparagraph(B) of paragraph(vi)of Section 4.4(4)of this Indenture; (vi) after the Fannie Mae Pass-Through Certificate Delivery Date, distributions under the Fannie Mae Pass-Through Certificate corresponding to a voluntary prepayment of principal of the Mortgage Loan; (vii) after the Fannie Mae Pass-Through Certificate Delivery Date,upon receipt,distributions under the Fannie Mae Pass-Through Certificate resulting from(a) Fannie Mae's determination that the Mortgage Loan is or is to be deemed a Fully Prepaid Mortgage Loan(other than by reason of optional prepayment of the entire principal balance of the Mortgage Loan prior to final maturity, causing an optional redemption of the Bonds pursuant to Section 3.2 of this Indenture), or(b)other moneys from time to time received by Fannie Mae with respect to the principal of the Mortgage Loan and distributed to the Trustee(other than by reason of optional prepayment of the entire principal balance of the Mortgage Loan prior to final maturity,causing an optional redemption of the Bonds pursuant to Section 3.2 of this Indenture); (viii) after the Fannie Mae Pass-Through Certificate Delivery Date,from time to time,upon receipt,Available Moneys provided by or on behalf of the Borrower pursuant to Section 3.2(2)of this Indenture to fund the premium portion of any End- Period Payment; (ix) on and after the Conversion Date, any other Available Moneys which may be deposited into the Redemption Account for the optional redemption of Bonds pursuant to Section 3.2(2)of this indenture;and (x) on and after the Conversion Date,any other amount received by the Trustee and required by the terms of this indenture or the Financing.Agreement to be DOCSSF1:269332.3 44511-107-ADI-07122M 6:37 PM 49 _....... .. ._..... _. .. ...... .._...._. _ _ . .... ._... .._... .......... .......... _. ._. _..._.. ......._._.. . ..__ ..... deposited into the Redemption Account,including amounts held in a'separate account of the Revenue Fund under Section 4.4(2)of this indenture for deposit into the Redemption Account,provided that such moneys shall be transferred to the Redemption Account only after they shall have become Available Moneys. Section 4.4(3)(3) Deposits Into the Credit Facility Account. The Trustee shall deposit each of the following amounts into the subaccounts of the Credit Facility Account of the Revenue Fund: (i) all amounts derived from the Collateral Agreement in respect of principal payments on the Mortgage Loan,which amounts shall be deposited into the Principal Subaccount, (ii) all amounts derived from the Collateral Agreement in respect of payments of the Pass-Through Rate,which amounts shall be deposited into the Pass- Through Rate Subaccount; and (iii) all amounts derived from the Collateral Agreement in respect of the Purchase Price of Bonds to be purchased pursuant to Section 3.9(1)of this indenture. No other moneys shall be deposited into the Credit Facility Account. The Credit Facility Account shall be closed at such time as Fannie Mae has no continuing liability under the Collateral Agreement. Section 4.4(3)(4) Roosits into the Fees Account. The Trustee shall deposit into the Fees Account of the Revenue Fund the amounts provided for in paragraph(iv)of Section 4.4(4)of this Indenture. Section 4.4(4)Disbursements From the Accounts of the Revenue Fund. Moneys on deposit in the various Accounts of the Revenue Fund shall be disbursed at the following times and applied in the following manner and in the following order of priority: (i) on each Interest Payment.Date,the Trustee shalt disburse from the General Receipts and Disbursements Account an amount equal to the amount of interest due on the Bonds on such Interest Payment Date and shall apply such amount to the payment of such interest so due; (ii) on each Sinking Fund Redemption Date, each Maturity Date and the date of acceleration of the Bonds,the Trustee shall disburse from the General Receipts and Disbursements Account an amount equal to the amount of principal due on the Bonds on such date and shall apply such amount to the payment of such principal so due, (iii) on each Redemption Date on which a redemption pursuant to Section 3.2 or Section 3.3 of this Indenture is scheduled to take place,the Trustee shall apply amounts on deposit in the Redemption Account to the payment of principal of and premium, if any,on the Bonds to be redeemed on such date; (iv) on each Interest Payment Date,the Trustee shall transfer(A)an aggregate amount equal to that portion of the Issuer's Annual Fee,the Trustee's Annual Fee and the Rebate Analyst's Annual Fee(to the extent(a)the Issuer's Annual Fee,the Trustee's Annual Fee and the Rebate Analyst's Annual Fee,if any,are included in the Pass-Through Rate,as described in Section 4.3 of the Financing Agreement and(b)such Fees are not paid in advance on the Closing DOCSSF1:269332.3 40511-107-AD1-07!22!98 6:37 PM 50 Date or provided for by transfer from the Mortgage Loan Fund pursuant to Section 4.3(2)of this Indenture)payable on such date(or on any date prior to the next Interest Payment Date),from the General Receipts and Disbursements Account to the Fees Account,and(B)an amount equal to the total amount of the Issuer's Annual Fee due for such period less such portion of the Issuer's Annual Fee included in the Pass-Through Rate,to the Fees Account; (v) on each Interest Payment Date,the Trustee shall disburse amounts on deposit in the Fees Account following the transfer provided for in the preceding paragraph(iv)and following any transfer pursuant to Section 4.3(2)of this Indenture and shall apply such amounts to the payment of Fees in satisfaction of the obligations of the Borrower under paragraph(i)of Section 4.3 of the Financing Agreement;in the event the amount in the Fees Account is insufficient to pay such Fees,the Trustee shall make written demand on the Borrower for the amount of such insufficiency and,pursuant to the terms of the Financing Agreement,the Borrower shall be liable to promptly pay the amount of such insufficiency to the Trustee within five(5)Business Days after the date of the Trustee's written demand; (vi) on each Interest Payment Date following the Conversion Date, and following the disbursement,transfer and application of funds described in the preceding paragraphs(i)through (v),the Trustee shall transfer any amounts remaining in the General Receipts and Disbursements Account in excess of[$10,000.40)to the following Funds and Accounts,and lin the following order of priority: (A) to the Rebate Fund,the amount required to be deposited into the Rebate Fund to the extent sufficient funds are not otherwise available to the Trustee for the payment of arbitrage rebate to the United States Government; and (B) to the Redemption Account,the balance; (vii) on the next succeeding Interest Payment Date for which a notice of redemption can be given pursuant to Section 3.4 of this Indenture following any transfer pursuant to subparagraph(B)of the preceding paragraph(vi),the Trustee shall apply any moneys so transferred(including any moneys so transferred on any prior Interest Payment Date),to the redemption of Bonds as provided in Section 3.3(5)of this Indenture;and (viii) on the Purchase Date,the Trustee shall disburse from the Redemption Account an amount equal to the Purchase Price of the Bonds to be purchased pursuant to Section 3.9(1)of the Indenture. Section 4.4(5)Transfers Within the Revenue Fund. The Trustee shall, (i)on each Interest Payment Date and Redemption Date,transfer any amounts on deposit in the Pass-Through Rate Subaccount and the Principal Subaccount,as applicable,of the Credit Facility Account to the General Receipts and Disbursements Account or the Redemption Account,as applicable;and(ii)on the Purchase Bate,transfer the amount received from Fannie Mae under the Collateral Agreement and deposited into the Credit Facility Account pursuant to paragraph(iii)of Section 4.4(3)(3)of this Indenture to the Redemption Account,to be used,notwithstanding that such amount has been transferred to the Redemption Account,to pay the Purchase Price of the Bonds to be purchased pursuant to Section 3.9(1) of this Indenture. Section 4.4(6)Remittance of Facility Fee to Fannie Mae. The Trustee shall remit to Fannie Mae monthly from the General Receipts and Disbursements Account,in accordance with written instructions provided by Fannie Mae to the Trustee,that portion of the Borrower's monthly DOCSSF1:269332.3 40511-107-ADI-07122/98 6:37 PM 51 payment of interest under the Mortgage Note allocable to the Facility Fee;the Trustee's remittance shall be made immediately upon receipt of the Borrower's monthly payment of interest under the Mortgage Note,but in any event,not later than the Business Day following receipt of payment from the Borrower or, if applicable,the Business Day following the date on which any such payment of interest is made from amounts on deposit in the Mortgage Loan Fund and credited to the Borrower under the terms of the Mortgage Note. Section 4.4(7)Funds Transfers to Facilitate Purchases. The Trustee is authorized to treat the date of any purchase of Bonds pursuant to Section 3.8 as a Redemption Date,and for such purpose to transfer moneys to the Redemption Account from the General Receipts and Disbursements Account as necessary in connection with any such application of moneys. Section 4.4(8)Investment Income on Revenue Fund Amounts on deposit in the Revenue Fund shall be invested as provided in Section 5 of this Indenture. All Investment Income earned on amounts on deposit in the Revenue Fund shall be retained in or transferred to,as the case may be,and credited to and become part of the amounts on deposit in the General Receipts and Disbursements Account. Section 4.5 The Costs of Issuance Fund Section 4.5(1)ftos is Into Costs of Issuance Fund On or before the Closing Date the Borrower shall deliver,or cause to be delivered,to the Trustee,the Costs of Issuance Deposit. On the Closing Date,the Trustee shall deposit or,if the Costs of Issuance Deposit is held in a temporary account,transfer the Costs of Issuance Deposit to the Costs of Issuance Fund. Section 4.5(2)Disbursements from the Costs of IssuanceFund. Moneys on deposit in the Costs of Issuance Fund shall be disbursed by the Trustee,pursuant to requisitions in the form of Exhibit E attached to this Indenture, signed by an Authorized Borrower Representative,to pay Costs of Issuance. The Trustee may conclusively rely on such requisitions for purposes of making such disbursements. Moneys on deposit in the Costs of Issuance Fund shall not be part of the Trust Estate and shall be used solely to pay Costs of Issuance. Suction 4.5(3)Disposition of Remaining Amounts. Any moneys remaining in the Costs of Issuance Fund six(6)months after the Closing Date and not needed to pay still unpaid Costs of Issuance shall be returned to the Borrower, except the portion of such moneys derived from Net Bond Proceeds, including Investment Income earned on such Net Bond Proceeds deposited into the Costs of Issuance Fund and Investment Income on such Investment Income,which shall be transferred to the Mortgage Loan Fund. Upon such final disbursement,the Trustee shall close the Costs of Issuance Fund. Section 4.5(4)Investment Income on Costs of Issuance Fund. Amounts on deposit in the Costs of Issuance Fund shall be invested as provided in Section 5 of this Indenture. All Investment Income earned on amounts on deposit in the Costs of Issuance Fund, except that portion of Investment Income earned on Net Bond Proceeds deposited into the Costs of Issuance Fund and Investment Income on such Investment Income,which shall be transferred to the Mortgage Loan Fund, shall be retained in the Costs of Issuance Fund. Section 4.6 The Rebate Fund. Section 4.6(1)Deposits;Administration. The Rebate Fund shall be held and applied as provided in the Tax Certificate. All money at any time deposited in the Rebate Fund shall be held by the Trustee in trust,to the extent required to satisfy the Rebate Requirement(as defined in the Tax DOCSSF1:269332.3 40511-107-AD1-07122198 6:37 PM 52 Certificate)and as calculated by the Rebate Analyst,for payment to the United States Government, and neither the Issuer nor the Borrower nor the Bondholders shall have any rights in or claim to such.moneys. All amounts deposited into or on deposit in the Rebate Fund shall be governed by this Section,by Section 7.2(9)of the Financing Agreement and by the Tax Certificate. The Trustee shall conclusively be deemed to have complied with such provisions if it follows the written instructions of the Borrower or of Band Counsel or the Rebate Analyst on behalf of the Borrower,including supplying all necessary information in the manner set forth in the Tax Certificate, and shall not be required to take any actions thereunder in the absence of written instructions from the Borrower,or from Bond Counsel or the Rebate Analyst on behalf of the Borrower. Upon receipt of written instructions from the Borrower,or from Bond Counsel or the Rebate Analyst on behalf of the Borrower,the Trustee shall remit part or all of the balances in the Rebate Fund to the United States Government,as so directed.. In addition,if so directed in writing by the Borrower, or by Bond Counsel or the Rebate Analyst on behalf of the Borrower,the'Trustee will deposit money into or transfer moneys out of the Rebate Fund from or into such Funds or Accounts held under this Indenture as shall be directed in writing by the Borrower. Any funds remaining in the Rebate Fund after redemption and payment of all of the Bonds and payment and satisfaction of any rebate requirement, or provision made therefor satisfactory to the Trustee,shall be withdrawn and remitted to the Issuer as provided for in Section 8.1 of this Indenture. Notwithstanding any provision of this Indenture to the contrary,the obligation to remit payment of the rebate amount to the United States and to comply with all other requirements of this Section 4.6, Section 7.2(9)of the Financing Agreement and the requirements of the Tax Certificate shall survive the defeasance or payment in full of the Bonds. Section 4.6(2)Records. The Trustee shall obtain and keep such records of the computations made pursuant to this Section 4.6 as are required under Section 148(f)of the Code to the extent such records are furnished to it. The Trustee shall keep and make available to the Borrower such records concerning the investments of the gross proceeds of the Bonds and the investments of earnings from those investments as may be requested by the Borrower in order to enable the Borrower to make the aforesaid computations as are required under Section 148(f)of the Code. Section 4.6(3)Exceci#ion. Notwithstanding the foregoing,the computations and payments of rebate amounts referred to in this Section 4.6 need not be made to the extent that neither the Issuer nor the Borrower will thereby fail to comply with any requirements of Section 148(f)of the Code based on an Opinion of Bond Counsel,a copy of which shall be provided to the Trustee. Section 4.7 Moneys to be Held_in_Trust. All moneys required to be deposited with or paid to the Trustee for the account of any Fund or Account established under any provision of this Indenture shall be held by the Trustee in trust,and,except for moneys deposited with or paid to the Trustee for the redemption of Bonds,notice of the redemption of which has been duly given,and except for moneys on deposit in the Costs of Issuance Fund,the Rebate Fund and the Fees Account,shall,while held by the Trustee,constitute part of the Trust Estate and be subject to the security interest created by this Indenture. Section 4.8 Words The Trustee shall keep and maintain accurate records with respect to the Funds and Accounts under this Indenture. The Trustee shall file at least an annual accounting of the Funds and Accounts,and the payment history on the Bonds and the Mortgage Loan, with the Fannie Mae,the Servicer,the Construction Phase Credit Facility Provider and the Borrower, and, upon request,the Issuer. Any notices,reports or other information delivered by the Trustee to Fannie Mae with respect to any Fund or Account shall also be delivered to the Servicer. Section 49 Re orfs From the Trustee. The Trustee shall,on or before the twentieth(2.0th)day of each month,file with the Servicer and the Borrower a statement setting forth in respect of the preceding calendar month: DOCssFI-269332.3 40511»147-ADl-07/22198 6:37 PM 53 (i) the amount withdrawn or transferred by it and the amount deposited within or on account of each Fund and Account held by it under the provisions of this Indenture,including the amount of Investment Income on each Fund and Account transferred to the General Receipts and Disbursements Account; (ii) the amount on deposit with it at the end of such month to the credit of each Fund and Account; (iii) a brief description of all obligations held by it as an investment of moneys in each such Fund and Account; (iv) the amount applied to the purchase or redemption of Bonds and a description of the Bonds or portions of Bonds so purchased or redeemed;and (v) any other information which the Borrower,Fannie Mae or the Issuer may reasonably request. No such statement need be rendered pursuant to the provisions of this Indenture if no activity occurred in the fund or account during such preceding month. Upon the written request of any Bondholder owning twenty-five percent(251/o)or more in aggregate principal amount of Bonds then Outstanding,the Trustee, at the Borrower's expense,shall provide a copy of such statement to the Bondholder. All records and files pertaining to the Trust Estate shall be open at all reasonable times to the inspection of the Issuer and Fannie Mae and their agents and representatives upon reasonable prior notice. Section 4.10 Nonoresentment of Bonds. In the event any Bond shall not be presented for payment when the principal of such Bond becomes due, either at maturity or at the date fixed for redemption of such Bond or otherwise,if amounts sufficient to pay such Bond shall have been deposited with the Trustee for the benefit of the owner of the Bond and shall have remained unclaimed for two(2)years after such principal has become due and payable, such amounts shall,to the extent amounts are owed to Fannie Mae,as set forth in a written statement of Fannie Mae addressed to the Trustee,be paid to Fannie Mae,with any excess to be paid to the Borrower;and all liability of the Issuer and the Trustee to the holder thereof for the payment of such Bond shall forthwith cease,determine and be completely discharged,provided,however,that the Trustee,before being required to make any such payment to Fannie Mae or the Borrower,may cause to be published once in a financial newspaper or journal of general circulation in New York,New York,notice that such moneys remain unclaimed and that,after a date specified in such notice,which shall not be less than thirty(30)days from the date of such publication, any unclaimed balance of such moneys then remaining will be paid to Fannie Mae or the Borrower, The cost of such publication shall be paid from the unclaimed amounts so held by the Trustee,or if such moneys are insufficient,by the Borrower. The obligation of the Trustee under this Section 4.10 to pay any such amounts to Fannie Mae or the Borrower shall be subject to any provisions of law applicable to the Trustee or to such amounts providing other requirements for disposition of unclaimed property. Section 4.11 Mgnevs Held for Particular Bonds. The amounts held by the Trustee for payment of the interest,principal or redemption price due on any date with respect to particular Bonds shall,pending such payment,be set aside and held in trust by it for the Bondholders entitled to such payment,and for the purposes of this Indenture such interest,principal or redemption price,after the due date of payment, shall no longer be considered to be unpaid. Section 5. Investments. Moneys held as part of any Fund or Account shall be invested and reinvested in Permitted Investments;provided that such investments shall have maturities equal to the DOCSBN1:269332.3 40511-107 ADD-{17!22/98 6:37 YM 54 lesser of six(6)months or the dates upon which such moneys will be needed for the purpose for which such moneys are held;and,provided further,that(a)moneys on deposit in the General Receipts and Disbursements Account and the Credit Facility Account of the Revenue Fund shall be invested only in investments described in paragraphs(i), (ii), (iii), (vii)and(viii)of the definition of Permitted Investments,(b)moneys on deposit in the Redemption Account shall be invested only in investments described in paragraphs (i)or(viii)of the definition of Permitted Investments,and(c)moneys on deposit in the Costs of Issuance Fund shall,until disbursed or returned to the Borrower pursuant to Section 4.5 of this Indenture,be invested in Permitted Investments described in paragraph(viii)of the definition of Permitted Investments. Permitted Investments shall be held by or under the control of the Trustee. All Investment Income from moneys held in all Funds and Accounts other than the Mortgage Loan Fund,the Rebate Fund and the Costs of Issuance Fund(other than as provided below)shall,upon receipt be deposited into the General Receipts and Disbursements Account of the Revenue Fund;Investment Income from moneys held in the Mortgage Loan Fund shall be retained in the Mortgage Loan Fund; Investment Income from moneys held in the Rebate Fund shall be retained in the Rebate Fund; Investment Income from moneys held in the Costs of Issuance Fund(other than Investment Income on Net Bond Proceeds deposited into the Costs of Issuance Fund and Investment Income on such Investment Income)shall be retained in the Costs of Issuance Fund. The Trustee is authorized to cause to be sold and reduced to cash a sufficient amount of Permitted Investments whenever the cash balance is or will be insufficient to make a requested or required disbursement. The Trustee shall not be accountable for any depreciation in the value of any Permitted Investment or for any loss resulting from such sale. The Trustee may trade with itself and its affiliates in the purchase and sale of securities for such investments, and may transact purchases and sales through its investment department or through its affiliates. The Trustee and its affiliates may act as principal,agent, sponsor,advisor or depository with respect to any investments. All Permitted.Investments shall be made by the Trustee in its name,as Trustee, at the written direction of the Borrower, subject to the limitations contained in this Indenture. If no direction is provided to the Trustee,the Trustee will invest such moneys in investments describedin paragraph(viii) of the definition of Permitted Investments, subject to the limitations contained in this Indenture. In computing the amount in any Fund or Account held by the Trustee under the provisions of this Indenture, Permitted Investments if purchased at par shall be valued at principal cost plus accrued interest, or,if purchased at other than par,at principal cost plus amortized discount or less amortized premium (amortization to be on a straight-line basis to the date of stated maturity without regard to redemptions or repayments of principal which may occur prior thereto)plus accrued interest. The Trustee shall take such actions as shall be necessary to assure that Permitted Investments purchased by it under this Indenture are held pursuant to the terms of this Indenture and are subject to the trusts and security interests created in this Indenture. The Trustee shall furnish to the Issuer and the Borrower monthly statements detailing all investment activity of the Trustee with respect to the Funds and Accounts. The Issuer(and the Borrower by its execution of the Financing Agreement)acknowledges that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Issuer or the Borrower the right to receive brokerage confirmations of security transactions as they occur,the Issuer and the Borrower specifically waive receipt of such confirmations to the extent permitted by law. The Trustee will furnish the Borrower and the Issuer periodic cash transaction statements which include detail for all investment transactions made by the Trustee hereunder. Section 6. Securitv. Section 6.1(1)Security: Pledre of Trust Estate: Compliance with Law. Section 6.1(1)(1) Authorization;Assignment. The Issuer covenants that(a)it is duly authorized under the laws of the State,including,particularly,the Act,to(1)authorize and issue the Bonds,(2)execute and deliver this Indenture, (3)enter into the Financing Agreement and the Regulatory Agreement, (4) assign its interest in the Financing Agreement(except the Reserved DOCSSF1:269332.3 40511-107-ADI-07!22198 6:37 FM 55 Rights)and the Regulatory Agreement(except the Reserved Rights)and(5)pledge and assign.the Trust Estate in the manner and to the extent set forth in this Indenture for the benefit of(A)the Bondholders,to secure the payment of the principal of premium,if any,and interest on the Bonds in accordance with the terms and provisions of this Indenture and the Bonds,and(B)Fannie Mae to secure the payment of all amounts owing to Fannie Mae under the Financing Agreement and the Credit Facility Agreement,and(b) that all actions on its part for the valid issuance of the Bonds and the execution and delivery of this Indenture have been duly and effectively taken,that the Bonds are and will be valid,binding and enforceable obligations of the Issuer according to the terms of the Bonds and this Indenture,and the Bonds,together with all other indebtedness of the Issuer,are within all applicable debt limits. Section 6.1(1)(2) Pledge of Trust Estate. The pledge and assignment of the Trust Estate pursuant to this Indenture shall attach and be valid and binding upon the execution and delivery of this Indenture by the Issuer and the Trustee,without any physical delivery of the Trust Estate or further act. Any and all interest in property acquired after the date of this Indenture of any kind or nature which is to become subject to the lien of this Indenture shall,without any further conveyance, assignment or act on the part of the Issuer or the Trustee,be subject to the lien of this Indenture as fully and completely as though specifically described in this Indenture,but nothing contained in this sentence shall be deemed to modify or change the obligations of the Issuer under Section 6.7 of this Indenture. The lien of the pledge and security interest created by this indenture shall be valid and binding and prior to the claims of any and all parties having claims of any kind in tort,contract or otherwise against the Issuer irrespective of whether such parties have notice of the lien. The Trust Estate so pledged,assigned, transferred and set over in trust is free and clear of any pledge,lien,charge or encumbrance other than the lien of this Indenture,and the Issuer shall not create or suffer any lien or charge upon the Trust Estate prior to or on a parity with the pledge, security interest and lien created by this Indenture for the payment of the principal of,premium, if any,and interest on the Bonds. Section 6.1(1)(3) Compliance with Law. The Trustee shall at all times,to the extent permitted by law, defend,preserve and protect the pledge and assignment in trust of the Trust Estate and all the rights of the Bondholders and Fannie Mae under this Indenture against all claims and demands of all persons. Notwithstanding the assignment of the Mortgage Loan to the Trustee as part of the Trust Estate,it is understood by the Issuer and the Trustee that(a)prior to the Fannie Mae Pass-Through Certificate Delivery Bate,the Trustee's interest in the Mortgage Loan,including the Mortgage Note and the Mortgage,is,at the direction of Fannie Mae,subject to assignment to,or at the direction of,Fannie Mae under the conditions set forth in the Collateral Agreement and(b)on the Fannie Mae Pass-Through Certificate Delivery Date,if it occurs,the Trustee's interest in the Mortgage Loan, including the Mortgage Note and the Mortgage,shall be assigned by the Trustee to the Servicer and in turn assigned by the Servicer to Fannie Mae,as provided in Section 2.15(1)of this Indenture. Subject to the assignment of the Trustee's interest in the Mortgage Loan,including the Mortgage Note and the Mortgage,as provided above,upon the Issuer's assignment and delivery of the Mortgage Loan to the Trustee and Fannie Mae,as their interests may appear,pursuant to the Assignment,and at all times during which such assignment is effective,the Trustee shall receive and hold the original Mortgage Note,duly endorsed to the Trustee,an executed copy of the recorded Mortgage and copies of all ether Mortgage Loan Documents.The Issuer covenants that(a)it is duly authorized under the laws of the State,including, particularly,the Act,to(1)authorize and issue the Bonds,(2)execute and deliver this Indenture, (3)enter into the Financing Agreement and the Regulatory Agreement,(4) assign its interest in,the Financing Agreement(except the Reserved Rights)and the Regulatory Agreement(except the Reserved Rights)and (5)pledge and assign the Trust Estate in the manner and to the extent set forth in this Indenture for the benefit of(A)the Bondholders,to secure the payment of the principal of,premium,if any,and interest on the Bonds in accordance with the terms and provisions of this Indenture and the Bonds, and(B)Fannie Mae to secure the payment of all amounts owing to Fannie Mae under the Financing Agreement and the Credit Facility Agreement,and(b)that all actions on its part for the valid issuance of the Bonds and the D005SF1:269332.3 40511-107-ADI-07121148 6:37 PM 56 execution and delivery of this Indenture have been duly and effectively taken,that the Bonds are and will be valid,binding and enforceable obligations of the Issuer according to the terms of the Bonds and this Indenture,and the Bonds,together with all other indebtedness of the Issuer,are within all applicable debt limits. Section 6.2 Pre„�s rvation of Security. The Issuer covenants that, except as otherwise provided in this Indenture,the Financing Agreement and the Credit Facility Agreement,it will not sell,convey,mortgage,encumber or otherwise dispose of any portion of the Security for the Bonds. Section 6.3 Payment of Bonds. The Issuer shall promptly pay or cause to be paid the principal of and interest on the Bonds at the place,on the dates and in the mannerprovided in this Indenture and the Bonds. Section 6.4 Performance of!Covenants. The Issuer shall promptly perform and observe all covenants,undertakings and obligations set forth in this Indenture,in the Financing Agreement and in the Bonds to be performed or observed by the Issuer. Section 6.5 Enforcement. The Issuer agrees that the Trustee and, so long as a Credit Facility provided by Fannie Mae shall continue in effect,Fannie Mae,in its name or in the name of the Issuer,may enforce against the Burrower or any Person any rights of the Issuer under,the Bonds or the Bond Documents(other than the Reserved Rights)whether or not the Issuer is in default under this Indenture or under the Financing Agreement,but the Trustee shall not be deemed to have assumed the obligations of the Issuer under the Financing Agreement,but rather shall have no obligations under the Financing Agreement except as specifically provided in the Financing Agreement with respect to the Trustee. The Issuer shall not be required to advance any moneys derived from any source other than the Trust Estate for any of the purposes of this Indenture,the Bonds,the Mortgage Loan,the Financing Agreement,the Credit Facility Agreement or any such related document, for the payment of the principal or redemption of,or interest on,the Bonds,the payment of Fees or administrative expenses or for any other purpose of this Indenture,the Bonds,the Mortgage Loan,the Financing Agreement,the Credit Facility or any such related document. Section 6.6 Limitations on Liability. Notwithstanding any other provision of this Indenture to the contrary: (i) the obligations of the Issuer with respect to the Bonds are not general obligations of the Issuer but are special,limited obligations of the Issuer payable by the Issuer solely from the Security for the Bonds; (ii) nothing contained in the Bonds or in this Indenture shall be considered as assigning or pledging any funds or assets of the Issuer other than the Trust Estate; (iii) the Bonds shall not be a debt of the State,the Issuer(except as provided in this Indenture)or of any other political subdivision of the State,and neither the State,the Issuer nor any other political subdivision of the State shall be liable for the payment of the Bonds; (iv) neither the faith and credit of the Issuer,the State nor'of any other political subdivision of the State are pledged to the payment of the principal or of interest on the Bonds; (v) no failure of the Issuer to comply with any term,condition,covenant or agreement in this Indenture or in any document executed by the Issuer in connection with the D 3CSSFI.289332.3 40511-107-ADI-07122/98 6t37 PM 57 Project,or the issuance, sale and delivery of the Bonds shall subject the Issuer to liability for any claim for damages, costs or other charge except to the extent that the same can be paid or recovered from the Trust Estate,and (vi) the Issuer shall not be required to advance any moneys derived from any source other than the Trust Estate for any of the purposes of this Indenture,the Bonds,the Mortgage Loan,the Financing Agreement,the Credit Facility Agreement or any related document, for the payment of the principal or redemption of,or interest on,the Bonds,the payment of Fees or administrative expenses or for any other purpose of this Indenture,the Bonds, the Mortgage Loan,the Financing Agreement,the Credit Facility Agreement or any such related document. The Issuer and the Trustee acknowledge that(a)the obligations of Fannie Mae,under the Collateral Agreement,the Fannie Mae Pass-Through Certificate or otherwise,are not backed by the full faith and credit of the United States of America,but by the credit of Fannie Mae,a federally-chartered, stockholder owned corporation, and(b)payment of principal of,and interest on and premium, if any, on the Bonds is not guaranteed by Fannie Mae. Section 6.7 Further Assurances. The Issuer covenants that it will,to the extent permitted by law, execute, acknowledge and deliver such supplemental indentures, and the Issuer shall perform such further acts,instruments, documents,financing statements and transfers,as the Trustee or Fannie Mae may reasonably require to perfect,and maintain perfected,the security interest in the Trust Estate or to better assure,transfer,convey,pledge,assign and confirm to the Trustee all of its interest in the property described in this Indenture and the revenues,receipts and other amounts pledged by this Indenture for the purposes set forth in Section 6.1 of this Indenture. The Issuer further covenants that it will,at the sole expense of the Borrower,cooperate to the extent necessary with the Borrower,the Trustee and Fannie Mae(subject to Section 12.5 of this Indenture)in their defenses of the Trust Estate against the claims and demands of all Persons. The Issuer shall not agree to any amendment,modification, supplement, waiver or consent with respect to the Financing Agreement without the prior written consent of the Trustee and Fannie Mae(subject to Section 12.5 of this Indenture),which consent of the Trustee shall be governed by Section 10 of this Indenture. Section 6.8 Possession of the Mortgage Note and Mortgage. Prior to the Fannie Mae Pass-Through Certificate Delivery Date,the Trustee shall hold the Mortgage Note and the Mortgage for the benefit of the Bondholders and Fannie Mae,as their interests may appear,as set forth in the Assignment, subject to the provisions of(a)the Collateral Agreement providing for the assignment of the Mortgage Note and the Mortgage to Fannie Mae in certain events and(b)this Indenture providing for the assignment of the Mortgage Note and the Mortgage to Fannie Mae on the Fannie Mae Pass-Through Certificate Delivery Date. Section 6.9 No Disposition of Mortgage Note or Mortgage Prigr to the Fannie Mae Pass-Throueh Certificate Delivery Date: Excepted Assianments• Substitution. Section 6.9(1)No Disposition of Mortgage Note or Mortgage Prior to the Fannie Mae Pass-Through Certificate Delfvery Date:Excepted Assignments. Prier to the Fannie Mae Pass-Through Certificate Delivery Date,the Trustee shall not,except at the prior written direction of Fannie Mae, dispose of the Mortgage Note or the Mortgage or any interest in the Mortgage Note or the Mortgage(a)other than to(1)Fannie Mae as provided in the Collateral Agreement, (2)the Servicer as provided in Section 2.15(1)of this Indenture or(3)a successor Trustee and(b)other than as provided in Section 6.9(2)of this Indenture. The Trustee and the Issuer acknowledge the Trustee's obligation to assign its interest in the Mortgage Note and the Mortgage to(a)Fannie Mae under, and on the terms DOCSSF1:269332.3 40511-107-ADI-07122/98 6:37 PM 58 provided in,the Collateral Agreement,(b)the Servicer on the Fannie Mae Pass-Through Certificate Delivery Date and(c)as provided in Section 6.9(2)of this Indenture. Section 6.9(2)Substitgtion. Upon receipt of written direction from Fannie Mae prior to the Fannie Mae Pass-Through Certificate Delivery Date,the Trustee shall amend,modify, supplement or restate the Mortgage Note or the Mortgage,or exchange the Mortgage jNote and the Mortgage for a new mortgage note and mortgage on the Project which may be executed by a person(the "New Borrower")other than the Borrower,provided that if Fannie Mae or its designee shall have acquired the Project through foreclosure,by accepting a deed in lieu of foreclosure or by comparable conversion of the Mortgage Loan,no approval from the Issuer shall be required. Except in the event of a transfer of the Mortgage Loan to Fannie Mae in accordance with the Collateral Agreement,prior to accepting a new mortgage note and mortgage,the Trustee shall have(a)received written evidence that the New Borrower shall have executed and recorded,as applicable,documents,acceptable to the Issuer and Fannie Mae, substantially in the forms of the Financing Agreement and the Regulatory Agreement(or executed and recorded an assumption,acceptable to the Issuer,of all of the applicable Borrower's obligations under the Financing Agreement and Regulatory Agreement)and that the Credit Facility Agreement and the Collateral Agreement,if required,have been modified to be applicable to the new mortgage loan, (b)received from the Rating Agency written confirmation that the rating to be in effect with respect to the Bonds from and after delivery to the Trustee of the new mortgage note and mortgage and the modified Credit Facility Agreement and modified Collateral Agreement will not be lower than the rating then in effect for the Bonds, (c)received an opinion of Bond Counsel to the effect that such exchange and modification, in and of itself, shall not affect the exclusion of the interest payable on the Bonds from gross income for federal income tax purposes and(d)received from the Issuer,the consent(if any)required by the Regulatory Agreement or the Financing Agreement. In addition,if the substitution has resulted in an amendment of(or other modification to)the Credit Facility Agreement or the Collateral Agreement,the Trustee shall receive from Fannie Mae an Opinion of Counsel to Fannie Mae,who may be an employee of Fannie Mae,to the effect that the modified Credit Facility Agreement and Collateral Agreement are valid and binding obligations of Fannie Mae,subject to any applicable bankruptcy, insolvency, reorganization,moratorium and other similar laws affecting the rights of creditors'generally, and general equitable principles. Prior to accepting any amended, modified, supplemented or restated Mortgage Note or Mortgage which changes the payment terms of the Mortgage Loan,,the Trustee shall have received from the Rating Agency written confirmation that the rating to be in effect with respect to the Bonds from and after delivery to the Trustee of the amended,modified, supplemented or restated Mortgage Note or Mortgage will not be lower than the rating then in effect for the Bonds. Section 6.10 Books.Records and Accounts. Section 6.10(1) Books.Records and Accounts. The Trustee,on behalf of the Issuer,shall keep and maintain,or cause to be kept and maintained,proper boobs,records and accounts,including the Bond Register,in which complete and accurate entries shall be made of all of its transactions relating to the Bonds,this Indenture,the Financing Agreement,the Regulatory Agreement, the Mortgage Loan(prior to the Fannie Mae Pass-Through Certificate Delivery Date),the Collateral Agreement,the Fannie Mae Pass-Through Certificate(on and after the Fannie Mae Pass-Through Certificate Delivery Date), including,without limitation,payments made under the Mortgage Loan on and before the Fannie Mae Pass-Through Certificate Delivery Date,receipts and disbursements of proceeds derived from distributions of principal and interest under the Fannie Mae Pass-Through Certificate after the Fannie Mae Pass-Through Certificate Delivery Date,the Funds and Accounts,Permitted Investments and Investment Income,all of which.shall,at all reasonable times, and upon reasonable prior notice,be subject to the inspection of the Issuer,Fannie Mae,the Borrower,the Servicer,the Construction Phase Credit Facility Provider or Bondholders owing not less than twenty five percent(2S°lo)in aggregate principal amount of Bonds then Outstanding or their accountants or agents duly authorized in writing, DOCSSF1:269332.3 40511-107-ADI-07/22!98 6:37 PM 59 each of whom shall Have the right, at its expense,to make copies of any such books of record and accounts. Section 6.10(2) List 2f Bondholders. The Trustee will keep on file at the Principal Office of the Trustee a list of names and addresses of all Bondholders as shown on the Bond Register maintained by the Trustee as Bond Registrar which shall be available for inspection by any Bondholder or its attorney duly authorized in writing during normal business hours of the Trustee upon reasonable prior notice. Section 6.11 Compliance with Itatin Aggncy Rec�pests. The Trustee shall comply with any reasonable written request of a Rating Agency for information in its possession regarding the Bonds which such Rating Agency requests in order to review its rating on the Bonds. Further,the Trustee shall comply with any reasonable request by the Issuer or Bondholders holding not less than fifty-one percent(5l%)in aggregate principal amount of Bonds then Outstanding for information in its possession regarding the Bonds,the Mortgage Loan,the Collateral Agreement,the Fannie Mae Dass-Through Certificate,if issued, or the Project. Any expense incurred by the Trustee pursuant to this Section 6.11 shall be borne by the Borrower. Section 6.12 Enforcement of Qblipmtions. Section 6.12(1) Enforcement by the Trustee. Upon the occurrence of an Event of Default under this Indenture,the Trustee,on behalf of the Issuer,if the same is in the best interests of the Bondholders,or on behalf of the Bondholders,shall, subject to the provisions of this Indenture, including,particularly, Section 6.12(2)of this Indenture,diligently enforce any and all rights and take all reasonable steps,actions and proceedings as the Trustee in its sole judgment shall deem necessary and reasonable to enforce the terms,covenants and conditions of the CreditFacility then in effect,the Financing Agreement and the Regulatory Agreement. Except in the case of'a default under the Financing Agreement or the Regulatory Agreement,the Trustee's responsibility with respect to the provisions of the Financing Agreement and the Regulatory Agreement shall be limited to the receipt of payments from and reports of the Borrower pursuant to the terms of the Financing Agreement and the Regulatory Agreement. All affidavits,notices, certificates and schedules received by the Trustee from the Borrower may in good faith be relied upon by the Trustee and shall be maintained in its possession subject at all times during normal business hours to inspection by the Issuer and Fannie Mae. Section 6.12(2) Notification of Non-Payment Under the Fannie Mae Pass•Through Certificate. From and after the Fannie Mae Pass-Through Certificate Delivery Date, in the event that the Trustee shall fail to receive a distribution under the Fannie Mae Pass-Through Certificate by the close of business on the Business Day following any Distribution Date,or if such distribution is to be made to a custodian under any Investment Agreement applicable to the moneys on deposit in the Revenue Fund or any Account within the Revenue Fund and the Trustee shall receive notice from such custodian that a distribution under the Fannie Mae Pass-Through Certificate has not been received by the close of business on the Business Day following any Distribution Date,the Trustee shall give written notice(not later than the following Business Day)to Fannie Mae and Fannie Mae's mortgage backed securities transfer and paying agent,the Federal Reserve Bank of New York(or such other paying agent as is designated in writing by Fannie Mae),by Electronic Means,that such distribution has not been received and request wire transfer of immediately available funds in the amount of such distribution from such paying agent to the account of the Trustee or such custodian,as the case may be. Section 6.13 Maintenange of Lien on Trust Estate. The Trustee,at the expense of the Borrower,will cause financing statements and continuation statements with respect to the Trust Estate described in this Indenture to be at all times filed in such manner and in such places,if any, as may be AOCSSF1:269332.3 40511-107-AAI-071221"6-37 PM 60 required by law. To the extent possible under applicable law,as in effect in the jurisdiction(s)in which the Trust Estate is located,the Trustee will maintain the priority of the security interest created by this Indenture in the Trust Estate as a first lien on the Trust Estate,and warrant,protect,preserve and defend its interest in the Trust Estate and the security interest of the Trustee in the Trust Estate and all rights of the Trustee under this Indenture against all actions,proceedings,claims and demandsof all Persons,ail paid for solely from the Trust Estate. Notwithstanding the foregoing,so long as the Collateral Agreement is in effect and Fannie Mae has not defaulted in payment under paragraph(i)of Section 5.1 of the Collateral Agreement,the Trustee shall not take any action pursuant to this Section 6:13 with respect to its interest in the Pledged Collateral(as defined in the Collateral Agreement). Section 6.14 No Modification of uri • N9 Additional 1ndLhkdnSH. The Issuer expressly reserves the right to adopt one or more general or special bond resolutions or to enter into one or more other indentures for any of its purposes including the issuance of bonds for other multifamily rental housing developments similar to the Project and reserves the right to issue other obligations so long as any such resolution,indenture or obligation is not a charge or lien prohibited by this Indenture. The Issuer shall not,without the prior written consent of the Trustee and Fannie Mae and prior notification to the Rating Agency,alter,modify or cancel,or agree to consent to alter,modify or cancel,any agreement which relates to or affects the Trust Estate. Without the prior written consent of Fannie Mae and without prior notification to and confirmation of the rating on the Bonds from the Rating Agency,the Issuer shall not incur any additional indebtedness having a lien on the Trust Estate. Section 6.15 Tax Covenants. Section 6.15(1) Issuer's Covenants. The Issuer covenants to and for the benefit of the Bondholders that,notwithstanding any other provisions of this Indenture or of any other instrument,it will: (i) neither make or use nor cause to be made or used any investment or other use of the proceeds of the Bonds or the moneys and investments held in the Funds and Accounts established under this Indenture which would cause the Bonds to be arbitrage'bonds under Section 103(b)and Section 148 of the Code and the Regulations issued under'Section 148 of the Code or which would otherwise cause the interest payable on the Bonds to be includable in grass income for federal income tax purposes;and (ii) enforce or cause to be enforced all obligations of the Borrower under the Regulatory Agreement in accordance with its terms and seek to cause the Borrower to correct any violation of the Regulatory Agreement within a reasonable period after any such violation is first discovered; (iii) not take or cause to be taken any other action or actions,or fail to take any action or actions,which would cause the interest payable on the Bonds to be includable in gross income for federal income tax purposes; (iv) at all times do and perform all acts and things permitted by law and necessary or desirable in order to assure that interest paid by the Issuer on the Bonds will be excluded from the gross income,for federal income tax purposes,of the Bondholders pursuant to Section 103 of the Code,except in the event where any such owner of Bonds is a"substantial user"of the facilities financed with the Bonds or a"related person"within the meaning of the Code; nocssr1:269332.3 40511-107-ADI-07x2/"6:37 PM 61 (v) not take any action or permit or suffer any action to be taken if the result of the same would be to cause the Bands to be"federally guaranteed"within the meaning of Section 149(b)of the Code and the Regulations;and (vi) require the Borrower to agree,pursuant to the terms and provisions of the Financing Agreement,not to commit any act and not to snake any use of the proceeds of the Bonds, or any other moneys which may be deemed to be proceeds of the Bonds pursuant to the Code,which would cause the Bonds to be"arbitrage bonds"within the meaning of Sections 103(b)and 148 the Cade,and to comply with the requirements of the Code throughout the term of the Bonds. In furtherance of the covenants in this Section 6.15,the Issuer and the Borrower shall execute,deliver and perform the Tax Certificate,which is by this reference incorporated into this Indenture and made a part of this Indenture as if set forth in this Indenture in full, and by its acceptance of this Indenture the Trustee acknowledges receipt of the Tax Certificate and acknowledges its incorporation in this Indenture by this reference. The Trustee agrees it will invest funds held under the Indenture in accordance with the terms of this indenture and the Tax Certificate(this covenant shall extend throughout the term of the Bonds,to all Funds and Accounts created under this Indenture and all moneys on deposit to the credit of any Fund or Account). Section 6.15(2) Trustee's Covenants. The Trustee covenants to and for the benefit of the Bondholders that,notwithstanding any other provisions of this Indenture or of any other instrument,it will reasonably follow the written directions of the Borrower with respect to investments under this Indenture. This covenant shall extend,throughout the term of the Bonds,to all Funds created under this Indenture and all moneys on deposit to the credit of any such Fund. The Trustee shall be deemed to have complied with such requirements and shall have no liability to the extent it reasonably follows the written directions of the Borrower. The Trustee further covenants that should the Borrower file with the Trustee(it being understood that the Borrower has no obligation to so file),or should the Trustee receive,an Opinion of Bond Counsel to the effect that any proposed investment or other use of proceeds of the Bonds would cause the Bonds to become"arbitrage bonds,"then the Trustee will comply with any written instructions of the Borrower or Bond Counsel regarding such investment or use so as to prevent the Bonds from becoming"arbitrage bonds,"and the Trustee will bear no liability to the Issuer, the Borrower,the Bondholders or Fannie Mae for investments made in accordance with such instructions. Section 6.15(3) Defini ions. All terms used in this Section 6.15 which are defined in Sections 142(d)and 148 of the Code shall have the same meanings in this Section 6.15 as in the definitions set forth in those Sections. Section 6.16 Preservation of Revenges. The Issuer shall not take any action to interfere with or impair the pledge and assignment of the Trust Estate under this Indenture,or the Trustee's enforcement of any rights under this Indenture or under the Financing Agreement or the Regulatory Agreement without the prior written consent of the Trustee. The Trustee may give such written consent,and may itself take any such action or consent to an amendment or modification to the Financing Agreement,the Regulatory Agreement or the Credit Facility then in effect,,only(a)with the prior written consent of Fannie Mae,(b)following receipt by the Trustee of written confirmation from the Rating Agency that the taking of such action or the execution and delivery of such amendment or modification will not adversely affect the rating then assigned to the Bonds by the Rating Agency,and(c) if the Trustee shall have received an opinion of Bond Counsel to the effect that such action or such amendment or modification will not affect adversely the validity of the Bonds or the exclusion from gross income, for federal income tax purposes,of the interest payable on the Bonds. DOCSSF1.269332.3 40511-107-ADI-07/221"6:37 PM 62 Section 5.17 Rgguest and lidemnificataun. If any consent or other action on the part of the Issuer is required in this or any other document,the Issuer shall have no obligation to act unless first requested to do so,and the Issuer shall have no obligation to expend time or money or to otherwise incur any liability unless indemnity satisfactory to the Issuer has been furnished to it. Section 7. The Cr dit Facility, Section 7.1 Theollatgral Ag_reernent. On the Closing bate,the Trustee shall enter into the Collateral Agreement with Fannie Mae. The Trustee shall abide by and take all actions required of the Trustee under the Collateral Agreement in accordance with its terms. Section 7.1(1)No Disposition of CA11tersd Ar reement. The Trustee shall not,without the prior written consent of the registered owners of all of the Bonds then C}utstanding, transfer,assign or release the Collateral Agreement until the principal of and interest on the Bonds shall have been paid or duly provided for in accordance with the terms of this Indenture,except(a)to a successor Trustee,or(b)to Fannie Mae upon expiration or other termination of the Collateral Agreement in accordance with its terms,including termination on its stated expiration date and upon payment under the Collateral Agreement of the full amount payable under the Collateral Agreement. If at any time during the term of the Collateral Agreement,a successor Trustee shall be appointed and qualified under this Indenture and the Collateral Agreement is not assignable or transferable to the successor Trustee,the resigning Trustee shall request that Fannie Mae enter into a new Collateral Agreement, substantially identical to the Collateral Agreement, with the successor Trustee for the benefit of the holders of the Bonds,and the resigning'Trustee shall continue to serve as Trustee under this Indenture until such time as the new Collateral Agreement is delivered to the successor Trustee. If the resigning Trustee fails to make this request,the successor Trustee shall do so before accepting its appointment. Upon issuance of the new Collateral Agreement to the successor Trustee,the Collateral Agreement shall be returned to Fannie Mae and canceled,and the new Collateral Agreement shall thereafter be subject to all'ofthe provisions of this Indenture relating to the Collateral Agreement,and shall be deemed for all purposes of this Indenture to be the Credit Facility then in effect. Section 7.1(2)No Disposition of Pledged Collateral. Except as expressly provided in the Collateral Agreement,the Trustee shall not dispose of any of its interest in the Pledged Collateral (as defined in the Collateral Agreement)unless Fannie Mae shall have defaulted in payment under paragraph(i)of Section 5.1 of the Collateral Agreement. Section 7.1(3)Payment Under the Collateral Ap�reement. Section 7.1(3)(1) 12eguired Notices;A,lt,Irlicat otl o_f 1lionevs. The Trustee shall give notices to Fannie Mae as required by,and pursuant to and in accordance with,the terms and conditions of the Collateral Agreement,in order to receive payments from Fannie Mae under,and as and to the extent provided in and permitted by,the Collateral Agreement,and shall cause moneys received from Fannie Mae to be applied for the purposes specified in this Indenture and the Collateral Agreement,provided that the Trustee shall,in accordance with this Indenture and the Collateral Agreement,first apply any amounts then on deposit in the Funds and Accounts(other than the Rebate Fund)for such purposes,as provided in Section 3.8(3)of the Collateral Agreement. Section 7.1(3)(2) Degosit of Moneys Derived from the Collateral Agreement. All moneys derived from the Collateral Agreement pursuant to Section 7.1(3)(1)of this Indenture shall be deposited into the Credit Facility Account of the Revenue Fund pending their application by the Trustee. DOCSSF1:269332.3 40511-107-AA2-07/22!98 6:37 PM 63 Section 7.1(3)(3) Return of Payments Under the Collateral Agreement. In the event that the Trustee shall have received any payment from Fannie Mae under or pursuant to the Collateral Agreement,and thereafter amounts shall be received by the Trustee from the Borrower or other source,which later received amounts were in payment of amounts;satisfied by the payment under or pursuant to the Collateral Agreement,then such later received amounts shall be promptly reimbursed to Fannie Mae to the extent of the amount so paid by Fannie Mae. Section 7.1(3)(4) Enforcement of Collateral Agreement. The Trustee shall hold the Collateral Agreement and shall in its name enforce all rights of the Trustee and all obligations of Fannie Mae under the Collateral Agreement for the benefit of the Bondholders. Section 7.1(3)(5) Certain Rights of Fannie Mae.... Each Bondholder, by its purchase of Bonds,the Trustee and the Issuer agree that Fannie Mae may at any time during the continuation of an insolvency proceeding of the Issuer or Borrower(an"Insolvency Proceeding")direct all matters relating to such Bonds in any such Insolvency Proceeding,including,without limitation, (i)all matters relating to any Preference Claim, (ii)the direction of any appeal of any order relating to any Preference Claim and(iii)the posting of any surety, supersedeas or performance bond pending any such appeal. In addition,and without limitation of the foregoing, Fannie Mae shall be subrogated to the rights of the Issuer,the Trustee and the Bondholders in any Insolvency Proceeding to the extent it has performed its payment obligations under the Collateral Agreement, including,without limitation,any rights of any party to an adversary proceeding with respect to any court order issued in connectionwith any such Insolvency Proceeding and rights pertaining to the filing of a proof of claim, voting on a reorganization plan and rights to payment. Section 7.1(4)Transfer of Collateral Agreement. The Trustee shall not assign or transfer the Collateral Agreement except as provided in Section 7.1(1)of this Indenture. Section 7.1(5)Certain Notices to Fannie Mae. The Trustee shall promptly give written notice to Fannie Mae of(a)an Event of Default under paragraph(vi) of Section 11.1(1)of the Financing Agreement, (b)the making of any claim in connection with seeking the avoidance as a preferential transfer(a"Preference Claim") of any payment of principal of,or interest on,the Bonds, (c) the occurrence of any Event of Default known to it under this Indenture or under the Collateral Agreement,the Financing Agreement,the Regulatory Agreement,the Mortgage Note,the Mortgage or any of the other Mortgage Loan Documents, or any event known to it which,with the passage of time or service of notice, or both,would constitute an Event of Default under this Indenture or under the Collateral Agreement,the Financing Agreement,the Regulatory Agreement,the Mortgage Note,the Mortgage or any of the other Mortgage Loan Documents, specifying the nature and period of existence of such event and the actions being taken or proposed to be taken with respect to such event, (d)the receipt of any prepayment, in whole or in part,with respect to the Mortgage Loan and(e)each proposed redemption of Bonds, such notice to be given at least 20 days prior to the scheduled Redemption Date. Section 7.1(6)Assignment of Mortgage: Liability of Fannie Mae. The Trustee and the Issuer acknowledge and agree to the rights of Fannie Mae to direct the Trustee to assign the Mortgage Loan,including the Mortgage Note and the Mortgage to Fannie Mae as set forth in the Collateral Agreement. The Issuer and the Trustee agree that Fannie Mae shall not be liable to the Trustee, the Issuer or any Bondholder for any action taken by Fannie Mae pursuant to any such assignment. Section 7.1(7)Termination of Trustee's Interest in the Collateral Agreement. Upon receipt of the Fannie Mae Pass-Through Certificate,the Trustee shall relinquish all of its rights and interests in the Collateral Agreement effective as of the expiration or earlier termination of the Collateral Agreement. DOCSSF1:364332.3 40511-107-AD1-O7/22M 6:37 PM 64 Section 7.2 The Fannie Mae Pass-Through Certificate. Section 7.2(l)Issuan a of the Fannie MatPass-Through Certific #e, The Trustee acknowledges and agrees that the Trustee,acting for and on behalf of the Issuer,will,on the Fannie Mae Pass-Through Certificate Delivery Date,assign its interest in the Mortgage Loan to the Servicer who,in turn,will assign such interest in the Mortgage Loan to Fannie Mae in exchange for the Fannie Mae Pass-Through Certificate as provided in and subject to the terms and conditions set forth in this Indenture. The Issuer and the Trustee understand that the Fannie Mae Pass-Through Certificate will be issued, on the Fannie Mae Pass-Through Certificate Delivery Date,in accordance with the Fannie Mae Trust Indenture,electronically,in"book entry„form,as shown on the records of the Federal Reserve Bank of New York,Fannie Mae's mortgage-backed securities transfer and paying agent;accordingly,all references in this Indenture to the Fannie Mae Pass-Through Certificate shall be deemed references to the electronic book entry reflecting the interest of the Trustee or a custodian for the Trustee in the Fannie Mae Pass-Through Certificate as shown in the records of the Federal Reserve Bank of New York. Delivery of the Fannie Mae Pass-Through Certificate to the Trustee or to a custodian for the Trustee shall be deemed to have occurred when the Trustee shall have received confirmation from the Federal Reserve Bank of New York that the Fannie Mae Dass-Through Certificate has been issued in book-entry form and registered on the registration books of the Federal Reserve Bank of New York,in the name of the Trustee or a custodian for the Trustee. Registration of the Fannie Mae Pass-Through Certificate in the name of the Trustee or in the name of a custodian for the Trustee shall be made with such recitals as are appropriate to indicate that the Fannie Mae Pass Through Certificate is to be held by or for the Trustee in its capacity as trustee under this Indenture and subject to the terms and provisions of this Indenture. The Trustee shall give written notice to the Rating Agency upon receipt by the Trustee or a custodian for the Trustee of the Fannie Mae Pass-Through Certificate. If the Trustee does not,for any reason,acquire the Fannie Mae Pass-Through Certificate on the Fannie Mae Pass-Through Certificate Delivery Date,the Trustee shall immediately give notice of that fact to Fannie Mae. The obligation of the Trustee to accept delivery of the Fannie Mae Pass Through Certificate shall be subject to the following(all of which shall be provided at the sole cost and expense of the Borrower): (i) satisfaction of the conditions set forth in Section 2.15(2)of this Indenture; (ii) the Trustee's confirmation(which may be based on information furnished to it by Fannie Mae or the Servicer)(a)that the Fannie Mae Pass-Through Certificate has an Issue Date Principal Balance equal to the then aggregate unpaid principal balance of the Mortgage Loan,which written confirmation may be an Issue Supplement,(b)that such Issue Date Principal Balance equals the then outstanding principal amount of the Bonds,and(c)of the Fannie Mae Pass-Through Certificate Rate; (iii) the Trustee's confirmation(which may be based on information furnished to it by Fannie Mae or the Servicer)that the last scheduled distribution under the Fannie Mae Pass-Through Certificate will be made not later than in the month preceding the final Maturity Bate of the Bonds; (iv) the Trustee's receipt of an Issue Supplement to the Fannie Mae Trust Indenture which has attached to it a Mortgage Loan Schedule specifying the Mortgage Loan(and no other mortgage loan)as the Mortgage Loan constituting the Pool(as defined in the Fannie Mae Trust Indenture);and (v) the Trustee's receipt of confirmation from Fannie Mae that the Fannie Mae Legal Department will issue to the Trustee on the Fannie Mae Pass-Through Certificate orlcssr1:269332.3 . 40511.197-An1-07n2i98 6:37 PM 65 Delivery Date,an Opinion of Counsel to the effect that the Fannie Mae Pass-Through Certificate constitutes a valid and binding obligation of Fannie Mae,entitled to the benefits of the Fannie Mae Trust Indenture, subject to any applicable bankruptcy,insolvency,reorganization and other laws of general applicability relating to or affecting creditors'rights from time to time in effect and to general equity principles. From and after the Fannie Mae Pass Through Certificate Delivery Bate,the Trustee shall hold the Fannie Mae Pass-Through Certificate(or evidence of the Trustee's interest in the Fannie Mae Pass-Through Certificate)for the benefit of the Bondholders. Upon issuance of the Fannie Mae Pass- Through Certificate,the Trustee shall receive distributions from Fannie Mae under the Fannie Mae Pass- Through Certificate in accordance with the terms of the Fannie Mae Pass-Through Certificate and shall deposit,hold and invest such amounts in accordance with this Indenture. In the event that an Investment Agreement shall at any time be in effect for the investment of funds on deposit in any Account within the Revenue Fund,the Trustee may,in its discretion,designate the office of the custodian of funds invested under the Investment Agreement as the address to which distributions under the Fannie Mae Pass- Through Certificate are to be made;provided that such custodian shall have agreed to notify the Trustee by telephone in the event that any amount distributable under the Fannie Mae Pass-Through Certificate is not received by the close of the Business Day following the Distribution Date. Section 7.2(2)Ills osition• Substitution or Rg lacement of the Fannie Mae Pass-Through Certificate. Section 7.2(2)(1) Dis osition. Following its acquisition of the Fannie Mae Pass-"Through Certificate,the Trustee shall not,without the prior written consent of Fannie Mae and of the owners of all of the Bonds then Outstanding,sell,exchange,transfer,assign or otherwise dispose of the Fannie Mae Pass-Through Certificate other than to Fannie Mae in exchange for(a)a Substitute Fannie Mae Pass-Through Certificate pursuant to Section 7.2(2)(2)of this Indenture or(b)payment to the Trustee of Available Moneys in an amount sufficient to pay or defease,in accordancewith Section 8.2 of this Indenture,the principal of and interest due and owing on the Bonds,provided that the Fannie Mae Pass-Through Certificate may be assigned to a successor Trustee under this Indenture. Section 7.2(2)(2) Substitution. Upon receipt of written notice from Fannie Mae,the Trustee shall exchange the Fannie Mae Pass-Through Certificate with Fannie Mae for one or more substitute Fannie Mae Pass-Through Certificates(in any such event,the"Substitute Fannie Mae Pass-Through Certificate")backed by the Mortgage Loan or by a different mortgage loan on the Project which may be executed by a person other than the Borrower(the"New Borrower'). In the event that Fannie Mae directs that the Trustee exchange the Fannie Mae Pass-Through Certificate for a Substitute Fannie Male Pass-Through Certificate,the Trustee shall immediately notify the Rating Agency in writing of Fannie Mae's request and of the date on which the substitution is expected to occur. The terms of the Substitute Fannie Mae Pass-Through Certificate,including,without limitation,the Fannie Mae Pass-Through Certificate Rate,term to maturity,,payment schedule,principal amount and prepayment terms may be the same or different from those of the Fannie Mae Pass-Through Certificate in effect immediately prior to the exchange. The obligation of the Trustee to accept delivery of a Substitute Fannie Mae Pass-Through Certificate shall be subject to the following(all of which shall be provided at the sole cost and expense of the related Borrower or the New Borrower,as the case may be): (i) the Trustee's receipt of either(a)a written confirmation of the existing Cash Flow Projection or(b)a then current Cash Flow Projection,in each instance accompanied by a Verification Report, showing that the schedule payments to be made under the Mortgage Loan and the corresponding distributions to be made under the Substitute Fannie Mae Pass-Through Certificate together with other Revenues and other moneys held under this Indenture that are DUCSSF1:269332.3 40511-107-ADI-071221"6:37 PM 66 available for such purpose,will be sufficient to timely pay the Fees and the principal of interest on the Bonds when the same shall become due and payable; (ii) the Trustee's confirmation(which may be based on information furnished to it by Fannie Mae or the Servicer)(a)that the Substitute Fannie Mae Pass-Through Certificate has an Issue Date Principal Balance equal to the then aggregate unpaid principal balance of the Mortgage Loan,which written confirmation may be an Issue Supplement, (b)that such Issue Date Principal Balance equals the then outstanding unpaid principal balance of the Bonds,and(c)of the Fannie Mae Pass-Through Certificate Rate applicable to such Substitute Fannie Mae Pass-Through Certificate; (iii) the Trustee's confirmation(which may be based on information furnished to it by Fannie Mae or the Servicer)that the last scheduled distribution under the Fannie Mae Pass- Through Certificate will be made not later than in the month preceding the find maturity date of the Bonds; (iv) the Trustee's receipt of an Issue Supplement to the Fannie Mae Trust Indenture which has attached to it a Mortgage Loan Schedule specifying the Mortgage Loan(and no other mortgage loan)as the Mortgage Loan constituting the Pool(as defined in the Fannie Mae Trust Indenture); (v) the Trustee's receipt of written evidence that the New Borrower either shall have executed and recorded a document substantially in the form of the Regulatory Agreement and that such document has been approved by Fannie Mae, or shall have assumed the Borrower's obligations under the Regulatory Agreement by recorded instrument; (vi) the Trustee shall have provided written notice to the Rating Agency not less than 30 days prior to the date of acceptance of the Substitute Fannie Mae Pass-Through Certificate of the proposed substitution; (vii) the Trustee's receipt from the Rating Agency of written confirmation that the rating to be in effect with respect to the Bonds from and after delivery to the Trustee of the Substitute Fannie Mae Pass-Through Certificate will not be lower than the rating then in effect for the Bonds; (viii) the Trustee's receipt of an Opinion of Bond Counsel,upon which the Underwriter,Fannie Mae,the Servicer,the Trustee and the Issuer may rely,to the effect that such substitution,in and of itself,shall not adversely affect the excludability of the interest on the Bonds, for federal income tax purposes,from the gross incomes of the Bondholders;and (ix) the Trustee's receipt of confirmation from Fannie Mae that the Fannie Mae Legal Department will issue to the Trustee on the Fannie Mae Pass-Through Certificate Delivery Date,an Opinion of Counsel to the effect that the Substitute Fannie Mae Pass-Through Certificate constitutes a valid and binding obligation of Fannie Mae, entitled to the benefits of the Fannie Mae Trust Indenture, subject to any applicable bankruptcy,insolvency,reorganization and other laws of general applicability relating to or affecting creditors'rights from time to time in effect and to general principles of equity. In addition,if the principal amount of the Substitute Fannie Mae Pass-Through Certificate is less than the principal amount of the Fannie Mae Pass Through Certificate being replaced, sufficient Available Moneys must be available to the Trustee to redeem Bonds such that the principal DocssF1:269332.3 4011-107-ADI.07/22 6:311 PM 67 __ _. . _. . . .... _..... ... _... _..... ......................................... amount of Bonds to remain Outstanding after such redemption will be equal to the principal amount of the Substitute Fannie Mae Pass-Through Certificate. Section 7,2(2)(3) Return of the Fannie Mae Pass-Thraueh Certificate. Upon the discharge of the lien of this Indenture,the Trustee shall return the Fannie Mae Pass-Through Certificate to Fannie Mae and shall,consistent with Section 8.1 of this Indenture, distribute any payments received by it in respect of the Fannie Mae Pass-Through Certificate after such discharge to Fannie Mae to the extent,as set forth in a statement from Fannie Mae,of any moneys then owed to Fannie Mae on account of the Mortgage Loan, or if a default shall have occurred and remain uncured under the Mortgage Loan of which the Trustee shall have received written notice from Fannie Mae or the Servicer,and provided, further,that upon payment in full of all obligations owed by the Borrower under the Bond Documents and under the Mortgage Loan Documents and termination of all obligations owed to Fannie Mae,the Issuer shall pay all such amounts in accordance with Section 8.1 of this Indenture. Pending such distributions,the Trustee shall hold such amounts in trust for the benefit of Fannie Mae and the Borrower, as their interests may appear. This Section 7.2(2)(3)may not be modified or amended without the prior written consent of Fannie Mae and the holders of all of the Bonds then Outstanding. Section 7.3 Requirement of Credit Facility. So long as the Bonds are Outstanding, a Credit Facility must be in effect with respect to the Bonds(except with respect to Purchased Bonds). Section 8. Discharge of Lien. Section 8.1 Discharee of Lien and Security Interest. Section 8.1(1)General. Upon(a)payment in full of the Bonds,(b)payment of all amounts due to the Trustee under this Indenture, (c)receipt by the Trustee of a written statement from Fannie Mae stating that all obligations owed to Fannie Mae in respect of the Bonds and the Mortgage Loan,whether with respect to the Bond Documents,the Mortgage Loan Documents,the Credit Facility Agreement,the Financing Agreement or otherwise in connection with the Bonds or the Mortgage Loan, have been fully paid,satisfied,and discharged, (d)receipt by the Trustee of a written statement from the Issuer stating that all amounts owed to the Issuer in respect of the Issuer's Reserved/tights have been fully paid, satisfied and discharged, (e)receipt by the Trustee of a written statement from the Construction Phase Credit Facility Provider stating that all amounts owed to the Construction Phase Credit Facility Provider in respect of any Construction Phase Credit Facility,whether with respect to any Construction Phase Credit Documents or otherwise in connection with the Bonds or the Mortgage Loan,have been fully paid, satisfied and discharged and(f)receipt of an Opinion of Counsel stating that all conditions precedent to the satisfaction and discharge of this Indenture have been complied with,the Trustee shall (1)cancel and discharge this Indenture and the pledge and assignment of the Trust Estate, (2)execute and deliver to the Issuer such instruments in writing as shall be required to evidence the cancellation and discharge of this Indenture and the pledge and assignment under this Indenture and(3)reconvey,assign and deliver to the Issuer so much of the Trust Estate as may be in its possession or subject to its control, except for(A)the Credit Facility,which shall be delivered to Fannie Mae,(B)moneys and Government Obligations held for the purpose of paying Bonds and(C)moneys and Permitted Investments held in the Rebate Fund for payment to the United States Government. Section 8.1(2)Finnie Mae. If the Trustee shall receive a written statement from Fannie Mae stating that moneys are owed to Fannie Mae on account of the Bonds and/or the Mortgage Loan,whether with respect to the Bond Documents,the Mortgage Loan Documents,the Credit Facility Agreement,the Financing Agreement or otherwise in connection with the Bonds or the Mortgage Loan,the Trustee shall,prior to cancellation and discharge of this Indenture and prior to any conveyance, assignment and delivery of the Trust Estate or any part of it,but after payment as provided for in clauses D04CSSF1:269332.3 40511-107-ADI-07!22198 6:37 PM 68 (a)and(b)of Section 8.1(1)of this Indenture,first, pay over,assign and deliver to Fannie Mae so much of(and not to exceed)the Trust Estate as shall be necessary to fully pay,satisfy and discharge all amounts due and owing to Fannie Mae in respect of the Bonds and the Mortgage Loan,whether with respect to the Bond Documents,the Mortgage Loan Documents,the Credit Facility Agreement,the Financing Agreement or otherwise in connection with the Bonds or the Mortgage Loan,as determined by Fannie Mae,in its sole and absolute discretion. Section 8.1(3)Def ult. If default shall have occurred and remain uncured under the Mortgage Loan of which the Trustee shall have received written notice from Fannie Mae or the Servicer,and if the Bonds have been paid in full,at the written direction of Fannie Mae,the Trustee shall pay over,assign and deliver to Fannie Mae so much of the Trust Estate as shall be necessary to fully pay, satisfy and discharge all obligations due and owing to Fannie Mae,as determined by Fannie Mae in its sole and absolute discretion. Section 8.1(4)Construction Phase Credit Facility Provider. If the Trustee shall receive a written statement from the Construction Phase Credit Facility Provider stating that moneys are owed to the Construction Phase Credit Facility Provider on account of the Bonds and/or the Mortgage Loan,whether with respect to the Construction Phase Credit Facility,any other Construction Phase Credit Document or otherwise in connection with the Bonds or the Mortgage Loan,the Trustee shall,prior to cancellation and discharge of this Indenture and prior to any reconveyance,assignment and delivery of the Trust Estate or any part of it,pay over,assign and deliver to the Construction Phase Credit Facility Provider so much of(and not to exceed)the Trust Estate as shall be necessary to fully pay, satisfy and discharge all amounts due and owing to the Construction Phase Credit Facility Provider in respect of the Bonds and the Mortgage Loan,whether with respect to the Construction Phase Credit Documents or otherwise in connection with the Bonds or the Mortgage Loan,as determined by the Construction Phase Credit Facility Provider,in its sole and absolute discretion. Section 8.1(5)Issuer. If the Trustee shall receive a writtenstatement from the Issuer stating that moneys are owed to the Issuer in respect of the Reserved Rights,the Trustee shall,prior to cancellation and discharge of this Indenture,and prior to any reconveyance,assignment and delivery of the Trust Estate or any part of it,pay over,assign and deliver to the Issuer so much of(and not to exceed) the Trust Estate as shall be necessary to fully satisfy,pay and discharge all amounts owing to the Issuer in respect of the Reserved Rights. Section 8»1(6)Conveyance of Trpst Estate. Upon payment in full of all obligations owed by the Borrower under the Bond Documents and under the Mortgage Loan Documents, payment in full of all amounts owing to the Trustee,Fannie Mae,the Servicer,the Construction Phase Credit Facility Provider and the Issuer,as provided in this Section 8.1,and termination of all obligations of Fannie Mae under the Collateral,as provided in Section 8.1(1),Agreement,including,without limitation,obligations under Section 7 of this Indenture,the Trustee shall convey so much of the Trust Estate as shall remain,to the Issuer,who shall,in turn,convey,assign and deliver the remaining Trust Estate to the Borrower. Notwithstanding the foregoing,the Trustee shall not reconvey,assign and deliver the Trust Estate to the Issuer if Fannie Mae remains obligated for any payments under the Collateral Agreement. Section 8.1(7)Additional Fannie Mae Pass-Throe h Cerhficate Distributions. Notwithstanding the foregoing provisions of this Section 8.1, if,at the time this Indenture is to be canceled and discharged as provided in this Section 8.1,the Trustee is to receive additional distributions under the Fannie Mae Pass-Through Certificate,then this Indenture shall(remain in effect and shall not be canceled or discharged until all such distributions have been received by the Trustee and the distributions so received by the Trustee applied as provided in this Indenture. D005sF1:369332.3 40511-107-ADI-07122198 6:37 PM 69 Section 8.1(8)Survival of Fights and Powers. The(a)rights and powers granted to the Trustee with respect to the payment,transfer and exchange of Bonds and(b)Reserved Rights of the Issuer shall survive the cancellation and discharge of this Indenture. Section 8.2 Limit tion on Tran fer or Release of Mortgage L an. Notwithstanding anything contained in this Indenture to the contrary,so long as Fannie Mae is obligated under the Collateral Agreement and has not defaulted in its obligations under the Collateral Agreement, the Trustee shall not transfer the Mortgage Note or the Mortgage or any interest in the Mortgage Note or the Mortgage other than as provided in this Indenture or release the Mortgage Loan from the lien of this Indenture without Fannie Mae's prior written consent. Section 8.3 Defiance. Section 8.3(1)Pression for Payment of Bonds. Any Bond shall be deemed to have been paid within the meaning of Section 8.1 of this Indenture if: (i) there shall have been irrevocably deposited with the Trustee either: (A) sufficient Available Moneys;or (B) Government Obligations,which are not subject to early redemption and which are purchased with Available Moneys,of such maturities and interest payment dates and bearing such interest as will,without further investment or reinvestment of either the principal amount of such Government Obligations or the interest earnings on Government Obligations(the earnings to be heldin trust also),be sufficient,together with any Available Moneys deposited pursuant to paragraph(i) above, as verified by a written report of an independent certified public accountant; in each case for the payment on their respective maturity dates,or redemption dates prior to maturity, of the principal of such Bonds and redemption premium,,if any,and interest to accrue on such Bonds to such maturity or redemption dates;provided,however,that the Trustee shall have received,at the expense of Borrower,(a)an Opinion of Counsel rendered by bankruptcy counsel that such Available Moneys or Government Obligations purchased with Available Moneys are not subject to avoidance under',Section 547 or 544 and are not subject to an automatic stay pursuant to Section 362 of the Bankruptcy Code or any successor statute,and,as such, are not recoverable under Section 550(a)of the Bankruptcy Code or other applicable insolvency law,should there be a petition by or against the Borrower,any general partner of the Borrower or the Issuer under the Bankruptcy Code or any other bankruptcy act,and(b)an Opinion of Bond Counsel to the effect that such deposit with the Trustee and consequent defeasance of the Bonds does not adversely effect the exclusion of the interest payable on the Bonds from gross income for federal income tax purposes; (ii) there shall have been paid all Fees due or to become due or there shall be irrevocably deposited with the Trustee sufficient additional moneys to make the required payments;and (iii) for any such Bonds to be redeemed on any date prior to their maturity, the Trustee shall have received in form satisfactory to it irrevocable instructions to redeem such Bonds on a date on which the Bonds are subject to redemption, and either evidence satisfactory to the Trustee that all redemption notices required by this Indenture DOCSSF1:2693323 44511-107-ADI-07122M 6:37 FM 70 have been given or irrevocable power authorizing the Trustee to give such redemption notices. The Trustee shall redeem the Bonds specified by such irrevocable instructions on the date specified by such irrevocable instructions. Section 8.3(2)Defeased Bonds No Longer Oiutstandina. ;At such times as a Bond shall be deemed to be paid under this Indenture,it shall no longer be secured by or entitled to the benefits of this Indenture, except for the purposes of payment in accordance with the terms of this Indenture. Section 8.3(3)Investment Limitations Not Anplicahle. Limitations elsewhere specified in this Indenture regarding the investment of moneys held by the Trustee,other than with respect to the Tax Certificate,shall not be construed to prevent the depositing and holding of the obligations described in subparagraph(i)(B)of Section 8.3(I)of this Indenture for the purpose of providing for the defeasance of the lien of this Indenture as to Bonds which have not yet become due and payable. All income from all Government Obligations in the hands of the Trustee pursuant to this Section 8.3 which has been identified by an independent certified public accountant as not required for the payment of the Bonds and interest on such income with respect to which such moneys shall have been so deposited shall be deposited with the Trustee as and when realized and collected for use and application as are other moneys deposited with the Trustee. Section 8.3(4)Pyr 'cular Bonds. Notwithstanding any other provision of this Indenture to the contrary,all moneys or Government Obligations set aside and held in trust pursuant to the provisions of this Section 8 for the payment of Bonds(including accrued interest on such Bonds)shall be applied to and used solely for the payment of the particular Bonds(including interest on such Bonds) with respect to which such moneys or Government Obligations have been so set aside in trust. Section 8.3(5)Restrictions on Amendments. Notwithstanding anything contained in Section 1 I to the contrary, if moneys or Government Obligations have been deposited or set aside with the Trustee pursuant to this Section 8 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 8 shall be made without the consent of the Bondholders affected by such amendment. Section 8.3(6)Disgharn of this Ind n ure. Notwithstanding the fact that the lien of this Indenture upon the Trust Estate may have been discharged and canceled in accordance with Section 8.1,this Indenture,the rights granted and duties imposed by this Indenture,to the extent not inconsistent with the fact that the lien upon the Trust Estate may have been discharged and canceled,shall nevertheless continue and subsist after payment in full of the Bonds until the Trustee shall, subject to the rebate requirements of the Tax Certificate,have returned to the Borrower,Fannie Mae or the Issuer,as appropriate,all amounts,if any,held by the Trustee in the Funds and Accounts. Section 9. Default Provisions and Remedies. Section 9.1 Events of Default:Preliminary Notice. Section 9.1(1)Events of Default. Each of the following shall constitute an Event of Default under this Indenture. (i) default in the payment of any interest due on any Bond on any Interest Payment Date or any other date when and as the same shall have become due, DOCSSF1:264332.3 . 44511-107-A.U1-07122148 6:37 PM 71 (ii) default in the payment of the principal of any Bond when and as the same shall become due,whether at the stated maturity of the Bond or upon any redemption (including any mandatory sinking fund redemption)of the Bond; or (iii) default in the observance or performance of any other of the covenants, agreements or conditions on the part of the Issuer included in this Indenture or in the Bonds (other than an Event of Default set forth in paragraph(i)or(ii)above)and the continuance of such default for a period of 30 days after receipt of written notice of such default from the Trustee to the Issuer,Fannie Mae,the Servicer and the Borrower;provided that Fannie Mae shall have consented in writing to the same constituting an Event of Default. A default on the part of Fannie Mae in making any distribution under the Fannie Mae Pass-Through Certificate or in failing to observe or perform any covenant, agreement or condition contained in the Fannie Mae Pass-Through Certificate shall not in and of itself constitute an Event of Default under this Indenture,but shall entitle the Trustee to exercise its rights and remedies under the Fannie Mae Pass-Through Certificate and as provided in Section 6.12(2)of this Indenture,provided that the Trustee shall not accelerate payment of the Bonds except as permitted by Section 9.2 of this Indenture. Section 9.1(2)Preliminary Notice. The Trustee will immediately notify the Issuer,the Servicer,the Borrower and Fannie Mae after a Responsible Officer obtains knowledge or receives notice,as provided in paragraph(xii)of Section 10.1 of this Indenture,of the occurrence of an Event of Default or an event which would become an Event of Default with the passage of time or the giving of notice,or both,identifying the paragraph in Section 9.1(1)of this Indentureunder which the Event of Default has occurred or may occur. Section 9.1(3)Non-Default and Prohibition of Mandatory Redemption Upon Event of Taxability. The occurrence of any event(a"Tax Event)which results in the interest payable on the Bonds being includable for federal income tax purposes,in the gross income of the Bondholders, including,without limitation,any violation of any provision of the Regulatory Agreement or any of the Bond Documents, shall not constitute an Event of Default or a default under the Mortgage Loan,the Bonds or any of the Bond Documents, or permit any party(other than Fannie Mae)to accelerate,or require acceleration of,the Mortgage Loan or the Bonds,or give rise to a mandatory redemption of the Bonds, or give rise to the payment to the Bondholders of any amount, denoted as "supplemental interest,""additional interest,""penalty interest,""liquidated damages"or otherwise,in addition to the amounts payable to the owners of the Bonds prior to the occurrence of the Tax Event. Nothing contained in this Section 9.1(3)shall be deemed to amend or modify the terms of the Mortgage Loan Documents. Promptly upon determining that a Tax Event has occurred,the Issuer or the Trustee shall, by notice in writing to Fannie Mae and the Servicer,inform Fannie Mae and the Servicer that a Tax Event has occurred and has been cured, or has occurred and has not been cured within a reasonable period, or has occurred and is incurable. Notwithstanding the availability of the remedy of specific performance to cure a Tax Event that is curable within a reasonable period,neither the Issuer nor the Trustee shall have, and each of them acknowledges that they shall not have,upon the occurrence of a Tax Event,any right or obligation to cause or direct acceleration of the Bonds or the Mortgage Loan,to enforce the Mortgage Note or to foreclose the Mortgage,to accept a deed to the Project in lieu of foreclosure,or to effect any other comparable conversion of the Project. Section 9.2 Remedies: Rights of Bondholders. Section 9.2(1)General. Upon the occurrence of an Event of Default,the Trustee may pursue any available remedy at law or in equity to enforce the payment of the principal of DOCSSF1:269332.3 40511-107-ADI-07122/98 6:37 PM 72 and interest on the Bonds then Outstanding,including enforcement of any rights of the Trustee under the Collateral Agreement or the Fannie Mae Pass-Through Certificate,as applicable,or of the Issuer and the Trustee under the Financing Agreement and the Regulatory Agreement;provided,however,that the Trustee shall not commence foreclosure upon any real property collateral so long as Fannie Mae timely perforins its monetary obligations under the Collateral Agreement. In the case of an Event of Default other than an Event of Default described in paragraph(iii)of Section 9.1(1)of this Indenture,the Trustee shall be entitled,but not obligated,to declare the principal amount of the Outstanding Bonds and interest accrued, and to accrue,on the Outstanding Bonds to the date of payment,to be immediately due and payable. Section 9.2(2)Acctlerpi ion•Rescission of Acceler t�,ion. Section 9.2(2)(I) Acceleration Prior to the Fannie Mae Pass- Throu li Certificate Delivery Date. Upon: (i) the occurrence of the Event of Default described in paragraph(i)or(ii)of Section 9.1(1)of this Indenture prior to the Fannie Mae Pass-Through Certificate Delivery Date, the Trustee may,upon receipt of indemnity satisfactory to the Trustee, and shall,upon the written request of Bondholders owning not less than fifty-one percent(51%)in aggregate principal amount of Bonds then Outstanding,by written notice to the Issuer,the Borrower,Fannie Mae and the Servicer,declare the principal of all Bonds then Outstanding(if not then due and payable)and the interest accrued,and to accrue,on the Outstanding Bonds to the date of payment immediately due and payable,or (ii) the occurrence of an Event of Default described in paragraph(iii)of Section 9.1(1)of this Indenture prior to the Fannie Mae Pass-Through Certificate Delivery Date, the Trustee may,upon receipt of indemnity satisfactory to the Trustee,and upon receiving the prior written consent of Fannie Mae,and shall,upon the written direction of Fannie Mae,by written notice to the Issuer,the Borrower,Fannie Mae and the Servicer,declare the principal of all Bonds then Outstanding(if not then due and payable)and the interest accrued, and to accrue, on the Outstanding Bonds to the date of payment immediately due and payable. Upon any such declaration of acceleration,the Trustee shall: (A) give Immediate Notice to Fannie Mae as contemplated in Section 3.8(2)(2)of the Collateral Agreement,activating Fannie Mae's obligation to redeem the Trustee's interest in the Pledged Collateral pursuant to Section 3.8(2)(2)of the Collateral Agreement, subject to the limitations of 3.8(3)(1)of the Collateral Agreement, and (B) exercise such rights as it may have under the Financing Agreement to declare all payments under this Indenture to be immediately due and payable. Section 9.2(2)(2) Acceleration On or After the Fannie M#e Pass- Through Certificate Delivery Dat+ . Upon: (i) the occurrence of an Event of Default described in paragraph(i)or(ii)of Section 9.1(1)of this Indenture on or after the Fannie Mae Pass-Through Certificate Delivery Date,the Trustee may,upon receipt of indemnity satisfactory to the Trustee,and shall upon the written request of Bondholders owning not less than fifty-one percent(51%)in aggregate principal amount of Bonds then Outstanding,which written request shall acknowledge that the amounts due on the Fannie Mae Pass-Through Certificate cannot be accelerated by virtue of DOCSSFI:269332.3 40511-1i17-ADI-49122/98 6.37 PM 73 acceleration of the Bonds,by written notice to the Issuer,the Borrower,Fannie Mae and the Servicer,declare the principal of all Bonds then Outstanding(if not then due and payable)and the interest accrued,and to accrue,on the Outstanding Bonds to the date of payment immediately clue and payable,in which event such principal and interest shall become and be immediately due and payable, or (ii) the occurrence of an Event of Default described in paragraph(iii)of Section 9.1(1)of this Indenture on or after the Fannie Mae Pass-Through Certificate Delivery Date,the Trustee may,upon receipt of indemnity satisfactory to the Trustee,and upon receiving the prior written consent of Fannie Mae,and shall,upon the written direction of Fannie Mae,by written notice to the Issuer,the Borrower,Fannie Mae and the Servicer,declare the principal of all Bonds then Outstanding(if not then due and payable)and the interest accrued,and to accrue, on the Outstanding Bonds to the date of payment immediately due and payable. The acceleration of the Bonds shall not constitute a default under,or cause the acceleration of,the Fannie Mae Pass-Through Certificate, Section 9.2(2)(3) N91jce. Upon any decision to accelerate payment of the Bonds,the Trustee shall notify the Bondholders of the declaration of acceleration,that interest on the Bonds will cease to accrue upon such declaration,and that payment of such Bonds will be made upon presentment of the Bonds at the Principal Office of the Trustee not earlier than fifteen(15)days following the date of acceleration. Such notice shall be sent by registered mail,overnight delivery service or other secure means,postage prepaid,or,at the Trustee's option,may be given by Electronic Means to each Registered Owner of Bonds at such Registered Owner's last address appearing in the Bond Register. Any defect in or failure to give notice of such declaration shall not affect the validity of such declaration. Section 9.2(2)(4) Rescission of Acceleration. If at any time after a declaration of acceleration, and before the payment of any money due to the Bondholders, (a)the issuer, the Borrower or Fannie Mae shall pay to or deposit with the Trustee a sum sufficient to pay all principal of the Bonds then due(other than solely by reason of such declaration)and all unpaidinstallments of interest(if any)on all the Bonds then due,with interest at the rate borne by the Bonds on such overdue principal and(to the extent legally enforceable)on such overdue installments of interest, (b)the reasonable expenses of the Trustee shall have been paid or adequate provision shall have been made therefor and(c)all other defaults under this Indenture shall have been cured or waived in writing by Fannie Mae or,in the case of a Fannie Mae Payment Default(as defined in the Collateral Agreement),by the holders of not less than fifty-one percent(51%)in aggregate principal amount of Bonds then Outstanding,then and in every case,the Trustee on behalf ofthe Bondholders of all the Bonds then Outstanding shall rescind and annul such declaration and its consequences,provided that no such rescission and annulment shall extend to or shall affect any subsequent Event of Default,or impair or exhaust any right or power arising by virtue of any subsequent Event of Default. Section 9.3 QLher R medics. Subject to Section 9.9(4)of this Indenture,upon the occurrence and continuance of an Event of Default,the Trustee may,with or without taking action under Section 9.2 of this Indenture,but only with the prior written consent of Fannie Mac;,and shall,at the direction of Fannie Mae if the Event of Default occurs under paragraphs(iii)or(iv)of Section 9.1(1)of this Indenture,pursue any of the following remedies: (i) an action in mandamus or other suit,action or proceeding at law or in equity(a) to enforce the payment of the principal of,premium, if any,or interest on the Bonds then Outstanding,(b)for the specific performance of any covenant or agreement contained in this Indenture or in the Financing Agreement or the Regulatory Agreement or(c)to require the issuer I)OCS9F1:269332.3 40511407-ADl-07/22198 6:37 PM 74 to carry out any other covenant or agreement with Bondholders and to perform its duties under the Act; (ii) the liquidation of the Trust Estate pledged under this Indenture(subject to the provisions of Section 8.1 of this Indenture)not including the sale,assignment or disposition of the Collateral Agreement or the Fannie Mae Pass-Through Certificate(if such Event of Default occurs after the Fannie Mae Pass-Through Certificate Delivery Date)without satisfying the conditions set forth in Section 7.2 of this Indenture and without the prior written consent of Fannie Mae;or (iii) an action or suit in equity,to enjoin any acts or things whichmay be unlawful or in violation of the rights of the Bondholders and to execute any other papers and documents and do and perform any and all such acts and things as may be necessary or advisable in the opinion of the Trustee in order to have the respective claims of the Bondholders against the Issuer allowed in any bankruptcy or other proceeding. Subject to the provisions of Section 9.9 of this Indenture and the requirement,if any,that Fannie Mae consent in writing to the exercise by the Trustee of any such available remedy,upon the occurrence and continuance of an Event of Default and provided that the Trustee is indemnified as provided in paragraph(ix)of Section 10.1 of this Indenture,the Trustee shall exercise such of the rights and powers conferred by this Section 9.3 as the Trustee,being advised by counsel, shall deem most effective to enforce and protect the interests of the Bondholders. Section 9.4 Remedies Not Exclusive. Subject to the provisions of Section 9.9 of this Indenture, no right or 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 right or remedy,but each and every such right and remedy shall be cumulative and shall be in addition to any other right or remedy given to the Trustee or to the Bondholders under this Indenture or under the Financing Agreement;the Regulatory Agreement or,the Credit Facility or now or hereafter existing at law or in equity. Section 9.5 Waiver. To the extent not precluded by law or Section 9.2(2)of this Indenture,the Trustee upon notice to and with the prior written consent of Fannie Mae may waive any Event of Default under this Indenture and its consequences and,if the Trustee has accelerated payment of the Bonds,rescind the declaration of acceleration upon the written request of (a)Fannie Mae or(b) Bondholders owning not less than fifty-one percent(51%)in aggregate principal amount of Bonds then Outstanding;provided,however,that there shall not be waived(a)any default in the payment of the principal amount of any Bonds at the date of maturity of such Bonds,at the due date of any sinking fund installment or upon proceedings for mandatory redemption, or(b)any default in the payment when due of the interest or premium, if any,on any such Bonds,unless prior to such waiver or rescission all arrears of interest,with interest(to the extent permitted by law)at the rate borne by the Bonds in respect of which such Event of Default shall have occurred on overdue installments of interest or all arrears of payments of principal or premium,if any,when due(whether at the stated maturity of the Bonds, at the due date of any sinking fund installment or upon proceedings for mandatory redemption)as the case may be,and all expenses of the Trustee in connection with such monetary default,shall have been paid or provided for;in the case of any such waiver,the Issuer,the Borrower,the Trustee and the Bondholders shall be restored to their former positions and rights under this Indenture. No waiver of any Event of Default under this Indenture shall extend to or shall affect any subsequent Event of Default or shall impair any rights or remedies arising by virtue of any subsequent Event of Default. The Trustee may not waive any Event of Default under this Indenture(i)while the Construction Phase Credit Facility is in effect,without the consent of the Construction Phase Credit Facility Provider,and(ii)unless the Credit Facility will remain in effect after the waiver,provided that such waiver will be permitted if(a)the Issuer consents to the DOCssFu:264332.3 40511-107-AnI-07n2/"6:37 PM 75 waiver, (b)the Rating Agency then rating the Bonds is notified and the Trustee gives written notice to the Bondholders that the ratings on the Bonds may be reduced or withdrawn upon the occurrence of such waiver,and(c) I GO%of the Bondholders consent to the waiver. Section 9.6 Limited Effect of Waiver. No waiver of any Event of Default,whether by the Trustee or by the Bondholders, shall extend to or shall affect any subsequent Event of Default or shall impair any rights or remedies consequent to such Event of Default. Section 9.7 Delay or Omission. No delay or omission to exercise any right or remedy provided in this Indenture upon any Event of Default shall impair any such right or remedy or shall be construed to be a waiver of any such Event of Default or acquiescence in it and every such right and remedy may be exercised from time to time as often as may be deemed expedient. Section 9.8 Enforcement of Finlncing Agreement. The Trustee,as assignee of all right,title and interest of the Issuer in and to the Financing Agreement,shall be empowered to enforce each and every right(except for the Reserved Rights)granted to the Issuer under the)Financing Agreement,which enforcement shall be limited as provided in the Financing Agreement,and particularly but without limitation as provided in Section 11.2 of the Financing Agreement. Section 9.9 Rights of Fannie Maend th Bon h lders To Direct Pro eedin s• Ri hts and Limitations A13plicable to Bon h lders Issuer and Trustee. Section 3.9(1)Rights to Direct Proceedings. Notwithstanding anything contained in this Indenture to the contrary,Fannie Mae itself or Bondholders owning not less than fifty- one percent(51%)in aggregate principal amount of Bonds then Outstanding,but only with the prior written consent of Fannie Mae, shall have the right,at any time,by an instrument or instruments in writing executed and delivered to the Trustee,to direct the method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of this Indenture or any other proceedings under this Indenture,provided that such direction shall not be otherwise than in accordance with the provisions of law and of this Indenture,and provided that the Trustee shall be indemnified to its satisfaction(except for actions required under Section 9.2(2)of this Indenture). Section 9.9(2)Limitations on Bondholders`Rights. No Bondholder shall have the right to enforce the provisions of this Indenture or the Financing Agreement,or to institute any proceeding in equity or at law for the enforcement of this Indenture or the Financing Agreement,or to take any action with respect to an Event of Default under this Indenture or an Event of Default under(and as defined in)the Financing Agreement,or to institute,appear in or defend any suit or,other proceeding with respect to this Indenture or the Financing Agreement upon an Event of Default unless(a)such Bondholder has given the Trustee,the Issuer,Fannie Mae,the Servicer and the Borrower written notice of the Event of Default, (b)the holders of not less than fitly-one percent(51°lo)in aggregate principal amount of Bonds then Outstanding shall have requested the Trustee in writing to institute such proceeding, (c)the Trustee shall have been afforded a reasonable opportunity to exercise its powers or to institute such proceeding,(d)there shall have been offered to the Trustee indemnity,where required, (e)the Trustee shall have thereafter failed or refused to exercise such powers or to institute such proceeding within a reasonable time and(f)provided no Fannie Mae Payment Default,shall have occurred and is continuing,Fannie Mae shall have given its prior written consent to such action! No Bondholder shall have any right in any manner whatever by his or her action to affect,disturb or prejudice the pledge of revenues or of any other moneys,funds or securities under this Indenture or,except'in the manner and on the conditions provided in this Section 9.9(2)to enforce any right or duty under this Indenture. No Bondholder shall have the right,directly or indirectly,individually or as a group,to seek to enforce, collect amounts available under, or otherwise realize on,the Credit Facility. DOCSSF1:269332.3 40511-107-ADI-07122/98 6:37 PM 76 Section 9.9(3)Qblization of Issuer To t#v and Right of Bondholders to Payment When Due. Nothing in this Indenture shall affect or impair any right of enforcement conferred on any Bondholder by the Act or other laws of the State to enforce(a)the obligation of the Issuer to pay the principal of and interest on the Bonds to such Bondholder at the time and place,from the source and in the manner as provided in this Indenture or(b)the payment of the principal of and!interest on any Bonds at and after the maturity of such Bonds. Section 9.9(4)Non-Interfer nce And N n-Im air ut of lV1 a e Lo n. Notwithstanding anything contained in this Indenture to the contrary, so long as the Credit Facility remains in effect and Fannie Mae is not in default in its payment obligations under the Credit Facility, neither the Issuer,the Trustee nor any person under their control nor the Bondholders shall,without the prior written consent of Fannie Mae, exercise,directly or indirectly,any remedy or direct any proceeding under the Bond Documents or with respect to the Mortgage Loan or,directly or Indirectly: (i) initiate or take any action which may have the effect,directly or indirectly,of (a) impairing the ability of the Borrower to timely pay the principal of, interest on,or other amounts due and payable under,the Mortgage Loan Documents or(b)impairing or defeating the validity or priority of the lien created by the Mortgage; (ii) interfere with or attempt to influence the exercise by Fannie Mae of its rights under the Mortgage Loan Documents,including,without limitation,Fannie Mae's remedial rights under the Mortgage Loan upon the occurrence of an event of default by the Borrower under the Mortgage Loan; (iii) upon the occurrence of an event of default under the Mortgage Loan,take any action to accelerate or otherwise enforce payment or seek other remedies with respect to the Mortgage Loan;or (iv) exercise any remedies or direct any proceeding under the Mortgage Loan Documents; provided that, subject to the provisions of the foregoing paragraphs(i)through(iv),this Section 9.4(4) shall not prohibit the Issuer's right to enforce its Reserved Rights. Notwithstanding the foregoing,the Issuer or the Trustee,as the case may be,may(a)enforce rights under the Collateral Agreement(so long as the Collateral Agreement is in effect),(b)enforce the tax covenants set forth in this Indenture and the Financing Agreement and(c)enforce rights of specific performance under the Financing Agreement and the Regulatory Agreement,provided,further,that neither the Issuer nor the Trustee shall seek damages or any monetary recovery under the Financing Agreement or the Regulatory Agreement. Section 9.10 Discontinuancl of Proceed nos. Prior to a demand for payment under the Collateral Agreement pursuant to Section 7.1(3)(1)of this Indenture,in case the Trustee shall have proceeded to enforce any right under this Indenture by the appointment of a receiver or otherwise,and such proceedings shall have been discontinued or abandoned for any reason,or shall have been determined adversely,then and in every such case the Issuer,Fannie Mae and the Trustee shall be restored to their former positions and rights under this Indenture,and all rights,remedies,powers,duties and obligations of the Issuer,the Trustee and Fannie Mae shall continue as if no such proceedings had been taken, subject to the limits of any adverse determination. Section 9.11 Action by Trustee. All rights of action under this Indenture or upon any of the Bonds enforceable by the Trustee may be enforced by the Trustee without the possession of any of the Bonds, or the production of the Bonds at the trial or other proceedings relative to such suit,action or DUCSSF1:269332.3 40511-IW-ADI-07122198 6:37 PM 77 proceeding,and any such suit,action or proceeding instituted by the Trustee may be brought in its name for the ratable benefit of the Bondholders without the necessity of joining any Bondholder as a party. In any action, suit or other proceeding by the Trustee,the Trustee shall be paid fees,counsel fees and expenses in accordance with Section 10.4 of this Indenture. Section 9.12 Accounting and Exgminatiun of Rrec rds After Default. The Issuer covenants with the Trustee and the Bondholders that if an Event of Default shall have happened and shall not have been remedied,the books of record and account of the Issuer relating to the Bonds and the Project shalt at all times during normal business hours be subject to the inspection and use of the Trustee and of its agents and attorneys. Section 1.13 Application of Moneys. Amounts derived from payments under the Collateral Agreement shall be deposited into the Credit Facility Account and applied solely to pay the principal of and interest on the Bonds and shall not be applied to pay any fees or expenses or advances of the Trustee or the Issuer(except to the extent such fees are payable out of the Fees Account from transfers to the Fees Account from the Pass-Through:hate Subaccount). All other moneys received by the Trustee pursuant to any action taken under this Section 9 and all moneys on deposit in the Funds and Accounts under this Indenture shall be deposited into the General Receipts and Disbursements Account of the Revenue Fund, and, other than with respect to an Event of Default under paragraph(iii)of Section 9.1(1) of this Indenture, after payment of the unpaid fees and expenses of the Trustee and the Issuer(including, without limitation,the fees and expenses of attorneys), and the costs and expenses of the proceedings resulting in the collection of such moneys and of the expenses, liabilities and advances incurred or made by the Trustee,the balance of such moneys,less such amounts as the Trustee shall determine may be needed for possible use in paying future fees and expenses and for the preservation and management of the Project(as identified by Fannie Mae), shall be applied as follows: (i) unless the principal on all Bonds shall have become or been declared due and payable, all such moneys shall be applied: First-to the payment of amounts,if any,payable to the United States pursuant to Section 4.6 of this Indenture; Second-to the payment to the persons entitled to such payment of all interest then due on the Bonds,in the order of the maturity of such interest and,if the amount available shall not be sufficient to pay in full said amount,then to the payment ratably, according to the amounts due to the persons entitled to such payment,without any discrimination or privilege; Third-to the payment to the persons entitled to such payment of the unpaid principal of any of the Bonds which shall have become due(other than Bonds matured or called for redemption for the payment of which moneys are held pursuant to the provisions of this Indenture),in the order of their due dates,upon which they became due with interest on such Bonds from the respective dates upon which they became due at the rate borne by the Bonds and,if the amount available shall not be sufficient to pay in full Bonds due on any particular date,together with such interest,then to the payment ratably, according to the amount of principal due on such date,to the persons entitled to such payment without any discrimination or privilege; Fourth -to be held for the payment to the persons entitled to such payment,as the same shall become due,of the principal of and interest on the Bonds which may thereafter become due either at maturity or upon call for redemption prior to maturity 1OCSSF1:269332.3 40511-107-anl-07/22/"6:37 PM 78 and,if the amount available shall not be sufficient to pay in full Bonds due on any particular date,together with interest then due and owing on such Bonds,payment shall be made ratably according to the amount of principal due on such date to the persons entitled to such payment without any discrimination or privilege; and Fifth-to the payment of amounts owed to Fannie Mae under the Credit Facility Agreement and the Financing Agreement and the Mortgage Loan.Documents,including amounts to reimburse Fannie Mae to the extent it has made payments under the Credit Facility,as specified to the Trustee in writing by Fannie Mae; (ii) if the principal of all the Bands shall have become or been declared due and payable,all such moneys shall be applied first to the payment of amounts,if any,payable to the United States pursuant to Section 4.6 of this Indenture;second to the payment of the principal and interest then due and unpaid upon the Bonds,without preference or priority of principal over interest or of interest over principal,or of any installment of interest over any other installment of interest, or of any Bond over any other Bond,ratably according to the amounts due respectively for principal and interest to the persons entitled to payment,until all such principal and interest has been paid;and third to pay Fannie Mae amounts owed to it under the Credit Facility Agreement and the Financing Agreement and the Mortgage Loan Documents,including reimbursement to the extent it has made payments under the Credit Facility;and (iii) if the principal of all the Bonds shall have been declared due and payable,and if such declaration shall thereafter have been rescinded under this Section 9.13,then,in the event that the principal of all the Bonds shall later become or be declared due and payable,the moneys shall be applied in accordance with paragraph(ii)of this Section 9.13. Whenever moneys are to be applied pursuant to this Section 9.13,such moneys shall be applied at such times, and from time to time, as the Trustee shall determine,having due regard for the amount of such moneys available for application,the likelihood of additional moneys becoming available for such application in the future,and potential expenses relating to the exercise of any remedy or right conferred on the Trustee by this Indenture. Whenever the Trustee shall apply=such moneys,it shall fix the date (which shall be an Interest Payment Date unless it shall deem an earlier date more suitable)upon which such application is to be made,and upon such date interest on the amounts of principal to be paid on such date shall cease to accrue. The Trustee shall give such notice as it may deem appropriate of the deposit with it of any such moneys and of the fixing of any such date,and shall not be required to make payment to the owner of any Bond until such Bond shall be presented to the Trustee for appropriate endorsement or for cancellation if fully paid. Whenever the principal of and interest on all Bonds have been paid in full under the provisions of this Section 9.13 and all expenses and charges of the Trustee and the Issuer have been paid,any balance remaining in the Funds and Accounts shall be paid as provided in Section 8.1 of this Indenture. Section 9.14 1VMorta e oAn: Issuer's and Trustee's Acknowied ements with Respect to the Mort& Ue Loan. The Issuer and the Trustee acknowledge and agree that the occurrence of an Event of Default under the Financing Agreement will not by itself cause a default to arise under the Mortgage Loan, including,without limitation,the Mortgage Note or the Mortgage. Section 18. The Trustee. Section 10.1 Appointment of Trustee;_Duties. The Trustee is appointed, and agrees to act as,and to perform the duties of,the Trustee,the Bond Registrar and the Paying Agent under the Financing Agreement,the Regulatory Agreement and this Indenture and under,or in connection with,all Dt)CSSFl:269332.3 40511-107-AD2-07f22/"6.37 PM 79 other documents,property and ether rights comprising the Trust Estate,but only upon and subject to the express terms and conditions(and no implied covenants or other obligations shall be read into this Indenture against the Trustee)set forth in the following paragraphs: (i) the Trustee shall be obligated to perform only such duties and exercise only such rights as are specifically set forth in this Indenture,in the Financing Agreement and in the Regulatory Agreement;the Trustee shall,during the existence of any Event of Default(which has not been cured), exercise such of the rights vested in it by this Indenture,in the Financing Agreement and in the Regulatory Agreement, and use the same degree of care and skill in their exercise,as a reasonable person would exercise or use under the circumstances in the conduct of his own affairs;the foregoing shall not limit the Trustee's obligations under Section 7.1(3)or Section 9.2(2)of this Indenture; (ii) the Trustee may execute any of its trusts or powers under this Indenture and perform any of its duties by or through attorneys,agents or receivers,and shall be entitled to advice of counsel concerning all matters of trust under this Indenture and the duties under this Indenture, and may in all cases pay such reasonable compensation and shall be entitled to reimbursement from the Borrower for all such compensation paid to such attorneys, agents and receivers;the Trustee may act upon the opinion or advice of counsel,accountants,or such other professionals as the Trustee deems necessary and selected by it in the exercise of reasonable care; the Trustee shall not be responsible for any loss or damage resulting from any action or nonaction based on its good faith reliance upon such opinion or advice which is not contrary to the express terms of this Indenture,any of the other Bond Documents or the Mortgage Loam Documents; (iii) except as otherwise specifically provided elsewhere in this Indenture,the Trustee shall not be responsible for any recital in this Indenture(other than Recital 0)or in the Bonds (other than in the certificates of authentication appearing thereon),or for any recording, rerecording, filing or refiling(other than as provided in Section 6.13 and Section 10.13 of this Indenture),or for insuring the Project, or for the sufficiency of any insurance,for for collecting any insurance moneys,or for the validity of this Indenture or of any supplements to this Indenture or instruments of further assurance,or for the sufficiency of the security for the Bonds issued under this Indenture or intended to be secured by this Indenture,or for the value of or title to the Project or otherwise as to the maintenance of the Trust Estate,but the Trustee may require(but shall be under no duty to require)of Fannie Mae or the Borrower full information and advice as to the performance of the covenants,conditions and agreements aforesaid as to the condition of the Project;except as otherwise provided in Section 9.2(2)of this Indenture,the Trustee shall have no obligation to perform any of the duties of the Issuer under the Financing Agreement or the Regulatory Agreement;the Trustee shall not be liable for any loss suffered in connection with any investment of amounts made by it in accordance with this Indenture; (iv) the Trustee shall not be accountable for the use of any Bonds authenticated or delivered under this Indenture after such Bonds shall have been delivered,or for the use by the Borrower of the proceeds of the Mortgage Loan,or for the use or application of any moneys received by the Trustee,except to the extent that the Trustee is obligated to disburse moneys under and in the manner provided in Section 4 of this Indenture or invest moneys under and in the manner provided in Section 5 of this Indenture;the Trustee may become the owner of Bonds secured by this Indenture with the same rights as any other Bondholder; (v) the Trustee shall be protected in acting upon an Opinion of Counsel, an Opinion of Bond Counsel a Cash Flow Projection and a Verification Report,and upon any notice,request, consent,direction, requisition,certificate,order,affidavit,letter,telegram or other paper or DOCSSFIs269332.3 40511-107-AW-07)22M 6:37 PM 80 _._ ......._. .......................... ........ ........_ . .... _.........._.... ...... _........ ... . ..... .. __........ ......... _........ . ......................................................................................... . ........................................ document believed to be genuine and correct and to have been signed or sentby the proper person or persons and which is not contrary to the express terms of this Indenture,any of the other Bond Documents or the Mortgage Loan Documents; any action taken by the Trustee pursuant to this Indenture upon the request or authority or consent of any person who at the time of making such request or giving such authority or consent is the owner of any Bond as shown on the Bond Register shall be conclusive and binding upon all fixture owners or holders of the same Bonds and upon Bonds issued in exchange therefor or in place of such Bonds; (vi) the permissive right of the Trustee to do things enumerated in this Indenture or in the other Bond Documents to which the Trustee is a party shall not be construed as duties until specifically undertaken by the Trustee;the Trustee shall only be responsible for the performance of the duties expressly set forth in this Indenture and in the other Bond Documents to which it is a party and shall not be answerable for other than its negligence or willful misconduct in the performance of those express duties; (vii) the Trustee shall not be personally liable for any debts contracted or for damages to persons or to personal property injured or damaged,or for salaries or nonfulfillment of contracts,relating to the Project; (viii) the Trustee shall not be required to give any bond or surety in respect of the execution of its trusts and powers or otherwise in respect of the premises; (ix) before taking any action requested under this Indenture(except for acceleration of Bonds as required by Section 9.2(2), or a payment pursuant to Section 7.1);or the other Bond Documents,the Trustee may require security or indemnity satisfactory to it for the payment of its fees and expenses and to protect it against all liability,except liability which is adjudicated to have resulted from its own negligence or bad faith by reason of any action so taken; (x) before taking any action requested by a Bondholder or Bondholders under or pursuant to Section 9 of this Indenture,the Trustee may require security or indemnity satisfactory to it from such Bondholder or Bondholders for the payment of its fees and expenses and to protect it against all liability,except liability which is adjudicated to have resulted from its own negligence or bad faith by reason of any such action so taken; (xi) all moneys received by the Trustee,until used or applied or invested as provided in this indenture, shall be held as special trust funds for the purposes specified in this Indenture and for the benefit and security of the Bondholders,Fannie Mae and the Persons to whom the Fees are owed,as provided in this Indenture;such moneys need not be segregated from other moneys except to the extent required by law or as provided in this indenture;the Trustee shall not otherwise be under liability for interest on any moneys received under this Indenture except such as may be agreed upon; (xii) the Trustee shall not be bound to ascertain or inquire as to the performance of the obligations of the Borrower under the Financing Agreement or the Regulatory Agreement,or the Issuer under this Indenture or the Regulatory Agreement,and shall not be deemed to have,or required to take,notice of default under this Indenture except any default under paragraphs(i), (ii)or(iv)of Section 9.1(1)of this Indenture or unless it receives written notice of an Event of Default from Fannie Mae,any party to the Financing Agreement or Bondholders owning not less than twenty-five percent(251/o)in aggregate principal amount of all Bonds then Outstanding, and in the absence of such written notice the Trustee may conclusively presume there is no default except as provided above;the Trustee may nevertheless require the Issuer and the Borrower to DOCSSF1:269332.3 40511-107-AM-07!22/98 6:37 PM 81 furnish information regarding performance of their respective obligations under the Financing Agreement and the Regulatory Agreement,but is not obligated to do so; (xiii) the Trustee shall,if the Bonds are then rated by a Rating Agency,give notice by mail to that Rating Agency at its address promptly upon the occurrence of any of the following. (A) the appointment of any successor trustee or separate trustee or co-trustee to serve under this indenture; (B) any modifications,amendments, supplements or revisions to this Indenture,the Financing Agreement,the Credit Facility or any Mortgage Loan Document; (C) the Conversion Date; (D) receipt of the Fannie Mae Pass-Through Certificate; (E) the termination of the Credit Facility; (F) an Event of Default under this indenture; (G) the replacement of any investment agreement; (H) a redemption or defeasance of the Bonds in whole or in part(other than any mandatory sinking fund redemption); (I) a purchase of the Bonds pursuant to Section 3.9(1)of this indenture; or (3) any other information reasonably requested by the Rating Agency; provided that,it is expressly understood and agreed that failure to provide any such notice to any Rating Agency or any defect in the notice or in the manner in which it is given will not affect the validity of any action with respect to which notice is to be given or the effectiveness of any such action; (xiv) the Trustee is authorized and directed by the issuer to execute in its capacity as Trustee the Financing Agreement,the Regulatory Agreement,the Collateral Agreement,any Mortgage Loan Document to which it is a party and any financing statements. (xv) the Trustee shall have no responsibility with respect to any information, statement,or recital in any official statement,offering memorandum or any other disclosure material prepared or distributed with respect to the Bonds; (xvi) no provision of this indenture,the Financing Agreement or any other Bonn Document or any Mortgage Loan Document shall require the Trustee to expend,risk or advance its own funds or otherwise incur any financial liability in the performance of its duties or the exercise of its rights under this indenture; (xvii) the immunities extended to the Trustee shall extend to its directors,officers, employees and agents; (xviii) the Trustee shall not be liable for any action taken or not taken by it in accordance with the direction of Fannie Mae or Bondholders owning not less than fifty-one nocssF1:269332.3 40511-107-ADI-07/22198 6:37 PM 82 percent(51%)(or other percentage provided for in this Indenture)in aggregate principal amount of all Bonds then Outstanding relating to the exercise of any right,power or remedy available to the Trustee,and (xix) the Trustee shall not be responsible for the actions or omissions of the Servicer and shall have no duty or responsibility to monitor the performance of the Servicer. Section 10.2 R gejipt itf Fannie Mae Pass-Through Certificate. The Trustee agrees to receive and accept the Fannie Mae Pass-Through Certificate on the Fannie Mae Pass-Through Certificate Delivery Bate,subject in all respects to the terms of the Fannie Mae Trust;Indenture and declares that it holds and will hold the Fannie Mae Pass-Through Certificate for the sale benefit of the Bondholders. In making determinations required by this Indenture with respect to the Fannie Mae Pass- Through Certificate,the Trustee may rely in good faith upon certifications and other information provided by the Servicer,provided that the Fannie Mae Trust Indenture and related Issue Supplement relating to the Fannie Mae Pass-Through Certificate shall in all events govern the Fannie Mae Pass-Through Certificate notwithstanding any certification by the Servicer inconsistent with the Fannie Mae Trust Indenture or the related Issue Supplement, Section 10.3 Regresegtation. The Trustee represents and warrants to the Issuer that it is a national banking association,having a combined capital stock, surplus and undivided profits aggregating at least$50,000,000 or a wholly-owned subsidiary of an entity meeting that requirement. Section 10.4 Fees; Expenses. The Trustee shall be entitled to payment and/or reimbursement from the Borrower for the Trustee's Annual Fee and other reasonable fees for its services rendered under this Indenture and under the Financing Agreement,the Regulatory Agreement and the Collateral Agreement,and all advances,counsel fees and other ordinary expenses reasonably made or incurred by the Trustee,in connection with such services,and,in the event that it should become necessary that the Trustee perform extraordinary services,it shall be entitled to reasonable extra compensation therefor,and to reimbursement for reasonable extraordinary expenses in connection therewith;provided that if such extraordinary services or extraordinary expenses are occasioned by the negligence or willful misconduct of the Trustee, it shall not be entitled to compensation or reimbursement therefor;provided further however,that the Borrower's failure to pay amounts owed to the Trustee shall not excuse the Trustee's performance of its obligations under this Indenture and under the other Bond Documents,provided that the Trustee shall not be required to expend or advance its own funds or otherwise incur any financial liability in connection therewith unless payment of its fees and expenses are assured to the satisfaction of the Trustee. The Trustee shall also be indemnified by the Borrower as provided in the Financing Agreement. The Trustee recognizes that all fees,charges and other compensation to which it may be entitled under the provisions of this Indenture are required to be paid by the Borrower under the terms of the Financing Agreement,and,accordingly,the Trustee agrees that except for moneys that the Issuer may derive from the Borrower for purposes of the foregoing,the Issuer shall not be liable for any such fees,charges and other compensation. Section 10.5 Merger:Consolidation. Any corporation or association into which the Trustee may be converted or merged,or with which it may be consolidated,or to which it may sell or transfer its corporate trust business and assets as a whole or substantially as a whole,or any corporation or association resulting from any such conversion, sale,merger,consolidation or transfer to which the Trustee is a party shall,provided such corporation or association otherwise qualifies under Section 10.9 of this Indenture,be and become the successor Trustee under this Indenture,vested with title to the Trust Estate and having all the trusts,powers,discretions,rights,duties,immunities and privileges as its predecessor,without the execution or filing of any instrument or any further act,deed or conveyance on the part of the Issuer(other than the provision of notice to the Issuer,Fannie Mae and the Servicer). DOCSSF1.2693323 40511-107-ADI-07122198 6:37 PM 83 Section 10.6 Intervention ip Litigation. In any judicial proceedings with respect to the Bonds to which the Issuer is a party the Trustee may intervene on behalf of Bondholders or Fannie Mae(with the prior written consent of Fannie Mae),and shall,subject to paragraph(ix)of Section 10.1 of this Indenture,intervene if requested in writing by Bondholders owning not less than fifty-one percent (51%)in aggregate principal amount of Bonds then Outstanding and with the consent of Fannie Mae or if requested in writing by Fannie Mae. Section 10.7 Resignation of Trustee. The Trustee and any successor Trustee may resign only upon giving 60 days'prior written notice to the Issuer,Fannie Mae,the Servicer,the Borrower,the Construction Phase Credit Facility Provider(if such resignation is on or before the Conversion Date)and to each registered owner of Bonds then outstanding as shown on the records of the Trustee. Notwithstanding such notice,such resignation shall take effect only upon the appointment of a successor Trustee in accordance with Section 10.9 of this Indenture and the acceptance of such appointment by such successor Trustee. Section 10.8 Rempval of Trustee. The Trustee may be removed at any time,upon 30 days'prior written notice to the Trustee, (a)by the Issuer, in its sole discretion,or at the direction of the Borrower,with the consent of Fannie Mae, (b)by an instrument or concurrent instruments in writing delivered to the Issuer,Fannie Mae,the Servicer,the Trustee and the Borrower, signed by the owners of not less than fifty-one percent(51c/o)in aggregate principal amount of Bonds then Outstanding,and approved by Fannie Mae,which written instrument shall designate a successor Trustee or(c)by Fannie Mae so long as Fannie Mae has not defaulted in payment under the Credit Facility. Such removal shall not be effective until a successor Trustee satisfying the requirements of Section 10.9 is appointed and has accepted its appointment. Section 10.9 Appointment of Successor Trus ee. Upon the resignation or removal of the Trustee,a successor Trustee shall be appointed by the Borrower(if the Borrower is not in any default under any Bond Document or any Mortgage Loan Document)with the prior written consent of the Issuer and Fannie Mae,provided that if the Borrower is in default, such appointment shall be made by the Issuer with the prior written consent of Fannie Mae. If,in the case of resignation of the Trustee,no successor is appointed within sixty(60)days after the notice of resignation,the resigning Trustee shall appoint a successor with the prior written consent of the Issuer and Fannie Mae or apply to a court of competent jurisdiction for the appointment of a successor. The successor Trustee shall(a)be a bank or trust company organized under the laws of the United States of America or any state of the United States of America,having(or its parent having)a combined capital stock, surplus and undivided profits aggregating at least$50,000,000,and shall(b)accept in writing its duties and responsibilities under this Indenture,the Financing Agreement and the Regulatory Agreement; such written acceptance shall be filed with the Issuer,Fannie Mae,the Servicer,the Borrower and, if such appointment is made prior to the Conversion Date,the Construction Phase Credit Facility Provider. The successor Trustee shall give notice of such succession by first-class mail,postage prepaid,to each Bondholder at the address of such Bondholder shown on the Bond Register. Upon appointment of a successor Trustee,the resigning or removed Trustee,as the case may be, shall assign all of its right,title and interest in the Trust Estate, including its right,title and interest in the Credit Facility and this Indenture,to the successor Trustee. Section 10.10 Transfer of Rights and Prouertv to Successor Trustee,Upon the execution of the written acceptance provided for in Section 10.9 of this Indenture,the successor Trustee shall,without any further act,deed or conveyance,become fully vested with all moneys,estates, properties, rights,powers, duties and obligations of the predecessor Trustee,with like effect as if named in this Indenture as such Trustee,but the former Trustee shall nevertheless, on the written request of the Issuer,Fannie Mae or the successor Trustee, execute,acknowledge and deliver such instruments of conveyance and further assurance and do such other things as may be reasonably required for more fully DOCSsFI:2,69332.3 40511-M-at3r-07122M 6:37 PMT 84 and certainly vesting and confirming in the successor Trustee all the right,title and interest of the predecessor Trustee in and to any properties held by it under this Indenture, and shall pay over,assign and deliver to the successor Trustee any money or other property subject to the trusts and'conditions set forth in this Indenture. Should any deed,conveyance or instrument in writing from the Issuer be required by such successor Trustee for more fully and certainly vesting in and confirming to the successor Trustee any such moneys,estates,properties,rights,powers and duties,any and all such deeds,conveyances and instruments in writing, shall, on request,and as may be authorized by law,be executed,acknowledged and delivered by the Issuer. Section 10.11 Instruments of Bondholders. Any instrument required by this Indenture to be executed by Bondholders may be in any number of writings of similar tenor and may be executed by Bondholders in person or by agents appointed in writing. Proof of the execution of any such instrument or of the writing appointing any such agent and of the ownership of Bonds shall be sufficient for any of the purposes of this Indenture if given by a certificate of any officer in any jurisdiction who by law has power to take acknowledgments within such jurisdiction that the person signing such instrument acknowledged before him the execution of such instrument. The Trustee may rely on such an instrument of Bondholders unless and until the Trustee receives written notice that the original of such instrument is no longer valid. In the event that the Trustee shall receive conflicting directions from two groups of Bondholders, each with combined holdings of not less than twenty-five percent(25%)in aggregate principal amount of all Bonds then Outstanding,the directions given by the group of Bondholders which hold the largest percentage of Bonds shall be controlling and the Trustee shall follow such directions as elsewhere required in this Indenture. Section 10.12 Pow To Appoint Co-Trustees and Separate Trustees. Section 10.12(1) Appointment of Co-Trustees. At any time or times,for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Project may at the time be located,the Issuer(in its sale discretion or at the request of the Borrower,unless the Borrower is in default,and with the acceptance of the Trustee)shall have the power, subject to the approval of Fannie Mae,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 Project, or to act as separate trustee or separate co-trustees of all or any part of the Project,and to vest in such person or persons, in such capacity, such title to the Project or any part of it,and/or such rights,powers,duties,trusts or obligations as the Issuer and the Trustee may consider necessary or desirable(including,if appropriate,the duties of the Bond Registrar or Paying Agent),subject to the remaining provisions of this Section 10.12(l). The Trustee shall give written notice of the appointment of a co-trustee to the Borrower and the Servicer. Upon the request of the Trustee or of Bondholders owning not less than fifty-one percent(511%)lin aggregate principal amount of Bonds then Outstanding,the Issuer shall join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to effect such appointment. If the Issuer shall not have joined in such appointment within 30 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, subject to Fannie Mae"s right to approve,the Trustee alone shall have the power to make such appointment. The Issuer shall execute,acknowledge and deliver all such instruments as may be required by any such co- trustee or separate trustee for more fully confirming such title, rights,powers,trusts,duties and obligations to such co trustee or separate trustee. Every co-trustee or separate trustee shall,to the extent permitted by law or any applicable contract,be appointed subject to the following terms,namely: (i) 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 separate trustee,jointly, as shall be provided in the instrument appointing such co-trustee or separate trustee, except to the extent that,under the law of any DOCSSF1:269332.3 40511-107-ADI-07!22198 6:37 PM 85 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 separate trustee; (ii) any request in writing by the Trustee to any co-trustee or separate trustee to take or to refrain from taking any action under this Indenture shall be sufficient warrant for the taking, or the refraining from taking, of such action by such co trustee or separate trustee; (iii) any co-trustee or separate trustee to the extent permitted by law may delegate to the Trustee the exercise of any right,power,trust,duty or obligation,discretionary or otherwise; (iv) the Trustee at any time,by an instrument in writing,with the concurrence of the Issuer evidenced by a resolution,may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section 10.12(l),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 Issuer;upon the request of the Trustee,the Issuer 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;a successor to any co-trustee or separate trustee so resigned or removed may be appointed in the manner provided in this Section 10.12(1); (v) no trustee under this Indenture shall be personally liable by reason of any act or omission of any co-trustee or separate trustee under this Indenture; (vi) any demand,request,direction,appointment,removal,notice, consent,waiver or other action in writing executed by any Bondholder and delivered to the Trustee shall be deemed to have been delivered to each such co trustee or separate trustee;and (vii) any moneys,papers, securities or other items of personal property received by any such co-trustee or separate trustee under this Indenture shall forthwith, so far as may be permitted by law,be turned over to the Trustee. Upon the acceptance in writing of appointment by any such co-trustee or separate trustee, it, she or he shall be vested with the pledge and assignment of the Security and with such rights,powers,duties,trusts 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,the Issuer,Fannie Mae,the Servicer,the Borrower and,if such appointment is made prior to the Conversion Date,the Construction Phase Credit Facility Provider. Section 10.12(2) _Effect of Death,Incapacity,Resienatign or Removal of Co-Trustee or Separate Trustee. In case any co-trustee or separate trustee shall die,become incapable of acting,resign or be removed,the pledge and assignment of the Security and all rights, powers,trusts,duties and obligations of the 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 same manner as provided for with respect to the appointment of a successor Trustee pursuant to Section 10.9 of this Indenture. Section 10:12(3} Approval of the Issuer. Notwithstanding anything else to the contrary in this Section 10,no successor trustee or any co-trustee or separate trustee shall assume its duties under this Indenture without the prior written approval of the Issuer. DOCssF'1:269332.3 40511-107-ADI-07122198 6:37 PM 86 Section 10.13 FilingofSl tements. From time to time,the Trustee, at the expense of the Borrower,shall file or record or cause to be filed or recorded all financing statements identified to it in writing by the Borrower or the Servicer,which are required to be filed or recorded in order fully to protect and preserve the security interests relating to this Indenture and the Trust Estate and, prior to the Fannie Mae Pass-Through Certificate Delivery Date,the Mortgage Loan,and the priority of such security interests and the rights and powers of the issuer and the Trustee in connection therewith, including without limitation all continuation statements for the purpose of continuingwithout lapse the effectiveness of(a)those financing statements which shall have been filed at or prior to the Closing Date in connection with the security for the Bonds pursuant to the authority of the U.C.C.,and(b)any previously filed continuation statements which shall have been filed as required by this Indenture; provided that if Fannie Mae or the Servicer gives written notice to the Trustee that it has filed or recorded all applicable financing statements,the Trustee shall be entitled to rely on such written notice. The Issuer shall sign,and the Borrower shall deliver to the Trustee or its designee,all such financing statements as may be required for the purposes specified in the preceding sentence. Each financing,statement so delivered to the Trustee shall be accompanied by a notice from the Borrower instructing the Trustee to file such financing statement in all appropriate places,which places shall be designated in such notice. Upon the filing of any such financing statement the Trustee shall immediately notify the Issuer,the Borrower and Fannie Mae that the same has been accomplished. Section 10.14 Servicing the Mortgage Loan. The Issuer and the Trustee acknowledge that the Servicer,as Servicer,will be responsible for servicing and administering the Mortgage Loan,but that Fannie Mae,in its discretion,may contract with another servicer designated by Fannie Mae to perform such functions for Fannie Mae. Any servicing contracts or arrangements by Fannie Mae with such servicer for servicing the Mortgage Loan shall constitute a contractual obligation only between Fannie Mae and such servicer and neither the Trustee nor the Issuer will be deemed to be a party to such arrangements nor have any claim,right,duty,obligation or liability with respect to the servicing of the Mortgage Loan. Section 10.15 Requests from Refine Agency. The Trustee shall promptly respond in writing, or in such other manner as may be reasonably requested,to requests from the Rating Agency for information deemed necessary by the mating Agency in order to maintain the rating assigned to the Bonds. The Trustee shall promptly furnish any such requested information in its possession to the Rating Agency and shall, as may be reasonably requested by the hating Agency,assist in efforts to obtain any necessary information from the issuer or the Borrower or Fannie Mae as applicable. Section 10.16 Discipsure,agreement. The Borrower and the Trustee shall enter into a Disclosure Agreement to provide for the continuing disclosure of information about the Bonds,the Borrower and other matters as specifically provided for in such agreement pursuant to Rule 15c2-12 of the Securities and Exchange Commission. The Trustee is authorized and directed to enter into the Disclosure Agreement and to make information public as provided in the Disclosure Agreement. Under the Disclosure Agreement,the Trustee shall act as the agent of the Borrower and not as the agent of the Issuer. The consent of the Issuer shall be required to each amendment to,or modification of,the Disclosure Agreement,which consent shall not be unreasonably withheld. The duties and obligations of the Trustee under the Disclosure Agreement shall be as set forth in the Disclosure Agreement,and the Trustee shall be responsible only for the express duties and obligations set forth in the Disclosure Agreement. The fees and expenses of the Trustee related to the Disclosure Agreements shall be the responsibility of and be paid by the Borrower. A default under any Disclosure Agreement shall not be a default under this Indenture,the Financing Agreement,any of the other Bond Documents or any of the Mortgage Loan Documents. DOCSSF1:269332.3 40511-107-ADI-07/22198 6•.37 PM 87 Section 11. Supplemental Indentures:Amendments. Section 11.1 $unnletnental Indentures blot Requiring-Bondholder Consent. The Issuer and the Trustee, without the consent of or notice to any of the Bondholders, but subject to the provisions of Section 11.10,may enter into an indenture or indentures supplemental to this Indenture for one or more of the following purposes. (i) to cure any ambiguity or to correct or supplement any provision contained in this Indenture or in any supplemental indenture which may be defective or inconsistent with any other provision contained in this Indenture or in any supplemental indenture; (ii) to make such other provisions in regard to matters or questions arising under this Indenture which are not materially adverse to the interests of the Bondholders; (iii) to amend,modify or supplement this Indenture in any respect if such amendment, modification or supplement is not materially adverse to the interests of the Bondholders; (iv) to grant to or confer upon the Trustee for the benefit of the Bondholders any additional rights,remedies,powers or authority that may lawfully be granted to or conferred upon the Bondholders or the Trustee,or to grant or pledge to the Trustee for the benefit of the Bondholders any additional security other than that granted or pledged under this Indenture; (v) to modify,amend or supplement this Indenture or any supplemental indenture in such manner as to permit the qualification of this Indenture or such supplemental indenture under the Trust Indenture Act of 1939, as amended,or any similar federal statute then in effect,or to permit the qualification of the Bonds for sale under the securities laws of any of the States of the United States; (vi) to appoint a successor trustee,separate trustee or co-trustee,or a separate Bond Registrar or Paying Agent,in the manner provided in Section 10 of this Indenture; (vii) to make any change requested by Fannie Mae which is not materially adverse to the interests of the Bondholders,including,without limitation,provision of a Credit Facility other than or in substitution for the Collateral Agreement or the Fannie Mae Pass-Through Certificate, provided that the provision of such other Credit Facility does not adversely affect the rating then in effect for the Bonds; (viii) to comply with requirements of any Rating Agency then rating the Bonds; (ix) to comply with the Code and the regulations and rulings issued with respect to the Code,to the extent determined as necessary or desirable in the Opinion of Bond Counsel; (x) to permit the Borrower to enter into a modification of any Mortgage Loan on terms approved by Fannie Mae,provided that there has first been delivered to the Trustee(a) written evidence of such approvals and the approval by Fannie Mae of the proposed form of supplemental indenture and any other documents relating to the supplemental;indenture;and(ii) written evidence from the Rating Agency that such modifications and any related changes to the terms of the financing will not adversely affect the rating then in effect on the Bonds; (xi) to implement any secondary market disclosure,required under applicable law with respect to the Bonds,the Issuer,the Borrower or the Project; DOCssFI:269332.3 40511-107-ADI-07/22198 6:37 PM 88 (-ii) to make any changes in this Indenture or in the terms of the Bonds necessary or desirable in order to(a)obtain the Fannie Mae Pass-Through Certificate or(b)maintain the rating of"AAA"awarded to the Bonds by the hating Agency,provided that any change under this clause(b),if made at all,must be made prior to the Fannie Mae Pass-Through Certificate Delivery Date; (xiii) to subject to this Indenture additional revenues,properties or collateral; (xiv) to modify,amend or supplement this Indenture as may be necessary or desirable in order to enable the Trustee to accept the Fannie Mae Pass-Through Certificate in certificated form instead of in book-entry form,and to make conforming amendments or supplements to this Indenture in connection therewith;or (xv) in connection with any other change in this Indenture which is not materially adverse to the interests of the Bondholders; provided that the Trustee shall have received,in each instance,written confirmation from the Rating Agency to the effect that such supplemental indenture will not result in the withdrawal or reduction of the then current rating on the Bonds. When requested by the Issuer or the Borrower, and if all conditions precedent in this Section 11.1 and in Sections 11.10 and 11.11 of this Indenture have been satisfied,the Trustee shall join the Issuer in the execution of any such supplemental indenture. A copy of any such supplemental indenture shall be promptly furnished by the Trustee to Fannie Mae,the Servicer and the Borrower. Section 11.2 Sunniemental Indentures Requiring Bondholder,Consent. Exclusive of supplemental indentures covered by Section 11.1 of this Indenture and subject to the terms and provisions contained in this Section 11.2 and in Sections 11.10 and 11.11,and not otherwise,the Issuer, in its sole discretion,and the Trustee may,with the consent of Bondholders owning not less than fifty-one percent(51%)in aggregate principal amount of Bonds then Outstanding and affected by such indenture or indentures supplemental to this Indenture, from time to time,anything contained elsewhere in this Indenture to the contrary notwithstanding,execute an indenture or indentures supplemental to this Indenture for the purpose of modifying,altering, arnending,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 contained in this Section 11.2 shall permit, or be construed as permitting,without the approval of Bondholders owning one hundred percent(100%)in aggregate principal amount of Bonds then Outstanding: (i) an extension of the maturity of the principal of or interest on,any Bond,without the consent of the owners of all of the Bonds then Outstanding (ii) a reduction in the principal amount of, or the rate of interest on,any Bond, without the consent of the owner of such Bond; (iii) a preference or priority of any Bond or Bonds over any other Bond or Bonds, without the consent of the owners of all such Bonds; (iv) the creation of a lien prior to or on parity with the lien of this Indenture,without the consent of the owners of all of the Bonds then Outstanding; (v) a change in the percentage of Bondholders necessary to waive an Event of Default or otherwise approve matters requiring Bondholder approval under this Indenture, DO CSSF1:269332.3 40511-147-ADW-07/22/98 6:37 PM 89 including consent to any supplemental indenture,without the consent of the owners of all the Bonds then Outstanding; (vi) so long as the Collateral Agreement is in effect,a transfer,assignment or release of the Collateral Agreement(or modification of the provisions of this Indenture governing such transfer,assignment or release), other than as permitted by this Indenture or the Collateral Agreement without the consent of all of the Bonds then Outstanding; (vii) on and after the Fannie Mae Pass-Through Certificate Delivery Date,a transfer, assignment,or release of the Fannie Mae Pass-Through Certificate,other than as permitted by this Indenture, at an aggregate price less than the Stated Principal Balance(as defined in the Fannie Mae Trust Indenture)of the Mortgage Loan,plus accrued interest,without the consent of the holders of all of the Bonds then Outstanding (viii) a reduction in the aggregate principal amount of the Bonds required for consent to such supplemental indenture,without the consent of the holders of all of the Bonds then Outstanding; (ix) the creation of any lien other than alien ratably securing all of the Bonds at any time Outstanding under this Indenture without the consent of the holders of all of the Bonds then Outstanding; or (x) the amendment of this Section 11.2. The giving of notice to and consent of the Bondholders to any such supplemental indenture shall be obtained as provided in Section 11.8 of this Indenture. When requested by the Issuer or the Borrower, and if all conditions precedent under this Section 11.2 and Sections 11.8, 11.10 and 11.11 of this Indenture have been satisfied,the Trustee shall join the Issuer in the execution of any such supplemental indenture. The Trustee shall promptly furnish a copy of any such supplemental indenture to Fannie Mae,the Servicer and the Borrower . Section 11.3 Amendments to Financing Agreement Not Requiring Bondholder Consent. The Issuer and the Trustee,without the consent of or notice to any of the Bondholders,but subject to the provisions of Sections 11.10 and 11.11 of this Indenture, (a) may enter into or permit any amendment of the Financing Agreement and(b)shall,at the direction of Fannie Mae,enter into any amendment of the Financing Agreement,but only with the consent of the Issuer, for one or more of the following purposes: (i) to cure any ambiguity or to correct or supplement any provision contained in the Financing Agreement which may be defective or inconsistent with any other provision of the Financing Agreement; (ii) to snake such other provisions in regard to matters or questions arising under the Financing Agreement which are not materially adverse to the interests of the Bondholders; (iii) to amend, modify or supplement the Financing Agreement in any respect if such amendment,modification or supplement is not materially adverse to the interests of the Bondholders; (iv) to grant to or confer upon the Issuer or the Trustee for the benefit of the Bondholders any additional rights, remedies,powers or authority that may lawfully be so granted DOCSSFI:269332.3 40511-107-ADI-07122198 6:37 PM 90 or conferred, or to grant or pledge to the Issuer or the Trustee for the benefit of the Bondholders any additional security; (v) to make any change requested by Fannie Mae which is not materially adverse to the interests of the Bondholders; (vi) to comply with the requirements of any Rating Agency then rating the Bonds; (vii) to comply with regulations or rulings issued with respect to the Code,to the extent determined as necessary or desirable in the opinion of Bond Counsel; (viii) to permit the Borrower to enter into a modification of the Mortgage Loan Documents on terms approved by Fannie Mae,provided that there has first been delivered to the Trustee(a)written evidence of such approval and the approval by Fannie Mae of the proposed form of amendment and any other documents relating to the amendment and(b)written evidence from the Rating Agency that such modifications and any related changes to the terms of the financing will not adversely affect the rating then applicable to the Bonds; (ix) in connection with any other change which is not materially adverse to the interests of the Bondholders; provided that the Trustee shall have received,in each instance, written confirmation from the Rating Agency to the effect that any such amendment will not result in a withdrawal or reduction of the then current rating on the Bonds. When requested by the Issuer or the Borrower,and if all;conditions precedent in this Section 11.3 and in Sections 11.9 and 11.10 of this Indenture have been satisfied,the Trustee shall join the Issuer and the Borrower in the execution of any such amendment. The Trustee shall furnish copies of any such amendments to the Financing Agreement to Fannie Mae,the Servicer,the Issuer and the Borrower. Section 11.4 Amendments to Financing Agreement and Other Documents Requiring,Bondholder Consent. Except as provided in Section 11.3 of this Indenture and subject to the provisions of Sections 11.10 and 11.11 of this Indenture,the Issuer and the Trustee shall not enter into any other modification or amendment of the Financing Agreement or,prior to the Fannie Mae Pass- Through Certificate Delivery Date,the Mortgage or the Mortgage Note,nor shall any such modification or amendment become effective,without the written consent of the owners of not less than fifty-one percent(51%)in aggregate principal amount of Bonds then Outstanding,such consent to be obtained in accordance with Section 11.8 of this Indenture. No such amendment may,without the consent of the owners of all the Outstanding Bonds,reduce the amounts or delay the payments on the Mortgage.Loan under the Financing Agreement;provided that any such amounts may be reduced without such consent solely to the extent that such reduction(a)results from a partial redemption from other than sinking fund installments or(b)represents a reduction in any Fees payable from such amounts(including,but not limited to,a reduction in the Facility Fee,the Guaranty Fee and/or the Servicing Fee). A copy of any such modification or amendment shall be provided to the Servicer. Notwithstanding the foregoing, on and after the Fannie Mae Pass Through Certificate Delivery Date,Fannie Mase and the Borrower may amend the Mortgage Note and the Mortgage without the consent of the.Issuer,the Trustee or the Bondholders so long as any such amendment does not reduce or modify the payments due under the Fannie Mae Pass Through Certificate. Section 11.5 Amendments,Chan2es_and Modifications to the Collateral Aereement and the Reeulatory Agreement. DOCSSF1:269332.3 40511-107-ADI-07/22/9$6.37 PM 91 Section 11.5(1) The Collateral Aereement. Subject to the provisions of Section 11.10 and Section 11.11 of this Indenture,the Trustee may,without notice to or the consent of the owners of the Bonds, enter into any amendment of the Collateral Agreement as may be required for purposes of curing any ambiguity, focal defect or omission which is not materially adverse to the interests of the Bondholders. Except for such amendments,the Collateral Agreement may be amended only with the written consent of the owners of not less than fifty-one percent(51°I/0)in aggregate principal amount of Bonds then Outstanding,except that,without the written consent of the owners of all Outstanding Bonds,no amendment may be made to the Collateral Agreement which would reduce the amounts required to be paid under the Collateral Agreement or change the time for payment of such amounts;provided that any such amounts may be reduced without such consent solely to the extent that such reduction represents a written agreement to reduce fees payable from such amounts. Section 11.5(2) The Reeulatery Aereement. Subject to the provisions of Section 11.10 and Section 11.11 of this Indenture and the Regulatory Agreement,the Borrower,the Trustee and the Issuer may enter into any amendment or modification of the Regulatory Agreement without the consent of the owners of the Bands(a)as may be required in connection with any amendment or modification to the Financing Agreement,the Mortgage Mote,the Mortgage or any of the other Mortgage Loan Documents and(b)provided that the Borrower shall furnish to the Trustee and the Issuer (1)an Opinion of Bond Counsel to the effect that such amendment or modification of the Regulatory Agreement will not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes and(2)the written consent of Fannie Mae. Section 11.6 Amendments to Mortgage Loan(Documents Not Rgguiring Bondholder fronsent. Fannie Mae shall have the right,without the consent of or notice to the Issuer,the Trustee or the Bondholders,but subject to the provisions of Section 11.10 of this Indenture,to enter into or permit, as the case may be,any amendment or modification of any Mortgage Loan Document for one or more of the following purposes: (i) to cure any ambiguity or to correct or supplement any provision which may be defective or inconsistent with any other provision of the same or any other Mortgage Loan Document or any Bond Document; (ii) to amend,modify or supplement any Mortgage Loan Document in any respect if such amendment,modification or supplement is not materially adverse to the interests of the Bondholders; (iii) to grant to or confer upon Fannie Mae any additional rights,remedies,powers or authority that may lawfully be so granted or conferred with respect to the Mortgage Loan,or to grant or pledge to Fannie Mae any additional security; (iv) to make any change requested by Fannie Mae which is not materially adverse to the interests of the Bondholders; (v) to comply with the requirements of any Rating Agency; (vi) to comply with regulations or rulings issued with respect to the Code,to the extent determined as necessary or desirable by Bond Counsel; (vii) in connection with any other change which, in the judgment of the Trustee, is not materially adverse to the interests of the Bondholders;or DoCssF1.269332.3 44511-147-ADI-07/22/99 6:37 PM 92 (viii) to amend the Mortgage Note in order to reamortize the Mortgage Note in connection with any partial prepayment of the Mortgage Loan and corresponding special mandatory redemption of Bonds pursuant to Section 3.3(1)of this Indenture;' provided that there has first been delivered to the Trustee(a)written evidence that any such modification will not affect(1)Fannie Mae's obligations under the Collateral Agreement, so long as the Collateral Agreement is in effect or(2)on and after the Fannie Mae Pass-Through Certificate Delivery Date,the distributions to be made by Fannie Mae under the Fannie Mae Pass-Through Certificate(except as described in Section 11.4)and(b)written evidence from the Rating Agency that such modifications and any related changes to the terms of the financing will not adversely affect the rating then applicable to the Bonds. The Trustee shall furnish copies of any such amendments to the Issuer and the Rating Agency. The Trustee agrees to cooperate in effecting any such amendment or modification. Section 11.7 Amendments to hiortean and Modgage Note Requiring Bondholder Consent. Except as provided in Section 11.6 of this Indenture and subject to the provisions of Sections 11.10 and 11.11 of this Indenture, Fannie Mae shalt not enter into any other amendment or modification of the Mortgage Note or the Mortgage,nor shall any such amendment or modification become effective, without the written consent of Bondholders owning not less thann fifty-one percent (51°l4)in aggregate principal amount of all Bonds at the time Outstanding,such consent to be obtained in accordance with Section 11.8 of this Indenture,unless such amendment or modification will have no materially adverse effect on the Security for the Outstanding Bonds. Section 11.8 Notice to and Consent of Bondholders. If consent of the Bondholders is required under the terms of this Indenture for any supplement, amendment or modification to this Indenture,the Financing Agreement,the Regulatory Agreement,the Mortgage Note,the Mortgage or any other Mortgage Loan Document,or for any other similar purpose,the Trustee shall cause notice of the proposed execution of the supplement,amendment or modification to be given by first class mail to the Bondholders. Such notice shall briefly set forth the nature of the proposed supplement, amendment or modification,and shall state that copies of any such supplement,amendment or modification are on file at the Principal Office of the Trustee for inspection by the Bondholders. If,within sixty(60)days or such longer period as shall be prescribed by the Trustee following the mailing of such notice,the holders of not less than fifty one percent(51%)in aggregate principal amount of all Bonds then Outstanding,by instruments filed with the Trustee, shall have consented to the supplement,amendment or modification, then the Trustee may execute such supplement,amendment or modification, and the consent of the Bondholders shall be conclusively presumed. The consent of the holder of any Bond shall be binding on any transferee and successor transferees of such Bond Any other notice required to be delivered to Bondholders pursuant to this Indenture shall be given,or caused to be given,by the Trustee by first class mail. Section 11.9 Waivers. The Trustee shall not waive,on its own behalf or on behalf of the Issuer,any obligation of the Borrower under the Financing Agreement or any Mortgage Loan Document without the prior written consent of Fannie Mae(subject to the provisions of Section 12.5 of this Indenture). Section 11.10 Required Approvals. Subject to the provisions of Section 12.5 of this Indenture, and notwithstanding anything in this Indenture to the contrary,no amendment, supplement, change or modification may be made to this Indenture,the Financing Agreement,the Reimbursement Agreement,any of the Mortgage Loan Documents,the Collateral Agreement or any of the other documents executed and delivered in connection with the Bonds without the prior written consent of(i) Fannie Mae,provided that Fannie Mae is not then in payment default under the Credit Facility then in effect and(ii)prior to the Conversion Date,the Construction Phase Credit Facility Provider(so long as DOCSSF1:269332.3 40511-107-ADI-07/22/98 6:37 PM 93 the Construction Credit Facility Provider is not in default under the Construction Phase Financing Agreement). Anything in this Indenture to the contrary notwithstanding,a supplement or amendment or other document described under this Section I I which affects any rights or obligations of the Borrower shall not become effective unless and until the Borrower shall have consented in writing to the execution of such supplemental indenture,amendment or other document. The Trustee shall not be required to enter into any supplement or amendment or other document described under this Section 11 which is, in the judgment of the Trustee,to the prejudice of the Bondholders or the Trustee. To the extent practicable,the Servicer shall be entitled to ten Business Days'prior notice of execution of such supplemental indenture, amendment or other document. Section 11.11 Opinions of Counsel. Subject to the provisions of Section 10.1 of this Indenture,the Trustee may obtain,at the Borrower's expense, and shall be fully protected in relying upon, an Opinion of Counsel as conclusive evidence that any supplement or amendment to this Indenture,the Financing Agreement,the Regulatory Agreement,the Mortgage Note,the Mortgage or the Credit Facility at the time in effect is authorized and permitted by this Indenture and, if applicable,is not materially adverse to the interests of the Bondholders. No supplement or amendment with respect to this Indenture, the Financing Agreement,the Regulatory Agreement,the Mortgage Note,the Mortgage or the Credit Facility at the time in effect shall be effective until the Issuer and the Trustee shall have received an Opinion of Bond Counsel to the effect that such supplement or amendment will not adversely affect the exclusion from gross income,for federal income tax purposes, of the interest payableon the Bonds. Section 11.12 Certific„4te of Borrower. In connection with any supplement, amendment or modification,the Trustee and the Issuer may obtain and shall be fully protected in relying upon a certificate of the Borrower to the effect that,as of the date of such certificate,the Borrower and the Project are in compliance with all requirements of the Bond Documents and the Mortgage Loan Documents(with such exceptions as shall be acceptable to the Issuer in its sole discretion). Section 11.13 Natation of Modification on Bonds., preparation of New Bonds. Bonds authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Section I 1 may bear a notation,in form approved by the Trustee and the Issuer as to any matter provided for in such supplemental indenture,and if such supplemental indenture shall so provide,new Bonds,so modified as to conform,in the opinion of the Trustee and the Issuer,to any modification of this Indenture contained in any such supplemental indenture,may be prepared by the Issuer, authenticated by the Trustee and delivered without cost to the Bondholders,upon surrender for cancellation of such Bonds in equal aggregate principal amounts. Section 12. Miscellaneous. Section 12.1 Consents,Etc..of Bondholders. Any consent,request, direction, approval, objection or other instrument required by this Indenture to be signed and executed by the Bondholders may be in any number of concurrent writings of similar tenor and may be signed or executed by any Bondholder 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 consent, request,direction,approval, objection or other instrument,namely: (i) the fact and date of the execution by any person of any such request, consent, direction, approval,objection or other instrument may be proved by the certificate of any officer in any jurisdiction who by law has power to take acknowledgments within such jurisdiction that D()CssF1.269332.3 40511-1m-aoi-07/22/99 6:37 PM 94 the person signing such writing acknowledged before such officer its execution, or by an affidavit of any witness to such execution;and (ii) the fact of ownership of Bonds and the amount or amounts,numbers or other identification of Bonds, and the date of owning the same shall be proved by the Bond Register. Section 12.2 Limitation of Rights. With the exception of rights expressly conferred in this Indenture,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 other than the Issuer,the Trustee,the Bondholders, Fannie Mae,the Servicer,the Construction Phase Credit Facility Provider and the Borrower any legal or equitable right,remedy or claim under or in respect of this Indenture or any covenants,conditions and provisions contained in this Indenture;this Indenture and all of the covenants,conditions and provisions in this Indenture being intended to be and being for the sole and exclusive benefit of the parties to this Indenture,the Bondholders,Fannie Mae and the Borrower as provided in this Indenture. Section 12.3 Severability. If any provision of this Indenture is held to be in conflict with any applicable statute or rule of law,or is otherwise held to be unenforceable for any reason whatsoever, such circumstance shall not have the effect of rendering the provision in question inoperative or unenforceable in any other part or circumstance,or of rendering any other provision or provisions contained in this Indenture invalid,inoperative or unenforceable to any extent whatsoever. The invalidity of any one or more phrases, sentences, clauses or Sections of this Indenture shall not affect the remaining portions of this Indenture. Section 12.4 Notices. Unless otherwise specified in this Indenture, it shall be sufficient service or giving of any notice,request, certificate,demand or other communication if the same shall be sent by, and all notices required to be given by mail shall be given by,first-class registered or certified mail, return receipt requested,or by private courier service which provides evidence of delivery, postage or other charges prepaid,or sent by telecopy or other Electronic Means which',produces evidence of transmission,confirmed by first-class mail, and in each case shall be deemed to have been given on the date evidenced by the postal or courier receipt or other written evidence of delivery or electronic transmission. Unless a different address is given by any party as provided in this Section 12.4,all such communications shall be addressed as follows: To the Issuer: COUNTY OF CONTRA COSTA 651 Pine Street Martinez, CA 94553 Attention: Telephone: Facsimile: To the Trustee: U.S. Bank Trust National Association Attention: Telephone: Facsimile: To the Borrower: Bollinger Crest Apartments Investors;LLC DOCSSF1.269332.3 40511-107-AD1-0712iM 6.37 PM 95 ...............................................--I'll, ............................................................................................... .................................................. ............................... Attention: Telephone: Facsimile: To S&P: STANDARD &POOR'S 25 Broadway New York,NY 10004 Attention: Public Finance Surveillance Group Telephone: (212)208-1766 Facsimile: (212)412-0393 To the Credit Facility FANNIE MAE Provider: 3900 Wisconsin Avenue,NW Drawer AM Washington,D.C. 20016-2899 Attention: Director, Multifamily Operations Asset Management Facsimile: (202)752-3542 RE: Bollinger Crest Apartments Washington Capital DUS, Inc. For messenger use: 4000 Wisconsin Avenue,N.W. with a copy to: FANNIE MAE 3900 Wisconsin Avenue,NW Washington, D.C. 20016-2899 Attention: Vice President,Multifamily Asset Management Facsimile: (202)752-5016 RE: Bollinger Crest Apartments Washington Capital DUS, Inc. For messenger use: 3939 Wisconsin Avenue,N.W. with a copy to: Arent Fox Kintner Plotkin&Kahn 1050 Connecticut Avenue,NW Washington,D.C. 20036 Attention:Will Basil,Esq. Telephone: (202) 857-8949 Facsimile: (202) 857-6395 DOCSSFI-269332.3 40511-107-ADI-07122198 6:37 PM 96 ............ ................... . ............ ......... ......... -... .... 11.11 . .... ............. ......... ......... ......... ......... .._...... _ __.._. _....................... 1111_.. .............................................................................................. .. .............................................. To the Construction Phase Credit Facility Provider: Attention: Telephone: Facsimile: with a copy to: Attention: Telephone: Facsimile: To the Servicer: WASHINGTON CAPITAL DUS,INC. 1616 N.Fort Myer Drive, Suite 1200 Arlington,VA 22209 Attention: Bridget O. Schmitz Executive Vice President Telephone: (703)243-5 100 Facsimile: (703) 525-4323 Copies of all notices, requests, certificates,demands or other communications required under this Indenture that are not otherwise required to be given to the Construction Phase Credit Facility Provider shall be given to the Construction Phase Facility Provider as and when otherwise required to be given under this Indenture. The Issuer,Borrower,Fannie Mae,the Servicer,the Construction Phase Credit Facility Provider and the Trustee,by notice given under this Indenture, may designate any different addresses to which subsequent notices,certificates,requests, demands or other communications shall be sent, but no notice directed to any one such entity(except for Fannie Mae)shall be required to be sent to more than two addresses. All approvals required under this Indenture shall be given in writing. Section 12.5 Limitations on Rights of Fannie Mae. Notwithstanding anything contained in this Indenture to the contrary,all provisions of this Indenture regarding consents,approvals, directions,waivers,appointments,requests or other actions by Fannie Mae shall be deemed not to require or permit such consents,approvals, directions,waivers,appointments, requests or other actions and shall be read as if Fannie Mae were not mentioned in such provisions after the Credit Facility then in effect shall at any time for any reason cease to be valid and binding on Fannie Mae(other than in accordance with its terms or the terms of this Indenture),or shall be declared to be null and void by final judgment of a court of competent jurisdiction,provided,however,that the payment of amounts due to Fannie Mae pursuant to the terms of this Indenture shall continue in full force and effect. The foregoing shall not affect any other rights of Fannie Mae or any rights of the Construction Phase Credit Facility Provider, including those rights assigned to the Construction Phase Credit Facility Provider by Fannie Mae,as referred to in Section 1.7(l)of this Indenture. In addition, all provisions in this Indenture relating to the rights of Fannie Mae shall be of no force or effect if there is no Credit Facility provided by Fannie Mae in effect and if all amounts owing to Fannie Mae under the Credit Facility Agreement shall have been paid in full. In such event,all references to Fannie Mae shall have no force or effect. Section 12.6 Action-Required to be taken on a Non-Business Day. In any case where any Bond Payment Date or any date on which action is required to be taken shall be a day other than a Business Day,then any action required to be taken or any payment required to be made on such T)MSF1:269333.3 40511-107-A,1D1-07122198 6:37 PM 97 ................................................ date need not be taken or made on such date,but may be taken or made on the next succeeding Business Day with the same force and effect as if made or taken on the date otherwise provided for in this Indenture and,in the case of any payment date,no interest shall accrue for the period from and after such date. Section 12.7 Bindine Effect. This Indenture shall from and after the Closing Date be binding upon the Issuer,the Trustee,the Borrower and Fannie Mae and their respective successors and assigns,subject,however,to the limitations contained in this Indenture. Section 12.8 Governing Law. This Indenture shall be governed by and interpreted in accordance with internal laws of the State without regard to c9nflicts of laws principles. Section 12.9 No-Personal Liability: No Recourse. No recourse under or upon any obligation,covenant,warranty or agreement contained in this Indenture or in any Bond,or under any judgment obtained against the Issuer,or the enforcement of any assessment,or any legal or equitable proceedings by virtue of any constitution or statute or otherwise, or under any circumstances under or independent of this Indenture,shall be had against the officers,agents or employees of the Issuer,as such, past, present or future of the Issuer,either directly or through the Issuer or otherwise,for the payment for or to the Issuer or any receiver of the Issuer, or for or to the owner of any Bond,or otherwise,of any sum that may be due and unpaid by the Issuer upon any such Bond. Any and all personal liability of every nature whether at common law or in equity or by statute or by constitution or otherwise of the officer, agent or employee, as such,by reason of any act of omission on his or her part or otherwise,for the payment for or to the owner of any Bond or otherwise of any sum that may remain due and unpaid upon the Bonds secured by this Indenture or any of them is,by the acceptance of such Bond, expressly waived and released as a condition of and in consideration for the execution of this Indenture and the issuance of the Bonds. Anything in this Indenture to the contrary notwithstanding, it is expressly understood by the parties to this Indenture that(a)the Issuer may rely exclusively on the truth and accuracy of any certificate,opinion,notice or other instrument furnished to the Issuer by the Trustee or any Bondholder as to the existence of any fitct or state of affairs,(b)the Issuer shall not be under any obligation under this Indenture to perform any record keeping or to provide any legal services, it being understood that such services shall be performed or caused to be performed by the Trustee or by the Bondholders and(c)none of the provisions of this Indenture shall require the Issuer to expend or risk its own funds or otherwise to incur financial liability in the performance of any of its duties or in the exercise of any of its rights or powers under this Indenture,unless it shall first have been adequately indemnified to its satisfaction against any costs,expenses and liability which it may incur as a result of taking such action. No recourse for the payment of any part of the principal of,premium,if any,or interest on the Bonds or for the satisfaction of any liability arising from,founded upon or existing by reason of the issuance,purchase or ownership of the Bonds shall be had against any officer,program participant, agent orl employee of the Issuer, as such,all such liability being expressly released and waived as a condition of and as a part of the consideration for the execution of this Indenture and the issuance of the Bonds. No covenant, stipulation, obligation or agreement of the Issuer contained in this Indenture shall be deemed to be a covenant, stipulation,obligation or agreement of any present or future program participant,officer,agent or employee of the Issuer in other than that person's official capacity. No officer,agent or employee of the Issuer shall be individually or personally liable for the payment of the principal or redemption price of or interest on the Bonds or be subject to any personal liability or accountability by reason of the issuance of the Bonds. Section 12.10 Captions. The captions or headings in this Indenture are for convenience only and in no way define, limit or describe the scope or intent of any provisions of Sections of this Indenture. DOCSS8I:269332.3 40511-197-ADI-07/22/98 6.37 PM 98 . ................................ .................... Section 12.11 CountgMarts. 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. DOCSSF1:269332.3 40511-10ti-nni-07122/95 6:37 PM 99 ... ........... .......... ........._... ...._...... ......... ......... ......... .................. _ _.. __... . ... ....._.. ......._. The Issuer has caused this Indenture to be executed, sealed and attested in its name and on its behalf by its duly authorized officers,and the Trustee has caused this Indenture to be executed in its name by its duly authorized officer, all as of the date set forth above. COUNTY OF CONTRA COSTA By: ATTEST: By Clerk of the Board U.S. BANK TRUST NATIONAL ASSOCIATION,as Trustee By: Authorized Signatory ATTEST: By Authorized Signatory DOCSSF1:269332.3 40511-147-ADI-07/22/98 6:37 PM 100 EXHIBIT A [FORM OF BOND] County of Contra Costa, California Multifamily Housing Revenue Bonds (Bollinger Crest Apartments)1998 Series C No. _ $ Interest Ra#e Dated Date Maturity date CUSIP No. REGISTERED OWNER: PRINCIPAL AMOUNT: DOLLARS FOR VALUE RECEIVED, the County of Contra Costa, California (the "Issuer"), a political subdivision of the State of California (the "State'), promises to pay to the registered owner identified above or registered assigns (subject to prior redemption provided for in the Indenture, as hereinafter defined), on the Maturity Date set forth above, the Principal Amount set forth above, and to pay interest on the Principal Amount from the Interest Payment Date (being each April land October 1, commencing April 1, 1999) next preceding the date of authentication of this Bond, providedthat if the date of authentication is an Interest Payment Date for which interest has been paid or is after the Record Date (being the 15th day of the month prior to an Interest Payment Date)but prior to the next Interest Payment Date, this Bond shall bear interest from such Interest Payment Date, provided further that if the date of authentication is prior to the Record Date for the first Interest Payment Date,this Bored shall bear interest from the Dated Date of this Bond. Interest shall be calculated on the basis of a 360-day year consisting of twelve 30-day months. If at the time of authentication of this Bond,interest on this Bond is in default,this Bond will bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment,or if no interest has theretofore been paid on this Bond,from the Dated Date of this Bond. The Bonds (as defined below) are issued as registered bonds without coupons in denominations of $5,000 or any integral multiple of$5,000. The principal of and the interest on this Bond are payable in lawful money of the United States of America to the person in whose name this Bond is registered at the close of business on the Bond Register on the applicable Record Date. Payment of the: (i) interest on this Bond will be made to the Registered Owner of this Bond (as determined at the close of business on the Record Date' next preceding the applicable Interest Payment Date) by check mailed by first class mail, postage prepaid, on the Interest Payment Date to the address of such Registered Owner as it appears on the Bond Register maintained by the Trustee as Bond Registrar, or to such other address as may be furnished in writing by the Registered Owner to the Trustee prior to the applicable Record Date; and (ii) principal amount of this Bond and premium, if any, together with interest payable on any Bond Payment Date other than a regularly scheduled Interest Payment Date, will be made by check only upon presentation and surrender of this Bond on or after its maturity date or date fuzed for redemption at the office of the Trustee designated by the Trustee for that purpose; provided, however, that payment of principal of, premium, if any, and interest on this Bond will be made by wire transfer to any account within the United States of America designated by the Registered Owner if such Registered Owner owns $1,000,000 or more in aggregate DOCSSF1:269794.1 40511-107-ADI-07/22196 6:48 PM A-1 ......... ...._. _.. .. ....................__. ._....... ......... ...._....... ......... ......... ......... ......... ......... ......... ......... . ......_... .............. ..._....._.............. principal amount of Bonds and if a written request for wire transfer is delivered to the Trustee by such Registered Owner not less than five days prior to the applicable Bond Payment Date and if such Registered Owner otherwise complies with the reasonable requirements of the Trustee (such request may specify that it is effective with respect to all succeeding payments of principal, premium, if any, and interest and will be so effective unless and until rescinded in writing by the Registered Owner at least five days prior to the Record Date for the Bond Payment Date to which such rescission is designated to apply). The terra"Bond Payment Date"means(a)any Interest Payment Date, (b)any other date on which interest is payable, including any Redemption Date,each Maturity Date and the date of acceleration of the Bonds and (c)any date on which principal of the Bands is payable. If interest on this .Bond is in default, the Trustee will, prior to the payment of interest, establish a special record date (the "Special Record Date") for such payment, which Special Record Date will be not more than fifteen (15) nor less than ten (10) days prior to the date of the proposed payment. Payment of such defaulted interest will then be made by check or wire transfer, as a permitted above, mailed or remitted to the person in whose name this Bond is registered on the Special Record Date at the address or account of such person shown on the Bond Register. THE BONDS ARE LIMITED OBLIGATIONS OF THE ISSUER, PAYABLE SOLELY OUT OF THE REVENUES, RECEIPTS AND OTHER MONEYS PLEDGED THEREFOR UNDER THE INDENTURE. THE BONDS SHALL NOT BE A DEBT OF THE STATE, THE ISSUER OR OF ANY OTHER POLITICAL SUBDIVISION OF THE STATE, AND NEITHER THE STATE, THE ISSUER NOR ANY OTHER POLITICAL SUBDIVISION OF THE STATE SHALL BE LIABLE FOR THE PAYMENT OF THE BONDS. NEITHER THE FAITH AND CREDIT OF THE STATE, THE ISSUER NOR OF ANY OTHER POLITICAL SUBDIVISION OF THE STATE ARE PLEDGED TO THE PAYMENT OF THE PRINCIPAL OR OF INTEREST OR PREMIUM,IF ANY,ON THE BONDS. THIS BOND DOES NOT CONSTITUTE AN INDEBTEDNESS OF THE ISSUER OR A LOAN OF CREDIT THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION. This Bond is one of a duly authorized issue of bonds of the Issuer designated as its Multifamily Housing Revenue Bonds (Bollinger Crest Apartments) 1998 Series C (the "Bonds'). The Bonds are issued pursuant to Chapter 7 of Part 5 of Division 31 of the California Health and Safety Code,as amended, and a Resolution of the Issuer adopted on July 28, 1998. The Net Bond Proceeds will be used to fund the Mortgage Loan to Bollinger Crest Apartment Investors(the "Borrower"),a California limited partnership, to provide financing for the acquisition, construction and development of a multifamily rental housing development located in the County of Contra Costa, California (the "Project"), and owned and operated by the Borrower. The Mortgage Loan will be in the amount of$[amount) and will be made pursuant to a Financing Agreement (the "Financing Agreement"), dated as of July 1, 1998, by and among the Issuer, the Trustee,the Borrower and Washington Capital DUS,Inc. (the"Servicer'). The Bonds are issued under and are equally and ratably secured as to principal,premium, if any, and interest by a Trust Indenture, dated as of July 1, 1998 (the "Indenture"), between the Issuer and the Trustee,to which Indenture and all indentures supplemental to such Indenture(copies of which are on file at the Principal Office of the Trustee) reference is made for a description of the Trust Estate under the Indenture,the nature and extent of the security,the terms and conditions upon which the Bonds are issued and secured, and the rights of the owners of the Bonds. The Federal National Mortgage Association ("Fannie Mae") has issued its commitment (the "Fannie Mae Commitment"), dated July�, 1998,as amended,to the Servicer, accepted by the Servicer on such date,pursuant to which Fannie Mae has agreed,subject to satisfaction of the terms and conditions of the Fannie Mae Commitment, to (a)provide credit enhancement for the Mortgage Loan pursuant to, and subject to the limitations of, a Collateral Agreement between Fannie Mae and the Trustee, and DocsSFI:269794.1 40511-107-ADI-07/22/98 6:49 PM A_2 _........ _...... ......_.. . . ... .... (b)acquire the Mortgage Loan in exchange for a Fannie Mae Pass-Through Certificate if, and at such time as, the Fannie Mae Pass-Through Certificate Delivery Requirements set forth in the Indenture (including, but not limited to, issuance of the Conversion Notice by the Servicer prior to the Termination Date evidencing that each of the Conditions to Conversion set forth in the Fannie Mae Commitment has been satisfied (or, to the extent that any Condition to Conversion has not been satisfied prior to the Termination Date, such Condition to Conversion has been waived in writing by Fannie Mae prior to the Termination Date) are satisfied such that the Trustee will issue the Fannie Mae Pass-Through Certificate Delivery Notice. The Mortgage Loan is (a)being made in accordance with the requirements of Fannie Mae and subject to the terms and conditions of the Fannie Mae Commitment, (b)originated by the Issuer, (c)evidenced by the Mortgage Note, (d)secured by the Mortgage and (e)otherwise evidenced and secured by the other Mortgage Loan Documents. If the Conversion Notice is issued by the Servicer prior to the Termination Date, the Mortgage Loan will convert from the Construction Phase to the Permanent Phase and, at such time as the Fannie Mae Pass-Through Certificate Delivery Requirements are satisfied, such that the Trustee will issue the Fannie Mae Pass-Through Certificate Delivery Notice, Fannie Mae will acquire all of the remaining interests in the Mortgage Loan in exchange for a Fannie Mae Pass-Through Certificate evidencing an interest in a mortgage pool comprised solely of the Mortgage Loan and under the terms of which distributions of principal and interest to or for the benefit of the Trustee corresponding to payments of principal and interest on the Mortgage Loan; Fannie Mae's distributions of principal and interest will be guaranteed by Fannie Mae regardless of whether corresponding payments on the Mortgage Loan are paid when due. If the Conversion Notice is not issued prior to the Termination Date, for whatever reason, (a) Conversion will not occur, (b)the Bonds will be subject to special mandatory redemption unless the Bonds are purchased by or for the account of the Construction Phase Credit Facility Provider, in accordance with the terms and conditions of the Indenture, (c)the Collateral Agreement will terminate in accordance with its terms and(d)Fannie Mae will have no obligation to acquire the.Mortgage Loan or to issue the Fannie Mae Pass-Through Certificate. Upon Fannie Mae's acquisition of the Mortgage Loan, the Fannie Mae Pass-Through Certificate will, on the order of the Servicer,be delivered to, or to a custodian for the benefit of,the Trustee and held by, or for the benefit of,the Trustee to secure payment of the Bonds. The Bonds are secured by, among other property comprising the Trust Estate and the security for the Bonds, the following: (a)prior to the Fannie Mae Pass-Through Certificate Delivery Date, (1)the Mortgage Loan, (2)Fannie Mae's credit enhancement of the Mortgage Loan pursuant to the Collateral Agreement, (3)the Net Bond Proceeds,to the extent not disbursed to the Borrower, (4)the Revenues and any other moneys received by the Trustee for the payment of the principal of and interest on the Bonds, (5)amounts otherwise on deposit in the Funds and Accounts (other than moneys on deposit from time to time, the Rebate Fund,the Costs of Issuance Fund and the Fees Account), all of which (in the foregoing clauses (a)(1) through (a)(5)), will be invested in Permitted Investments, and (6)Investment Income (excluding Investment Income earned on amounts on deposit in the Rebate Fund and certain Investment Income earned on amounts on deposit in the Costs of Issuance Fund) and (b)upon Fannie Mae Pass- Through Certificate Delivery, (1)the Fannie Mae Pass-Through Certificate, (2)the Revenues, including distributions under the Fannie Mae Pass-Through Certificate, and any other moneys received by the Trustee for the payment of the principal of and interest on the Bonds, (3)amounts otherwise on deposit in the Funds and Accounts (other than moneys on deposit from time to time, the Rebate Fund and the Fees Account), all of which (in the foregoing clauses (b)(1) through (b)(3)) will be invested in Permitted Investments and (4)Investment Income (excluding Investment Income earned on amounts on deposit in the Rebate Fund). DOCSSF1:269794.1 40511-107-ADI-07122/98 6:45 PM A-3 _1111._. .... ......... .__...... ......... ......... ......... ......... _ _......_....._.................................................... ............................................... Pursuant to the Collateral Agreement, Fannie Mae has pledged and granted to the Trustee a security interest in certain collateral owned by Fannie Mae (the "Pledged Collateral'). The proceeds of the Pledged Collateral, or other funds of Fannie Mae,will be available to the Trustee under the Collateral Agreement to pay principal of and interest on the Mortgage Loan if any Required Mortgage Payment(as defined in the Collateral Agreement) is not timely received by the Trustee. The Trustee is required under the Indenture to request payment under the Collateral Agreement in accordance with its terms in order to receive payment under the Collateral Agreement. PAYMENT OF THE PRINCIPAL OF PREMIUM, IF ANY, AND INTEREST ON, THE BONDS IS NOT GUARANTEED BY FANNIE MAE. FANNIE MAE'S SOLE OBLIGATION WITH RESPECT TO THE MORTGAGE LOAN WILL BE CONTAINED IN THE COLLATERAL AGREEMENT, SO LONG AS IT IS IN EFFECT, AND UPON DELIVERY OF THE FANNIE MAE PASS-THROUGH CERTIFICATE,IF IT OCCURS,IN THE FANNIE MAE PASS-THROUGH CERTIFICATE, AND WILL BE LIMITED, AS TO THE COLLATERAL AGREEMENT, SOLELY TO ITS OBLIGATIONS THEREUNDER AND, AS TO THE FANNIE MAE PASS-THROUGH CERTIFICATE,TO MAKING DISTRIBUTIONS OF PRINCIPAL AND INTEREST UNDER THE FANNIE MAE PASS-THROUGH CERTIFICATE, IN ACCORDANCE WITH ITS TERMS, TO THE RECORD OWNER OF THE FANNIE MAE PASS-THROUGH CERTIFICATE. THE OBLIGATIONS OF FANNIE MAE ARE NOT BACKED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA, BUT BY THE CREDIT OF FANNIE MAE,A FEDERALLY CHARTERED,STOCKHOLDER-OWNED CORPORATION. Optional Redemp ion. The Bonds are not subject to optional redemption prior to the Conversion Date. On and after the Conversion Date, the Bonds will, to the extent optional; prepayment of the Mortgage Loan in whole is made pursuant to and as permitted by the terms of the Mortgage Loan Documents(it being understood and agreed that the right to optionally prepay the Mortgage Loan prior to the Fannie Mae Pass-Through Certificate Delivery Date other than wholly with Available Moneys shall be subject to, and evidenced by, the prior written consent of Fannie Mae provided to the Trustee, on which the Trustee may conclusively rely),be subject to corresponding optional redemption, in whole and not in part, on the first day of any month on or after October 1, 2008. Such redemption will be made on any date for which timely notice of redemption can be given during the periods set forth in the below table and at the respective redemption prices set forth below (expressed as percentages of the principal amounts of the Bonds called for redemption),plus accrued interest, if any,to the Redemption Date: Redemption Period Redemption Prices (Both.Dates Inclusive) C-x ressed as a Percentage) October 1, 2008 through September 30,2009 101% October 1, 2009 and thereafter 100 Unless Fannie Mae provides its prior written consent to an optional prepayment of the Mortgage Loan prior to the Fannie Mae Pass-Through Certificate Delivery Date other than wholly with Available Moneys (as provided in the Indenture) optional redemption is not permitted unless such redemption is effected solely with Available Moneys. Unless Fannie Mae provides its prior written consent to an optional prepayment of the Mortgage Loan prior to the Fannie Mae Pass-Through Certificate Delivery Date other than wholly with Available Moneys (as provided in the Indenture) optional redemption is not permitted unless such redemption is effected solely with Available Moneys. DOCSSF1169794.1 40511-107-AII1-07/22198 6:48 PM A-4 Optional redemption of the Bonds arising from the optional prepayment of the Mortgage Loan at any time will not be made, and notice of any redemption arising from the optional prepayment of the Mortgage Loan will not be given to Bondholders, unless and until thirty (30) days prior to the Redemption Date, the Trustee has on hand Available Moneys in an amount sufficient to pay the End Period Payment. Neither the Issuer, Fannie Mae nor the Servicer will have any responsibility or liability to provide funds to be included in the End Period Payment. Under the Financing Agreement,the Borrower is required to provide to the Trustee, the Servicer and Fannie Mae written notice of the optional prepayment of the Mortgage Loan, not less than sixty(00) days prior to the date of such prepayment. As soon as practicable after receipt of such notice,the Trustee is required to send notice of redemption of the Bonds to the Bondholders. Under the Mortgage Note, prepayment of the Mortgage Loan must be made on the last Business Day of a month, and therefore on a day immediately preceding a scheduled payment date under the Mortgage Note. If Fannie Mae Pass-Through Certificate Delivery has occurred, an optional prepayment of the Mortgage Loan will be distributed by Fannie Mae on the Distribution Date in the month following the month in which the prepayment is made by the Borrower;because of the timing of the distribution of the prepayment of the Mortgage Loan under the Fannie Mae Pass-Through Certificate,the Redemption Date of any such optional redemption will be the first day of the month following the month in which falls the Distribution Date on which Fannie Mae will distribute the prepayment of the Mortgage Loan. Special Mandato Rede tion Pri r o and in Conner ion with Conversion. The Bonds are subject to special mandatory redemption prior to the Conversion Date or in connection with Conversion, in whole or in part: (i) in the event,and to the extent that(A)amounts remaining in the Mortgage Loan Fund are transferred to the Redemption Account pursuant to the Indenture for application to the redemption of Bonds; or (B) proceeds of insurance from any casualty to, or proceeds of any award from any condemnation of, the Project are not applied in accordance with the Mortgage Loan Documents to the rebuilding, restoration or replacement of the Project, or, with the prior written consent of Fannie Mae, otherwise used for improvements to the Project, or applied to the reimbursement of amounts owed to Fannie Mae pursuant to the Reimbursement Agreement following (l)the involuntary destruction or loss of the Project in its entirety or nearly in its entirety as a result of casualty or condemnation, such special mandatary redemption of Bonds to be a redemption of all of the Bonds Outstanding and, therefore, in a principal amount equal to the unpaid principal balance of the Mortgage Note, provided further that the Trustee will be entitled to payment under the Collateral Agreement, in accordance with its terms, to the extent the insurance or condemnation proceeds, as applicable, applied to the payment of the Mortgage Note, and moneys, if any, on deposit in the Funds and Accounts (other than the Rebate Fund) are less than the unpaid principal balance of the Mortgage Note and are,therefore,insufficient to redeem all of the Bonds Outstanding and(2)the partial destruction or condemnation of the Project, such special mandatory redemption of Bonds to be a redemption of Bonds Outstanding in a principal amount equal to the insurance or condemnation proceeds received with respect to the Project;and (ii) at the written direction or with the prior written consent of Fannie Mae to the Trustee and in the amount specified by Fannie Mae (A) as soon as the notice requirements of the Indenture permit, following (1)any event of default under the Mortgage Loan, including any default under the Mortgage Note, the Mortgage or any other Mortgage Loan Document or any "'Event of Default" under and as defined in the Reimbursement Agreement or the Financing Agreement (including any Event of Default under, and as defined in,the Reimbursement Agreement or the Financing Agreementcaused by a default under the Mortgage Note,the Mortgage or any other Mortgage Loan Document) or(2)the occurrence of a"Borrower Default" or a Direction to Draw under,and as each such term is defined in,the Construction DOCSSF1:259794.1 40311-107-AD2-07f22/98 6:49 PM A-5 Phase Financing Agreement; or(B)on or after the Termination Date, as soon as the notice requirements of the Indenture permit, if the Conversion Notice is not issued prior to the Termination Date, or(C)on or after the Conversion Date, as soon as the notice requirements of the Indenture permit; if, and to the extent that, the Permanent Phase Mortgage Loan Amount (as such term is defined in, and determined in accordance with the terms and conditions of, the Fannie Mae Commitment) with respect to the Mortgage Loan is less than the original principal amount of the Mortgage Loan. A special mandatory redemption pursuant to paragraph(i)or paragraph(ii)above will be effected on the earliest practicable Redemption Date for which timely notice of redemption can be given pursuant to the Indenture.following the occurrence of any of the events described in paragraphs(i) or(ii) above, at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest on the Bonds to the Redemption Date. Special Mandatory Redemption After the Fannie Mae Pass-Through Certificate Delivery Date from Fannie Mae Pass Through Certifigag Distributions. The Bonds are subject to special mandatory redemption in whole or in part after the Fannie Mae Pass-Through Certificate Delivery Date and prior to their stated maturity at a redemption price equal to 100% of the principal amount',of the Bonds to be redeemed plus accrued interest to the Redemption Date, but without premium, in each case from and to the extent that the Trustee receives a distribution under the Fannie Mae Pass-Through',Certificate resulting from: (i) Fannie Mae's determination that the Mortgage Loan is or is to be deemed a Fully Prepaid Mortgage Loan (other than by reason of optional prepayment of the entire principal balance of the Mortgage Loan prior to final maturity, causing an optional redemption of the Bands pursuant to the Indenture); or (ii) other moneys received by Fannie Mae on account of the Mortgage Loan (other than by reason of optional prepayment of the entire unpaid principal balance of the Mortgage Loan prior to final maturity, causing an optional redemption of the Bonds pursuant to the Indenture), including, without limitation, prepayment as a result of a casualty or condemnation affecting the Project, or a default under the Mortgage Loan; provided,however,that at the direction of Fannie Mae, all or part of the proceeds of such a prepayment of the Mortgage Loan will be used, in lieu of redeeming Bonds, to acquire a Substitute Fannie Mae Pass- through Certificate pursuant to the Indenture. Because of the timing of the distribution under the Fannie Mae Pass-Through Certificate, the Redemption Date of any such special mandatory]redemption will be the first day of the month following the month in which falls the Distribution Date on which Fannie Mae will make such distribution. Spgcial Mandatory Redemption After the Fannin Mae Pass Through Certificate Delivery Date Upon Purchase of Fannie Mae Pass-Through Certificate. In the event that Fannie Mae is in default of its payment obligations under the Fannie Mae Pass-Through Certificate, the Trustee is authorized to accept from Fannie Mae an offer to purchase the Fannie Mae Pass-Through Certificate from the Trustee at a purchase price not less than the aggregate Stated Principal Balance (as defined in the Fannie Mae Trust Indenture) of the Mortgage Loan plus accrued interest. If such a purchase occurs, the Trustee will thereafter immediately call all of the Outstanding Bonds for redemption on the first day for which the requisite notice of redemption can be given but in no event more than 10 days after the TnLstee receives the purchase price from Fannie Mae, and will apply the proceeds received from Fannie Mae in respect of purchase of the Fannie Mae Pass-Through Certificate, together with Available Moneys held by the Trustee, to the payment of the redemption price of the Bonds. No such offer from Fannie Mae will be accepted by the Trustee unless the Available Moneys held by the Trustee under the Indenture, together DOCS8F1:269794.1 40511-107-ADI-07122198 6:48 PM A-6 _._..... . ......... ......... ............._.. _.... ........._................. ......... ......_.. ...._.... ......... ......... ......... _ _ _... ......... ......... ......... .................................................. with the amounts to be paid by Fannie Mae in respect of the purchase of the Fannie Mae Pass-Through Certificate, are sufficient to pay in full the principal amount of the Bonds Outstanding and interest accrued and to accrue on the Outstanding Bonds to the Redemption Date. Any such redemption of Bonds will be at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued and unpaid interest on the Bonds to the Redemption Date,but without premium. Mandatory Sinking Fund Redemption. The Bonds are subject to mandatory redemption in part, by lot,prior to maturity from sinking fund installments on April I and October I in each year on the dates and in the amounts set forth in the Indenture,at a redemption price equal to 100%of the principal amount of the Bonds to be redeemed,plus accrued interest,to the Redemption Date. If less than all of the Bonds of a specific maturity shall have been redeemed other than from sinking fund installments applicable to such Bonds,the principal amount of the Bonds of such maturity to be redeemed in each year from sinking fiend installments will be decreased pro rata among all sinking fiend installments applicable to such Bonds or, if Fannie Mae Pass-Through Certificate Delivery has occurred, by an amount, in proportion, as nearly as practicable, to the decrease in the distributions under the Fannie Mae Pass-Through Certificate in such year or,if there is no decrease in the distributions under the Fannie Mae Pass-Through Certificate, pro rata among all such sinking fund installments. Any such proportional redemption shall be confirmed in writing to the Trustee by the Servicer. Special Mandatory Redemption from Excess Cash Flow Distributions. The Bonds are subject to special mandatory redemption after the Conversion Date, in whole or in part, prior to their stated maturity, at a redemption price equal to 100%of the principal amount of the Bonds to be redeemed, plus accrued interest to the Redemption Date, but without premium, in Authorized Denominations, on the next succeeding Interest Payment Date for which notice of redemption can be given pursuant to the Indenture, from certain funds transferred from the General Receipts and Disbursements Account to the Redemption Account in accordance with the Indenture. Bonds redeemed under this provision shall be redeemed in inverse order of maturity. Notice-of Rede_ption. Notice of the call for redemption of any Bonds will be given by the Trustee in the name d on behalf of the Issuer not less than 30 nor more than 45 days prior to the anticipated Redemption Date by mailing such notice, first class mail, postage prepaid, to the Registered Owner of each Bond to be redeemed at the address of such Registered Owner as shown on the Bond Register as of the date of the mailing of such notice, provided that notice of any optional redemption or any special mandatory redemption may be given not less than 15 nor more than 20 days prior to the date fixed for such redemption. Notwithstanding the foregoing, so long as the Book Entry System is maintained in effect, notice of redemption will be given to the entity designated in the Letter of Representations executed among the Issuer,the Trustee and DTC in connection with the issuance and sale of the Bonds, and the Trustee will not be required to give any other notice of redemption. Each notice of redemption will state: (a)the date of the redemption notice, (b)the date of issue of the Bonds as originally issued and the complete official name of the Bonds, including the series designation, (c)the numbers of the Bonds to be redeemed, by giving the individual certificate number of each Bond to be redeemed (or stating that all Bonds between two stated certificate numbers, both inclusive,are to be redeemed, or that all or a stated portion of the Bonds of one or more maturities have been called for redemption), (d)the CUSIP numbers of all Bonds being redeemed, (e)in the case of a partial redemption of Bonds, the principal amount of each Bond being redeemed, (f)the rate or rates of interest borne by each Bond being redeemed, (g)the maturity date of each Bond being redeemed, (h)the place or places where amounts due upon such redemption will be payable, (i)the Redemption Date and redemption price of each Bond being redeemed, 0)the name, address and telephone number and the contact person at the office of the Trustee with respect to such redemption, (k)that all Bonds to be DOCSSF1:269794.1 40511-107-ADI-07122/98 6:48 PM A-7 __. _....._. ......... ......... ......... .. _ _......... ......................_....... ......... ......... ......... ......... ......... ......._. _...... ......... ......... ......... .. .................................................... redeemed are required to be surrendered at the office of the Trustee designated by;the Trustee for that purpose for redemption at the redemption price, (1)that interest on such Bonds will not accrue from and after the Redemption Date, and (in)if applicable, that redemption is conditional upon receipt by the Trustee of sufficient Available Moneys to redeem the Bonds. Neither failure to give or receive any notice of redemption, failure to give notice timely nor any defect in any notice(or in its content or in the manner in which notice is given)will affect the validity or sufficiency of any proceedings for the redemption of the Bonds to be redeemed. Any notice of optional redemption given as provided in the Indenture will be revoked by the Trustee by notice given in the same manner as provided for the giving of notice of redemption or by Electronic Means, confirmed in writing, and the redemption canceled, if Available Moneys or, with Fannie Mae's prior written consent, other moneys other than wholly Available Moneys, sufficient to effect such redemption have not been received by, or are not on hand with, the Trustee at least five days prior to the Redemption Date. If notice of redemption of Bonds has been given pursuant to the Indenture and if, on the Redemption Date, Available Moneys or, with Fannie Mae's prior written consent, moneys other than wholly Available Moneys, in an amount sufficient (including principal, interest and premium, if any) to effect the redemption of the Bonds to be redeemed are held by the Trustee for the purpose of effecting the redemption of such Bonds, the Bonds called for redemption will become due and payable on the Redemption Date, interest on those Bonds will cease to accrue on the RedemptionDate and the called Bonds will no longer be deemed Outstanding;the Available Moneys or, with Fannie Mae's prior written consent, moneys other than wholly Available Moneys, on deposit with the Trustee will be used to pay, and the Trustee is authorized and directed to apply such fiends to the payment of,the Bonds or portions of the Bonds called for redemption, together with accrued interest on such Bonds to the Redemption Date; the Registered Owners of the Bonds so called for redemption will thereafter no longer have any security or benefit under the Indenture except to receive payment of the redemption price for such Bands upon surrender of such Bonds to the Trustee. Except during any period in which the Bonds are subject to the Book Entry System: (i) no payment will be made by the Trustee upon any Bond or portion of a Bond called for redemption until such Bond or portion shall have been presented and surrendered for payment or cancellation or the Trustee shall have received the items required by the Indenture with respect to any mutilated,lost,stolen or destroyed Bond;and (ii) if there shall be so called for redemption less than the entire principal amount of a Bond, the Issuer will execute, and the Trustee will authenticate and deliver, upon the surrender of such Bond to the Trustee, without charge by the Issuer or the Trustee to the Bondholder, in exchange for the unredeemed principal amount of such Bond, a new Bond or Bonds of the same interest rate, maturity and term, in any Authorized Denomination, in aggregate principal amount equal to the unredeemed balance of the principal amount of the Bond so surrendered. SZcial Purchase in Lieu of Redemption. Subject to the satisfaction of all applicable terms and conditions set forth in the Indenture, if all Bonds Outstanding are called for redemption under paragraph (ii)(A) or paragraph (ii)($) of Section 3.3(l) of the Indenture, described above in paragraphs (ii)(A) and (ii)(B) under"Special Mandatory Redemption Prior to and in Connection with Conversion", such Bonds may be purchased ("Purchased Bonds')by the Trusteem at the writtendirection of the Construction Phase Credit Facility Provider, in whole, but not in part, on the date such Bonds are otherwise scheduled to be redeemed (the "Purchase Date"), at the purchase price specified below (the "Purchase Price"), and from the source of funds specified below (the "Payment Source"), by the Trustee at the written direction of the DOCSSF1:269794.1 40311-107-ADI-07/22/98 6:48 PM A-8 Construction Phase Credit Facility Provider and for the account of the Construction Phase Credit Facility Provider. The Payment Source will consist solely of funds to be delivered by Fannie Mae under the Collateral Agreement in connection with such redemption together with funds otherwise available under the Indenture to pay the redemption price of the Bonds as directed by Fannie Mae. The Purchase Price will be equal to the principal amount of the Bonds otherwise subject to redemption, plus accrued interest, if any,on such Bonds to the Purchase Date. Bonds to be purchased as provided above which are not delivered to the Trustee on the Purchase Date will be deemed to have been so purchased and not redeemed on the Purchase Date and will cease to accrue interest as to the former owner on the Purchase Date. Re is ogon'on' Transfer and Exchan&. The Trustee is the Bond Registrar for the Bonds and will keep the Bond Register for the registration of the Bonds and for the registration of transfer of the Bonds. Subject to the express limitations contained in the Indenture, any Bondholder or its attorney duly authorized in writing may transfer title to a Bond on the Bond Register kept by the Trustee, upon surrender of the Bond at the office of the Trustee designated by the Trustee for that purpose,together with a written instrument of transfer (in substantially the form of assignment, including signature guarantee, attached to the Bond) satisfactory to the Trustee executed by the Bondholder or its attorney duly authorized in writing, and upon surrender for registration of transfer of any Bond,the Issuer will execute and the Trustee will authenticate and deliver in the name of the transferee or transferees a new Bond or Bonds of the same aggregate principal amount, rate of interest, maturity, Series Cud tenor as the Bond surrendered and of any Authorized Denomination. Transfers of an interest in the Bonds will be in principal amounts equal to any Authorized Denomination. Subject to the express limitations contained in the Indenture, Bonds may be exchanged upon surrender of such Bonds at the office of the Trustee designated by the Trustee for that purpose together with a written instrument of transfer (in substantially the form of assignment, 'including signature guarantee, attached to the Bond) satisfactory to the Trustee, executed by the Bondholder or its attorney duly authorized in writing, for an equal aggregate principal amount of Bonds of the same aggregate principal amount, rate of interest, maturity, aeries Cnd tenor as the Bonds being exchanged and of any Authorized Denomination. The Issuer will execute and the Trustee will authenticate and deliver Bonds which the Bondholder making the exchange is entitled to receive, bearing numbers not contemporaneously then outstanding. The Trustee is not required to register any transfer or exchange of any Bond (or portion of any Bond)called for redemption. Registrations of transfers or exchanges of Bonds will be without charge to the Bondholders, but any taxes or other governmental charges required to be paid with respect to a transfer or exchange must be paid by any Bondholder requesting the registration of transfer or exchange as a condition precedent to the exercise of such privilege. Any service charge made by the Trustee for any such registration,transfer or exchange will be paid by the Borrower. Ownership of Bond. The person in whose name this Bond is registered on the Bond Register will be deemed and regarded as the absolute owner of this Bond for all purposes, and payment of or on account of either principal or interest will be made only to or upon the order of such person or its attorney duly authorized in writing,but such registration may be changed as provided in the Indenture. Acceleration. Under certain circumstances as described in the Indenture, the principal of all of the Bonds may be declared due and payable in the manner and with the effect provided in the Indenture. DOCssPi:269794.1 40511-107-ADI-07122198 6:48 PM A-9 ......... ......... ..._..... _ ..............__...... ._....... ......... _........ ..........._. . .. _....... _... ......... ................_. .. .............................................................................. Immediately following any such declaration of acceleration, the Trustee will snail notice of such declaration by registered mail, overnight delivery service or other secure means, or by Electronic Means, to each registered owner of Bonds at such registered owner's last address appearing on the Bond Register. Any defect in or failure to give such notice of such declaration will not affect the validity of such declaration. Waiver. The Indenture contains provisions permitting the Trustee to waive compliance with certain provisions of the Indenture and their consequences,subject to the provisions of the Indenture. Amendments. The Indenture permits, with certain exceptions provided in the Indenture, supplements to the Indenture and amendments of the Financing Agreement at any time with the consent of the registered owners of not less than S 1% in aggregate principal amount of Bonds then Outstanding which are affected by such supplements or amendments. The Indenture also permits supplements to the Indenture, amendments to the Financing Agreement and other documents without requiring the consent of any Bondholders in certain specifically described instances. Limitations on Enforcement. The Registered Owner of this Bond will have no right to enforce the provisions of the Indenture or the Financing Agreement, or to institute any proceeding in equity or at law for the enforcement of the Indenture or the Financing Agreement,or to take any action with respect to an event of default under the Indenture or the Financing Agreement, or to institute, appear in or defend any suit or other proceeding with respect to the Indenture or the Financing Agreement upon an event of default, except under certain limited circumstances provided in the Indenture; provided, however, that nothing contained in the Indenture will affect or impair any right of enforcement conferred on the Registered Owner of this Bond to enforce (a)the obligation of the issuer to pay the principal of and interest on this Bond to the Registered Owner of this Bond at the time and place, from the sources and in the manner provided in the Indenture or (b)the payment of the principal of and interest on this Bond at and after the maturity of this Bond. onsent. The Registered Owner of this Bond, by acceptance of this Bond, consents to all of the terms and provisions of the Indenture and the Financing Agreement. Exculpation. No recourse shall be had for the payment of the principal of or the interest on this Bond, or for any claim based on this Bond, or otherwise in respect of this Bond, or based on or in respect of the Indenture or any supplemental indenture, against the general credit of the Issuer or against any member, officer, employee or agent, as such, past, present or future, of the Issuer or any successor, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance of this Bond and as part of the consideration for the issue of this Bond, expressly waived and released. NO MEMBER, OFFICER, AGENT, EMPLOYEE OR ATTORNEY OF THE ISSUER, INCLUDING ANY PERSON EXECUTING THE INDENTURE OR THE BONDS, SHALL BE LIABLE PERSONALLY ON THE BONDS OR FOR ANY REASON RELATING TO THE ISSUANCE OF THE BONDS. NO RECOURSE SHALL BE HAD FOR THE PAYMENT OF THE PRINCIPAL OF OR THE INTEREST ON THE BONDS, OR FOR ANY CLAIM BASED ON THE BONDS, OR OTHERWISE IN RESPECT OF THE BONDS, OR BASED ON OR IN RESPECT OF THE INDENTURE OR ANY SUPPLEMENTAL INDENTURE, AGAINST ANY MEMBER, OFFICER, EMPLOYEE OR AGENT, AS SUCH, OF THE ISSUER OR ANY SUCCESSOR, WHETHER BY VIRTUE OF ANY CONSTITUTION, STATUTE OR RULE OF LAW, OR BY THE .ENFORCEMENT OF ANY ASSESSMENT OR PENALTY OR OTHERWISE,ALL SUCH LIABILITY BEING,BY THE ACCEPTANCE OF THIS BOND AND DOCss1:1:269794.1 40311-107-ADI-07/22/98 6:48 PM A-10 AS PART OF THE CONSIDERATION FOR THE ISSUE OF THE BONDS, EXPRESSLY WAIVED AND RELEASED. It is certified, recited and declared that all acts, conditions and things required to exist, happen and 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, together with all other obligations of the Issuer, does not exceed or violate any constitutional or statutory limitation. This Bond shall not be entitled to any benefit under the Indenture or become valid or obligatory for any purpose until such Bond shall have been authenticated by the certificate of the Trustee endorsed on it. The Issuer has caused this bond to be duly executed in its name by the facsimile signature of its Authorized Officer under its official seal, and attested by the facsimile signature of its Attesting Officer all as of the Dated Date. COUNTY OF CONTRA COSTA., CALIFORNIA By: Attest: Clerk of the Board CERTIFICATE OF AUTHENTICATION This Bond is one of the Bonds of the issue described in the within-mentioned Indenture. U.S.Bank Trust National Association, as Trustee By: Authorized Signatory Authentication Date: D005SF1:269794.1 40511.1417-A171-07r22198 6:48 PM A-11 ASSIGNMENT FOR VALUE RECEIVED,the undersigned sells,assigns and transfers unto the within Bond and all rights thereunder and hereby irrevocably constitutes and appoints to transfer the within-mentioned Bond on the books kept for registration thereof with full power of substitution in the Premises. Please insert social security or other identifying number of assignee: Dated: NOTICE: The signature to this Assignment must correspond with the name as it appears upon the face of the within bond in every particular,without alteration or enlargement or any change whatever. Signature Guaranteed: DOCssF1:269794.1 40511-107-aDi-07/22/98 6:48 PM A-12 EXHIBIT B ASSIGNMENT OF MORTGAGE LOAN TO TRUSTEE C-1 EXHIBIT C ASSIGNMENT OF MORTGAGE LOAN TO SERVICER C-1 EXHIBIT D FORM OF REQUISITION (Mortgage Loan Fund) (Complete in Triplicate) U.S. Bank Trust National Association,as Trustee San Francisco, California Re: County of Contra Costa,California,Multifamily Housing Revenue Bonds (Bollinger Crest Apartments)1998 Series C You are requested to disburse funds from the Mortgage Loan Fund pursuant to Section 4.3(2)of the Indenture in the amount(s),to the person(s)and for the purpose(s)set forth in this requisition(the "Requisition"). The terms used in this Requisition shall have the meanings given to those terms in the Trust Indenture(the "Indenture"),dated as of July 1, 1998,by and between the County of Contra Costa, California,and you,as Trustee, securing the above-referenced Bonds. 1. REQUISITION NO.: 2. PAYMENT DUE TO: 3. AMOUNT TO BE DISBURSED: $ 4. The amount requested to be disbursed pursuant to this Requisition will be used to pay the Borrower for those Costs of the Project detailed in Schedule I attached to this Requisition. 5. The undersigned certifies that: (i) the amounts included in 3 above were made or incurred or financed and were necessary for the Project and were made or incurred in accordance with the construction contracts, plans and specifications heretofore in effect; (ii) the amount paid or to be paid,as set forth in this Requisition,represents a part of the funds due and payable for Costs of the Project, such funds were not paid in advance of the time, if any,fixed for payment and such funds are due in accordance with the terms of any contracts applicable to the Project and in accordance with usual and customary practice under existing conditions; (iii) the expenditures for which amounts are requisitioned represent proper charges against the Mortgage Loan Fund,have not been included in any previous requisition,have been properly recorded on the Borrower's books and are set forth in Schedule I,with paid invoices attached for any sums for which reimbursement is requested, (iv) the moneys requisitioned are not greater than those necessary to meet lobligations due and payable or to reimburse the Borrower for its funds actually advanced for Costs of the Project and do not represent a reimbursement to the Borrower for working capital; (v) the amount remaining in the Mortgage Loan Fund,together with expected Investment Income on the Mortgage Loan Fund, in addition to those funds identified in the DOCSSF1:269794.1 40511-107-ADI-07122/98 6:48 PM D-1 Construction Loan Agreement that remain available to the Borrower for the payment of Costs of the Project,will,after payment of the amount requested by this Requisition,be sufficient to pay the Casts of completing the project substantially in accordance with the [construction] [rehabilitation]contracts,plans and specifications and building permits therefor,if any,currently in effect; (vi) all of the funds being requisitioned are being used in compliance with all tax covenants set forth in the Indenture,the Financing Agreement and the Regulatory Agreement; (vii) not less than 95%of the sum of: (A) the amounts requisitioned by this Requisition;plus (B) all amounts previously requisitioned and disbursed from the Mortgage Loan Fund; have been or will be applied by the Borrower to pay Qualified project Costs; (viii) the Borrower is not in default under the Financing Agreement,the Regulatory Agreement or the Mortgage Loan Documents and nothing has occurred to the knowledge of the Borrower that would prevent the performance of its obligations under the Financing Agreement,the Regulatory Agreement or the Mortgage Loan Documents; (ix) no amounts being requisitioned by this Requisition will be used to pay, or reimburse, any Costs of Issuance incurred in connection with the issuance of the Bonds;and (x) the Construction Phase Credit Facility has been issued and delivered to Fannie Mae and is in full force and effect in accordance with the terms and conditionsof the Construction Phase Financing Agreement. DOCSSF1:269794.1 40511-107-ADI-07/22/98 6:48 PM D_2 6. Attached to this Requisition is Schedule i,together with copies of invoices or bilis of sale covering all items for which payment is being requested. DATE OF REQUISITION: BOLLINGER CREST APARTMENT INVESTORS By: Authorized Borrower Representative APPROVED BY[BAND.], as Construction Phase Credit Facility Provider By: Title: Date: DOCSSF1:269794.1 40511-107-ADI-07122198 6:48 PM D-3 Exhibit E FORM OF REQUISITION/ (Costs of Issuance Fund) U.S. Bank Trust National Association,as Trustee San Francisco,California Re: County of Contra Costa,California, Multifamily Housing Revenue Bonds (Bollinger Crest Apartments) 1998 Series C You are requested to disburse funds from the Costs of Issuance Fund pursuant to Section 4.5(2)of the Indenture in the amount(s),to the person(s)and for the purpose(s)set forth in this requisition(the "Requisition"). The terms used in this requisition shall have the meaning given to those terms in the Trust Indenture(the "Indenture"),dated as of July 1, 1998,by and between the County of Contra Costs, California,and you,as Trustee,securing the above-referenced Bonds. I. REQUISITION NO.: 2. PAYMENT DUE TO: See Schedule I attached. 3. AMOUNT TO BE DISBURSED: $ 4. The undersigned certifies that: (i) the expenditures for which moneys are requisitioned by this Requisition represent proper charges against the Costs of Issuance Fund,have not been included in any previous requisition,have been properly recorded on the Borrower's books-and are set forth in Schedule I attached to this Requisition,with paid invoices attached for any sums for which reimbursement is requested; (ii) the moneys requisitioned are not greater than those necessary to meet'obligations due and payable or to reimburse the Borrower for its funds actually advanced for Costs of Issuance;and (iii) the Borrower is not in default under the Financing Agreement,the Regulatory Agreement or the Mortgage Loan Documents and nothing has occurred to the knowledge of the Borrower that would prevent the performance of its obligations under the Financing Agreement,the Regulatory Agreement or the Mortgage Loan Documents. DOCSSF2:269794.1 40511-107-ADD-47/22/98 6:48 PM E-t 5. Attached to this Requisition is Schedule I,together with copies of invoices or bills of sale covering all items for which payment is being requested. DATE OF REQuismoN• BOLLINGER CREST APARTMENT INVESTORS By: Authorized Borrower Representative .APPROVED BY[BANK], as Construction Phase Credit Facility Provider By: Title: DOCSSF'1:269794.1 40511-147-ADI-07/22/98 6:48 PM E-2 SCHEDULE To R,E,QuissmoN CERTIFICATE PAYEE: AMOUNT: TIEM OF COSTS OF ISSUANCE DOCSSI.1:269794.1 40511-107-ADI-07/22/98 6:48 PM E_3 RECEIVED JUL 2f M8 OTA STAG , FINANCING AGREEMENT Among COUNTY OF CONTRA COSTA, CALIFORNIA, as Issuer and U.S. Bank Trust National Association, as Trustee and WASH NGTON CAPITAL D►US,INC., as Servicer and BOLLINGER CREST APARTMENT INVESTORS,LLC Relating to $[7,400,000] County of Contra Costa, California Multifamily Housing Revenue Bonds (Bollinger Crest Apartments) 1998 Series C Dated as of August 1, 1998 13QCSSFI:269333.2 40511-147-ADI .........................I................................. ...........''I...................................................................................................................................................... . .............. .. ........... SECTION 1. DEFINITIONS AND INTERPRETATION..............................I.........................1 Section 1.1, Incorporation of Recitals.........................................................................I Section1.2. Definitions ..............................................................................................I Section 1.3. Rules of Construction..............................................................................3 Section 1.4. Content of Certificates and Opinions.......................................................3 Section1.5. Effective Date..........................................................__....... ...................4 Section1.6. Interpretation...........................................................................................4 SECTION 2, REPRESENTATIONS AND WARRANTIES....................................................4 Section 2.1. Representations and Warranties of the Issuer...........................................4 Section 2.2. Representations and Warranties of the Borrower.....................................5 Section 2.3. Representations and Warranties of the Trustee......................................12 Section 2.4. Representations and Warranties of the Servicer.....................................12 SECTION3. THE BONDS....................................................................................................13 Section 3.1. Obligations Conditioned on Issuance of the Bonds; Application of the proceeds of the Bonds......................................................................13 Section 3.2. Borrower's Obligations..........................................................................13 Section 3.3. Issuance of Fannie Mae Pass-Through Certificate ....................... .........14 Section 3.4. Change in Fannie Mae Credit Facility....................................................14 SECTION 4. THE MORTGAGE LOAN...............................................................................15 Section 4.1. Amount and Source of Mortgage Loan....... ..........................................15 Section 4.2. Terms of the Mortgage Loan; Funding..................................................15 Section 4.3. Payment of Fees and Expenses............................... ........... ..................17 Section4.4. Notice .................... ....... .................................. ...................................19 Section4.5. Deposits................................................................................................19 Section 4.6. Mortgage Loan Payments......................................................................20 Section 4.7. Certain Notices From Trustee................................................................20 Section 4.8. Certain Obligations Relating to Mortgage Loan....... .............................20 Section 4.9. Modification of Mortgage Loan Documents; Consent at Direction ofFannieMae................................................... ................ ..................20 Section4.10. Prepayment...........................................................................................20 Section 4.11. Assignment of Mortgage Loan; Application of Mortgage Loan Payments; Assignment to Trustee..........................................................22 SECTION 5. FANNIE MAE COMMITMENT;FANNIE MAE PASS-THROUGH CERTIFICATE;DISTRIBUTIONS UNDER FANNIE MAE PASS- THROUGH CERTIFICATE.............................................................................22 DOCSSFI:269333.2 40511-107-ADI ..........I............I....................I.................................................. ...................-...I--.................................................................................................................................. . . .......... ........... Section 5.1. Fannie Mae Commitment........................................... ..........................22 Section 5.2. Servicer Assignment .............................................................................22 Section 5.3. Fannie Mae Pass-Through Certificate................... ................................23 Section 5.4. Distributions Under the Fannie Mae Pass-Through Certificate...............23 SECTION 6, SERVICING OF THE MORTGAGE LOAN....................................................23 Section 6.1. Rights of Fannie Mae............................................................................23 Section6.2. Servicing Fee ........................................................................................23 Section6.3. Notices........................... ......................................................................23 Section 6.4. Notice of Default or Noncompliance.....................................................24 Section6.5. Removal................................................................................................24 SECTION7. COVENANTS......................................... ........................... .........................24 Section 7.1. Covenants of the Issuer .................................................................... ...24 Section 7.2. Covenants of the Borrower............. ......................................................25 SECTION 8. MORTGAGE LOAN DOCUMENTS...............................................................35 Section8.1. Assurances............................................................................................35 Section 8.2. Assignment of Certain Rights................................................................35 Section 8.3. Nature of Borrower's Financial Obligations ............. ................ ...........36 SECTION9. THE PROJECT ................................ ...............................................................36 Section 9.1. Regulatory Agreement .................................. .......................................36 Section 9.2. Right To Enforce Compliance...............................................................36 Section 9.3. Damage, Destruction and Condemnation...__........................................36 Section 9.4. Obligation of the Borrower To Acquire and Develop the Project...........37 SECTION 10. TRUSTEE'S INTEREST IN AGREEMENT.....................................................37 Section 10.1. Issuer Assignment of This Financing Agreement...................................37 Section 10.2. Rights of Trustee; Third-Party Beneficiaries..........................................38 SECTION 11. EVENTS OF,DEFAULT AND REMEDIES...... ..............................................38 Section 11.1. Events of Default...................................................................................38 Section 11.2. Remedies Upon an Event of Default......................................................40 Section 11.3. Default Under Regulatory Agreement ...................................................42 Section 11.4. Delay or Omission.................................................................................43 Section 11.5. Limitations on Waivers .........................................................................43 Section 11.6. Notice of Default;Fannie Mae's Right To Cure.....................................43 Section 11.7. Right to Specific Performance...............................................................44 Section 11.8. Rights Cumulative.......................................................................... ......44 Section 11.9. Assignment to Fannie Mae....................................................................44 DOCSSFI:269333.2 40511-107-ADI 51 ....................I......................................................................................... ............. I,., .. ........................................... ................................................................................................................. ..... . ...... .....,.,..... ... Section 11.10. Limitations............................................................................................44 SECTION 12. MISCELLANEOUS.............................................................. ..........................45 Section 12.1. Amounts Remaining in Funds .............................. ................................45 Section12.2. Notices................................................................... ..............................45 Section12.3. Amendment...........................................................................................45 Section 12.4, Entire Agreement.............................I....................................................45 Section 12.5. Binding Effect............. .........................................................................45 Section 12.6. Severability...........................................................................................46 Section 12.7. Execution in Counterparts.............................. .................................46 Section 12.8. Governing Law.......................................... ..........................................46 Section 12.9. Limited Liability...................................................................................46 Section12.10.Reliance.......................................................................................... .....46 Section 12.11. Rights of the Trustee.............................................................................47 Section 12.12. Financing Statements ........... ................................................................47 Section 12.13. Tenn of This Financing Agreement.......................................................47 Section 12.14. Limitations on Rights of Fannie Mae.....................................................47 Section 12.15. Capacity of the Trustee..........................................................................48 SECTION 13. SUBORDINATION..........................................................................................48 D005S1'I:269333.2 40511-107-ADI 52 .........................................................................11...........I...................11 ................. ................ .. ... ..................... . . .... . FINANCING AGREEMENT This FINANCING AGREEMENT (this "Financing Agreement') is dated as of August 1, 1998 and is entered into by and among the COUNTY OF CONTRA COSTA, CALIFORNIA (the "Issuer), a political subdivision of the State of California, U.S. BANK TRUST NATIONAL ASSOCIATION (together with its successors and assigns, the "Frustee'), a national banking association, which is authorized to exercise corporate trust powers in the State of California, with its principal corporate trust office located in [San Francisco], California, not in its individual or corporate capacity, but solely as trustee under the Indenture, WASHINGTON CAPITAL DUS, INC., a Delaware corporation (together with its successors and assigns,the "Servicer"), and BOLLINGER CREST APARTMENT INVESTORS, LLC (together with its successors and assigns,the"Borrower").a California limited liability company. (The meaning of capitalized terms can be determined by reference to Section 1.2 of this Financing Agreement.) RECITALS: A. As more fully set forth in the Indenture,the Issuer has determined to issue the Bonds and to lend the Net Bond Proceeds to the Borrower pursuant to and in accordance with the terms and conditions of this Financing Agreement and the Mortgage Loan Documents. B. The parties to this Financing Agreement acknowledge the matters set forth in the Recitals to the Indenture. The parties to this Financing Agreement in consideration of the premises and the mutual covenants and commitments of the parties set forth in this Financing Agreement, the receipt and sufficiency of which are acknowledged by the parties to this Financing Agreement,agree as follows: Section 1. Definitions and Interpretation. Section I.I. Incorporation of Recitals. The Recitals to(a)the Indenture and(b)this Financing Agreement are, by this reference, incorporated into and deemed a part of this Financing Agreement. Section 1.2. Definitions. All capitalized terms used in this Financing Agreement shall have the meanings given to those terms in this Section 1.2 or elsewhere in this Financing Agreement unless the context indicates a different meaning. Certain capitalized terms used, but not defined, in this Financing Agreement are defined in the Indenture. "Activity Fee"has the meaning given to that term in the Reimbursement Agreement. "Activity Rate"has the meaning given to that term in the Reimbursement Agreement. "Event of Default" means any event of default specified and defined in Section 11.1(1) of this Financing Agreement. "Facility Fee"has the meaning given to that term in the Mortgage Note. "Guaranty Fee"means the Guaranty Fee payable to Fannie Mae on and after the Issue Date. DOCSSFI:269333.2 40511-107-ADI . .. ................................. "Immediate Notice" means personal delivery of a written notice or written notice given by telecopier or other telecommunication device or by messenger service promptly followed by a duplicate or"hard copy"of such written notice sent by certified mail, return-receipt requested',or by any nationally recognized overnight delivery service. "Indemnified Parties" or "indemnified parties" has the meaning given to that term in Section 7.2(19)of this Financing Agreement. "Key Principal"has the meaning given such term in the Mortgage Note. "Mortgage Loan Documents" means, collectively, the Mortgage Note, the Mortgage, the Reimbursement Agreement,and all other agreements, documents and instruments evidencing, securing or otherwise relating to the Mortgage Loan, including all amendments, modifications, supplements and restatements of such documents,excluding,however,the Bond Documents. "Mortgage Loan Term" means the period from the Closing Date to and including the maturity date of the Mortgage Loan. "Mortgage Note Rate"means the per annum rate of interest set forth in the Mortgage Note. "Pass-through Rate"has the meaning given to that term in paragraph(i)of Section 4.2(1)of this Financing Agreement. "Permitted Liens"has the meaning given to that term in the Reimbursement',Agreement. "Project Purposes" means use of the Project as a multifamily residential rental property for persons and families of low and moderate income,or any other use of the Project which will not(a)cause the Project to cease to qualify for financing under the Act or(b)cause the interest on the Bonds to become includable for federal income tax purposes in the gross income of the Bondholders'(other than a holder who is a`.`substantial user"of the Project or a"related person"as such terms are used in the Code). "Qualified Project Costs" means any expenditure: (a) to provide facilities and improvements that constitute part of a qualified residential rental project within the meaning of Section 142(d) of the Code;and(b)that is properly chargeable to the Project's capital account under general federal income tax principles or that would be so chargeable with a proper election or but for a proper election by the Borrower to deduct such expenditure. "Qualified Project Period"has the meaning given to that term in the Regulatory Agreement. "Servicer's Commitment"means the commitment letter issued by the Servicer to the Borrower with respect to the Mortgage Loan. "Servicing Fee" means the Servicing Fee payable to the Servicer for servicing the Mortgage Loan for Fannie Mae on and after the Conversion Date. DOCSSF 1:269333.2 40511-107-ADI 2 ...... _....... ..._... .. ......... ......... ......... ..................................................... _..__.... .._...._. ......... ......... ......__... ......................._. ....._...... ...._.... ........... ....... ...... Section 1.3. Rules of Construction. The following rules of construction shall apply: (i) the singular form of any word used in this Financing Agreement, including the terms defined in Section 1.2, shall include the plural, and vice versa, unless the context otherwise requires;the use in this Financing Agreement of a pronoun of any gender shall include correlative wards of the other genders; (ii) all references in this Financing Agreement to "Sections" and ether subdivisions of this Financing Agreement are to the corresponding, Sections or subdivisions of this Financing Agreement as originally executed; (iii) the headings or titles of the Sections of this Financing Agreement, and any table of contents appended to copies of this Financing Agreement, shall be solely, for convenience of reference and shall not limit or otherwise affect the meaning, construction or effect of this Financing Agreement or describe the scope or intent of any provision of this Financing Agreement; (iv) all accounting terms not otherwise defined in this Financing Agreement have the meanings assigned to them in accordance with applicable generally accepted accounting principles as in effect from time to time; (v) every "request," "order," "demand," "application," "appointment," "notice," "statement," "certificate," "consent" or similar action under this Financing Agreement by any party shall, unless the form of such instrument is specifically provided,be in writing signed by a duly authorized representative of such party with a duly authorized signature; (vi) if any provision of this Financing Agreement calls for the approval or consent of Fannie Mae, whether stated as "consent," "written consent," "prior written consent," "approval," "written approval," "prior written approval" or otherwise, or any waiver by Fannie Mae, and if a basis for Fannie Mae granting such approval, consent or waiver is not otherwise stated,then it is understood and agreed that such approval, consent or waiver will be given by Fannie Mae in its discretion;and (vii) whenever Fannie Mae shall have any right or option to exercise any discretion, to determine any matter, to accept any presentation or to approve or consent',to any matter, such exercise, determination, acceptance, approval or consent shall, without exception, be in Fannie Mae's sole and absolute discretion. Section 1.4. Content of Certificates and Orinions. Every certificate or opinion with respect to compliance by or on behalf of the Issuer,the Borrower,the Servicer or the Trustee with a condition or covenant provided for in this Financing Agreement or the Indenture shall include: (i) a statement that the person or persons providing or giving the certificate or opinion have read the covenant or condition and the definitions in the Indenture or this Financing Agreement relating to the covenant or condition; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in the certificate or opinion are based; DOCssF1:269333.2 40511-107-ALAI 3 (iii) a statement that,in the opinion of the signers, they have made or caused to be made such examination or investigation as is necessary to enable them to express an informed opinion as to whether or not the covenant or condition has been complied with;and (iv) a statement as to whether, in the opinion of the signers,the condition or covenant has been complied with. Any such certificate or opinion made or given by an officer of any party may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless the officer knows that the certificate or opinion or representation with respect to any matter upon which his or her certificate or opinion may be based is erroneous, or in the exercise of reasonable care should have known that the same is erroneous. Any certificate or opinion provided or given by counsel may be based, insofar as it relates to any factual matter(with respect to which information is in the possession of a party), upon the certificate or opinion of or representations by an officer of the party, unless such counsel knows that the certificate or opinion or representation with respect to the matter upon which his or her opinion may be based is erroneous,or in the exercise of reasonable care should have known that the same is erroneous. Section 1.5. Effective Date. The provisions of this Financing:Agreement shall be effective on and as of the Closing Date. Section 1.6. InteMretstion. The parties to this Financing Agreement acknowledge that each party and Fannie Mae and their respective counsel have participated in the drafting and revision of this Financing Agreement. Accordingly, the parties agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in the interpretation of this Financing Agreement or any amendment,modification, supplement or restatement of any of the foregoing or of any exhibit to this Financing Agreement. Section 2. Representations and Warranties. Section 2.1. Representations and Warranties of the Issuer. The Issuer represents and warrants that: (i) the Issuer is a political subdivision of the State duly organized and existing under the Consititution and laws of the State; (ii) the Issuer has complied with the provisions of the Act and the Constitution and laws of the State which are prerequisites to the closing of the transactions provided for in the Bond Documents; (iii) the issuance of the Bonds to obtain funds to provide financing for the Project is intended to serve the public interest and will further the purposes of the Act including, among such purposes, the provision of decent, safe and sanitary rental housing units for persons and families of low or moderate income; to accomplish the foregoing, the Issuer intends to issue the Bonds on the terms set forth in the Indenture and to use the proceeds derived from the sale of the Bonds as specified in the Indenture and this Financing Agreement; (iv) the Issuer has the full legal right, power and authority to execute and deliver the Indenture, this Financing Agreement, the Regulatory Agreement, the Assignment and the Tax Certificate (collectively, the "Issuer Documents"), and to carry out its obligations under, and to close the transactions provided for in,the Issuer Documents; DMSSIr 1:269333.2 40511-107.AD1 4 . ......... ......... ......... ......... ......... ..................................................... _. ......... ......._. . ......... ......... ..._...................... ........._...._...__.... _...._._. ._....__.. ...._....__...._....... (v) the issuance of the Bonds, and the execution, delivery and performance of the Issuer Documents have been duly authorized by the Issuer, and the Bonds and each of the Issuer Documents has been duly executed and delivered by the Issuer and upon execution and delivery by the other parties to the Issuer Documents,as applicable,is a legal, valid and binding obligation of the Issuer, enforceable against the Issuer in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights of creditors generally and general principles of equity; (vi) neither the execution and delivery of the Bonds or any of the Issuer Documents, nor the closing of the transactions provided for in the Issuer Documents nor the fulfillment of or compliance with the terms, conditions or provisions of the Bonds or the Issuer Documents violates or will violate the Constitution or laws of the State or any judgment, order, writ, injunction or decree to which the Issuer is subject, or conflicts or will conflict in any material respect with, or results or will result in a material breach of any of the terms, conditions or provisions of, or constitutes or will constitute a material default under, any agreement or instrument which the Issuer is now a party or by which it is bound; (vii) the Issuer has complied and will comply with all material provisions of the Act applicable to the Bonds and the transactions provided for in the Issuer Documents; (viii) the Bonds have been issued under the Indenture, and are secured by the Indenture, pursuant to which the Issuer's interest in this Financing Agreement (other than the Reserved Rights), and the revenues and receipts to be derived by the Issuer pursuant to this Financing Agreement, will be pledged and assigned to the Trustee as security for payment of the principal of, premium, if any, and interest on the Bonds and to secure amounts owed under the Mortgage Note and the other Mortgage Loan Documents; (ix) except as otherwise provided in the Indenture,the Issuer has not created and will not create any debt, lien or charge upon the Trust Estate, and has not made and will not make any pledge or assignment of or create any encumbrance on the Trust Estate, other than the pledge and assignment to the Trustee under the Indenture;and (x) no litigation or administrative action of any nature has been served on the Issuer and is now pending (a) seeking to restrain or enjoin the execution and delivery of any of the Issuer Documents, or in any manner questioning the proceedings or authority relating to any of the Issuer Documents or otherwise affecting the validity of the Bonds or(b)questioning the existence or authority of the Issuer or that of its present or former members or officers, and, to the best knowledge of the Issuer,none of the foregoing are threatened. Section 2.2. Representations and Warranties of the Barrower. Section 2.2(1) Specific Representations and Warranties. The Borrower represents and warrants that: (i) the Borrower is a limited liability company, duly organized, validly existing and in good standing under the laws of the State and is duly qualified to conduct its business wherever such qualification is required, including the State and every other state in which the nature of its business requires such qualification; (ii) the Borrower has the full legal right,power and authority to own its properties and to carry on its business as now being conducted and as the Borrower contemplates it to be conducted DOCSSF1:269333.2 40511-147-Alli 5 _. ......... ......... ......... ......... ......... ..................................................... .. ......_.. ._._........._........ .....................................__. ......__.... .................._......... ........ with respect to the Project, and to execute and deliver, to carry out its obligations under, and to close the transactions provided for in,this Financing Agreement,the other Bond Documents,the Mortgage Loan Documents and the Construction Phase Credit Documents; (iii) - this Financing Agreement, the other Bond Documents to which the Borrower is a party, the Construction Phase Credit Documents, the Mortgage Loan Documents to which the Borrower is a party and all other documents to which the Borrower is a party and which are being executed and delivered by the Borrower in connection with the transactions provided for in the Indenture,this Financing Agreement,the Regulatory Agreement,the other Bund Documents and the Mortgage Loan Documents have been duly authorized, executed and delivered by the Borrower and constitute the legal, valid and binding obligations of the Burrower, enforceable against the Borrower in accordance with their respective terms,subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights of creditors generally and general equitable principles; (iv) no authorization, consent, approval, order, registration,declaration or withholding of objection on the part of, or filing of or with any governmental authority, not already obtained or made (or to the extent not yet obtained or made the Borrower has no reason to believe that such authorizations, consents, approvals, orders, registrations or declarations will not be obtained or made in a timely fashion) is required for (a) the execution and delivery or approval, as the case may be, of this Financing Agreement, the Regulatory Agreement, the other Bond Documents to which the Borrower is a party, the Construction Phase Credit Documents,',the Mortgage Loan Documents to which the Borrower is a party or any other documents to which the Borrower is a party or (b)the performance of the terms and provisions of this Financing Agreement or of such other documents by the Borrower; (v) neither the execution and delivery of this Financing Agreement, the other Bond Documents to which the Borrower is a party, the Mortgage Loan Documents to which the Borrower is a party, the Construction Phase Credit Documents or any other documents to which the Borrower is or will be a party and which are being or will be executed and delivered by the Borrower in connection with the transactions provided for in the Indenture, this Financing Agreement, the Regulatory Agreement, the other Bond Documents, the Mortgage Loan Documents and the Construction Phase Credit Documents, nor the closing of the transactions provided for in the Indenture, the Financing Agreement, the Regulatory Agreement, the other Bond Documents, the Mortgage Loan Documents or the Construction Phase Credit Documents, nor the fulfillment of or compliance with the terms and conditions of this Financing Agreement, the Regulatory Agreement, the other Bond Documents to which the Borrower is a party, the Mortgage Loan Documents to which the Borrower is a party, the Construction Phase Credit Documents or any other documents to which the Borrower is a party and which are being or will be executed and delivered by the Borrower in connection with the transactions provided for in the Indenture, this Financing Agreement,the Regulatory Agreement,the other Bond Documents, the Mortgage Loan Documents, the Construction Phase Credit Documents or such other documents violates or will violate any law, rule or regulation of any governmental agency or body having jurisdiction over the Borrower or its managing member or any of their activities or properties, or any judgment, order, writ, injunction or decree to which the Borrower or its managing member is subject, or any of the organizational or other governing documents of the Borrower or its managing member, or conflicts or will conflict with any agreement, instrument or license to which the Borrower or its managing member is now a party or by which it or its managing member or any of their properties or assets is bound or results or will result in a breach of, or constitutes or will constitute a default(with due notice or the passage of time or both)under, any such agreement, instrument or license, or contravenes or will contravene any such law, rule or DOCSSF1:269333.2 40511-107-ADI 6 _.. _.. ...... ._....... ......... ......... ................................................................................................................................................................................................................................ . ....... ........... ...._..... _. regulation or any such judgment, order, writ, injunction or decree, or, except as provided in the Mortgage Loan Documents, result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the Borrower or its managing member, except for any lien, charge or encumbrance allowed under the terms of the Mortgage Loan Documents and any other Permitted Lien; (vi) the Borrower has made all filings with and has obtained all approvals, permits, authorizations and consents from all federal, state and local regulatory agencies having jurisdiction to the extent, if any, required by applicable laws and regulations;to be made or to be obtained in connection with the (a) acquisition, construction, development and equipping of the Project and (b) execution and delivery by the Borrower of, and performance by the Borrower of its obligations under, the Indenture, this Financing Agreement, the Regulatory Agreement, the other Bond Documents, the Mortgage Loan Documents and the Construction Phase Credit Documents; (vii) the Borrower is not presently under any cease or desist order or other orders of a similar nature, temporary or permanent, of any federal or state authority which would have the effect of preventing or hindering the performance of the Borrower's duties under any of the Bond Documents,the Mortgage Loan Documents or the Construction Phase Credit Documents; nor are there any proceedings presently in progress or to its knowledge contemplated which would, if successful,lead to the issuance of any such order; (viii) no litigation or proceeding is pending or, to the knowledge of the Borrower or the managing members of the Borrower,threatened against the Borrower or its managing members or any Key Principal or with respect to the Project which has a reasonable probability of having a material adverse effect on its financial condition or business, or the transactions provided for in the Indenture, this Financing Agreement, the Regulatory Agreement,the other Bond Documents, the Mortgage Loan Documents or the Construction Phase Credit Documents,or which in any way seeks to prohibit, restrain or enjoin the issuance, sale or delivery of the Bonds, the funding of the Mortgage Loan or the execution and delivery of the Bonds, the Indenture, this Financing Agreement, the Regulatory Agreement, any of the other Bond Documents, the Mortgage Loan Documents or the Construction Phase Credit Documents, or which in any way would adversely affect or call into question the validity or enforceability of the Bonds,' the Indenture, this Financing Agreement,the Regulatory Agreement,the other Bond Documents,the Mortgage Loan Documents to which it is a party or the Construction Phase Credit Documents, or the power or authority of the Borrower to incur, or the ability of the Borrower to perform, its obligations under this Financing Agreement, the Regulatory Agreement, the other Bond Documents to which the Borrower is a party, the Mortgage Loan Documents to which the Borrower is a party, or the Construction Phase Credit Documents,or which questions the power or authority of the Borrower to carry out the transactions provided for in, or to perform its obligations under, the Bond Documents to which it is a party, the Mortgage Loan Documents to which it is a party or the Construction Phase Credit Documents, or which would affect the power of the Borrower to own, equip or operate the Project or which questions the exclusion from gross income for federal income tax purposes of the interest payable on the Bonds; (ix) the Borrower is not in default under any document, instrument or commitment to which the Borrower is a party or to which it or any of its property or assets is subject which default would or could affect the ability of the Borrower to carry out its obligations under this Financing Agreement, the Regulatory Agreement, the other Bonn Documents to which the Borrower is a party, the Mortgage Loan Documents to which it is a party'or the Construction Phase Credit Documents; DocssPl:269333.2 40511.107-ADI 7 .........111.1 ..... .......................................................... . ........................................................................................................................................................................................................................................... _ ....... ........ ........ (x) the financial statements which have been furnished by or on behalf of the Borrower, its managing member and each Key Principal to the Issuer, Fannie Mae and/or the Servicer are complete and accurate in all material respects and present fairly and consistently the financial condition of the Borrower and such other entities or persons as of their respective dates in accordance with generally accepted accounting principles applied on a consistent basis, and since the date of the most recent of such financial statements there has not been any material adverse change, financial or otherwise, In the condition of the Borrower, and there has not been any material transaction entered into by the Borrower or its managing member other than transactions in the ordinary course of business,and neither the Borrower or its managing member nor any Key Principal has any material contingent obligations which are not otherwise disclosed in its financial statements; (xi) there (a) is no completed, pending or threatened bankruptcy, reorganization, receivership, insolvency or like proceeding, whether voluntary or involuntary, affecting the Project, the Borrower, any managing member of the Borrower or any Key Principal and (b) has been no assertion or exercise of jurisdiction over the Project, the Borrower, any managing member of the Borrower or any Key Principal of the Borrower by any court empowered to exercise bankruptcy powers; (xii) no event has occurred and no condition exists with respect to the Borrower or the Project that would constitute an Event of Default or which,with the lapse of time,if not cured, or with the giving of notice or both, would become an Event of Default; (xiii) the Borrower has not taken and will not take any action, or permit any action that is within the Borrower's control to be taken,that would impair the exclusion from gross income for federal income tax purposes of the interest payable on the Bonds; (xiv) as of the Closing Date, the Borrower is in compliance with allrequirements of the Tax.Certificate, and the representations set forth in the Tax Certificate of the Borrower executed by the Borrower pertaining to the Borrower and the Project are true and accurate; (xv) no information, statement or report furnished in writing to the Issuer,Fannie Mae,the Servicer or the Trustee by the Borrower in connection with the transactions provided for in the Indenture,this Financing Agreement,the Regulatory Agreement, the other Bond Documents, the Tax Certificate,the Construction Phase Credit Documents,the Mortgage Loan Documents or the Disclosure Agreement or the closing of the transactions provided for in the Indenture, this Financing Agreement, the Regulatory Agreement, the other Bond Documents, the Construction Phase Credit Documents or the Mortgage Loan Documents (including, without limitation, any information furnished by the Borrower in connection with the preparation of any materials related to the issuance, delivery or offering of the Bonds) contains any material misstatement of fact or omits to state a material fact necessary to make the statements contained in such written materials or in any offering material, in the light of the circumstances under which they were made, not misleading; the representations and warranties of the Borrower and the statements, information and descriptions contained in the Borrower's closing certificates, as of the Closing Date, are and will be true, correct and complete, do not and will not contain any untrue statement or misleading statement of a material fact, and do not and will not omit to state a material fact required to be stated in such certificates or necessary to make the certifications, representations, warranties, statements, information and descriptions contained in such certificates or in any offering materials, in the light of the circumstances under which they were made,;not misleading; the estimates and the assumptions contained in this Financing Agreement and in any certificate of the DOCSSFi:269333.2 40511-107-ADI 8 ...1.111 ......... ......... ......... ......... ......... ..................................................................... _............__....... ......... ......... ......__..._.._............ ......... ........_... .. ......._. .......__.... ....._...._._...... Borrower delivered as of the Closing Date are reasonable and based on the best information available to the Borrower, (xvi) to the best knowledge of the Borrower,no member, officer,agent or employee of the Issuer has been or is in any manner interested, directly or indirectly,in that person's own name or in the name of any other person, in the Bonds, the Bond Documents, the Construction Phase Credit Documents, the Mortgage Loan Documents, the Disclosure Agreement, the Borrower or the Project, in any contract for property or materials to be furnished or used in connection with the Project, or in any aspect of the transactions contemplated by the Bond Documents, the Construction Phase Credit Documents, the Disclosure Agreement or the Mortgage Loan Documents; (xvii) the Borrower acknowledges that (a) it understands the nature and structure of the transactions relating to the financing of the Project, (b)it is familiar with the provisions of all of the documents and instruments relating to such financing to which it or the Issuer is a party or of which it is a beneficiary, (c) it understands the risks inherent in such transactions, including without limitation the risk of loss of the Project, and (d) it has not relied on the Issuer, Fannie Mae or the Servicer for any guidance or expertise in analyzing the financial or other consequences of the transactions contemplated by this Financing Agreement and the other Bond Documents, the Construction Phase Credit Documents or the Mortgage Loan Documents or otherwise relied on the Issuer,Fannie Mae or the Servicer in any manner; (xviii) to its best knowledge, the Borrower is in compliance with (a) all provisions of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended ("CERCLA"), the Resource Conservation and Recovery Act, the Superfund Amendments and Reauthorization Act of 1986,the Toxic Substances Control Act, (b)all environmental laws of the State (collectively,the "Environmental Laws'), (c) with any rules, regulations or administrative orders of any governmental agency, and(d)with any judgments, decrees or orders of any court of competent jurisdiction with respect to CERCLA or any of the Environmental Laws;the Borrower has not received any assessment or notice of primary or secondary liability or financial responsibility, and no notice of any action,claim or proceeding to determine;any such liability or responsibility, or the amount of any such action,claim or proceeding,or any assessment or notice seeking to impose civil penalties with respect to a site listed on any federal or state listing of sites containing or believed to contain"hazardous materials" (as defined in the Environmental Laws); nor has the Borrower received notification that any "hazardous substances" (as defined under CERCLA)that it has disposed of have been found in any site at which any governmental agency is conducting an investigation or other proceeding under any Environmental Law; (xix) the Borrower has not received any notice that it is not in full compliance with ERISA and applicable Department of Labor regulations under ERISA, with the Code and applicable Treasury Regulations under the Code or with the terms of each pension or welfare benefit plan to which the Borrower is a party or makes any employer contributions with respect to its employees, for the current or prior plan years of such plans; (xx) the Bonds are not"federally guaranteed"as defined in Section 149(b)of the Code; (xxi) in accordance with Section 147(b) of the Code, the weighted average maturity of the Bonds does not exceed 120%of the weighted average reasonably expected economic life of the facilities of the Project financed with the Net Bond Proceeds, determined as of the later of the date the Bonds are issued or the date the facilities are expected to be placed in service; DOCSSF1:269333.2 40511-107-ADI 9 . ...................................................................................................................................................................................... _ ..................... ......... ......... .._..._.. .._......... ..................._._. _.......... .....__._.. .._...._......._.. .. (xxii) neither the Borrower nor any person who is a "related person" to the Borrower (within the meaning of Section 147(x)(2) of the Code) will purchase Bonds pursuant to any arrangement, formal or informal; (xxiii) the information furnished by the Borrower and used by the Issuer in preparing the certificate pursuant to Section 148 of the Code and information statement,pursuant to Section 149(e)of the Cade is accurate and complete as of the date of the issuance of the Bonds; (xxiv) the acquisition, construction and equipping of the Project were not commenced (within the meaning of Section 144(x)of the Code)prior to (which is the date 60 days prior to the adoption of the resolution of the Issuer with respect to the Project) and no obligation for which reimbursement will be sought from proceeds of the Bonds relating to the acquisition,construction or equipping of the Project was paid or incurred prior to such date; (xxv) the Borrower is the sole borrower under the Mortgage Loan and is a single asset entity,the single asset of which is the Project; (xxvi) the Borrower has and will have fee simple title to the Project, subject only to Permitted Liens; (xxvii) the Project is located entirely within the boundaries of the Issuer;' (xxviii) the Project, as designed, conforms in all material respects with all applicable zoning, planning, building and environmental laws, ordinances and regulations of governmental authorities having jurisdiction over the Project, including, but not limited to the Americans with Disabilities Act of 1990("ADA")(as evidenced by an architect's certificate to such effect); (xxix) all necessary utilities are available to the Project in adequate supply; (xxx) the Borrower has obtained or will obtain all requisite zoning, planning, building and environmental and other permits which may become necessary with respect to the construction, equipping,use and occupancy of the Project; (xxxi) the Borrower has obtained or will obtain all licenses,permits and approvals necessary for the ownership, operation and management of the Project including compliance with the ADA (as evidenced by an architect's certificate to such effect), and further including all approvals essential to the transactions contemplated by the Indenture, this Financing Agreement, the other Bond Documents,the Construction Phase Credit Documents,the Mortgage Loan Documents,the Disclosure Agreement and any other documents contemplated by this Financing Agreement or by such other documents; (xxxii) the Project meets the requirements of this Financing Agreement, the Regulatory Agreement,the Act and the Code with respect to multifamily rental housing; (xxxiii) the Protect 1s, as of the Closing Date, in compliance with all requirements of the Regulatory Agreement,including all applicable requirements of the Code and the Act; (xxxiv) the Borrower intends to hold the Project for its own account and has no current plans to sell,and has not entered into any agreement to sell,the Project or any part of it; DOCSSF1:269333.2 44511-107-AU1 10 ... ......... ......... ......... ......... ......... ..................................................... ......... ......... ......... ......... _._...... ......._. .......... ......... .__......... ._........_. ..._..... ........ (xxxv) the Borrower intends to cause the residential units in the Project to be rented or available for rental on a basis which satisfies the requirements of the Regulatory Agreement, including all applicable requirements of the Act and the Code, and pursuant to leases which comply with all applicable laws and the Regulatory Agreement; (xxxvi) the Borrower intends to cause the Project to be occupied and to operate it or cause it to be operated at all times during the term of this Financing Agreement for Project Purposes and does not know of any reason why the Project will not be so used by it in the absence of circumstances not now anticipated by it or totally beyond its control; (xxxvii) the factual statements and representations concerning the Borrower and the Project set forth in the Fannie Mae Commitment and in the Servicer's Commitment are now true, correct and complete,will be true, correct and complete on the Closing Date and will continue to be true, correct and complete throughout the term of this Agreement; (xxxviii) the information contained in the Official Statement with respect to the Bonds, insofar as such information relates to the Borrower and the Project, is accurate in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact required to be stated in the Official Statement or necessary to make the statements made in the Official Statement,in light of the circumstances under which they were made,not misleading; (xxxix) the Borrower has filed or caused to be filed all federal, state and local tax returns which are required to be filed, and has paid or caused to be paid all taxes as shown on those returns or on any assessment received by it,to the extent that such taxes have',become due;and (xl) neither Fannie Mae nor any subsidiary or affiliate of Fannie Mae now owns or will, by conveyance from the Borrower or any affiliate of the Borrower,acquire(ether than pursuant to a foreclosure under the Mortgage or pursuant to a deed in lieu of foreclosure or other comparable conversion of the Mortgage Loan)an equity ownership interest in the Project. Section 2.2(2) Certificates. Any certificate signed or to be signed by the managing member of the Borrower and delivered pursuant to the Indenture, this Financing Agreement, the Regulatory Agreement,the Tax Certificate,the other Bond Documents,the Construction Phase Credit Documents or the Mortgage Loan Documents, when executed and delivered by the Borrower, shall be deemed a representation and warranty by the Borrower as to the statements contained',in the certificate. Section 2.2(3) Incorporation of t)#hgr Rear sen#atigns,, Warranties and Covenants. In addition to, and not in limitation or contravention of, the foregoing representations, warranties and covenants contained in Section 2.2(1)and Section 2.2(2)of this Financing Agreement,the representations, warranties and covenants of the Borrower set forth in the Reimbursement Agreement are incorporated into this Financing Agreement as if restated in this Financing Agreement in full, for the benefit of, and may be relied upon by,the beneficiaries of this Financing Agreement.' Section 2.2(4) Notification. The Borrower agrees to immediately notify the Trustee, the Servicer, Fannie Mae and the Issuer in writing of any misrepresentation made by the Borrower in, or any default by the Borrower in the performance or observance of any covenant, agreement, representation, writing or obligation of the Borrower set forth in, this Financing Agreement, the other Bond Documents,the Construction Phase Credit Documents,the Mortgage Loan Documents, or any other documents which are being executed and delivered by the Borrower in'connection with the transactions provided for or to be provided for in the Indenture, this Financing Agreement,the Regulatory Agreement,the Tax Certificate,the other Bond Documents or the Mortgage Loan Documents. DOCSSF1:269333.2 40511-147-Alli 11 ...... ......... ......... ......... ......... ......... ...................................................... ....._... ....._... ......... ......... ......._. ...._._.. _....._......._......... ._....... .._...... ..._._............... Section 2.3. Representations and Warranties of the Trustee. The Trustee represents and warrants that: (i) it is a national banking association duly organized and validly existing under the laws of the United States of America,has all necessary power and authority to execute and deliver the Indenture, this Financing Agreement, the Collateral Agreement and the Regulatory Agreement, and to carry out and perform all of its obligations and undertakings ;with respect to the transactions provided for in the Indenture, this Financing Agreement, the Collateral Agreement and the Regulatory Agreement,and the execution,delivery and performance of the Indenture,this Financing Agreement, the Collateral Agreement and the Regulatory Agreement have been duly authorized by all necessary action required on the part of the Trustee and any administrative or regulatory body having jurisdiction over the Trustee; (ii) upon the execution and delivery of the Indenture, this Financing Agreement, the Collateral Agreement and the Regulatory Agreement by the other parties to those documents,the Indenture, this Financing Agreement, the Collateral Agreement and the Regulatory Agreement will constitute the legal, valid and binding obligations of the Trustee, enforceable against the Trustee in accordance with their respective terms, except as limited by bankruptcy, insolvency, reorganization, moratorium or other similar Iaws affecting creditors' rights generally and by general principles of equity;and (iii) neither the execution and delivery of the Indenture, this Financing Agreement, the Collateral Agreement or the Regulatory Agreement, nor the closing of the transactions provided for in the Indenture, this Financing Agreement, the Collateral Agreement or the Regulatory Agreement, nor the fulfillment of or compliance with the terms and conditions of the Indenture, this Financing Agreement, the Collateral Agreement or the Regulatory Agreement, violates or will violate any law, rule, regulation or legal restriction, or any judgment, order, writ, injunction or decree to which it is subject, or conflicts or will conflict with or results or will result in a breach of any of the terms, conditions or provisions of, or constitutes or will constitute a default under, any agreement or instrument to which the Trustee is now a party or by which it is bound. Section 2.4. Representations and Warranties of the Servicer. The Servicer represents and warrants that: (i) the Servicer is a corporation duly organized and validly existing tinder the laws of the State of Delaware, is duly qualified to do business in the State, has all necessary corporate power and authority to execute and deliver this Financing Agreement, to assign the Mortgage Loan, including the Mortgage Loan Documents to which it is a party, to Fannie Mae and to carry out and perform all of its obligations under this Financing Agreement and the Mortgage Loan Documents to which it is or will be a party and its contractual arrangements with Fannie Mae;the execution,delivery,acceptance and performance of this Financing Agreement and any documents assigning the Mortgage Loan to Fannie Mae have been or will be duly authorized by all necessary corporate and other action required on the part of the Servicer; (ii) the Servicer has been approved by Fannie Mae as a seller and servicer of multifamily mortgage loans under Fannie Mae's Delegated Underwriting And Servicing Product Line;and (iii) the Servicer has complied with the provisions of the laws of the State which are prerequisites to the assignment and servicing of the Mortgage Loan. DOCS&F1169333.2 40511-107-ADI 12 ...11 1.1 ........ ......... ......... ......... ......... ..................................................................... ......... ......... ......... ......... .._.......__......._.. ......... . ......... _.......... ._..._... .............._....... Section 3. The Bonds. Section 3.1. Obligations Conditioned on Issuance of the Bonds, AF„plication of the Proceeds of the Bond.The Issuer has authorized the issuance of the Bonds in the Principal Amount. The obligations of the Issuer,the Trustee,the Borrower and the Servicer under this Financing Agreement are expressly conditioned upon the issuance, sale and delivery of the Bonds. Neither the Issuer, the Servicer, the Trustee nor Fannie Mae shall have any liability for any fees, costs or;expenses, including, without limitation, issuance costs relating to the Bonds, except to the extent the Trustee or the Issuer is required to pay such costs from amounts received as provided in the Indenture,it being understood that all of such fees,costs and expenses shall be paid by the Borrower. Notwithstanding anything to the contrary expressed or implied in this Financing Agreement or in the Indenture or any other Bond Documents, the Issuer shall be under no obligation to issue the Bonds or to make the Mortgage Loan if, on or before the Closing Date,any one or more of the following shall not have been fully fulfilled or satisfied: (i) any condition precedent to the issuance of the Bonds as set forthin the Indenture, the Bond Purchase Agreement or this Financing Agreement;or (ii) any condition precedent to the making of the Mortgage Loan as set forth in the Indenture or in this Financing Agreement, the Fannie Mae Commitment, the Servicer's Commitment or any Mortgage Loan Document; it being understood and agreed that any failure by the Borrower or any other person to fulfill and satisfy, or cause to be fulfilled and satisfied, any of the foregoing conditions precedent on or before the Closing Date shall relieve the Issuer of its obligations to issue the Bonds and to make the Mortgage Loan. Section 3.2. Borrower's OblitAtions,,. Section 3.2(1) General ObliMation. The Borrower is unconditionally obligated,anything else to the contrary notwithstanding,to timely pay amounts sufficient to pay, pursuant to the Mortgage Note or otherwise, when due, the principal of, premium, if any, and interest on, the Bonds. Section 3.2(2) Borrower's Obligations Upon Prepayment and Redernption. Section 3.2(2)(1) Optional Prepayment and Redemption. In the event of an optional redemption of Bonds pursuant to Section 3.2 of the Indenture as a result of an optional prepayment in whole of the Mortgage Loan pursuant to Section 4.10 of this Financing Agreement and in accordance with the terms of the Mortgage Note,and subject to the requirements of the Indenture,the Borrower shall timely pay, or cause to be paid, (a) an amount equal to the unpaid principal balance of the Mortgage Loan, (b) interest on the Mortgage Loan to the date of prepayment, (c) interest payable on the Bonds to be redeemed to the Redemption Date, (d) the premium, if any, payable with respect to the Bonds to be redeemed (the premium to be paid with Available Moneys), (e) any other amount that is part of the End Period Payment, (f) an amount sufficient to pay'any fees, costs and expenses in connection with such redemption and(g) all other amounts payable under the Indenture,this Financing Agreement, the Mortgage Note and the other Mortgage Loan Documents in connection with the prepayment of the Mortgage Loan and the corresponding redemption of the Bonds on the applicable Redemption Date, Section 3.2(2)(2) Mandatory Prepayment' and Special Mandatory Redemption. In the event of a mandatory prepayment of the Mortgage Loan in connection with a special mandatory redemption of Bonds: DOCSSF1:269333.2 40511-107-ADI 13 .....1.11.1.. ......... ....__... ......... ......... ......... ..................................................... ..... ......... ......... ......... __....... ....__.... ......... .............._........ ........... ......... ......... (i) in,part pursuant to paragraph (i)(A) of Section 3.3(1) of the Indenture, the Borrower shall timely pay, or cause to be paid, in addition to the proceeds of the Bonds on deposit in the Mortgage Loan Fund to be applied to the redemption of Bonds, (a)interest on the Mortgage Loan to the date of prepayment, (b) interest payable on the Bonds to be redeemed to the Redemption Date, (c) an amount sufficient to pay any fees, costs and expenses in connection with such redemption and(d)all other amounts payable under the Indenture and this Financing Agreement in connection with the prepayment of the Mortgage Loan and the corresponding redemption of such Bonds on the applicable Redemption Date, (ii) in whole or in part, pursuant to paragraph (i)(B) of Section 3.3(i) of the Indenture, the Borrower shall timely pay or cause to be paid,(a)in the event of an involuntary destruction or loss of the Project in part as a result of a casualty or condemnation, a principal amount equal to the insurance proceeds or condemnation award received by the Borrower and applied, in accordance with the Mortgage Loan Documents, to the prepayment, in part, of the Mortgage Loan and the corresponding redemption of Bonds on the applicable Redemption Date, or (b) in the event of the involuntary destruction or loss of the Project in its entirety or nearly in its entirety as a result of casualty or condemnation, the unpaid principal balance of the;Mortgage Loan and an amount sufficient to effect the corresponding redemption of the Bonds on the applicable Redemption Date and, in the case of(a) or (b), (1) interest on the Mortgage Loan to the date of prepayment, (2) interest payable on the Bonds to be redeemed to the Redemption Date, (3) an amount sufficient to pay any fees, costs and expenses in connection with such redemption and(4) all other amounts payable under the Indenture and this Financing Agreement in connection with the prepayment of the Mortgage Loan and the corresponding redemption of the Bonds to be redeemed on the applicable Redemption Date,and (iii) in whole or in part, pursuant to paragraph (ii) of Section 3.3(1) of the Indenture, the Borrower shall pay, or cause to be paid, (a) a principal amount, as specified by Fannie Mae, corresponding to the principal amount of Bonds to be redeemed (and, therefore, a like principal amount of the Mortgage Loan)at the written direction or with the prior written consent of Fannie Mae, (b) interest on the Mortgage Loan to the date of prepayment, (c) interest payable on the Bonds to be redeemed to the Redemption Date, (d)an amount sufficient to pay any fees, costs and expenses in connection with such redemption and (e) all other amounts payable under the Indenture and this Financing Agreement in connection with the prepayment of the Mortgage Loan and the corresponding redemption of the Bonds to be redeemed on the applicable Redemption Date. All payments shall be made in accordance with the payment procedures set forth in the Mortgage Note. Section 3.3. Issuance of Fannie Mae Pass-Through Certificate. Subject to Section 3.4 of this Financing Agreement,upon Fannie Mae Pass-Through Certificate Delivery,the Fannie Mae Pass-Through Certificate shall be substituted for the Collateral Agreement, provided that Fannie Mae's obligation to issue the Fannie Mae Pass-Through Certificate is subject to the satisfaction of the Fannie Mae Pass-Through Certificate Delivery Requirements. Section 3.4. Change in Fannie Mae Credit Facility. Without the consent of the Borrower, Fannie Mae may provide a Credit Facility tither than the Collateral Agreement or the Fannie Mae Pass-Through Certificate in substitution for the Collateral Agreement or the Fannie Mae Pass- Through Certificate, as the case may be, effective on a date specified by Fannie Mae if(a) the Rating Agency confirms in writing that such substitution will not adversely affect the rating then in effect with respect to the Bonds, (b) Fannie Mae delivers to the Issuer and the Trustee an Opinion of Counsel to Fannie Mae (who may be an employee of Fannie Mae) in form and substance satisfactory to the Issuer DOCSSFI:269333.2 40511-107-ADI 14 and the Trustee, relating to the due authorization and issuance of the new Credit Facility and its enforceability and an Opinion of Bond Counsel to the effect that the substitution of the new Credit Facility will not adversely affect the exclusion from gross income,for federal income tax purposes, of the interest payable on the Bonds, and (c) the provision of the new Credit Facility dices not increase the amounts required to be paid by, or other obligations of,the Borrower without its consent. The Borrower, the Issuer and the Trustee (at the expense of the Borrower)agree to execute and deliver such documents, certificates and opinions including,but not limited to, an amendment to this Financing Agreement and the Indenture, as Fannie Mae reasonably may request, or as may otherwise be necessary, in order to implement the new Credit Facility. Section 4. The Mortgaze Loan. Section 4.1. Amount and Source of Mortgage Loan. Upon the issuance and delivery of the Bonds pursuant to the Indenture, the Issuer shall apply the Net Bond Proceeds in the amount of$[7,000,000)to fund the Mortgage Loan. The Borrower accepts the Mortgage Loan from the Issuer, upon the terms and conditions set forth in this Financing Agreement, in the Mortgage Loan Documents and in the Indenture, and subject to the terms and conditions of the Regulatory Agreement. The Borrower agrees to apply the proceeds of the Mortgage Loan deposited in the Mortgage Loan Fund as provided in paragraph (i) of Section 4.2 of the Indenture and in Section 4.3(l) of the Indenture and Section 3.1 of this Financing Agreement to pay costs of acquiring, constructing and equipping the Project. Section 4.2. Terms of the M ft age Loan; F nnding. Section 4.2(1) Terms. In consideration of and in repayment of the Mortgage Loan,the Borrower shall make payments on the Mortgage Note(a)on and before the Conversion Date,to the Trustee and (b)after the Conversion Date,to the Servicer, which payments shall, in all events and at all times, be sufficient to repay the Mortgage Loan, including all payments of principal and interest when due and to timely pay,when due,the principal of,premium,if any,and interest on,the Bonds,plus the(1) Fees and (2) fees due to Fannie Mae (the Facility Fee (in the amount set forthin the Fannie Mae Commitment) for credit enhancing the Mortgage Loan or, after the issue Date, the Guaranty Fee (in the amount set forth in the Fannie Mae Commitment)for issuing the Fannie Mae Pass-Through Certificate,as applicable)and the Servicer(the Servicing Fee (in the amount set forth in the Fannie Mae Commitment) for servicing the Mortgage Loan on and after the Conversion Date), notwithstanding any other provision of this Financing Agreement, the Mortgage Note, any other Bond Document or any Mortgage Loan Document which may state or imply to the contrary, and notwithstanding the amount of Investment Income available to be applied to the payment of the foregoing obligations. The Mortgage Loan shall (a) be evidenced by the Mortgage Note, (b)be in a principal amount approved by Fannie Mae,not to exceed $[7,000,000], (c) bear interest at the Mortgage Note Rate, (d) be payable on the terms provided in the Mortgage Note,(e) be secured by, among other instruments,the Mortgage, (f)be subject to optional and mandatory prepayment at the times, in the manner and on the terms, and have such other terms and provisions, as are set forth in the Mortgage Note,the Mortgage and the other Mortgage Loan Documents and (g) otherwise comply in all respects with the requirements of the Fannie Mae;'Commitment. The Mortgage Note Rate shall be comprised of. (i) a pass-through rate of interest (the "Pass-Through Rate'), which shall be a rate sufficient to pay when due the interest on the Bonds, the Issuer's Annual Fee, the Trustee's Annual Fee and the Rebate Analyst's Annual Fee,if any;and (ii) a fixed rate of interest, which (a)prior to the Conversion Date, shall be equivalent to the Facility Fee payable to Fannie Mae(as set forth in the Fannie Mae Commitment), (b)on and after the Conversion Date and until the Issue Date shall be equivalent to;the sum of (1) the UOCssF1:269333.2 40511-107-ADI 15 11 _. .. ......... ......... _.__... .. ......... ......... ......._. ............._.................................................................................................................................................................................. Facility Fee payable to Fannie Mae (as set forth in the Fannie Mae Commitment) and (2) the Servicing Fee (as set forth in the Fannie Mae Commitment) and (c) on and after the Issue Date, shall be equivalent to the sum of (1) the Guaranty Fee (as set forth in the Fannie Mae Commitment)and(2)the Servicing Fee(as set forth in the Fannie Mae Commitment). The Mortgage Note hate shall be percent(___°/a)per annum from the Accrued Date as set forth in the Mortgage Note to, but not including, the Conversion.Date; on and after the Conversion Date,the Mortgage Note hate shall be percent(__°lo)per annum to final payment of the Mortgage Nate. The Mortgage Note shall be payable monthly, interest only, in arrears, to and including the Conversion Date and, thereafter, the Mortgage Note shall be due and payable in 360 consecutive level monthly installments of principal and interest (computed at the Mortgage Note Rate then in effect, as specified above, on the outstanding principal amount of the Mortgage Loan)beginning on the first day of the month following the month in which the Conversion Date occurs (the "Amortization Commencement Date") until the entire indebtedness evidenced by the Mortgage Note is paid in full, provided that any remaining indebtedness, if not sooner paid, shall be due and payable on the 30th anniversary of the Conversion Date. Section 4.2(2) Fundi . Upon issuance and delivery of the Bonds (a) the Issuer shall cause (1)the Net Bond Proceeds to be delivered to the Trustee for deposit into the Mortgage Loan Fund, and (2) the accrued interest on the Bonds to be delivered to the Trustee for deposit into the General Receipts and Disbursements Account, and (b)the Borrower shall deliver to the Trustee moneys in an amount equal to the Costs of Issuance Deposit,which sum shall be deposited by the Trustee into the Costs of Issuance Fund as provided in paragraph(v)of Section 4.2 of the Indenture and in Section 4.5(l) of the Indenture, and moneys in an amount equal to the Initial Debt Service Deposit, which sum shall be deposited by the Trustee into the General Receipts and Disbursements Account as provided in paragraph (iv) of Section 4.2 of the Indenture and in paragraph (iii) of Section 4.4(3)(1) of;the Indenture. The Mortgage Loan shall be deemed to have been made in full to the Borrower immediately upon the deposit of the Net Bond Proceeds into the Mortgage Loan Fund, as provided above, at which time the Net Bond Proceeds so deposited shall become and remain the property of the Borrower as a result of the Mortgage Loan having been so made, and the Issuer shall have no further right, title or interest in such proceeds (subject to the security interest granted by the Borrower to the Issuer pursuant to this Financing Agreement and also subject to the lien in favor of the Trustee created as a result of the pledge of the Trust Estate pursuant to the Indenture). The Trustee shall cause the Net Bond Proceeds to be disbursed from the Mortgage Loan Fund as provided in Section 4.3(2)(1) of the Indenture, provided that the initial disbursement from the Mortgage Loan Fund shall not be made until the conditions for disbursement set forth in the Indenture have been satisfied and until the following conditions have been satisfied: (i) the Regulatory Agreement shall have been executed and delivered by the Issuer, the Trustee and the Borrower, and shall have been properly recorded in the appropriate office for officially recording real estate documents in the jurisdiction in which the Project is located; (ii) the Borrower shall have executed and delivered the Mortgage Note to the Issuer, and the:Issuer shall have endorsed the Mortgage Note (without recourse) to the order of the Trustee and Fannie Mae, as their interests may appear, and shall have delivered the Mortgage Note as so endorsed to the Trustee; (iii) the Borrower shall have executed and delivered the Mortgage to the Issuer, and the Issuer shall have executed and delivered the Assignment to the Trustee and Fannie Mae, as their interests may appear;the Mortgage and the Assignment shall have been properly recorded in the appropriate office for officially recording real estate documents in the jurisdiction in which the Project is located;and DOCSSF1:269333.2 40511-107-ADI 16 .... ......... ......... ......... ......... ......... ..................................................................... .......... ......... ......... ......... ......._. ......... ......... ......... ......... ......... .................... (iv) the Borrower shall have delivered to the Trustee a certificate confirming the matters set forth in Section 2.2 of this Financing Agreement and an Opinion of Counsel confirming,as of such date, the matters set forth in paragraphs (i) through (viii) of Section 2.2 of this Financing Agreement. For the purpose of establishing that the Regulatory Agreement, the Mortgage and the Assignment have been properly recorded, the Trustee, the Borrower, Fannie Mae, the Servicer and the Issuer shall be authorized and entitled to rely conclusively on the oral or written advice of an attorney-at-law or a title company to which any such instrument has been delivered to and entrusted for filing that such instrument has been delivered to and accepted for recording by the public officer responsible under the laws of the State for receiving such instrument for recording in the appropriate public records, provided that, based on local custom and practice, Fannie Mae and the Servicer may rely on a title insurance policy covering any"gap"in a manner acceptable to Fannie Mae and the Servicer. Section 4.3. Payment of Fees and Eanenses. In addition to all fees, casts, expenses and other amounts required to be paid by the Borrower under the Mortgage Note, the Reimbursement Agreement,the Borrower shall pay,without duplication,the following fees and expenses: (i) fees included in the Mortgage Note hate: (A) the portion of the Issuer's Annual Fee equal to .125%of the outstanding principal amount of the Mortgage Loan; (B) the Trustee's Annual Fee; (C) the Rebate Analyst's Annual Fee,if any; (D) on and before the Issue Date,the Facility Fee, in the amount specified in the Fannie Mae Commitment, based on the principal amount of the Mortgage Loan outstanding from time to time,payable monthly, in arrears, on the same dates on which and for the same periods for which interest is payable under the Mortgage Note; on and before the Conversion Date, the Facility Fee shall be collected by the Trustee from payments of interest on the Mortgage Note received by the Trustee'and remitted by the Trustee to Fannie Mae in accordance with Section 4.4(6) of the 'Indenture; after the Conversion Date, the Facility Fee shall be collected by the Servicer from payments of interest on the Mortgage Note received by the Servicer, deducted by the Servicer from such payments of interest and remitted by the Servicer to Fannie Mae; (E) after the Issue Date, the Guaranty Fee, in the amount specified on the Fannie Mae Commitment, based on the principal amount of the Mortgage Loan outstanding from time to time,payable monthly, in arrears, on the same dates on which and for the same period for which interest is payable under the Mortgage Note; the Guaranty Fee shall be received by the Servicer as part of the payments of interest remitted by the Servicer to Fannie Mae as part of the Servicer's remittance of principal and interest to Fannie Mae(net of the Servicing Fee)and deducted by Fannie Mae prior to distribution under the Fannie Mae pass-Through Certificate of principal and interest to the Trustee;and (F) after the Conversion Date, the Servicing Fee, in the amount specified in the Fannie Mae Commitment, based on the principal amount of the Mortgage Loan outstanding from time to time,payable monthly, in arrears, on the same dates on which DOCSSFI:269333.2 40511-107-ADI 17 and for the same period for which interest is payable under the Mortgage Note; the Servicing Fee shall be deducted by the Servicer from payments of interest on the Mortgage Note received by the Servicer prior to remitting the balance of the payments on the Mortgage Note to (a) the Trustee on and before the Issue Date and (b) Fannie Mae after the Issue Date; (ii) fees not included in the Mortgage Note Rate and expenses: (A) the fees (other than the Servicing Fee) and expenses due to the Servicer in connection with the Mortgage Loan; (B) to the extent not previously paid by the Borrower, the fees and expenses required to be paid by the Servicer to Fannie Mae under the terms of the Fannie Mae Commitment, such fees and expenses to be paid at the times and in the manner set forth in the Fannie Mae Commitment, provided that the imposition of such obligation on the Borrower shall not diminish the Servicer's obligation to pay such fees to Fannie Mae; (C) all amounts required to pay to the Issuer (a) the Issuer'sAnnual Fee, except to the extent any portion of such Fee is included in the Mortgage Nate Rate or funded on the Closing Date, and (b) all expenses of the Issuer incurred at any time in connection with the financing of the Project or the Bonds, including, without limitation, counsel fees and expenses incurred in connection with the interpretation,performance, enforcement or amendment of the Bond Documents, the Mortgage Loan Documents or any other documents relating to the Project or the Bonds or in connection with questions or other matters arising under such documents or in connection with any federal or state tax audit; all payments for fees and expenses other than the Issuer's Annual ',Fee included in the Mortgage Note Rate shall be made by the Borrower to the Issuer or to any payee designated by the Issuer not later than thirty(30) days after receipt of invoices rendered to the Borrower by the Issuer; (D) the Trustee's acceptance fee, which shall be paid to the Trustee on the Closing Date, and all amounts required from time to time to (a)',pay the fees of the Trustee for its duties and services as Trustee in connection with the Bonds (as such duties and services are set out in the Indenture), except that portion of such fees as are included within the definition of Trustee's Annual Fee, which portion is included in the Mortgage Note Rate and, therefore, paid by the Borrower with each monthly payment on the Mortgage Note, and (b) reimburse the Trustee for all advances, out-of-locket expenses, fees, costs and other charges, including counsel fees and expenses, and taxes (excluding income, value added and single business taxes), reasonably and necessarily incurred by the Trustee in performing its duties as Trustee under the Indenture, this Financing Agreement, the Disclosure Agreement, the Collateral 'Agreement and the Regulatory Agreement and(c)pay and reimburse the Trustee for any fees and expenses incurred in connection with any default under the Indenture, this Financing Agreement or under the Regulatory Agreement; all payments for fees and expenses other than the Trustee's Annual Fee included in the Mortgage Note Rate shall be made by the Borrower to the Trustee not later than thirty(30)days after receipt of invoices rendered to the Borrower by the Trustee; (E) all amounts required to pay the fees and expenses of the Rebate Analyst as required by this Financing Agreement, except that portion of such fees as are included within the definition of Rebate Analyst's Annual Fee, which portion is DOCSSF1:269333.2 40511-107-ADI 18 ......... _........ ......... ......... ......... . ..................................................................................................................................................................................................................................... .. ........ ........ _......... ......... _....._.. _..... included in the Mortgage Note Rate and, therefore, paid by the Borrower with each monthly payment on the Mortgage Note; all payments for fees and expenses other than the Rebate Analyst's Annual Fee included in the Mortgage Nate Rate shall be made by the Borrower not later than thirty (30) days after receipt of invoices rendered to the Borrower by the Rebate Analyst; (F) all Costs of Issuance,including the Issuer's issuance fee of$ [amount equal to .125% of the par amount of the Bonds] (neither the Issuer, the Servicer, the Trustee, the Construction Phase Credit Facility Provider nor Fannie Mae shall have any liability for any Costs of Issuance relating to the Bonds); (G) all costs of registering, printing, reprinting, preparing and delivering any replacement bonds required under the Indenture and in connection with the registration, printing,reprinting or transfer of Bonds; 0 all fees and expenses of Fannie Mae, the Servicer, their respective counsel, title insurance, survey, recording and other costs related to underwriting, closing and disbursing the Mortgage Loan and of the Assignment of the Mortgage Loan to the Trustee and Fannie Mae,as their interests may appear;and (1) all fees, costs and expenses in connection with Conversion and Fannie Mae Pass-Through Certificate Delivery. The Borrower acknowledges that all fees, costs,expenses and other amounts described in this Section 4.3,are obligations solely of the Borrower and(a) as to fees described in paragraph(i)above, must be paid by the Borrower in all events, including the insufficiency of the amounts included in the Mortgage Note Rate to pay such fees,and(b)as to fees described in paragraph(ii)above,must be paid by the Borrower in all events separate and apart from payments due under the Mortgage Loan and will not be included in the Mortgage Note Rate. Neither the Servicer, the Trustee, the Issuer nor Fannie Mae shall have(a)any liability,responsibility or accountability for the payment,remittance or handling of any such fees, costs or expenses or(b) any obligation to pay any such fees, costs or expenses.The payment of all fees and expenses specified in this Financing Agreement that are not included in the Mortgage Note Rate or provided for in the Reimbursement Agreement shall not be secured by the Mortgage or constitute a lien on the Project in any manner(unless the Servicer or Fannie Mae shall, in its sole discretion, advance such fees and expenses), shall be unsecured obligations of the Borrower and shall be subordinate to the Borrower's obligations under the Mortgage Note and the Reimbursement Agreement. Section 4.4. Notice. The Borrower shall give written notice to Fannie Mae and the Servicer of the payment of all fees and expenses specified in Section 4.3 of this Financing Agreement that are not included in the Mortgage Note Rate. Section 4.5. D asi s. It shall be a condition precedent to the issuance of the Bonds and the obligation of the Issuer to make the Mortgage Loan that, on or before the scheduled Closing Date, the Borrower shall deliver to the Trustee moneys in an amount equal to. (i) the Costs of Issuance Deposit,which shall be deposited by the Trustee into the Costs of Issuance Fund as provided in paragraph (v)of Section 4.2 of the Indenture and Section 4.5(1) of the Indenture;and DMSSF1:269333.2 40511-10'7-ADI 19 (ii) the Initial Debt Service Deposit, which shall be deposited by the Trustee into the General Receipts and Disbursements Account as provided in paragraph (iv)of Section 4.2 of the Indenture and in paragraph(iii)of Section 4.4(3)(1)of the Indenture. Section 4.6. Mortgage Loan Payments. All regularly scheduled payments due under the Mortgage Note shall be timely paid by the Borrower,when due, in immediately available funds. All payments of interest, principal or other amounts payable by the Borrower under the Mortgage Nate shall be paid(a) on and before the Conversion Date (and in respect of payments due on and before the Conversion Date), to the Trustee, and (b) after the Conversion Date, to the Servicer i(or other entity then servicing the Mortgage Loan for Fannie Mae). Payments received by the Servicer after the Conversion Date and on or before the Issue Date are to be remitted (net of the Servicing Fee and the Facility Fee (which Servicing Fee is to be retained by the Servicer and which Facility Fee is to be remitted to Fannie Mae)) to the Trustee; payments received by the Servicer after the Issue Date are to be remitted by the Servicer to Fannie Mae in accordance with the contractual agreements between Fannie Mae and the Servicer after the Servicer's retention of that portion of each such payment of interest allocable to the Servicing Fee. The Borrower agrees to hold the Trustee,the Servicer and Fannie Mae harmless from any liability on account of such payments. After the Conversion Date, the Borrower shall not make any payments of principal, interest or other amounts payable under the Mortgage Loan to the Trustee (other than in respect of payments due on or before the Conversion Date). Section 4.7. Certain Notices From Trustee. The Trustee shall, in accordance with the terms and conditions of the Collateral Agreement, timely give all notices required by the Collateral Agreement, including, without limitation, a notice to Fannie Mae, with copies to the Servicer and the Issuer, of the Trustee's failure to receive any Required Mortgage Payment (as defined in the Collateral Agreement) when due, which notice shall be given by the Trustee, not later than 4:00 p.m. Eastern Time on the Business Day next succeeding any day on which the Required Mortgage Payment was due. Section 4.8. Certain Obligations Rglating to MortgUe_ Loan. The Trustee agrees to accept the Assignment. Provided that all of the conditions to Fannie Mae Pass-Through Certificate Delivery have been satisfied, the Trustee agrees to execute and deliver the Trustee Assignment on the Fannie Mae Pass-Through Certificate Delivery Date. Section 4.9. Modification of Mortgaze Loan Documents,-Consent IJ Direction of Fannie Mae. The Trustee shall not,prior to the Fannie Mae Pass-Through Certificate Delivery Date: (i) consent or enter into, without the prior written consent of Fannie Mae, or fail to consent or enter into,at the written direction of Fannie Mae,any amendments or modifications to, or adjustments or revisions of the terms and conditions of the Mortgage Note, the Mortgage or any of the other Mortgage Loan Documents;or (ii) take, without the prior written consent of Fannie Mae, or fail to take at the written direction of Fannie Mae, any action in the event of a default or otherwise tinder any Mortgage Loan Document, including, without limitation, any action which would: cause there to be insufficient money available for the scheduled payment of principal and interest on the Mortgage Loan. Section 4.10. Prepayment. Section 4.10(1)Optional Prepayment. At any time that the Bonds are subject to optional redemption pursuant to Section 3.2 of the Indenture, the Borrower shall have the right to prepay the Mortgage Loan in whole, but not in part, on the terms provided in,; and subject to the DocssF1:269333.2 40511-107-ADI 20 _.... .... .......................................................................................................................................................... ................. ......... ......... ......... ......... ....................................................................................._.............. limitations of, the Mortgage Note and the Mortgage and, if and to the extent applicable, the other Mortgage Loan Documents, provided that the Borrower shall comply with the provisions of Section 3.2(2)(1) of this Financing Agreement. The Borrower expressly agrees and acknowledges that the payment of all amounts set forth in Section 3.2(2)(1) of this Financing Agreement shall be a condition precedent to the effectiveness of any such prepayment of the Mortgage Loan. The Servicer (or other entity then servicing the Mortgage Loan) shall provide an additional notice of the voluntary prepayment (a)to Fannie Mae and(b)to the Trustee; such notice shall contain the information provided for in Section 4.10(3)of this Financing Agreement. Section 4.10(2) Mandatory Prep avmen#. The Mortgage Loan shall be subject to mandatory prepayment in whole or in part, on the terms provided in, and subject to the limitations of, the Mortgage Note. Section 4.10(3) Notices. In the event any prepayment of principal shall be made on account of the Mortgage Loan,whether optional or mandatory, and regardless of the underlying cause for the prepayment, the Borrower shall provide written notice of the prepayment to the Trustee, Fannie Mae and the Servicer in writing, not less than sixty (60) days, or the longest period of time, if any, less than sixty(60)days that is possible in the case of involuntary prepayments, prior to the date on which the Borrower will make the prepayment. Each such notice shall state: (i) the amount to be prepaid; (ii) the date on which the prepayment will be made by the Borrower to the Servicer;and (iii) the cause for the prepayment,if any. The Servicer(or other entity then servicing the Mortgage Loan), upon receipt of the Borrower's notice of prepayment, shall provide an additional notice of the voluntary prepayment(a)to Fannie Mae and (b)to the Trustee; such notice shall contain the information provided for in this Section 4.10(3) to the extent such information has been provided by the Borrower to the Servicer. Section 4.10(4) Limit of Fannie Mae Pass-Through Certificate Distribution With Respect to Prepayments Made After the Fannie Mae Pass-Through Certificate Del very Date,- End ate,End Period P'avmen#. Upon any prepayment of the Mortgage Loan after the Fannie Mae Pass-Through Certificate Delivery Date, the amount distributable under the Fannie Mae Pass-Through Certificate as a result of the prepayment shall include interest on the prepaid amount only through and including the last day of the calendar month preceding the date of distribution under the Fannie Mae Pass-Through Certificate. Accordingly, the Borrower is required, and agrees, that in order to effect any optional prepayment of the Mortgage Loan after the Fannie Mae Pass-Through Certificate Delivery Date, the Borrower shall,to the extent the Trustee does not have on.hand sufficient Available Moneys, (a)make an End Period Payment by paying or otherwise providing Available Moneys in an amount, calculated by the Trustee, equal to the difference between (1)the principal of, premium, if any, and interest on the Bonds due on the Redemption Date as a result of the prepayment, and (2)the sum of(A) distributions under the Fannie Mae Pass-Through Certificate to be deposited into the Revenue Fund prior to the Redemption Date, (B)Investment Income on the Funds and Accounts held under the Indenture to be received prior to the Redemption Date which constitute Available Moneys and which are available to be applied to the payment of the redemption price, and (C) any other Available Moneys held under the Indenture and available to be applied on the Redemption Date to the payment of the redemption price and(b) deliver to the Servicer a certificate from the Trustee stating that the Trustee has received, in Available Moneys, an amount equal to the End Period Payment. Under no circumstances shall any voluntary or involuntary prepayment create any obligation on the part of Fannie Mae to make any distributions under the Fannie DOGss1=1:269333.2 40511-107-ADI 21 . . ......................................................................................................................................................................................... . ......... ......... ......... ......... ......... ......... .......... ........_. ......._. ......... ...........__...... Mae Pass-Through Certificate, except as required by the terms and provisions of the Fannie Mae Pass- Through Certificate. Section 4.14(5)Limitation on Collateral Agreement Obligations, No prepayment of the Mortgage Loan prior to the Fannie Mae Pass Through Certificate Delivery Date shall create any obligation on the part of Fannie Mae to make any payments under the Collateral Agreement. Section 4.11. Assignment of Mortgage Loan: Application of Mortgage Loan moments; Assignment to Trustee. Section 4.11(1)Assignment of Mortgage Loan by Servicer to Fannie Mae. Subject to the satisfaction of the Fannie Mae Pass-Through Certificate Delivery Requirements, Fannie Mae has agreed to acquire all of the interests in the Mortgage Loan from the Servicer. The Borrower covenants and agrees that it shall exercise due diligence and use its best efforts to cause all of the Fannie Mae Pass-Through Certificate Delivery Requirements to be satisfied,as expeditiously as possible,prior to the Termination Date, to the end that the Issue Date of the Fannie Mae Pass-Through Certificate will coincide with the Conversion Date,provided that the Fannie Mae Pass-Through Certificate Delivery Date may occur on a date such that the Issue Date and the Conversion Date will not coincide. The Servicer (subject to the satisfaction by the Borrower and other third parties of its and their respective covenants and agreements set forth in the preceding sentence) covenants and agrees that it will exercise due diligence and use its best efforts to cause all of the terms and conditions applicable to the Servicer set forth in the Fannie Mae Commitment and the Indenture for assignment of the Mortgage Load to Fannie Mae to be satisfied and to cause the Mortgage Loan to be assigned to Fannie Mae, as expeditiously as possible, prior to the Termination Date, to the end that the Issue Date of the Fannie Mae Pass-Through Certificate will coincide with the Conversion Date, provided that the Fannie Mae Pass-Through Certificate Delivery Date may occur on a date such that the Issue Date and the Conversion Date will not coincide. Section 4.11(2)Assignment to Trustee. Pursuant to the Indenture, the Issuer shall pledge, assign and transfer to the Trustee all of its right, title and interest in and to this Financing Agreement (other than its Reserved Rights), the Regulatory Agreement (other than its Reserved Rights) and the revenues, receipts and collections under this Financing Agreement, as security for the payment of the principal of,premium,if any, and interest on the Bonds and as security for Fannie Mae with respect to the obligations of the Borrower under the Mortgage Loan Documents. The Issuer, the Borrower, the Trustee and the Servicer acknowledge that the covenants and agreements contained in this Financing Agreement and in the Regulatory Agreement are for the benefit of the Bondholders and Fannie Mae and may be enforced on behalf of the Bondholders and Fannie Mae by the Trustee. The Issuer shall execute and deliver from time to time, in addition to the instruments of aassigranent specifically provided for in this Financing Agreement, such other and further instruments and documents as may be requested by the Trustee from time to time to further evidence, effect or perfect such pledge and assignment for the purposes stated in the Indenture. Section 5. Fannie MaeCommitment; Fannie Mae Pass-Throu h Certificate:-Distributions Under Fannie Mae Pass-ThroVXh Cerrti#icate, Section 5.1. Fannie Mae Commitment, The Servicer acknowledges its receipt and acceptance of the Fannie Mae Commitment. Receipt of a copy of the executed Fannie Mae Commitment is acknowledged by the Issuer and the Trustee. Section 5.2. Servicer Assignment. The Servicer agrees to 'accept the Trustee Assignment and to assign to Fannie Mae, without recourse, pursuant to the Servicer Assignment, DOCSS>~1:269333.2 40511-107-ADI 22 . .................................................................................................................................................................................................................................................... . ...... ........ ..._......... _..._.... ......... ..._..... ......... ......... ......... ......... ......... ......... ......... ......... immediately following assignment from the Trustee pursuant to the Trustee Assignment, without recourse, all such right,title and interest in and to the Mortgage Loan, including the Mortgage Note and the Mortgage,as shall be assigned by the Trustee to the Servicer pursuant to the Trustee Assignment. Section 5.3. Fannie Mae Pass-Throuth Certificate. On the Fannie Mae Pass- Through Certificate Delivery Date,the Fannie Mae Pass-Through Certificate shall, at the direction of the Servicer,be delivered to,and in the name of,the Trustee,provided that the Trustee is an entity eligible to maintain a "book-entry"account with a Federal Reserve Bank. If the Trustee is not an entity eligible to maintain a"book-entry"account with a Federal Reserve Bank,the Trustee shall designate an entity which does maintain a "book-entry" account with a Federal Reserve Bank and which has agreed to act as custodian of the Fannie Mae Pass-Through Certificate for the Trustee, as beneficial owner of the Fannie Mae Pass-Through Certificate, as the entity to whom the Fannie Mae Pass-Through Certificate is to be issued. The Servicer's obligations set forth in this Section 5 shall be subject to the prior satisfaction by the Borrower of all of the terms and conditions set forth in the Borrower's loan commitment with the Servicer. Section 5.4. Distributions Unifier the Fannie Mae Pass-Through Certificate. Following the Fannie Mae Pass-Through Certificate Delivery Date, Fannie Mae will iremit to the Trustee for deposit into the appropriate Accounts, as provided in the Indenture, amounts representing, respectively, interest(less the portion of each payment of interest attributable to the Servicer's Servicing Fee and the Guaranty Fee,but including the portion of each payment of interest attributable to the Issuer's Annual Fee, the Trustee's Annual Fee and the Rebate Analyst's Annual Fee, if any) and principal on the Mortgage Loan at the times and in the manner provided in the Fannie Mae Pass-Through Certificate without regard to whether timely payment of amounts payable as principal and interest on the Mortgage Loan shall have been made. Section 6. Servicing of the Mortaave Loan. Section 6.1. Rights of Fannie Mae. The Trustee, the Issuer and the Borrower acknowledge that on and after the Conversion Date, the Mortgage Loan shall be serviced by Fannie Mae or, in the sole discretion of Fannie Mae, the Servicer, pursuant to contractual arrangements between Fannie Mae and the Servicer, or any other servicer selected by Fannie Mae pursuant to contractual arrangements between Fannie Mae and such servicer. The issuer, the Trustee and the Borrower acknowledge and agree that (a) the selection of any servicer is in the sole and absolute discretion of Fannie Mae, (b)neither the Issuer nor the Trustee shall terminate or attempt to terminate the Servicer or any successor servicer as the servicer for the Mortgage Loan or appoint or attempt to appoint a substitute servicer for the Mortgage Loan, (c) the servicing arrangements, including any Servicing Agreement between Fannie Mae and the Servicer,are subject to amendment or termination without the consent of the Trustee,the Issuer or the Borrower and(d)none of the Trustee,the Issuer or the Borrower shall have any rights under, or be a third party beneficiary of, any such servicing arrangement, including any Servicing Agreement. Section 6.2. 5ervicin� Fee. The Trustee and the Issuer acknowledge and agree that any Servicer designated by Fannie Mae shall be paid a fee for its services. Neither the Issuer,the Trustee nor Fannie Mae shall have any obligation to pay such fees from their own funds, provided that, the Trustee acknowledges the right of the Servicer, after the Conversion Date, to deduct the Servicing Fee from monthly payments of interest made by the Borrower on the Mortgage Note. Section 6.3. Notices. Prior to the Fannie Mae Pass-Through Certificate Delivery Date, the Servicer shall provide written notice to the Trustee and the .Borrower specifying the manner in which any prepayment of the Mortgage Loan is to be applied. Such notice shall specify the allocation of DOCSSFi:269333.2 40511-107-Aril 23 ........................I................................................................................................................................................ the prepayment among principal, interest and premium, if any, and shall be given to the Trustee at the same time the Servicer remits the prepayment to Fannie Mae. Section 6.4. Notice of Default or Noncompliance. The Trustee shall immediately provide written notice to each other party to this Financing Agreement and Fannie Mae of any actual or perceived default or noncompliance by the Borrower known to the Trustee with any provision of this Financing Agreement, the Regulatory Agreement the Mortgage Loan Documents or the Disclosure Agreement. Section 6.5. Removal. Fannie Mae reserves the right to remove the Servicer and to terminate its right to service the Mortgage Loan and its right to be paid the servicing fee upon any default by the Servicer under the Servicing Agreement for any reason specified in the Servicing Agreement, or for any failure by the Servicer to comply with the applicable provisions of the contractual arrangements between Fannie Mae and the Servicer. The Borrower, the Issuer and the Trustee acknowledge the authority of Fannie Mae under this Section 6.5. Section 7. Covenants. Section 7.1. Covenants of the Issuer. Section 7.1(1) Pledge and Assignment, The Issuer has not pledged and will not pledge or assign its interest in this Financing Agreement or the revenues and receipts derived pursuant to this Financing Agreement (except for the Issuer's Reserved Rights) other than to the Trustee and Fannie Mae,as their interests may appear. Section 7.1(2) Tax-Exemption. The Issuer will not knowingly take or permit any action that would adversely affect the exclusion from gross income for federal income tax purposes of the interest payable on the Bonds, and if it should take or permit any such action, it will take all lawful actions that it can to rescind such actions promptly upon having knowledge of them. Section 7.1(3) with Feac lComplitit - Federal Tax Laws. The Issuer will take such t .-I-e action or actions from time to time, including amendment of this Financing Agreement, as may be necessary, as stated in an Opinion of Bond Counsel acceptable to the, Issuer, to comply fully with all applicable rules, rulings, policies, procedures, regulations or other official statements promulgated or proposed by the Department of the Treasury or the Internal Revenue Service from time to time pertaining to (a) obligations on which the interest is tax-exempt under Section 103 of the Code and (b) the provisions,therefore,of Section 142(4) of the Code. The Issuer will not take, or permit to betaken on its behalf,any action that would cause the interest payable on the Bonds to cease to be excludable for federal income purposes under Section 103 of the Code from the gross incomes of the owners of the Bonds, and it will take, at the sole cost and expense of the Borrower, such action as may be necessary in the Opinion of Bond Counsel to continue such exclusion from gross income. Section 7.1(4) Notification of Violation of Regrulatoa Agreement. Upon the discovery by the Issuer or the Trustee of any noncompliance by the Borrower with the Regulatory Agreement, the Issuer (if discovered by the Issuer) will notify the Trustee, and thei Trustee will, in any event, notify the Servicer and Fannie Mae of such noncompliance and, subject to the provisions of Section 11 of this Financing Agreement, (if discovered by the Issuer)the Issuer will direct the Trustee to, or the Trustee itself will, promptly institute action, or cause the Borrower to institute action, to correct such noncompliance, and will diligently pursue such action and will attempt to correct such noncompliance within sixty (60) days after such discovery, all strictly in accordance with the terms and conditions of this Financing Agreement and the Regulatory Agreement, as the case may be, provided that DMSSFI:269333.2 40511-107-ADI 24 . ........................................................................................................................................I.......................... .................I............................................................................................................................................................................ no such action shall be taken which would adversely affect the interests of the Bondholders or Fannie Mae. Section 7.2. Covenants of the Borrower. Section 7.2(1) Mainten"we of Proie!d ky Borrower.• 1p uranc . So long as any of the Bonds are Outstanding, the Borrower shall own and operate the Project as required by this Financing Agreement and the Regulatory Agreement and shall, as required by the Mortgage Loan Documents,keep and maintain the Project, including all appurtenances to it and any personal property in or on the Project(other than property of tenants), in good repair and good operating condition, and shall insure the Project as required by the Mortgage Loan Documents. The Borrower will operate the Project in accordance with all federal, state and local laws, ordinances, orders, rules and regulations, including, without limitation, those relating to zoning, building, safety and environmental quality. The Borrower will operate the Project for Project Purposes. Section 7.2(2) Taxes; Other Governmental Char-yes and Utility.-Charges. The Borrower will pay, or cause to be paid, promptly as the same become due and payable, every lawful cost, expense and obligation of every kind and nature, foreseen or unforeseen, for the payment of which the Issuer,the Trustee or Fannie Mae,or any other party, is or shall become liable by reason of its or their estate or interest in the Project or any portion of it, by reason of any right or interest of the Issuer, the Trustee or Fannie Mae in or under this Financing Agreement,or by reason of or in any manner connected with or arising out of the possession, operation, maintenance, alteration, repair, rebuilding, use or occupancy of the Project or any portion of it, including, without limitation, all taxes, assessments, whether general or special, and governmental charges of any kind whatsoever that may at any time be lawfully assessed or levied against or with respect to the Project or any machinery, equipment or other property installed or brought by the Borrower in or on the Project; provided that any amounts payable under this Financing Agreement that are also required to be paid by the terms of the Mortgage shall be paid on the terms provided in the Mortgage. Upon request, the Borrower shall furnish to the Issuer, the Trustee, Fannie Mae and the Servicer proof of the payment of any such tax, assessment or other governmental or similar charge,or any other charge which is payable by the Borrower as set forth above. Section 7.2(3) Remodeling and Imnroytments. Subject to the terms of the Mortgage Loan Documents, the Borrower may remodel the Project or make modifications or improvements on or to the Project from time to time as it in its discretion, may deem to be desirable for its uses and purposes, provided that such remodeling, modifications or improvements (a) do not materially alter the scope or character or diminish the value of the Project, (b)are permitted under the Act and the Code and (c) have been approved by the Servicer and Fannie Mae; provided further, however, that the Borrower may make any de minimis modifications and improvements which may be permitted by the Mortgage. The cost of such remodeling, modifications or improvements shall be paid by the Borrower. Section 7.2(4) Compliance With Laws. The Borrower will, throughout the term of this Financing Agreement and at no expense to the Issuer or the Trustee, promptly comply or cause compliance with all laws, ordinances, rules, regulations and requirements of duly constituted public authorities which may be applicable to the Project or to the construction, repair and alteration of the Project, or to the use or manner of use of the Project, including, but not limited to, the Act, the ADA, Environmental Laws and all federal, State and local labor, health and safety laws, rules and regulations. Subject to the provisions of the Mortgage Loan Documents, the Borrower may, at its expense and in its own name, and provided the Borrower is not in default under any Mortgage Loan Document or any Bond Document, in good faith contest compliance with any such legal requirement and, in the event of any such contest, upon notice to the Issuer, the Trustee, the Servicer and Fannie Mae, may permit the legal DOCSSFI:20333.2 40511-107-ADI 25 .....................-....................I.........................................I.............. ............... ............................................................................................- ...............I.........................I................................................................................................................................... . ........................... requirement so contested to remain in noncompliance during the pendency of such contest and any appeal from it, unless the Issuer, the Trustee, the Servicer or Fannie Mae shall notify the Borrower that, in the opinion of counsel to the Issuer, the Trustee, or Fannie Mae, by noncompliance with any such legal requirement the Project or any part of it may be subject to being closed, lost or forfeited, in which event such legal requirement shall be complied with. Nothing contained in this Section 7.2(4) is intended to modify or limit any provisions of the Regulatory Agreement or the Mortgage Loan Documents. Section 7.2(5) Maintenance of Legal Existence. During the term of this Financing Agreement,the Borrower will maintain its existence in good standing in order to maintain the accuracy of the representation set forth in paragraph (i) of Section 2.2(1) of this Financing Agreement, and will not terminate,dissolve, or dispose of all or substantially all of its assets,provided, however,that the Borrower may, with the written permission of Fannie Mae, consolidate with or merge into another entity or permit one or more other entities to consolidate with or merge into it, or transfer all or substantially all of its assets to another entity, but only on the condition that the assignee entity or the entity resulting from or surviving such merger or consolidation(if other than the Borrower), or the entity to which such transfer shall be made, shall be duly organized and existing and in good standing under the laws of a state of the United States of America and shall be qualified to do business and in good standing under the laws of the State, shall remain so continuously during the term of this Financing Agreement, and shall expressly assume in writing and agree to perform all of the Borrower's obligations under this Financing Agreement and under all other documents executed by the Borrower in connection with the issuance of the Bonds; provided, further, that(a) the Borrower delivers an Opinion of Bond Counsel to the effect that such consolidation or merger will not cause the interest payable on the Bonds to be included in gross income for federal or State income tax purposes and(b)any transfer of the Project shall be effected in accordance with the Regulatory Agreement and the Mortgage Loan Documents. Nothing in this Section 7.2(5) shall be deemed to relieve the Borrower of its obligations to comply with the provisions of the Mortgage Loan Documents. Section 7.2(6) Access to Project and .Records, Reports. Section 7.2(6)(1) Access to Proyect. Subject to reasonable notice, the Issuer, Fannie Mae, the Trustee and the Servicer, and the respective duly authorized agents of each, shall have the right at all reasonable times during normal business hours, upon reasonable notice,to enter the Project and any other location containing the records relating to the Borrower, the Project the Mortgage Loan, the Indenture, this Financing Agreement, the Construction Phase Credit Documents, the Regulatory Agreement or the Disclosure Agreement and to inspect and audit and make copies of any and all of the Borrower's records or accounts pertaining to the Borrower,the Project,the Mortgage Loan,the Indenture, this Financing Agreement, the Construction Phase Credit Documents, the Regulatory Agreement and the Disclosure Agreement and the Borrower's compliance with the terms and conditions of the Mortgage Loan, the -Indenture, this Financing Agreement, the Construction Phase Credit Documents, the Regulatory Agreement and the Disclosure Agreement and shall have the right to require the Borrower, at the Borrower's sole expense,to famish such documents to the Issuer,the Trustee, Fannie Mae and the Servicer, as the Issuer, the Trustee, Fannie Mae or the Servicer, as the case may be, from time to time, deems reasonably necessary in order to determine that the provisions of the Mortgage Loan, the Indenture, this Financing Agreement, the Construction Phase Credit Documents, the Regulatory Agreement and the Disclosure Agreement have been complied with and to make copies of any records that Fannie Mae, the Trustee, the Issuer or the Servicer, or their respective duly authorized agents, may reasonably require. The Borrower shall make available to the Issuer, the Trustee, Fannie Mae and the Servicer such information concerning the Borrower, the Project, the Mortgage Loan, the Indenture, this Financing Agreement, the Construction Phase Credit Documents, the Regulatory Agreement and the Disclosure Agreement as any of them may reasonably request. DOCSSF1,269333.2 40511-107-ADI 26 ...................... ........... ........I.,.............. ................................................................................................................ I I ........ ........... ...............I........................................................................................................................................................................ Section 7.2(6)(2) Ggafficates and Reports. The Borrower shall file such certificates and other reports with the Servicer, the Issuer, the Trustee and Fannie Mae as are required by the Regulatory Agreement, including but not limited to the filing with the Trustee and the Issuer of true copies of each IRS Fon-n 8703 -"Annual Certification of a Residential Rental Project" (or any successor form thereto) as completed and filed with the Internal Revenue Service for each calendar year during the Qualified Project Period. Section 7.2(6)(3) Reporting. The Borrower agrees to provide to the Issuer all information necessary to enable the Issuer to complete and Me all forms and reports required by the laws of the State and the Code in connection with the Project and the Bonds, The Borrower shall deliver to the Servicer and, if requested in writing by the Issuer or the Trustee, to the Issuer and the Trustee,copies of all reports and notices required by the Mortgage Loan Documents. Section 7.2(7) Disposition of Proiec . The Borrower will not sell, transfer or otherwise dispose of the Project except as provided in the Regulatory Agreement and the Mortgage, and the Borrower further agrees that any sale, transfer or other disposition of the Project in violation of this Section 7.2(7)shall be null,void and without effect and shall be ineffective to relieve the Borrower of its obligations under this Financing Agreement, provided that this Section 7.2(7) shall not be construed to prohibit the granting by the Borrower of the Mortgage or the deed of trust that secures the obligations of the Borrower under the Construction Phase Reimbursement Agreement or any other subordinate mortgage or mortgages approved by Fannie Mae (each, a "Subordinate Mortgage"), provided that each Subordinate Mortgage shall be subject to a subordination agreement (the "Subordination Agreement') in form and substance acceptable to Fannie Mae or the foreclosure of the Mortgage, acceptance of a deed in lieu of foreclosure or comparable conversion of the Mortgage Loan or any Subordinate Mortgage by the holder of the Mortgage Note or the beneficiary of the Subordinate Mortgage subject; in all cases, to the terms and conditions of the applicable Subordination Agreement. Section 7.2(8) Tax Covenants. The Borrower covenants that: (i) it will comply with the requirements and conditions of the Tax Certificate and will, at all times during the Qualified Project Period, use its best efforts and all due diligence to assure compliance of the Project with the provisions of the Regulatory Agreement; (h) it will not take, or permit to be taken on its behalf, any action which would cause the interest payable on the Bonds to be included in gross income for federal income tax purposes and that it will take such action as may be necessary in the Opinion of Bond Counsel to continue such exclusion from gross income,including,without limitation the following: (A)it will comply with all of the requirements of this Financing Agreement and the Regulatory Agreement; (B) it will prepare and file all statements required to be filed by it in order to maintain such exclusion, including but not limited to the filing of all reports and certifications required by the Regulatory Agreement; (C)it will timely pay to the United States of America any rebate amount required to be paid by the Issuer or the Borrower pursuant to Section 148(f)of the Code and the Treasury Regulations under Section 148, all as contemplated and required by the Indenture and this Financing Agreement; and DOCSSFI:269333.2 40511-107-ADI 27 ........................................................................................................................................................................... ...........- (D)it will cause not less than 95%of the net proceeds of the Bonds (within the meaning of Section 142(x)of the Code)to be expended for Qualified Project Costs; (iii) in order to satisfy the requirements set forth in subpart (4) of the definition of "program investment" that appears in Section 1.148-1(b) of the Treasury Regulations (which requirements must be met in order for the Mortgage Loan to qualify as a program investment within the meaning of the aforementioned Treasury Regulation), neither the Borrower nor any related person (within the meaning of the aforementioned definition of "program investment") will purchase Bonds in an amount related to the amount of the Mortgage Loan; (iv) no changes will be made in the Project,no actions will be taken by the Borrower and the Borrower will not omit to take any actions, which will in any way adversely affect the tax- exempt status of the Bonds; (v) the Borrower will not make any use of the proceeds of the Bonds, or of any other funds which may be deemed to be proceeds of the Bonds pursuant to Section 148 of the Code and the Treasury Regulations issued under Section 148, which will cause the Bonds to be "arbitrage bonds"within the meaning of such Section and such Treasury Regulations, and will comply with the requirements of Section 148 and such Treasury Regulations throughout the term of the Bonds; (vi) if the Borrower becomes aware of any situation, event or condition which would result in the interest payable on the Bonds becoming includable in gross income for federal income tax purposes, the Borrower will promptly give written notice of such situation, event or condition to the Issuer,the Trustee,the Servicer and Fannie Mae; and (vii) it will comply with the requirements and conditions of the Tax Certificate and will, at all times during the Qualified project Period, use its best efforts and all due diligence to assure compliance of the Project with the provisions of the Regulatory Agreement. (viii) the full amount of each disbursement from the Mortgage Loan Fund will be applied to pay or to reimburse the Borrower for the payment of Costs of the Project and that, atter taping into account the proposed disbursement, (a) at least 95% of the net proceeds of the Bonds (as defined in Section 150 of the Code) will be used to provide a qualified residential rental project (as defined in Section 142(d)of the Code)and(b)less than 25%of the net proceeds of the Bonds will have been disbursed to pay or to reimburse the Borrower for the cost of acquiring land; none of the proceeds of the Bonds (as defined for purposes of Section 147(g) of the Code) will be disbursed to provide working capital; (ix) the Borrower will cause all of the residential units in the Project to be rented or available for rental on a basis which satisfies the requirements of the Regulatory Agreement, including all applicable requirements of the Cade; all leases will comply with all applicable laws and the Regulatory Agreement;and (x) in connection with any lease or grant by the Borrower of the use of the Project, the Borrower will require that the lessee or user of any portion of the Project shall not use that portion of the Project in any manner which would violate the covenants set forth in this Financing Agreement; any lease or grant of use will be subject to compliance with this Financing Agreement. Section 7.2(9) Payment of Rebate Amounts. The Borrower covenants and agrees that it will hire a Rebate Analyst, acceptable to the Issuer, to calculate the rebate amount as DOCs5Fi:269333.2 40511-1411-AUi 28 required under the Indenture and will provide a copy of each rebate report to the Issuer and the Trustee. The Borrower further covenants and agrees that it will promptly pay, or cause to be paid,when due to the United States of America all rebate amounts that may be or become owing with respect to the Bonds, which payment may be made out of any available moneys on deposit in the various Funds and Accounts established under the Indenture or,in the absence of such available moneys,shall be paid by the Borrower (or a managing member of the Borrower) out of its own funds. For purposes of this Section, "available moneys", when used with respect to any Fund or Account established under the Indenture, shall mean moneys on deposit in such Fund or Account in excess of the amounts required to be on deposit in any such Fund or Account from time to time for the payment of interest, principal or premium, if any, due with respect to the Bonds and Fees. In the event that the Trustee receives written notice from the Borrower, the Servicer, the Issuer or Fannie Mae, that the Borrower has failed to employ a Rebate Analyst,the Trustee in consultation with,and with the approval of,Fannie Mae and the Issuer, will use its best efforts to hire a Rebate Analyst to calculate the rebate amount as required under the Indenture, provided that such a Rebate Analyst can be employed for amounts which do not exceed on an annual basis, the moneys that are and will be then available under the Indenture to pay the Rebate Analyst's Annual Fee, or from other moneys furnished to the Trustee; in no event shall the Trustee be required to risk or expend its own moneys to employ a Rebate Analyst. Section 7.2(10) Oualificadop Under the Act. So long as the Bonds remain Outstanding, the Borrower will operate the Project in accordance with the Act and agrees to take all actions necessary to qualify and to continue to qualify the Project under the Act. Section 7.2(11)Agreement Regarding Documents. The Indenture and the Collateral Agreement have been submitted to the Borrower for its examination, and the Borrower acknowledges, by execution of this Financing Agreement, that it has participated in the drafting of the Indenture and the Collateral Agreement, that it has reviewed, approved and agreed to each of the provisions of the Indenture and the Collateral Agreement and that it is bound by, shall adhere to the provisions of, and shall have the rights set forth by the terms and conditions of, the Indenture and covenants and agrees to perform all obligations required of the Borrower pursuant to the terms of the Indenture and the Collateral Agreement as if, in the case of the Indenture, the Borrower were a party to the Indenture. The Borrower acknowledges that it has no rights under, and is not, and is not intended to be,a third party beneficiary of,the Collateral Agreement. Section 7.2(12) Compliance with other Documents. The Borrower agrees to, assumes, and acknowledges and agrees to abide by, the terms and conditions of, and will make all payments and will observe and perform all covenants, conditions and agreements required to be paid, observed or performed by the Borrower under, the Mortgage Note, the Mortgage, the other Mortgage Loan Documents, this Financing Agreement, the Regulatory Agreement and the other Bond Documents, the Construction Phase Credit Documents applicable to the Borrower, the Credit Facility Agreement and all other documents, instruments or agreements which are at any time, or from time to time,to be entered into by the Borrower with respect to the Project or the ownership, operation, occupancy,use or financing of the Project. The Borrower acknowledges that the Borrower's failure to comply;with the terms and conditions of the Credit Facility Agreement shall constitute an Event of Default under the Mortgage Loan, and, at the option of Fannie Mae (as set forth in Section 11.1(2) of this Financing Agreement), an Event of Default under this Financing Agreement, entitling the Trustee,but only at the direction of Fannie Mae, to exercise all available remedies set forth in this Financing Agreement. Section 7.2(13)Disclosure Agreemen#. The Borrower acknowledges and agrees that the Issuer is not an "obligated person"(as defined in the Disclosure Agreement) with respect to the Bonds and represents that the Borrower is the only obligated person with respect to the Bonds. The Issuer acknowledges the entry by the Borrower and the Trustee into the Disclosure Agreement under DOCSSF1:269333.2 40511-107-ADI 29 _ _ __ .. . .................................................................................................................................................................................................................................... ...._......._.. ......... ......... ......... ......... ......... ......... ......... ......... ......... .......... ........ ......... which the Trustee has assumed certain obligations, in addition to those assumed under the Indenture, for the benefit of the Bondholders. The Borrower agrees to perform its obligations under the Disclosure Agreement, including without limitation, the payment of compensation to the Trustee and payment or reimbursement of expenses, disbursements and advances incurred or made by the Trustee, all in accordance with the provisions of the Disclosure Agreement. Notwithstanding any other provision of this Agreement,any failure by the Borrower to comply with any provision of the Disclosure Agreement shall not be a failure or a default,or an Event of Default,under this Financing Agreement or the Indenture. Section 7.2(10 Security Interest. The Borrower, in order to secure its obligations under this Financing Agreement and under the Reimbursement Agreement and the Mortgage Loan Documents, grants to the Issuer for the benefit of Fade Mae and the Trustee for the benefit of the Bondholders a security interest in all of its rights in and to all Funds and Accounts created or established under the Indenture. Section 7.2(15) Notice of Certain Events. The Borrower;agrees to advise the Servicer,the Issuer, the Trustee and Fannie Mae promptly in writing of the occurrence of any default by the Borrower in the performance or observance of any covenant, agreement, representation, warranty or obligation of the Borrower set forth in this Financing Agreement, in any of the other Bond Documents, the Construction Phase Credit Documents, the Disclosure Agreement, in any of the Mortgage Loan Documents or any other documents contemplated by this Financing Agreement or by such other documents, or of any Event of Default under this Financing Agreement known to it or of which it has received notice, or any event which, with the passage of time or service of notice, or both, would constitute an Event of Default under this Financing Agreement, specifying the nature and period of existence of such event and the actions being taken or proposed to be taken with respect to such event. The Borrower's notice shall be given promptly, and in no event more than ten (14) Business Days after the Borrower receives notice or has knowledge of the occurrence of any such event. The Borrower further agrees that it will give prompt written notice to the Trustee and the Servicer if insurance proceeds or condemnation awards are received with respect to the Project and are not used to repair or replace the Project,which notice shall state the amount of such proceeds or award. Section 7.2(16)Warranty of Truth. The Borrower agrees that no information, certificate, statement in writing or report required to be delivered by the Borrower to the Issuer or the Trustee or both will contain any untrue statement of a material fact or omit a material fact necessary to make such information,certificate, statement or report not misleading. Section 7.2(17) Qperating Statement The Borrower agrees to prepare and submit to the Issuer,the Trustee and the Servicer, annually within ninety (90) days after the close of the Borrower's fiscal year, a Project operating statement and balance sheet which have been audited by an independent certified public accountant or firm of independent certified public accountants, acceptable to the Servicer and Fannie Mae in their discretion. The Borrower further agrees to prepare and submit to the Issuer,the Trustee and the Servicer quarterly, within thirty(34) days after the close of each fiscal quarter (a)a statement showing,separately,the percentage of occupied and unoccupied units in the Project, (b)an unaudited Project operating statement certified by the Borrower as being true, correct and complete and (c)a current rent roll for the most recent date available which has been certified by the Borrower as being true, correct and complete in all material respects. In addition, the Borrower will comply with the reporting requirements set forth in the Regulatory Agreement and as required by the Mortgage Loan Documents. Nothing contained in this Section 7.2(18)is intended to modify or limit any provisions of the Mortgage Loan Documents. DOCSSF1:269333.2 40511-107-ADI 30 Section 7.2(18)Indemnification. Section 7.2(19)(1) Borrower's Obligation . The Borrower releases the Issuer, the Trustee, Fannie Mae and the Servicer, and their respective officers, directors, agents, officials, employees, and any person who controls the Issuer, the Trustee, Fannie Mae or the Servicer within the meaning of the Securities Act of 1933, from, and covenants and agrees to indemnify, hold harmless and defend the Issuer, the Trustee, Fannie Mae and the Servicer and their respective officers, directors, employees, agents, program participants, members, officials and any person who controls such party within the meaning of the Securities Act of 1933 and employees and each of them (each an"Indemnified Party")from and against, any and all losses, claims, damages; demands, liabilities and expenses(including attorney's fees and expenses),taxes,causes of action, suits, claims, demands and judgments of any nature,joint or several,by or on behalf of any person arising out of. (i) the transactions provided for in the Bond Documents or the Mortgage Loan Documents or otherwise in connection with the Project, the Bonds, the Mortgage Loan or the execution and delivery or amendment of any other document entered into in connection with the transactions provided for in the Bond Documents or the Mortgage Loan Documents; (ii) the approval of the financing for the Project or the making of the Mortgage Loan; (iii) the issuance and sale of the Bonds or any certifications or representations made by any person other than the party seeking indemnification; (iv) any and all claims arising in connection with the interpretation, performance, enforcement, breach, default or amendment of the Bond Documents, the Mortgage Loan Documents or any other documents relating to the Project or the Bonds or in:connection with any federal or state tax audit, or any questions or other matters arising under such'documents; (v) the carrying out by the Borrower of any of the transactions provided for in the Bond Documents or the Mortgage Loan Documents; j (vi) the Trustee's acceptance or administration of the trusts created by the Indenture or the exercise of its powers or duties under the Indenture or under this Financing Agreement, the Regulatory Agreement or any other agreements to which it is a party or otherwise in connection with the transactions provided for in the Bond Documents or the Mortgage Loan Documents; (vii) any and all claims arising in connection with the issuance and sale of any Bonds or any certifications or representations made by any person other than the Indemnified Party seeking indemnification, including, without limitation, any statement or information made by the Borrower with respect to the Borrower or the Project in any offering document or materials regarding the Bonds,the Project or the Borrower or the Tax Certificate of the Borrower executed by the Borrower or any other certificate executed by the Borrower which, at the time made, is misleading,untrue or incorrect in any material respect and any untrue statement or alleged untrue statement of a material fact relating to the Borrower or the Project contained in any offering material relating to the sale of the Bonds, as from time to time amended or supplemented, or arising out of or based upon the omission or alleged omission to state in such offering material a material fact relating to the Borrower or the Project required to be stated in such offering material or necessary in order to make the statements in such offering material not misleading, or failure to properly register or otherwise qualify the sale of the Bonds or failure to comply with any licensing or other law or regulation which would affect the mariner in which or to whom the DOCSSF1:269333.2 44511-107-ADI 31 ...-............................................................................................................................................................................................................. . . . .... .............................................................................................................. Bonds could be sold and the carrying out by the Borrower of any of the transactions contemplated by the Bond Documents or the Mortgage Loan Documents; (viii) the Borrower's failure to comply with any requirement of this Financing Agreement including Section 7.2(g)of this Financing Agreement,or the Regulatory Agreement;and (ix) any act or ornission of the Borrower or any of its agents, servants, employees or licensees in connection with the Mortgage Loan or the Project, including violation of any law, ordinance, court order or regulation affecting the Project or any part of it or the ownership, occupancy or use of it; (x) any damage or injury, actual or claimed, of whatsoever kind, cause or character, to property (including loss of use of property)or persons, occurring or allegedly occurring in, on or about the Project or arising out of any action or inaction of the Borrower, whether or not related to the Project, or resulting from or in any way connected with specified events, including the construction or management of the Project,the issuance of the Bonds or otherwise in connection with transactions contemplated or otherwise in connection with the Project, the Bonds or the execution or amendment of any document relating to the Project or the Bonds; (xi) any violation of any environmental law, rule or regulation with respect to, or the release of any toxic substance from,the Project;and (xi) any and all claims arising in connection with the operation of the Project, or the conditions, environmental or otherwise, occupancy, use, possession, conduct or management of work done in or about, or from the planning,design, acquisition,construction or equipping of,the Project or any part of it, including, but not limited to, the ADA (as evidenced by an architect's certificate to such effect). This indemnification shall extend to and include, without limitation, all reasonable costs, counsel fees, expenses or liabilities incurred in connection with any such claim, or proceeding brought with respect to such claim; except (A)in the case of the foregoing indemnification of the Trustee or any of the other Indemnified Parties(except as provided in the following subparagraph(B))to the extent such damages are caused by the negligence or willful misconduct of such Person; and (B) in the case of the foregoing indemnification of the Issuer or Fannie Mae, or any of their respective Indemnified Parties, to the extent such damages are caused by the willful misconduct of such Person. In the event that any action or proceeding is brought against any Indemnified Party with respect to which indemnity may be sought under this Financing Agreement, the Borrower, upon written notice from the Indemnified Party, shall assume the investigation and defense of the action or proceeding, including the employment of counsel selected by the Borrower, subject to the approval of the Indemnified Party in such party's sole discretion, and shall assume the payment of all expenses related to the action or proceeding, with full power to litigate, compromise or settle the same in its sole discretion, provided that the Issuer, the Servicer, Fannie Mae and the Trustee, as appropriate, shall have the right to review and approve or disapprove any such compromise or settlement. Each Indemnified Party shall have the right to employ separate counsel in any such action or proceeding and participate in the investigation and defense of the action or proceeding, and the Borrower shall pay the reasonable fees and expenses of such separate counsel, provided, however, that unless such separate counsel is employed with the approval of the DOCSSFI:269333.2 40511-107-ADI 32 ..................... . ...................................................-........................I..................-....... ............................................................................................................ ............................................................................................................................................................................................................ Borrower,which approval shall not be unreasonably withheld, conditioned or delayed,the Borrower shall not be required to pay the fees and expenses of such separate counsel. Section 7.2(19)(2) Borrower's Continuing Obligation. Notwithstanding any transfer of the Project to another owner, the Borrower shall remain obligated to indemnify each Indemnified Party pursuant to this Section 7.2(19)for all matters arising prior to the date of such transfer, and, as a condition to the release of the transferor on and after the transfer date, the transferee must assume the obligations of the Borrower under the Bond Documents, the Construction Phase Credit Documents,if applicable,and the Mortgage Loan Documents on and after such transfer date and indemnify each Indemnified Party pursuant to this Section 7.2(19)for all matters arising on and after the date of such transfer. The Indemnified Party's rights under this Section 7.2(19) shall survive the termination of this Financing Agreement, the payment of the Mortgage Loan and the payment or defeasance of the Bonds. Section 7.2(19)(3) Limitation with Respect.to--Credit Facility Provi r. During any period that Fannie Mae owns the Project and that this Section 7.2(19)is applicable to Fannie Mae, Fannie Mae's obligations under this Section 7.2(19)shall be limited to acts and omissions of Fannie Mae occurring during the period of Fannie Mae's ownership of the Project. Section 7.2(19)(4) Indemnification of Fannie Mae and the Servicer. So long as the indemnification provisions of the Reimbursement Agreement shall continue in effect, such provisions shall, as to any indemnification of Fannie Mae or the Servicer, supersede and take precedence over the provisions of Section 7.2(19)(1) and 7.2(19)(2) of this Financing Agreement. Otherwise the provisions of Section 7.2(19)(1)and 7.2(19)(2) of this Financing Agreement shall apply to the indemnification of Fannie Mae and the Servicer. Section 7.2(19) Might To Perform-Boer ower's Obligations. In the event the Borrower fails to perform any of its obligations under this Financing Agreement, the Issuer, Fannie Mae and/or the Trustee, after giving the requisite notice, if any, may, but shall be under no obligation to, perform such obligation and pay all costs related to such performance, and all such costs so advanced by the Issuer, Fannie Mae (itself or through the Servicer) or the Trustee shall become an additional obligation of the Borrower under this Financing Agreement, payable on demand, with interest on such obligation at the maximum rate permitted by law. In the event of an advance made due to the Borrower's default, the interest on the advance shall be at the default rate of interest payable under the Mortgage Note. Nothing contained in this Section 7.2(20) is intended to modify or limit any provisions of the Mortgage Loan Documents which provide for sums advanced by the Servicer or Fannie Mae to be added to the principal balance of the Mortgage Loan and secured by the Mortgage. Section 7.2(20) Obligations of the Borrower Uncondition . The obligation of the Borrower to repay the Mortgage Loan,to pay in all events amounts sufficient to timely pay, pursuant to the Mortgage Note or otherwise, when due, the principal of, premium, if any, and interest on, the Bonds, to reimburse Fannie Mae as provided in the Reimbursement Agreement, to perform all of its obligations under the Reimbursement Agreement and the Mortgage Loan Documents, to make all payments required by this Financing Agreement, to provide indemnification pursuant to Section 7.2(19) of this Financing Agreement, to pay rebate amounts pursuant to Section 7.2(9) of this Financing Agreement and to make any and all other payments required by this Financing Agreement,the Indenture, the Bond Documents, the Mortgage Loan Documents and any other documents contemplated by this Financing Agreement or by such other documents, shall be absolute and unconditional and shall not be subject to diminution by set-off, recoupment, counterclaim, abatement or otherwise. Until the Mortgage Loan and the Bonds have been fully paid or the Mortgage Loan is fully paid and provision is made for payment of the Bonds in accordance with the Indenture or until such later time as is required by the terms DO-CSSFI:269333.2 40511-107-ADI 33 ..................................................................I..............................................................I......................I......I......... ........................................................................................... ......... ......... ..._..... ......... ......... ......... ._..._... _... ......... _....... ......... ......... .................................................................................................................... of this Financing Agreement or any Mortgage Loan Document,the Borrower (a) shall continue to repay the Mortgage Loan, (b) shall perform and observe all of its other obligations contained in this Financing Agreement, the Reimbursement Agreement, the Indenture, the Bond Documents, the Mortgage Loan Documents and all other documents contemplated by this Financing Agreement or by such other documents, and (c) shall not terminate this Financing Agreement for any cause; including, without limiting the generality of the foregoing, any defect in title to the Project, any acts or circumstances that may constitute failure of consideration, destruction of, damage to or condemnation of the Project, commercial frustration of purpose, any change in the tax or other laws of the United States of America or of the State or any political subdivision of either, or any failure of the Issuer to perform and observe any of its obligations arising out of or connected with this Financing Agreement. It is the intent and expectation of the Borrower that the Borrower's payments under this Financing Agreement and the Mortgage Note will be sufficient for the payment in full of the Bands, including (a) the total interest becoming due and payable on the Bonds to the respective dates of payment of the Bonds, (b) the Outstanding principal amount of the Bonds and(c)the redemption price of the Bonds prior to their stated payment dates, including any premium required to be paid in connection with such redemption. In the event of any deficiency in the fonds available under the terms of the Indenture for payment of the principal of, premium, if any, or interest on the Bonds when and as due, regardless of the reason for the deficiency, including any deficiency resulting from any shortfall in payments made or to be made by the Borrower under the Mortgage Loan Documents or any shortfall in Investment Income from haat included in any Cash Flow Projection, whether occasioned by a change in Investment Agreements or otherwise, the Borrower agrees that upon notice of the deficiency from the Trustee or the Issuer it shall then immediately pay the amount of the deficiency to the Trustee on behalf of the Issuer, provided that if Fannie Mae shall have provided funds under the Collateral Agreement to pay principal of or interest on the Bonds, the Borrower agrees to immediately pay the amounts owed Fannie Mae in reimbursement of the funds provided by Fannie Mae as provided in the Reimbursement Agreement. leo payment made by Fannie Mae under the Collateral Agreement with respect to the payment of the principal and interest on the Mortgage Loan, to redeem Pledged Collateral or otherwise, shall relieve the Borrower of any of its obligations under the Bond Documents, the Mortgage Loan Documents, the Construction Phase Credit Documents or any other document contemplated by this Financing Agreement or by such other documents. Section 7.2(21) Subordination.1 Performance. Notwithstanding anything to the contrary contained in this Financing Agreement or in the Regulatory Agreement,all obligations under this Financing Agreement or the Regulatory Agreement for the payment of money, if any, and all claims for damages or reimbursement or indemnification against the Borrower occasioned by breach or alleged breach by the Borrower of its obligations under this Financing Agreement or the Regulatory Agreement shall be subordinate in all respects to the obligations of the Borrower under the Mortgage and all other Mortgage Loan Documents. In the event the Borrower fails to perform any of its obligations under this Financing Agreement, Fannie Mae, the Servicer and/or the Trustee, after giving the requisite notice, if any, may, but shall be under no obligation to, perform such obligation and pay all costs related to such performance, and all such costs so advanced by Fannie Mae,the Servicer or the Trustee shah become an additional obligation of the Borrower under this Financing Agreement, payable on demand with interest at the default rate of interest payable under the Mortgage Note. Nothing contained in this Section 7.2(22) is intended to modify or limit any provisions of the Mortgage Loan Documents which provide for sums advanced by the Servicer or Fannie Mae to be added to the principal balance of the Mortgage Loan and secured by the Mortgage. Section 7.2(22) Trustee and Servicer H{cve No obligation to IVlonitor Comealiag . So long as the Servicer is servicing the Mortgage Loan, the Borrower shallfurnish to the Servicer copies of all reports with respect to the Project required to be filed by the Borrower pursuant to this Financing Agreement and/or the Regulatory Agreement. Notwithstanding anything contained in this UOCSSF1:269333.2 40511-107-ADI 34 Financing Agreement to the contrary, neither the Trustee nor the Servicer shall have any duty or obligation to analyze or review any such reports for determining whether or not the Borrower and/or the Project are in compliance with the requirements of the Code for maintaining the excludability from gross income for federal income tax purposes of the interest payable on the Bonds. Section 7.2(23)Enforcement by the Trustee. In order to assure compliance by the Project with the requirements of this Financing Agreement and the Regulatory Agreement, the Trustee, on behalf of the Issuer agrees that it shall, subject to the provisions of the Indenture and Section I l of this Financing Agreement, take such action at the direction of the Issuer as may be required to achieve compliance by the Borrower with the terms and provisions of this Financing Agreement and the Regulatory Agreement. Section 7.2(24) Further Assurances and Corrective Instryments. The parties to this Financing Agreement agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such amendments and supplements to this Financing Agreement and to the other documents contemplated by this Financing Agreement, the Regulatory Agreement and the Mortgage Loan Documents as may reasonably be required to carry out the intention of,or to facilitate the performance of,this Financing Agreement and the Regulatory Agreement or, in the opinion of Fannie Mae, to carry out the intention of, or to facilitate the performance of, the Mortgage Loan Documents, and to execute and deliver such additional instruments and to perform such additional acts as may be necessary, in the opinion of the Issuer, to carry out the intent of the Indenture, this Financing Agreement,the Regulatory Agreement and the Mortgage Loan Documents>or to perfect or give further assurances of any of the rights granted or provided for in the Indenture,this Financing Agreement, the Regulatory Agreement and the Mortgage Loan Documents. The Borrower,the Issuer and the Trustee each agree that they will not,without the consent of the Servicer and Fannie Mae, enter into any contracts or agreements or perform any acts or request any other party to this Financing Agreement to enter into any contracts or agreements or perform any acts, which may adversely affect the Mortgage Loan Documents. Section 7.2(25)Nonrecourse Liability. Except as otherwise provided in the Mortgage Loan Documents and in Section 8.3, in any action or proceeding brought with respect to enforcement of the Borrower's obligations created or arising under the Mortgage Loan Documents or,the Bond Documents, no deficiency or other money judgment shall be enforced against the Borrower, any managing member of Borrower or any successor or assign of the Borrower or any managing member,and any judgment obtained shall, subject to Section 8.3 of this Financing Agreement,be enforced only against the Project and other property of the Borrower encumbered by the Mortgage Loan Documents and not against the Borrower or any successor or assign of the Borrower. Section 8. Morteaffle Loan Documents. Section 8.1. Assurances. The Borrower, the Issuer and the Trustee each agree that, without the consent of Fannie Mae and the other parties to this Financing Agreement, no party to this Financing Agreement shall enter into any contracts or agreements or perform any acts, or request any other party to this Financing Agreement to enter into any contracts or agreements or perform any acts, which shall amend or affect any Mortgage Loan Document. Section 8.2. Assi nment of Certain Rights. Pursuant to the Assignment and subject to the terms of the Collateral Agreement, the Borrower acknowledges that the Issuer has assigned certain of its rights in the Mortgage Note and the Mortgage (excluding, as provided in and subject to the provisions of the Collateral Agreement, the right to receive payments in respect of principal and certain DOCSSFI:269333.2 40511.107-ADI 35 ........................................................................................................................................................................... ........................I........................................................................ interest on the Mortgage Loan prior to the Fannie Mae Pass-Through Certificate Delivery Date)to Fannie Mae. Section 8.3. N Nature of Borrower's Financial Obligations. The Issuer and the Trustee acknowledge that (a)the Project will be encumbered by the Mortgage Loan Documents and (b) all obligations of the Borrower under this Financing Agreement (in contrast to the Borrower's obligations under the Mortgage Loan Documents) or under the Regulatory Agreement (if any) for the payment of money and all claims for damages against the Borrower occasioned by the breach or alleged breach by the Borrower of its obligations under this Financing Agreement or the Regulatory Agreement, including indemnification obligations, will not in any manner constitute alien on the Project. Notwithstanding anything to the contrary contained in this Financing Agreement, the obligations of the Borrower or any other party (other than Fannie Mae) (a) under Section 4.3 and Section 7.2(19) of this Financing Agreement and (b) to pay any and all rebate amounts that may be or become owing with respect to the Bonds, shall be recourse to the Borrower, but not to the Project or any other property encumbered by the Mortgage Loan Documents. No subsequent owner of the Project shall be liable or obligated for the breach or default of any obligation of any prior owner under this Financing Agreement including, but not limited to,any payment or indemnification obligation,provided that any subsequent owner shall be bound by the terms of this Financing Agreement, including, but not limited to, the obligations to muse the use and occupancy of the Project to satisfy the terms and requirements of this Financing Agreement. Such obligations are personal to the Person who was the owner at the time the default or breach was alleged to have occurred and such Person shall remain liable for any and all damages occasioned by the default or breach even after such Person ceases to be the owner. It is understood and agreed that nothing contained in this Financing Agreement shall be construed in any way to limit or restrict any of the,Reserved Rights of the Issuer or any of the rights and remedies of the Issuer in any proceedings for the enforcement of the Issuer's Reserved Rights, subject to the limitations of this Section 8.3. Section 9. The Project. Section 9.1. Regulatory Agreement. The covenants of the Borrower in the Regulatory Agreement shall be deemed to constitute covenants of the Borrower running with the land and an equitable servitude for the benefit of the owners of the Bonds and shall be binding upon any owner of the Project until (a) such time as such restrictions expire under their own terms, or (b)the Issuer and the Trustee consent to the release of such restrictions, or (c) the Regulatory Agreement is otherwise terminated by its terms. The Borrower covenants to file of record the Regulatory Agreement and such other documents and take such other steps as are necessary in order to assure that the restrictions contained in the Regulatory Agreement will, subject to the terms of the Regulatory Agreement, be binding upon all owners of the Project. The Borrower covenants to include such restrictions in any documents transferring any interest in the Project to another to the end that such transferee has notice of, and is bound by, such restrictions. Subject to the provisions of Section 11 of this Financing Agreement, the Issuer and the Trustee shall have the right to seek specific performance of or injunctive relief to enforce the requirements of any covenants of the Borrower contained in the Regulatory Agreement or this Financing Agreement. Section 9.2. Right To Enforce Compliance. The Issuer, the Trustee, the Servicer and Fannie Mae shall each have the right, but not the obligation, to enforce compliance by the Borrower and its successors as subsequent owners of the Project with the requirements contained in this Financing Agreement. Section 9.3. Damare. Destruction and Condemnation. If prior to full payment of the Bonds (or provision for payment of the Bonds in accordance with the provisions of the Indenture)the Project or any portion of it is destroyed (in whole or in part) or is damaged by fire or other casualty, or DOCSSFI.269333.2 40511-107-ADI 36 ........................................................................................................................... ....I.......................................................................... _... title to, or the temporary use of, the Projector any portion of it shall be taken under the exercise of the power of eminent domain by any governmental body or by any person, firm or corporation acting under governmental authority, or shall be transferred pursuant to an agreement or settlement in lieu of eminent domain proceedings, the Borrower shall nevertheless be obligated to continue to pay the amounts specified in this Financing Agreement and in the Mortgage Note to the extent the Mortgage Loan is not prepaid in accordance with the terms of the Mortgage Loan Documents. The proceeds, if any, of any insurance or condemnation awards resulting from the damage,destruction or condemnation of the Project or any portion of it shall be deposited in an account to be created and held by the Servicer and applied to the payment of all or a portion of the Mortgage Loan or to the repair,restoration, replacement, relocation or improvement of the Project,all as provided in the Mortgage. Section 9.4. Obligation of th orro er To Ac wire and Develop the P'ro's t. The Borrower shall proceed with reasonable dispatch to complete the acquisition, construction and equipping of the Project. If amounts on deposit in the Mortgage Loan Fund designated for the Project and available to be disbursed to the Borrower are not sufficient to pay the costs of such acquisition, construction and equipping, the Borrower shall pay such costs from its own funds. The Borrower shall not be entitled to any reimbursement from the Issuer, the Trustee, Fannie Mae, the Servicer or the Bondholders in respect of any such costs or to any diminution or abatement in the repayment of the Mortgage Loan. Neither the Issuer nor Fannie Mae shall be liable to the Borrower,;the Bondholders or any other person if for any reason the Project is not completed or if the proceeds of the Mortgage Loan are insufficient to pay all Costs of the Project. THE ISSUER DOES NOT MAKE ANY REPRESENTATION OR WARRANTY, EITBER EXPRESS OR IMPLIED, THAT MONEYS, IF ANY, WHICH WILL BE PAID INTO THE MORTGAGE LOAN FUND OR OTHERWISE MADE AVAILABLE TO THE BORROWER WILL BE SUFFICIENT TO COMPLETE THE PROJECT, AND THE ISSUER SHALL NOT BE LIABLE TO THE BORROWER,TIDE BONDHOLDERS OR ANY OTHER PERSON IF FOR ANY REASON THE PROJECT IS NOT COMPLETED. Section 10. Trustee's Interest in Aereement. Section 10.1. Issuer Assi—ynment of This Financing Agreement. Pursuant to the Indenture, the Issuer shall pledge, assign and transfer all of its right, title and interest in and to this Financing Agreement (other than. the Reserved Rights of the Issuer), and the revenues, receipts and collections under this Financing Agreement,to the Trustee, for the benefit of the Bondholders and Fannie Mae, as security for the payment of the principal of, premium, if any, and interest on the Bonds, as security for the reimbursement of amounts owing to Fannie Mae under this Financing Agreement and the Reimbursement Agreement, and as security for the payment of amounts due under the Mortgage Loan Documents. The parties to this Financing Agreement acknowledge that the covenants and agreements contained in this Financing Agreement and in the Indenture are for the benefit of the Bondholders from time to time and Fannie Mae and may be enforced on their behalf by the Trustee. The Issuer shall, at the expense of the Borrower, execute and deliver from time to time, in addition to the instruments of assignment specifically provided for in this Financing Agreement, such other and further instruments and documents as may be reasonably requested by the Trustee from time to time to further evidence, effect or perfect such pledge and assignment for the purposes stated in the Indenture. The Borrower acknowledges and consents to the assignment and pledge of the Trust Estate (subject to the reservation by the Issuer of its Reserved Rights) by the Issuer to the Trustee, for the benefit of the Bondholders and Fannie Mae, as security for the payment of the Bonds and as security for the payment of amounts owing under this Financing Agreement, the Reimbursement Agreement and the Mortgage Loan Documents, including as part of the Trust Estate (a)the moneys deposited to the various Funds and Accounts under the Indenture (excluding the Rebate Fund, the Costs of Issuance Fund and the Fees Account), including Investment D)CSSF1.269333.2 40511-107-ADI 37 Income (other than Investment Income with respect to the Rebate Fund and certain Investment Income with respect to the Costs of Issuance Fund), and (b) all of the Issuer's rights and interests under this Financing Agreement (but excluding the Issuer's Reserved Rights) and the reserves, receipts and collections under this Financing Agreement and the right and interest to enforce, either jointly or separately, the performance of the obligations of the Borrower under this Financing Agreement. The Borrower further acknowledges and consents to the right of the Trustee to enforce all rights of the Issuer and the Bondholders assigned under the Indenture. Section 10.2. Riehts of Trustee Third-Party Beneficiaries. The Issuer, the Borrower, the Trustee and the Servicer recognize and agree that the terms of this Financing Agreement and the enforcement of it are essential to the security of the Bonds and the security;of Fannie Mae, and are entered into for the benefit of the Bondholders and Fannie Mae. The Trustee, as representative of the Bondholders and Fannie Mae in accordance with the Indenture, shall accordingly have contractual rights and duties in this Financing Agreement and be entitled to enforce separately or jointly with the Issuer, or to cause the Issuer to enforce,the terms of this Financing Agreement. In addition,the Bondholders and Fannie Mae are intended to be, and shall be, third-party beneficiaries of this Financing Agreement, and Fannie Mae shall have the right(but not the obligation)to enforce the terms of this Financing Agreement insofar as this Financing Agreement sets forth obligations of the Borrower under this Financing Agreement. Section 11. Events of Default and Remedies. Section 11.1. Events of Default. Section 11.1(1)Events of Default. Each of the following shall constitute an event of default under this Financing Agreement, and the term "Event of Default" shall mean, whenever used in this Financing Agreement,any one or more of the following events: (i) the failure by the Borrower to pay any amounts due under this Financing Agreement, the Mortgage Note, the Mortgage, the Reimbursement Agreement or any other Mortgage Loan Document at the titres and in the amounts required by this Financing Agreement, the Mortgage Note, the Mortgage, the Reimbursement Agreement or any of the other Mortgage Loan Documents;or (ii) the failure by the Borrower to observe or perform any covenants, agreements or obligations in this Financing Agreement on its part to be observed or performed (other than as provided in paragraph(i)above) for a period of thirty (30)days after receipt,by the Borrower of written notice from the Trustee specifying such failure and requesting that it be remedied, provided,however,that if the failure is such that it cannot be corrected within such period,it shall not constitute an Event of Default if the failure is correctable without material adverse effect on the validity or enforceability of the :Bonds or on the exclusion from gross 'income, for federal income tax purposes, of the interest on the Bonds, and if corrective action is instituted by the Borrower within such period and diligently pursued until the failure is corrected, and provided further that any such failure shall have been cured within 90 days of receipt of notice of such failure;or (iii) any breach of any of the covenants, agreements or obligations of the Borrower under, or the occurrence of a default under, the Regulatory Agreement, including any exhibits to the Regulatory Agreement;or DO"SF1:269333.2 40511-107-ADI 38 (iv) any representation or warranty made by the Borrower in this Financing Agreement or in any document delivered by or on behalf of the Borrower to the Trustee, Fannie Mae, the Servicer or the Issuer in connection with the Project,the Mortgage Loan or the Bonds is untrue or proves to have been untrue or misleading in any material respect as of the date made or deemed made;or (v) the occurrence of an Event of Default under and as defined in the Indenture or under and as defined in any other Bond Document caused by the Borrower's failure to comply with the terms or conditions of any such Bond Document;or (vi) the occurrence of any of the following: the Borrower shall generally not pay its debts as they become due, or shall admit in writing its inability to pay its debts,generally,or shall make a general assignment for the benefit of creditors or shall institute any proceeding or voluntary case seeking to adjudicate it a bankrupt or insolvent or seeking liquidation, winding up, reorganization, arrangement, adjustment,protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief or protection of debtors, or seeking the entry of an order for relief or the appointment of a receiver,trustee,custodian or other similar official for it or for any substantial part of its property; or the Borrower shall take any action to authorize any of the actions described above in this paragraph (vi) or any proceeding shall be instituted against the Borrower seeking to adjudicate it a bankrupt or insolvent or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief or protection of debtors,or seeking the entry of an order for relief or the appointment of a receiver,trustee,custodian or other similar official for it or for any substantial part of its property, and, if such proceeding is being contested by the Borrower in good faith, such proceeding shall remain undismissed or unstayed for a period of 60 days; (vii) the filing or making of any claim against the Trust Estate as a result of any action or proceeding described in paragraph(vi)of this Section 11.1 by,or with respect to,the Issuer; or (viii) an Event of Default as a result of a determination by Fannie Mae pursuant to Section 11.1(2)of this Financing Agreement. The occurrence of any event(a"Tax Event") which results in the interest payable on the Bunds being includable, for federal income tax purposes, in the gross income of the Bondholders including, without limitation, any violation of any provision of the Regulatory Agreement or any of the Bond Documents, shall not constitute a default under the Mortgage Loan or the Bonds, or permit or require acceleration of the Mortgage Loan or a mandatory redemption of the Bonds,(unless Fannie Mae, in its sole and'absolute discretion,provides written notice to the Trustee that such Tax Event constitutes a default under the Mortgage Loan and, by cross default, a default under this Financing Agreement. The occurrence of a Tax Event shall not give rise to the payment to the owners of the Bonds of any amount, denoted as "supplemental interest," "additional interest," "penalty interest," "liquidated damages" or otherwise, in addition to the amounts payable to the owners of the Bonds prior to the occurrence of the Tax Event. From and after the assignment and delivery of the Mortgage Loan to the Trustee, promptly upon determining that a Tax Event has occurred,the Trustee shall by notice in writing to Fannie Mae and the Servicer, inform Fannie Mae and the Servicer that a Tax Event has occurred and has been cured, or has occurred and has not been cured within a reasonable period, or has occurred and is incurable. Notwithstanding the availability of the remedy of specific performance to cure a flax Event that is curable within a reasonable period, neither the Issuer nor the Trustee shall have, and each of them acknowledges that they shall not have, upon the occurrence of a Tax Event, any right or obligation to cause or direct acceleration of the Mortgage Loan, to enforce the Mortgage Note or to foreclose the Mortgage,to accept DOCSSFi:269333.2 40511-107-ADI 39 .......................................................................................................................................................... ...................................................... a deed to the Project in lieu of foreclosure, or to effect any other comparable conversion of the Mortgage Loan. Section 11.1(2) Cross Defaul The occurrence of a default under the Mortgage Loan shall, at the option of Fannie Mae, in its sole and absolute discretion, with written notice to the Trustee, constitute an Event of Default under this Financing Agreement, and the occurrence of a default under this Financing Agreement shall, at the option of Fannie Mae, in its sole and absolute discretion, with written notice to the Trustee, constitute a default under the Mortgage Loan. The Issuer and the Trustee acknowledge that the occurrence of an Event of Default under this Financing Agreement will not by itself cause a default to arise under the Mortgage Loan or any of the Mortgage Loan Documents. Section 11.1(3)MortepjLe Ln n_-Documents Nothing contained in this Section 11.1 is intended to amend or modify any of the provisions of the Mortgage Loan Documents or the Reimbursement Agreement nor to bind the Servicer or Fannie Mae to any notice and cure periods other than as expressly set forth in the Mortgage Loan Documents and the Reimbursement Agreement. Section 11.2. Remedies Upon an Event of Default. Section 11.2(l) General. Subject to Sections 11.2(8) and Section 11.10 of this Financing Agreement whenever any Event of Default shall have occurred and be continuing under this Financing Agreement,the Trustee may take any one or more of the following remedial steps: (i) solely with respect to an Event of Default prior to the Fannie Mae Pass-Through Certificate Delivery Date; (A)give Immediate Notice to the Issuer and Fannie Mae, and, if the Event of Default is the failure to receive a Required Mortgage Payment (as defined in the Collateral Agreement), the Trustee shall give notice to Fannie Mae, pursuant to and in accordance with Section 3.7(l)of the Collateral Agreement,and shall give notice to the Issuer and to the Servicer, of such failure and demand payment by Fannie Mae of a Required Fannie Mae Payment (as defined in the Collateral Agreement) in lieu of the Required Mortgage Payment;or (B) if, with the prior written consent or at the direction of Fannie Mae, the principal and interest accrued on the Bonds shall have been declared immediately due and payable pursuant to Section 9.2(2)(1) of the Indenture,the Trustee shall thereupon give notice to the Issuer, the Servicer and Fannie Mae, as contemplated by Section 3.8(2)(2)of the Collateral Agreement,activating Fannie Mae's obligation to redeem the Trustee's interest in the Pledged Collateral pursuant to Section 3.8(2)(2) of the Collateral Agreement, subject to the conditions of Section 3.8(3)(1) of the Collateral Agreement; provided, however, that if the Trustee shall rescind or annul a declaration of acceleration of Bonds pursuant to the Indenture,the Issuer, the Servicer, the Trustee and Fannie Mae shall be restored to their former rights and positions, and all rights, duties and obligations of the parties shall continue as if no adverse proceeding had been taken,subject to the limits of any ad-verse determination;and/or (C)take such action as is permitted by the Mortgage Loan Documents but only with the prior written consent of Fannie Mae; (ii) to the extent of any insufficiency in the payment of the Bonds after the Trustee shall have received money pursuant to the Credit Facility, the Trustee may, by any suit action or DOCSSFI:269333.2 40511-107-ADI 40 ................. ...... ...... ........ ................................................................................................................. ............I............................................ ........................................................................................ ................. proceeding, pursue all remedies now or hereafter existing at law or in equity to collect all amounts then due and thereafter to become due under this Financing Agreement, to enforce the performance of any covenant, obligation or agreement of the Borrower under this Financing Agreement (subject to the nonrecourse provisions of this Financing Agreement and the Regulatory Agreement) or, to enjoin acts or things which may be unlawful or in violation of the tights of the Issuer or the Trustee; (iii) pursue any remedy under Section 11.7 of this Financing Agreement;or (iv) with the prior written consent of Fannie Mae,take whatever other action at law or in equity may appear necessary or desirable to enforce any obligation of the Borrower under this Financing Agreement. In addition, upon the occurrence of an Event of Default, the Issuer, Fannie Mae, the Servicer and the Trustee shall have access to and may inspect, examine, audit and make copies of the books and records and any and all accounts, data and income tax and other tax returns of the Borrower. Section 11.2(2)Waiver and Annulment. If, after any Event of Default (a) all amounts which would then be payable under this Financing Agreement by the Borrower if such Event of Default had not occurred and was not continuing shall have been paid by or on behalf of the Borrower, and (b) the Borrower shall have also performed all other obligations in respect of which it is then in default under this Financing Agreement and shall have paid the reasonable fees and expenses of the Issuer,the Trustee,Fannie Mae and the Servicer, including reasonable attorney fees and expenses paid or incurred in connection with such default then and in every such case, such Event of Default shall be waived and annulled by the Trustee if so directed by Fannie Mae in its sole and absolute direction, but no such waiver or annulment shall extend to or affect any subsequent Event of Default or impair any right or remedy consequent on such Event of Default. Section 11.2(3) Permitted Cures of an Event of Default. Prior to the Fannie Mae Pass-Through Certificate Delivery Date, the Trustee may, with the consent or at the direction of Fannie Mae in its sole and absolute direction, permit the Borrower,for a period specified by Fannie Mae, to cure any default under the Mortgage Note and the Mortgage, but only if(a) the Borrower pays to the Trustee or the Servicer, as the case may be, for proper remittance, all overdue payments of principal and interest on the Mortgage Note, (b) the Borrower cures any notirnonetary defaults under the Mortgage Note, the Mortgage and the other Mortgage Loan Documents to the satisfaction of Fannie Mae, and (c) the Borrower pays all fees, costs and expenses of the Trustee, the Issuer, the Servicer and Fannie Mae, extraordinary or otherwise, including, without limitation, legal fees and expenses, incurred in connection with the default. The Borrower acknowledges that any cure of any default will not affect any subsequent default under the Mortgage Loan Documents. Section 11.2(4) Environmental Concerns. In addition to and without limitation of the foregoing, the Trustee shall not otherwise acquire possession of or take any other action with respect to the Project if, as a result of any such action,the Trustee would be considered to hold title to,to be a"mortgagee-in-possession"of,or to be an"owner"or"operator"of the Project within the meaning of CERCLA unless the Trustee has previously received a report prepared by a Person who regularly conducts environmental audits,that: (i) the Project is in compliance with applicable environmental laws or, if not, that it would be in the best interest of the owners of the Bonds to take such actions as are necessary for the Project to comply therewith;and DKXSSFI:269333.2 40511-107-ADI 41 ................................... .......I...........-....................................I................ .......... ........................................................................................................I........ ........ ­­­­-,.......I........................................................ .......................................................................................................................................I ''I'll ..........I........................................................................ ........................... (ii) there are no circumstances present at the Project relating to the use, management or disposal of any hazardous wastes for which investigation, testing, monitoring, containment, clean-up or remediation could be required under any federal, state or local law or regulation, or that if any such materials are present for which such action could be required, that it would be in the best economic interest of the owners of the Bonds to take such actions with respect to the Project. The environmental audit report contemplated by this Financing Agreement shall not be prepared by an employee or affiliate of the Trustee, but shall be prepared by a Person who regularly conducts environmental audits for purchasers of commercial property, as determined (and, if applicable, selected) by the Trustee, and the cost of such audit report shall be borne by the Borrower. Section 11.2(5)Enforcement of Reserved Rights. Subject to the terms of the Regulatory Agreement and Section 11.10 of this Financing Agreement,the Issuer,without the consent of the Trustee,but only after written notice to the Trustee,the Borrower,the Servicer, and Fannie Mae, may take whatever action may appear necessary or desirable to specifically enforce the performance and observance of any Reserved Right of the Issuer, provided that the Issuer may not, without the prior written consent of the Trustee and Fannie Mae, (a) terminate this Financing Agreement or cause the Mortgage Loan to become due and payable or(b)cause the Trustee to declare the principal of all Bonds then Outstanding and the interest accrued on the Bonds to be immediately due and payable, or cause the Trustee to accelerate, foreclose or take any other action or seek other remedies under the Bond Documents, the Mortgage Loan Documents or any other documents contemplated by this Financing Agreement or by such other documents to obtain such performance or observance. Section 11.2(6)Application of Proceeds Except as required to be deposited in the Rebate Fund pursuant to the Indenture and the Tax Certificate, any amounts collected pursuant to action taken under this Section 11.2 shall, after the payment of the fees and expenses of the proceedings resulting in the collection of such moneys and of the expenses, liabilities and advances incurred or made by the Trustee, the Issuer, the Servicer or Fannie Mae and their respective counsel, be paid into the General Receipts and Disbursements Account of the Revenue Fund, and applied in accordance with the provisions of the Indenture; provided, however, there shall be no deduction for fees and expenses associated with the Trustee's collection of funds payable under the Credit Facility. No action taken pursuant to this Section shall relieve the Borrower from the Borrower's obligations pursuant to Section 7.2(19)of this Financing Agreement. Section 11.2(7)Non-Exclushvity of Remedies. No remedy conferred in this Financing Agreement upon or reserved to the Issuer or the Trustee 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 now or hereafter existing pursuant to any other agreement at law or in equity or by statute. Section 11.2(8)Limitations on Actions. Notwithstanding any other provision of this Financing Agreement or the Regulatory Agreement to the contrary, neither of the Issuer, the Trustee nor any person under the control of either shall,without the prior written consent of Fannie Mae, exercise any remedies or direct any proceedings under the Bond Documents or the Mortgage Loan Documents other than to(a)enforce rights under the Credit Facility, (b) enforce the tax covenants in the Indenture, the Regulatory Agreement and this Financing Agreement (c) enforce rights of specific performance under the Regulatory Agreement or (d) enforce the Issuer's Reserved Rights, provided, however, that any enforcement under (b), (c) or (d) above shall not include seeking any monetary recovery apart from a monetary recovery associated with Reserved Rights and provided further that (1) any claim of the Issuer for a monetary recovery shall be subordinate to the payment obligations of the DOCSSFI:269333.2 40511-107-AD1 42 .......................................................................I.......................I.......... .........................................................................................11........- ................................... _. .. ......... ......... ......... ......... ............._.... ........ ......... ......... ......... .......... ........ ......... ......... ......... ............ __. _ _....... ......... ......... ......... ............ .................. .........._...._._................ Mortgage Loan and (2) the enforcement of any claim for a monetary recovery shall not cause the Borrower to file a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Borrower under any applicable liquidation, insolvency, bankruptcy, rehabilitation, composition,reorganization,conservation or other similar law now or hereafter in effect. Section 11.3. JkfAult Under Regulatory A�;rgernent. If the Borrower fails, at any time for any reason,to comply with the requirements of the Regulatory Agreement,then within thirty(30) days after the earlier of the date the violation is discovered by the Issuer or the Trustee or the date the Issuer or the Trustee received notice of the violation,the Issuer or the Trustee, on behalf of the Issuer, in each case at the expense of the Borrower, shall(if necessary to preserve the exclusion from gross income, for federal income tax purposes, of the interest payable on the Bonds) institute an action for specific performance or injunctive relief to correct the violation or for an injunction to enjoin any anticipated violation. The Borrower acknowledges and agrees that were money damages a remedy under the Regulatory Agreement, money damages alone would not be an adequate remedy at law for a default by the Borrower arising from a failure to comply with the Regulatory Agreement,and therefore the Borrower agrees that the remedy of specific performance or injunctive relief shall be available to the Issuer and/or the Trustee in any such case. Notwithstanding the availability of the remedy of specific performance or injunctive relief provided for in this Section 11.3, promptly upon determining dW a'violation of the Regulatory Agreement has occurred, the Issuer shall, by notice in writing to Fade Mae and to the Servicer,inform Fannie Mae and the Servicer that a violation of the Regulatory Agreement has occurred; notwithstanding the occurrence of such violation, neither the Issuer nor the Trustee shall have, and each of them acknowledges that they shall not have, any right to cause or direct acceleration of the Mortgage Loan,to enforce the Mortgage Note or to foreclose on the Mortgage. Section 11.4. Delay or©mission. No delay or omission to exercise any right or power occurring upon any Event of Default shall impair any such right or power or shall be construed to be a waiver of such Event of Default, but any such right and power may be exercised from time to time and as often as may be deemed appropriate. The Issuer and the Trustee agree to give only such notices as may be expressly required by this Financing Agreement. Section 11.5. Limitations on Waivers. In the event any covenant, agreement or condition contained in this Financing Agreement shall be breached by a party and thereafter waived by another party, such waiver shall not bind any party which has not waived the breach and shall be limited to the particular breach so waived and shall not be deemed to waive any other breach under this Financing Agreement nor be a waiver of the same breach on a future occasion. By reason of the assignment and pledge of certain of the Issuer's rights and interests in this Financing Agreement to the Trustee,the Issuer shall have no power to waive or release the Borrower from any Event of Default or the performance or observance of any obligation or condition of the Borrower under this Financing Agreement without first requesting and receiving the prior written consent of the Trustee and Fannie Mae, but shall do so if requested by the Trustee and Fannie Mae, provided that the Issuer shall not be required to grant such waiver or release unless it shall have been provided with (a) an opinion of Counsel that such action will not result in any pecuniary liability to it and an opinion of Bond Counsel that such waiver shall not cause interest on the Bonds to be included in the gross income, for federal income tax purposes, of the holders of the Bonds, (b)such indemnification as the Issuer shall deem necessary and(c)written notice from the Trustee and Fannie Mae of the request for such waiver or release. Section 11.6. Notice of Default: Fannie Maes Right To Cure,' The Issuer and the Trustee shall each give notice to the other and to Fannie Mae and the Servicer of the occurrence of any Event of Default by the Borrower under this Financing Agreement of which it has actual knowledge. Fannie Mae and the Servicer shall each have the right, but not the obligation, to cure any default by the Borrower, and uponperformance by Fannie Mae or the Servicer to the satisfaction of the Issuer and the DMSSF2:269333.2 40511-107-ADI 43 ........................................................................................................................................................... ..................................................................... Trustee of the covenant agreement or obligation of the Borrower with respect to which an Event of Default has occurred,the parties to this Financing Agreement shall be restored to their former respective positions, it being agreed that both Fannie Mae and the Servicer shall have right to reimbursement from the Borrower of moneys expended and any other appropriate redress for actions taken to curio any default by the Borrower; provided that the Borrower's reimbursement obligation shall be non-recourse to the same extent as the underlying obligation is non-recourse to the Borrower. Section 11.7. r Right to Spgg: c Performance. The Issuer or the Trustee may,but only x _ at the direction of Fannie Mae, apply in any court of competent jurisdiction for specific performance by the Borrower of its covenants, obligations and agreements under this Financing Agreement or for injunctive relief to prevent any violation of the covenants, obligations or agreements on the part of the Borrower to be observed or performed under this Financing Agreement, it being mutually agreed by the parties to this Financing Agreement that the injury arising from an Event of Default under this Financing Agreement, or from a breach of the covenants, obligations or agreements contained in this Financing Agreement,would be irreparable, and that the amount of monetary damages arising as a consequence of an Event of Default would be difficult to ascertain. Section 11.8. Rights Cumulative. All rights and remedies provided in this Financing .:L_ -- Agreement are cumulative,nonexclusive and in addition to any and all rights and remedies that the Issuer, the Trustee and Fannie Mae may have or may be given by reason of any law, statute, ordinance or otherwise, Section 11.9. Assignment to Fannie Mae. The Trustees interest in the Mortgage Loan, including the Mortgage Note, the Mortgage and the Mortgage Note Payments Interest (as defined in the Collateral Agreement) shall be subject to assignment to Fannie Mae as provided in the Indenture and the Collateral Agreement. Section 11.10. Limitations. Notwithstanding any other provision of this Financing Agreement to the contrary, so long as the Collateral Agreement or the Fannie Mae Pass-Through Certificate remains outstanding and Fannie Mae is not in default of its payment obligations under the Collateral Agreement or the Fannie Mae Pass-Through Certificate, as applicable, neither the Issuer, the Trustee,nor any person under their control shall: (a) initiate or take any action which may have the effect, directly or indirectly, of impairing the ability of the Borrower to timely pay the principal, interest and other amounts due under the Mortgage Loan; (b) interfere with or attempt to influence the exercise by Fannie Mae of any of its rights under the Mortgage Loan, including, without limitation, its remedial rights under the Mortgage Loan upon the occurrence of an event of default by the Borrower under the Mortgage Loan; or (c) upon the occurrence of an event of default under the Mortgage Loan, take any action to accelerate or otherwise enforce payment or seek other remedies with respect to the Mortgage Loan; provided that this Section 11.10 is not intended,and shall not be construed,to: (1) limit the rights of the Issuer and the Trustee to seek specific performance of or injunctive relief to enforce the Regulatory Agreement and/or of this Financing Agreement, or DOCSSFI:265333.2 40511-107-ADI 44 ............ ........1.11111111111.111.1...... ............................................................I......................I........................ ....... .................................................................................... (2) preclude the issuer from specifically enforcing its Reserved Rights, provided further that (A) such rights shall not be, exercised or enforced by the Issuer or the Trustee in a manner inconsistent with the limitations set forth in this Section 11.10, and (B) under no circumstances shall the Issuer or the Trustee seek any monetary recovery(other than as permitted by Section 11.2(8) of this Financing Agreement)under the Regulatory Agreement or under this Financing,Agreement. Section 12. Aliseellaneous. Section 12.1. Amounts l emaining_,in Funds. It is agreed by the parties to this Financing Agreement that any amounts remaining in the Revenue Fund upon expiration or earlier cancellation or termination of this Financing Agreement after payment in full of the Mortgage Loan and the Bonds (or provision therefor) shall be applied in accordance with this Financing Agreement and the Indenture. Section 12,2. Notices. All notices, certificates or other communications provided for in this Financing Agreement shall be given in writing to the Issuer,the Borrower,the Trusted,Fannie Mae and the Servicer, and shall be sufficiently given and shall be deemed given if given in the manner provided in Section 12.4 of the Indenture. Copies of each notice, certificate or other communication given under this Financing Agreement by any party to this Financing Agreement shall be given to all parties to this Financing Agreement. By notice given under this Financing Agreement, any party may designate further or different addresses to which subsequent notices, certificates or other communications are to be sent. A duplicate copy of each notice, certificate, request or other communication given under this Financing Agreement to the Issuer, the Borrower, the Servicer or the Trustee shall also be given to Fannie Mae. Section 1.2.3. Amendment. This Financing Agreement and all other documents contemplated by this Financing Agreement to which the Issuer is a party may be amended or terminated only as permitted by Section I of the Indenture, provided that no amendment to this Financing Agreement shall be binding upon any party to this Financing Agreement until such amendment is reduced to writing and executed by the parties to this Financing Agreement, provided further that no amendment, supplement or other modification to this Financing Agreement or any other Bond Document shall be effective without the prior written consent of.Fannie Mae (subject to the provisions of Section 12.14 of this Financing Agreement). Section 12.4. Entire Agreement. Except as provided in the other Bond Documents, the Reimbursement Agreement, the Construction Phase Credit Documents and the Mortgage Loan Documents, this Financing Agreement contains all agreements among the parties to this Financing Agreement, and there are no other representations, warranties, promises, agreements or understandings, oral,written or implied,among the parties to this Financing Agreement,unless reference is made to them in this Financing Agreement or the Indenture. Section 12.5. Binding, Effect. This Financing Agreement shall be binding upon the Issuer, the Borrower, the Servicer and the Trustee and their respective successors and assigns. This Financing Agreement shallinure to the benefit of the Issuer, Fannie Mae,the Servicer,the Borrower and the Trustee and their respective successors and assigns, subject to the limitation that any obligation of the Issuer created by or arising out of this Financing Agreement shall be limited as described in Section 6.6 of the Indenture and Section 12.9 of this Financing Agreement. Section 12.6. Severability. If any provision of this Financing Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining portions shall DOCSSFI:269333.2 40511-107-ADI 45 ................................................................................................................................... ........................................................................................... .............................. not in any way be affected or impaired. In case any covenant, stipulation, obligation or agreement of the Issuer, the Trustee, the Servicer or the Borrower contained in this Financing Agreement shall for any reason be held to be in violation of law,then such covenant, stipulation, obligation or agreement shall be deemed to be the covenant, stipulation, obligation or agreement of the Issuer, the Trustee, the Servicer or the Borrower, as the case may be,to the full extent permitted by law. Section 12.7. Execution in-,Counterparts. This Financing 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 12.8. Ggyerning Law. This Financing Agreement shall be governed by and interpreted in accordance with the internal laws of the State without regard to conflicts of laws principles. Section 12.9. Limited Liability. All obligations of the Issuer incurred under this Financing Agreement, the Regulatory Agreement and the Indenture shall be limited obligations of the Issuer, payable solely and only from the proceeds of the Bonds, Revenues and other amounts derived by the Issuer from the Trust Estate and from the Credit Facility, The Bonds shall be payable solely from the Revenues and other funds and property pledged under the Indenture for the payment of the Bonds, and no owner or owners of any of the Bonds shall ever have the right to compel any exercise of the taxing power of the Issuer, the State or any political subdivision or other public body of the State, nor to enforce the payment of the Bonds against any property of Issuer, the State or any such political subdivision or other public body,except as provided in the Indenture. No member,officer,agent,director, employee,attorney of the Issuer, including any person executing this Financing Agreement on behalf of the Issuer, shall be liable personally under this Financing Agreement or for any reason relating to the issuance of the Bonds. No recourse shall be had for the payment of the principal of,premium, if any,or interest on the Bonds,or for any claim based on the Bonds, or otherwise in respect of the Bonds, or based on or in respect of this Financing Agreement or any amendment to this Financing Agreement, against any member, officer, employee, director, agent, attorney, as such, of the Issuer or any successor whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance of this Financing Agreement and as part of the consideration for the issuance of the Bonds,expressly waived and released. Section 12.10. Relianee. The Issuer, the Trustee, the Servicer and the Borrower recognize and agree that the representations, covenants, agreements and warranties set forth in this Financing Agreement may be relied upon by Bond Counsel and all persons interested in the legality and validity of the Bonds and in the exclusion from gross income, for federal income tax purposes, of the interest payable on the Bonds and in the exemption from personal income taxes imposed by the State of the interest payable on the Bonds. In performing their duties and obligations under this Financing Agreement and under the Indenture, the Issuer and the Trustee may rely upon statements and certificates of the Borrower, upon certificates of tenants believed to be genuine and to have been executed by the proper person or persons, and upon audits of the books and records of the Borrower pertaining to occupancy of the Project. In addition, the Issuer and the Trustee may consult with counsel, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by the Issuer or the Trustee under this Financing Agreement and under the Indenture in good faith and in conformity with the opinion of such counsel. It is expressly understood and agreed by the parties to this Financing Agreement(other than the Issuer)that: (i) the Issuer may rely conclusively on the truth and accuracy of any certificate,opinion, notice or other instrument furnished to the Issuer by the Trustee, any Bondholder or the Borrower as to the existence of a fact or state of affairs required under this Financing Agreement to be noticed by the Issuer; DOCSSF1:269333.2 40511-107-ADI 46 . ............................................................ ............----........ ..............................................................................................-...''Ill-,........... ....................................................................... ........................................... (ii) the Issuer shall not be under any obligation to perform any record keeping or to provide any legal service, it being understood that such services shall be performed or caused to be performed by the Trustee, Fannie Mae,the Servicer, the Construction Loan Administrator or the Borrower;and (iii) none of the provisions of this Financing Agreement shall require the Issuer or the Trustee to expend or risk its own funds (apart from the proceeds of Bonds issued under the Indenture) or otherwise endure financial liability in the performance of any of its duties or in the exercise of any of its rights under this Financing Agreement, unless it shall first have been adequately indemnified to its satisfaction against the casts,expenses and liabilities which may be incurred by taking any such action. Section 12.11. Rights of the Trustee. The Issuer, the Servicer and the Borrower recognize that the Issuer,pursuant to the Indenture,has assigned, conveyed and transferred all of its right, title and interest in and to this Financing Agreement(except the Reserved Rights)to the Trustee to secure the payment of the principal of, premium, if any, and interest on the Bonds and the performance of the obligations, covenants and agreements of the Issuer under the Indenture, and to secure Fannie Mae, The Issuer, the Servicer and the Borrower agree that, by virtue of such assignment, conveyance and transfer, the Trustee shall have all of the rights and remedies accorded to the Issuer in this Financing Agreement, The Trustee, in its name or in the name of the Issuer, may, for and on behalf of the Bondholders, subject to the provisions of the Indenture and this Financing Agreement, enforce all rights of the Issuer, except the Reserved Fights,and all obligations of the.Borrower,under and pursuant to this Financing Agreement and the Regulatory Agreement,whether or not the Issuer has pursued or attempted to enforce any of such rights and obligations. Section 12.12. Financing Statements, The Borrower shall cause the Trustee to file and record, at the Borrower's expense, all such financing statements and other documents as the Issuer or the Trustee shall deem necessary or desirable to perfect the lien of the Indenture with respect to the Trust Estate. Upon the request of the Issuer or the Trustee, the Borrower shall cause the Trustee to file and record, at the Borrower's expense, all instruments which the Issuer or the Trustee determines to be necessary or desirable in order to protect and preserve the right,title and interest of the Trustee in and to the Trust Estate, and shall cause the Trustee to furnish satisfactory evidence to the Issuer and the Borrower of filing and refiling of such instruments and of every additional instrument which shall be necessary to preserve the lien of the Indenture upon the Trust Estate, Section 12.13. Term of This Financine Agreement. This Financing Agreement shall be in full force and effect from its date to and including such date as all of the Bonds shall have been fully paid or retired(or provision for such payment shallhave been made as provided in the Indenture) and all amounts owing to the Issuer and Fannie Mae under this Financing Agreement or under the Reimbursement Agreement, as applicable, shall have been paid; provided,however,that the provisions of Sections 2.2, 4.3, 7.2(8), 7.2(9), 7.2(19) and 7.2(26) of this Financing Agreement shall survive the termination of this Financing Agreement. Section 12.14. Limitations on Rights of Fannie Mae. Notwithstanding anything contained in this Financing Agreement to the contrary, all provisions of this Financing Agreement regarding notices, consents, approvals, directions, waivers, appointments, requests or other actions by Fannie Mae shall be deemed not to require or permit such notices, consents, approvals, directions, waivers,appointments,requests or other actions and shall be read as if Fannie Mae were not mentioned in such provisions after the Credit Facility then in effect shall at any time for any reason cease to be valid and binding on Fannie Mae (other than in accordance with its terms or the terms of this Financing Agreement), or shall be declared to be null and void by final judgment of a court of competent UOCSSFI.259333.2 40511-107-ADI 47 ........................................................................................................................................................... ..................................... jurisdiction,provided,however,that the payment of amounts due to Fannie Mae pursuant to the terms of the Indenture shall continue in full force and effect. The foregoing shall not affect any other rights of Fannie Mae. In addition, all provisions of the Indenture relating to the rights of Fannie Mae shall be of no force or effect if there is no Credit Facility provided by Fannie Mae in effect and if all amountsowing to Fannie Mae under-the Credit Facility Agreement shall have been paid in full. Section 12.15. Owarity of the Trustee. The Trustee is entering into this Financing Agreement solely in its capacity as Trustee and shall be entitled to the protections, limitations from liability and immunities afforded it as Trustee under the Indenture. Section 13. Subordination. This Financing Agreement is subordinate in all respects to the Mortgage Loan Documents. Notwithstanding any provision of this Financing Agreement to the contrary, all obligations of the Borrower under this Financing Agreement for the payment of money and all claims for damages against the Borrower occasioned by breach or alleged breach by the Borrower of its obligations under this Financing Agreement shall be subordinate in all respects to the obligations of the Borrower under the Mortgage Loan Documents. [Remainder of page intentionally left blank] DMSSFI.269333.2 40511-107-ADI 48 ............................................................................ ........ ...................................................................................... . ... .......................................................................... .................I............................................................................................................................................................................. The parties to this Financing Agreement have caused this Financing Agreement to be executed by their duly authorized representatives as of the date set forth above. COUNTY OF CONTRA COSTA, CALIFORNIA By: BOLLINGER CREST APARTMENT DWESTORS, LLC,a California limited liability company By: U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee By: Authorized Officer WASHINGTON CAPITAL DUS,INC. By: Title: DOCSS1.I:269333.2 40511-107-ADI 49 ................................................................................................................................................ .............. ........................................................................................................... ...... ......... ......... ......... ......... ......... ...._.................................................... ...... ......... ......... ......... ......... ......_... ......... ......... ......... ......... ......... ......... rn RECORDING REQUESTED BY AND RECEIVED WHEN RECORDED RETURN TO: } rj .a £ n Orrick,Herrington & Sutcliffe LLP 400 Sansome Street CLERK WARD OF SUPERVIS RS T CO1'A San Francisco, CA 94111 Attention: Ana Marie del Ria,Esq. REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS By and Among COUNTY OF CONTRA COSTA and U.S.BANK TRUST NATIONAL ASSOCIATION, as Trustee and BOLLINGER CREST APARTMENT INVESTORS,LLC, Dated as of August 1, 1998 Relating to: COUNTY OF CONTRA COSTA,CALIFORNIA MULTIFAMILY HOUSING REVENUE BONDS (BOLLINGER CREST APARTMENTS)1998 SERIES C DOCssl<1:276271.2 40511.107-ADI-07/22198 5:43 PM ........''I'll'-,...I..........I......................I..,.......................................................................................................... .................................................................................................................................................................................. TABLE OF CONTENTS Page Section 1. Definitions and Interpretation..............................................................................I Section 2. Representations, Covenants and Warranties of the Owner...................................3 Section 3. Qualified Residential Rental Project....................................................................4 Section 4. Very Low Income Tenants;Reporting Requirements..........................................5 Section S. Tax-Exempt Status of Bonds...............................................................................6 Section 6. Additional Requirements of the Housing Law.......................... ..........................7 Section 7. Additional Requirements of the Issuer............ ...................................................7 Section 8. Modification of Covenants................ .....7..................................................... ... 8 Section 9. Indemnification; Other Payments................. ......................................................9 Section10. Consideration............................................... ....................................................10 Section11. Reliance................. ................. ................... ....................................................10 Section 12. Sale or Transfer of the Project...........................................................................10 Section13. Term.................................................................................................................I I Section 14. Covenants to Run With the Land ......................................................................12 Section 15. Burden and Benefit...... .............................................................. .....................12 Section 16. Uniformity; Common Plan................................................................................12 Section 17. Default; Enforcement................. ........................................ .............................12 Section18. The Trustee.......................................................................................................15 Section 19. Recording and Filing.............................................................................. .......... 16 Section20. Payment of Fees........ ............................................................................. .........16 Section21. Governing Law.................................................................................................16 Section 22. Amendments;Waivers............................................ .................... ....................16 Section23. Notices ........................... .................................................................................17 Section24. Severability.......................................................................................................17 Section 25. Multiple Counterparts.... ..................................................................................17 Section 26. Limitation on Liability............................................................................... ......17 Section 27. Subordination............................................................ ..................... ................18 Section 28. Third-Party Beneficiary ....................................................................................18 DOCSSF1176271.2 40511-107-ADI-07/22/99 5:43 PM ..............................................................I............. ........ __...... ......... ......... ......... „_...................... ..... ......... ......... ......... ......... ....._..... ._.._._... _........... __....._. _............ .......-_. ........ ......... REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS THIS REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS (as supplemented and amended from time to time, this "Regulatory Agreement") is made and entered into as of .August 1, 1998, by and among the COUNTY OF CONTRA COSTA, CALIFORNIA, a political subdivision of the State of California(together with any successor to its rights, duties and obligations, the "Issuer), U.S. BANK TRUST NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America(together with any successor in such capacity, the "Trustee"), in its capacity as truster under the Indenture of even date herewith(as supplemented and amended from time to time,the "Indenture'),by and between the Trustee and the Issuer, and BOLLINGER CREST APARTMENT INVESTORS, LLC, a California limited liability company(together with any successor to its rights,duties and obligations hereunder and as owner of the Project identified herein,the"Owner"). WITNESSETH: WHEREAS, the Issuer proposes to issue its County of Contra Costa, California Multifamily Housing Revenue Bonds (Bollinger Crest Apartments), 1998 Series C (the `Bonds") pursuant to Chapter 7 of Part 5 of Division 31 of the California Health and Safety Code (the "Housing Law"), the proceeds of which will be utilized to fund a loan to the Owner pursuant to the Financing Agreement of even date herewith (as supplemented and amended from time to time, the "Financing Agreement"), among the Issuer, the Owner, the Trustee and Washington Capital DUS, Inc. (the "Servicer"), in order to enable the Owner to finance the acquisition, construction and development of a 65-unit multifamily rental housing project known as Bollinger Crest Apartments, located on the real property site described in Exhibit A hereto(the"Project"); WHEREAS, the payment of the principal of and interest on the Loan and, therefore, indirectly on the Bonds, will be supported by a Credit Facility issued by the Fannie Mae, a corporation duly organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. Section 1716 et seq.,and its successors and assigns;and WHEREAS, in order to assure the Issuer and the owners of the Bonds that interest on the Bonds will be excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the "Code'), and to satisfy the public purposes for which the Bonds are authorized to be issued under the Act and the Housing Law, and to satisfy the purposes of the Issuer in determining to issue the Bonds, certain limits on the occupancy of units in the Project need to be established and certain other requirements need to be met; NOW,THEREFORE,in consideration of the issuance of the Bonds by the Issuer and the mutual covenants and undertakings set forth herein, and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the Issuer,the Trustee and the Owner hereby agree as fellows: Section 1. Definitions and Interpr t�at1ion. Unless the context otherwise requires,the capitalized terms used herein shall have the respective meanings assigned to them in the recitals hereto, in this Section I or in Section 1.2 of the Indenture. "Adjusted Income" means the adjusted income of a person (together with the adjusted income of all persons who intend to reside with such person in one residential unit) as calculated in the manner prescribed in Regulations Section 1.167(k)-3(b)(3)in effect as of the Closing Date. DOCSSP1:276271.2 40511-107-ADI-07/22198 5:43 PM "Administrator"means any administrator or program monitor appointed by the Issuer to administer this Regulatory Agreement,and any successor so appointed. The initial Administrator shall be the Issuer. `°Area"means the Oakland Primary Metropolitan Statistical Area. "Certificate of Continuing Program Compliance" means the Certificate to be filed by the Owner with the Issuer,the Administrator and the Trustee pursuant to Section 4(e) hereof, which shall be substantially in the form attached as Exhibit C hereto or in such other comparable form as may be provided by the Issuer to the Owner. "Closing Date" means the date of the issuance and delivery of the Bonds, being August[13], 1998. "Housing Act" means the United States Housing Act of 1937, as amended, or its successor. "Income Certification" means a Verification of Income and an Occupancy Certificate in the form attached as Exhibit B hereto or in such other comparable form as may be provided by the Issuer to the Owner. "Project" means the multifamily rental housing development known as Bollinger Crest Apartments, located on the real property site described in Exhibit A hereto, consisting of those facilities, including real property, structures, buildings,fixtures or equipment situated thereon,as it may at any time exist,the acquisition of which facilities is to be financed, in whole or in part,from the proceeds of the sale of the Bonds or the proceeds of any payment by the Owner pursuant to the Financing Agreement, and any real property, structures, buildings, fixtures or equipment acquired in substitution for, as a renewal or replacement of, or a modification or improvement to, all or any part of the facilities described in said Exhibit A. "Regulatory Agreement" means this Regulatory Agreement, as it may be supplemented and amended from time to time. "Qualified Project Period"means the period beginning on the later of the Closing Date or the first day on which at least 10%of the units in the Project are first occupied, and ending on the later of the following: (A) the date which is fifteen (15) years after the date on which at least fifty percent (50°l0)of the units in the Project are first occupied, (B) the first date on which no Tax-Exempt private activity bonds with respect to the Project are Outstanding, or (C) the daze on which any assistance provided with respect to the Project under Section 8 of the Housing Act terminates. "Regulations" means the Income Tax Regulations of the Department of the Treasury applicable under the Code from time to time. "Tax-Exempt" means with respect to interest on any obligationsof a state or local government, including the Bonds,that such interest is excluded from gross income for federal income tax DoCssr1:276271.2 40511-107-ADI-07122198 5:43 PM 2 ''I'll.,......I.....I............................................................................................................................................................................. ..................................................................................................................................................... purposes; provided, however, that such interest may be includable as an item of tax preference or otherwise includable directly or indirectly for purposes of calculating other tax liabilities, including any alternative minimum tax or environmental tax,under the Code. "Verification of Income"means a Verification of Income in the form attached as Exhibit B hereto or in such other comparable form as may be provided by the Issuer to the Owner. "Very Low Income Tenant" means any tenant (i) whose Adjusted Income does not exceed limits determined in a manner consistent with determinations of very low income families under Section 8 of the Housing Act, except that the percentage of median gross income that qualifies as very low income shall be fifty percent(50%)of median gross income for the Area,with adjustments for family size; and (ii) whose income does not exceed the qualifying limits for very low income families as established and amended from time to time pursuant to Section 8 of the Housing Act, or who otherwise qualify as lower income households as defined by Section 50105 of the California Health and Safety Code (as in effect on the Closing Date). If all the occupants of a unit are students (as defined under Section 151(4:)(4)of the Code),no one of whom is entitled to file a joint return under Section 6013 of the Code, such occupants shall not qualify as Very Low Income Tenants. The determination of a tenant's status as a Very Low Income Tenant shall be made by the Owner upon initial occupancy of a unit in the Project by such Tenant, on the basis of an Income Certification executed by the Tenant. "Very Low Income Units" means the units in the Project required to be rented, or held available for occupancy, by Very Low Income Tenants pursuant to Sections 4(a) and 6(a) of this Regulatory Agreement. Unless the context clearly requires otherwise, as used in this Regulatory Agreement, words of any gender shall be construed to include each other gender when appropriate and words of the singular number shall be construed to include the plural number, and vice versa, when appropriate. This Regulatory Agreement and all the terms and provisions hereof shall be construed to effectuate the purposes set forth herein and to sustain the validity hereof. The titles and headings of the sections of this Regulatory Agreement have been inserted for convenience of reference only, and are not to be considered a part hereof and shall not in any way modify or restrict any of the terms or provisions hereof or be considered or given any effect in construing this Regulatory Agreement or any provisions hereof or in ascertaining intent, if any question of intent shall arise. The parties to this Regulatory Agreement acimowledge that each party and Fannie Mae and their respective counsel have participated in the drafting and revision of this Regulatory Agreement. Accordingly, the parties agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in the interpretation of this Regulatory Agreement or any supplement or exhibit hereto. Section 2. Representations,Covenants and Warranties of the Owner. (a) The Owner hereby incorporates herein, as if set forth in full herein, each of the representations,covenants and wan-antics of the Owner contained in the Tax Certificate and the Financing Agreement relating to the Project. (b) The Owner hereby represents and warrants that the Project is located entirely within the County of Contra Costa, California. DOCSSFI:276271.2 40511-107-A171-07/23/99 5:43 PM 3 ............. ...... .......... .................... ............ (c) The Owner acknowledges, represents and warrants that it understands the nature and structure of the transactions contemplated by this Regulatory Agreement; that it is familiar with the provisions of all of the documents and instruments relating to the Bonds to which it is a party or of which it is a beneficiary;that it understands the financial and legal risks inherent in such transactions;and that it has not relied on the Issuer for any guidance or expertise in analyzing the financial or other consequences of such financing transactions or otherwise relied on the Issuer in any manner except to issue the Bonds in order to provide funds to assist the Owner in acquiring and rehabilitating the Project. Section 3. Qualified Residential Rental Project. The Owner hereby acknowledges and agrees that the Project is to be owned, managed and operated as a"qualified residential rental project„ (within the meaning of Section 142(4) of the Code) for a term equal to the Qualified Project Period. To that end, and for the term of this Regulatory Agreement, the Owner hereby represents, covenants, warrants and agrees as follows: (a) The Project will be acquired and operated for the purpose of providing multifamily residential rental property. The Owner will own,manage and operate the Project as a project to provide multifamily residential rental property comprised of a building or 'structure or several Interrelated buildings or structures, together with any functionally related and subordinate facilities, and no other facilities, in accordance with Section 142(d) of the Code, Section 1.103-8(b) of the Regulations and the provisions of the Act, and in accordance with such requirements as may be imposed thereby on the Project from time to time. (b) All of the dwelling units in the Project will be similarly constructed units, and each dwelling unit in the Project will contain complete separate and distinct facilities for living, sleeping, eating, conking and sanitation for a single person or a family, including a sleeping area, bathing and sanitation facilities and cooking facilities equipped with a cooking range, refrigeratorand sink. (c) None of the dwelling units in the Project will at any time be utilized on a transient basis or rented for a period of less than 30 consecutive days, or will ever be used as a hotel, motel, dormitory, fraternity house, sorority house, rooming house, nursing home, hospital, sanitarium, rest home or trailer court or park. (d) No part of the Project will at any time during the Qualified Project Period be owned by a cooperative housing corporation, nor shall the Owner take any steps in connection with a conversion to such ownership or use, and the Owner will not take any steps in connection with a conversion of the Project to condominium ownership during the Qualified Project Period. (e) All of the dwelling units in the Project(except for not more than [two] units set aside for resident manager or other administrative use) will be available for rental'during the Qualified Project Period on a continuous basis to members of the general public, on a first-come, first-served basis, and the Owner will not give preference to any particular class or group in renting the dwelling units in the Project, except to the extent that dwelling units are required to be leased or rented to Very Law Income Tenants. (f) The Project consists of a parcel or parcels that are contiguous except for the interposition of a road, street or stream, and all of the facilities of the Project comprise a single geographically and functionally integrated project for residential rental property, as evidenced by the ownership,management, accounting and operation of the Project. (g) No dwelling unit in the Project shall be occupied by the Owner; provided, however,that if the Project contains five or more dwelling units, this provision shall not be construed to DOCssF1:276271.2 40511-107-ADI-07/22198 3:43 PM 4 prohibit occupancy of not more than two dwelling units by two or more resident managers or maintenance personnel any of whom may be the Owner. (h) Within 30 days after the date on which 10%of the dwelling units in the Project are occupied,the Owner shall deliver to the Issuer and the Trustee a written notice specifying such date, and within 30 days after the date on which 50% of the dwelling units in the Project are occupied, the Owner shall deliver to the Issuer and the Trustee a written notice specifying such date and the beginning and ending dates of the Qualified Project Period. The Owner shall cause a copy of such notice to be recorded in the Official Records of the County of Contra Costa. Section 4. Very Low Inde Tenants: Reporting Requirements. Pursuant to the requirements of the Code,the Owner hereby represents,warrants and covenants as follows: (a) During the Qualified Project Period no less than 20% of the total number of completed units in the Project shall at all times be rented to and occupied by Very Low Income Tenants. For the purposes of this paragraph (a), a vacant unit which was most recently occupied by a Very Low Income Tenant is treated as rented and occupied by a Very Low Income Tenant until reoccupied, other than for a temporary period of not more than 31 days, at which time the character of such unit shall be redetermined. (b) No tenant qualifying as a Very Low Income Tenant upon initial occupancy shall be denied continued occupancy of a unit in the Project because, after admission, such tenant's Adjusted Income increases to exceed the qualifying limit for Very Low Income Tenants. However, should a Very Low Income Tenant's Adjusted Income,as of the most recent determination thereof,lexceed one hundred forty percent(1401/o) of the applicable income limit for a Very Low Income Tenant of the same family size,the next available unit of comparable or smaller size must be rented to (or held vacant and available for immediate occupancy by) a Very Low Income Tenant. Until such next available unit is rented, the former Very Low Income Tenant who has ceased to qualify as such shall be deemed to continue to be a Very Low Income Tenant for purposes of the 20%requirement of Section 4(a)hereofC (c) For the Qualified Project Period, the Owner will obtain, complete and maintain on file Income Certifications for each Very Low Income Tenant, including (i) an Income Certification dated, with respect to existing Very Low Income Tenants, within 60 days after the date that the Owner acquires the Project and, with respect to new Very Low Income Tenants, immediately prior to the initial occupancy of such Very Low Income Tenant in the Project, and (ii) thereafter; an annual income Certification with respect to each Very Low Income Tenants provided that such certification with respect to any tenant shall in no case cover a period greater than one year. The Owner will provide such additional information as may be required in the future by the Code, the State or the Issuer, as the same may be amended from time to time, or in such other form and manner as may be required by applicable rules,rulings,policies,procedures,Regulations or other official statements now or hereafter promulgated, proposed or made by the Department of the Treasury or the Internal Revenue Service with respect to Tax- Exempt obligations. A copy of the most recent Income Certifications for Very Low Income Tenants commencing or continuing occupation of a Very Low Income Unit shall be attached to each report to be filed with the Issuer pursuant to paragraph(e)of this Section 4. The Owner shall make a good faith effort to verify that the income information provided by an applicant in a Verification of Income is accurate by taking one or more of the following steps as a part of the verification process: (1)obtain a pay stub for the most recent pay period, (2)obtain an income tax return for the most recent tax year, (3)obtain a credit report or conduct a similar type credit search, (4) obtain an income verification from the applicant's current employer, (5) obtain an income verification from the Social Security Administration and/or the California Department of Social Services if the DOCSSF1:298271.2 40511-107-ADI-07/22/98 5:43 PM 5 ......... ..__...................... ... . . ............................................................................................................................................................................................................................................. ...... ....... __........... ........... _ _ _. applicant receives assistance from either of such agencies, or(6) if the applicant is unemployed and does not have an income tax return, obtain another form of independent verification reasonably acceptable to the Issuer. (d) The Owner will maintain complete and accurate records pertaining to the Very Low Income Units, and will permit any duly authorized representative of the Issuer, the Trustee, the Department of the Treasury or the Internal Revenue Service to inspect the books and records of the Owner pertaining to the Project, including those records pertaining to the occupancy of the Very Low Income Units. (e) The Owner will prepare and submit to the Issuer,the Administrator(if other than the Issuer) and the Trustee, at the end of each month until 95% of the units in the Project are occupied, and thereafter at the end of each calendar quarter, until the end of the Qualified Project Period, a Certificate of Continuing Program Compliance executed by the Owner. On or before each February 15 during the Qualified Project Period,the Owner will submit to the Issuer a draft of the completed Internal Revenue Code Form 8703 or such other annual certification as required by the Code with respect to the Project, which form shall be submitted to the Secretary of the Treasury on or before March 31 of each year(or such other date as may be required by the Code). (f) For the Qualified Project Period, all tenant leases or rentalagreements shall be subordinate to this Regulatory Agreement and the Mortgage. All leases pertaining to Very Low Income Units shall contain clauses, among ethers, wherein each tenant who occupies a Very Low Income Unit: (i) certifies the accuracy of the statements made in the Verification of Income, (ii) agrees that the family income and other eligibility requirements shall be deemed substantial and material obligations of the tenancy of such tenant, that such tenant will comply promptly with all requests for information with respect thereto from the Owner, the Trustee, the Issuer or the Administrator on behalf of the Issuer, and that the failure to provide accurate information in the Verification of Income or refusal to comply with a request for information with respect thereto shall be deemed a violation of a substantial obligation of the tenancy of such tenant; (iii) acknowledges that the Owner has relied on the Verification of Income and supporting information supplied by the Very Low Income Tenant in determining qualification for occupancy of the Very Low Income Unit, and that any material misstatement in such certification (whether or not intentional) will be cause for immediate termination of such lease or rental agreement; and (iv) agrees that the tenant's income is subject to annual certification in accordance with Section 4(c) and that if upon any such certification such tenant's Adjusted Income exceeds the applicable income limit under Section 4(b), such tenant may cease to qualify as a Very Low Income Tenant and such tenant's rent may be subject to increase. Section 5. Tax-Exempt Status of Bonds. The Owner and the Issuer, as applicable, each hereby represents, wan-ants and agrees as follows: (a) The Owner and the Issuer will not knowingly take or permit, or omit to take or cause to be taken, as is appropriate, any action that would adversely affect the Tax Exempt nature of the interest on the Bonds and,if either of them should take or permit,or omit to take or cause to be taken, any such action, it will take all lawful actions necessary to rescind or correct such actions or omissions promptly upon obtaining knowledge thereof. (b) The Owner and the Issuer will file of record such documents and take such other steps as are necessary, in the written opinion of Bond Counsel filed with the Issuer and the Trustee, in order to insure that the requirements and restrictions of this Regulatory Agreement will be binding upon all owners of the Project, including, but not limited to, the execution and recordation of this Regulatory Agreement in the real property records of the County of Contra Costa. DOCSSF1:276271.2 40511-107-ADI-07127/98 5.43 PM 6 Section 6. Additional Requir meats of the Housing Law. In addition to the requirements set forth above,the Owner hereby agrees that it shall comply with each of the requirements of Section 52080 of the Housing Law,including(but not limited to)the following: (a) Not less than 20%of the total number of units in the Project shall be available for occupancy on a priority basis to Very Low Income Tenants. The units made available to meet this requirement shall be of comparable quality and offer a range of sizes and numbers of bedrooms comparable to the units that are available to other tenants in the Project. (b) The rental payments for the Very Low Income Units paid by the tenants thereof (excluding any supplemental rental assistance from the State,the federal government or any other public agency to those tenants or on behalf of those units) shall not exceed 30% of an amount equal to 50%of the median adjusted gross income for the Area. (c) The Owner shall accept as tenants, on the same basis as all other prospective tenants, low-income persons who are recipients of federal certificates or vouchers for rent subsidies pursuant to the existing program under Section 8 of the Housing Act. The Owner shall not permit any selection criteria to be applied to Section 8 certificate or voucher holders that is more burdensome than the criteria applied to all other prospective tenants. (d) The units reserved for occupancy as required by subsection (a) of this Section shall remain available on a priority basis for occupancy at all times during the Qualified Project Period. (e) During the three (3) years prior to the expiration of the Qualified Project Period, the Owner shall continue to make available to eligible households reserved units that have been vacated to the same extent that nonreserved units are made available to noneiigible households. (f) Following the expiration or termination of the Qualified Project Period, except in the event of foreclosure and redemption of the Bonds, deed in lieu of foreclosure, eminent domain, or action of a federal agency preventing enforcement,units reserved for occupancy as required by subsection (a) of this Section shall remain available to any eligible tenant occupying a reserved unit at the date of such expiration or termination, at the rent determined by subsection(b)of this Section,until the earliest of (1) the household's income exceeds 140% of the maximum eligible income specified above, (2) the household voluntarily moves or is evicted for good cause (as defined in the Housing Law), (3) 30 years after the date of the commencement of the Qualified Project Period, or(4)the Owner pays the relocation assistance and benefits to households as provided in Section 7264(b)of the California Government Code. (g) The covenants and conditions of this Regulatory Agreement shall be binding upon successors in interest of the Owner. (h) This Regulatory Agreement shall be recorded in the office of the county recorder of the County of Contra Costa and shall be recorded in the grantor grantee index to the names of the Owner as grantor and to the name of the Issuer as grantee. Section 7. Additional Reguirements of the Issuer. In addition,to the requirements set forth above and to the extent not prohibited thereby,the Owner hereby agrees to comply with each of the requirements of the Issuer set forth in this Section 7,as follows: (a) The Owner will pay to the Issuer all of the amounts required by Section 4.3 of the Financing Agreement, and will indemnify the Issuer and the Trustee as provided in Section 7.2(19)of the Financing Agreement. DOCssF1.275271.2 40531-167-Ar)1-07/22/98 5:43 PM 7 (b) All tenant lists, applications and waiting lists relating to the Project shall at all times be kept separate and identifiable from any other business of the Owner and shall be maintained as required by the Issuer, in a reasonable condition for proper audit and subject to examination during business hours by representatives of the Issuer. (c) The Owner shall submit to the Issuer (i) annually, not later than July 15th, a statistical report to the Issuer in the form attached hereto as Exhibit D and, within fifteen days after receipt of a written request, any other information or completed forms requested by the Issuer in order to comply with reporting requirements of the Internal Revenue Service or the State, including without limitation information necessary for the Issuer to file the annual report required said Section 8855.5. (d) The Owner shall not discriminate on the basis of race, creed, color, religion, sex, sexual orientation, marital status,national origin, source of income (e.g. SSI), ancestry or handicap in the lease, use or occupancy of the Project or in connection with the employment or application for employment of persons for the constructions, operation or management of the project, and will not discriminate on the basis of household size as long as the tenants meet the household size standards of Section 8 of the Housing Act. Further,the Owner shall not permit occupancy in any unit in the Project by more persons than is permissible under the Section 8 household size standards. (e) The Owner acknowledges that the Issuer may appoint an Administrator other than the Issuer to administer this Regulatory Agreement and to monitor performance by the Owner of the terms, provisions and requirements hereof. In such event, the Owner shall comply with any reasonable request by the Issuer to deliver to any such Administrator, in addition to or instead of the Issuer, any reports, notices or other documents required to be delivered pursuant hereto, and to make the Project and the books and records with respect thereto available for inspection by the Administrator as an agent of the Issuer. (f) For purposes of Section 6(b), the base rents shall be adjusted for household size, to the extent permitted by law, and in making such adjustments it shall be assumed that one person will occupy a studio unit, two persons will occupy a one bedroom unit, three persons will occupy a two- bedroom unit, four persons will occupy a three-bedroom unit, and five persons will occupy a four- bedroom unit. (g) The requirements of this Section 7 shall be in effect for the Qualified Project Period; provided that any of the foregoing requirements of the Issuer may be expressly waived by the Issuer,in its sole discretion,in writing,but(i)no waiver by the Issuer of any requirement of this Section 7 shall, or shall be deemed to, extend to or affect any other provision of this Regulatory Agreement except to the extent the Issuer has received an opinion of Bond Counsel that any such provision is not required by the Act and may be waived without adversely affecting the exclusion from gross income of interest on the Bonds for federal income tax purposes; and(ii)any requirement of this Section 7 shall be void and of no force and effect if the Issuer and the Owner receive a written opinion of Bond Counsel to the effect that compliance with any such requirement would cause interest on the Bonds to cease to be Tax-Exempt or to the effect that compliance with such requirement would be in conflict with the Act or any other state or federal law. Section 8. Modification of Covenants. The Owner, the Trustee and the Issuer hereby agree as follows: (a) To the extent any amendments to the Act, the Housing Law, the Regulations or the Code shall, in the written opinion of Bond Counsel filed with the Issuer, the Trustee and the Owner, retroactively impose requirements upon the ownership or operation of the Project more restrictive than DMSSF2:276271.2 4051 1-107-ADI-07/22/99 5:43 PM 8 ........................................................................................................................................................................................................................................... ..... .........._.........._.. ......_.... ......... ......... _...._._. .......... ......... ......... ......... ......... ......... ......... those imposed by this Regulatory Agreement, and if such requirements are applicable to the Project, this Regulatory Agreement shall be deemed to be automatically amended to impose such additional or more restrictive requirements. (b) To the extent that the Act,the Housing Law,the Regulations or the Code, or any amendments thereto, shall, in the written opinion of Bond Counsel filed with the Issuer,the Trustee and the Owner, impose requirements upon the ownership or operation of the Project less restrictive than imposed by this Regulatory Agreement, this Regulatory Agreement may be amended or modified to provide such less restrictive requirements but only by written amendment signed by the Issuer, at its sole discretion,the Trustee and the Owner,and only upon receipt by the Issuer of the written opinion of Bond Counsel to the effect that such amendment will not affect the Tax-Exempt status of interest on the Bonds or violate the requirements of the Housing Law,and otherwise in accordance with Section 22 hereof. (c) The Owner, the Issuer and, if applicable, the Trustee, shall execute, deliver and, if applicable, file of record any and all documents and instruments necessary to effectuate the intent of this Section 8, and each of the Owner and the Issuer hereby appoints the Trustee as its true and lawful attorney-in-fact to execute, deliver and, if applicable, file of record on behalf of the Owner or the Issuer, as is applicable, any such document or instrument (in such form as may be approved in writing by Bond Counsel) if either the Owner or the Issuer defaults in the performance of its obligations under this subsection (c); provided, however,that unless directed in writing by the Issuer or the Owner,the Trustee shall take no action under this subsection (c) without first notifying the Owner or the Issuer, or both of them, as is applicable, and without first providing the Owner or the Issuer, or both, as is applicable, an opportunity to comply with the requirements of this Section 8. Nothing in this subsection (c) shall be construed to allow the Trustee to execute an amendment to this Regulatory Agreement on behalf of the Issuer. Section 9. Indemnification;_Other Payments. The Owner hereby covenants and agrees that it shall indemnify and hold harmless the Issuer and the Trustee and their respective officers, members, directors, officials, employees, program participants and agents as set forth in the Financing Agreement. In addition thereto,the Owner will pay upon demand all of the fees and expenses paid or incurred by the Trustee and/or the Issuer in enforcing the provisions hereof, as more fully set forth in Section 7.2(19)of the Financing Agreement. The provisions of this Section 9 shall survive the term of the Bonds'and this Regulatory Agreement;provided, however,the provisions of this Section shall, in the case ofthe'Trustee, survive the term of this Regulatory Agreement or the resignation or removal of the Trustee, but only as to claims arising from events occurring during the term of this Regulatory Agreement or the Trustee's tenure as Trustee under the Indenture, and shall, in the case of the Issuer, survive the term of this Agreement, but only as to claims arising from events occurring during the term of this Regulatory Agreement. Inasmuch as the covenants, reservations and restrictions of this Regulatory Agreement run with the land, the indemnification obligations of the Owner contained in this Regulatory Agreement will be deemed applicable to any successor in interest to the Owner; however, it is acknowledged and agreed, notwithstanding any other provision of this Regulatory Agreement to the contrary, that neither Fannie Mae nor any successor in interest to Fannie Mae will assume or take subject to any liability for the indemnification obligations of the Owner for acts or omissions of the Owner prior to any transfer of title to Fannie Mae, whether by foreclosure, deed in lieu of foreclosure or comparable conversion of the Mortgage Loan; the Owner shall remain liable under the indemnification provisions for its acts and omissions prior to any transfer of title to Fannie Mae. Fannie Mae shall indemnify the Issuer following DOCSSFI:276271.2 40511-107-aria-07/22/98 5:43 PM 9 acquisition of the Project by Fannie Mae, by foreclosure, deed in lieu of foreclosure or comparable conversion of the Mortgage, during, and only during, any ensuing period that Fannie Mae owns and operates the Project;provided that Fannie Mae's liability shall be limited to acts and omissions of Fannie Mae occurring during the period of ownership and operation of the Project by Fannie Mae. The Owner shall remain liable under this Regulatory Agreement for its actions and omissions prior to any transfer of title to Fannie Mae. Section 10. Consideration. The Issuer has agreed to issue the Bonds to provide funds to lend to the Owner to finance the Project, all for the purpose, among others, of inducing the Owner to acquire and operate the Project. In consideration of the issuance of the Bonds by the Issuer,the Owner has entered into this Regulatory Agreement and has agreed to restrict the uses to which this Project can be put on the terms and conditions set forth herein. Section 11. Reliance. The Issuer and the Owner hereby recognize and agree that the representations and covenants set forth herein may be relied upon by all persons interested in the legality and validity of the Bonds, in the exemption from California personal income taxation of interest on the Bonds and in the Tax-Exempt status of the interest on the Bonds. In performing their duties and obligations hereunder, the Issuer, the Administrator and the Trustee may rely upon statements and certificates of the Very Low Income Tenants, and upon audits of the books and records of the Owner pertaining to the Project. In addition, the Issuer and the 'Trustee may consult with counsel, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by the Issuer or the Trustee hereunder in good faith and in conformity with such opinion. In determining whether any default or lack of compliance by the Owner exists under this Regulatory Agreement,the Trustee shall not be required to conduct any investigation into or review of the operations or records of the Owner and may rely solely on any written notice or certificate delivered to the Trustee by the Owner or the Issuer with respect to the occurrence or absence of a default unless it knows that the notice or certificate is erroneous or misleading. Section 12. Sale or Transfer of the Project. For the Qualified Project Period, the Owner shall not, except as provided below, sell,transfer or otherwise voluntarily dispose of the Project, in whole or in part,without the prior written consent of the Issuer and the Trustee, which consent shall not be unreasonably withheld or delayed if the following conditions are satisfied: (A) the Issuer and the Trustee have received evidence, reasonably acceptable to the Issuer and the Trustee, that (1) the Owner shall not be in default hereunder or under the Financing Agreement (which may be evidenced by a Certificate of Continuing Program Compliance) or the purchaser or assignee undertakes to cure any defaults of the Owner to the reasonable satisfaction of the Issuer; (2) the continued operation of the Project shall comply with the provisions of this Regulatory Agreement; (3) either (a) the purchaser or assignee or its property manager has at least three years' experience in the ownership, operation and management of similar size rental housing projects,and at least one year's experience in the ownership, operation and management of rental housing projects containing below-market-rate units, without any record of material violations of discrimination restrictions or other state or federal laws or regulations or local governmental requirements applicable to such projects, or (b) the purchaser or assignee agrees to retain a property management firm with the experience and record described in subclause(a)above, or(c) the transferring Owner or its management company will continue to manage the Project for at least one year following such transfer and during such period will provide training to the transferee and its manager in the responsibilities relating to the Very Low Income Units; and (4) the person or entity which is to acquire the Project does not have pending against it, and does not have a history of significant and material building code violations or complaints concerning the maintenance, upkeep, operation, and regulatory agreement compliance of any of its projects as identified by any local, state or federal regulatory agencies;(B)the execution by the purchaser or assignee of any document reasonably requested by the Issuer or the Trustee with respect to the assumption of the Owner's obligations under this DOCSSFI:276271.2 40511-147-ADI-07/22/48 5:43 PM 10 Regulatory Agreement and, if the Bonds are outstanding at the time of transfer,the Financing Agreement, including without limitation an instrument of assumption hereof and thereof, and delivery to the Issuer of an opinion of such purchaser or assignee's counsel to the effect that each such document and this Regulatory Agreement are valid, binding and enforceable obligations of such purchaser or assignee, subject to bankruptcy and other standard limitations affecting creditor's rights;(C)receipt by the Issuer of an opinion of Bond Counsel to the effect that any such We, transfer or other disposition will not adversely affect the Tax-Exempt status of interest on the Bonds;and(D)receipt by the Issuer and Trustee of all fees and/or expenses then currently due and payable to the Issuer and Trustee. The written consent of the Issuer to any transfer of the Project shall constitute conclusive evidence that the transfer is not in violation of this Section 12. Notwithstanding any provision of this Section 12, the Project may be transferred to Fannie Mae or any transferee of or successor in interest to Fannie Mae pursuant to or following a foreclosure, deed in lieu of foreclosure or comparable conversion of the Mortgage Loan, without the consent of the Issuer. It is hereby expressly stipulated and agreed that any sale, transfer or other disposition of the Project in violation of this Section 12 shall be null, void and without effect, shall cause a reversion of title to the Owner, and shall be ineffective to relieve the Owner of its obligations under this Regulatory Agreement. Nothing in this Section shall affect any provision of any other document or instrument between the Owner and any other party which requires the Owner to obtain the prior written consent of such other party in order to sell, transfer or otherwise dispose of the Project or any interest(direct or indirect)therein or in the Borrower or any interest(direct or indirect)therein. Upon any sale or other transfer that complies with this Regulatory Agreement,the Owner shall be fully released from its obligations hereunder to the extent such obligations have been fully assumed in writing by the transferee of the Project. Except as otherwise provided herein, any transfer of the Project to any entity, whether or not affiliated with the Owner, shall be subject to the provisions of this Section 12, except that no consent of the Issuer shall be required in the case of any transfer of the Project to a wholly-owned subsidiary or related entity of the Owner if the conditions set forth in Section 7.2(5) of the Financing Agreement are satisfied. For the Qualified Project Period,the Owner shall not: (1)encumber any of the Project or grant commercial leases of any part thereof, or permit the conveyance, transfer or encumbrance of any part of the Project, except pursuant or subordinate to the provisions of this Regulatory Agreement and the Mortgage (and upon receipt by the Owner of an opinion of Bond Counsel that such action will not adversely affect the Tax-Exempt status of interest on the Bonds; provided that such opinion will not be required with respect to any encumbrance,lease or transfer relating to a commercial operation or ancillary facility that will be available for tenant use and is customary to the operation of multifamily housing developments similar to the Project), or except upon a sale, transfer or other disposition of the Project in accordance with the terms of this Regulatory Agreement or pursuant to and in accordance with the Mortgage Loan Documents; (2)demolish any part of the Project or substantially subtract from any real or personal property of the Project, except to the extent that what is removed is replaced with comparable property; or (3) permit the use of the dwelling accommodations of the Project for any purpose except rental residences. Section 13. Tenn. This Regulatory Agreement and all and several of the terms hereof shall become effective upon its execution and delivery, and shall remain in full force and effect for the period provided herein and shall terminate as to any provision not otherwise provided with a specific termination date and shall terminate in its entirety at the end of the Qualified Project Period, it being expressly agreed and understood that the provisions hereof are intended to survive the retirement of the Bonds and discharge of the Indenture and the Financing Agreement. The terms of this Regulatory Agreement to the contrary notwithstanding, the requirements of this Regulatory Agreement shall terminate and be of no further force and effect in the event of involuntary noncompliance with the provisions of this Regulatory Agreement caused by fire, DOCSSFI:276271,2 40511-107-ADI-07M/98 5:43 PM 11 ....................................... ...... .................................................................................... ..............-............................................I............. ........-...... seizure,requisition,change in a federal law or an action of a federal agency after the Closing Date,which prevents the Issuer and the Trustee from enforcing such provisions, or condemnation or foreclosure, transfer of title by deed in lieu of foreclosure, or a similar event, but only if, within a reasonable period, either the Bonds are retired or amounts received as a consequence of such event are used to provide a project that meets the requirements hereof, provided, however, that the preceding provisions of this sentence shall cease to apply and the restrictions contained herein shall be reinstated if, at any time subsequent to the termination of such provisions as the result of the foreclosure or the delivery of a deed in lieu of foreclosure or a similar event,the Owner or any related person (within the meaning of Section 1.103-10(e) of the Regulations) obtains an ownership interest in the Project for federal income tax purposes. The Owner hereby agrees that, following any foreclosure, transfer of title by deed in lieu of foreclosure or similar event,neither the Owner not any such related person as described above will obtain an ownership interest in the Project for federal tax purposes. Notwithstanding any other provision of this Regulatory Agreement,this Regulatory Agreement may be terminated upon agreement by the Issuer, the Trustee and the Owner upon receipt by the Issuer and the Trustee of an opinion of Bond Counsel to the effect that such termination will not adversely affect the exclusion from gross income of interest on the Bonds for federal income tax purposes. Upon the termination of the terms of this Regulatory Agreement, the parties hereto agree to execute,deliver and record appropriate instruments of release and discharge of the terms hereof, provided, however, that the execution and delivery of such instruments shall not be necessary or a prerequisite to the termination of this Regulatory Agreement in accordance with its terms. Section 14. Covenants to Run With the Land, Notwithstanding Section 1461 of the California Civil Code, the Owner hereby subjects the Project to the covenants, reservations and restrictions set forth in this Regulatory Agreement. The Issuer and the Owner hereby declare their express intent that the covenants, reservations and restrictions set forth herein shall be deemed covenants running with the land and shall pass to and be binding upon the Owner's successors in title to the Project; provided,however,that on the termination of this Regulatory Agreement said covenants, reservations and restrictions shall expire without the necessity of further action. Each and every contract, deed or other instrument hereafter executed covering or conveying the Project or any portion thereof shall conclusively be held to have been executed, delivered and accepted subject to such covenants, reservations and restrictions, regardless of whether such covenants, reservations and restrictions are set forth in such contract,deed or other instruments. Section 15. Burden and Benefit. The Issuer and the Owner hereby declare their understanding and intent that the burdens of the covenants set forth herein touch and concern the land in that the Owner's legal interest in the Project is rendered less valuable thereby. The Issuer and the Owner ,hereby further declare their understanding and intent that the benefits of such covenants touch and concern the land by enhancing and increasing the enjoyment and use of the Project by Very Low Income Tenants, the intended beneficiaries of such covenants, reservations and restrictions, and by furthering the public purposes for which the Bonds were issued. Section 16. Uniformity: Common Plan. The covenants, reservations and restrictions hereof shall apply uniformly to the entire Project in order to establish and carry out a common plan for the use of the site on which the Project is located. Section 17. Default—Enforcement. If the Owner defaults in the performance or observance of any covenant, agreement or obligation of the Owner set forth in this Regulatory Agreement, and if such default remains uncured for a period of 60 days after notice thereof shall have been given by the Issuer or the Trustee to the Owner, or for a period of 60 days from the date the Owner should,with reasonable diligence,have discovered such default,then the Issuer or the Trustee(as directed by the Issuer, subject to the provisions of the Indenture) acting on its own behalf or on behalf of the Issuer, shall declare an "Event of Default" to have occurred hereunder; provided, ihowever, that if the DOCSSFI:276271.2 40511-107-ADI-07J2"5:43 PM 12 . . ....................................I.................................................................................................................................. .......................................................................................................................................................................................... ... .. .................................... default is of such a nature that it cannot be corrected within 60 days, such default shall not constitute an Event of Default hereunder so long as (i)the Owner institutes corrective action within said 60 days and diligently pursues such action until the default is corrected, and (ii) in the opinion of Bond Counsel, the failure to cure said default within 60 days will not adversely affect the Tax-Exempt status of interest on the Bonds. The Issuer and the Trustee shall have the right to enforce the obligations of the Owner under this Regulatory Agreement within shorter periods of time than are otherwise provided herein if necessary to insure compliance with the Housing Law or the Code. Following the declaration of an Event of Default hereunder, the Issuer or the Trustee, at the direction of the Issuer, subject to the provisions of the Indenture, may take any one or more of the following steps, in addition to all other remedies provided by law or equity: (i) by mandamus or other suit, action or proceeding at law or in equity, including injunctive relief, require the Owner to perform its obligations and covenants hereunder or enjoin any acts or things that may be unlawful or in violation of the rights of the Issuer or the Trustee hereunder; (ii) have access to and inspect, examine and make copies of all of the books and records of the Owner pertaining to the Project; (iii) require the Owner to pay to the Issuer an amount equal to the rent or other amounts received by the Owner for any units in the Project that were in violation of this Regulatory Agreement during the period such violation continued (which payment shall not reduce the amount due under the Mortgage Loan); (iv) take such other action at law or in equity as may appear necessary or desirable to enforce the obligations,covenants and agreements of the Owner hereunder; and (v) subject to the provisions of the Financing Agreement, declare a default thereunder and proceed with any remedies provided therein. The Owner hereby agrees that specific enforcement of the Owner's agreements contained herein is the only means by which the Issuer may fully obtain the benefits of such agreements made by the Owner herein, and the Owner therefore agrees to the imposition of the remedy of specific performance against it in the case of any Event of Default by the Owner hereunder. [In addition, during the Qualified Project Period, the Owner hereby grants to the Issuer the option, upon the expiration of 30 days after the giving of the notice to the Owner referred to in the first paragraph of this Section 17 of the Owner's default under this Regulatory Agreement,to lease up to 20%of the units in the Project for a rental of$1.00 per unit per year for the purpose of subleasing such units to Very Low Income Tenants, but only to the extent necessary to comply with the provisions of Sections 4, 6 and 7. The option granted in the preceding sentence shall be effective only if the Owner has not instituted corrective action within such 30-day period. Such option shall be exercisable first with respect to units which are vacant at the time of exercise of this option and shall be exercised with respect to occupied units only to the extent that subleasing of additional units is necessary in order to bring the Project into compliance with the provisions of Sections 4, 6 and 7, and any eviction carried out in connection with the exercise of such option shall be carried out in compliance with applicable laws. The option and any leases to the Issuer under this provision shall terminate with respect to each default upon the achievement,by the Owner or the Issuer,of compliance with the requirements of Sections 4, 6 and 7, and any subleases entered into pursuant to the Issuer's option shall be deemed to be leases from the Owner. The Issuer shall make diligent efforts to rent Very Low Income Units to Very Low Income Tenants for monthly rental amounts equivalent to those collected from tenants of similar units in the DOCSSF1:276271.2 40511-107-ADI-07/22/98 5:43 PM 13 .....................................................................I......... _...... ........ __._ _.... Project, or such lesser maximum amounts as may be permitted by Section 6(b) hereof, but shall not be required to obtain such rental amounts. Any rental paid under any such sublease shall be paid to the Owner after the Issuer has been reimbursed for any expenses incurred in connection with such sublease.] The Trustee shall have the right, in accordance with this Section and the provisions of the Indenture,without the consent or approval of the Issuer,to exercise any or all of the rights or remedies of the Issuer hereunder;provided that prior to taking any such action the Trustee shall give the Issuer written notice of its intended action. After the Indenture has been discharged, the Issuer may act on its own behalf to declare an "Event of Default" to have occurred and to take any one or more of the steps specified hereinabove to the same extent and with the same effect as if taken by the Trustee. All reasonable fees, casts and expenses of the Trustee and the Issuer incurred in taking any action pursuant to this Section shall be the sole responsibility of the Owner. No breach or default under this Regulatory Agreement shall defeat or render invalid the lien of the Mortgage or any other mortgage or like encumbrance upon the Project or any portion thereof given in good faith and for value. The Trustee shall not be deemed to have knowledge of any default hereunder unless the Trustee shall have been specifically notified in writing of such default by the Issuer, the Administrator or by the Owners of at least 25%of the Bonds outstanding. Promptly upon determining that a violation of this Regulatory Agreement has occurred, the Issuer or the Trustee shall,by written notice, inform Fannie Mae and the Servicer that such violation has occurred,the nature of the violation and that the violation has been cured or has not been cured,but is curable within a reasonable period of time,or is incurable. Notwithstanding anything herein to the contrary; (A) the occurrence of an Event of Default under this Regulatory Agreement shall not be deemed,under any circumstances whatsoever,to be a default under the Mortgage Loan Documents, except as may be otherwise specified therein; and (B) neither the Issuer nor the Trustee may, upon the occurrence of an Event of Default under this Regulatory, Agreement, seek, in any manner,to(a)cause or direct acceleration.of the Mortgage Loan, (b) enforce the Mortgage Note, (c)foreclose on the Mortgage, (d)cause the Trustee to redeem the Bonds or to declare the principal of the Bonds and the interest accrued on the Bonds to be immediately due and payable or (e) cause the trustee to take any other action under any of the Mortgage Loan Documents, any of the Bond Documents or any other documents,which action would or could have the effect of achieving any one or more of the actions, events or results described in the preceding clauses (a)through (d). No person other than Fannie Mae shall have the right to (a) declare the principal balance of the Mortgage Note to be immediately due and payable or(b)commence foreclosure or other like action. The foregoing prohibitions and limitations are not intended to limit the rights of the Issuer or the Trustee to specifically enforce the Regulatory Agreement or to seek injunctive relief in order to provide for the operation of the Project in accordance with the requirements of the Code and State law. Accordingly,upon any default by the Owner,the Issuer or the Trustee may seek specific performance of this Regulatory Agreement or enjoin acts that may be in violation of this Regulatory Agreement or unlawful,but neither the Issuer nor the Trustee may seek any form of monetary recovery from the Owner, although the Issuer and the Trustee may seek to enforce a claim for indemnification; provided that no obligation of the Owner under this Regulatory Agreement, including, without limitation, any indemnification obligation, any other obligation for the payment of money, any claim and any judgment for monetary damages against the Owner, occasioned by breach or alleged breach by the Owner of its obligations under this Regulatory Agreement or otherwise, shall be secured by or in any manner DOCSSF1:276271.2 40511-107-ADI-07/22/98 5.45 PM 14 constitute a Tien on, or security interest in, the Project, whether in favor of the Issuer, the Trustee or any other person,and all such obligations shalt be,and hereby are,subordinate in priority, in right to payment and in all other respects to the obligations, liens, rights(including without limitation the right to payment) and interests arising or created under the Mortgage Loan Documents. Accordingly, neither the Issuer nor the Trustee shall Have the right to enforce any monetary obligation other than directly against the Owner, without recourse to the Project. In addition, any such enforcement must not cause the Owner to file a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Owner under any applicable liquidation, insolvency, bankruptcy, rehabilitation, composition, reorganization, conservation or other similar law in effect now or in the future. The obligations of any Owner under this Regulatory Agreement shall be personal to the person who was the Owner at the time that an event, including, without limitation, any default or breach of this Regulatory Agreement, occurred or was alleged to have occurred, and such;person shall remain liable for any and all such obligations, including damages occasioned by a default or breach, even after such person ceases to be the Owner of the Project. Accordingly,no subsequent Owner of the Project shall be liable or obligated for the obligation of any prior owner (including the initial Owner), including, but not limited to, any obligation for payment, indemnification or damages, for default or breach of this Regulatory Agreement or otherwise. The Owner of the Project at the time the obligation was incurred, including any obligation arising out of a default or breach of this Regulatory Agreement, shall remain liable for any and all payments and damages occasioned by the Owner even after such person ceases to be the Owner of the Project, and no person seeking such payments or damages shall have recourse against the Project. Under no circumstances shall the Issuer or the Trustee: (i) initiate or take any action which may have the effect, directly or indirectly, of impairing the ability of the Owner to timely pay the principal of, interest on, or other amounts due and payable under,the Mortgage Loan; (ii) interfere with or attempt to influence the exercise by Fannie Mae of any of its rights under the Mortgage Loan, including, without limitation, Fannie Mae's remedial rights under the Mortgage Loan Documents upon the occurrence of an event of default by the Owner under the Mortgage Loan;or (iii) upon the occurrence of an event of default under the Mortgage Loan, take any action to accelerate or otherwise enforce payment or seek other remedies with respect to the Mortgage Loan. Section 18, The Trustee. The Trustee shall act as specifically provided herein and in the Indenture and may exercise such additional powers as are reasonably incidental hereto and thereto. The Trustee shall have no duty to act with respect to enforcement of the Owner's performance hereunder as described in Section 17 unless it shall have actual knowledge of any such default as provided in Section 17. The Trustee may act as the agent of and on behalf of the Issuer, and any act required to be performed by the Issuer as herein provided shall be deemed taken if such act is performed by the Trustee. In connection with any such performance, the Trustee is acting solely as Trustee under the Indenture and not in its individual capacity, and, except as expressly provided herein, all provisions of the Indenture relating to the rights,privileges,powers and protections of the Trustee, including without limitation those set forth in Section 10 thereof shall apply with equal force and effect to all actions taken (or omitted to be taken) by the Trustee in connection with this Agreement. Neither the Trustee nor any of its officers, directors or employees shall be liable for any action taken or omitted to be taken by it hereunder or in connection herewith except for its or their own negligence or willful misconduct. DOCSSPI:278271.2 40511-107-AD1-07122198 5;43 PM 15 ......... ......... ......... ......... ......... ......... ......._. ......... .1111. . 1111 _ _... .......... .......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... _ ._ . .... ......... . ........ ......... The Issuer shall be(or shall cause the Administrator to be)responsible for the monitoring of the Owner's compliance with the terms of this Regulatory Agreement. The Trustee shall not be responsible for such monitoring. After the date on which no Bonds remain Outstanding, as provided in the Indenture, the Trustee shall no longer have any rights, duties or responsibilities under this Regulatory Agreement and all references to the Trustee in this Regulatory Agreement shall be deemed references to the Issuer. Section 19. Recording and Filing. (a) The Owner shall cause this Regulatory Agreement and all amendments and supplements hereto and thereto, to be recordedand filed in the real property records of the County of Contra Costa and in such other places as the Issuer or the Trustee may reasonably request. The Owner shall pay all fees and charges incurred in connection with any such recording. (b) The Owner and the Issuer will file of record such other documents and take such other steps as are reasonably necessary, in the opinion of Bond Counsel, in order to insure that the requirements and restrictions of this Regulatory Agreement will be binding upon all owners of the Project. (c) Except in the case of a foreclosure, deed in lieu of foreclosure or comparable involuntary conversion of the Mortgage Loan, the Owner hereby covenants to include or reference the requirements and restrictions contained in this Regulatory Agreement in any documents executed and delivered in connection with a voluntary transfer of any interest in the Project to another person to the end that such transferee has notice of, and is bound by, such restrictions and to obtain the agreement from any transferee to abide by all requirements and restrictions of this Regulatory Agreement.' Section 20. Payment of Fees. Notwithstanding any prepayment of the Mortgage Loan and notwithstanding a discharge of the Indenture, the Owner shall continue to pay to the Trustee reasonable compensation for any services rendered by it hereunder and reimbursement for all expenses reasonably incurred by it in connection therewith, and shall continue to pay (or, to the extent allowed under the Code, shall prepay) the Issuer's annual administrative fee and expenses as provided in the Financing Agreement. Fannie Mae shall not be liable for the payment of any compensation or any accrued unpaid fees, costs, expenses or penalties otherwise owed by the Owner or any subsequent Owner of the Project prior to the date of acquisition of the Project by Fannie Mae, whether such acquisition is by foreclosure,deed-in-lieu of foreclosure or comparable conversion of the Mortgage Loan. Section 21. Governing Law. This Regulatory Agreement shall'be governed by the laws of the State of California. Section 22. Amendments;'Waivers. (a)Except as provided in Section 8(a) hereof, this Regulatory Agreement may be amended only by a written instrument executed by the parties hereto or their successors in title, and duly recorded in the real property records of the County of Contra Costa, and only upon receipt by the Issuer of(i) an opinion from Band Counsel that such amendment will not adversely affect the Tax-Exempt status of interest on the Bonds and is not contrary to the provisions of the Housing Law, and (ii) so Tang as Fannie Mae has not failed to comply with any of its payment obligations under the Credit Facility,the prior written consent of Fannie Mae. (b) Anything to the contrary contained herein notwithstanding, the Issuer, the Trustee and the Owner hereby agree to amend this Regulatory Agreement to the extent required, in the r.yacssF1:276271.2 40511-107-ADI-07122/98 5.43 PM 16 opinion of Bond Counsel, in order that interest on the Bonds remain Tax-Exempt. The parties requesting such amendment shall notify the other parties to this Regulatory Agreement and Fannie Mae of the proposed amendment, with a copy of such requested amendment to Bond Counsel and a request that Bond Counsel render to the Issuer an opinion as to the effect of such proposed amendment upon the Tax- Exempt status of interest on the Bonds. This provision shall not be subject to any provision of any other agreement requiring any party hereto to obtain the consent of any other person in order to amend this Regulatory Agreement. (e) Any waiver of, or consent to, any condition under this Regulatory Agreement must be expressly made in writing. Section 23. Notices. Any notice required to be given hereunder shall be made in writing and shall be given by personal delivery, overnight delivery, certified or registered mail, postage prepaid, return receipt requested, or by telecopy, in each case at the respective addresses specified in the Indenture,or at such other addresses as may be specified in writing by the parties hereto. A copy of each notice sent by or to the Owner shall also be sent to (i) the Servicer, as provided in the Section 12.4 of the Indenture, and (ii) the manager of the Project at such address as provided by the Owner to the Administrator; but such copy shall not constitute notice to the Owner, nor shall any failure to send such copy constitute a breach of this Regulatory Agreement or a failure of or defect in notice to the Owner. A copy of any notice of default under this Regulatory Agreement shall be sent to Fannie Mae as provided in the Section 12.4 of the Indenture. The Issuer, the Administrator, the Trustee, the Servicer and the Owner may, by notice given hereunder, designate any further or different addresses to which subsequent notices,certificates or other communications shall be sent. Notice shall be deemed given on the date evidenced by the postal or courier receipt or other written evidence of delivery or electronic transmission; provided that any telecopy or other electronic transmission received by any party after 4:00 p.m., local time of the receiving party, as evidenced by the time shown on such transmission,shall be deemed to have been received the following Business Day. Section 24. Severability. If any provision of this Regulatory Agreement shall be invalid, illegal or unenforceable,the validity, legality and enforceability of the remaining portions hereof shall not in any way be affected or impaired thereby. Section 25. Multiple Counterparts. This Regulatory Agreement may be simultaneously executed in multiple counterparts, all of which shall constitute' one and the same instrument,and each of which shall be deemed to be an original. Section 26. Limitation on Liability. Notwithstanding the foregoing or any other provision or obligation to the contrary contained in this Regulatory Agreement, (i) the liability of the Owner under this Regulatory Agreement to any person or entity, including,but not limited to,the Trustee or the Issuer and their successors and assigns, is limited to the Owner's interest in the Project, the Revenues,including the amounts held in the funds and accounts created under the Indenture, or any rights of the Owner under any guarantees relating to the Project, and such persons and entities shall look exclusively thereto, or to such other security as may from time to time be given for the payment of obligations arising out of this Regulatory Agreement or any other agreement securing the obligations of the Owner under this Regulatory Agreement; and (ii) from and after the date' of this Regulatory Agreement, no deficiency or other personal judgement, nor any order or decree of specific performance (other than pertaining to this Regulatory Agreement,any agreement pertaining to any Project or any other agreement securing the Owner's obligations under this Regulatory Agreement), shall be rendered against the Owner, the assets of the Owner (other than the Owner's interest in the Project, this Regulatory Agreement, amounts held in the funds and accounts created under the Indenture, any rights of the Owner DOCSSF1:276271.2 40511-107-A,D1-07/22/98 5:43 PM 17 . .................................................................................................................................................................................................... ....._.... ......... ......... ......... ......... ......... ......... ......... ......... ......... ........ ......... ......... under the Indenture or any other documents relating to the Bonds or any rights of the Owner under any guarantees relating to the Project),its partners,members,successors,transferees or assigns and each their respective officers, directors, employees, partners, agents, heirs and personal representatives, as the case may be, in any action or proceeding arising out of this Regulatory Agreement and the Indenture or any agreement securing the obligations of the Owner under this Regulatory Agreement, or any judgment, order or decree rendered pursuant to any such action or proceeding. Section 27. Subordination. The terms, covenants and restrictions of this Regulatory Agreement, other than those set forth in Sections 3 through 6,are and shall at all times remain subject and subordinate, in all respects,to the liens, rights and interests created under the Mortgage Loan Documents. Upon a conveyance or other transfer of title to the Project by foreclosure, deed in lieu of foreclosure or comparable conversion of the Mortgage Loan, the Person who acquires title to the;Project pursuant to such foreclosure,deed in lieu of foreclosure or comparable conversion of the Mortgage Loan(unless such person is the Owner or a person related to the Owner within the meaning of Section 1.103-10(e) of the Regulations,in which event this Regulatory Agreement shall remain in full force and effect in its entirety) shall acquire such title free and clear of the terms, covenants and restrictions of the Regulatory Agreement, other than those set forth in Sections 3 through 6 and, from and after the date on which such person acquires title to the Project, the terms, covenants and restrictions of this Regulatory Agreement, other than those set forth in Sections 3 through 6, shall automatically terminate and be of no force and effect; provided that Sections 3 through 6 shall also terminate and be of no force';or effect under the circumstances set forth in Section 13 of the Regulatory Agreement. Section 28. Third-Party Beneficiary. The parties to this Regulatory Agreement recognize and agree that the terms of this Regulatory Agreement and the enforcement of such terms are essential to the security of Fannie Mae and are entered into for the benefit of various parties, including Fannie Mae. Fannie Mae shall accordingly have contractual rights in this Regulatory Agreement and shall be entitled(but not obligated)to enforce, separately or jointly with the Issuer and/or the Trustee, or to cause the Issuer or the Trustee to enforce,the terms of this Regulatory Agreement. In addition, Fannie Mae is intended to be and shall be a third-party beneficiary of this Regulatory Agreement. DOCSSF1:276271.2 40511-167-ADI-07122/98 5:43 Phi 18 ..............I.......................................................................................................................................................................... .. . .. ............. IN WITNESS WIHEREOF, the Issuer, the Trustee and the Owner have executed this Regulatory Agreement by duly authorized representatives,all as of the date first above written. COUNTY OF CONTRA COSTA By: Deputy Director—Redevelopment U.S. BANK TRUST NATIONAL ASSOCIATION,as Trustee By: Authorized Officer BOLLINGER CREST APARTMENT INVESTORS, LLC,a California limited liability company By: [Title] DOCSSFI:276271,2 40511-107-ADI-07/22/98 5:43 PM 19 .................. ....... ......... ...... .................................................................................................................... ............................................................................ [Attach Notary Acknowledgements] EXHIBIT A DESCRIPTION OF REAL PROPERTY RELATING TO TI4E PROJECT A-1 .......................................................................................................................... .................... EXHIBIT B (FORM OF INCOME CERTIFICATION] WRIFICATION,OF INCOME RE: [Name of Project] [Address of Project] Apartment Number: Initial Occupancy Date: I/We, the undersigned, being first duly sworn, state that I/we have read and answered fully, and truthfully each of the following questions for all persons who are to occupy the unit in the above apartment development for which application is made,all of whom are listed below: 2. 3. 4. 5. Relationship to Name of Members Head of Household Social Security Place of of the Household Age Number Employment Head of Household Spouse 6. The anticipated income of all the above persons during the 12-month period beginning this date, including'income described in (a) below, but excluding all income described in (b) below, is$ (a) The amount set LoLffi_ above includes all of the followingincome (unless such income is described in fb)below): (i) all wages and salaries, over-time pay, commissions, fees, tips and bonuses before payroll deductions; (ii) 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 amortization of capital indebtedness or any allowance for depreciation of capital assets); DOCSSFI:269360.1 07/22198 B-1 DOCSSFI:276271.2 40511-107-ADI-07122/98 5:43 PM . .......... .........................................................................1.111,11.1.1....... ..............................................................................11........ ......................................................... (iii) interest and dividends (include all income from assets as set forth in item 7(b)below); (iv) 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; (v) payments in lieu of earnings, such as unemployment and disability compensation,workmen's compensation and severance pay; (vi) the maximum amount of public assistance available to the above persons; (vii) periodic and determinable allowances, such as alimony and child support payments and regular contributions and gifts received from persons not residing in the dwelling; (viii) 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;and (ix) any earned income tax credit to the extent it exceeds income tax liability. (b) The following income is excluded from the amount set forth above: (i) casual,sporadic or irregular gifts; (ii) amounts which are specifically for or in reimbursement of medical expenses; (iii) 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; (iv) amounts of educational scholarships paid directly to a student or an 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; (v) hazardous duty to a member of the household in the armed forces who is away from home and exposed to hostile fire; (vi) relocation payments under Title 11 of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970; (vii) income from employment of children (including foster children) under the age of 18 years; (viii) foster child care payments; (ix) the value of coupon allotments under the Food Stamp Act of 1977; (x) payments to volunteers under the Domestic Volunteer Service Act of 1973; DOCSSF1:276271.2 40511-107-ADI-07/22/98 5:43 PM $-2 (xi) payments received under the Alaska Native Claims Settlement Act; (x ) income derived from certain submarginal land of the United States that is held in trust for certain Indian tribes; (xiii) payments on allowances made under the Department of Health and Human Services' Low-Income Home Energy Assistance Program; (xiv) payments received from the Job Partnership Training Act; (xv) income derived from the disposition of funds of the Grand River Band of Ottawa Indians;and (xvi) the first $2000 of per capita shares received from judgment funds awarded by the Indian Claims Commission or the Court of Claims or from funds held in trust for an Indian tribe by the Secretary of Interior. 7. If any of the persons described in column I above(or any person whose income or contributions were included in item 6)has any savings, stocks, bonds, equity in real property or other form of capital investment(excluding interests in Indian trust lands),provide: (a) the total value of all such assets owned by all such persons: $ ,and (b) the amount of income expected to be derived from such assets in the 12-month period commencing this date: $ 8. (a) Will all of the persons listed in column I 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) (Complete only if the answer to Question 8(a) is "Yes"). Is any such person (other than nonresident aliens)married and eligible to file a joint federal income tax return? Yes No DOCSSF1:276271.2 40511-107-AD1-07122/98 5:43 PM B-3 _....... ......... ................ .. ....................._. ......... ......... ......... ......... ......... ......... . ........ ......... ......... ......... ..............._. . ............................................................................................................................... ............................................. We acknowledge that all of the foregoing information is relevant to the status under federal income tax lave of the interest on bonds issued to finance the acquisition and rehabilitation of the apartment building for which application is being made. We consent to the disclosure of such information to the issuer of such bonds,the holders of such bonds, any trustee acting on their behalf and any authorized went of the Treasury Department or Internal Revenue Service. We declare under penalty of perjury that the foregoing is true and correct. Date: Head of Household Spouse DOCSSF1:278271.2 40511-107-ADI-07122!48 5:43 PM B-4 FOR COMPLETION BY PROJEC r OWNER ONLY: I. Calculation of eligible income: (A) Enter amount entered for entire household from 6 above: $ (B) If the amount entered in 7(a)above is greater than$5,000,enter: (i) the product of the amount entered in 7(a)above multiplied by the current passbook savings rate as determined by HUD: $ (ii) the amount entered in 7(b)above: $ (iii) line(i)minus line(ii)(if less than$0,enter$0): $, (C) TOTAL ELIGIBLE INCOME: $ (Line I(A)plus line I(B)(iii)) Il. Qualification as individuals or a family of Very Low Income: (A) Is the amount entered in line I(C)less than 50%of median gross income for the Area? Yes No (B) (i) If line II(A)is`oto,"then the household does not qualify as individuals or a family of Very Low Income;go to item III. (ii) If line II(A) above is "Yes" and 8(a) above is "No,"then the household qualifies as individuals or a family of Very Low Income;go to item III. (iii) If line II(A)above is "Yes" and 8(b) above is "Yes,"then the household qualifies as individuals or a family of Very Low Income;go to item IIT. (iv) If neither(ii)nor (iii) is applicable,then the household does not qualify as individuals or a family of Very Low Income. DOCssfi1:276271.2 44511-107-ADI-07/22/98 5:43 PM $-5 in, (Check one) The household does not qualify as individuals or a family of Very Low Income. The household qualifies as individuals or a family of Very Low Income, IV. Number of apartment unit assigned: (enter here and on page one) Owner NOTE TO PROTECT OWNER: A vacant unit previously occupied by individuals or a family of Very Low Income, may be treated as occupied by individuals or a fiunily of Very Low Income until reoccupied, other than for a period of 31 consecutive days or less, at which time the character of the unit shall be redetermined. DOCSSF1:276271.2 40511-107-Ai)1-07/22/98 5:43 PM $-( 0CCMANCY CERTIFICATE (To be filed with the Adnurustrator along with a Verification of Income upon the rental of a unit in the Project.) Project: BOLLINGER CREST APARTNIENTS The tenant identified in the attached Verification of Income has entered into a base with respect to a unit in the above-describedProject. j Such tenant is I is not(circle ane)a Very Low Income Tenant. The rental of a unit to such tenant will not result in a violation of any of the requirements of the Financing Agreement or the Regulatory Agreement to which the Owner is a party. Witness Owner Date: Date: DOCSSF1:276271.2 40511-107-ADI-07/22/98 5:43 PM B-7 EXHIBIT C [FORM OF CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE) CERTIFICATE OF Ct3I�1TINUiNG PROGRAM COMPLIANCE Witnesseth that on this_day of _ ' 19-,the undersigned,having borrowed funds nds from the COUNTY OF CONTRA COSTA (the "Issuer) for the purpose of financing a multifamily rental housing development(the"Project'),does hereby certify that: 1. During the preceding month (i)such Project was continually in;compliance with the Regulatory Agreement executed in connection with such loan from the Issuer, (ii) %of the units in the Project were occupied by Very Low Income Tenants(minimum of 40%). Set forth below are the names of Very Low Income Tenants who commenced or terminated occupancy during the preceding month. Commenced Occuppcy Terminated Occupancy 2. 2. 3. 3. The units occupied by Very Low Income Tenants are of similar size and quality to other units and are dispersed throughout the Project. Attached is a separate sheet listing the number of each unit and indicating which units are occupied by Very Low Income Tenants,the size,the number of bedrooms of such units and the number of Very Low Income Tenants who commenced occupancy of units during the preceding month. 2. Select appropriate certification: [No unremedied default has l occurred under this Regulatory Agreement,the Financing Agreement or the Mortgage.] [A default has occurred. The nature of the default and the measures being taken to remedy such default are as follows: 3. The representations set forth herein are true and correct to the bestof the undersigned's knowledge and belief Date: Owner DOCssF1:276271.2 40511-107-Ab1-07122198 5:43 PM C-1 § � � § � � ■ � � # � A � q ƒ � $ § . . � k / $ � % \ d 2 ./ ( � � o k E3GHBIT D STATISTICAL REPORT TO ISSUER Reporting Period: Date: As of the date hereof: 1. Of the Very Low Income Units occupied by Very Low Income Tenants: units are occupied by households with children; and units are occupied by elderly households with a member of age 62 or over. 2. The percentage of units currently occupied by whitey black,'Hispanic and Asian persons and American Indians are as follows (optional): white % black Hispanic Asian _ American Indian 3. The number of Very Low Income Tenants who terminated Meir rental agreements during the previous twelve (12) month period is 4. The number of units rented to new Low Income Tenants during the last twelve (12) month period is 5. The family names of each household currently occupying a Low Income Unit are listed on the schedule attached hereto. 6. The number of Low Income Units of various sizes is: one-bedroom: two-bedroom: three-bedroom: 7. The number of former Very Low Income Tenants whose Adjusted Income have exceeded 140% of the applicable income limit for a Very Low Income Tenant of the same family size and have therefore ceased to qualify as Very Low Income Tenants Is BOLLINGER CREST APARTMENT INVESTORS, LLC By Owner Representative DOCSSFI:276271.2 40511-107-ADI-07/22/98 5:43 PM D-1 r ED RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO. Arent Fox Kintner Plotkin& Kahn CLERK BOARD Of SUPERVISORS 1050 Connecticut Avenue,N.W. NTRA CURIA co. Washington, D.C. 20036-5339 Attention: Stephen D. Kahn, Esq. (Space above this line is for Recorder's use) ASSIGNMENT OF MORTGAGE LOAN This ASSIGNMENT OF MORTGAGE LOAN is made as of 1, 1998, by County of Contra Costa(the"Assignor"),a political subdivision of the State of California,to U.S. Bank Trust, a national banking association, duly organized and validly existing under the laws of the United States of America,not in its individual or corporate capacity,but solely as trustee, and to Fannie Mae, a corporation organized and existing under the FederalNational Mortgage Association Charter Act, 12 U.S.C. § 1716,rj=d. 1. Definitions. Capitalized terms used in this Assignment shall have the meanings given to these terms in this section 1'or elsewhere in this Assignment unless the context clearly indicates a different meaning. Capitalized terms used in this Assignment and not defined in this Assignment are defined in,and shall have the meanings given to those terms in, the Indenture. The meanings given to all defined terms shall be applicable whether such terms are used in the singular or the plural form. "Assigned Documents"means, collectively,the Mortgage Loan Documents. "Assigned Rights" shall have the meaning given to that term in section 2.1 of this Assignment. "fig" means, individually, Fannie Mae, as its interest may appear, or the Trustee, as its interest may appear, as the context shall permit or require, and,collectively,Fannie Mae and the Trustee,as their interests may appear. "Assignment" means this Assignment. Assignment of Mortgage Lain-Bollinger Crest (DRAFT 07115198) f e szAss " means County of Contra Costa, a political subdivision of the State of California, and its successors and assigns. "As their interests may.appear" or "as its interest,,,may an1jear" means, with reference to the Assigned Documents and/or the Assigned Rights,the respective interests, exclusive of the Reserved Rights of the Assignor,of Fannie Mae,L&„ "Fannie Mae's Interests"(as defined in paragraph (i)below),and of the Trustee,i&,,the "Trustee's Interests" (as defined in paragraph(ii) below), from time to time, in and to the Assigned Documents and the Assigned Rights: (i) "Fannie Mae's Interests" means and includes (a) all rights and interests of Fannie Mae under or pursuant to the Credit Facility Agreement, including, without limitation,the(1)right of Fannie Mae,pursuant to the Credit Facility Agreement,to payment by the Borrower of, or reimbursement by the Borrower for, all funds paid, advanced or otherwise provided by Fannie Mae under the Collateral Agreement and (2)right of Fannie Mae, pursuant to the Credit Facility Agreement, to payment by the Borrower, of all fees (including, without limitation, the Facility Fee and the Activity Fee), costs and expenses (including, without limitation, reasonable attorneys' fees) and other amounts payable to Fannie Mae under the Credit Facility Agreement as a result of its execution and delivery of, and, if applicable, any payment under, the Collateral Agreement, (b) all other rights of Fannie Mae to payment,reimbursement and/or security under the Credit Facility Agreement and under the Mortgage Loan Documents, or otherwise with respect to the transactions provided for in the Indenture,the Financing Agreement,the Mortgage Loan Documents(but excluding the payments to be received by the Trustee pursuant to the assignment of the Mortgage Note Payments Interest to the Trustee)and the Credit Facility Agreement, (c)the right of Fannie Mae to payment by the Borrower of all unreimbursed fees,costs, expenses and other sums paid or incurred by Fannie Mae (including, without limitation, reasonable attorneys' fees) in connection with the exercise by Fannie Mae of any duties, obligations, rights,powers,options,privileges or remedies as an Assignee under this Assignment and(d) the Mortgage Rights; (ii) the "Trustee's Interests" means and includes (a) the right to receive the payments to be received by the Trustee pursuant to the assignment of the Mortgage Note Payments Interest to the Trustee,(b)the right to receive all fees,costs and expenses owing to the Trustee under the Indenture, (c) the right to receive all unreimbursed fees, costs, expenses and other sums paid or incurred by the Trustee (including,without limitation, reasonable attorneys'fees and expenses),for itself or on behalf of the Assignor,in exercising any of its rights,powers,options,privileges or remedies as Assignee under this Assignment and(d)custody of the Mortgage Note and the Mortgage. "BorTower"means Bollinger Crest Apartment Investors, LLC,a California limited liability company. Assignment of Mortgage Loan.Bollinger Crest (DRAFT 07115148) -2- s "EXhiW AA" means Exhibit A attached to and by this reference made a part of this Assignment. "FannLe�M _e"means Fannie Mae, a corporation organized and existing under the Fannie Mae Charter Act, and its successors and assigns. "Fannie Mae Charter Act" means the Federal National Mortgage Association Charter Act, 12 U.S.C. §1716 rA=a, as amended from time to time. "Fannie Mae Pa„ ment Default"means a default under paragraph {i}of section 5.1 of the Collateral Agreement. "Financing Aareemen#"means the Financing Agreement,dated as of 1, 1998,between the Issuer,the Trustee,the Servicer and the Borrower,as the Financing Agreement may be amended, modified, supplemented or restated from time to time. "Improvements"means the improvements now existing and to be made on the Land. "Indenture" means the Trust Indenture, dated as of 1, 1998, between the Assignor and the Trustee, as the Trust Indenture may be amended,modified, supplemented or restated from time to time. "L "means the land described in Exhibit A,being the same land described in the Mortgage. "Mares"means the Multifamily Deed of Trust,Assignment of Rents and Security Agreement(the "Multifamily Instrument"),dated as of 1, 1998,together with the Rider to Multifamily Instrument,the Special Rider to Multifamily Instrument and all other riders to the Multifamily Instrument (together with the Rider to Multifamily Instrument and the Special Rider to Multifamily Instrument, the "Riders"), securing the Mortgage Note in the original principal amount of Dollars ($ ), executed by the Borrower, in favor of the Assignor,with respect to the Project,as the Multifamily Instrument and the Riders may be amended, modified, supplemented or restated from time to time,which Mortgage was recorded immediately prior to the recordation of this Assignment. "Mortgage an"means the mortgage loan made by the Assignor to the Borrower, evidenced by the Mortgage Note,secured by the Mortgage and otherwise evidenced and secured by the other Mortgage Loan Documents,for the purpose of providing funds to the Borrower to finance the Project. Assignment of Mortgage Loan-Hollinger Crest (DRAFT 07/15/98) -3- "Modgage Loan Documents" means, collectively (a)the Mortgage Note, (b) the Mortgage and (c) each of the other instruments documenting, evidencing, securing or otherwise relating to the Mortgage Loan, as each such instrument may be amended,modified,supplemented or restated from time to time, but specifically excluding the Financing Agreement and the Regulatory Agreement. "MortgageNote"means the Multifamily Note,dated as of 1, 1998,in the original principal amount of Dollars($ )evidencing the Mortgage Loan, secured by the Mortgage and otherwise evidenced and secured by the other Mortgage Loan Documents,as the Multifamily Note may be amended,modified,supplemented or restated from time to time. "Mortgage Note Payments Interest"means,with respect to the Mortgage Loan,the right of the Trustee to receive and retain all payments due and owing under the Mortgage Note other than(a)fees due to Fannie Mae, (b)servicing fees due to the Servicer, (c) late'charges, (d)default interest,(e)escrow payments for reserves,taxes,insurance and other impositions, and all payments for deposit into the Replacement Reserve(as defined in the Mortgage Note), (f)payments pursuant to any Ancillary Collateral Agreement(as defined in the Mortgage)and(g)other amounts which do not constitute principal or interest at the Pass-Through Rate (as defined in the Mortgage Note). "Mortgage Rights" means, with respect to the Mortgage Loan,without limitation, (a) all of the rights and interests under the Mortgage Note,the Mortgage, and the other Mortgage Loan Documents to direct actions, grant consents, grant extensions,grant waivers,grant requests, give approvals, give directions, exercise remedies, exercise forbearance, give releases, make appointments,make decisions,take actions,apply partial payments,apply late charges,apply default interest, apply escrow payments for reserves, taxes, insurance and other impositions, apply funds received pursuant to any Ancillary Collateral Agreement, and, subject to the exclusion set forth below,do all other things that may be done under the Mortgage Note,the Mortgage, and the other Mortgage Loan Documents and (b)the right, power and authority to,enter into and/or receive or accept delivery of and/or be a party to all Mortgage Loan Documents(other than the Mortgage Note and the Mortgage which are executed and delivered by the Borrower to the Issuer),to be executed and delivered in connection with the Mortgage Loan,and which are not entered into and/or received or accepted by the Issuer, or to which the Issuer is not a party, including,without limitation, any agreements, documents and instruments ancillary to or otherwise relating to the Mortgage Loan, including agreements with respect to the servicing of the Mortgage Loan and the establishment of custodial and other accounts for the deposit of fluids payable by the Borrower under the Mortgage Loan Documents and collected by the Servicer,and to vest in any assignee or delegatee,including the Servicer, such rights, powers and authority as may be necessary to implement any of the foregoing; "Mortgage Rights" also means, and expressly includes, with respect to the Mortgage Loan,custody of,and exclusive dominion and control over, each Mortgage Lean Document other than the Mortgage Note and the Mortgage, custody of which is held by the Trustee; "Mortgage Assignment of Mortgage Loan-Bollinger Crest (DRAFT 07115199) -4- r Rights" does not mean,and expressly excludes,the Reserved Rights(as defined in the Indenture) and, with respect to the Mortgage Loan, the Mortgage Note Payments Interest and custody of the Mortgage Note and the Mortgage(excluding rights to receive condemnation awards and insurance proceeds), all of which are assigned by the Issuer to the Trustee, subject to Section 3.12(2) and Section 3.12(3)of the Collateral Agreement,dated as of 1, 1998, between Fannie Mae and the Trustee. "Person"means an individual,partnership, corporation, limited liability company, business trust,joint stock company,trust,unincorporated association,joint venture, or other entity of any kind. "Pledged Collateral" shall have the meaning given to that term in the Collateral Agreement. "Pro "means,collectively,the Land and the Improvements and includes all of the Property. "Proms" shall have the meaning given to that term in the Mortgage. "atm"shall have the meaning given to that term in the introductory paragraph of this Assignment. "Underwriter"means PaineWebber Incorporated. 2. Assignm. ent. 2.1 ,Ansi ent. Subject to the specific assignments set forth in section 2.2 and section 2.3 of this Assignment,and further subject to the provisions of sections 2.4 through 2.12 of this Assignment, the Assignor absolutely and irrevocably assigns, transfers, conveys and delivers to each of the Assignees,and their respective successors and assigns,for the benefit of each of the Assignees,and their respective successors and assigns,in each instance as their interests may appear(i&,to Fannie Mae,as its interest may appear,and to the Trustee,as its interest may appear), without recourse,all (a)of the Assignor's right,title and interest in and to the(Mortgage Loan and each of the Assigned Documents,provided that the Reserved Rights of the Assignor are excepted from this assignment,transfer,conveyance and delivery,and provided further,that this reservation by the Assignor of its Reserved Rights shall not preclude the exercise by the Assignees of any other rights of the Assignor under the Assigned Documents and(b)right,title and interest of every nature of the Assignor(except for the Reserved Rights of the Assignor)in the rights to receive payments on the Mortgage Note and under the Mortgage and the other Mortgage Loan Documents(including all proceeds of insurance or condemnation awards)and in and to all Funds and Accounts(other than the Rebate Fund)held,maintained or administered by the Trustee pursuant to and in accordance with Assignment of Mortgage Loan-Bollinger Crest (DRAFT 07115/98) the Indenture and in all amounts on deposit in any Fund or Account (other than the Rebate Fund) held, maintained or administered by the Trustee pursuant to and in accordance with the Indenture (all rights;titles,interests,liens and privileges described in paragraphs(a)and(b)of this section 2.1 and assigned to the Assignees by this section 2.1 are, collectively, the "Assigned Rights"). Each Assignee, for and on behalf of itself and its successors and assigns, acknowledges receipt of, and accepts, and shall hold, the Assigned Rights, together with all right, title, interest, estates, liens, privileges,claims and demands and equities now existing,and to exist in the future, in connection with the Assigned Rights, or as security for the Assigned Rights, as its interest may appear. 2.2 Assignmgnt of MortgagtRights to Fannie Mae. Notwithstanding the provisions of section 2.1 of this Assignment,the Assignor absolutely and irrevocably assigns, transfers,conveys and delivers exclusively to Fannie Mae, and its successors and assigns,without recourse,the Mortgage Rights with respect to the Mortgage Loan. 2.3 Mortgage Note Payments,Interest Assigacd to Trustee; Morigage Note and Mortgage Held in Trust. Notwithstanding the provisions of section 2.1 of this Assignment,but subject to the provisions of section 2.5 of this Assignment and the provisions of the Collateral Agreement, the Assignor absolutely and irrevocably assigns, transfers, conveys and delivers to the Trustee, without recourse, (a)the Mortgage Note Payments interest with respect to the Mortgage Loan and(b)custody of the Mortgage Note and the Mortgage(excluding the right to receive condemnation awards and insurance proceeds and subject to the assignment of the Mortgage Rights to Fannie Mae pursuant to Section 2.2 of this Assignment),each such assignment to be (1) for the equal and proportionate benefit, security and protection of the owners of the Outstanding Bonds,without privilege,priority or distinction as to the lien or otherwise of any of the Bonds over any of the other Bonds,and(2)for the benefit of Fannie Mae,for the payment of all amounts owing to Fannie Mae and/or secured under the Credit Facility Agreement and the Assigned Documents. 2.4 Exercise of Assigned Right . Subject to the Reserved Rights of the Assignor and to the provisions of section 2.2, section 2.3 and section 2.5 of this Assignment, the Assignor agrees that either Assignee,in its own name or in the name of the Assignor,may enforce all of the Assigned Rights and all obligations of the Borrower under the Assigned Documents, without regard to whether the Assignor is in default under the Assigned Documents or under this Assignment. In order to implement the foregoing, the Assignor appoints each Assignee, and its successors and assigns, as the Assignor's true and lawful attorney-in-fact,irrevocably,with power of substitution to do any or all of the foregoing in the name,place and stead of the Assignor. This power of attorney, being coupled with an interest, is irrevocable as long as this Assignment shall remain in effect as to such Assignee. The Assignees shall not be obligated by reason of this Assignment or otherwise to perform or be responsible for the performance of any of the covenants or agreements of the Assignor under the Assigned Documents. In no event shall (a)the exercise of any of the foregoing rights, remedies or powers or (b) any default under any of the Assigned Documents and/or the Credit Facility Agreement result in a redemption of the Bonds or an Assignment of Mortgage Loan-Hollinger Crest (DRAFT 07/15/48) -6- acceleration of the Bonds pursuant to the terms of the Indenture unless Fannie Mae shall have directed such redemption or acceleration in writing. 2.5 Exclusive Exercise of Rights,by Fannie Mae: ExclusivC E rcifie of Rights by Trustee. 2.5(1) Fannie Mae. Notwithstanding any other provision of this Assignment to the contrary,until this Assignment is terminated as to Fannie Mae, as provided in section 6 of this Assignment,or until a Fannie Mae Payment Default shall have occurred and,in that event,only during such period of time as the Fannie Mae Payment Default continues,Fannie Mae shall,subject to the assignment of the Mortgage Note Payments Interest to the Trustee pursuant to section 2.3 of this Assignment, have(a)exclusive dominion and control over,and the sole right to exercise, the Mortgage Rights and (b) the sole and exclusive right to exercise all of the rights, powers,options,privileges and remedies provided to the Assignees in this Assignment, including, but not limited to, all rights to enforce all obligations of the Borrower under the Assigned Documents(except for the Reserved Rights)and to enforce all of the Assigned Rights to the total exclusion of the Trustee,and without the consent of the Trustee,and the Trustee shall not have, and may not exercise,any of such rights,powers,options,privileges and remedies. Any one or more of the Mortgage Rights afforded to Fannie Mae under the provisions of this Assignment may be exercised by Fannie Mae concurrently with or independently of the exercise of any one or more other Mortgage Rights. Consistent with the foregoing,until this Assignment is terminated as to Fannie Mae,as provided in section 6 of this Assignment,or until a Fannie Mae Payment Default shall have occurred and, in that event, only during such period of time as the Fannie Mae Payment Default continues, the proceeds of any foreclosure of the Project or other enforcement of the Assigned Documents, the proceeds of any sale of the Project, the rents and other amounts generated by the holding, leasing, operation or other use of the Project, and any condemnation and insurance proceeds, shall be applied in any manner permitted by the Mortgage,as directed by Fannie Mae, in its discretion. 2.5(2) Trustee. Only at such time as this Assignment shall have terminated as to Fannie Mae as provided in section 6 of this Assignment or during such period of time as there exists a continuing Fannie Mae Payment Default may the Trustee',exercise any of the rights,powers,options,privileges and remedies provided to the Assignees under this Assignment, including,but not limited to,all rights to enforce all obligations of the Borrower under the Assigned Documents and to enforce all of the Assigned Rights to the exclusion of Fannie Mae,and without the consent of Fannie Mae, provided that, and notwithstanding any such Fannie Mae Payment Default, Fannie Mae shall be entitled to receive all notices pursuant to this Assignment, the Indenture and the Assigned Documents. Assignment of Mortgage Loan-Bollinger Crest (DRAFT 07/1 S/9$) -7- 2.5(3) Disclaimer of Assumption gff Obligations. Neither the Trustee nor Fannie Mae shall be deemed by reason of this Assignment to have assumed the obligations of the Assignor, if any,under the Financing Agreement. 2.6 Further Assurances. The Assignor covenants that it will,at the sole expense of the Borrower, cooperate to the extent necessary with the Borrower, the Trustee and Fannie Mae in their defenses of the security for the Bonds against the claims and demands of all Persons, and will do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, such additional and supplemental agreements, instruments and documents,do such ftuuthher acts,and make such further transfers as the Trustee or Fannie Mae may reasonably request to effectuate the purpose and intent of this Assignment. The Assignor shall execute and Fannie Mae and the Trustee shall do,execute,acknowledge and deliver,such additional and supplemental agreements, documents and instruments, do such further, acts and make such further transfers as Fannie Mae or the Trustee may reasonably require for the better assuring, transferring, conveying, pledging, assigning and confirming to Fannie Mae and the Trustee the interests to be assigned pursuant to this Assignment. 2.7 No Other Encumbrances. The Assignor covenants that, except as otherwise provided in the Indenture,this Assignment and the Collateral Agreement, it will not sell, convey, mortgage, encumber or otherwise dispose of any of the Assigned Rights or any of the Assigned Documents. 2.8 Consent Required for AmOdMents. The Assignor covenants that it will not agree to any amendment,modification,supplement,waiver or consent with respect to any of the Assigned Documents without the prior written consent of the Trustee and Fannie Mae. 2.9 Custody of Mortgage Mote and,MQ a . Subject to the provisions of section 3.12 of the Collateral Agreement,the Trustee shall,in accordance with Section 2.3 of this Assignment,hold the original Mortgage Note,duly endorsed to the Trustee and Fannie Mae,as their interests may appear, and the recorded Mortgage. True copies of the Mortgage Note and the Mortgage shall be delivered to and held by Fannie Mae, and the originals (or, where recorded, executed copies)of all other Mortgage Loan Documents,shall be delivered to,held by,and be under the exclusive dominion and control of,Fannie Mae. 2.10 Remedies Cumulative. The rights, powers and remedies of the Assignees under this Assignment are in addition to all rights,powers and remedies given by statute or rule of law and are cumulative. The exercise of any one or more of the rights,powers or remedies provided in this Assignment shall not be construed as a waiver of any other rights, powers and remedies of any of the Assignees. Assignment of Mortgage Loan-Bollinger Crest (DRAFT 07115198) 2.11 Qhligiltions Limited. Neither Assignee,as such, shall be obligated to take any steps which are or may be necessary to preserve any rights of the Assignee in and to the Assigned Documents or the Assigned Rights against any other parties who may be liable in connection therewith. Neither Assignee,as such, shall have a duty to comply with any recording, re-recording, filing, re-fling, or other legal requirements necessary to establish or maintain the validity,priority or enforceability of,or the Assignee's rights in and to,the Assigned Documents or the Assigned Rights. 2.12 LiMitationson Assigno . From and after the elate of this Assignment, the Assignor shall not,except with respect to its Reserved Rights (a)deal in any manner with any of the Assigned Documents, (b) exercise or refrain from exercising any of the Assigned Rights or any rights under the Assigned Documents,(c)purport to exercise or refrain from exercising any of the Mortgage Rights or (d) take any other action with respect to the Assigned Documents, the Assigned Fights or the Mortgage Rights. 3. LiMitatigns on .At 'on . Notwithstanding any other provision of this Assignment to the contrary, until this Assignment shall have terminated as to Fannie Mae as provided in section o of this Assignment or until a Fannie Mae Payment Default shall have occurred and, in that event,only during such period of time as the Fannie Mae Payment Default continues, neither the Assigner nor the Trustee,nor any person under the control of the Assignor or the Trustee, shall,without the prior written consent of Fannie Mae(a)initiate or take any action which may have the effect,directly or indirectly,of impairing the ability of the Borrower to timely pay the principal, interest or other amounts due under the Mortgage Loan, (b) upon the occurrence of an event of default under the Mortgage Loan,take any action to accelerate or otherwise enforce payment or seek other remedies with respect to the Mortgage Loan, (c) interfere with or attempt to influence the exercise by Fannie Mae of any of its rights under the Mortgage Loan Documents,including,without limitation,the Mortgage Rights,or any of the documents relating to the Bonds or(d)exercise any remedies or direct any proceedings under the Financing Agreement except at the express direction of Fannie Mae, provided that such restrictions shall not be construed to limit the rights of the Assignor to seek specific performance of the Regulatory Agreement or to otherwise specifically enforce its Reserved Rights or to take any action against the Borrower for the payment of fees,costs and expenses payable to the Assignor,or of the Trustee to take action against the Borrower for the payment of fees, costs and expenses payable to the Trustee. 4. Exculpation. Notwithstanding any term or provision of this Assignment and/or the Assigned Documents to the contrary, Fannie Mae shall not be liable under this Assignment to any other parry to this Assignment for any action taken or omitted by Fannie Mae in connection with the Mortgage Loan,the Assigned Documents or this Assignment except for such action or omission which is directly attributable to its own gross negligence or willful misconduct. Fannie Mae shall be protected and shall incur no liability in relying upon the accuracy, acting in reliance upon the contents, or assuming the genuineness, of any notice, demand, certificate, Assignment of Mortgage Loan o Ballinger Creat (DRAFT 07115/99) -9- signature,instrument or other document believed by Fannie Mae to be genuine and to have been duly executed by the appropriate signatory. In addition, Fannie Mae shall be protected and shall incur no liability in relying upon an opinion of counsel with respect to any action taken or not taken in good faith by Fannie Mae under this Assignment or any of the Assigned Documents. Fannie Mae shall, at all times, be free to establish independently to its satisfaction and in its discretion the existence or non-existence,as the case may be,of any fact the existence or non-existence of which shall be a condition to any term or provision of this Assignment or of any of the Assigned Documents. The immunities and exemptions from liability of each Assignee shall extend to its directors,officers,employees and agents. 5. Disclaimers. Approval by Fannie Mae of the Borrower,l the Mortgage Loan, the Bonds or otherwise shall not constitute a warranty or representation by Fannie Mae as to any matter. Nothing set forth in this Assignment or in the subsequent conduct of the parties shall be deemed to constitute Fannie Mae as the partner of any person for any purpose)whatsoever. 6. Termination. This Assignment(a)shall terminate and be of no further force or effect as to Fannie Mae at such time as the Term(as defined in the Reimbursement Agreement) of the Reimbursement Agreement terminates in accordance with Section 6.8 of the Reimbursement Agreement and(b)shall terminate and be of no further force or effect as to the Trustee at the earlier of(1)such time as the Bonds shall have been paid in full or deemed paid in full as provided in the Indenture or(2)by mutual written agreement of the Assignor and the Trustee after this Assignment shall have so terminated as to Fannie Mae. Fannie Mae agrees that upontermination of this Assignment as to Fannie Mae,as provided in clause(a)of the preceding sentence, it will execute a release,in recordable form,of its rights and interests under this Assignment. 7. lncorporatign of Mortgage. The provisions of the Mortgage are, by this reference,incorporated into this Assignment and shall have the same force and effect as if fully set forth in this Assignment. 8. Issuer's Acknowledgment. The Issuer(a)acknowledges that on the Fannie Mae Pass-Through Certificate Delivery Date the Trustee will assign to the Servicer,and the Servicer will, in turn,assign to Fannie Mae,all of the Trustee's right,title and interest in and to the Mortgage Loan and each of the Assigned Documents and the Assigned Rights assigned to the Trustee pursuant to this Assignment, such that Fannie Mae will succeed completely to the interests of the Trustee under this Assignment and the position of the Trustee vis-a-vis the Mortgage Loan and each of the Assigned Documents and the Assigned Rights,and (b)consents to that assignment and agrees, if deemed necessary by Fannie Mae, to (1) join in that assignment, and in the assignment by the Servicer to Fannie Mae and(2)execute,acknowledge and deliver such additional assignments and other instruments as shall be necessary to confirm and fully effectuate the assignment of all of the Trustee's right,title and interest in and to the Mortgage Loan and each of the Assigned Documents Assignment of Mortgage Loan-Hollinger Crest (DRAFT 07/15/99) _10- and the Assigned Rights to the Servicer,and by the Servicer to Fannie Mae,on the Fannie Mae Pass- Through Certificate Delivery Date. 9. Notice. All notices given under or pursuant to this Assignment shall be given: To the Assignor: County of Contra Costa 651 Pine Street Martinez,California 94553 Attention: Deputy Director Redevelopment Telephone : (925)335-1255 Facsimile: (925) 335-1265 To the Trustee: U.S. Bank Trust SANF0527 One California Street, Suite 400 San Francisco,California 94111 Attention: Corporate Trust Services Telephone: (415)2734556 Facsimile: (415)273-4591 To Fannie Mae: Fannie Mae 3900 Wisconsin Avenue,N.W. Drawer AM Washington,D.C. 20016 Attention: Director,Multifamily Operations Asset Manager Facsimile: (202) 752-3542 RE: $ County of Contra Costa Multifamily Housing Revenue Bonds (Bollinger Crest Apartments Project) 1998 Series A/Washington Capital DUS, Inc. [for messenger use 4000 Wisconsin Avenue,N.W.,and delete Drawer AM) with a copy to: Fannie Mae 3900 Wisconsin Avenue,N.W. Washington,D.C. 20016 Attention:'Vice President,Multifamily Asset Management Facsimile: (202)752-5016 Assignment of Mortgage Loan-Bollinger Crest (DRAFT 07115!48) -11- RE: S County of Contra Costa Multifamily Housing Revenue Bonds (Bollinger Crest Apartments Project) 1998 Series A/Washington Capital DUS,Inc. [for messenger use 3939 Wisconsin Avenue,N.W.] Copies of all notices under or pursuant to this Assignment shall be given: To the Borrower: Bollinger Crest Apartment Investors, LLC 45752 Mission Boulevard, Suite E Fremont,California 94539 Attention: Managing Member Telephone: (510)623-6320 Facsimile: (510) 623-6324 To the Servicer: Washington Capital DUS,Inc. 1616 N. Fort Myer Drive, Suite 1200 Arlington,Virginia 22209 Attention: Executive Vice President Telephone: (703)243-5100 Facsimile: (703) 5254323 10. Miscellaneous. 10.1 Waivers. The Assignees shall not by any act, delay, omission or otherwise be deemed to have waived any of their rights or remedies under this Assignment and no waiver whatever shall be valid,unless in writing signed by the Assignees,and then only to the extent set forth in the waiver. A waiver by the Assignees of any default, right or remedy under this Assignment on any one occasion shall not be construed as a waiver of any other default or be a bar to any right or remedy the Assignees would otherwise have on any future occasion. 10.2 Governing Law. This Assignment shall be governed by and construed in accordance with the laws of the State of California,without regard'to conflicts of laws principles, except to the extent that the laws of the United States of America may prevail. 10.3 References. Whenever any party is referred to in this Assignment, such reference shall be deemed to include the successors and assigns of such party. 10.4 Addifional AssignMen . In the event that the Borrower is no longer the owner of the Project and a new mortgagor is substituted in its place, or if the Mortgage is Assignment of Mortgage Loan-Bollinger Crest (DRAFT 07/15/99) -12- replaced by a new mortgage on the Project,the Assignor shall promptly execute and deliver to the Assignees,and shall promptly record,a new assignment,substantially the same as this Assignment, which shall refer to this Assignment. 10.5 No Merger of Intere ts,. There shall be no merger of the interests of any of the Bondholders with the interests of any holder of the Assigned Rights by reason of the fact that the same person,firm or entity may acquire,own or hold,directly or indirectly, such interests, unless and until such person, firm or entity and all others having an interest in the Bonds and the Assigned Rights shall effect such merger in a written,duly recorded instrument. 10.6 Approval of Documents. All documents relating to the transactions described in this Assignment shall be subject to the approval of Fannie Mae, in its discretion. 10.7 Apilroval or Consent of.Waivers byFannie Mai. If any provision of this Assignment provides for the prior approval or consent of Fannie Mae or any waiver by Fannie Mae and if a basis for Fannie Mae granting such approval,consent or waiver is not otherwise stated, then it is understood and agreed that such approval,consent or waiver will be given by Fannie Mae in its discretion. 10.8 Discre 'on. Whenever Fannie Mae shall have any right or option to exercise any discretion,to determine any matter,to accept any presentation or to approve any matter, such exercise, determination, acceptance or approval shall, without exception,be in Fannie Mae's sole and absolute discretion. Assignment of Mortgage Loan•Bollinger Crest (DRAFT 07;15/98) -13- The Assignor has duly executed this Assignment as of the day and year first above written. COUNTY OF CONTRA COSTA By: Name: Title: ti Assignment of Mortgage Loan-Bollinger Crest (DRAFT 07/15/98) -14- ACKNOMIEDGENI ESTATE/COMMONWEALTH], County ss: The foregoing instrument was acknowledged before me this (stare) by ,the[ 1 of the County of Contra Costa,a political subdivision of the State of California,on behalf of the County of Contra Costa. My Commission Expires: Notary Public (NOTARIAL SEAL] G:\KAF rs\w7P HOW\FANNM.MA£usoLl NGR\AssiGN.NIL Assignment of Mortgage Loan-Bollinger Crest (DRAFT 07/15/98) Exhibit A PropujX Ikscriplion Assignment of Mortgage Loan-Bollinger Crest (DiiAFF 47115148) 16- Nossaman,Guthner,Knox&Elliott,LLP July 20, 1998 $7,UA#1,U00 COUNTY OF CONTRA COSTA MULTIFAMILY HOUSING REVENUE BONDS (BOLLINGER CREST APARTMENTS) 1998 SERIES C BOND PURCHASE AGREEMENT 1998 County of Contra Costa 651 Pine Street,4th Floor,North Wing Martinez,California 94553 Bollinger Crest Apartment Investors,LLC 46752 Mission Boulevard,Suite E Fremont,California 94539 Ladies and Gentlemen: PaineWebber Incorporated (the "Purchaser") hereby enters into this BondPurchase Agreement with the County of Contra Costa^ (the "Issuer") and Bollinger Crest Apartment Investors, LLC, a California limited liability company (the 'Borrower"). All defined terms used herein shall have the meaning set forth in the Indenture(hereinafter defined),except as otherwise provided herein. 1. Introductory. In accordance with the authority contained in Chapter 7 of Part 5 of Division 31 of the California Health and Safety Code, as the same may be amended (the "Act"), the Issuer is authorized to issue $7,000,000 aggregate principal amount of Multifamily Housing Revenue Bonds (Bollinger Crest Apartments) 1998 Series C (the "Bonds"). The Bonds are being issued by the Issuer to provide funds to make a loan to the Borrower to provide construction and permanent financing for a multifamily rental housing project(the "Project")to be occupied by tenants whose incomes satisfy certain income requirements set forth in certain provisions of the Internal Revenue Code of 1986, as amended(the "Code"). The Bonds are being issued pursuant to a Trust Indenture dated as of August 1, 1998(the"Indenture")by and between the Issuer and (the "Trustee"). Pursuant to a Financing Agreement(the "Financing Agreement")dated as of August 1, 1998, among the Issuer, the Trustee, Washington Capital DUS, Inc., a Delaware corporation (the'"Servicer"), and the Borrower, the proceeds of the Bonds shall be applied to enable the issuer to fund a new loan (the "Mortgage Loan")to the Borrower. Fannie Mae has issued a commitment(the "Fannie Mae Commitment")to the Servicer pursuant to which Fannie Mae has agreed, subject to satisfaction of the terms and conditions of the Fannie Mae OLD:SPS91630046NEW,SM82010016 . . ...... ......... ......... ......... ......... ......... ............................_...................._...... ....... ........_.__...._......._... ......... ......... ............ ........ ........ .. Commitment, to (a)provide credit enhancement for the Mortgage Loan pursuant to, and subject to the limitations of,a Collateral Agreement,dated as of August 1, 1998,between Fannie Mae and the Trustee, and (b)acquire the Mortgage Loan in exchange for a Fannie Mae Pass-Through';Certificate if, and at such time as, the Fannie Mae Pass-Through Certificate Delivery Requirements set forth in the indenture (including,but not limited to,issuance of the Conversion Notice by the Servicer prior to the Termination Date evidencing that each of the Conditions to Conversion set forth in the Fannie Mae Commitment has been satisfied (or, to the extent that any Condition to Conversion has not been satisfied prior to the Termination Date, such Condition to Conversion has been waived in writing by Fannie Mae prior to the Termination Date))are satisfied such that the Trustee will issue the Fannie Mae Pass-Through Certificate Delivery Notice. If issued, the Fannie Mae Pass-Through Certificate will be substituted for the Collateral Agreement. Distributions of principal and interest under the Fannie Mae Pass-Through Certificate will be made by Fannie Mae regardless of whether corresponding payments on the Mortgage Loan are paid when due. If the Conditions to Conversion are not met prior to the Termination Date,the Bonds are subject to special mandatory redemption in accordance with the Indenture. The Bonds shall mature and shall bear interest at the rates of interest set forth on Schedule I hereto. Interest on the Bonds shall be payable semiannually on^ n'I I and ^ October I of each year, —ARcommencing on ^ April 1, 1999 (each an "Interest Payment Date"). The Bonds will be subject to optional and mandatory redemption by the Issuer prior to maturity under the circumstances and at the prices and times set forth in the Indenture and as described in the Official Statement (as hereinafter defined). Interest on the Bonds will be computed on the basis of a 360-day year consisting of twelve 30- day months. The Bonds will be issued as fully registered Bonds in the denomination of$5,000 principal amount or any integral multiple thereof. The Bonds will be issued in book-entry form only and will be registered in the name of Cede & Co. as the agent of The Depository Trust Company,New York, New York. Principal of and premium, if any, on the Bonds will be payable to the registered owner thereof upon surrender thereof at the Principal Office of the Trustee(as defined in the Indenture). Interest on the Bonds will be payable by check or draft mailed to the registered owners of the Bonds as of the close of business on the Record Date(as defined in the Indenture) immediately preceding each Interest Payment Date at the addresses of the registered owners as they appear on the bond registration books of the Trustee. At the request of any registered owner of at least $1,000,000 or more in aggregate principal amount of the Bonds, the principal of,premium, if any, and interest on the Bonds will be paid by wire transfer to such account as any such Bondholder shall specify. 2. Purchase. Sale and Delivery of Bonds. On the basis of the representations, warranties and agreements contained herein, but subject to the terms and conditions herein set forth,the Purchaser hereby agrees to purchase from the Issuer, and the Issuer hereby agrees to sell to the Purchaser, all but not less than all of the Bonds at a purchase price of^X7,000.000,plus accrued interest to the Closing(as defined below). In consideration of the Bonds being purchased by the Purchaser, the Purchaser in connection with the financing,the Purchaser shall be paid an underwriting fee of %of the principal amount of the Bonds ($ ) by wire transfer funds prior to 10:00 am. on the Closing Date. Purchaser's underwriting fee shall be the sole obligation of the Borrower. This fee is conditional upon the Bonds being issued. The Issuer will cause the Bonds to be delivered to DTC in New York, New York, and the Purchaser will pay the purchase price therefor in immediately available funds by 9:00 a.m., California time, on August 5, 1998, or at such other time as the Purchaser, the Issuer and the Borrower may agree (such time being hereinafter referred to as the"Closing" or"Closing Date"). The Bonds to be delivered -2- __ shall be in book-entry form,shall bear CUSIP numbers,and shall be in fully registered form registered in the name of Cede & Co., as nominee of DTC, with one Bond for each maturity;of the Bonds in the aggregate principal amount of such maturity. 3. Delivery of Official Statement. The Issuer by official action of its governing board has approved the Preliminary Official Statement relating to the Bonds dated July—, 1998 (the "Preliminary Official Statement"). Both the Issuer and the Borrower have deemed portions of the Preliminary Official Statement relating to it to be final as of its date for purposes of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934("Rule 15c2-12"). The Issuer hereby ratifies the use of the Preliminary Official Statement by the Purchaser in the marketing of the Bonds. The Issuer'shall provide to the Purchaser, at the expense of the Borrower, within seven business days following the date hereof, a quantity of final Official Statements, including final information as to the matters omitted from the Preliminary Official Statement in accordance with Rule 15c2-12 (the "Official Statement") adequate to enable the Purchaser to meet the continuing obligations imposed on it by Ruler 15c2-12 under the Securities Exchange Act of 1934; provided that the Purchaser shall have advised the Issuer of such quantity within two business days following the date hereof. 4. Financiniz Documents. The obligation of the Purchaser to purchase the Bonds is subject to the condition that on or prior to the Closing Date, the Purchaser shall have received the following in form and substance satisfactory to the Issuer and the Purchaser. (a) A copy of the Indenture, duly executed and delivered by the Issuer and the Trustee; (b) A copy of the Financing Agreement(the "Financing Agreement")duly executed and delivered by the Issuer,the Borrower,the Servicer and the Trustee; (c) A copy of the Regulatory Agreement and Declaration of.Restrictive Covenants, dated as of August 1, 1998 (the "Regulatory Agreement"), duly executed and delivered by the Issuer,the Trustee and Borrower. (d) A copy of the Collateral Agreement duly executed and delivered by Fannie Mae and the Trustee; (e) A copy of the Fannie Mae Commitment issued by Fannie Mae and accepted by the Servicer; (f) Certified copies of the final Resolution of the Issuer approving the issuance and sale of the Bonds(the"Resolution");and (g) All other material documents relating to the foregoing. The Issuer agrees to provide the Purchaser, at the expense of the Borrower, with a reasonable number of additional copies of the Official Statement as the Purchaser shall request, and the Issuer authorizes the use thereof in connection with the offer,sale and distribution of the Bonds. -3- _.. ......... ......... ..._..... ....._... ......... ...................................... ....... ._....... ........................... ........ ....... ......... .......... ....... ........ ......... ....... 5. Representations and Warranties of the Issuer. The Issuer represents and warrants to the Purchaser that: (a) The Issuer is a joint powers agency organized and existing under the laws of the State of California (the "State") and has and as of the Closing Date will have full legal right, power and authority(i)to enter into this Bond Purchase Agreement, (ii)to issue, sell and deliver the Bonds as provided herein, (iii)to cause the lending of the proceeds thereof to the Borrower under the Mortgage Loan,(iv)to carry out the transactions contemplated by this Bond Purchase Agreement,the Indenture, the Official Statement,the Financing Agreement, the Mortgage Loan and the Regulatory Agreement as they may be amended or supplemented from time to time by the Issuer. (b) The statements contained in the Preliminary Official Statement and the Official Statement under the caption "THE ISSUER" and the first paragraph after the caption "NO LITIGATION" do not contain any untrue statement of a material fact or omit,to state a material fact necessary in order to make the statements relating to the Issuer contained therein, in light of the circumstances under which they were made,not misleading. (c) By official action of the Issuer prior to or concurrentlywith the acceptance hereof, the Issuer has duly authorized and approved the use and distribution of the Preliminary Official Statement and the Official Statement, has duly authorized and approved the execution and delivery of, and the performance by the Issuer of the obligations on its part contained in,the Indenture, the Bonds, this Bond Purchase Agreement, the Financing Agreement, the Regulatory Agreement and the Assignment (collectively, the "Issuer Documents") and has duly authorized and approved the consummation of all other transactions contemplated by this Bond Purchase Agreement. (d) The Issuer is not in breach of or default under any applicable law or administrative regulation of the State or the United States which would impair the performance of its obligations under the Issuer Documents or any applicable judgment or decree or any loan agreement, note, resolution, agreement or other instrument to which the Issuer is a party or is otherwise subject, and the execution and delivery of the Bonds or the Issuer Documents, and compliance with the provisions of each thereof, will not conflict with or constitute a breach of default under any California or federal law, administrative regulation, judgment, decree, loan agreement, note, resolution, agreement or other instrument to which the Issuer is a party or is otherwise subject. (e) All approvals, consents and orders of any California governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to the performance by the Issuer of its obligations hereunder and under the Issuer Documents have been obtained and are in full force and effect. (f) To the best of the Issuer's knowledge,there is no action,suit,proceeding, inquiry or investigation, at law or in equity, before or by any California court, public board or body, pending or threatened against the Issuer affecting the existence of the Issuer or the titles of its officials to their respective offices or seeking to prohibit, restrain or enjoin the operation of the Project or the sale, issuance or delivery of the Bonds or the pledge of revenues or assets of the Issuer pledged or to be pledged to pay the principal of and interest on the Bonds, or in any way contesting or affecting the validity or enforceability of the Act,the Resolution,the Bonds or the -4- ..... _........ ._..._.__. _..._.. ......... ......... ._....... ......... ..............._... ......... .......... ......... ........_.. .._...__... ............ .............. . ......._.. .__....... .......................... Official Statement, or contesting the powers of the Issuer for the issuance of the Bonds, the execution and delivery of this Bond Purchase Agreement or the Issuer Documents. (g) The Bonds, when issued, authenticated and delivered in accordance with the Indenture and sold to the Purchaser as provided herein, will be validly issued and outstanding limited obligations of the Issuer according to their terms and entitled to the benefits of the Indenture. (h) The Issuer has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that the Issuer is a bond issuer whose arbitrage certifications may not be relied upon. (i) Not later than the date required therefor,the Issuer will prepare and file with the Internal Revenue Service Center Form 8038 as required by Section 149(e)of the Code. 0) To the best knowledge of the Issuer, the issuance and sale of the Bonds to the Purchaser will not be subject to any transfer or other documentary stamp taxes of the State or any political subdivision thereof. Any certificate signed by an authorized officer of the Issuer and delivered to the Purchaser shall be deemed a representation and warranty by the Issuer to the Purchaser as to the statements made therein. 6. Representations and Warranties of the Borrower. The Borrower represents and warrants to the Purchaser that: (a) The Borrower is a California limited liability company, duly organized and existing and in good standing under the laws of the State of California. The Borrower has full legal right, power and authority (i)to enter into this Bond Purchase Agreement, the Financing Agreement, the Mortgage, the Mortgage Note, the Reimbursement Agreement and the Regulatory Agreement (collectively, the "Borrower Documents"), (ii)to borrow the funds specified in the Borrower Documents for the purposes specified therein,and(iii)to carry out the transactions contemplated by the Borrower Documents,the Indenture and the Official Statement. (b) The statements in the Official Statement relating to the Borrower and the Project set forth under the caption "THE BORROWER AND THE PROJECT"and the second paragraph after the caption "NO LITIGATION." do not, as of the date thereof, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading. (c) The Borrower is duly qualified to do business in the State of California. (d) The Borrower has the power and authority to enter into and perform its obligations under the Borrower Documents to which the Borrower is a party. The execution, delivery and performance by the Borrower of the Borrower Documents to which the Borrower is a party have been duly authorized by all requisite action on the part of the Borrower. (e) As of the date hereof,to the best knowledge of the Borrower,the Borrower is not in any material respect in breach of or default under any applicable law or administrative -5- ....... ......... ......... ......... ......... ......... ........................................................................................ ........ ........ .....__.................... ........ ........ ......._... ........... .......... ........_......................._... regulation of the State of California or the United States or any applicable judgment or decree or any loan agreement, note resolution, agreement or other instrument to which the Borrower is a party or otherwise subject, which breach or default would have a materially adverse impact on the transactions contemplated by this Bond Purchase Agreement and the Official Statement; and the execution and delivery of the Borrower Documents and compliance with the provisions of each thereof will not conflict with or constitute a breach of or default under any law, administrative regulation, judgment, decree or material loan agreement, note, resolution agreement or other instrument to which the Borrower is a party or is otherwise subject, which breach or default would have a material adverse effect upon the transactions contemplated by this Bond Purchase Agreement. (f) All approvals,consents and orders of any governmental authority, board,agency or commission having jurisdiction which would constitute a condition precedent to the performance by the Borrower of its obligations under the Borrower Documents have been obtained. (g) As of the date hereof, to the best knowledge of the Borrower, there is no action, suit,proceeding, inquiry or investigation,at law or in equity,before or by any court,public board or body, pending or threatened against the Borrower in any way contesting or affecting the transactions contemplated by the Borrower Documents or contesting in any way the completeness or accuracy of the Official Statement as it relates to statements contained under the caption "THE BORROWER AND THE PROJECT" or the second paragraph after the caption "NO LITIGATION" or the execution and delivery of the Borrower Documents or, to the best knowledge of the Borrower, seeking to prohibit, restrain or enjoin the making of the Mortgage Loan,or the sale,issuance or delivery of the Bonds,nor,to the best knowledge of the Borrower, is there any basis therefor,wherein any unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the Borrower Documents. (h) Each of the representations and warranties of the Borrower made in the Borrower Documents is true and correct as of the date hereof and will remain true and correct as of the Closing Date. (i) The Borrower will undertake, pursuant to a Continuing Disclosure Agreement, to provide certain annual financial information and notices of the occurrence of certain events, if material. A description of this undertaking is set forth in the Preliminary Official Statement and will also be set forth in the Final Official Statement. Any certificate signed by the Borrower and delivered to the Purchaser at the Closing shall be deemed a representation and warranty by the Borrower to the Purchaser as to the statements made therein. 7. Covenants. Each of the Issuer and the Borrower covenant with the Purchaser that if between the date on which the Official Statement is delivered pursuant to Section!3 hereof and 25 days after the End of the Underwriting Period(as hereinafter defined)(or such longer period as the Issuer and the Purchaser shall agree), an event occurs which would cause the information in the Official Statement to contain an untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, it shall notify the Purchaser of any such event of which it has knowledge or if the purchaser notifies the Issuer and the Borrower of such an event, and, if in the opinion of the Issuer and the Purchaser such -6- _. _....._ ......... ......... ......_..._...... _. . ..... ........ ........_......_.......... ._........ ......_..._... ......... ......... ......... ......... ......._._...... _.. _.....__. ........._......_. event requires an amendment or supplement to the Official Statement, the Issuer, at the expense of the Borrower, will amend or supplement the Official Statement in a form and in a manner approved by the Issuer and the Purchaser. As used herein,the term"End of the Underwriting Period"means the later of such time as(i)the Issuer delivers the Bonds to the Purchaser, or(ii)the Purchaser does not retain, directly or as a member of an underwriting syndicate,an unsold balance of the Bonds for sale to the public. Unless the Purchaser gives notice to the contrary,the End of the Underwriting Period shall be deemed to be the Closing Date. Any notice delivered pursuant to this provision shall be written notice delivered to the Issuer at or prior to the Closing Date,and shall specify a date(other than the Closing Date)to be deemed the "End of the Underwriting Period". The Issuer and the Borrower shall furnish such information, execute such instruments and take such other action consistent with the provisions of the Indenture, the Mortgage Loan and the Financing Agreement in cooperation with the Purchaser as the Purchaser may reasonably request to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Purchaser may designate; provided,;however, neither the Borrower nor the Issuer shall be required to register as a dealer or broker in any such state or jurisdiction or execute any consent to jurisdiction; and provided further all filing fees and other costs shall be paid by the Purchaser. S. Conditions to Obligations of Purchaser. The obligation of the Purchaser to purchase and pay for the Bonds will be subject to the accuracy of the representations and warranties of the Issuer herein, to the accuracy of the representations and warranties made by the Borrower herein and in the Borrower Documents,to the accuracy of statements to be made on behalf of the Issuer and the Borrower hereunder, to the performance by the Issuer and the Borrower of their respective obligations hereunder and to the following additional conditions precedent: (a) At the Closing Date, the Resolution and the Issuer Documents and all official action of the Issuer relating thereto shall be in full force and effect and; shall not have been amended,modified or supplemented except as may have been agreed to by the Purchaser. (b) The Issuer shall have received an approving opinion of Orrick, Herrington & Sutcliffe LLP, San Francisco,California,Bond Counsel,substantially in the form attached to the Official Statement as Appendix G and acceptable to the Purchaser and counsel to the Purchaser, and the Purchaser,Fannie Mae and the Trustee shall have received a letter from said firm, dated the Closing Date and addressed to the Purchaser, Fannie Mae and the Trustee, to the effect that the Purchaser, Fannie Mae and the Trustee may rely upon such firm's approving opinion as if they were addressed to the Purchaser and the Trustee. (c) The Purchaser shall have received opinions,dated the Closing Date,of- (i) Bond Counsel, addressed to the Purchaser and in substantially the form attached hereto as Exhibit A; (ii) Counsel to the Issuer, addressed to the Purchaser,',Fannie Mae and the Trustee and in substantially the form attached hereto as Exhibit B; -7- _..._. ......... ......... ......... ......... ................................ ......... ......... ......... ._...._.. _ _ ....... ....... ............ ....__..... ........ ........ .............. ..........._.........._._.. . ......... ...._.... .._...... (iii) Counsel to the Trustee,addressed to the Issuer,the Purchaser and Fannie Mae and in substantially the form attached hereto as Exhibit C; (iv) Counsel to the Borrower in a form reasonably approved by the Issuer and the Purchaser, addressed to the Issuer, the Purchaser and Fannie Mae and in substantially the form attached hereto as Exhibit D;and (v) Counsel to Fannie Mae in substantially the forms attached hereto as Exhibit E-I (addressed to the Purchaser) and Exhibit E-2 (addressed to the Issuer, the Purchaser and the Trustee); (d) The Purchaser shall have received a certificate, dated the Closing Date and signed by an authorized officer of the Trustee, to the effect that (i)he or she is an authorized officer of the Trustee;(ii)the Indenture,the Collateral Agreement,the Financing Agreement and the Regulatory Agreement have been duly executed and delivered by the Trustee; (iii)the Trustee has all necessary corporate and trust powers required to carry out the trust created by the Indenture; and (iv)to the best of his or her knowledge, the acceptance by the Trustee of the duties and obligations of the Trustee under the Indenture, the Collateral Agreement, the Financing Agreement and the Regulatory Agreement and compliance with the provisions thereof will not conflict with or constitute a breach of or default under any law, administrative regulation or consent decree to which the Trustee is subject. (e) The Purchaser shall have received a certificate, dated the Closing Date and signed on behalf of the Issuer,to the effect that: (i) Except as disclosed in the Official Statement,' to the best of the knowledge of the person signing the certificate, no litigation or other proceedings are pending or threatened against the Issuer in any California court or other tribunal of competent jurisdiction, state or federal, in any way (a)seeking to restrain or enjoin the issuance, sale or delivery of the Bonds, (b)questioning or affecting the validity of this Bond Purchase Agreement, the Bonds, the Resolution, the Collateral Agreement, the Issuer Documents, the pledge to the Bondholders of any money or other security provided under the Indenture or any other transaction referred to in the Official Statement, (c)questioning or affecting the validity or any of the proceedings for the authorization, sale, execution, issuance or delivery of the Bonds, (d)questioning or affecting the organization or existence of the Issuer or the officers thereof or (e)questioning or affecting the power and authority of the Issuer to issue the Bonds or to execute the Issuer Documents or the Official Statement. (ii) to the best knowledge and belief of the persons signing the certificate, the Official Statement, solely with respect to the section captioned "THE ISSUER" insofar as it contains information relating to the Issuer, and 'NO LITIGATION" insofar as it relates to the Issuer,does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements'contained therein,in light of the circumstances under which they were made,not misleading;and (iii) the Issuer has complied with and satisfied all the conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date and the -8- .............. .................. ............................................. representations and warranties the Issuer contained herein are true and correct as of the Closing Date. (f) The Purchaser shall have received an opinion of Nossaman, Guthner, Knox & Elliott, LLP, dated the Closing Date and addressed to the Purchaser as to such matters as the Purchaser shall reasonably request. In rendering such opinion, Nossaman, Guthner, Knox & Elliott, LLP may rely on the other opinions and certificates delivered pursuant to this Bond Purchase Agreement as to the matters covered therein. (g) The Purchaser shall have received written or telephonic evidence that Standard &Poor's Ratings Services,a division of The McGraw-Hills Companies, Inc., has issued and has not withdrawn a rating of"AAA" on the Bonds, the documents delivered at the Closing Date shall satisfy the conditions to the continuance of such rating and no action shall have been taken or threatened with a view to the suspension or withdrawal of such rating as of the Closing Date. (h) The Purchaser shall have received a certificate of the Borrower dated as of the Closing Date, to the effect that: (i)except as disclosed in the Official Statement, to the best knowledge of the Borrower,no litigation or other proceedings are pending or threatened against the Borrower in any California court or other tribunal of competent jurisdiction, state or federal, in any way, which if adversely determined would (a)restrain or enjoin the issuance or delivery of the Bonds,the Indenture,the Borrower Documents,or the collection of the Revenues pledged under the Indenture, or (b)in any way contest or affect the issuance and the validity of the Bonds, the Indenture or the Borrower Documents; (ii)to the best of its knowledge, no event affecting the Borrower or any of its properties has occurred since the date of the Official Statement which should be disclosed in the Official Statement for the purpose for which it is to be used or which it is necessary to disclose therein in order to make the statements and information therein not misleading in any material respect as of the Closing Date,(iii)to the best of its knowledge,the representations and warranties of the Borrower herein and in the Borrower Documents are true and correct in all material respects as of the Closing Date; and(iv)as of the Closing Date, to the best of its knowledge, no event has occurred and is continuing which with the lapse of time or the giving of notice, or both, would constitute a "Default" or "Event of Default"under the Indenture or any of the Borrower Documents. (i) The Purchaser shall have received duly executed copies of all agreements documents and certificates listed on a Closing Memorandum to be approved by Bond Counsel, counsel to the Borrower and counsel to the Purchaser. 0) The Purchaser shall have received evidence,acceptable to Bond Counsel,that all public hearings and approvals of appropriate governmental officials required with respect to the issuance of the Bonds have been accomplished. (k) The Purchaser shall have received arbitrage certifications by the Issuer and the Borrower in form and substance satisfactory to Bond Counsel. (1) The Purchaser shall have received a certificate dated the Closing Date and signed by an authorized officer of Fannie Mae in substantially the form attached hereto as Exhibit F. -9- ............... ....... ..................................................I...... (in) The Purchaser shall have received a certificate dated the Closing Date and signed by an authorized officer of the Servicer in substantially the forth attached hereto as Exhibit G. (n) The Purchaser shall have received a Continuing Disclosure Agreement in substantially the form attached as an appendix to the Official Statement. (o) The Purchaser shall have received a Cash Flow Prospectus and a Verification Report. (p) The Purchaser shall not have discovered any material error, misstatement or omission in the representations and warranties made by either the Issuer or the Borrower in this Bond Purchase Agreement, all of which representations and warranties will be deemed to have been made again at and as of the time of the Closing Date and will then be true in all material respects. All the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Bond Purchase Agreement shall be deemed to be in compliance with the provisions hereof if,but only if,they are in form and substance reasonable satisfactory to the Purchaser. If any of the conditions set forth in this Section have not been met on the Closing Date, the Purchaser may, at its sole option, terminate this Bond Purchase Agreement or proceed to Closing upon waiving any rights under this Bond Purchase Agreement with respect to any such condition. If this Bond Purchase Agreement is terminated, none of the parties hereto will have any rights or obligations to the other except as provided in Section 10. 9. Termination of Purchaser's Obligations. The Purchaser and the Borrower may terminate their obligations hereunder by written notice to the Issuer if, at any time subsequent to the date hereof and on or prior to the Closing Date: (a) (i)Legislation shall have been enacted by the Congress, or recommended to the Congress for passage by the President of the United States or the United States Department of the Treasury or the Internal Revenue Service or any member of the United States Congress, or favorably reported for passage to either House of the Congress by any Committee of such House to which such legislation has been referred for consideration, or(ii)a decision shall have been rendered by a court established under Article III of the Constitution of the United States, or the United States Tax Court,or(iii)an order,ruling,regulation or communication(including a press release) shall have been issued by the Department of the Treasury of the United States or the Internal Revenue Service, in each case referred to in clauses(i),(ii)and(iii),with the purpose or effect,directly or indirectly,of imposing federal income taxation upon interest to be received by any owners of the Bonds which, in the reasonable judgment of the Purchaser, adversely affects the market price of the Bonds. (b) Legislation shall have been enacted or any action taken by the Securities and Exchange Commission that, in the opinion of counsel to the Purchaser,has the effect of requiring the offer or sale of the Bonds to be registered under the Securities Act of 1933 or the Indenture to be qualified as an indenture under the Trust Indenture Act of 1939 or any event shall have occurred which, in the reasonable judgment of the Purchaser or counsel to the Purchaser, makes untrue or incorrect in any material respect any statement or information contained in the Oficial -10- Statement or that, in their reasonable judgment, should be reflected therein in order to make the statements contained therein not misleading in any material respect. (c) (i)In the Purchaser's reasonable judgment, the market price of the Bonds is adversely affected because (a)additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority or by any national securities exchange; (b)the New York Stock Exchange or other national securities exchange, or any governmental authority shall impose, as to the Bonds or similar obligations,any material restrictions not now in force,or increase materially those now in force, with respect to the extension of credit by, or the charge to the net capital requirements of, the Purchaser; (c)a general banking moratorium shall have been established by federal,New York or California authorities; or (d)a war involving the United States of America shall have been declared, or any other national or international calamity shall have occurred, or any conflict involving the armed forces of the United States of America shall have escalated to such a magnitude as to materially affect the Purchaser`s ability to market the Bonds; (ii)any litigation shall be instituted,pending or threatened to restrain or enjoin the issuance or sale of the Bonds or in any way contesting or affecting any authority for or the validity of the Bunds,or the existence or powers of the Issuer; or (iii)legislation shall have been introduced in or enacted by the Assembly or Senate of the State of California with the purpose or effect,directly or indirectly,of imposing California income taxation upon interest to be received by any holders of the Bonds. 10. Expenses. The Purchaser shall pay its own expenses, except as provided below. The Borrower shall pay, at the closing, the fees and expenses of Bond Counsel, all Blue Sky fees and expenses, rating agency fees, C)IAC and CDLAC fees, the cost of printing the Bunds and the Official Statement, the Trustee's authentication fees, the fees and expenses of the Issuer, and all costs and expenses in connection with the Mortgage Loan, including, but not limited to, the Trustee's fees and expenses. The Issuer will have no liability for payment of any of the foregoing items, except to the extent provided under the Indenture from the proceeds of the Bonds. 11. Notices. Any notice or other communication to be given under this Bond Purchase Agreement may be given by delivering the same in writing as follows: if to the Issuer: County of Contra Costa, Community Development Department, County Administration Building, 651 Pine Street, 4th Floor,North Wing,Martinez,California 94553;if to the Borrower. Bollinger Crest lApartment Investors, LLC, 46752 Mission Boulevard, Suite E, Fremont, California 94539, Attn. Art Lorenzini; and if to the Purchaser: PaineWebber Incorporated, 100 California Street, 12th Floor; San Francisco, California 94111,Attn: Peter J.Nolden; 12. Successors, This Bond Purchase Agreement is made solely for the benefit of the Issuer, the Borrower and the Purchaser(including its successors or assigns)and no other persons shall acquire or have any right hereunder or by the virtue hereof; provided that purchasers of the Bonds from the Purchaser will not be considered successors or assigns of the Purchaser. The representations,warranties, and agreements contained herein shall remain operative and in full force and effect and shall survive delivery of and payment for the Bonds hereunder regardless of any investigation made by or on behalf of the Purchaser. 13. Governing Law. This Bond Purchase Agreement shall be governed by the laws of the State of California. -11- 14. Public Ofterina. The Purchaser agrees to make a public offering of the Bonds at the initial public offering price set forth on the cover page of the Official Statement. • -12- _... _. . ........................................................................ 15. Effectiveness. This Bond Purchase Agreement shall become effective upon the execution of the acceptance hereof by the issuer and the Burrower. Very truly yours, PAINEWEBBER INCORPORATED By: Vice President COUNTY OF CONTRA COSTA^ By: Deputy Director-Redevelopment BOLLINGER CREST APARTMENT INVESTORS,INC., a California limited liability company By: ^Manager -13- SCHEDULEI MATURITY SCHEDULE Maturity Principal Interest Date Amount Rate EXHIBIT A FORM OF SUPPLEMENTAL OPINION OF BOND COUNSEL 1998 PaineWebber Incorporated 1 OO California Street, 12th Floor San Francisco,California 94111 $7,000,000 COUNTY OF CONTRA COSTA^ MULTIFAMILY HOUSING REVENUE BONDS (BOOLLINGER CREST APARTMENTS) 1998 SERIES C Ladies and Gentlemen: We have acted as bond counsel in connection with the issuance by the County of Contra Costa^ (the "Issuer")of its $7,000,000 aggregate principal amount of its Multifamily Housing Revenue Bonds (Bollinger Crest Apartments) 1998 Series C(the"Bonds")pursuant to Chapter 7 of Part 5 of Division 31 of the California Health and Safety Code, as the same may be amended (the "Act"), and a Trust Indenture, dated as of August 1, 1998 (the "Indenture"), by and between the Issuer and n U.S. Bank Trust Natjonal AssociatiQU as trustee (the "Trustee"), approved by the Issuer by a resolution adapted the Issuer(the"Resolution"). We have examined the Indenture, the Regulatory Agreement and Declaration of Restrictive Covenants, dated as of August 1, 1998, by and among the Issuer, the Trustee l and Bollinger Crest Apartment Investors, LLC, a California limited liability company (the "Borrower"), the Financing Agreement,dated as of August 1, 1998,by and among the Issuer,the Trustee, Washington Capital DUS, Inc., a Delaware corporation,as servicer,and the Borrower,the Assignment of Mortgage Loam,dated as of August 1, 1998, by the Issuer to the Trustee and Fannie Mae, as their interests may appear (the "Assignment") and the Bond Purchase Agreement, dated^ gu 1998, by and among the Issuer, the Borrower and PaineWebber Incorporated, as underwriter (the "Underwriter") (the foregoing documents are collectively referred to herein as the "Agreements"), the Oficial Statement, dated ^ usstt , 1998,relating to the Bonds(the"Official Statement"),the law and such certified proceedings and other papers as we deem necessary to render this opinion. As to questions of fact material to our opinion,we have relied upon representations of the Issuer contained in the Indenture and in the certified proceedings and other certifications of public officials and of the Borrower,furnished to us,without undertaking to verify such facts by independent investigation. Based upon the foregoing,we are of the opinion,under existing law,that: A-1 1. The Issuer has full legal right, power and authority to enter into and carry out and effectuate the transactions contemplated in the Bonds,the Agreements and the Official Statement and in the Bond Purchase Agreement, 2. The Bonds are exempt from registration pursuant to the Securities Act of 1933, as amended, and the Indenture is exempt from qualification pursuant to the Trust Indenture Act of 1939,as amended. 3. The statements contained in the Official Statement under the captions "INTRODUCTION^", "'THE BONDS" (except under the subcaption "Book-Entry-Only System"), "SECURITY FOR THE BONDS"{except under the subceptions "Collateral Agreement^","Fannie Mae Pass 'Through Certificatte^", "Sufficiency of Gash Flow" and "Construction Phase Credit Facility Provider"} "TAX EXEMM fON" and in APPENDIX A, APPENDIX B, APPENDIX D, APPENDIX F and APPENDIX G insofar as such statements purport to summarize certain provisions of the Bonds and the Agreements, and to describe the exclusion of interest on the Bonds from gross income for purposes of federal income taxation and the exemption from State of California personal income taxation of interest on the Bonds,are accurate in all material respects,as of the date hereof. This opinion letter is solely for your benefit in connection with the transaction covered by the first paragraph of this letter and may not be relied upon, used, circulated, quoted or referred to, nor may copies hereof be delivered to,any other person without our prior written approval. Respectfully submitted, A-2 EXHIBIT B FORM OF OPINION OF COUNSEL OF THE COUNTY OF CONTRA COSTA^ 1998 PaineWebber Incorporated 100 California Street, 12th Floor San Francisco,California 94111 Federal National Mortgage Association 135 North Los Robles,Suite 300 Pasadena,California 91101 U.S.Bank Trust National Association 1 California Street,Suite 400 Sgn Francisca,Califorisf 94111^ $7,000,000 COUNTY OF CONTRA COSTA^ MULTIFAMILY HOUSING REVENUE BONDS (BOLLINGER CREST APARTMENTS) 1998 SERIES C Ladies and Gentlemen: I am counsel for the County of Contra Costa (the "Issuer"), a political subdivision of the State of California. This opinion is delivered in connection with the issuance by the Issuer of its $7,000,000 aggregate principal amount of its Multifamily Housing Revenue Bonds (Bollinger Crest Apartments) 1998 Series C(the 'Bands"). The Bonds are being issued pursuant to Chapter 7 of Part 5 of Division 31 of the California Health and Safety Code, as the same may be amended(the "Act"), and an authorizing resolution of the Issuer. Capitalized terms not defined herein shall have the meanings assigned to them in the Trust Indenture for the Bonds dated as of August 1, 1998 between the Issuer and ^ U.S. Bank Trust Natioual Ass2Siation(the"Trustee"). In this connection, I have examined and am familiar with the State of California Constitution, pertinent state statutes and copies,certified or otherwise identified to my satisfaction,of such documents of the Issuer as I have deemed necessary or appropriate for the purposes of this opinion. The opinions and conclusions expressed herein are based on an analysis of existing laws, regulations, rulings, and court decisions and cover certain matters not directly addressed by such authorities. Such opinions or conclusions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to informany person,whether B-1 any such actions are taken or omitted or events do occur. We have assumed the genuineness of all documents.and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the Issuer. We have not undertaken to verify independently, and have assumed, the accuracy of the factual matters represented, warranted or certified in the documents referred to in the second paragraph hereof. We have further assumed compliance with all covenants and agreements contained in such documents. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Bonds and express no opinion with respect thereto.' Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions: I. The Issuer is duly organized and validly existing under and by virtue of the laws of the State of California. 2. The Resolution was duly adopted at a meeting of the governing board of the Issuer, which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout. The Resolution is in full force and effect and has not been amended,modified or superseded. This letter is furnished by us as counsel to the Issuer. No attorney-client relationship has existed or exists between our firm and the underwriter in connection with the Bonds or by virtue of this letter. We disclaim any obligation to update this letter. This letter is solely for the benefit of the addressee hereof, and is not to be used, circulated, quoted or otherwise referred to or relied upon for any other purpose or by any other person other than said underwriter and the Issuer. Very truly yours, B-2 EXHIBIT C FORM OF OPINION OF COUNSEL TO TRUSTEE 1998 County of Contra Costa 651 Pine Street,4th Floor,North Wing Martinez,California 94553 PaineWebber Incorporated 100 California Street, 12th Floor San Francisco,California 94111 Federal National Mortgage Association 135 North Los Robles,Suite 300 Pasadena,California 91101 $7,000,000 COUNTY OF CONTRA COSTA^ MULTIFAMILY HOUSING REVENUE BONDS (BOLLINGER CREST APARTMENTS) 1999 SERIES C Ladies and Gentlemen. We have acted as special counsel to ^Int S auk Trust Natgteal &WkAgn as trustee (the "Trustee"),in connection with the Trustee's execution of the Indenture of Trust(the"Indenture")dated as of August 1, 1998 between the Trustee and the County of Contra Costa^ (the "City"), relating to the issuance by the City of its $7,000,000 aggregate principal amount of its Multifamily Housing Revenue Bonds(Ballinger Crest Apartments) 1999 Series C(the"Bonds"). In connection with this opinion letter, we have examined originals, or copies certified or otherwise identified to our satisfaction, of the Indenture, the Financing Agreement, the Regulatory Agreement, the Collateral Agreement and such documents, corporate records, certificates, including certificates of public officials, and other instruments as we have deemed necessary or advisable for purposes of this opinion letter, including those relating to the authorization,execution and delivery of the Indenture. In our examination and review we have assumed the genuineness of all signatures(other than the signatures of representatives of the Trustee), the legal capacity of natural persons,the authenticity of the documents submitted to us as originals, the conformity to the original documents of all documents submitted to us as certified or photostatic copies, and the authenticity of the originals of such copies. Regarding documents executed by parties other than the Trustee, we have assumed (i)that each such other party had the power to enter into and perform all its obligations thereunder, (ii)the due authorization of,and the due execution and delivery of, such documents by each such party and(iii)that such documents constitute the legal,valid and binding obligations of each such party. C-1 Based upon and subject to the foregoing, and subject to further assumptions, limitations, qualifications and exceptions set forth herein,we are of the opinion that. (1) The Trustee is a national banking association duly organized, validly existing and in good standing under the laws of the United States of America and has full power and authority to execute and deliver the Indenture and the Collateral Agreement and to perform its obligations thereunder. (2) The Indenture, the Financing Agreement and the Collateral Agreement have been duly authorized,executed and delivered by the Trustee and constitute the valid and binding obligations of the Trustee enforceable against the Trustee in accordance with its terms, except insofar as the validity, binding nature and enforceability of the Trustee's obligations under the Indenture, the Financing Agreement and the Collateral Agreement may be limited by the effect of(i)insolvency, reorganization, arrangement, moratorium, fraudulent transfer and other similar laws, (ii)the discretion of any court of competent jurisdiction in awarding equitable remedies, including, withoutlimitation, specific performance or injunctive relief and(iii)the effect of general principles of equity embodied in California statutes and common law. This opinion is limited to the 'law of the State of California and applicable federal law of the United States, and we express no opinion with respect to the effect or applicability of the law of other jurisdictions. The opinions expressed herein are solely for your benefit in connection with the above transaction and may not be relied on in any manner or for any purpose by any other person without our express written consent. Very truly yours, C-2 EXHIBIT D FORM OF BORROWER'S COUNSEL'S OPINION ' 1998 County of Contra Costa 651 Pine Street,4th Floor,North Wing Martinez,California 94553 PaineWebber Incorporated 100 California Street, 12th Floor San Francisco,California 94111 Federal National Mortgage Association 135 North Los Robles Avenue,Suite 300 Pasadena,California 91101-1701 $7,000,000 COUNTY OF CONTRA COSTA^ MULTIFAMILY HOUSING REVENUE BONDS (BOLLINGER CREST APARTMENTS) 1998 SERIES C Ladies and Gentlemen: We have acted as counsel to Bollinger Crest Apartment Investors, LLC,', a California limited liability company (the "Borrower"), in connection with the issuance by County of Contra Costa (the "Issuer") of its $7,000,000 aggregate principal amount of its Multifamily Housing Revenue Bonds (Bollinger Crest Apartments) 1998 Series C(the"Bonds"). We understand that the Issuer will rely on this opinion in issuing the Bonds and that PaineWebber Incorporated(the"Underwriter")will rely on it in purchasing the Bonds. In our capacity as counsel to the Borrower,we have examined the following: A. The Regulatory Agreement and Declaration of Restrictive Covenants dated as of August 1, 1998,executed by the Borrower,the Issuer and^U.S.Bank Trust NatlgnalAssaclatlon(the "Trustee"); B. The Financing Agreement dated as of August 1, 1998, executed by the Borrower, the Issuer,the Trustee and Washington Capital DUS,Inc.,a Delaware corporation(the"Servicer"); C. The Bond Purchase Agreement dated ^ u ust 1998, executed by the Issuer, the Underwriter and the Borrower; -` D-1 D. The Official Statement dated^ u„ x , 1998 delivered with respect to the Bonds; E. A certified copy of the Borrower's Articles of Organization, as filed with the Office of the Secretary of State, a copy of the operating agreement of the Borrower, certified by an authorized officer as a true and correct copy (collectively, the "Organizational Documents") and a certificate of status of the Borrower issued by the California Secretary of State on , 1998; F. Such other documents, matters, statutes, ordinances, published rules and regulations, published judicial and governmental decisions interpreting or applying the sane and other official interpretations as we deem applicable in connection with this opinion. The documents listed in A through C above are referred to collectively as the "Bond Docurnents^". The documents listed in A through F above are referred to collectively as the In basing the opinions set forth in this opinion on "our knowledge,"the wards "our knowledge" signify that,in the course of our representation of the Borrower,no facts have come to our attention that would give us actual knowledge or actual notice that any such opinions or other maters are not accurate or that any of the Documents are not accurate and complete. Except as otherwise stated in this opinion, we have undertakers no investigation or verification of such matters. Further,the wards"our knowledge" and similar language as used in this opinion are intended to be limited to the actual knowledge of the attorneys within our firm who have been directly involved in representing the Borrower in connection with the Loan or who we reasonably believe have knowledge of the affairs of the Burrower. In reaching the opinions set forth below, we have assumed, and to our knowledge there are no facts inconsistent with,the following: (a) Each of the parties to the Bond Documents, other than the Borrower and any partner of the Borrower, has duly and validly executed and delivered each such instrument, document and agreement to be executed in connection with the Loan to which such party is a signatory,and such party's obligations set forth in the Bond Documents are its legal, valid and binding obligations, enforceable in accordance with their respective terms. (b) Each person, other than the Borrower or any partner of the Borrower, executing any of the Bond Documents,whether individually or on behalf of an entity,is duly authorized to do so. (c) Each natural person executing any of the Bond Documents is legally competent to do so. (d) All documents submitted to us as originals are authentic; all Documents submitted to us as certified or photostatic copies conform to the original document, and all public records reviewed are accurate and complete. (e) The terms and conditions relating to the Bonds as reflected in the Bond Documents have not been amended, modified or supplemented by any other agreement or undertaking of the ,parties or waiver of any of the material provisions of the Bond Documents. D-2 ................................................... _ ............................................................. Based on the foregoing and subject to the assumptions and qualifications set forth above, it is our opinion that; 1. The Borrower is a duly organized limited liability company validly existing and in good standing under the laws of the State of California. 2. The Borrower has the authority to own its properties and conduct its business as now conducted and to execute and perform its obligations under the Bond Documents. 3. All necessary action has been taken to authorize the execution,delivery and performance of the Bond Documents by the Borrower. The individual or individuals who have executed the Bond Documents on behalf of the Borrower have the authority to bind the Borrower to the terms and conditions of the Bond Documents. 4. To our knowledge,no authorization,consent, approval or other action by, or filing with, any state or federal court or governmental authority is required in connection with the execution and delivery by the Borrower of the Bond Documents. 5. Each of the Bond Documents has been duly executed and delivered by the Borrower and constitutes the valid and legally binding obligation of the Borrower,enforceable against the Borrower in accordance with its terms, subject to (i)applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights of creditors generally, and (ii)the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or of equity). 6. The execution and delivery of, and the performance of the obligations under, the Bond Documents will not violate the Organizational Documents. 7. To our knowledge, there is no litigation or other claim pending',before any court or administrative or other governmental body or overtly threatened by a written communication against the Borrower,the Property or any other properties of the Borrower. 8. To our knowledge, the information in the Official Statement relating to the Borrower, the Project and the Mortgage Loan did not, as of the date thereof, and does not, as of the date hereof, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading. In addition to the assumptions set forth above,the opinions set forth above are also subject to the following qualifications. (i) We express no opinion with respect to title to any of the real or personal property constituting the Property,but we assume the Borrower has rights in Property. (ii) We express no opinion as to the laws of any jurisdiction other than the laws of California and the laws of the United States of America. The opinions expressed above concern only the effect of the laws (excluding the principles of conflict of laws) of California and the United States of America as currently in effect. We assume no obligation to supplement this D-3 opinion if any applicable laws change after the date of this opinion, or if we become aware of any facts that might change the opinions expressed above after the date of this opinion. We confirm that: (a) based on the Organizational Documents, the name of the Borrower in each of the Bond Documents is the correct legal name of the Borrower; (b) we do not have any financial interest in the Project,the Property or the Loan, other than fees for legal services performed by us,payment for which has been provided;and (c) other than as counsel for the Borrower, we have no interest in the Borrower or the Servicer and do not serve as an officer or an employee of the Borrower or the Servicer. We have no undisclosed interest in the subject matters of this opinion. The foregoing opinions are for the exclusive reliance of the Trustee (including any successor trustee for the Bonds),the Issuer and the Underwriter and their respective counsel. Very truly yours, D-4 ...................................................................................................... ................................................................... ................. EXHIBIT E-1 OPINION OF COUNSEL TO FANNIE MAE ' 1998 PaineWebber Incorporated San Francisco,California Ladies and Gentlemen: We have acted as special counsel to Federal National Mortgage Association ("Fannie Mae") in connection with the issuance by the County of Contra CoStaA (the "Issuer") of its $7,000,000 Multifamily Housing Revenue Bonds(Bollinger Crest Apartments) 1998 Series C (the "Bonds"). This letter is furnished to you pursuant to the Bond Purchase Agreement, executed in connection with the Bonds, among the Issuer, Bollinger Crest Apartment Investors, LLC, a California limited liability company and you. In our capacity as special counsel to Fannie Mae, we have reviewed (a)those portions (the "Reviewed Portions") of the Official Statement (the "Official Statement") prepared in connection with the offering and sale of the Bonds, describing (1)the Collateral Agreement, (2)the Fannie Mae Pass- Through Certificate, and (3) the Mortgage Note (the "Described Documents") and (b)the summary document regarding the Collateral Agreement contained in the Official Statement as Appendix C— "SUMMARY OF CERTAIN PROVISIONS OF THE COLLATERAL AGREEMENT" (the "Document Summary"). We emphasize that we have not been engaged by any party to pass upon or assume any responsibility for, nor have we undertaken to verify, the fairness, accuracy, sufficiency or completeness of the information or statements contained in the Official Statement. Accordingly, we express no opinion on the Official Statement. Based upon our review of the Reviewed Portions and of the Document Summary, however, and without having undertaken to determine independently the fairness, accuracy, completeness or sufficiency of any statement or information contained in the Official Statement, and without assuming any responsibility for the fairness, accuracy, completeness or sufficiency of the statements and information contained in the Official Statement,we can advise you that nothing has come to our attention that would lead us to believe that(a)the abbreviated descriptions(the "Abbreviated Descriptions")of the Described Documents, specifically, the descriptions of(1)Collateral Agreement under the heading"SECURITY FOR THE BONDS—Collateral AgreementA"2(2)the Fannie Mae Pass-Through Certificate under the heading "SECURITY FOR THE BONDS-4-s6ic Mae Pass A 0 Through CertificateT,and (3)the Mortgage Note under the heading 'THE MORTGAGE N TEA=", do not constitute fair &;criptions of the portions of the Described Documents so described or (b)the summary of the Collateral Agreement contained in the Documents Summary does not constitute a fair summary of the portions of the Collateral Agreement so summarized, provided that we express no opinion as to the adequacy,sufficiency or completeness of the Abbreviated Descriptions of the Described ...................11.......................-....... ............ -....... .................................................._­­­..'' ....... ....................................... ....................................I I'll ............................... Documents or of the Document Summary. We have not been engaged to pass upon or to verify any financial information set forth in the Official Statement. We have made no investigation into the business or financial affairs of Fannie Mae. This opinion may not be relied upon by any party other than the addressee. This opinion is not intended to be used in any transaction other than the transaction described above. Very truly yours, Arent Fox Kintner Plotkin&Kahn,PLLC E-1-2 .. .............. ......... ...... ......................................................... .......... ................................................. ..........- EXHIBIT E-2 OPINION OF FANNIE MAE LEGAL DEPARTMENT , 1998 County of Contra Costa,California Martinez,California PaineWebber Incorporated San Francisco,California U.S.Bank Trust National Association Sau Iw ran+cisco.California^ $7,000,000 COUNTY OF CONTRA COSTA^ MULTIFAMILY HOUSING REVENUE BONDS (BOLLINGER CREST APARTMENTS) 1998 SERIES C Ladies and Gentlemen: This opinion is furnished to you in connection with the execution and delivery by the Federal National Mortgage Association ("Fannie Mae") of the Collateral Agreement ("Collateral Agreement") between Fannie Mae and ^U.S. Bank Trust National Association as Trustee, in connection with the issuance of the Bonds. As Senior Vice President and Deputy General Counsel of Fannie Mae,I am of the opinion that: (i) Fannie Mae has been duly organized under the Federal National Mortgage Association Charter Act,as amended, 12 U.S.C. 1716 et sea..and is a corporation duly organized and existing under the laws of the United States; (ii) Fannie Mae has full right, power, and authority to execute and deliver the Collateral Agreement;and (iii) the Collateral Agreement has been duly authorized, executed and delivered by Fannie Mae and constitutes a valid and binding obligation of Fannie Mae, enforceable in accordance with its terms, subject to any applicable bankruptcy, insolvency, reorganization, moratorium,and other laws of general applicability relating to or affecting creditors'rights from time to time in effect as such laws would be applied in the event of a bankruptcy, insolvency, reorganization, moratoriums or similar occurrence affecting Fannie Mae and to the exercise of judicial discretion in accordance with general principles of equity,whether applied by a court of law or of equity. E-2-1 I express no opinion on the perfection or priority of any lien or security interest described in the Collateral Agreement. My opinion is rendered only to, and may be relied upon only by, the addressees. My opinion herein is limited to the laws of the District of Columbia and of the United States of America, to the extent they are applicable, and I express no opinion as to the applicability of the laws of any other jurisdiction. Sincerely, E-2-2 EXHIBIT F $7,000,000 COUNTY OF CONTRA COSTA MULTIFAMILY HOUSING REVENUE BONDS (BOLLINGER CREST APARTMENTS) 1998 SERIES C CERTIFICATE OF FANNIE MAE This Certificate of Federal National Mortgage Association("Fannie Mae")is being executed and delivered on behalf of Fannie Mae by the undersigned, an authorized officer of Fannie Mae. The undersigned certifies, on behalf of Fannie Mae, that the attached information regarding Fannie Mae is accurate and may be included in the Official Statement for the bonds described above. Dated: , 1998 FEDERAL NATIONAL MORTGAGE ASSOCIATION By: Title: F-1 EXHIBIT G $7,000,000 COUNTY OF CONTRA COSTA^ MULTIFAMILY HOUSING REVENUE BONDS (BOLLINGER CREST APARTMENTS) 1998 SERIES C CER'T'IFICATE OF SERVICER The undersigned, a duly authorized officer of Washington Capital DUS, Inc., a Delaware corporation (the "Servicer"), hereby certifies for the n t of Pain Weh Inco rated with respect to the $7,000,000 County of Contra Costa" Multifamily Housing Revenue Bands (Bollinger Crest Apartments) 1398 Series C(the"Bonds")as follows. I. All capitalized terms used herein and not otherwise defined shall have the meanings given to such terms in the Trust Indenture dated as of August 1, 1998 (the "Indenture") between the County of Contra Costa,California and _,as trustee. 1 The Servicer is a corporation duly organized and existing and in good standing under the laws of the State of Delaware ^ th power and authority to execute and deliver ^ the Financing Agreement^. _ ^3. The information in the Official Statement, dated^Aq use 1998,with respect to the Bonds, which relates to the Servicer under the caption "THE SERVICER" sloes not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein,in light of the circumstances under which they were made,not misleading. Dated: . 1998 WASHINGTON CAPITAL DUS,INC., a Delaware corporation By: Title: G-1 Nossaman,Guthner,Knox&Elliott,LLP . � July 20, 1998 LIMINARY OFFICIAL STATEMENT DATED JULY ,,,1998 • O K ENTRY ONLY Rating: Standard&POWs: CLE K 80AFitl i}f S0RS (See"RATING" herein) In the opinion of Orrick, Herrington & Sutcliffe LLP" ("Bond Counsel"), based on an analysts of existing laws, regulations,rulings and court decisions,and assuming,among other matters,compliance with certain covenants,interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the"Code'),except that no opinion is expressed as to the status of interest on any Bond during any period such Bond is held by a person who is a"substantial user"of the facilities financed by the Bonds or is a"related person"within the meaning of Section I47(a)of the Code. Bond Counsel observes,however,that interest on the Bonds is a specific preference item for ptoposes of the federal individual and corporate alternative minimum taxes. Bond Counsel is also of the opinion that interest on the Bonds is exempt from State of California personal income taxes. Bond Counsel expresses no opinion regarding other tax consequences relating to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. See "TAX MATTERS"for additional information. $7,000,000* COUNTY OF CONTRA COSTA^ MULTIFAMILY HOUSING REVENUE BONDS (BOLLINGER CREST APARTMENTS) 1998 Series C Dated: August 1, 1998 Maturity: April 1,as shown on the inside cover The above-captioned Bonds(the"Bonds")arc being issued by the County of Contra Costa,California(the"Issuer")to provide funding for a mortgage loan(the"Mortgage Loan")to be made by the Issuer to Bollinger Crest Apartment Investors, LLC,a California limited liability company(the"Borrower"),to provide construction and permanent financing for a multifamily residential housing project(the"Project"). The Bonds are being issued pursuant to a Trust Indenture dated as of August 1,1998 (the"Indenture")by and between the Issuer and A U.S.Hank'Frust National Association(the"Trustee"). The Mortgage Loan will be made pursuant to a Financing Agreement del es of August 1, 1993(the"Financing Agreement"),among the Issuer,the Trustee,Washington Capital AUS,Inc.,a Delaware corporation(the"Servicer")and the Borrower. Federal National Mortgage Association ("Fannie Mae") has issued a commitment(a "Fannie Mae Commitment")^ with respect to the Mortgage Loan pursuant to which Fannie Mae has agreed,subject to satisfaction of the terms and conditions of the Fannie Mae Commitment,to provide credit enhancement for the Mortgage Loan pursuant to,and subject to the limitations of, a Collateral Agreement (described herein). In addition, if the Conditions to Conversion (set forth in the Fannie Mae Commitment and relating primarily to completion of construction and stabilization of the Project at a specified level of occupancy)of the Mortgage Loan from the Construction Phase to the Permanent Phase are satisfied,and if the Fannie Mae Pass- Through Certificate Delivery Requirements are satisfied (as described under the caption "SECURI'T'Y FOR THE BONDS— Conversion;Issuance of Fannie Mae Pass-Through Certificate—Fannie alae Pass-Through Certificate DeliveryRequirements"), Fannie Mae will acquire the Mortgage Loan in exchange for a Fannie Mae Guaranteed Mortgage Pass-Through Certificate(the "Fannie Mae Pass-Through Certificate")issued in respect of the Mortgage Loan and evidencing an interest in a mortgage pool comprised solely of the Mortgage Loan. The Fannie Mae Pass-Through Certificate, if and when issued,will be substituted for the Mortgage Loan and the Collateral Agreement The Trustee will hold the Fannie Mae Pass-Through Certificate as security for the holders of the Bonds. If the Conditions to Conversion are not timely satisfied(or waived by Fannie Mae),with the result that the Servicer fails to issue a Conversion Notice(as defined herein)prior to the Termination Date specified in the Fannie Mae Commitment(and described herein),the Bonds will be subject to special mandatory redemption at a redemption price equal to 100%of the principal amount of the Bonds to be redeemed plus accrued interest on the Bonds to the Redemption Date (as defused herein)in the event of such a redemption,the redemption price will be paid with funds provided under the Collateral Agreement. The Collateral Agreement will then terminate in accordance with its terms. If Conversion does occur,the Bonds will not be subject to special mandatory redemption for failure of the Servicer to issue a Conversion Notice. There can be no assurance that Conversion will occur. If Conversion occurs, but the Fannie Mae Pass-Through Certificate Delivery Requirements are not satisfied, the Collateral Agreement will continue in effect as credit enhancement for the Mortgage Loan. It is anticipated that Fannie Maes acquisition of the Mortgage Loan will coincide with Conversion to the Permanent Phase(see"SECURITY FOR THE BONDS--- Conversion;Issuance of Fannie Mae Pass-Through Certificate--Conversion,Failure of Conversion To Occur"). 0LD:SF1981610006NEW:SF1981830002 Payment of the principal of and interest on the Bonds prior to the Fannie Mae Pass-Through Certificate Delivery Date will be secured,to the extent described herein,by the Mortgage Loan and by certain other resources and assets constituting the trust estate under the Indenture,all as described herein. Prior to the Fannie Mae Pass-Through Certificate Delivery Date,certain required payments due under the Mortgage Loan will be secured, to the extent described herein, by Fannie Mae under the Collateral Agreement. On and after the Fannie Mae Pass-Through Certificate Delivery Date, if it occurs,the payments of the principal and interest on the Bonds will be secured primarily from distributions under the Fannie Mac Pass-Through Certificate. Distributions under the Fannie Mae Pass-Through Certificate, if issued, will correspond to scheduled principal and interest payments to be made by the Borrower on the Mortgage Loan(less certain fees payable to the Servicer and Fannie Mae, the "Spread Amount,"as defined herein),provided that Fannie Mae's obligation to make scheduled distributions under the Fannie Mae Pass-Through Certificate is independent of its receipt of corresponding payments from the Borrower under the Mortgage Loan. See"SECURITY FOR THE BONDS"herein. PAYMENT OF PRINCIPAL, OR PREMIUM, IF ANY, AND INTEREST ON THE BONDS IS NOT GUARANTEED BY FANNIE MAE. FANNIE MAE'S SOLE OBLIGATION WITH RESPECT TO THE MORTGAGE LOAN WILL BE CONTAINED IN THE COLLATERAL AGREEMENT, 5O LONG AS IT IS IN EFFECT,AND,UPON FANNIE MAE PASS-THROUGH CERTIFICATE DELIVERY(AS DESCRIBED HEREIN), IF IT OCCURS,IN THE FANNIE MAE PASS-THROUGH CERTIFICATE, AND WILL BE LIMITED, AS TO THE COLLATERAL AGREEMENT, SOLELY TO ITS OBLIGATIONS THEREUNDER AND, AS TO THE FANNIE MAE PASS-THROUGH CERTIFICATE, TO MAKING DISTRIBUTIONS OF PRINCIPAL AND INTEREST UNDER THE FANNIE MAE PASS-THROUGH CERTIFICATE, IN ACCORDANCE WITH ITS TERMS, TO THE RECORD OWNER OF THE FANNIE MAE PASS-THROUGH CERTIFICATE. THE OBLIGATIONS OF FANNIE MAE ARE NOT BACKED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA, BUT BY THE CREDIT OF FANNIE MAE, A FEDERALLY CHARTERED, STOCKHOLDER-OWNED CORPORATION. SEE"FANNIE MAE"HEREIN. THE BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER, PAYABLE SOLELY FROM AND SECURED BY THE PLEDGE OF THE TRUST ESTATE PURSUANT TO THE INDENTURE. THE BONDS ARE NOT A DEBT OF THE STATE OF CALIFORNIA,THE ISSUER OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE OF CALIFORNIA. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF CALIFORNIA, THE ISSUER OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE OF CALIFORNIA IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR THE INTEREST ON THE BONDS. The Bonds will be delivered in fully registered form only and,when issued and delivered, will be registered in the name of Cede&Co.,as nominee of The Depository Trust Company,New York,New York("DTC"). Ownership interest in the Bonds may be purchased in book-entry form only in the denomination of 55,000 and any integral multiples thereof Ultimate purchasers of Bonds will not receive physical certificates representing their interest in such Bonds. So long as the Bonds are registered in the name of Cede&Co., as nominee of DTC,references herein to the Bondholders shall mean Cede&Co. and shall not mean the ultimate purchasers of the Bonds. See"THE BONDS—Book-Entry-Only System^o Interest on the Bonds will be payable semiannually on April I and October I of each year(each,an"Interest Payment Date"), commencing April 1, 1999. Interest will be payable by check or wire transfer as provided under the Indenture and described herein mailed by first-class mail, or by wire transfer as permitted under the Indenture and described herein,to the registered owners of the Bonds appearing on the registration books of the Trustee at the close of business on the fifteenth day of the month preceding the applicable interest Payment Date. Principal and premium,if any,together with interest payable on any Bond Payment Date other than a regularly scheduled Interest Payment Date, on the Bonds will be payable by check upon surrender thereof on or after its maturity date or date faced for redemption or other payment at the office of the Trustee designated in the Indenture. So long as any of the Bonds are registered in the name of Cede & Co., as nominee of DTC, payments of the principal of,premium,if any,and interest on such Bonds will be made directly to DTC or its nominee,Cede& Co.,by the Trustee. Disbursements of such payments to DTC`s Participants are the responsibility of DTC and disbursements of such payments to the Beneficial Owners are the responsibility of DTC's Participants and Indirect Participants, as more fully described herein. The Bonds are subject to redemption prior to maturity. See"THE BONDS—ItedemptioiY�"= This cover page of theOfficial Statement contains certain information for quick reference only. It is not a complete summary of the Bonds. Investors should read the entire Official Statement to obtain information essential to the making of an informed investment decision. THE BONDS ARE BEING SOLD ON THE BASIS OF THE FINANCIAL STRENGTH OF FANNIE MAE AND NOT ON THE FINANCIAL STRENGTH OF THE BORROWER OR THE PROJECT. SEE THE SECTION HEREIN CAPTIONED"SECURITY FOR THE BONDS"". The Bonds are offered when, as and if issued and received by the Underwriter,and subject to the approval as to their legality by Orrick.Herrington&Sutcliffe LLP,San Francisco,California,Bond Counsel,and certain other conditions. Certain legal matters will be passed upon for Fannie Mae by its Legal Department and Arent Fox Kintner Plotkin & Kahn, PLLC, . Washington, D.C., Counsel to Fannie Mae,for the Borrower by ^Le" LM A L rtrlrsn California, and for the Underwriter by Nossaman, Guthner, Knox& El tiott LLP, San Francisco, a ifornia. It is expected that the Bonds will be available for delivery in book entry form through DTC in New York,New York on or about^Au us 3 1998. PaineWebber Incorporated. Dated: ^August . 1998 *Preliminary;subject to change. _. MATURITY SCHEDULE* All Bonds Priced at 100% $1,110,000 %Term Bonds due April 1,2011 $2,045,000 ala Term Bonds due April 1,2021 $3,$45,000 ala Term Bonds due April 1,2031 *Preliminary,subject to change. __. .__..._._ ......... ......... ................. _ .._... ........ ........... ...__.............................__._......._...........___.._.. .._...... ......... ......... ......... .............................. No dealer,broker,salesperson or other person has been authorized by the Issuer,the Borrower or the Underwriter to give any information or to make any representations with respect to the Bonds other than those contained in this Official Statement, and, if given or made, such 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 nor shall there be any sale of the Bonds by any person in any jurisdiction in which such offer, solicitation or sale is not authorized or in which the person making such offer, solicitation or sale is not qualified to do so or to any person to whom it is unlawful to make such offer, solicitation or sale. The information herein has not been independently verified and is not guaranteed as to accuracy. The information and expressions of opinion stated herein are subject to change without notice. The delivery of this Official Statement shall not, under any circumstances, create any implication that there has been no change in the information or opinions set forth herein or in the affairs of the Issuer or any other parties described herein since the date hereof. The information set forth herein has been furnished by the Issuer and other sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness',by, and is not to be construed as a representation by, the Underwriter. Fannie Mae has not provided or approved any information in this Official Statement except with respect to the description under the caption "FANNIE MAE," takes no responsibility for any other information contained in this Official',Statement and makes no representation as to the contents of this Official Statement(other than with respect to the description under the caption "FANNIE MAE"). Without limiting the foregoing, Fannie Mae makes no representation as to the suitability of the Bonds for any investor, the feasibility or performance of the Project or compliance with any securities,tax or other laws or regulations. Fannie Mae's role is limited to issuing the Fannie Mae Commitment,entering into the Collateral Agreement,acquiring the Mortgage Loan from the Servicer if the Fannie Mae Pass-Through Certificate Delivery Requirements are satisfied by issuing a Fannie Mae Pass-Through Certificate in exchange for the Mortgage Loan, and making distributions under the Fannie Mae Pass-Through Certificate, all as described herein. The information herein is subject to change without notice,and neither the delivery of this Official Statement nor any sale made hereunder may, under any circumstances, create any implication that there has been no change in the affairs of the Issuer,the Borrower or Fannie Mae since the date hereof. References in this Official Statement to the Indenture,the Financing Agreement,the Regulatory Agreement,the Fannie Mae Commitment,the Collateral Agreement and other documents do not purport to be complete, and reference should be made to such documents for full and complete details of their contents. In reliance upon applicable exemptions, no registration statement relating to the Bonds has been filed with the United States Securities and Exchange Commission(the "Commission")or with any state securities agency. The Bonds have not been approved or disapproved by the Commission or any state securities agency, nor has the Commission or any state securities agency passed upon the accuracy or adequacy of this Official Statement. Any representation to the contrary is a criminal offense. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. _.__ .. ............... ......... ......... ....__...... ......... _. ......... ......... ......... .............................. TABLE OF CONTENTS Page INTRODUCTION................................................................................................................................. I THEBONDS..................................................................................................:...................................... 6 General.......................................................................................................... ....................... 6 Redemption.............................................................................................................................. 7 Noticeof Redemption.............................................................................................................. 1 i Selection of Bonds To Be Redeemed Upon Partial Redemption of Bonds............................. 12 Purchase of Bonds in Lieu of Redemption.............................................................................. 13 SpecialPurchase in Lieu of Redemption................................................................................. 13 Book-Entry-Only System......................................................................................................... 14 SECURITY FOR THE BONDS................................................................................. ....................... 16 Pledgeof Trust Estate................................................................................... ....................... 16 Non-Recourse Obligations....................................................................................................... 18 CollateralAgreement............................................................................................................... 18 Conversion;Issuance of Fannie Mae Pass-Through Certificate.............................................. 20 Fannie Mae Pass-Through Certificate...................................................................................... 24 LimitedLiability...................................................................................................................... 26 NoAdditional Bonds..................................................................................... ....................... 27 Sufficiencyof Cash Flow.............................................................................. ....................... 27 Construction Phase Credit Facility Provider............................................................................ 27 THE FANNIE MAE COMMITMENT................................................................................................. 27 Commitment With Respect to Mortgage Loan........................................................................ 28 FANNIEMAE...................................................................................................................................... 29 THEISSUER............................................................................................................. ...................... 29 PLANOF FINANCING............................................................................................. . ...................... 30 Sourcesand Uses...................................................................................................................... 30 ^USE OF BOND PROCEEDS ................................................................................. ...................... 31 THE BORROWER AND THE PROJECT........................................................................................... 31 TheBorrower........................................................................................................................... 31 TheProject............................................................................................................................... A32 Affordable Housipg Sitbsidl....................................................................., ......................._32 LeasingRestrictions.... .......................................... ......... ............................... .................. ^32 RegulatoryAgreement.............................................................................................................^33 LimitedRecourse to Borrower........................................................................ ........................ AL3 THEMORTGAGE NOTE.................................................................................................................... A33 FANNIE MAE AND SERVICING FEES........................................................................................... ^34 Timing of Receipt of Revenues.................... `^35 35 THESERVICER.................................................................................................................................. ^35 ENFORCEABILITY OF REMEDIES............N....................................................................................... ^35 TAXMATTERS.................................................................................................................................. ^36 CERTAINLEGAL MATTERS............................................................................................................ ^37 UNDERWRITING..................... A -i- _. .... ......... ......... .__...... __... .._..... .... _. _ . _.. ....... _ _ __ .......................... .......... .. .. ........ . ........................................._. ........ .._...... ......... ......... TABLE OF CONTENTS (continued) Page CONTINUING DISCLOSURE ^38 _ VERIFICATION OF CASH FLOWS........................................................................ ...................... ^38 NOLITIGATION ION....................................................................................................... ......................... ^39 BATING....................... A 39 ADDITIONAL INFORMATION........................................................................................................ ^44 APPENDIX A---Summary of Certain Definitions APPENDIX B—Summary of Certain Provisions of the Indenture APPENDIX C--Summary of Certain Provisions of the Collateral Agreement APPENDIX D--Summary of Certain Provisions of the Regulatory Agreement APPENDIX E--Summary of Certain Provisions of the Financing Agreement APPENDIX F—Form of the Continuing Disclosure Agreement APPENDIX G----Proposed Form of Opinion of Bond Counsel -ii- PRELIMINARY OFFICIAL STATEMENT S7,000,000* COUNTY OF CONTRA COSTA^ MULTIFAMILY HOUSING REVENUE BONDS (BOLLINGER.CHEST APARTMENTS)1"S Series C INTRODUCTION This Official Statement and the Appendices hereto set forth certain information relating to the issuance by the County of Contra +Costa^ (the "Issuer") of the above-captioned Bonds (the "Bonds"). The Bonds are being issued by the Issuer to provide funding for a mortgage loan(the"Mortgage Loan") to be made by the Issuer to Bollinger Crest Apartment Investors, LLC, a California limited liability company(the"Borrower"),to provide construction and permanent financing for a multifamily residential housing project known as the Bollinger Crest Apartments located in the City of San Ramon, County of Contra Costa,California(the"Project"). The Bonds are being issued pursuant to a Trust Indenture dated as of August 1, 1998 (the "Indenture") by and between the Issuer and ^ U.S Bank Trust National Assoe ation as trustee (the "Trustee"),and pursuant to Chapter 7 of Part 5 of Division 31 of the California Health and Safety Code, as the same may be amended (the "Act"). Certain capitalized terms used in this Official Statement are summarized in^A,APPENDI K A "SUMMARY OF CERTAIN DEFINITIONS- A"--The Mortgage Loan will be made pursuant to the Financing Agreement dated as of August 1, 1998 (the "Financing Agreement") among the Issuer, the Trustee, Washington Capital DUS, Inc., a Delaware corporation (the "Servicer") and the Borrower. The Mortgage Loan will be evidenced by a promissory note executed by the Borrower and made payable to the Issuer (the "Mortgage Note") and will be secured by, among other things, a multifamily deed of trust, assignment of rents and security agreement from the Borrower, in favor of the Issuer(the"Mortgage"),encumbering the Project. The Mortgage Loan will be made by the Issuer in accordance with the requirements of the Federal National Mortgage Association ("Fannie Mae") and subject to the terms and conditions of a commitment(the "Fannie Mac Commitment") issued by Fannie Mae to the Servicer with respect to the Mortgage Loan. Under the Fannie Mae Commitment, Fannie Mae has agreed, subject to satisfaction of the terms and conditions of the Fannie Mae Commitment, to provide credit enhancement for the Mortgage Loan pursuant to,and subject to the limitations of,a Collateral Agreement(described herein). In addition,under the Fannie Mae Commitment, if the Conditions to Conversion(as described under the caption "SECURITY FOR THE BONDS--Conversion; Issuance of Fannie', Mae Pass-Through Certificate---Conversion; Failure of Conversion To Occur")are satisfied prior to the Termination Date such that the Trustee will issue a Conversion Notice prior to the Termination Date, the Mortgage Loan will convert from the Construction Phase to the Permanent Phase, effective on the Conversion Date and, on such date, or thereafter upon satisfaction of the Fannie Mae Pass-ThroughCertificate Delivery Requirements,the Mortgage Loan will be acquired by Fannie Mae in exchange for a Fannie Mae Pass- Through Certificate. •Preliminary,subject to change. -1- On the Closing Date, the Mortgage Note and the Mortgage will be executed by the Borrower in favor of the Issuer and assigned (except for certain Reserved Rights) by the Issuer to the Trustee and Fannie Mae, as their interests may appear, and, upon such assignment, will be part of the Trust Estate securing the Bonds. In addition to the other security provided under the Indenture, prior to the Issue Date (as described under the caption "SECURITY FOR THE BONDS---Issuance of the Fannie Mae Pass-Through Certificate; Conversion"), if it occurs, certain required mortgage payments under the Mortgage Note designated as "Required Mortgage Payments" (as defined herein) will be secured, pursuant to a Collateral Agreement dated as of August 1, 1998 between Fannie Mae and the Trustee(the "Collateral Agreement"), by a pledge and security interest granted by Fannie Mae to the Trustee of interests in certain residential mortgages and other collateral owned by Fannie Mae (the "Pledged Collateral"). The Trustee's security interest in the Pledged Collateral will be unper€ected. The obligation of the Borrower to reimburse Fannie Mae for any funds provided by Fannie Mae pursuant to the Collateral Agreement is established by the terms and conditions of a Reimbursement Agreement dated as of August 1, 1998 by and between the Borrower and Fannie Mae (the "Reimbursement Agreement"). See "SECURITY FOR THE BONDS---Collateral Agreement" and ^ APPENDIX C--- „SUMIVIARY OF CERTAIN PROVISIONS OF THE COLLATERAL AGREEMENT^". The Conditions to Conversion include satisfaction of each of the terms and conditions of the Fannie Mae Commitment. The conditions of the Fannie Mae Commitment include, for example, completion of construction of the Project and the achievement of a specified occupancy level from the leasing of units. No assurance can be given that all of the conditions stipulated by Fannie Mae in the Fannie Mae Commitment will be satisfied with respect to the Project or that other events or circumstances may or may not occur with respect to the Project as a result of which Conversion will not occur. In addition,no assurance can be given that the principal amount of the Mortgage Loan,as finally determined in accordance with the Fannie Mae Commitment, will not be less than the original principal amount of the Mortgage Loan; if the principal amount of the Mortgage Loan as finally determined in accordance with the Fannie Mae Commitment is less than the original principal amount of the Mortgage Loan,a corresponding portion of the Bonds will be subject to special mandatory redemption. See "THE BONDS---Redemptio"peciat Mandatory .Redemption--Special Mandatory Redemption in Connection with Conversion All. If the Conditions to Conversion, including the conversion requirementsand other terms and conditions of the Fannie Mae Commitment, cannot be or are not satisfied(or,to the extent not satisfied, are not waived by Fannie Mae) prior to the Termination Date, the Bonds will be subject to special mandatory redemption at par plus accrued interest to the Redemption Date, or to purchase by or for account of the Construction Phase Credit Facility Provider in accordance with the terms and conditions of the Indenture. See "THE BONDS—Redemption" herein. In the event of such a special mandatory redemption or purchase, the redemption price or purchase price will be paid with funds provided under the Collateral Agreement. The Collateral Agreement will then terminate in accordance with its terms. The Termination Date specified in the Fannie Mae Commitment is August^1121, 2000. The Servicer may request one six-month extension of the Termination Date. The grant of any such extension is in the discretion of Fannie Mae. If Conversion does occur and if and at such time as the Fannie Mae Pass-Through Certificate Delivery Requirements(as described under the caption "SECURITY FOR THE BONDS--4Conversion; Issuance of the Fannie Mae Pass-Througb Certificate--Fannie Mae Pass-Through Certificate Delivery Requirements") are satisfied, such that the Trustee will issue the Fannie Mae Pass-Through Certificate Delivery Notice, Fannie Mae will acquire all of the remaining interests in the Mortgage Loan in exchange for a Fannie Mae Pass-Through Certificate. The Fannie Mae Pass-Through Certificate will(a) -2- ........ ......... ...._.... ......... .._...... ..._.._.. . ......... . . .. _ _.... ........ _._...__. ......_.... ......... ........... ._......_.... ......... ......... ......... ......... ......... ......... be issued and delivered to the Trustee, (b)evidence an interest in a mortgage pool;comprised solely of the Mortgage Loan and(e)be held by the Trustee to secure payment of the Bonds. Distributions under the Fannie Mae Pass-Through Certificate corresponding to scheduled payments of principal and interest on the Mortgage Loan (less the Spread Amount with respect thereto, comprising the servicing and guaranty fees payable to the Servicer and Fannie Mae, respectively) will be made to the Trustee, as holder of the Fannie Mae Pass-Through Certificate. Such distributions of principal and interest will be made by Fannie Mae regardless of whether corresponding payments on the Mortgage Loan are paid when due. See "SECURITY FOR THE BONDS---Conversion; Issuance of the Fannie Mae Pass- Through Certificate,". It is anticipated that Fannie Mae's acquisition of the remaining interests in the -Mortgage Loan and, therefore, Fannie Mae Pass-Through Certificate Delivery, will coincide with Conversion to the Permanent Phase. If Conversion does occur, but Fannie Mae Pass-Through Certificate Delivery does not coincide with Conversion, then until such time as Fannie Mae Pass-Through Certificate Delivery does occur, the Collateral Agreement will continue in effect as credit enhancement for the Mortgage Loan. Fannie Mae's obligation to make payments under the Collateral Agreement is absolute, unconditional and irrevocable. See "SECURITY FOR THE BONDS--Collateral Ageement^"_ If, for any reason, Fannie Mae Pass- Through Certificate Delivery does not occur, the Collateral Agreement will continue in effect as credit enhancement for the Mortgage Loan. If Fannie Mae Pass-Through Certificate Delivery does occur,whether at or after Conversion,the obligation of Fannie Mae to make distributions under the Fannie Mae Pass-Through Certificate will be the general, unsecured obligation of Fannie Mae. If Fannie Mae fails to perform such obligation, distributions to the Trustee will consist of payments and other recoveries on the Mortgage Loan itself, and a delinquency or default on the Mortgage Loan at that time would seriously and adversely affect monthly distributions to the Trustee. The Trustee will accumulate and invest the monthly payments on the Mortgage Loan and, after Fannie Mae Pass-Through Certificate Delivery, the monthly distributions under the Fannie Mae Pass- Through Certificate, for application semiannually to payments of interest and principal, as due, on the Bonds and for payment of certain fees and expenses associated therewith. See ^ AMR=8 "SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE^". IF THE FANNIE MAE PASS-THROUGH CERTIFICATE IS ISSUED, FANNIE MAE WILL BE OBLIGATED UNDER THE FANNIE MAE PASS-THROUGH CERTIFICATE TO MAKE TIMELY DISTRIBUTIONS OF SCHEDULED PRINCIPAL AND INTEREST UNDER THE FANNIE MAE PASS-THROUGH CERTIFICATE REGARDLESS OF WHETHER THE CORRESPONDING PAYMENTS ARE RECEIVED ON THE UNDERLYING MORTGAGE LOAN. FANNIE MAE WILL HAVE NO OBLIGATION UNDER THE FANNIE MAE PASS-THROUGH CERTIFICATE TO PAY PREMIUM,IF ANY,ON THE BONDS. Prior to Conversion,pursuant to the Construction Phase Financing Agreement,Fannie Mae will be protected against risk of loss by a Construction Phase Credit Facility acceptable to Fannie Mae issued by a Construction Phase Credit Facility Provider acceptable to Fannie Mae. Certain events concerning the Construction Phase Credit Facility Provider, the Construction Phase Financing Agreement and the Construction Phase Credit Facility may result in the prepayment of the Mortgage Loan and a corresponding special mandatory redemption of the Bonds. See "THE BONDS Special Mandatory Redemption—Special Mandatory Redemption in Connection with Conversion^". _3- ......... ._....... ... ...... ....... ......................... ......... ......... ......... ......... ........_ _ _... _._... ......... ......... ......... .......... ................................... The interest rate on the Mortgage Note will be established at a rate, and the monthly payments under the Mortgage Note will be scheduled, such that the monthly payments of principal and interest on the Mortgage Note and upon issuance of the Fannie Mae Pass-Through Certificate, the corresponding distributions under the Fannie Mae Pass-Through Certificate, plus, in each instance, other moneys on deposit with the Trustee pursuant to the Indenture and Investment Income,will be sufficient to pay,when due, the semi-annual principal of and interest on the Bonds, as well as, the Issuer's Annual Fee, the Trustee's Annual Fee and the Rebate Analyst's Annual Fee, if any(collectively,the"Fees,"as defined in the Indenture). Fannie Mae has not prepared, review or verified, makes no representation or warranty with respect to,does not certify to,and assumes no responsibility or liability for,any calculations used to establish such schedule of payments and corresponding distributions,the assumptions used in make such calculations,their mathematical accuracy or for the sufficiency of payments on which they are based to pay the principal of and interest on the Bonds when due,the Fees when due or any,other amounts at any time. The Project is required to be occupied by tenants whose incomes satisfy certain provisions of the Act and the Internal Revenue Code of 1986 (the "Code"), as set forth in a Regulatory Agreement and Declaration of Restrictive Covenants dated as of August 1, 1998 and entered into by and among the Issuer,the Trustee and the Borrower(the"Regulatory Agreement"). See"THE BORROWER AND THE PROJECT" and ^ APPENDIX D— "SUMMARY OF CERTAIN PROVISIONS OF THE REGULATORY AGREEMENT!`". In addition, the Project is subject to an Extended Use Agreement required by the Code and the California Tax Credit Allocation Committee described under the caption "THE BORROWER AND THE PROJECT--Regulatory Agreement"herein. The regulatory agreements impose substantial restrictions on the operation of the Project, including(but not limited to)restrictions on the income of occupants and the amount of rent that may be charged. THE BONDS ARE NOT A DEBT OF THE UNITED STATES OF AMERICA OR ANY AGENCY THEREOF OR OF FANNIE MAE. PAYMENT OF PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE BONDS IS NOT GUARANTEED BY FANNIE MAE. SO LONG AS THE COLLATERAL AGREEMENT IS IN EFFECT WITH RESPECT TO THE MORTGAGE LOAN, FANNIE MAE`S OBLIGATIONS WILL BE SOLELY AS PROVIDED IN THE COLLATERAL AGREEMENT. IF A FANNIE MAE PASS-THROUGH CERTIFICATE IS ISSUED WITH RESPECT TO THE MORTGAGE LOAN, FANNIE MAE'S SOLE OBLIGATION WILL BE CONTAINED IN THE FANNIE MAE PASS-THROUGH CERTIFICATE AND WILL BE LIMITED TO MAKING DISTRIBUTIONS OF PRINCIPAL AND INTEREST UNDER THE FANNIE MAE PASS-THROUGH CERTIFICATE, IN ACCORDANCE WITH ITS TERMS, TO THE RECORD OWNER OF THE FANNIE MAE PASS-THROUGH CERTIFICATE. THE OBLIGATIONS OF FANNIE MAE UNDER THE COLLATERAL AGREEMENT AND UNDER THE FANNIE MAE PASS-THROUGH CERTIFICATE,IF ISSUED,WILL BE OBLIGATIONS SOLELY OF FANNIE MAE,A FEDERALLY CHARTERED STOCKHOLDER-OWNED CORPORATION. THE OBLIGATIONS OF FANNIE MAE ARE NOT BACKED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA. FANNIE MAE HAS NO OBLIGATION TO PURCHASE,DIRECTLY OR INDIRECTLY, ANY OF THE BONDS. Fannie Mae has designated the Servicer to service the Mortgage Lean; however, Fannie Mae may subsequently designate other eligible servicing institutions to service the Mortgage Loan for Fannie Mae or may elect to service the Mortgage Loan itself(the Servicer or any such other mortgage servicer so acting from time to time may herein be referred to as the"Mortgage Servicer"). -4- The Bonds are subject to optional, special mandatory and mandatory sinking fund redemption prior to maturity as described under the heading"THE BONDS"herein. Any failure of a Borrower to comply with the terms of the Regulatory Agreement may cause interest on the Bonds to be included in the gross income of the owners thereof for federal income tax purposes, possibly retroactively as well as prospectively. See "TAX MATTERS" herein. None of the Trustee, the Issuer or the Bondholders may ceruse an acceleration or redemption of the Bonds solely by reason of a default by the Borrower under the Regulatory Agreement or of interest on the Bonds becoming includable in the gross income of the owners thereof for federal income tax purpose In addition,the interest rate on the Bonds will not be 4asted in the event that interest payable on such Bonds becomes includable in the gross income of the owners thereof,for federal Income tax purposes The Bonds are special, limited obligations of the Issuer payable solely from and secured by, among other property comprising the Trust Estate described in the Indenture and;the security for such Bonds, the following: (a) prior to the Fannie Mae Pass-Through Certificate Delivery bate, (i) the Mortgage Loan, (ii) Fannie Mae"s credit enhancement of the Mortgage Loan pursuant to the Collateral Agreement, (iii)the Net Band Proceeds,to the extent not disbursed to the Borrower,(iv)the Revenues and any other moneys received by the Trustee for the payment of the principal of and interest on the Bonds,(v)amounts otherwise on deposit in the Funds and Accounts(other than moneys on deposit from time to time in the Rebate Fund, the Costs of Issuance Fund and the Fees Account), all of which will be invested in Permitted Investments, and(vi)Investment Income(excluding Investment Income earned on amounts on deposit in the Rebate Fund and certain Investment Income earned on amounts on deposit in the Costs of Issuance Fund)and(b)on and after the Fannie Mae Pass-Through Certificate Delivery Date, (i)the Fannie Mae Pass-Through Certificate, (ii)the Revenues, including distributions under the Fannie Mae Pass-Through Certificate, and any other moneys received by the Trustee for the payment of the principal of and interest on the Bands, (iii) amounts otherwise on deposit in the Funds and Accounts (other than moneys on deposit from time to time in the Rebate Fund and the Fees Account), all of which will be invested in Permitted Investments,and(iv)the Investment Income(excluding Investment Income earned on amounts on deposit in the Rebate Fund). THE BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER, PAYABLE SOLELY FROM AND SECURED BY THE PLEDGE OF THE TRUST ESTATE PURSUANT TO THE INDENTURE. THE BONDS ARE NOT A DEBT OF THE STATE OF CALIFORNIA, THE ISSUER OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE OF CALIFORNIA. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF CALIFORNIA, THE ISSUER OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE OF CALIFORNIA IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR THE INTEREST" ON THE BONDS. NONE OF THE UNITED STATES OF AMERICA,FANNIE MAE,ANY AGENCY OF THE UNITED STATES OF AMERICA, THE STATE OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE (EXCEPT THE ISSUER, TO THE LIMITED EXTENT SET FORTH IN THE INDENTURE) 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, OBLIGATION OR AGREEMENT OF ANY KIND WHATSOEVER OF THE ISSUER, AND NEITHER THE BONDS NOR ANY OF THE ISSUER'S AGREEMENTS OR OBLIGATIONS SHALL BE CONSTRUED TO CONSTITUTE AN INDEBTEDNESS OF OR A PLEDGE OF THE FAITH AND CREDIT OF OR A LOAN OF THE CREDIT OF ANY OF THE FOREGOING "WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISIONS WHATSOEVER. THE BONDS ARE NOT GUARANTEED BY THE FULL FAITH AND CREDIT` OF THE UNITED STATES OF AMERICA. _. ._._. .. .............................. ......... _........ ......... ...._.... Brief descriptions of the Bonds,the security for the Bonds,the Issuer,Fannie Mae,the Collateral Agreement, the Fannie Mae Commitment, the Fannie Mae Pass-Through Certificate, the Servicer, the Project and the Borrower are included in this Official Statement together with summaries of the Indenture, the Financing Agreement, the Regulatory Agreement and the Collateral Agreement, the Continuing Disclosure Agreement. Such descriptions do not purport to be comprehensive or definitive. All references herein to the Indenture, the Financing Agreement, the Regulatory Agreement, the Continuing Disclosure Agreement, the Collateral Agreement, the Fannie Mae Pass Through Certificate, Fannie Mae Commitment or other document are qualified in their entirety by reference to such documents, and references herein to the Bonds are qualified in their entirety by reference to the forms thereof included in the Indenture and the information with respect thereto in the aforementioned documents, copies of all of which are available for inspection in the designated office of the Trustee in San Francisco,California. THE BONDS General The Bonds are issuable only as fully registered bonds, without coupons, in denominations of $5,000 or any integral multiple thereof. The Bonds are dated as of the date set forth on the cover hereof and will bear interest at the rates per annum, and mature in the principal amounts, as set forth on the inside cover of this Official Statement, subject to prior redemption as described under the caption "Redemption"below. Interest on the Bonds will be calculated on the basis of a 360-day year composed of twelve 30- day months and be payable on April 1 and October 1 of each year, commencing on April 1, 1999(each, an "Interest Payment Date") calculated from the Interest payment Date next preceding the date of authentication of the Bonds, provided that if the date of authentication is an Interest payment Date for which interest has been paid or is after the Record Date but prior to the next Interest Payment Date, the Bonds shall bear interest from such Interest Payment Date, provided further that if the date of authentication is prior to the Record Date for the first Interest Payment Date, the Bonds shall bear interest from the dated date of the Bonds. Notwithstanding the foregoing, if,at the time of authentication of any Bond, interest on any Bond is in default, the Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment or, if no interest has theretofore been paid on the Bond,from the dated date of the Bond. The Bonds will be delivered in fully registered form only and,when issued and delivered,will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"). Ownership interest in the Bonds may be purchased in book-entry form only. Ultimate purchasers of Bonds will not receive physical certificates representing their interest in the Bonds. So long as the Bonds are registered in the name of Cede&Co.,as nominee of DTC,references herein to the Bondholders shall mean Cede&Co. and shall not mean the ultimate purchasers of the Bonds. Payments of the principal of and interest on the Bonds while under the Book-Entry System shall be made in accordance with the rules,regulations and procedures established by DTC in connection with such Book- Entry System. See"THE BONDS--Book-Entry-Only System^"herein. -6- ....................................................................I...................-...I.''..''...11.11,111,111,11,...... ... .............................................................................................................................................................................................. Redemption Optional Redemption. The Bonds are not subject to optional redemption prior to the Conversion Date. On and after the Conversion Date, the Bonds will, to the extent optional prepayment of the Mortgage Loan is made pursuant to and as permitted by the terms of the Mortgage Loan Documents (the right to optionally prepay the Mortgage Loan prior to the Fannie Mae Pass-Through Certificate Delivery Date other than wholly with Available Moneys is subject to, and must be evidenced by, the prior written consent of Fannie Mae provided to the Trustee, on which the Trustee may conclusively rely), be subject to corresponding optional redemption on the first day of any month on or after October 1, 2008, in whole but not in part (except under certain circumstances the Indenture permits optional redemption of the Bonds in part,but solely with Available Moneys). Such redemption shall be made on any date for which timely notice of redemption can be given during the periods set forth in the table below and at the respective redemption prices set forth below (expressed as percentages of the principal amounts of the Bonds called for redemption),plus accrued interest, if any,to the Redemption Date: Redemption Period Redemption Prices (Both Dates inclusive) ffix gressed as a Percentage) October 1,2008 through September 30,2009 101% October 1,2009 and thereafter 100 Unless Fannie Mae provides its prior written consent to an optional prepayment of the Mortgage Loan prior to the Fannie Mae Pass-Through Certificate Delivery Date other than wholly with Available Moneys, optional redemption shall not be permitted unless such redemption is effected solely with Available Moneys. Notwithstanding any other provision of the Indenture to the contrary,the optional redemption of the Bonds arising from the optional prepayment of the Mortgage Loan at any time shall not be made,and notice of any redemption arising from the optional prepayment of the Mortgage Loan shall not be given iven to Bondholders,unless and until 30 days prior to the Redemption Date the Trustee has on hand Available Moneys in an amount sufficient to pay the End Period Payment. Neither the Issuer, Fannie Mae nor the Servicer shall have any responsibility or liability to provide funds to be included in the End Period Payment. Special Mandatory.Redemption. Special Mandatory Redemption From Excess Amounts in General Receipts and Disbursements Account. The Bonds are subject to special mandatory redemption after the Conversion Date,in whole or in part,prior to their stated maturity, at a redemption price equal to 100%of the principal amount of the Bonds to be redeemed, plus accrued interest to the Redemption Date, but without premium, in Authorized Denominations, on the next succeeding Interest Payment Date, from funds transferred from amounts remaining in the General Receipts and Disbursements Account of the Revenue Fund to the Redemption Account after making all of the transfers from the General Receipts and Disbursements Account required pursuant to the Indenture. Such amounts shall be applied to redeem the Bonds in inverse order of maturity. -7- . ..........................---l''..,...... ........................................I........... Special Mandatory Redemption in Connection with Conversion. The Bonds are subject to special mandatory redemption in connection with conversion, in whole or in part: (a) in the event,and to the extent that: (i) amounts remaining in the Mortgage Loan Fund are transferred to the Redemption Account pursuant to the Indenture for application to the redemption of Bonds;or (ii) proceeds of insurance from any casualty to, or proceeds of any award from any condemnation or any award as part of a settlement in lieu of condemnation of, the Project are not applied in accordance with the Mortgage Loan Documents to the rebuilding,restoration or replacement of the Project,or,with the prior written consent of Fannie Mae, otherwise used for improvements to the Project, or applied to the reimbursement of amounts owed to Fannie Mae pursuant to the Reimbursement Agreement following(A)the involuntary destruction or loss of the Project in its entirety or nearly in its entirety as a result of casualty or condemnation, such special mandatory redemption of Bonds to be a redemption of all of the Bonds Outstanding and, therefore, in a principal amount equal to the unpaid principal balance of the Mortgage Note, provided further that the Trustee shall be entitled to payment under the Collateral Agreement, in accordance with its terms, to the extent the insurance or condemnation proceeds, as applicable, applied to the payment of the Mortgage Note, and moneys, if any,on deposit in the Funds and Accounts(other than the Rebate Fund)are less than the unpaid principal balance of the Mortgage Note and are,therefore, insufficient to redeem all of the Bonds Outstanding and (B) the partial destruction or condemnation of the Project, such special mandatory redemption of Bonds to be a redemption of Bonds Outstanding in a principal amount equal to the insurance or condemnation proceeds received with respect to the Project,and (b) at the written direction or with the prior written consent of Fannie Mae to the Trustee and in the amount specified by Fannie Mae: (i) as soon as the notice requirements of the Indenture permit,following(A) any event of default under the Mortgage Loan, including any default under the Mortgage Note, the Mortgage or any other Mortgage Loan Document or any "Event of Default" under and as defined in the Reimbursement Agreement or the Financing Agreement (including any Event of Default under,and as defined in,the Reimbursement Agreement or the Financing Agreement caused by a default under the Mortgage Nate,the Mortgage or any other Mortgage Loan Document) or(B) the occurrence of a "Borrower Default" or a "Direction to Draw" under, and as each such term is defined'in, the Construction Phase Financing Agreement; (ii) on or after the Termination Date, if the Conversion Notice is not issued prior to the Termination Date;or (iii) on or after the Conversion Date, as soon as the notice requirements of the Indenture permit, if, and to the extent that, the Permanent Phase Mortgage Loan Amount (as such term is defined in, and determined in accordance with the terms and -8- x conditions of, the Fannie Mae Commitment) with respect to the Mortgage Loan is less than the original principal amount of the Mortgage Loan. A special mandatory redemption pursuant to paragraph (a) or paragraph (b) above shall be effected on the earliest practicable Redemption Date for which timely notice of redemption can be given pursuant to the Indenture following the occurrence of any of the events described in paragraphs (a) and (b) above. A special mandatory redemption pursuant to paragraphs (4) and (b) above shall be at a redemption price equal to 1000 of the principal amount of the Bonds to be redeemed plus accrued interest on such Bonds to the Redemption Date. Special Mandatory Redemption After the Fannie Mae Pass-Through Certificate Delivery.Date ,,From Fannie Mae Pass-Through Certificate Distributions. The Bonds are subject to special mandatory redemption in whole or in part after the Fannie Mae Pass-Through Certificate Delivery bate and prior to their stated maturity at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest to the Redemption Date, but without premium, in each case from and to the extent that the Trustee receives a distribution under the Fannie Mae Pass-Through Certificate resulting from: (a) Fannie Mae's determination that the Mortgage Loan is or is to be deemed a Fully Prepaid Mortgage Loan (other than by reason of optional prepayment of the entire principal balance of the Mortgage Loan prior to final maturity, causing an optional redemption of the Bonds pursuant to the Indenture);or (b) other moneys received by Fannie Mae on account of the Mortgage Loan (other than by reason of optional prepayment of the entire unpaid principal balance of the Mortgage Loan prior to final maturity, causing an optional redemption of the Bands pursuant to the Indenture), including, without limitation, prepayment as a result of a casualty or condemnation affecting the Project,or a default under the Mortgage Lean; provided, however,that at the direction of Fannie Mae,all or part of the proceeds of such a prepayment of the Mortgage Loan shall be used, in lieu of redeeming Bonds, to acquire a Substitute Fannie Mae Pass-Through Certificate pursuant to the Indenture. Because of the timing of the distribution under the Fannie Mae Pass-Through Certificate, the Redemption Date of any such special mandatory redemption shall be the first day of the month following the month in which falls the Distribution Date on which Fannie Mae will make such distribution. Special Mandatory Redemption After the Fannie Mae Pass-Yhrough Certificate Delivery Late Upon Purchase of Fannie Mae Pass- hrough Certificate. In the event that FannieMae is in default of its payment obligations under the Fannie Mae Pass-Through Certificate, the Trustee is authorized to accept from Fannie Mae an offer to purchase the Fannie Mae Pass-Through Certificate from the Trustee at a purchase price not less than the aggregate Stated Principal Balance (as defined in the Fannie Mae Trust Indenture)of the Mortgage Loan plus accrued interest. If such a purchase occurs,the Trustee shall thereafter immediately call all of the Outstanding Bonds for redemption on the first day for which the requisite notice of redemption can be given but in no event more than 10 days afar the Trustee receives the purchase price from Fannie Mae, and shall apply the proceeds received from Fannie Mae in respect of purchase of the Fannie Mae Pass-Through Certificate, together with Available Moneys held by the Trustee,to the payment of the redemption price of the Bonds. No such offer from Fannie Mae shall be accepted by the Trustee unless the Available Moneys held by the Trustee under the Indenture, together with the amounts to be paid by Fannie Mae in respect of the purchase of the Fannie Mae Pass-Through -9- _.... ......._. ......... ......... ......... ......... ......... ........ . ......_.. .. ........ ...._..........__..._.. ......... ......... ......... ......... ......... ......... ......... ......... ......... Certificate, are sufficient to pay in full the principal amount of the Bonds Outstanding and interest accrued and to accrue on the Outstanding Bonds to the Redemption Date. Any redemption of Bonds pursuant to this paragraph shall be at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued and unpaid interest on the Bonds to the Redemption Date, but without premium. Mandatory Sinking Fund Redemption. Bands Maturing on April], 2011. The Bonds maturing on April 1, 2011 are subject to mandatory redemption in part,by lot,prior to maturity, from sinking fiend installments on each Sinking Fund Redemption Date of October I and April 1, commencing October 1, 2001, at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed, plus accrued interest, to the Redemption Date,but without premium,in the years and in the amounts set forth below: Redemption Redemption Redemption Date Amount Redemption Date Amount October 1,2001 October 1,2006 April 1,2002 April 1,2007 October 1,2002 October 1,2007 April 1,2003 April 1,2008 October 1,2003 October 1,2008 April 1,2004 April 1,2009 October 1,2004 October 1,2009 April 1,2005 April 1,2010 October 1,2005 October 1,2010 April 1,2006 April 1,2011 *Maturity Bonds Maturing on April 1, 2021. The Bonds maturing on April 1, 2021 are subject to mandatory redemption in part, by lot, prior to maturity, from sinking fund installments on each Sinking Fund Redemption Date of October I and April 1, commencing October 1, 2011, at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed, plus accrued interest, to the Redemption Date,but without premium, in the years and in the amounts set forth below: Redemption Redemption Redemption Date Amount Redemption Date Amount October 1,2011 October 1,2016 April 1,2012 April 1,2017 October 1,2012 October 1,2017 April 1,2013 April 1,2018 October 1,2013 October 1,2018 April 1,2014 April 1,2019 October 1,2014 October 1,2019 April 1,2015 April 1,2020 October 1,2015 October 1,2020 April 1,2016 April 1,2021* *Maturity -10- Bands Maturing on April 1, 2031. The Bonds maturing on April 1, 2031 are subject to mandatory redemption in part, by lot,prior to maturity, from sinking fund installments on each Sinking Fund Redemption Date of October I and April 1, commencing October 1, 2021, at a redemption price equal to 140% of the principal amount of the Bonds to be redeemed, plus accrued interest, to the Redemption Date,but without premium,in the years and in the amounts set forth below: Redemption Redemption Redemption Date Amount Redemption Date Amount October 1,2021 October 1,2026 April 1,2022 April 1,2027 October 1,2022 October 1,2027 April 1,2023 April 1,2028 October 1,2023 October 1,2428 April 1,2024 April 1,2029 October 1,2024 October 1,2029 April 1,2025 April 1,2030 October 1,2025 October 1,2030 April 1,2026 April 1,2031 "Maturity Adjustment for Redemptions From Other ,?Iran Sinking Fund Installments. If less than all of the Bonds shall have been redeemed other than from sinking fund installments, the;principal amount of Bonds to be redeemed in each year from sinking fund installments shall be decreased pro rata among all sinking fund installments applicable to such Bonds, or, if Fannie Mae Pass-Through Certificate Delivery has occurred, by an amount in proportion, as nearly as practicable, to the decrease in the distributions under the Fannie Mae Pass-Through Certificate in such year or,if there is no decrease in the distributions under the Fannie Mae Pass-Through Certificate, pro rata among all sinking fund installments. Any such proportional redemption shall be confirmed in writing to the Trustee and the Issuer by the Servicer. Special Mandatory Redemption from Excess Cash Flow D3iso7butions. The Bonds are subject to special mandatory redemption after the Conversion Date, in whole or in part, 'prior to their stated maturity,at a redemption price equal to 100%of the principal amount of the bonds to be redeemed, plus accrued interest to the Redemption Date, but without premium, in Authorized Denominations, on the next succeeding Interest Payment Date for which notice of redemption can be given pursuant to the Indenture, from funds transferred to the Redemption Account pursuant to the Indenture. Bonds redeemed pursuant to this section shall be redeemed in inverse order of maturity. Notice of Redemption Notice of the call for redemption of any Bonds shall be given by the Trustee in the name and on behalf of the Issuer not less than 30 or more than 45 days prior to the anticipated Redemption Date by mailing such notice, fust-class mail, postage prepaid, to the Registered Owner of each Bond to be redeemed at the address of such Registered Owner as shown on the Bond Register maintained by the Trustee, provided that notice of any optional redemption or any special mandatory redemption may be given not less than 15 nor more than 20 days prior to the date fixed for such redemption. Notwithstanding the foregoing, so long as the Book Entry System is maintained in effect, notice of redemption shall be given to the entity designated in the Letter of Representations;executed among the _11- Issuer,the Trustee and DTC in connection with the issuance and sale of the Bonds,and the Trustee shall not be required to give any other notice of redemption. In the event of(a)prepayment that will give rise to an optional redemption, (b)a special mandatory redemption in connection with Conversion, (c)prepayment of amounts payable to the Trustee under the Fannie Mae Pass-Through Certificate that will give rise to a special mandatory redemption or (d)a purchase by Fannie Mae of the Fannie Mae Pass-Through Certificate that will give rise to a special mandatory redemption, the Trustee (1)immediately following receipt of notice of a prepayment that will give rise to a Fannie Mae Pass- Through Certificate distribution that in turn will give rise to an optional redemption or(2)immediately following receipt of funds from Fannie Mae with respect to a special mandatory redemption in connection with certain events,including Conversion,or(3)immediately following receipt of notice of a Fannie Mae Pass-Through Certificate distribution that will give rise to a special mandatory redemption or (4)immediately following receipt by the Trustee of notice from Fannie Mae that a purchase of the Fannie Mae Pass-Through Certificate is to be made will select the Bonds to be redeemed pursuant to the corresponding provisions of the Indenture and notify the Securities Depository by Electronic Means of the redemption of Bonds on the date fixed for redemption of Bonds. Neither failure to give or receive any notice of redemption as required under the Indenture, failure to give timely notice nor any defect in any notice (or in its content or in the manner in which notice is given) shall affect the validity or sufficiency of any proceedings for the redemption of the Bonds to be redeemed. Any notice of optional redemption given shall be revoked by the Trustee by notice given in the same manner for the giving of notice of redemption or by Electronic Means, confirmed in writing, and the redemption canceled, if Available Moneys or,with Fannie Mae's prior written consent,moneys other than wholly Available Moneys sufficient to effect such redemption have not been received by, or are not on hand with,the Trustee on the Redemption hate. Selection of Bunds To Be Redeemed Upon Partial Redemption of Bonds If less than all of the Outstanding Bonds are to be called for redemption,Bonds to be redeemed shall be selected by the Trustee on a reasonably proportionate basis, in minimum amounts of$5,080, from among all the then existing maturities of the Bonds Outstanding, such reasonably proportionate basis to be determined and effectuated as nearly as practicable by multiplying the total amount of money available to redeem Bonds by the ratio which the principal amount of Bonds Outstanding in each maturity bears to the principal amount of all of the Bonds Outstanding,and within a maturity by lot or in such other manner as the Trustee shall deem fair,provided that,with respect to any Optional Redemption of Bonds, the sufficiency of the scheduled cash flow from the monthly payments to be matte under the Mortgage Norte or the scheduled cash flow from the monthly distributions to be matte under the Fannie Mae pass-Through Certificate, as the case may be, and Investment Income with aspect to the General Receipts and Disbursements Account to pay the principal of and interest on the Bonds and the Fees when due and payable, after such redemption, shall be established by a then current Cush Flow Projection which shall be verified by a'Verification Report, each prepared and delivered to the'Trustee and Fannie Mae,at the Borrower's expense, at least 15 days prior to the Redemption Bate. In the event that any Bonds of the same maturity are to be redeemed in part, the Trustee shall assign to each Bond then Outstanding a distinctive number for each $5,€00 of the principal amount of such Bond and from the numbers so assigned to such Bonds,the Trustee shall randomly select as many numbers as,at$5,000 for each number, shall equal the principal amount of such Bonds to be redeemed. The Bonds within a maturity that are to be redeemed shall be the Bonds to which are assigned the numbers selected by the -12- Trustee, but only so much of the principal amount of each such Bond of a denomination of more than $5,000 shall be redeemed as shall equal $5,000 for each number assigned to it and so selected. Bonds may be redeemed only in Authorized Denominations. Notwithstanding the foregoing, so long as the Bonds remain in the Book-Entry System, the Bonds to be redeemed shall be selected by DTC, or any successor Securities Depository, and the DTC Participant through such selection process as is applicable at such time. For the purposes of this paragraph, Bonds which have theretofore been selected for redemption shall not be deemed Outstanding. Purchase of Bonds in Lieu of Redemption Unless otherwise expressly provided in the Indenture,if at any time moneys are held in any Fund or Account to be used to redeem Bonds, in lieu of such redemption the Borrower may direct the Trustee to use part or all of such moneys to purchase Bonds which would otherwise be subject to redemption from such moneys. The purchase price of such Bonds (excluding accrued interest, but including any brokerage and other charges)shall not exceed the applicable redemption price of the Bonds which would be redeemed but for the operation of this provision (accrued interest to be paid from the same Fund or Account from which accrued interest would be paid upon the redemption of such Bonds). Any such purchase must be completed prior to the time notice would otherwise be requested to be given to redeem the Bonds and may not occur, without the consent of the Trustee, after a Record Date. All Bonds so purchased will be canceled by the Trustee and the face amount of the Bonds so purchased shall be applied as a credit against the Issuer's obligation to redeem such Bonds from such moneys. Savings resulting from the purchase of Bonds at less than their respective redemption prices shall be used to purchase or redeem additional Bonds to the extent permitted by the provisions of the Indenture. The Borrower may direct the Trustee to request the submission of tenders following notice to Bondholders requesting such submission prior to making the purchase authorized by this paragraph. Notice of acceptance of tenders shall be given by first-class mail, postage prepaid, to all registered Bondholders, or, in the case of Book-Entry Bonds, to DTC, or any successor Securities Depository. The Borrower may, at its own expense, specify the maximum and minimum period of time which shall transpire between the date upon which such notice is to be given and the date upon which such tenders are to be accepted. No tenders shall be considered or accepted at any price exceeding the price specified in this paragraph. The Trustee shall accept bids with the lowest price and in the event the moneys available for purchase pursuant to such tenders are not sufficient to permit acceptance of all tenders and if there shall be tenders at an equal price above the amount of moneys available for purchase, then the Trustee shall select by lot, in such manner as it shall determine in its discretion, the Bonds tendered which shall be purchased. Special Purchase in Lieu of Redemption Subject to the satisfaction of all applicable terms and conditions set forth in the Indenture, if all Bonds Outstanding are called for special mandatory redemption (as described in paragraphs (bXi) and (bXii) under the caption "THE BONDS—Redemption--Special Mandatory Redemption-_-Special Mandatory Redempti©n in Connection with Conversion A' M, such Bonds may be purchased in whole, but not in part on the date such Bonds are otherwise scheduled to be redeemed, at the purchase price and from the source of funds specified in the Indenture, by the Trustee at the written direction of the Construction Phase Credit Facility Provider and for the account of the Construction Phase Credit Facility Provider or its designee. The Payment Source shall consist solely of funds to be delivered by Fannie Mae under the Collateral Agreement in connection with such redemption together with funds otherwise available under the Indenture to pay the redemption price of the Bonds as directed by Fannie Mae. The -13- . ................ ........................................I....... ........................................ 4 Purchase Price shall be equal to the principal amount of the Bonds otherwise subject to redemption,plus accrued interest,if any,on such Bonds to the Purchase Date. Book-Entry-Only System General. The Bonds will be available initially in hook-entry form only in the principal amount of$5,000 and any integral multiples thereof. Purchasers of beneficial ownership interests in the Bonds will not receive bunds representing their interests in the Bonds purchased. The Underwriter will confirm original issuance purchases with statements containing certain terms of the Bonds purchased. The following information concerning DTC and DTC"s book-entry system has been obtained from sources the Issuer and the Underwriter believe to be reliable; however, the Issuer and the Underwriter take no responsibility as to the accuracy or completeness thereof. There can be no assurance that DTC will abide by its procedures or that such procedures will not be changed from time to time. DTC will act as initial Securities Depository for the Bonds. The ownership of one fully registered Bond in the aggregate principal amount of the Bonds for each maturitywill be registered in the name of Cede&Co.,as nominee for DTC,and will be deposited with DTC. DTC is a limited-purpose trust company organized under the New York Banking Law as a Banking Organization within the meaning of the New York Banking Law. DTC is 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,as amended. DTC was created to hold securities of its participants(the "DTC Participants")and to facilitate the settlement of securities transactions among DTC Participants in such securities though computerized book-entry changes in accounts of the DTC'Participants, thereby eliminating the need for physical movement of securities certificates. DTC Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is owned by a number of its DTC 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 DTC Participant,either directly or indirectly ("Indirect Participant"). The Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. Purchases of the Bonds under the DTC system must be made through DTC Participants, which will receive a credit for the Bonds on DTC"s records. The ownership interest of each actual purchaser of each Bond (the "Beneficial Owner') will be recorded on the DTC 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 DTC Participant or the 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 interests in Bonds,except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers,all Bonds deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede & 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 -14- of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the DTC Participants to whose accounts such Bonds are credited,which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. NEITHER THE ISSUER, THE TRUSTEE, THE SERVICER NOR FANNIE MAE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO DTC PARTICIPANTS,;OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES WITH RESPECT TO THE BONDS, IN RESPECT OF THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT, THE PAYMENT BY DTC OR ANY DTC PARTICIPANT OF ANY AMOUNT IN(RESPECT OF THE PRINCIPAL, INTEREST OR REDEMPTION PRICE OF THE BONDS; ANY NOTICE WHICH IS PERMITTED OR REQUIRED TO BE GIVEN TO BONDHOLDERS UNDER THE INDENTURE; THE SELECTION BY DTC OR ANY DTC PARTICIPANT OF ANY PERSON TO RECEIVE PAYMENT IN THE EVENT OF A PARTIAL REDEMPTION OF THE BONDS; OR ANY OTHER ACTION TAKEN BY DTC AS BONDHOLDER. SO LONG AS CEDE&.CO.IS THE REGISTERED OWNER OF THE BONDS,AS NOMINEE OF DTC, REFERENCES HEREIN TO THE OWNERS OR HOLDERS OF THE BONDS (OTHER THAN UNDER THE CAPTION "TAX MATTERS")SHALL MEAN CEDE&CO. AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE BONDS. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving written notice to the Issuer and the Trustee. Under such 'circumstances, if no successor to DTC is appointed to act as securities depository, Bond certificates are required to be delivered as described in the Indenture. The Issuer may determine that continuation of the system of book-entry transfers through DTC (or a successor securities depository) is not in the best interest of the Beneficial Owners. In such event, Bond certificates will be delivered as described in the Indenture. Conveyances of notices and other communications by DTC to DTC Participants, by DTC Participants to Indirect Participants and by DTC Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to such statutory and regulatory requirements as may be in effect from time to time. Neither DTC nor Cede & Co. will consent or vote with respect to Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those DTC Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments of principal of, premium, if any, and interest on the Bonds will be made to DTC. DTC's practice is to credit the accounts of the DTC Participants in accordance with their respective holdings shown on the records of DTC unless DTC has reason to believe that it will not receive payment on the payable date. Payments by DTC Participants and Indirect Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is now the case with municipal securities held for the accounts of customers in bearer form or registered in "street name,"and will be the responsibility of such DTC Participant or Indirect Participant,and not of DTC,the Trustee or the Issuer, subject to such statutory and regulatory requirements as may be in effect from time to time. Payment of -is- principal and interest to DTC is the responsibility of the Issuer or the Trustee. Disbursement of such payments to the DTC Participants is the responsibility of UTC,and disbursement of such payments to the Benefic=ial Owners is the responsibility of the DTC Participants and the Indirect Participants. In the event the Bonds are removed from the Book-Entry System, the principal of and the interest on the Bonds shall be payable to the persons in whose names the Bonds,are registered on the Bond Register on the applicable Record Date. Payments of interest on the Bonds shall be made to the registered owner of the Bonds(as determined at the close of business on the Record Date next preceding the applicable Interest Payment Date) by wire transfer to any account within the United States of America designated by a Bondholder(if requested in writing of the Trustee by a Bondholder of not less than $1,000,000 in aggregate principal amount of Bonds not less than five days prior to the applicable Interest Payment Date and if such Bondholder otherwise compliers with the reasonable requirements of the Trustee (such request m►ay specify that it is effective with respect to all succeeding payments of principal, premium, if any, and interest and will be so effective unless and until rescinded in writing by the Bondholder at least five days prior to the Record Date for the first Interest Payment Date to which such rescission is designated to apply) or by check mailed by first-class mail, postage prepaid, on the Interest Payment Date to the address of such Bondholder as it appears on the registration books of the Issuer maintained by the Trustee as Bond Registrar, or to such other address as may be furnished in writing to the Trustee prior to the applicable Record Date by such registered Bondholder. Payments of principal of a Bond shall be made by check only upon presentation and surrender of the Bond at the designated office of the Trustee on or after its maturity date or date fixed for redemption. If interest on the Bonds is in default,the Trustee shall,prior to payment of interest,establish a special record date(the "Special Record Date")for such payment, which. Special Record Date shall be not more than 15 or less than 10 days prior to the date of the proposed payment. Payment of such defaultedinterest shall then be made by check or wire transfer,as permitted above, mailed or remitted to the persons in whose names the Bonds are registered on the Special Record Date at the addresses or accounts of such persons shown on the Bond Register. SECURffY FOR THE BONDS Pledge of Trust Estate Pursuant to the Indenture,the Issuer has assigned and granted a security interest in,and pledged, the property described below to the Trustee, in its capacity as Trustee, to secure the payment of the principal of, premium, if any, and interest on the Bonds when the same become due and payable (the "Trust Estate"): (a) all right, title and interest of the Issuer in and to the Financing Agreement, the Regulatory Agreement,the Mortgage:Loan, including the Mortgage Note,the Mortgage and the other Mortgage Loan Documents, further including, but not limited to, all rights to receive payments on the Mortgage Note and under the Mortgage Lean Documents, including all proceeds of insurance or condemnation awards, but subject to the provisions of the Assignment of Mortgage Loan (the "Assignment") and the Collateral Agreement, including the right of Fannie Mae, as provided in the Collateral Agreement, to direct the Trustee to assign the Mortgage Loan to Fannie Mae, including within such assignment the Mortgages Note and the Mortgage, and all amendments, modifications, supplements, renewals and restatements of the foregoing,reserving,however,the Reserved Rights; -16- (b) all right, title and interest of the Issuer in and to the proceeds derived from the sale of the Bonds and all Funds and Accounts under the Indenture(including,without limitation, moneys, documents, securities, investments, instruments and general intangibles on deposit, or otherwise held by the Trustee under the Indenture), including Investment Income,but excluding moneys on deposit from time to time in the Fees Account, the Rebate Fund and the Costs of Issuance Fund (including, within such exclusion, Investment Income retained in the Costs of Issuance Fund); (c) all Revenues; (d) all funds, moneys and securities and any and all other tights and interests in property,whether tangible or intangible,from time to time hereafter by delivery or by writing of any kind conveyed, mortgaged, pledged, assigned or transferred as and for additional security under the Indenture for the Bonds by the Issuer, or by anyone on its behalf, or with its written consent, to the Trustee, which is authorized to receive any and all such property at any and all times,and to hold and apply the same subject to the terms of the Indenture;and (e) all of the proceeds of the foregoing, including, withoutlimitation, Permitted Investments and Investment Income. Prior to the Fannie Mae Pass-Through Certificate Delivery Date,the principal of and interest on the Bonds will be secured by the Mortgage Loan and by Fannie Maes credit; enhancement of the Mortgage Loan pursuant to the Collateral Agreement and by the proceeds of the Bands,to the extent not disbursed to the Borrower,and will be further secured by and payable from the Revenues, other moneys received by the Trustee for payment of the principal of and interest on the Bonds,(certain funds held by the Trustee under the Indenture and certain Investment Income. If a Fannie Mae Pass-Through Certificate is issued and, on the order of the Servicer, delivered to the Trustee, then from and after the delivery of such Fannie Mae: Pass-Through Certificate to the Trustee, the principal and interest on the Bonds will be secured by, among other things, the Fannie Mae Pass-Through Certificate, and other moneys received by the Trustee for payment of the principal of and interest on the Bonds, certain funds held by the Trustee under the Indenture and certain Investment Income. The Trustee;will hold the Fannie Mae Pass-Through Certificate for the benefit of the holders of the Bonds. THE BONDS ARE NOT A DEBT OF THE UNITED STATES OF AMERICA OR ANY AGENCY THEREOF OR OF FANNIE MAE. PAYMENT OF PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE BONDS IS NOT GUARANTEED BY FANNIE MAE.' SO LONG AS THE COLLATERAL AGREEMENT IS IN EFFECT WITH RESPECT TO THE MORTGAGE LOAN, FANNIE MAES OBLIGATIONS WILL BE SOLELY AS PROVIDED IN THE COLLATERAL AGREEMENT. IF A FANNIE MAE PASS-THROUGH CERTIFICATE IS ISSUED WITH RESPECT TO THE MORTGAGE LOAN, FANNIE MAUS SOLE OBLIGATION WILL BE CONTAINED IN THE FANNIE MAE PASS-THROUGH CERTIFICATE AND WILL BE LIMITED TO MAKING DISTRIBUTIONS OF PRINCIPAL AND INTEREST UNDER THE FANNIE MAE PASS-THROUGH CERTIFICATE, IN ACCORDANCE WITH ITS TERMS, TO THE RECORD OWNER OF THE FANNIE MAE PASS-THROUGH CERTIFICATE. THE OBLIGATIONS OF FSE MAE UNDER THE COLLATERAL AGREEMENT AND UNDER THE FANNIE MAE PASS-THROUGH CERTIFICATE,IF ISSUED,WILL BE OBLIGATIONS SOLELY OF FANNIE MAE,A'FEDERALLY CHARTERED STOCKHOLDER-OWNED CORPORATION. THE OBLIGATIONS OF FANNIE MAE ARE NOT BACKED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF -17- ............ AMERICA. FANNIE MAE HAS NO OBLIGATION TO PURCHASE,DIRECTLY OR INDIRECTLY, ANY OF THE BONDS. THE BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE iISSUER, PAYABLE SOLELY FROM AND SECURED BY THE PLEDGE OF THE TRUST ESTATE PURSUANT TO THE INDENTURE. THE BONDS ARE NOT A DEBT OF THE STATE OF CALIFORNIA, THE ISSUER OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE OF CALIFORNIA. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF CALIFORNIA IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR THE INTEREST ON THE BONDS. NONE OF THE UNITED STATES OF AMERICA, FANNIE MAE, ANY AGENCY OF THE UNITED STATES OF AMERICA, THE STATE OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE (EXCEPT THE ISSUER, TO THE LIMITED EXTENT SET FORTH IN THE INDENTURE) 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,OBLIGATION OR AGREEMENT OF ANY KIND WHATSOEVER OF THE ISSUER, AND NEITHER THE BONDS NOR ANY OF THE ISSUER'S AGREEMENTS OR OBLIGATIONS SHALL BE CONSTRUED TO CONSTITUTE AN INDEBTEDNESS OF OR A PLEDGE OF THE FAITH AND CREDIT OF OR A LOAN OF THE CREDIT OF ANY OF THE FOREGOING WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISIONS WHATSOEVER. THE BONDS ARE NOT GUARANTEED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA. Non-Recourse Obligations THE OBLIGATION TO MAKE LOAN PAYMENTS AND ADDITIONAL PAYMENTS IS A NON-RECOURSE OBLIGATION. NO RECOURSE SHALL BE AVAILABLE FOR THE PAYMENT OF ANY LOAN PAYMENTS AND ADDITIONAL PAYMENTS OR THE PRINCIPAL, INTEREST OR PREMIUM, IF ANY, WITH RESPECT TO THE BONDS AGAINST ANY PAST, PRESENT OR FUTURE OFFICER, DIRECTOR, PARTNER, COUNSEL, FINANCIAL ADVISOR OR AGENT OF THE BORROWER, OR OF ANY SUCCESSOR TO THE BORROWER, AS SUCH, EITHER DIRECTLY OR THROUGH THE BORROWER OR ANY SUCCESSOR TO TEE BORROWER, UNDER ANY RULE OF LAW OR EQUITY, STATUTE OR CONSTITUTION OR BY THE ENFORCEMENT OF ANY ASSESSMENT OR PENALTY OR OTHERWISE, AND ALL SUCH LIABILITY OF ANY SUCH OFFICERS, DIRECTORS, PARTNERS, COUNSEL, FINANCIAL ADVISORS OR AGENTS, AS SUCH, IS EXPRESSLY WAIVED AND RELEASED AS A CONDITION OF AND CONSIDERATION FOR THE EXECUTION AND DELIVERY OF THE BONDS. Collateral Agreement On the Closing Date,the Trustee will enter into the Collateral Agreement with Fannie Mae and thereafter the Trustee is required to abide by and take all actions required of the Trustee under such Collateral Agreement in accordance with its terms. In addition to the other security provided under the Indenture, the obligation of the Borrower to make Required Mortgage Payments under the Mortgage Note will, so long as the Collateral Agreement is in effect,be secured by a pledge by Fannie Mae to the Trustee of interests in certain Pledged Collateral pursuant to the terms of the Collateral Agreement The Pledged Collateral may consist of(a)an interest in residential mortgages insured by the Federal Housing Administration of the United States Department of Housing and Urban Development under the National Housing Act of 1934, as amended, or otherwise ..........''I'll''....... .........................................................I.......... ........................- insured or guaranteed by an agency of the United States of America, (b) mortgage-backed securities guaranteed as to payment when due by Fannie Mae, the Federal Home Loan Mortgage Corporation or the Government National Mortgage Association, (c) any general obligation of Fannie Mae and/or (d) participation interests in any such securities or obligations described in clauses (b) and (c). The pledge made by Fannie Mae in the Collateral Agreement is in the nature of a hypothecation in which pledged collateral is not delivered to the pledgee. On the basis of the pledge and security interest with respect to the Pledged Collateral, Fannie Mae is obligated, upon the Borrower's default in making any Required Mortgage Payment under the Mortgage Note when due, and upon receipt of notice from the Trustee of such default,to pay to the Trustee,from proceeds of the Pledged Collateral or other funds of Fannie Mae, an amount equal to the Required Mortgage Payment that was to have been made';by the Borrower. In addition,under certain terms and conditions set forth in the Collateral Agreement,proceeds derived from redeeming all or a portion of the Pledged Collateral from the Trustee or other funds of Fannie Mae will be available to the Trustee under the Collateral Agreement in amounts which, when aggregated with certain other funds held by the Trustee under the Indenture,and, in certain cases,with funds received by the Trustee, will be sufficient to provide for the timely payment of the principal of and interest on the Bonds(other than Bonds purchased,pursuant to the Indenture,at the direction of the Construction Phase Credit Facility Provider for the account of the Construction Phase Credit Facility Provider). Fannie Mae's obligations under the Collateral Agreement with respect to the Mortgage Loan are limited to (i) making payments to the Trustee to the extent that the Borrower fails to make a Required Mortgage Payment under the Mortgage Note, as described in the Collateral Agreement, including payment of the unpaid principal balance of the Mortgage Note and all accrued and unpaidinterest due on the Mortgage Note on the maturity date of the Mortgage Note, (ii) asking payments to the Trustee to redeem Pledged Collateral upon acceleration of the Bonds(other than Purchased Bands)or upon special mandatory redemptions of Bonds (other than Purchased Bonds) and (iii) making payments following certain proceedings under the Bankruptcy Code resulting in recoveries of certain'payments previously paid. Fannie Mae has no obligation under the Collateral Agreement to make any payment with respect to any other payments which may be due and payable under the Mortgage Note, the Mortgage, any other Mortgage Loan Document or the Bonds. Fannie Mae's obligation to make payments under the Collateral Agreement is absolute, unconditional and irrevocable and is not dependent upon the principal amount or the fair market value of the Pledged Collateral or whether cash flaw on the Pledged Collateral(whether or not Pledged Collateral is identified to the Trustee pursuant to the Collateral Agreement) is sufficient to make the payments required by the Collateral Agreement. Under the Collateral Agreement, Fannie Mae has the right to direct the Trustee to assign the Mortgage Loan to Fannie Mae. If Fannie Mae does not redeem the Pledged Collateral in connection with such assignment, it must file with the Trustee a certification reaffirming Fannie Mae's obligations under the Collateral Agreement. Fannie Mae is obligated to assign the Mortgage Rights with respect to the Mortgage Loan to the Trustee upon any payment default by Fannie Mae under the Collateral Agreement. The Trustee is required to give notices to Fannie Mae as required by, and pursuant to and in accordance with, the terms and conditions of the Collateral Agreement, in order to receive payments from Fannie Mae under,and as and to the extent provided in and permitted by,the Collateral Agreement, and is to cause moneys received from Fannie Mae to be applied for the purposes specified in the Collateral Agreement and the Indenture. All moneys derived from the Collateral Agreement are to be deposited into the Credit Facility Account of the Revenue Fund under the Indenture pending their -19- ................................................................................................................................. . ............................................................................................................................................................................................. application by the Trustee. In the event that the Trustee shall have received any payment from Fannie Mae under or pursuant to the Collateral Agreement, and thereafter amounts shall be received by the Trustee from the Borrower or other source, which later received amounts were in payment of amounts satisfied by the payment under or pursuant to the Collateral Agreement,then such later received amounts shall be promptly reimbursed to Fannie Mae to the extent of the amount so paid by Fannie Mae. The Trustee has covenanted that it will not, without the prior written consent of the registered owners of all of the Bonds then Outstanding, transfer, assign or release the Collateral Agreement until the principal of and interest on the Bonds shall have been paid or duly provided for in accordance with the terms of the Indenture, except (a)to a successor Trustee or(b) to Fannie Mae upon expiration or other termination of the Collateral Agreement in accordance with its terms, including termination on its stated expiration date and upon payment under the Collateral Agreement of the full amount payable under the Collateral Agreement. If at any time during the term of the Collateral Agreement a successor Trustee shall be appointed and qualified under the Indenture and the Collateral Agreement is not assignable or transferable to the successor Trustee, the resigning Trustee is to request that Fannie Mae enter into a new Collateral Agreement, substantially identical to the Collateral Agreement, with the successor Trustee for the benefit of the holders of the Bonds,and the resigning Trustee is to continue to serve as Trustee under the Indenture until such time as the new Collateral Agreement is delivered to the successor Trustee. If the resigning Trustee fails to make this request, the successor Trustee is to do so before accepting its appointment. Upon issuance of the new Collateral Agreement to the successor Trustee, the Collateral Agreement is to be returned to Fannie Mae and canceled, and the new Collateral Agreement is to thereafter be subject to all of the provisions of the Indenture relating to the Collateral Agreement and is to be deemed for all purposes of the Indenture to be the Credit Facility in effect prior to the Conversion Date. Upon receipt of the Fannie Mae Pass-Through Certificate, the Trustee is to relinquish all of its rights and interests in the Collateral Agreement effective as of the expiration or earlier termination of the Collateral Agreement in accordance with its terms. If all Conditions to Conversionare not been satisfied prior to the Termination Date set forth in the Fannie Mae Commitment, the Collateral Agreement will terminate in accordance with its terms and the Bonds will be subject to special mandatory redemption. See "THE BONDS—Redemption All. Each purchaser of the Bonds should be aware that the Collateral Agreement does not guarantee payment of principal of, premium, if any, or interest on the Bonds. Neither does the Collateral Agreement create a perfected security interest in specific Pledged Collateral. The Collateral Agreement only provides that payments corresponding to the Required Mortgage Payments due under the Mortgage Note will be made by Fannie Mae if not made by the Borrower or that Fannie Mae will redeem the Trustee's interest in the Pledged Collateral In certain events. A summary of certain provisions of the Collateral Agreement is contained in A MPEND=IX 9—"SU_MM____"Y OF CERTAIN PROVISIONS OF TIM COLLATERAL == = AGREEMENT All MAJE�All Information regarding Fannie Mae is contained herein under the caption "FANNIE Conversion;Issuance of Fannie Mae Pass-Through Certificate Conversion; Failure of Conversion To Occur. Fannie Mae has issued the Fannie Mae Commitment to the Servicer, pursuant to which Fannie Mae-has agreed, subject to satisfaction of the terms and conditions of the Fannie Mae Commitment, to (a) provide credit enhancement for the _20- .................. ......''I'll.--,.......­­..''.......­­.­­­­­­....... .............................................................................................­.­.­.­.­.­­........ ........................................................ Mortgage Loan pursuant to, and subject to the limitations of,the Collateral Agreement,and (b)acquire the Mortgage Loan in exchange for a Fannie Mae Pass-Through Certificate if, and at such time as, the Fannie Mae Pass-Through Certificate Delivery Requirements set forth in the Indenture (including, but not limited to, issuance of the Conversion Notice by the Servicer prior to the Termination Date evidencing that each of the Conditions to Conversion set forth in the Fannie Mae Commitment has been satisfied (or, to the extent that any Condition to Conversion has not been satisfied prior to the Termination.Bate, such Condition to Conversion has been waived in writing by Fannie Mae prior to the Termination Date))are satisfied such that the Trustee will issue the Fannie Mae Pass-Through Certificate Delivery Notice. If all Conditions to Conversion are not satisfied prior to the Termination Date, (a) Conversion will not occur,(b)the Bonds will be subject to special mandatory redemption pursuant to the Indenture or to purchase by or for the account of the Construction Phase Credit Facility Provider in accordance with the terms and conditions of the Indenture,(c)the Collateral Agreement will terminate in accordance with its terms,and (d)Fannie Mae will have no obligation to acquire the Mortgage Loan or to issue the Fannie Mae Pass-Through Certificate. See "THE FANNIE MAE COMMITMENT— Commitment OMMITMENTCommitment With Respect to Mortgage Loan^°,, Issuance of.F`annk Mae Pass-Through CertiP,f kcate. The Trustee acknowledges and agrees, in the Indenture, that the Trustee, acting for and on behalf of the Issuer, will, on the Fannie Mae Pass- Through Certificate Date, assign its interest in the Mortgage Loan to the Servicer who, in turn, will concurrently assign such interest in the Mortgage Loan to Fannie Mae in exchange for the Fannie Mae Pass-Through Certificate as provided in and subject to the terms and conditions set forth in the Indenture. The Issuer and the Trustee understand that the Fannie Mae Pass-Through Certificate will be issued, on the Fannie Mae Pass-Through Certificate Delivery Date, in accordance with the Fannie Mae Trust Indenture,electronically, in "book entry" form, as shown on the records of the Federal Reserve Hank of New York, Fannie Mae's mortgage-backed securities transfer and paying agent; accordingly,`all references in this Indenture to the Fannie Mae Pass-Through Certificate shall be deemed references to the electronic book entry reflecting the interest of the Trustee or a custodian for the Trustee in the Fannie Mae Pass-Through Certificate as shown in the records of the Federal ReserveBank of New York. Delivery of the Fannie Mae Pass-Through Certificate to the Trustee or to a custodian for the Trustee shall be deemed to have occurred when the Trustee shall have received confirmation from the Federal Reserve Bank of New York that the Fannie Mae Pass-Through Certificate has been issued in book-entry form and registered on the registration books of the Federal Reserve Bank of New York, in the name of the Trustee or a custodian for the Trustee. Registration of the Fannie Mae Pass-Through.Certificate in the name of the Trustee or in the name of a custodian for the Trustee shall be made with such recitals as are appropriate to indicate that the Fannie Mae Pass-Through Certificate is to be held by or for the Trustee in its capacity as trustee under the Indenture and subject to the terms and provisions of the Indenture. The Trustee shall give written notice to the Rating Agency upon recent by the Trustee or a custodian for the Trustee of the Fannie Mae Pass-Through Certificate. If the Trustee does not, for any reason, acquire the Fannie Mae Pass-Through Certificate on the Fannie Mae Pass-Through Certificate Delivery Date, the Trustee shall immediately give notice of that fact to Fannie Mae. The obligation of the Trustee to accept delivery of the Fannie Mae Pass-Through Certificate shall be subject to the following(all of which shall be provided at the sole cost and expense of the Borrower): (i) satisfaction of the Faimie Mae Pass-Through Certificate Delivery Requirements, see'­Fannie Mae Pass Through Certificate Delivery Requirements"below. (ii) the Trustee's confirmation (a)that the Fannie Mae Pass-Through Certificate has an issue Date Principal Balance equal to the then aggregate unpaid principal balance of the Mortgage Loan, which written confirmation may be an Issue Supplement, (b) that such Issue -2I- Date Principal Balance equals the then outstanding principal amount of the Bonds,and(c)of the Fannie Mae Pass-Through Certificate Rate; (iii) the Trustee's confirmation that the last scheduled distribution under the Fannie Mae Pass-Through Certificate will be made not later than in the month preceding the final Maturity Date of the Bands, (iv) the Trustee's receipt of an Issue Supplement to the Fannie Mae Trust Indenture which has attached to it a Mortgage Loan Schedule specifying the Mortgage Loan(and no other mortgage loan) as the Mortgage Loan constituting the Pool (as defined in the Fannie Mae Trust Indenture);and (v) the Trustee's receipt of confirmation from Fannie Mae that the Fannie Mae Legal .Department will issue to the Trustee on the Fannie Mae Pass-Through Certificate Delivery Date an Opinion of Counsel to the effect that the Fannie Mae Pass-Through Certificate constitutes a valid and binding obligation of Fannie Mae, entitled to the benefits of the Fannie Mae Trust Indenture, subject to any applicable bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights from time to time in effect and to general equity principles. From and after the Fannie Mae Pass-Through Certificate Delivery Date, the Trustee shall hold the Fannie Mae Pass-Through Certificate (or evidence of the Trustee's interest in the Fannie Mae Pass- through Certificate)for the benefit of the Bondholders. Upon issuance of the Fannie Mae Pass-Through Certificate,the Trustee shall receive distributions from Fannie Mae under the Fannie Mae Pass--Through Certificate in accordance with the terms of the Fannie Mae Pass-Through Certificate and shall deposit, hold and invest such amounts in accordance with this Indenture. In the event that an Investment Agreement shall at any time be in effect for the investment of funds on deposit in any Account within the Revenue Fund,the Trustee may, in its discretion,designate the office of the custodian of funds invested under the Investment Agreement as the address to which distributions under the Fannie Mae Pass- Through Certificate are to be made,provided that such custodian shall have agreed to notify the Trustee by telephone in the event that any amount distributable under the Fannie Mae Pass-Through Certificate is not received by the close of the Business Day following the Distribution Date. A default under the Mortgage Loan.Documents may result in the Mortgage Loan being deemed, by Fannie Mae, a Fully Prepaid Mortgage Loan (as defined herein), which could result in mandatory redemption of the Bonds. See "THE BONDS—Redemption--Special Mandatory Redemption—pecial Mandatary Redemption After the Conversion hate From Certain Fannie Mae Pass-Through Certificate .Distributions"herein. Fannie Mae Pass-:Through Certificate Delivery.Requirements. The conditions which must be satisfied in order for the Trustee to issue the Fannie Mae Pass-Through Certificate'Delivery Notice are the fallowing. (a) the Servicer must have issued the Conversion Notice to the Trustee prior to the Termination Date; (b) the Servicer shall have confirmed to the Trustee that the Servicer has ordered the Fannie Mae Pass-Through Certificate(i) in a principal amount equal to the Issue Date Principal Balance and(ii)with an interest rate equal to the Fannie Mae Pass-Through Certificate Rate; -22- (c) the Trustee shall have received confirmation from the Servicer that the Servicer has received confirmation from Fannie Mae that Fannie Mae intends to issue the Fannie Mae Pass-Through Certificate; (d) the Trustee shall have received confirmation from Fannie Mae that Fannie Mae will, on the Fannie Mae Pass-Through Certificate Delivery Bate, deliver to the Trustee an Issue Supplement to the Fannie Mae Trust Indenture,which will have attached to it a Mortgage Loan Schedule specifying the Mortgage Loan (and no,other mortgage loan) as the Mortgage Loan constituting the Pool(as defined in the Fannie Mae Trust Indenture); (e) the Servicer shall have confirmed to the Trustee that the Servicer has received confirmation from Fannie Mae that the Fannie Mae Legal Department will issue to the Trustee on the Fannie Mae Pass-Through Certificate Delivery Date,an Opinion of Counsel to the effect that the Fannie Mae Pass-Through Certificate constitutes a valid and binding obligation of Fannie Mae,entitled to the benefits of the Fannie Mae Trust Indenture, subject to any applicable bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors'rights from time to time in effect and to general equity principles; (f) the Trustee, the Servicer,the Issuer, the Borrower, Fannie Mae and the Rating Agency shall have received either(i)a written confirmation of the original Cash Flow Projection from the Verification Agent or (ii) a then current Cash Flow Projection, in the latter instance accompanied by a Verification Report, showing that the scheduled payments to be made under the Mortgage Loan and the corresponding distributions to be made under the Fannie Mae Pass- Through Certificate,together with other Revenues,will be sufficient to timely pay the principal of and interest on the Bonds and the Fees when the same shall become due and payable; (g) the Trustee shall have received from Bond Counselthe form of, and confirmation from Bond Counsel that, subject to satisfaction of the Fannie Mae Pass-Through Certificate Delivery Requirements, Band Counsel will issue to the Trustee, Fannie Mae, the Servicer and the Issuer on the Fannie Mae Pass-Through Certificate Delivery Date, a then current Opinion of Bund Counsel to the effect that, absent a change in law or material fact bearing on the matters covered in the form of Opinion of Bond Counsel, the substitution of the Fannie Mae Pass-Through Certificate for the Collateral Agreement is permitted by this Indenture and will not affect the excludability from gross income, for federal income tax purposes, of the interest payable on the Bonds; (h) the Trustee shall have determined that all other agreements, documents, instruments, certificates(including an update of the Tax Certificate, dated as of the Conversion Date) and opinions as the Issuer, the Trustee or Fannie Mae shall require, in their respective discretion, to effect Fannie Mae Pass-Through Certificate Delivery have been prepared, agreed upon and accepted as to form and content by the intended recipients of such agreements, documents,instruments,certificates and opinions; (i) the Borrower shall have deposited with the Trustee moneys sufficient to pay all fees, costs and expenses (including attorneys' fees and expenses) necessary to effectuate the terms and conditions of this Section;and -23- (j) if the Issue Date will coincide with the Conversion Date, any special mandatory redemption,as set forth in the Indenture,shall have occurred. Fannie Mae Pass-Through Certificate Summary Description of Fannie Mae Pass-Through Cert fcate. The following description of the Fannie Mae Pass-Through Certificate assumes that at the time the Fannie Mae Pass-Through Certificate is issued, the Fannie Mae Trust Indenture and the form of Fannie Mae Pass-Through Certificate issued by Fannie Mae under the Fannie Mae Trust Indenture will be in substantially the form they are in on the date of this Official Statement. Under the terms of the Fannie Mae Pass-Through Certificate, if issued by Fannie Mae, Fannie Mae will distribute to the registered holder (the Trustee or a custodian for the Trustee) on the twenty- fifth day of each month or, if any such twenty-fifth day is not a business day, the succeeding business day (each a "Distribution Date"), commencing with the Distribution Date in the month following the month in which the Fannie Mae Pass-Through Certificate is issued, an amount equal to the total of(i) Aggregate Scheduled Principal (as defined below), (ii) the scheduled payment of interest on the Mortgage Loan during the period beginning on the second day of the preceding month and ending on the first day of the month of such Distribution Date, less the portion of such monthly scheduled payment of interest attributable to the Spread Amount, (iii) the Stated Principal Balance of the Mortgage Loan if such Mortgage Loan became or was deemed by Fannie Mae to be a Fully Prepaid Mortgage Loan (as defined below) in the month prior to the month of distribution, and (iv) any unscheduled partial payments or ether recoveries of principal on the Mortgage Loan which are not accompanied by an amount representing scheduled interest due after the month of payment, which payments or recoveries are received or deemed to have been received in the month prior to the month of distribution. "Aggregate ,Scheduled Principal" means, with respect to any Distribution Date, the aggregate principal due on the Mortgage Loan during the period beginning on the second day of the month preceding the month of such Distribution Date and ending on the first day of the month of such Distribution Date. "Guaranty Fee"means the guaranty fee payable to Fannie Mae for issuing the Fannie Mae Pass- Through Certificate. "Issue Supplement" means an instrument published by Fannie Mae pursuant to the Fannie Mae Trust Indenture which supplements the Fannie Mae Trust Indenture and identifies and establishes a mortgage pool comprising the Mortgage Loan and the Fannie Mae Pass-Through Certificate related to the Mortgage Loan. "Spread Amount"means the portion of interest on the Mortgage Loan allocable to the Servicer's Servicing Fees and Fannie Mae's Guaranty Fee. "Started Principal Balance"means,with respect to the Mortgage Loan and any Distribution Date, the principal balance of the Mortgage Loan on the date of issuance of the Fannie Mae Pass-Through Certificate reduced by all amounts distributed to the registered owner of the Fannie Mae Pass-Through Certificate in respect of principal of the Mortgage Loan. A Mortgage Loan will constitute a "Fully Prepaid Mortgage Loan" if(i) payment of the entire principal balance of the Mortgage Loan is made prior to final maturity,(ii)cash is received in connection -24- with the liquidation of the Mortgage Loan (whether through insurance proceeds, condemnation awards, proceeds of any sale of the Project or otherwise and whether or not such cash is equal to the unpaid principal amount of the Mortgage Loan and all accrued interest on the MortgageLoan) in an amount determined by Fannie Mae in its reasonable judgment to be the full amount finally recoverable on account of the Mortgage Loan, or (iii) a default has occurred under the Mortgage Loan which, in accordance with the Fannie Mae Trust Indenture, causes the Mortgage Loan to become or to be deemed by Fannie Mae to be a Fully Prepaid Mortgage Loan. Under the Fannie Mae Trust Indenture,a Mortgage Loan will be deemed a Fully Prepaid Mortgage Loan if Fannie Mae exercises certain rights with respect to the Mortgage Loan,such as withdrawing the Mortgage Loan from the mortgage pool. Fannie Mae has the right and option, without obligation and in its discretion, to withdraw the Mortgage Loan from the mortgage pool, for example (i)at any time after the Mortgage Note becomes delinquent, in whole or in part,as to four consecutive monthly installments of interest or principal and interest,(ii) if the Borrower shall be in violation of or default under any covenant or agreement under the Mortgage Note or the Mortgage or under the Regulatory Agreement or any similar document intended to insure compliance by the Project with certain laws and regulations relating to the tax-exempt status of the Bonds and such violation or default shall have continued for 60 days or(iii)if the principal balance of the Mortgage Loan is declared to be immediately due and payable by Fannie Mae and such principal balance shall not have been paid within 10 days after such declaration. In addition,Fannie Mae shall have the right to withdraw the Mortgage Loan from the mortgage pool if the Project is transferred, or proposed to be transferred, under circumstances in which Fannie Mae is legally permitted or reasonably believes that it is legally permitted,to accelerate the maturity of the Mortgage Loan pursuant to the terms of the "due-on-sale" or like clause contained in the Mortgage, or if Fannie Mae acquires the Project through foreclosure, deed- in-lieu of foreclosure or comparable conversion of the Mortgage Loan. Upon the Exercise of any such rights by Fannie Mae,the Mortgage Loan will be deemed to be a Fully Prepaid Mortgage Loan resulting in a prepayment under the Fannie Mae Pass-Through Certificate and a corresponding redemption of the Bonds. See "THE BONDS—Redemption--Special Mandatory Redemption-Special Mandatory Redemption After the Fannie Mae Pass-Through Certificate Delivery Date From Fannie Mae Pass- Through Certificate Distributions." The obligation of Fannie Mae to make distributions under the Fannie Mae Pass-Through Certificate is a general, unsecured obligation of Fannie Mae. If Fannie Mae fails to perform such obligations, distributions to the Trustee will consist of payments and other recoveries on the Mortgage Loan, and a delinquency or default on the Mortgage Loan at that time would seriously and adversely affect monthly distributions to the Trustee. The monthly distributions under the Fannie Mae Pass-Through Certificate will be subject to adjustment by reason of any prepayments or other early or unscheduled recoveries of principal of the Mortgage Lean. In any event,Fannie Mae is obligated to pay to the Trustee,as registered owner of the Fannie Mae Pass-Through Certificate, monthly installments of not less than the interest due on the Fannie Mae Pass-Through Certificate,together with any scheduled installments of principal, whether or not collected from the Borrower,and any prepayments or early recoveries of principal. The Fannie Mae Pass-Through Certificate will mature no later than the Distribution Date subsequent to the maturity date of the Mortgage Loan. Prior to the issuance of the Fannie Mae Pass-Through Certificate, or if the Fannie Mae Pass- Through Certificate is not issued, Fannie Mae will not have any obligation to make any distributions with respect to the Mortgage Lean as would otherwise be contemplated to be rade pursuant to the provisions of the Fannie Mae Trust Indenture. -25- Following its acquisition of the Fannie Mae Pass-Through Certificate, the Trustee will not, without the prier written consent of Fannie Mae and of the owners of all of the Bonds then Outstanding, sell, exchange, transfer, assign or otherwise dispose of the Fannie Mae Pass-Through Certificate other than to Fannie Mae in exchange for(a)a substitute Fannie Mae Pass-Through Certificate pursuant to the Indenture or(b)payment to the Trustee of Available Moneys in an amount sufficient to pay or defease, in accordance with the Indenture,the principal of and interest due and owing on the Bonds,provided that the Fannie Mae Pass-Through Certificate may be assigned to a successor Trustee under the Indenture. THE BONDS ARE NOT A DEBT OF THE UNITED STATES OF AMERICA, OR ANY AGENCY THEREOF,OR OF FANNIE MAE. PAYMENT OF PRINCIPAL OF,PREMIUM,IF ANY, AND INTEREST ON,THE BONDS IS NOT GUARANTEED BY FANNIE MAE SO LONG AS THE COLLATERAL AGREEMENT IS IN EFFECT WITH RESPECT TO THE MORTGAGE LOAN, FANNIE MAE'S OBLIGATIONS WILL BE SOLELY AS PROVIDED IN THE COLLATERAL AGREEMENT. IF THE FANNIE MAE PASS-THROUGH CERTIFICATEIS ISSUED WITH RESPECT TO THE MORTGAGE LOAN, FANNIE MAE'S SOLE OBLIGATION WILL BE CONTAINED IN THE FANNIE MAE PASS-THROUGH CERTIFICATE, AND WILL BE LIMITED TO MAKING DISTRIBUTIONS OF PRINCIPAL AND INTEREST UNDER THE FANNIE MAE PASS-THROUGH CERTIFICATE, IN ACCORDANCE WITH ITS TERMS, TO THE RECORD OWNER OF THE FANNIE MAE PASS-THROUGH CERTIFICATE. THE OBLIGATIONS OF FANNIE MAE UNDER THE COLLATERAL AGREEMENT AND UNDER THE FANNIE MAE PASS-THROUGH CERTIFICATE, IF ISSUED, WILL BE OBLIGATIONS SOLELY OF FANNIE MAE, A FEDERALLY CHARTERED STOCKHOLDER-OWNED CORPORATION. THE OBLIGATIONS OF FANNIE MAE ARE NOT BACKED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA. FANNIE MAE HAS NO OBLIGATION TO PURCHASE, DIRECTLY OR INDIRECTLY,ANY OF THE BONDS. Limited Liability THE BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER, PAYABLE SOLELY FROM AND SECURER BY THE PLEDGE OF THE TRUST ESTATE PURSUANT TO THE INDENTURE. THE BONDS ARE NOT A DEBT OF THE STATE OF CALIFORNIA, THE ISSUER OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE OF CALIFORNIA. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF CALIFORNIA IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR THE INTEREST ON THE BONDS. NONE OF THE UNITED STATES OF AMERICA, FANNIE MAE, ANY AGENCY OF THE UNITED STATES OF AMERICA, THE STATE OR ANY OTHER. POLITICAL SUBDIVISION OF THE STATE (EXCEPT THE ISSUER, TO THE LIMITED EXTENT SET FORTH IN THE INDENTURE) 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,OBLIGATION OR AGREEMENT OF ANY KIND WHATSOEVER.OF THE ISSUER,AND NEITHER THE BONDS NOR ANY OF THE ISSUER'S AGREEMENTS OR OBLIGATIONS SHALL BE CONSTRUED TO CONSTITUTE AN INDEBTEDNESS OF OR A PLEDGE OF THE FAITH ANIS CREDIT OF OR A LOAN OF THE CREDIT OF ANY OF THE FOREGOING WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISIONS WHATSOEVER. THE BONDS ARE NOT GUARANTEED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA. -26- .. .__.... ......... ......... ......... ......... ...... _ _ ............. .._..._.... ......... ......... ......... ......... ......... ......... ......... __. _..... ......... ......... ......... ......... ......... ......... ............ No Additional Bonds The Indenture does not authorize the issuance of additional bonds. Sufficiency of Cash Flow Fannie Mae does not guarantee the payment of the principal of, premium,;if any, or interest on the Bonds. The interest rate on the Mortgage Loan has been established at a rate expected to be sufficient to'pay the Servicing Fee of the Servicer,the Fannie Mae Facility Fee or the Guaranty Fee, as the case may be, and certain other fees, as well as the debt service on the Bonds, taking into consideration the projected investment earnings on the moneys on deposit in the various funds and accounts. Such investment earnings are not guaranteed by Fannie Mae. In the event that the investment of such money at an anticipated rate of return should fail,or there is an error in the cash flow projections, the interest rate on the Mortgage Loan may not be sufficient to pay all such fees and expenses, together with the debt service on the Bonds. This could result in a payment default on the Bonds even though there is no default under the Collateral Agreement or the Fannie Mae Pass-Through Certificate, as the case may be. The remedies of the Trustee are limited in this event. See ^ APPENDS B-- "SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE—Default Provisions and Remedies"". An independent verification of the cash flow sufficiency for the Bonds has been provided by Causey, Demgen & Moore Inc., Denver, Colorado. FANNIE MAE HAS NO RESPONSIBILITY FOR THE CASH FLOW PROJECTIONS OR THE VERIFICATION THEREOF AND MAKES NO REPRESENTATION WITH RESPECT TO THE SUFFICIENCY OR THE ACCURACY OF SUCH CASH FLOWS OR THE ASSUMPTIONS THEREIN. See "VERIFICATION OF CASH FLOWS" herein. Construction Phase Credit Facility Provider Pursuant to the Construction Phase Credit Reimbursement Agreement, the Construction Phase Credit Facility Provider, Aells Forgo Bank. N.A.] has provided to Fannie Mae the Construction Phase Credit Facility in the form of a Letter of Credit(the"Letter of Credit"). The Letter of Credit is to be used to reimburse Fannie Mae in the event Fannie Mae is required to pay amounts under the Collateral Agreement. Under the terms of the Construction Phase Financing Agreement, Fannie Mae will be authorized, subject to the terms and conditions of the Construction Phase Financing Agreement, to draw on the Letter of Credit in certain events, including, but not limited to, (a) a default by the Borrower under the Mortgage Note, (b) the receipt by Fannie Mae of a notice from the Trustee demanding payment from Fannie Mae under the Collateral Agreement, or(c) the failure to satisfy the Conversion Requirements on or before the Termination Yate. In addition,the Construction Phase Credit Facility Provider may direct Fannie Mae,upon the occurrence of a default under the Construction Phase Credit Reimbursement Agreement,to draw on the Letter of Credit and effect a corresponding redemption of the Bonds with funds drawn on the Collateral Agreement. THE FANNiE MAE COMMTTNMNT The following is a brief summary of the Fannie Mae Commitment. The summary does not purport to be complete or definitive and is qualified in its entirety by reference to Fannie Mae Commitment. -27- Commitment With Respect to Mortgage Loan The Mortgage Loan will be made by the Issuer in accordance with the requirements of Fannie Mae and subject to the terms and conditions of the Fannie Mae Commitment. Under the Fannie Mae Commitment, Fannie Mae has agreed, subject to satisfaction of the terms and conditions of the Fannie Mae Commitment,to provide credit enhancement for the Mortgage Loan pursuant to, and subject to the limitations of, the Collateral Agreement. If, however, the Conditions to Conversion set forth in the Fannie Mae Commitment are not timely satisfied or waived by Fannie Mae prior to the Termination Date established by the Fannie Mae Commitment,(i)Conversion will not occur,(ii)the Bonds will be subject to special mandatory redemption or to purchase by or for the account of the Construction Phase Credit Facility Provider in accordance with the terms and conditions of the Indenture and (iii) the Collateral Agreement will terminate in accordance with its terms. Under the Fannie Mae Commitment, Fannie Mae will, if Conversion occurs and if, and at such time as, the Fannie Mae Pass-Through Certificate Delivery Requirements are satisfied, acquire the Mortgage Loan in exchange for a Fannie Mae Pass- Through Certificate. If Conversion does not occur, Fannie Mae will have no obligation to acquire the Mortgage Loan or to issue the Fannie Mae Pass-Through Certificate. The "Conversion Requirements" set forth in the Fannie Mae Commitment include, among ether requirements (i) completion of the Project, (ii) satisfaction of Fannie Maes Minimum Occupancy Requirement (i.e., the Project"s achievement of 90% occupancy of all units in the Project under acceptable leases for a specified three- month period),(iii)completion of various real estate due diligence requirements, (iv)delivery of various mortgage loan documents to.Fannie Mae,(v)release of lien of the Construction Phase Credit Facility Provider's subordinated mortgage, if any,and(vi)the absence of any default. Under the Fannie Mae Commitment,the principal amount of the MortgageLoan on the Closing Date may not exceed $ 1 . The Permanent Phase Mortgage Loan Amount will be determined following completion and stabilization (as required by the Fannie Mae Commitment) of the Project by application of the following formula and may be less than the principal amount of the Mortgage Loan permitted by the Fannie Mae Commitment on the Closing date: (Net Operating Income +Debt Service Coverage Factor) + Annual Debt Service Constant. For purposes of the Fannie Mae Commitment, the terms "Net Operating Income," "Debt Service Coverage Factor" and "Annual Debt Service Constant" have the following meanings: "Net Operating Income"means the difference between(a)the annualized effective gross income of the Project determined on the basis of the actual effective gross income produced by the Project during the three consecutive full calendar months immediately preceding the month in which the Servicer delivers the Conversion Requirements Satisfaction Notice and (b) the annualized expenses for the Project determined on the basis of the higher of(i) the actual year to date expenses of the Project approved by the Servicer or(ii)the expenses for the Project assumed by the Servicer in underwriting and approving the Mortgage Loan. "Annual Debt Service Constant" means the constant annual percentage necessary to fully amortize the Mortgage Loan in level monthly annuity payments over the amortization period of the Mortgage Loan at the Mortgage Note Rate (when expressed as a percentage, the Annual Debt Service Constant must be carried out to at least six decimal places). "Debt Service Coverage Factor"means ^ 1.25. _2g_ FANNY MAE Fannie Mae is a federally chartered and stockholder-owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. 1716 et seq. it is the largest investor in home mortgage loans in the United States with a net portfolio of$31:6 billion of mortgage loans as of December 31, 1997. Fannie Mae was originally established in 1938 as a United States government agency to provide supplemental liquidity to the mortgage market and was transformed into a stockholder-owned and privately managed corporation by legislation enacted in 1%8. Fannie Mae purchases, sells and otherwise deals in mortgages in the secondary market rather than as a primary lender. It does not make direct mortgage loans but acquires mortgage loans originated by others. In addition, Fannie Mae issues mortgage-backed securities("MBS"), primarily in exchange for pools of mortgage loans from lenders. Fannie Mae receives guaranty fees for its guarantee of timely payment of principal of and interest on MBS certificates. Fannie Mae is subject to regulation by the Secretary of Housing and!Urban Development ("HUD") and the Director of the independent Office of Federal Housing Enterprise Oversight within HUD. Approval of the Secretary of Treasury is required for Fannie Mae's issuance of its debt obligations and MBS. Five of the eighteen members of Fannie Mae's Board of Directors are appointed by the President of the United States,and the other thirteen are elected by the holders of Fannie Mae's common stock. The securities of Fannie Mae are not guaranteed by the United States and dei not constitute a debt or obligation of the United States or any agency or instrumentality thereof other than Fannie Mae. As of 1,May 31, ",�9�,,$, Fannie Maes stockholders' equity was ^ billion. Information on Fannie Mae and its financial condition is contained in Fannie Mae's information Statement dated March 31, 1"S nd Sugpftment thereto d ted Ma ,15 1998 (and any later update of such Information Statement). Copies of the most recent Information Statement and MBS Prospectus, as well as any supplement to the Information Statement and Fannie Mae's most recent annual and quarterly reports to stockholders and proxy statement, are available without charge from the Office of Investor Relations, Fannie Mae, 3940 Wisconsin Avenue, NW, Washington, D.C., 20016 (telephone. 202/752- 7115). Fannie Mae makes no representation as to the contents of this Official Statement,the suitability of the bonds for any investor, the feasibility of performance of any project, or compliance with any securities, tax or other laws or regulations. Fannie Mae's role is limited to discharging its obligations under the Collateral Agreement. THE ISSUER The County of Contra Costa, California (the "Issuer") was incorporated in 1850 as one of the original 27 counties of the State of California with the City of Martinez as the County Seat. It is one of the nine counties in the San Francisco-Oakland Bay Area. The Issuer covers about 733 square miles and extends from the northeastern shore of the of San Francisco Bay easterly about 20 miles to San Joaquin County. The Issuer is bordered on the south and west by Alameda County and on.the north by Suisun and Clayton Bays. The western and northern shorelines are highly industrialized while the interior sections are suburban/residential, commercial and light industrial. A large part of the interior of the -2'9- Issuer is served by the Bay Area Rapid Transit District("BART")which has contributed to the expansion of residential and commercial development. In addition, economic development along the interstate 680 corridor in the Issuer has been substantial in the cities of Concord, Walnut Creek and San Ramon. The Issuer has a population of approximately 870,700 as of January 1, 1997 according to the State Department of Finance. FLAN OF FINANCING Sources and Uses The total permanent project costs of the Project is estimated by the Borrower to be not including interim sources of funds or accrued interest on the Bonds. The sources and uses of funds for the Project are projected to be approximately as follows: Sources of Funds: 1998 Series C Bond Proceeds General Partner Capital _^Affordable Housing Subsidy Total Uses of Funds: LandAcquisition Casts Construction(including contingency) Architecture and Engineering Net Loan Interest Prior to Conversion Date ^CoSts M Of Issuance Marketing/Reserves Government Fees and Permits Other Soft Development Costs Developer Fee Total -30- USE OF BOND PROCEEDS The following is a description of the sources and uses of proceeds of the Bonds (other than accrued interest on the Bonds,which is to be deposited in the Band Fund)and other amounts: Sources of Funds:. 1998 Series C Bonds Accrued Interest 30 Day Lag Deposit Borrower Contribution Total Sources Estimated Uses of Funds: Deposit to Mortgage Loran Fund Deposit to General Receipts and Disbursements Account Deposit to Costs of Issuance Fund Total Uses THE BORROWER AND THE PROJECT The Borrower The Borrower is Bollin er Cre t ApArtment Investors. L the "Borrower" a California limited 11abilily compgal organized under the laws of the State of, alifo0jg,0g4W"x.rj.23. 1 The Manager of the Borr ewer ` Cj! MallagemeaL LLC ("M a California limited Habilitj coingany organized Mader the laws of the State of California on Febr 'a 4 1998, The sole ur one of the rrorver's to,ft_velog ad ogMte the,Pro`ect. The members f the-- orr are the Mana erCP and the Investo as follow : The nzi 'n Trust dated Janu 18 1995 The.-C—oa_1qX.Livigg,Trust dated October 22.-IM The Faris Marital, d T e lah-n Coulart and Connie Goulart Trust dot J e MAn#gen of CPM are Arthur L. Lorenzini Jr. ad Michael W.-CouISL and the Members of P1YI are e i ida januan 18 1995 Thg C nle M-j dated ctober 22 1996. The 'ect will hl built and maugVA by Claramont Homes Inc. The sole t ldersireetora of CIH are Arthur L.Lorenzi ni.Jr.and Mkbael W.Conley. The grinciRal office o he Bo rower PM and CHI is 46752 MiLsaign jjqWevard. Bite E moatCalifornia 94539. Messrs. X&reniul and Coolly each have over 20 ears of real gsLate develo men#ex a ce•jd1h CIH or Rredecessor firms #hv leve` built over 1500 single stud-multifamily resid#_nti#l,upillin the cities of Fremont,Livermon.Qsk1gy.,Pleawat 1111 San Ra ren &ad5a4Ualiforn' ul it rental ro`ects *ey have built and rented haus ranged in size fmm 60''' 0 300 units. Both'Mr.Lorenzini and Mr.C nle an licensed general contracLors.as,is CHI which will be the gegueral contractor for the Pro ect. The Bo o er IPA Members of the Borrower wl not be VSrsonally.liable for mments an the Mortgat a Loan L 4g�Mwgjl on which are to be a li #o a rind r 'nm if n -31- d i teres# on the n s. Accord'n the financials a tints of th er and o th ern of The BorE*_w_er are got `nrluded # is OffiLial StateMeno recti to` is made that the Borrower has s bsta tial t rower s n o tin hist i#ion the weer is intendin '#o i the low h in ome tax vro"r itself. there will not any Sui ;:inv tme t from a tax JEAdil inv for^ The Project Batl'n r C is a to- tt ru ed and argent eommuani t on l rive a agent to the 19tengdkon of v4* Road and Bo . an o '1t a # t e i of San Ramon. n of on Californ`'' . nit S2 >_u of t o buildi wit .I each ha tue - nder indivi a . T ' comm"ft ' A ted;on 4.3 KW. 421 ear resrt Within Woking 4istanst-1of sh, i a school gM Io ent nters amedical ffi es and it close 12 major `o al trans motion arteries. The Proiect n sts of room tMhakyni1g of 1095 square. t. Each unit will have Dace assigned enclosed riv toa e wvit car and ong jMign o n Darkin e. In addition `ect'has addi#io t; dldnL 100—vidual units will a u a ► of hv_asher mit w v her/ er n i#i nin d o Icon With e --as ell full sante `t a d computer act ' gad t hn 1 . The Prolecl will a 13>unift f2r v IM income reside 2 units far Mot gate i' c me resid n l ordft able ffig SAbsidv The QV of *an Ramon th '11"I'11ty"I is maldne a 9Mt Of S736 to, a &rrgwer the "Affordable Housin W&I.under an Affordable Housing t the " '" entered into as of Pebru 26 1 ; betvvee # e i and the waxer. P ua t':' e <the s all adv nce to the Bo weer 117,73-3 f11190 of S236.000) within 1teen (15),.hpAgM(1g &3A after Wrtiti a' ofoccu aan' is issed for Res#rioted ni which is de£ t e a It -ect W The terms of which shall be gied hX&2MMed Aggicant. "QuaLiflid ARAHNOCA efinec as beinga " uali od rate, ca # which n'<or Id w ose annul_ roc' i does not lof the C AS tablish b_y the U& ftartment o VA28:I)ev lop"I0"► or "Qlified Ldw Lnc=g Agplicant".wh r o d w se muss incom d: no M% of the laed fan inc2me for C9Df alta lirlish . The ices thg the Doga—er shall 1! g f r g to M of nyears aftr Ini of acb, of Inch ttni two twc>- ni # ff bl ats to ed Appligan and hirt t ab is toQualified'V Low c Leasing Restrictions Pursuant to the Regulatory Agreement,at least 400/a of the units in the Project must be occupied by Low Income Tenants whose income is Gt#%of the median grass income for the"t California Primary Metropolitan Statistical Area adjusted for family income until the Extended Use Agreement is entered into between the Borrower and the California Tax Credit Allocation Committee, at which time 100% of the units in the Project must be occupied by Low Income Tenants. In addition to the requirement that the units be rented to Low Income Tenants,the Borrower will be required to restrict the -32- rents on the units to,on a monthly basis, 1/12 of 30%of 60°/0 of area median income. The Extended Use Agreement and all amendments and supplements thereto will be recorded and filed in the real property records of the County of Contra Costa. In the event that tax credits are never allocated,the Extended Use Agreement will not be entered into and recorded against the Property. See ^ APPENDIX D-- "SUMMARY OF CERTAIN PROVISIONS OF THE REGULATORY AGREEMENT" ^ for a more detailed description of the leasing and tenant income restrictions that apply to the Project. Regulatory Agreement As noted above, the Project is subject,to the terms of the Regulatory Agreement. A brief summary of the Regulatory Agreement is provided here. See also_^ AERJ 4M --w "SUI►'IIViA.IEtY OF CERTAIN PROVISIONS OF THE REGULATORY AGREEMENT",�. The Regulatory Agreement imposes certain requirements on the Borrower with respect to the tax-exempt status of the Bonds under the Code,which include,among ether requirements, a set aside of 40%of the units for rental to persons or families hawing incomes at or below 60%of area median gross income, adjusted for family size and determined in accordance with Section 142(d) of the Code and certain other requirements under State law. The Regulatory Agreement also requires that rent on such 40%of the units not exceed 3€%of an amount equal to 60%of area median adjusted gross income. See ^ MPENM,D ",MM1t R:Y OF CERTAIN PROVISIONS OF THE REGULATORY AGREEMENT" for a description o the requirements affecting the operation of the Project in order to assure compliance with the Code and State law. The Project will also be encumbered by an Extended Use Agreement required by the Code and the California Tax Credit Allocation Committee, which during the Qualified Project Period will (a) restrict the income levels of 100% of the units in the Project to amounts not greater than 60% of area median income adjusted for family size,and(b)restrict the rents which may be charged for occupancy of those units in the Project to not more than 30%of an amount equal to 60%of area median gross income, adjusted for family size. Limited Recourse to Borrower Neither the Borrower nor its partners have been nor will they be(subject to certain exceptions to nonrecourse liability set forth in the Mortgage Note and the Mortgage)personally liable for payments on the Mortgage Note backing the Fannie Mae Pass-Through Certificate,the payments on which are to be applied to pay the principal of and interest on the .Bonds, nor will the Borrower or the payers of the Borrower be(subject to certain exceptions to nonrecourse liability set forth in the Mortgage Note and the Mortgage)personally liable under the other documents executed in connection with the issuance of the Bonds and the making of the Mortgage Loan. Furthermore,no representation is made that the Borrower will have the necessary funds available for the development of the Project or for the payment of principal and interest on the Mortgage Note. Accordingly,neither the Borrower's financial statements nor those of its partners are included in this Official Statement. TBX MORTGAGE NOTE The Mortgage Loan will be evidenced by a:Mortgage Note. The Mortgage;Note will be a non- recourse obligation of the Borrower to repay the Mortgage Loam and is secured by the Mortgage. The Mortgage Note will be payable monthly, interest only, in arrears,to and including the Conversion Date -33- and thereafter will be due and payable in 360 consecutive level monthly installments of principal and interest(computed at the Mortgage Note Rate then in effect on the outstanding principal amount of the Mortgage Note) beginning on the first day of the month following the month in which the Conversion Date occurs until the entire indebtedness evidenced by the Mortgage Note is paid in full, provided that any remaining indebtedness, if not sooner paid, shall be due and payable on the thirtieth anniversary of the Conversion Date,but in any event, not later than ^March 1,2031. The Mortgage Note is subject to optional and mandatory prepayment at the times, in the manner and on the terms set forth therein. The Mortgage Note will bear interest at the "Mortgage Note Rate^"_. The Mortgage Note Rate comprises(i) a pass-through rate of interest (the "Pass-Through Rate") and (ii) a;fixed rate of interest which(a)prior to the Issue Date of the Fannie Mae Pass-Through Certificate will, until the Conversion Date, be equivalent to the Facility Fee payable to Fannie .Mae and, on and after the Conversion Date, until the Issue Date, will be equivalent to the sum of(1) the Facility Fee payable to Fannie Mae, as increased to reflect Conversion, and (2) the Servicing Fee and (b) on and after the Issue Date will be equivalent to the sum of(1) the Guaranty Fee and (2) the Servicing Fee. The pass-Through Rate is, beginning on and 'including the Closing Date, to, but not including the Conversion Date, % per annum,and beginning on the Conversion Date to,but not including the date the Mortgage Note is paid in full, % per annum, which Pass-Through Rate includes an amount, expressed as a percentage, sufficient to pay the annual fees of the Issuer,the Trustee and the Rebate Analyst, if any,included in the Mortgage Note Rate. The Mortgage Note provides that, if any installment under the Mortgage Note is not paid when due, or any other default exists under the Mortgage Nate, the Mortgage of any other Mortgage Loan Document, Fannie Mae, at its option, may declare the entire principal amount outstanding under the Mortgage Note,plus accrued interest thereon,at once clue and payable. FANNIE MAE AND SERVICING FEES Effective on the Closing Date, Fannie Mae will receive a Credit Fee'for providing credit enhancement for the Mortgage Loan. The Credit Fee is included in the Mortgage Note Rate and is (a) prior to the Issue Date of a Fannie Mae Pass-Through Certificate issued by Fannie Mae in connection with the acquisition of all of the right, title and interest in and to the Mortgage Loan, equivalent to the Facility Fee charged by Fannie Mae for entering into and maintaining the Collateral Agreement as credit enhancement for the Mortgage Loan and (b) on and after the Issue Date of any such Fannie Mae Pass- Through Certificate, equivalent to the Guaranty Fee charged by Fannie Mae for issuing the Fannie Mae Pass-Through Certificate. The Facility Fee, expressed as a percentage, is (i) prior to the Conversion Date, A1.201%per annum,or^[2Ul "basis points"per annum,of the outstanding principal amount of the Mortgage Loan and (ii) on and after the Conversion to, but not including, the Issue Date, .45% per annum, or 45 "basis points"per annum,of the outstanding principal amount of the Mortgage Loan. The Facility Fee component of the Mortgage Note Rate accrues from and including the Accrual Date to, but not including, the first to occur of the Issue Date or the date the Mortgage Note is paid in full and is payable on the first day of each month,in arrears,as part of the Mortgage Note Rate,to and including the first to occur of the Issue Date or the date the Mortgage Note is paid in full. The Facility Fee payable on the first day of each month to and including the Conversion Date shall, as part of the Mortgage Note Rate, be paid to and received by the Trustee, and.remitted by the Trustee solely to Foie Mae, in accordance with the Indenture, in consideration of Fannie Mae entering into and maintaining the Collateral Agreement in ,effect. The Facility Fee payable on the fust day of each month after the Conversion Date and to and including the first to occur of the Issue Date or the date the Mortgage Note is paid in full shall,as part of the Mortgage Note Rate,be paid to and received by the Servicer and remitted by the Servicer solely to Fannie Mae in consideration of Fannie Mae entering into and maintaining the -34- Collateral Agreement in effect on and after the Conversion Bate. The Guaranty Fee, expressed as a percentage, is ^.I.+lll5}°l,� or'4 "basis paints" per annum of the outstanding principal amount of the Mortgage Loan,the Guaranty Fee component of the Mortgage Note Rate accrues from and including the Issue Date to the date the Mortgage Note is paid in full. Effective on the Conversion Bate, the Servicer will receive a Servicing Fee for servicing the Mortgage Loan. The Servicing Fee is ^43 ° per annum or^j43, 1 "basis points" per annum of the outstanding principal amount of the Mortgage Loan and accrues from and including,the Conversion Date to, but not including, the date the Mortgage Dote is paid in full. The Servicing Fee is included in the Mortgage Note Rate. The Credit Fee and the Servicing Fee (when applicable) will be based on the unpaid principal amount of the Mortgage Loan and will be calculated and payable monthly on the principal valance of the Mortgage Loan outstanding on the first day of each month. The Servicer will deduct the Servicing Fee from,and Fannie Mae will deduct the Guaranty Fee from,the interest portion of the monthly payments on the Mortgage Loan,so that distributions of interest received by the Trustee will be net of the Guaranty Fee and the Servicing Fee. Fannie Mae is also entitled to retain late charges or,in certain cases,to share with the Servicer late charges,assumption fees, interest float on advance payments,and similar charges to the extent they are collected from the Borrower. Timing of Receipt of Revenues The payment of the principal of and interest on Bonds depends upon timely distributions of principal and interest on the Fannie Mae Pass-Through Certificate, as well as receipt of Investment Income on amounts on deposit in the Revenue Fund. The scheduled debt service payments on the Bonds have been calculated based on the assumed receipt of these payments and income. TETE SERVICER Washington Capital DUS, Inc., a Delaware corporation (the "Servicer"), will perform mortgage servicing functions with respect to the Mortgage.Loan on behalf of and in accordance with Fannie Mae's servicing requirements, beginning on the Conversion Date. Any servicing contracts or arrangements between Fannie Mae and the Servicer for the servicing of the Mortgage Loan are solely between Fannie Mae and the Servicer and neither the Issuer nor the Trustee is deemed to be party thereto or has any, claim,right,obligation,duty or liability with respect to the servicing of the Mortgage Loan. The Servicer will be obligated, pursuant to its contract with Fannie Mac and Fannie Mae's servicing requirements, to perform diligently all services and duties customary;to the servicing of mortgages,as well as those specifically prescribed by the contract,the Fannie Mae Commitment and the DUS Guide. Fannie Mae will monitor the Servicees performance and has the right to remove the Servicer at any time and to designate a successor servicer. The duties performed by,the Servicer include general loan servicing responsibilities, collection and remittance of principal and interest payments, administration of mortgage escrow accounts and collection of insurance claims. The Servicer makes no representation as to the contents of this Official Statement,the suitability of the Bonds for any investor, the feasibility of performance of the Project or compliance with any securities, tax or other laws or regulations. The Servicer's rule is limited to the underwriting and servicing of the Mortgage Loan. -35- ENFORCEABILITY TY OF REMEDIES The remedies available to the Trustee,the Issuer and the owners of the Bands upon an Event of Default under the Indenture are in many respects dependent upon regulatory and judicial actions,which are often subject to discretion and delay. Under existing law and judicial decisions, the remedies provided for under the Financing Agreement, the Regulatory Agreement or the Indenture may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Bonds, the Financing Agreement, the Regulatory Agreement and the Indenture will be qualified as to enforceability of the various legal instruments by limitations imposed by bankruptcy, reorganization, insolvency or ether similar laws affecting the rights of creditors generally and by equitable remedies and proceedings generally. TAX MATTERS In the opinion of Orrick,Herrington& Sutcliffe LLP ("Bond Counsel"),based on an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under the Internal Revenue Code of 1986 (the "Code"), except that no opinion is expressed as to the status of interest on any Bond during any period such Bond is held by a person who is a "substantial user" of the Project or a "related person"within the meaning of Section 147(a)of the Code. Bond Counsel observes, however, that such interest is a specific preference item for purposes of the federal individual and corporate alternative minimum taxes. Bond Counsel is also of the opinion that interest on the Bonds is exempt from State of California personal income takes. A complete copy of the proposed form of the opinion of Bond Counsel is set forth in APPENDIX G. To the extent the issue price of any maturity of the Bonds is less than the!amount to be paid at maturity of such Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Bonds), the difference constitutes "original issue discount," the accrual of which, to the extent properly allocable to each owner thereof, is treated as interest on the Bonds which is excluded from gross income for federal income tax purposes and State of California personal income taxes. For this purpose, the issue price of a particular maturity of the Bands is the first price at which a substantial amount of such maturity of the Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Bonds accrues daily over the term to maturity of such Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Bonds to determine taxable gain or loss upon disposition (including sale, redemption,or payment on maturity)ofsuch Bonds. Owners of the Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of purchasers who do not purchase such Bonds in the original offering to the public at the first price at which a substantial amount of such bonds is sold to the public. The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. The Issuer and the Borrower have covenanted to comply with certain restrictions designed to ensure that interest on the Bonds will not be included in federal gross income. Failure to comply with these -36- covenants may result in interest on the Bonds being included in Federal gross income, possibly from the date of issuance of the Bonds. The opinion of Bond Counsel assumes compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person)whether any actions taken (or not taken)or events occurring(or not occurring)after the date of issuance of the Bonds may affect the value of, or the tax status of interest, on the Bonds, Further,no assurance can be given that pending or future legislation or amendments to the Code, if enacted into law, or any proposed legislation or amendments to the Code,will not adversely affect the value of,or the tax status of interest on,the Bonds. Prospective Bondowners are urged to consult their own tax advisors with respect to proposals to restructure the federal income tax.. Certain requirements, agreements and procedures contained or referred to in the Indenture, the Financing Agreement,the Regulatory Agreement,the Tax Certificate and other relevant documents may be changed and certain actions(including,without limitation,defeasance of the Bonds)may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. Orrick, Herrington& Sutcliffe LLP expresses no opinion as to any Bond or the interest thereon if any such change occurs or action is taken or omitted upon the advice or approval of bond counsel other than Orrick,Herrington& Sutcliffe LLP. Although Bond Counsel will render an opinion that interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes, the ownership or disposition of, or the accrual or receipt of interest on,the Bonds may otherwise affect a Bondownees tax liability. The nature and extent of these other tax consequences;will depend upon the particular tax status of the Bondowner and the Bondowner's other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. CERTAIN LEGAL MATTERS Legal matters incident to the authorization, issuance and sale of the Bonds are subject to the approving opinion of Orrick Herrington & Sutcliffe LLP, as Bond Counsel. A complete copy of the proposed form of opinion of Bond Counsel is attached hereto as APPENDIX G. Band Counsel undertakes no responsibility for the accuracy,completeness or fairness of this Official Statement. Certain legal matters will be passed upon for the Issuer by its County Counsel; for the Borrower by ^ & Isn.LM s r California;for Fannie Mae by its Legal Department and by Arent Fox Kintner Plotkin&Kahn,PLLC,Washington,D.C.,Fannie Mae Counsel,and for the Underwriter by its counsel,Nossaman, Guthner, Knox&Elliott,LLP, San Francisco, California. Fees and expenses of certain of the above-mentioned counsel are contingent upon issuance of the Bonds. The various Iegal opinions to be delivered concurrently with the delivery of the Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by the valid exercise of the constitutional powers of the State of California and the United States of America and bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally, and by ,general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). The various legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the attorneys rendering the opinions on the legal issues explicitly addressed therein. By rendering a legal opinion,the opinion giver does not become an insurer or guarantor of that -37- expression of professional judgment, of the transaction opined upon or of the future performance of parties to such transaction, nor dries the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. The remedies available to the bondholders upon a default under the Indenture or the financing Agreement are in many respects dependent upon judicial actions which are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including specifically Title I I of the United States Code(the federal bankruptcy code),the remedies provided in the Indenture and the Financing Agreement may not be readily available or may be limited. UNDERWRITING PaineWebber Incorporated has agreed,subject to certain conditions,to purchase the Bonds from the.Issuer at a price of par. As consideration for its purchase of the Bonds,the Underwriter will be paid a fee equal to S ,from which the Underwriter will pay certain expenses. The obligation of the Underwriter to purchase the Bonds is subject to certain terms and conditions set forth in the purchase contract entered into among the Underwriter, the Borrower and the Issuer. The Bonds may be offered and sold to certain dealers, banks and others at prices lower than the initial offering prices, and such initial offering prices may be changed, from time to time, by the Underwriter. CONTI14UING DISCLOSURE The Borrower has entered into a Continuing Disclosure Agreement datedAugust 1, 1998 (the "Continuing Disclosure Agreement") with the Trustee obligating the Borrower to send, or cause to be sent,certain financial information with respect to the Project to certain information'repositories annually and to provide notice,or cause notice to be provided,to the Municipal Securities Rulemaking Board and a state information repository, if any, of certain enumerated events for the benefit of the Beneficial Owners and Molders of any of the Bonds,pursuant to the requirements of Section(b)(Si)of Securities Exchange Commission Rule 15c2-12 (the "Rule"). See ^ APPENDIX F " R_M OF THE CONTINUING DISCLOSURE AGREEMENT"A. The Borrower has not entered' into any other such undertaking with respect to the Rule. A failure by the Borrower to comply with the, previsions of the Continuing Disclosure Agreement will not constitute a default under the Indenture or Financing Agreement (although Bondholders will have any available remedy at law or in equity). Nevertheless, such a failure to comply must be reported in accordance with the Rule and must be considered by any broker,dealer or municipal securities dealer before recommending the purchase or sale of the Bonds in the secondary market. Consequently,such a failure may adversely affect the transferability and liquidity of the Bonds. VERIFICATION OF CASH FLOWS The mathematical accuracy of certain computations included in the schedules provided by the Underwriter on behalf of the Issuer relating to the computation of the cash flows from the projected payments of principal and interest on the Mortgage Loan and the sufficiency of such payments together -31- with certain amounts held under the indenture for the payment of the principal of and interest on the Bonds and certain fees will be verified by Causey, Denrgen & Moore Inc., Denver, Colorado, certified public accountants (the "Verification Agent"). The Verification Agent has restricted its procedures to verifying the arithmetical accuracy of certain computations and has not made any study or evaluation of the assumptions and information on which the computations are based and, accordingly, has not expressed an opinion on the data used,the reasonableness of the assumptions or the achievability of the projected outcome. NO LITIGATION To the best knowledge of the Issuer no litigation of any nature is pending,or to its knowledge threatened,in any way relating to,affecting or questioning the issuance,sale,execution or delivery of the Bonds, or of any of the proceedings of the Issuer taken with respect to the issuance or sale thereof, or otherwise affecting or questioning the validity of the Bonds, the pledge or application of any money or securities provided for the payment of the Bonds and the existence or powers of the Issuer or the title of any officers of the Issuer to their respective offices. To the best knowledge of the Borrower, there is no pending or threatened action, suit or proceeding restraining or enjoining the execution or delivery of the Bonds, or in any way contesting or affecting the validity of the foregoing or which in any way contests the existence or powers of the Borrower,and there is no pending or threatened action, suit or proceeding pending against or relating to the Borrower or the Project or which could have a material adverse effect on the financial condition or operation of the Borrower or the Project. RATING Standard & Pooes, Ratings Services, a Division of The McGraw-Hill Companies, Inc., has assigned the Bonds the rating shown on the cover page hereof. Such rating reflects only the view of such organization, and an explanation of the significance of such rating may be obtained only from Standard & Pooes Datings Services, a division of The McGraw-Hill Companies, inc., 25 Broadway, New York, New 'York 10004, telephone number (212) 208-1002. There is no assurance that such rating will continue for any given period of time or that it will not be revised downward or withdmwn entirely by the rating agency if, in the ,judgment of such gating agency, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the marketing price of the Bonds. -39- ADDITIONAL INFORMATION The foregoing references to, and summaries or descriptions of, provisions of the Bonds, the Collateral Agreement, the Fannie Mae Pass-Through Certificate, the Financing Agreement, the Indenture,the Regulatory Agreement and all references to other documents or materials not stated in full are only brief references, outlines or summaries of some of the provisions thereof and do not purport to summarize or describe all of the provisions thereof. Copies of the Collateral Agreement,the Financing Agreement, the Regulatory Agreement and the Indenture may be obtained from the Underwriter or the Trustee. The Issuer has provided only the information under the headings "TIE ISSUER," and "NO LITIGATION," as such information relates to the Issuer, and the Issuer is not responsible for the accuracy or completeness of any other information contained herein. The use of this Official Statement in connection with the offering of the Bonds has been duly authorized by the Issuer and the Borrower. COUNTY OF CONTRA COSTA,CALIFORNIA By. Deputy Director-Redevelopment BOLLINGER CREST APARTMENT INVESTORS,LLC, a'California limited liability company By: [Managing Member] -4t1=