Loading...
HomeMy WebLinkAboutMINUTES - 03151994 - 1.55 Rev. Contra TO: BOARD OF SUPERVISORS Costa FROM: Harvey E. Bragdon Co�..�nty Director of Community Development '� � ���` DATE: March 15, 1994 SUBJECT: Bond Sale Resolution - Crescent Park Apartments, Richmond SPECIFIC REQUEST(S) OR -RECOMMENDATIONS (S) & .BACKGROUND .AND JUSTIFICATION RECOMMENDATIONS ADOPT resolution authorizing the sale of Multi-Family Mortgage Revenue Bonds for the acquisition of the Crescent Park Apartments, Richmond, and actions related thereto. FISCAL IMPACT None. County is compensated for costs incurred in issuance process and for costs of monitoring compliance with Regulatory Agreement. BACKGROUND/REASONS FOR RECOMMENDATIONS On February 5, 1991 the Board of Supervisors approved an Inducement Resolution conditionally stating its intent to issue multi-family mortgage revenue bonds for the acquisition/renovation of the Crescent Park Apartments in Richmond by Ecumenical Association for Housing. The Crescent Park Apartments are an existing, privately owned, federally subsidized affordable housing project in South Richmond. The current owner desires to prepay the existing mortgage, thereby terminating the federal affordability controls, and sell the 378 unit project. In order to preserve the affordability of the project, EAH- Contra Costa, Inc. , a subsidiary of the Ecumenical Association for Housing, a California Non-Profit Public Benefit Corporation, negotiated an acquisition price as a "priority purchaser" (as defined in the "Low Income Housing Preservation and Resident Homeownership Act of 199011) . CONTINUED ON ATTACHMENT: XX SIGNATURE: 00" RECOMMENDATION OF COUNTY ADMINISTRATOR MMENDATION OF BOARD COMMIT E APPROVE OTHER SIGNATURE(S) : ACTION OF BOARD ON y h APPROVED AS RECOMMENDED ,( OTHER VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A UNANIMOUS (ABSENT ) TRUE AND CORRECT COPY OF AN AYES: NOES: ACTION TAKEN AND ENTERED ON THE ABSENT: ABSTAIN: MINUTES OF THE BOARD OF SUPERVISORS ON THE DATE SHOWN. Source: Jim Kennedy 646-4208 cc: Community Development ATTESTED County Administrator PHIL BATCHELOR, CLERK OF County Counsel THE BOARD OF SUPERVISORS via Community Development AND COUNTY ADMINISTRATOR EAH-Contra Costa Kirkpatrick Pettis Orrick Herrington & Sutcliffe Arter Hadden Haynes & Miller BY , DEPUTY JK:1h sra12/crespark.bos The Regulatory Agreement of the County will require that 186 units (49% of the total) be reserved for very low income tenants for at least thirty years. The owner, EAH-Contra Costa, Inc. , intends to provide approximately 70% of the units for very low income tenants. No existing qualified tenant will be displaced as a result of this acquisition. The bonds to be issued will finance the acquisition and rehabilitation of the Crescent Park Apartments. The bonds will be secured by a pledge of rents, reserve accounts and by a policy of mortgage insurance issued by FHA under the 241(f) mortgage insurance program. The bonds are expected to be rated AAA. The bonds are to be issued in three series (a taxable Series A-T; a Series A FHA insured/GNMA collateralized bonds; and a Series B FHA insured) in an amount not to exceed $22 million. The underwriters for this transaction is Kirkpatrick, Pettis, Smith & Polian, Inc. as Senior Manager, and Charles A. Bell Securities Corp. as Co-Manager. The underwriter was determined pursuant to adopted Board policy for the selection of underwriters and the County's MBE-WBE goals and policies. Charles A. Bell Securities Corp. is a MBE firm. The bond sale resolution authorizes a number of actions, a summary of which is provided as Attachment A. ATTACHMENT A The attached resolution authorizes a number of actions, a summary of which follows: 1. Authorizes the issuance of revenue bonds in an amount not to exceed $22 million; 2 . Approves the form of Trust Indentures .between the County and the Trustee, Bank of America NT&SA; 3 . Approves the form of Bond Purchase Agreements between the County, EAH-Contra Costa, Inc. and Kirkpatrick, Pettis, Smith, Polian, Inc. and Charles A. Bell Securities Corp. as Underwriter; 4 . Approves form of Financing Agreements between County, Trustee, Developer and TRI Capital Corporation, the FHA Lender; 5. Approves form of Regulatory Agreement between County, Trustee and EAH-Contra Costa, Inc. ; 6. Approves form, of Preliminary Official Statements; 7 . Designates Kirkpatrick, Pettis, Smith, Polian, Inc. and Charles A. Bell Securities Corp. as Underwriters; 8. Designates Orrick, Herrington, & Sutcliffe as Bond Counsel; 9. Designates Litten Financial Consulting as financial advisor; 10. Authorizes the Chair, vice-Chair, County Administrator, Director of Community Development, Deputy Director- Redevelopment to take such other actions necessary to complete J the sale of bonds and assistance related thereto. JK:1h sra12/crespark.bos tL/ COUNTY OF CONTRA COSTA RESOLUTION NO. 94/154 A RESOLUTION AUTHORIZING THE ISSUANCE, SALE AND DELIVERY OF MULTIFAMILY HOUSING REVENUE BONDS FOR THE PURPOSE OF FINANCING THE ACQUISITION AND REHABILITATION OF A MULTIFAMILY RENTAL HOUSING DEVELOPMENT KNOWN AS CRESCENT PARK APARTMENTS, DETERMINING AND PRESCRIBING CERTAIN MATTERS RELATING THERETO, AND APPROVING AND AUTHORIZING RELATED ACTIONS AND THE EXECUTION AND DELIVERY OF RELATED DOCUMENTS. WHEREAS, Chapter 8 of Part 5 of Division 31 of the Health and Safety Code of the State of California (the "Act") authorizes counties to incur indebtedness for the purpose of financing the acquisition of multifamily rental housing by nonprofit organizations exempt from federal income taxation under Section 501 (c) (3) of the Internal Revenue Code of 1986 (the "Code") , and the Act provides a complete, additional and alternative method for such financing; WHEREAS, the County of Contra Costa (the "County") desires to engage in a program (the "Program") of financing the acquisition by EAH-Contra Costa, Inc. , a California nonprofit corporation (the "Owner") , of multifamily rental housing known as Crescent Park Apartments (the "Project") , and in order to do so intends to sell and issue not to exceed $22,.000, 000 of multifamily housing revenue bonds; WHEREAS, the Board of Supervisors of the County (the "Board") has now determined to provide financing for the Project for the purpose of providing housing for very low income persons or families; WHEREAS, the Issuer expects the Owner to pay certain expenditures (the "Reimbursement Expenditures") in connection with the Project prior to the issuance of indebtedness for the purpose of financing costs associated with the Project on a long-term basis; WHEREAS, the Issuer reasonably expects that certain of the proceeds of multifamily housing revenue bonds will be used to reimburse the Owner for the Reimbursement Expenditures; and WHEREAS, there has been prepared and presented to this Board for consideration at this meeting the documentation required for the issuance of bonds for such financing; WHEREAS, it appears that each of the documents which are now before this meeting is in appropriate form and is an SF2-27263.2 RESOLUTION NO. 941154 appropriate instrument to be executed and delivered for the purposes intended; WHEREAS, the interest on the bonds may qualify for exclusion from gross income under Section 103 of the Code, only if the bonds are approved in accordance with Section 147 (f) of the Code; and WHEREAS, the Project is located wholly within the County of Contra Costa, California; and WHEREAS, this Board is the elected legislative body of the County and is the applicable elected representative required to approve the issuance of the bonds within the meaning of Section 147 (f) of the Code; and WHEREAS, this Board has received from Jim Kennedy, Deputy Director-Redevelopment of the County of Contra Costa, a report to the effect that, pursuant to Section 147 (f) of the Code, following notice duly given, such officer held a public hearing regarding the issuance of such bonds, and now desires this Board to approve the issuance of such bonds. WHEREAS, Kirkpatrick, Pettis, Smith, Polian Inc. and Charles A. Bell Securities Corp. (the "Underwriters") , expressed their intention to purchase the bonds authorized hereby, and this Board finds that the public interest and necessity require that the County at this time make arrangements for the sale of such bonds; NOW, THEREFORE, BE IT RESOLVED by the Board of Supervisors of the County of Contra Costa, as follows: 1. Pursuant to the Act and the Indentures (hereinafter defined) , revenue bonds of the County, to be designated as "County of Contra Costa Multifamily Housing Revenue Bonds (GNMA Collateralized - Crescent Park Apartments Project) 1994 Series A, " County of Contra Costa Multifamily Housing Revenue Bonds (GNMA Collateralized - Crescent Park Apartments Project) Taxable 1994 Series A-T, " and County of Contra Costa Multifamily Housing Revenue Bonds (FHA Insured Mortgage Loan Crescent Park Apartments Project) 1994 Series B (the "Series A Bonds, " the "Series A-T Bonds" and the "Series B Bonds, " respectively, and collectively, the "Bonds") , in an aggregate principal amount not to exceed $22, 000, 000, and with a final maturity date not later than April 1, 2035, are hereby authorized to be issued. The Bonds shall be in the forms set forth in and otherwise in accordance with the Indentures, and shall be executed by the manual or facsimile signature of the Chair of this Board, and the manual or facsimile seal of the County shall be impressed or reproduced thereon and attested by the manual or facsimile signature of the County Administrator and Clerk of this Board. SF2-27263.2 2 2 . The proposed forms of Trust Indentures (the "Indentures") , each between the County and the Trustee, as defined below, in substantially the forms presented to this meeting, are hereby approved. Any Authorized Issuer Representative (as defined in the Indentures) is hereby authorized and directed, for and in the name and on behalf of this Board and the County, to execute by manual signature, and such officer is hereby authorized and directed, for and in the name and on behalf of this Board and the County, to deliver, the Indentures in substantially said forms, with such additions thereto or changes therein as such officer may approve or recommend upon consultation with County Counsel and Bond Counsel to the County (provided that such additions or changes shall not authorize an aggregate principal amount of Bonds in excess of the amount stated above, or having a maturity later than the date stated above, or result in a stated interest rate on the Bonds in excess of 8 .5% per annum) , the approval of such additions or changes to be evidenced conclusively by the execution and delivery of the Indentures. The date, maturity dates, interest rate or rates, interest payment dates, denominations, form, registration privileges, manner of execution, place of payment, terms of redemption and other terms of the Bonds shall be as provided in the appropriate Indenture as finally executed. The execution of the Indentures shall constitute appointment by the Authorized Issuer Representative of the Trustee named therein (the "Trustee") to act as such Trustee, and such appointment is hereby approved. 3 . The proposed forms of bond purchase agreements relating to the Bonds (the "Purchase Contracts") , each among the County, the Owner and the Underwriters, in substantially the forms presented to this meeting, are hereby approved. Any Authorized Issuer Representative is hereby authorized and directed, for and in the name and on behalf of this Board and the County, to accept the offer of the Underwriters to purchase the Bonds contained in the Purchase Contracts (when such offers are made and if such offer is consistent with Section 2 hereof) and to- execute and deliver said Purchase Contracts; provided, however, that the Underwriters' fee with respect to such purchase of Bonds shall not exceed 2 % of the aggregate principal amount of the Bonds. 4 . The proposed forms of Financing Agreements (the "Financing Agreements") each among the County, the Trustee and the Owner, in substantially the forms presented to this meeting, are hereby approved. Any Authorized Issuer Representative is hereby authorized and directed, for and in the name and on behalf of this Board and the County, to execute by manual signature, and such officers are hereby authorized and directed, for and in the name and on behalf of this Board and the County, to deliver the Financing Agreements, with such additions or changes in said document as such officers may recommend or approve upon consultation with County Counsel and Bond Counsel to the County, SF2-27263.2 3 the approval of such additions or changes to be evidenced conclu- sively by the execution and delivery of the Financing Agreements. 5 . The proposed form of Regulatory ory Agreement and Declaration of Restrictive Covenants (the "Regulatory Agreement") among the County, the Trustee and the Owner, in substantially the form presented to this meeting, is hereby approved. Any Authorized Issuer Representative is hereby authorized and directed, for and in the name and on behalf of this Board and the County, to execute by manual signature, and such officers are hereby authorized and directed, for and in the name and on behalf of this Board and the County, to deliver, the Regulatory Agreement with such additions or changes in said document as such officers may recommend or approve upon consultation with County Counsel and Bond Counsel to the County, the approval of such additions or changes to be evidenced conclusively by the execution and delivery of the Regulatory Agreement. 6 . The proposed forms of preliminary official statements relating to the Bonds (the "Preliminary Official Statements") , in substantially the form presented to this meeting, to be used in connection with the offer and sale of the Bonds, is hereby approved, and the Board hereby ratifies and approves distribution of the Preliminary Official Statements to prospective purchasers of the Bonds. Any Authorized Issuer Representative is hereby authorized and directed, for and in the name and on behalf of this Board and the County, to execute and deliver, at the time of sale of the Bonds, said forms of Preliminary Official Statements as the final official Statements, (the "Official Statements") , with such additions thereto or changes therein as such officer may recommend or approve upon consultation with County Counsel and Bond Counsel to the County, the approval of such additions or changes to be conclusively evidenced by the execution and delivery of the Official Statements. Such changes may include, without limitation, such changes as to the principal amount, maturity schedule, interest rates and redemption features of the Bonds as effectuate the purposes of this resolution, subject to the limitations prescribed in Section 2 hereof. Any Authorized Issuer Representative is hereby authorized to certify that the Preliminary official Statements and the final Official Statements are, as of their respective dates, "deemed final" by the County as defined in Rule 15c2-12 of the Securities and Exchange Commission. 7. It is -the purpose and intent of this Board that this Resolution constitute approval of the Bonds by the applicable elected representative of the issuer of the Bonds and the applicable elected representative of the governmental unit having jurisdiction over the area in which the Project is located, in accordance with Section 147 (f) of the Code. M-27263.2 4 8 . It is the purpose and intent of this Board that this Resolution constitute compliance with the requirements of Section 1.150-2 of the Treasury Regulations. 9 . The Issuer hereby declares its official intent to use proceeds of indebtedness to reimburse the Owner for Reimbursement Expenditures. 10 . The Bonds, when executed, shall be delivered to the Trustee for authentication. The Trustee is hereby requested and directed to authenticate the Bonds by executing the Trustee' s certificate of authentication and registration appearing thereon, and to deliver the Bonds, when duly executed and authenticated, to the Underwriters in accordance with written instructions executed on behalf of this Board and the County by any Authorized Issuer Representative, which instructions said officer is hereby authorized and directed, for and in the name and on behalf of the Board and the County, to execute and deliver to the Trustee. Such instructions shall provide for the delivery of the Bonds to the Underwriters in accordance with the Purchase Contracts, upon payment of the purchase price thereof. 11. Orrick, Herrington & Sutcliffe is hereby appointed Bond Counsel in regards to the issuance of the Bonds, Litten Financial Consulting is hereby appointed Financial Advisor to the County in regards to the issuance of the Bonds, and Kirkpatrick, Pettis, Smith, Polian Inc. and Charles A. Bell Securities Corp. are hereby appointed Underwriters in regards to the issuance of the Bonds. 12 . All consents, approvals, notices, orders, requests and other actions permitted or required by any of the documents authorized by this resolution, including without limitation any of the foregoing which may be necessary or desirable in connection with any default under or amendment of such documents, any transfer or other disposition of the Project, any substitution of credit enhancement for the Bonds or any redemption of the Bonds, may be given or taken by any Authorized Issuer Representative without further authorization by this Board, and any Authorized Issuer Representative is hereby authorized and directed to give any such consent, approval, notice, order or request and to take any such action which such officer may deem necessary or desirable to further the purposes of this resolution and- the Program. 13 . All actions heretofore taken by the officers and agents of the County with respect to the establishment of the Program and the sale and issuance of the Bonds are hereby approved, confirmed and ratified, and the proper officers of the County are hereby authorized and directed, for and in the name and on behalf of the County, to do any and all things and take any and all actions and execute and deliver any and all certificates, agreements and other documents, including but not limited to an escrow or similar agreement or instrument and those SF2-27263.2 5 documents described in the Indentures, the Purchase Contracts and the other documents herein approved, which they, or any of them, may deem necessary or advisable in order to consummate the lawful issuance and delivery of the Bonds and to effectuate the purposes thereof and of the documents herein approved in accordance with this resolution and resolutions heretofore adopted by this Board and otherwise in order to carry out the Program. 14 . This Resolution shall take effect immediately upon its passage and adoption. ADOPTED this 15th day of March 1994, by the following vote: AYES: Supervisors Smith, Bishop, McPeak, Torlakson and Powers NOES: None ABSTAINING: None ABSENT: None Ch it of the Board of Supervisors ATTEST: Phil Batchelor, County Administrator and Clerk of the Board of Supervisors By: D6jpulty SF2-27263,2 6 Bond Purchase Agreement COUNTY OF CONTRA COSTA MULTIFAN13LY HOUSING REVENUE BONDS (GNMA Collateralized -- Crescent Park Apartments Project) 1994 Series A and COUNTY OF CONTRA COSTA MULTIFAMILY HOUSING REVENUE BONDS (GNMA Collateralized -- Crescent Park Apartments Project) Taxable 1994 Series A-T BOND PURCHASE AGREEMENT March _, 1994 County of Contra Costa Community Development Department County Administration Building 651 Pine Street 4th Floor, North Wing Martinez, California 94553-0095 EAH - Contra Costa, Inc. 2169 East Francisco Boulevard Suite B San Rafael, California 94901 Dear Ladies and Gentlemen: Kirkpatrick, Pettis, Smith, Polian Inc. and Charles A. Bell Securities Corp. (collectively, the "Purchasers"), offer to enter into this Bond Purchase Agreement with the County of Contra Costa, a political subdivision and body corporate and politic of the State of California (the "Issuer") and EAH - Contra Costa, Inc., a California nonprofit corporation (the "Borrower"). 02/24/94 m12-1853 0 1. Background. (a) The Issuer proposes to issue $ aggregate principal amount of its Multifamily Housing Revenue Bonds (GNMA Collateralized --Crescent Park Apartments) 1994 Series A (the "1994 Series A Bonds") and $ aggregate principal amount of its Multifamily Housing Revenue Bonds (GNMA Collateralized -- Crescent Park Apartments) Taxable 1994 Series A-T (the "Taxable 1994 Series A-T Bonds") (collectively, the "Bonds"), and to loan the proceeds of the Bonds to the Borrower in order to provide money to finance the Borrower's acquisition and rehabilitation of a 378 unit multifamily rental housing project located in the City of Richmond, County of Contra Costa, California, for low-income persons (the "Project") and to pay certain costs related to the issuance of the Bonds. (b) The Bonds will mature on the dates and in the amounts and bear interest at the rates set forth on Schedule I attached hereto, subject to prior redemption or acceleration as described in the Official Statement (as hereinafter defined). The Bonds will be issued pursuant to a bond resolution (the "Resolution") passed on March _, 1994 by the Issuer, and will be secured under a Trust Indenture (the "Indenture"), dated as of March 1, 1994, between the Issuer and Bank of America National Trust and Savings Association, as trustee (the "Trustee") for the holders of the Bonds. All terms used herein and not otherwise defined shall have the meanings set forth in the Indenture. (c) The Bonds are being issued pursuant to and in accordance with the provisions of Chapter 8 of Part 5 of Division 31 of the Health and Safety Code of the State of California (the "Act"), the proceeds of the Bonds will be expended so that the interest on the 1994 Series A Bonds will not be includable in gross income for the purposes of federal income taxation, and the Bonds may be purchased by the original purchasers without registration of any security under the Securities Act of 1933, as amended (the "Securities Act"), or qualification of any indenture under the Trust Indenture Act of 1939 (the "Trust Indenture Act"). (d) In order that the Project will be operated as a charitable project property within the meaning of Section 145 of the Internal Revenue Code of 1986, as amended (the "Code"), the Borrower will enter into a Regulatory Agreement and Declaration of Restrictive Covenants (the "Regulatory Agreement"), dated as of March 1, 1994, with the Issuer for the benefit of the Issuer. (e) In order to induce the Issuer to enter into this Bond Purchase Agreement, and to induce the Issuer to issue and deliver the Bonds, the Borrower has joined in this Bond Purchase Agreement. 2. Purchase, Sale and Delivery of Bonds. (a) Subject to the terms and conditions and in reliance upon the representations, warranties and agreements. set forth herein, the Purchasers hereby agree to purchase from the Issuer for reoffering to the public all of the Bonds as contemplated herein. The purchase price for the Bonds shall be as follows, plus accrued interest to the Closing Date (defined herein): 02124194 2 - m12-1853 1994 Series A Bonds Principal Amount Purchase Price Taxable 1994 Series A-T Bonds Principal Amount Purchase Price (b) The Issuer has delivered or shall cause to be delivered to the Purchasers copies of the Preliminary Official Statement (the "Preliminary Official Statement") and copies of the final Official Statement, substantially in the form of the Preliminary Official Statement, with such changes as may be approved by the Purchasers (collectively, the "Official Statement") in quantities and at times sufficient to enable the Purchasers to comply with the rules of the Municipal Securities Rulemaking Board and Rule 15c2-12 of the Securities and Exchange Commission. The Issuer hereby approves the use and distribution by the Purchasers to persons who may by interested in the purchase of the Bonds of the Preliminary Official Statement and the Official Statement, and hereby authorizes the Purchasers to use and distribute the Preliminary Official Statement and the Official Statement, and copies of the Indenture and all other documents, executed in connection with the placement and sale of the Bonds. (c) At 10:00 a.m. on April _, 1994, or at such earlier or later time or date as shall be agreed_by the Issuer, the Borrower and the Purchasers (such time and date being herein referred to as the "Closing Date"), the Issuer will deliver to the Purchasers in the offices of The Depository. Trust Company ("DTC"), 55 Water Street, New York, New York, a single Bond for each maturity, in a form which is eligible for the book entry system maintained by DTC, registered in the name of Cede & Co., duly executed by the Issuer and authenticated by the Trustee (or Authenticating Agent if an entity separate from the Trustee is acting as an authenticating agent) as provided for in the Indenture, and will deliver to the Purchasers in the offices of Orrick, Herrington &Sutcliffe, San Francisco, California ('Bond Counsel") the other documents herein mentioned; and the Purchasers will accept such delivery and shall arrange for the purchase price of the Bonds as set forth in paragraph (a) of this section to be paid by the original purchasers by wire transfer in immediately available funds to an account specified by the Trustee, for the account of the Issuer (such delivery and payment being herein referred to as the "Closing"). 02124/94 - 3 - m12-1853 (d) Except as may be inconsistent with the provisions of this Bond Purchase Agreement, the Purchasers covenant and agree to purchase all (but not less than all) of the Bonds at the price set forth in the Official Statement and to send to each such original purchaser a copy of the Official Statement concurrently with or prior to sending to such purchaser a final written confirmation of the sale. Further, the Purchasers agree not to use the Official Statement for the purpose of marketing the Bonds subsequent to receiving written notice from the Issuer or the Borrower which (i) states that the Official Statement contains an untrue statement of a material fact or omits to state a material fact, and (ii) specifically identifies the material fact or omission, provided that upon the amendment of the Official Statement to the satisfaction of the party delivering the notice pursuant hereto, the Purchasers may, subject to the continuing obligations contained herein, resume use of the amended Official Statement in marketing the Bonds. 3. Issuer's Representations and Warranties. The Issuer makes the following representations and warranties: (a) The Issuer is authorized by the provisions of the Act, among other things, (i) to issue revenue bonds, such as the Bonds, and to make the proceeds of such Bonds available to persons such as the Borrower for the purposes described in the Indenture and the Financing Agreement (the "Agreement") by and among the Issuer, the Borrower, the Trustee and TRI Capital Corporation, a California corporation (the "Lender"), payable from and secured by a pledge of the revenues and assets pledged thereto under the Indenture (the "Revenues"), and (ii) to secure such Bonds in the manner contemplated by the Indenture. (b) The Issuer has full legal right, power and authority (i) to pass the Resolution, (ii) to enter into this Bond Purchase Agreement, the Indenture, the Agreement and the Regulatory Agreement, (iii) to issue, sell and deliver the Bonds to the original purchasers as provided herein, and (iv) to carry out and consummate all other transactions contemplated by each of the aforesaid documents, and the Issuer has complied with all provisions of applicable law, including the Act, in all matters relating to such transactions. (c) The Issuer has duly authorized (i) the issuance and sale of the Bonds upon the terms set forth herein and in the Indenture, (ii) the execution, delivery and due performance of this Bond Purchase Agreement, the Bonds, the Indenture, the Agreement and the Regulatory Agreement, and (iii) the taking of any and all such actions as may be required on the part of the Issuer to carry out, give effect to and consummate the transactions contemplated by such instruments, including the use of the Official Statement. All consents or approvals, if any, necessary to be obtained by the Issuer in connection with the foregoing have been received, and the consents or approvals so received, if any, are still in full force and effect. (d) The Resolution has been duly passed by the Issuer, is in full force and effect and constitutes the legal, valid and binding act of the Issuer. This Bond Purchase Agreement and the Regulatory Agreement constitute, and the Indenture and the Agreement, when executed and delivered, will constitute legal, valid and binding obligations of the Issuer in accordance with their respective terms, except that enforceability may be limited by laws relating to bankruptcy, 0224/94 - 4 - m12-1853 reorganization or other similar laws affecting the rights of creditors, by the exercise of judicial discretion in accordance with general principles of equity, and by matters of public policy. (e) When duly authenticated by the Trustee and delivered to and paid for by the Purchasers at the Closing in accordance with the provisions of this Bond Purchase Agreement, the Bonds will have been duly authorized, executed, issued and delivered and will constitute legal, valid and binding limited obligations of the Issuer in conformity with the laws of the State of California, including the Act, will be entitled to the benefit and security of the Agreement and the Indenture, and will be enforceable in accordance with their terms, except that enforceability may be limited by laws relating to bankruptcy, reorganization or other similar laws affecting the rights of creditors and by principles of equity. (f) Neither the passage of the Resolution, the execution and delivery by the Issuer of this Bond Purchase Agreement, the Bonds, the Indenture, the Agreement or the Regulatory Agreement, nor the consummation by the Issuer of the transactions contemplated therein or the compliance by the Issuer with the provisions thereof, will conflict with, or constitute on the part of the Issuer a violation of, or a breach of or default under, any statute, indenture, mortgage, commitment, note or other agreement or instrument to which the Issuer is a party or by which it is bound, or under any provision of the California Constitution or under any existing law, rule, regulation, ordinance, charter, judgment, order or decree to which the Issuer is subject. (g) Other than the Indenture and the Agreement, the Issuer has not entered into any contract or arrangement of any kind which might give rise to any lien or encumbrance on the Trust Estate. (h) 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 court, public board or body, pending or threatened against the Issuer, which in any way questions the powers of the Issuer referred to in paragraph (a)above, or the validity of any proceedings taken by the Issuer in connection with the issuance of the Bonds, or wherein an unfavorable decision, ruling or finding would materially adversely affect the transactions contemplated by, or the validity or enforceability of, the Resolution, the Regulatory Agreement, the Indenture, the Agreement, the Bonds or this Bond Purchase Agreement. (i) ' The information contained in the Preliminary Official Statement and the Official Statement under the caption "THE ISSUER" was or will be, as of their respective dates, and as of the Closing Date will be, true, correct and complete in all material respects, and such information in the Preliminary Official Statement and the Official Statement does not and will not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they are made, not misleading. The Preliminary Official Statement as of its date was "final" within the meaning of paragraph (b)(1) of Securities and Exchange Commission Rule 15c2-12, and the Official Statement will be final within the meaning of paragraphs (b)(3)and (b)(4)of such Rule. 02124194 - 5 - m12-1853 Any certificate relating to the Bonds signed by any official of the Issuer and delivered to Bond Counsel or the Purchasers at or before the Closing Date shall be deemed a representation and warranty by the Issuer to Bond Counsel or the Purchasers, as the case may be, as to the truth of the statements therein contained. (k) 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 on. (1) The Issuer is not now in default nor has it been in default since December 31, 1975, as to principal or interest with respect to any obligations issued or guaranteed by the Issuer. 4. Borrower's Representations and Warranties. The Borrower makes the following representations and warranties: (a) The Borrower is a nonprofit corporation, duly organized, validly existing and in good standing under the laws of the State of California, with full power to own the Borrower's properties and conduct the Borrower's business. The Borrower has full legal right, power and authority to execute and deliver this Bond Purchase Agreement, the Mortgage and the Mortgage Note (as defined in the Indenture), the Agreement and the Regulatory Agreement, to provide for the operation and management of the Project, and to take any and all such action as may be required on the Borrower's part to carry out, give effect to.and consummate the transactions contemplated by this Bond Purchase Agreement, the Agreement and the Regulatory Agreement. (b) The Borrower has duly authorized, executed and delivered this Bond Purchase Agreement, and on the Closing Date will have duly authorized, executed and delivered the Mortgage, the Mortgage Note, the Agreement and the Regulatory Agreement, and has taken or will take all such action as may be required on the part of the Borrower to carry out, give effect to and consummate the transactions contemplated by each of such documents. This Bond Purchase Agreement and the Regulatory Agreement constitute, and the Mortgage, the Mortgage Note, the Agreement and the Bonds, when executed and delivered, will constitute, legal, valid and binding obligations of the Borrower enforceable in accordance with their respective terms, except that enforceability may be limited by laws relating to bankruptcy, reorganization or other similar laws affecting the rights of creditors. (c) Neither the execution and delivery of this Bond Purchase Agreement, the Mortgage, the Mortgage Note or the Agreement, nor the consummation of the transactions contemplated therein or the compliance with the provisions thereof, will conflict with, or constitute on the part of the Borrower a violation of, or a breach of or default under the Borrower's organizational documents, or any statute, indenture, mortgage, commitment, note or other agreement or instrument to which the Borrower is a party or by which the Borrower is bound, or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Borrower or any of the Borrower's activities or properties. All consents, approvals,authorizations and orders of governmental or regulatory authorities which are required for the Borrower's execution and delivery of, consummation of the transactions contemplated 02/24/94 - 6 - m12-1853 by and compliance with the provisions of this Bond Purchase Agreement, the Mortgage, the Mortgage Note, the Regulatory Agreement and the Agreement have been obtained. (d) To the best of the Borrower's knowledge, 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 or affecting the Borrower or the actions taken or contemplated to be taken by the Borrower, nor, to the best of the Borrower's knowledge, is there any basis therefor, wherein an unfavorable decision, ruling or finding would materially adversely affect the business, financial condition or operations of the Borrower, or the transactions contemplated by, or the validity or enforceability of, this Bond Purchase Agreement, the Mortgage, the Mortgage Note, the Agreement or the Regulatory Agreement, or which would in any way jeopardize the tax-exempt status of the interest on the Bonds. . (e) No event has occurred and no condition exists which, upon issuance of the Bonds, would constitute (or with the giving of notice or lapse of time, or both, would constitute) an Event of Default under the Indenture. (f) The Borrower is not in violation of any provision of, or in default under, its organizational documents, or any statute, indenture, mortgage, commitment, note or other agreement or instrument to which the Borrower is a party or by which it is bound, or any order, rule, regulation or decision of any court or governmental agency or body having jurisdiction over the Borrower or any of the Borrower's activities or properties. (g) The information contained in the Preliminary Official Statement and the Official Statement relating to the Borrower and the Project was or will be, as of their respective dates, and as of the Closing Date will be, true, correct and complete in all material respects, and the Preliminary Official Statement and the Official Statement as to such matters do not and will not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they are made, not misleading. (h) The Borrower will furnish such information and cooperate with the Purchasers as the Purchasers may reasonably request in order for the Purchasers (i) to qualify, or perfect an exemption from qualification, 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 Purchasers may designate, and (ii) to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions, and the Borrower will use its best effort to continue such qualification in effect so long as required for distribution of the Bonds. (i) Any certificate signed by any officer of the Borrower and delivered to the Issuer, Bond Counsel or the Purchasers shall be deemed a representation and warranty by the Borrower to the Issuer, Bond Counsel and the Purchasers as to the truth of the statements therein contained. 112124/94 - T - m12-1853 S. Covenants of the Issuer. The Issuer covenants that it will observe all covenants of the Issuer in the Indenture and the Agreement and will not issue or sell any bonds or obligations other than the Bonds referred to in the Indenture, the principal of, premium, if any, and interest on which are payable in whole or in part from the Trust Estate or are to be secured by any lien on, or pledge of, the Trust Estate. 6. Covenants of the Borrower. The Borrower covenants as follows: (a) The Borrower will cause the proceeds of the Bonds to be applied as provided in and subject to all of the terms and provisions of the Agreement and will observe all covenants of the Borrower in such instrument. (b) The Borrower will take such action as may be reasonably requested to facilitate the timely consummation of the transactions contemplated by this Bond Purchase Agreement. (c) The Borrower will notify the Issuer and the Purchasers of any material adverse change in the plan of financing for the Project occurring before the Closing Date. (d) The Borrower will not take any action or permit any action to be taken on the Borrower's behalf, or cause or permit any circumstance within the Borrower's control to arise or continue, if such action would adversely affect the excludability from gross income for federal income tax purposes of the interest on the 1994 Series A Bonds. (e) The Borrower will secure the consents and approvals of the Lender, the Federal Housing Administration ("FHA") and the Government National Mortgage Association ("GNMA") on or prior to the Closing Date which are necessary to consummate the transactions contemplated by this Bond Purchase Agreement and the Official Statement. 7. Conditions to the Obligations of the Purchasers. The obligation of the Purchasers to accept delivery of and to cause payment for the Bonds on the Closing Date shall be subject, at the option of the Purchasers, to the accuracy in all material respects of the representations and warranties on the part of the Issuer and the Borrower contained herein as of the date hereof and as of the Closing Date, to the accuracy in all material respects of the statements of the Issuer and the Borrower made in any certificates or other documents furnished pursuant to the provisions hereof, to the performance by the Issuer and the Borrower of their respective obligations to be performed hereunder at or prior to the Closing Date and to the following additional conditions: (a) At the Closing Date, the Indenture, the Regulatory Agreement, the Agreement, the Mortgage and the Mortgage Note shall have been duly authorized, executed and delivered by the respective parties thereto, and the Official Statement shall have been delivered to the Purchasers, and none of the foregoing agreements shall have been amended, modified or supplemented so as to materially affect the content thereof, except as may have been agreed to in writing by the Purchasers, and there shall have been taken in connection therewith, with the issuance of the Bonds, and with the transactions contemplated thereby and by this Bond Purchase 02124194 - 8 .. m12-1853 Agreement, all such actions as Arter Hadden Haynes .& Miller, counsel to the Purchasers ("Purchasers' Counsel"), shall deem to be necessary and appropriate; (b) At the Closing Date, the Official Statement shall not have been amended, modified or supplemented, except as may have been agreed to in writing by the Purchasers; (c) At or prior to the Closing Date, no event shall have occurred or information become known which, in the reasonable judgment of the Purchasers, makes untrue in any material respect any statement or information contained in the Official Statement or has the effect that the Official Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (d) At or prior to the Closing Date, the Purchasers and the Issuer shall have received an original or copies of the following documents, in each case satisfactory in form and substance to the Purchasers and in each case conforming in all material respects with any description thereof contained in the Official Statement: W The Indenture, the Agreement, the Bonds, the Mortgage, the Mortgage Note and the Regulatory Agreement, each duly executed and delivered by the respective parties thereto, with such amendments, modifications or supplements as may have been agreed to in writing by the Purchasers; (ii) The opinion of Michaud &Hoshiyama, San Franciso,'Califomia, counsel to the Borrower, dated the Closing Date, in substantially the form attached as Exhibit A hereto; The opinion of Bond Counsel, dated the Closing Date, in form, scope and substance acceptable to the Purchasers' and their counsel and a supplemental opinion of Bond Counsel, dated the Closing Date, in substantially the form attached as Exhibit B hereto; (iv) The opinion of Arter Hadden Haynes&Miller,Purchasers' Counsel,dated the Closing Date, in substantially the form attached as Exhibit C hereto; W A certificate, dated the Closing Date, signed by a duly authorized official of the Issuer, in form satisfactory to the Purchasers and the Purchasers' Counsel to the effect that the representations and warranties of the Issuer set forth in Section 3 hereof are true, correct and complete on the date thereof, (vi) A certificate or certificates dated the Closing Date, signed by properly authorized officers of the Borrower, in form satisfactory to the Purchasers and the Purchasers' Counsel to the effect that the representations and warranties of the Borrower set forth in Section 4 hereof are true, correct and complete on the date thereof; 02/24/94 m12-1853 (vii) A certificate, dated the Closing Date, signed by a duly authorized officer of the Lender, in substantially the form attached as Exhibit D hereto; (viii) Evidence that Standard &Poor's Ratings Group has assigned a rating of "AAA" to,the Bonds; (ix) FHA shall initially endorse the Mortgage Loan with respect to the Project providing for a principal amount equal to $15,672,100 bearing interest at not less than a rate of % per annum; (x) The Investment Agreement; and (xi) Such additional legal opinions, certificates, proceedings, instruments and other documents as the Purchasers or Purchasers' Counsel may reasonably request to evidence compliance by the Trustee or the Borrower with legal requirements of closing, and to certify the truth and accuracy, as of the Closing Date, of the representations of the Issuer and the Borrower contained herein and the due performance or satisfaction by the Issuer and the Borrower at or prior to such time of all agreements then to be performed and all conditions then to be satisfied by each of them. (e) Between the date hereof and the Closing Date, legislation shall not have been enacted by the Congress or be actively considered for enactment by Congress, or recommended to the Congress for passage by the President of the United States, or introduced to either house of the Congress, nor a decision rendered by any court of competent jurisdiction, or the Tax Court of the United States, nor any order, ruling, regulation or official statement made by the United States Treasury Department or the Internal Revenue Service, with the purpose or effect of imposing federal income taxation upon revenues or other income of the character derived by the Issuer under the Agreement or upon the interest to be paid on the Bonds or on bonds of the general character of the Bonds, or of subjecting any such interest to the federal alternative minimum tax applicable to individuals and corporations. (f) Between the date hereof and the Closing Date, legislation-shall not have been enacted by the Congress or be actively considered for enactment by Congress, or recommended to the Congress for enactment by the President of the United States, or introduced or favorably reported for passage to either house of the Congress, and neither a decision, order or decree of a court of competent jurisdiction, nor an order, ruling, regulation or.official statement of or on behalf of the Securities and Exchange Commission shall have been rendered or made, with the purpose or effect that the issuance, offering or sale of the Bonds or any related security or obligations of the general character of the Bonds or any related security as contemplated hereby, or the execution and delivery of the Indenture, is or would be in violation of any provision of, or is or would be subject to registration or qualification requirements under, the Securities Act or the Trust Indenture Act. 0224194 _ 10 - m12-1853 (g) None of the following shall have occurred: (i) additional material restriction not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority or by any national securities exchange or such trading shall have been suspended; (ii) the New York Stock Exchange or other national securities exchange, or the National Association of Securities Dealers, Inc. or other national securities association, or the Municipal Securities Rulemaking Board or other similar national self-regulatory rule-making board, 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 change in the net capital requirements of, underwriters; (iii) a general banking moratorium shall have been declared by Federal, New York or California authorities; or (iv) a war involving the United States of America, whether or not declared, or any other national or international calamity or crisis, or a financial crisis, shall have occurred, the effect of which, in the judgment of the Purchasers, would make it impracticable to market the Bonds or would materially and adversely affect the ability of the Purchasers to enforce contracts for the sale of the Bonds. (h) All matters relating to this Bond Purchase Agreement, the Official Statement, the Bonds, the Resolution, the Regulatory Agreement, the Indenture, the Agreement and the consummation of the transactions contemplated by this Bond Purchase Agreement and the Official Statement, shall be reasonably satisfactory to and subject to the approval of the Purchasers. If the conditions to the Purchasers' obligations contained in this Bond Purchase Agreement are not satisfied or if the Purchasers' obligations shall be terminated for any reason permitted herein, this Bond Purchase Agreement shall, at the option of the Purchasers, terminate and neither the Purchasers, the Issuer, nor the Borrower shall have any further obligations hereunder, except as provided in Section 10 with respect to the payment of certain expenses. 8. No Pecuniary Liability of Issuer. No provision, covenant, or agreement contained in this Bond Purchase Agreement, and no obligation herein imposed upon the Issuer, or the breach thereof, shall constitute an indebtedness of the Issuer or the State of California or any political subdivision thereof within the meaning of any California constitutional provision or statutory limitation or shall constitute or give rise to a pecuniary liability of the Issuer or the State of California or any political subdivision thereof or a charge against its general credit or taxing powers. In making the agreements, provisions and covenants set forth in this Bond Purchase Agreement, the Issuer has not obligated itself, except to the extent that the Issuer is authorized to act pursuant to California law and except with respect to the Trust Estate. The Issuer and any of its officials, officers, employees, members or agents shall have no monetary liability arising out of the obligations of the Issuer hereunder or in connection with any covenant, representation or warranty made by the Issuer herein, and neither the Issuer nor its officials shall be obligated to pay any amounts in connection with the transactions contemplated hereby other than from the Trust Estate or other moneys received from the Borrower. 02n4/94 - 11 - m12-1853 9. Survival of Representations,Warranties, Covenants, Agreements and Indemnities. All representations, warranties, covenants, agreements and indemnities contained in this Bond Purchase Agreement, or contained in the certificates of members, officials or officers of the Issuer or the Borrower submitted pursuant hereto, shall remain operative and in full force and effect, regardless of any investigation by or on behalf of the Purchasers or any person controlling the Purchasers, and shall survive delivery of the Bonds to the Purchasers and payment therefor by the original purchasers. 10. Expenses. The Borrower shall be responsible for payments of all costs and expenses incident to the performance of the Issuer's, the Purchasers', and the Borrower's obligations in connection with the authorization, issuance and sale of the Bonds, the Mortgage, the Mortgage Loan and the Project. The costs set forth on Schedule 11 hereto shall be paid by the Trustee from funds on deposit in the Costs of Issuance Fund; provided, however, that the Purchasers shall not be responsible for paying the fees of Bond Counsel, Issuer's Counsel, Borrower's Counsel and Trustee's Counsel in excess of the amounts listed on Schedule 11 and any additional amounts, if any, shall be the responsibility of the Borrower. 11. Indemnification. (a) General. The Borrower covenants and agrees to indemnify the Issuer and the Purchasers and their respective directors, officers, attorneys, trustees, and employees and each person, if any, who controls any of such persons within the meaning of Section 15 of the Securities Act (collectively, the "Indemnified Parties") for, and to hold each Indemnified Party , harmless against, all liabilities, claims, costs, losses and expenses (including without limitation, to the extent permitted by law, reasonable attorneys' fees and expenses), imposed upon or asserted against the Indemnified Parties pursuant to any action, claim or proceeding based upon any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Official Statement or the Official Statement. The Borrower shall reimburse any legal or other expenses incurred reasonably by any Indemnified Party in connection with investigating and defending any liability, claim, cost, loss, expense, action or proceeding described above; provided, nothing herein shall require the Borrower to pay for any losses, claims, damages, liabilities or expenses resulting from the negligence or the willful misconduct of an Indemnified Party or for expenses that were incurred without prior notice to the Borrower. At the request and the expense of the Borrower, each Indemnified Party shall cooperate in making any investigation and defense of any action, claim or proceeding and shall assert appropriately the rights, privileges and defenses which are available to the Indemnified Party in connection therewith. (b) Procedure. The Indemnified Party shall, in the event of any claim, suit, action or proceeding against it, any of its directors, attorneys, officers, representatives or employees or any persons controlling it as referenced above, in respect of which indemnity may be sought on account of any indemnity agreement by the Borrower contained herein, promptly give written notice thereof to the Borrower. When such notice is given, the Borrower shall be entitled to participate at its own expense in the defense of, or if it so elects, to assume the defense of, such 02/24/94 - 12 - m12-1853 0 claim, suit, action or proceeding, in which event such defense shall be conducted by counsel chosen by the Borrower, but if the Borrower shall elect not to assume such defense, it shall reimburse such Indemnified Party or Parties for the reasonable fees and expenses of any counsel retained by them. Each and every Indemnified Party shall have the right to compromise, settle or conclude any claim, action or proceeding against it with the written consent of the Borrower, which consent shall not be unreasonably withheld. The foregoing notwithstanding, in the event that the Borrower shall assume such defense and any Indemnified Party or Parties shall be advised by independent legal counsel that counsel selected by the Borrower is not fully and adequately protecting such party or parties and representing the interests of such party.or parties, any such Indemnified Party or Parties shall have the right to conduct its own defense against any such claim, suit, action or proceeding in addition to or in lieu of any defense conducted by the Borrower, and the Borrower shall indemnify and hold harmless such Indemnified Party or Parties against and from any and all suits, claims, damages, liabilities or expenses whatsoever (including reasonable fees and expenses of counsel selected by such Indemnified Party or Parties) incurred by and arising out of or in connection with any such claim, suit, action or proceeding. 12. Parties in Interest. This Bond Purchase Agreement is made solely for the benefit of the Purchasers and their successors and assigns, the Issuer and its officials and officers, and the Borrower and the Borrower's successors and assigns, and no other person, partnership, association or corporation shall acquire or have any right under or by virtue of this Bond Purchase Agreement. 13. Notices. Any notice or other communication to be given to any party to this Bond Purchase Agreement may be given by delivering the same in writing at the respective addresses set forth below: Issuer: County of Contra Costa Community Development Department County Administration Building 651 Pine Street 4th Floor, North Wing Martinez, California 94553-0095 Attention: Deputy Director-Redevelopment Borrower: EAH - Contra Costa, Inc. 2169 East Francisco Boulevard, Suite B San Rafael, California 94901 Attention: Purchasers: Kirkpatrick, Pettis, Smith, Polian Inc. 1700 Lincoln Street, 30th Floor Denver, Colorado 80203 Attn: James A. Danford M/24/% - 13 - m12-1853 14. Seve_ rabili1y. If any provisions of this Bond Purchase Agreement shall be held or deemed to be or shall, .in fact, be inoperative, invalid or unenforceable as applied in any particular case in any jurisdiction or jurisdictions or in all jurisdictions because it conflicts with any provisions of any constitution, statute, rule or public policy, or any other reason, such circumstance shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance, or of rending any other provision or provisions of this Bond Purchase Agreement invalid, inoperative or unenforceable to any extent whatever. 15. Subordination to HUD Regulations. In the event of conflict between the provisions of this Bond Purchase Agreement and the National Housing Act, as amended, the regulations and administrative requirements promulgated thereto and the FHA documents, such acts, regulations, administrative requirements and FHA documents shall control. No amendment to this Bond Purchase Agreement shall conflict with any such acts, regulations, or administrative requirements or FHA documents. 16. Limited Liability. Enforcement of the covenants under Section 6 of this Bond Purchase Agreement will not result inany claim by the Issuer against the Project, the proceeds of the Mortgage, any reserve or deposit required by FHA, or the rents or income from the Project; except for available Residual Receipts (as defined in the Loan Agreement). 17. Applicable Law. This Bond Purchase Agreement shall be governed by and construed in accordance with the laws of the State of California. 18. Counterparts. This Bond Purchase 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. COUNTY OF CONTRA COSTA By: Title: Chairman EAH - CONTRA COSTA, INC. By: 02/24/94 - 14 - m12-1853 IQRKPATRICK,PETTIS, SMITH,POLIAN INC. CHARLES A. BELL SECURITIES CORP. By: KIRKPATRICK, PETTIS, SMITH, POLIAN INC. By: Vice President 02/24/94 - is - m12-1853 SCHEDULE I MATURITY SCHEDULE 1994 Series A Bonds Maturijy Date Principal Amount Interest Rate Taxable 1994 Series A-T Bonds Maturity Date Principal Amount Interest Rate Price: _% (Plus accrued interest if any) 0224/94 m12-1853 SCHEDULE II COSTS OF ISSUANCE (1) BOND COSTS OF ISSUANCE Bond Counsel - Orrick, Herrington & Sutcliffe Purchasers' Counsel - Arter Hadden Haynes & Miller Borrower's Counsel Printing Rating - Standard & Poor's Ratings Group Out-of-Pocket Expenses Sales Concessions Management Fee Cash Flow Verification Issuer's Counsel Issuer's Fee Trustee Acceptance & Legal Contingency Total (2) MORTGAGE LOAN COSTS AND FEES Lender Warehouse Costs GNMA Application Fee GNMA Set up Fee Lender Legal Title and Recording Lender Fee Total Mortgage Loan 02124/94 m12-1853 EXHIBIT A [FORM OF OPINION OF COUNSEL TO THE LENDER] April 1994 County of Contra Costa Martinez, California Bank of America National Trust and Savings Association Los Angeles, California Kirkpatrick, Pettis, Smith, Polian Inc. Denver, Colorado Charles A. Bell Securities Corp. San Francisco, California COUNTY OF CONTRA COSTA MULTIFAMILY HOUSING REVENUE BONDS (GNMA Collateralized -- Crescent Park Apartments Project) 1994 Series A and COUNTY OF CONTRA COSTA MULTIFAMILY HOUSING REVENUE BONDS (GNMA Collateralized -- Crescent Park Apartments Project) Taxable 1994 Series A-T Dear Ladies and Gentlemen: We have acted as counsel to TRI Capital Corporation, a corporation organized under the laws of the State of California (the "Lender"), in connection with the issuance of the above- referenced bonds (the "Bonds"). 02/24/94 A-1 m12-1853 i • In our capacity as such counsel, in rendering the opinions set forth below, we have examined among other things, originals or copies, certified or otherwise identified to our satisfaction, of the following documents: (i) the Official Statement, dated March _, 1994 (the "Official Statement") of the County of Contra Costa (the "Issuer"), with respect to the Bonds; (ii) the Financing Agreement, dated as of March 1, 1994 the ("Financing Agreement"), among the Issuer, the Lender, EAH - Contra Costa, Inc., as Borrower and Bank of America National Trust and Savings Association, as Trustee; and (iii) such other documents, certificates and instruments as we have deemed necessary for the purposes of reaching the opinion expressed herein. We have also relied as to matters of fact upon certificates of officers of the Lender and examined certain other certificates and documents. In such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to the original document of all documents submitted to us as photostatic or certified copies. We have assumed due authorization, execution and delivery of all documents referenced herein by the parties thereto other than the Lender and that each of such parties has full power, authority and legal right to execute and deliver each such instrument. Capitalized terms used but not defined herein have the meanings assigned to them in the Financing Agreement. 1. The Lender (i) is a corporation duly and lawfully organized under the laws of the State of California and duly authorized to, transact business in the State of California; (ii) is organized and operated for the purposes, among others, of making mortgage loans to provide financing for the acquisition and construction of residential developments and issuing mortgage- backed securities guaranteed by GNMA in order to obtain funds to make the mortgage loans; (iii) has the requisite power and authority to execute and deliver the Financing Agreement, to issue and deliver the GNMA Securities and to perform its obligations under the Financing Agreement and the GNMA Securities; and (vi) has duly authorized the execution and delivery of the Financing Agreement and the issuance and delivery of the GNMA Securities. 2. The execution and delivery of the Financing Agreement, the issuance and delivery of the GNMA Securities and the consummation of the transactions contemplated in the Financing Agreement and the GNMA Securities do not conflict with or constitute a breach of or a default under the Lender's organizational documents. 3. GNMA has approved the Lender to issue mortgage-backed securities guaranteed by GNMA as to timely payment of principal and interest pursuant to Section 306(g) of Title III of the National Housing Act of 1934 and the regulations promulgated pursuant thereto as in effect on the date hereof. 4. The Mortgage Note, upon due execution and delivery by the Borrower and upon endorsement for insurance by the Commissioner, will be in a form which complies with (i) HUD's requirements as expressly set forth in Title 24, Part 251 of the Code of Federal Regulations (the "HUD Regulations") and GNMA's requirements as expressly set forth in Title 02/24/94 A-2 m12-1853 24, Part 390 of the Code of Federal Regulations (the "GNMA Regulations") and GNMA Handbook 5500.1 REV-6 (Government National Mortgage Association Mortgage-Backed Securities Guide) (the "GNMA Handbook"). 5. The Lender has duly authorized,executed and delivered the Financing Agreement, and, assuming the due and valid authorization, execution and delivery by the other parties thereto, the Financing Agreement constitutes a legal, valid,and binding obligation of the Lender, subject to (i) the exercise of judicial discretion in accordance with general principals of equity, and (ii) bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted to the extent constitutionally applicable. 6. The Lender has duly authorized the issuance and delivery of the GNMA Securities, and, upon the issuance and delivery by the Lender, such instruments will constitute legal, valid and binding obligations of the Lender, subject to (i) the compliance by the Lender on the date of issuance of the GNMA Securities with all issuer eligibility requirements of GNMA, (ii) the exercise of judicial discretion in accordance with general principles of equity, and (iii) bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted to the extent constitutionally applicable. The foregoing statement, however, is expressly limited by the fact that the GNMA Securities do not constitute liability of, nor evidence any recourse against, the Lender, as recourse may be had to GNMA in the event of any failure of timely payment as provided for in the GNMA Guaranty set forth on the face of the GNMA Securities. We have made no independent investigation of the Lender's compliance with the issuer eligibility requirements of GNMA. 7. Upon the valid issuance of the GNMA Securities and the execution by GNMA of the Guaranty set forth on the face thereof as required under Section 390.13(a) of the GNMA Regulations and as particularly set forth in Appendices 42 and 43 of the GNMA Handbook, the GNMA Securities will be guaranteed by GNMA as to timely payment of principal and interest pursuant to Section 306(g) of Title III of the Act and the regulations promulgated pursuant thereto as in effect on the date of issuance of the GNMA Commitments. 8. Nothing has come to our attention which would lead us to believe that the information appearing under the caption "THE GNMA MORTGAGE-BACKED SECURITIES PROGRAM," and "THE MORTGAGE NOTE AND MORTGAGE" in the Official Statement contains any untrue statement of a material fact or fails to state any fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The information appearing under those captions are fair and accurate summaries of the matters discussed therein. Except as expressly stated herein, we express no opinion regarding the accuracy or completeness of any of the other information contained in any other section of the Official Statement. 02/24/94 A-3 m12.1853 This opinion is intended solely for the reliance of the Issuer, and the Trustee, and the initial purchaser of the Bonds, as addressee above and may not be delivered to or relied upon by any other person without our express prior written consent. Very truly yours, 02124/94 A-4 m12-1853 EXHIBIT B [FORM OF OPINION OF COUNSEL TO THE BORROWER] April 1994 County of Contra Costa Martinez, California Bank of America National Trust and Savings Association Los Angeles, California Kirkpatrick, Pettis, Smith, Polian Inc. Denver, Colorado Charles A. Bell Securities Corp. San Francisco, California COUNTY OF CONTRA COSTA MULTIFAMILY HOUSING REVENUE BONDS (GNMA Collateralized -- Crescent Park Apartments Project) 1994 Series A and COUNTY OF CONTRA COSTA MULTIFAMILY HOUSING REVENUE BONDS (GNMA Collateralized -- Crescent Park Apartments Project) Taxable 1994 Series A-T Dear Ladies and Gentlemen: We have acted as counsel to EAH-Contra Costa, Inc., a nonprofit corporation organized under the laws of the State of California (the 'Borrower"), in connection with the issuance of the above-referenced bonds (the "Bonds"). In our capacity as such counsel, in rendering the opinions set forth below, we have examined among other things, originals or copies, certified or otherwise identified to our satisfaction, of the following documents: (i) the Official Statement, dated March _, 1994 (the "Official Statement") of the County of Contra Costa (the "Issuer"), with respect to the Bonds; 02/24/94 B-1 m12-1853 (ii) the Financing Agreement, dated as of March 1, 1994 (the "Financing Agreement") among the Issuer, the Borrower, TRI Capital Corporation, as Lender, and Bank of America National Trust and Saving Association, as Trustee (iii) the Regulatory Agreement and Declaration of Restrictive Covenants dated as of March 1, 1994 (the "Regulatory Agreement"), between the Issuer and the Borrower; (iv) Bond Purchase Agreement, dated March _, 1994, among the Issuer, the Borrower, and Kirkpatrick, Pettis, Smith, Polian Inc. and Charles A. Bell Securities Corp., as Purchasers (the "Bond Purchase Agreement"); and (v) such other documents, certificates and instruments as we have deemed necessary for the purposes of reaching the opinion expressed herein. We have also relied as to matters of fact upon certificates of officers of the Borrower and examined certain other certificates and documents. In such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to the original document of all documents submitted to us as photostatic or certified copies. We have assumed due authorization, execution and delivery of all documents referenced herein by the parties thereto other than the Borrower and that each of such parties has full power, authority and legal right to execute and deliver each such instrument. Capitalized terms used but not defined herein have the meanings assigned to them in the Indenture or the Bond Purchase Agreement. Based upon and subject to the foregoing, we are of the opinion that, as of the date hereof. (i) The Borrower is a nonprofit corporation validly existing and in good standing under the laws of the State of California, with full power and authority to execute and deliver the Mortgage Loan Documents (as defined below), the Financing Agreement and the Regulatory Agreement and to perform its obligations under each respective agreement. (ii) The Mortgage, the Mortgage Note, the Regulatory Agreement and the Financing Agreement (collectively, the "Mortgage Loan Documents") and the Bond Purchase Agreement have each been duly authorized, executed and delivered by the Borrower and constitute legal, valid and binding obligations of the Borrower, enforceable in accordance with their respective terms, except as the enforcement thereof may be limited by (a)applicable bankruptcy, insolvency, moratorium, reorganization and similar laws(including fraudulent conveyance laws)affecting the enforcement of creditors' rights and remedies generally in effect from time to time, and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding at equity or at law). (iii) The execution and delivery of the Mortgage Loan Documents, the Bond Purchase Agreement and the performance by the Borrower of the terms of the respective agreements do not conflict with or violate any other document, instrument, decree, indenture or agreement by which the Borrower is bound. 02/24/94 B-2 m12-1853 • (iv) No approval, authorization or other action by, or filing with, the State of California, or any agency thereof, is required in connection with the execution and delivery by the Borrower of the Bond Purchase Agreement. (v) There is no action, suit, proceeding, inquiry or investigation at law or in equity or before any court, public body pending or, to the best of our knowledge, after due inquiry, threatened, to challenge the right, power or authority of the Borrower to own and operate the Project (as defined in the Official Statement) or to perform its obligations under the Bond Purchase Agreement or the Mortgage Loan Documents. (vi) The information set forth in the Official Statement under the subcaptions "The Project," "Sources of Revenue" and "The Borrower" under the caption "THE PROJECT AND THE PRIVATE PARTICIPANTS" is true and correct and does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (vii) We have no reason to believe that the Official Statement (except.as to any financial or statistical data included therein, as to which we do not express any opinion), as of the date hereof, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading. Very truly yours, MICHAUD & HOSHIYAMA 02/24/94 B-3 m12-1853 EXHIBIT C [FORM OF BOND COUNSEL SUPPLEMENTAL OPINION] April _, 1994 Kirkpatrick, Pettis, Smith, Polian Inc. Denver, Colorado Charles A. Bell Securities Corp. San Francisco, California COUNTY OF CONTRA COSTA MULTIFAMILY HOUSING REVENUE BONDS (GNMA Collateralized -- Crescent Park Apartments Project) 1994 Series A and COUNTY OF CONTRA COSTA MULTIFAMILY HOUSING REVENUE BONDS (GNMA Collateralized -- Crescent Park Apartments Project) Taxable 1994 Series A-T Dear Ladies and Gentlemen: We have acted as Bond Counsel in connection with the authorization and issuance of the above-captioned bonds (the "Bonds") by the County of Contra Costa (the "Issuer"). We have examined originals, or copies certified or otherwise identified to our satisfaction, of (a) the Trust Indenture (the "Indenture") relative to the Bonds dated as of March 1, 1994, between the Issuer and Bank of America National Trust and Savings Association(the "Trustee"); (b) the Mortgage Loan and the Note from the EAH - Contra Costa, Inc. (the 'Borrower"); (c) the Bond Purchase Agreement dated March_, 1994 (the'Bond Purchase Agreement"),between the above-named purchasers, the Issuer and the Borrower; (d) the Financing Agreement dated as of March 1, 1994, among the Issuer, the Borrower, the Trustee and TRI Capital Corporation (the "Lender"); (e) the Regulatory Agreement and Declaration of Restrictive Covenants dated as of March 1, 1994, between the Issuer and the Borrower; (f) the Official Statement (the "Official Statement") of the Issuer relating to the Bonds; and (g) the opinions and certificates required to be delivered to the above-named purchasers pursuant to Section 7 of the Bond Purchase Agreement. Capitalized terms used herein and not otherwise defined shall have the same meanings as set forth in the Indenture. 02/24/94 C-1 m12-1853 On the basis of the foregoing, and our review of such other information, records and documents as in our judgment is necessary or advisable, we are of opinion as follows: 1. Under existing laws, the Bonds may be offered and sold without registration under the Securities Act of 1933, as amended, and the Indenture is not required to be qualified under the Trust Indenture Act of 1939, as amended. 2. The statements made in the Official Statement under the headings "THE BONDS," "TAX EXEMPTION," "CERTAIN OTHER TAX CONSEQUENCES," and "CERTAIN LEGAL MATTERS" and in APPENDIX B -- "SUMMARY OF THE INDENTURE," APPENDIX C -- "SUMMARY OF THE FINANCING AGREEMENT" and APPENDIX D -- "SUMMARY OF THE REGULATORY AGREEMENT AND DECLARATION OF RESRICTIVE COVENANTS" are, to the extent that such statements are summaries of documents referred to therein, accurate summaries of the information purported to be shown. Except as indicated in the preceding paragraph, we have not undertaken to check the accuracy or completeness of, or verified the information contained in, the Official Statement. Nevertheless, we have had discussions with representatives of the Issuer and such other persons as we deemed appropriate and our participation in such discussions did not disclose to us any information which gives us reason to believe that the Official Statement (except as to any financial or statistical data included in the Official Statement as to which we do not express any opinion), as of the date hereof, contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein made, in light of the circumstances under which they were made, not misleading. In rendering this opinion, we have relied upon the opinions and certificates delivered pursuant to the Bond Purchase Agreement. Reference is made to our opinion of even date herewith delivered in connection with the Bonds and addressed to the Issuer. You may rely on such opinion as if it were addressed to you. We bring to your attention the fact that our conclusions are an expression of professional judgment and are not a guarantee of a result. Very truly yours, ORRICK, HERRINGTON & SUTCLIFFE 02/24/94 C-2 m12-1853 • 0 EXHIBIT D [FORM OF OPINION OF PURCHASERS' COUNSEL] April _, 1994 Kirkpatrick, Pettis, Smith, Polian Inc. Denver, Colorado Charles A. Bell Securities Corp. San Francisco, California COUNTY OF CONTRA COSTA MULTIFAMILY HOUSING REVENUE BONDS (GNMA Collateralized -- Crescent Park Apartments Project) 1994 Series A and COUNTY OF CONTRA COSTA MULTIFAMILY HOUSING REVENUE BONDS (GNMA Collateralized -- Crescent Park Apartments Project) Taxable 1994 Series A-T Dear Ladies and Gentlemen: We have acted as your counsel in connection with the issuance of the above-captioned Bonds. In connection with such representation, we have examined originals, or copies certified or otherwise identified to our satisfaction, of the following documents: (i) the Trust Indenture dated as of March 1, 1994 (the "Indenture") by and between the County of Contra Costa (the "Issuer") and Bank of America National Trust and Savings Association, Los Angeles, California, as trustee (the "Trustee"); (ii) the Financing Agreement, dated as of March lf 1994 by and among the Issuer, the Trustee, TRI Capital Corporation (the "Lender"), and EAH - Contra Costa, Inc., a California nonprofit corporation (the "Borrower"); (iii) the Bond Purchase Agreement, relating to the sale of the Bonds, by and among the Issuer, the Borrower and you; (iv) the Official Statements with respect to the Bonds (the "Official Statements"); (v) the Regulatory Agreement and Declaration of Restrictive Covenants dated as of March 1, 1994 between the Issuer and the Borrower; and (vi) such other documents, certificates, opinions, instruments and records as we have deemed necessary for the purpose of this opinion. 02t24194 D-1 m12-1853 Based on the foregoing, we are of the opinion that the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Indenture is not subject to the qualification requirements of the Trust Indenture Act of 1939, as amended. We have not undertaken to determine independently or assume any responsibility for the accuracy, completeness or fairness of, or to verify the information contained in, the Official Statements relating to the Bonds. Nevertheless, we have had discussions with you, representatives of the Issuer, the Borrower and the Trustee and their respective counsels and Bond Counsel with respect to the preparation of the Official Statements. Our participation in such discussions and our review of the Official Statements as your counsel did not disclose to us any information that gives us reason to believe that the Official Statements' (except as to the statistical and financial data and any project information included in the Official Statements, as to which we do not express any opinion), as of the date hereof, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. In rendering this opinion we have relied on the opinions and certificates delivered pursuant to the aforementioned Bond Purchase Agreement with respect to the matters covered therein. No opinion is expressed herein with respect to the status of the offer and sale of the Bonds under the Blue Sky laws of any jurisdiction. This letter, and the legal opinions herein, are intended for the information solely of the addressee hereof and solely for the purposes of the transactions described in the Official Statements and are not to be relied upon by any other person or entity, or for any other purpose, or quoted as a whole or in part, or otherwise referred to, in any document, or to be filed with any governmental or other administrative agency or other person or entity for any purpose without our prior written consent. We do not undertake to advise you of matters that may come to our attention subsequent to the date hereof that may affect the conclusions expressed herein. We bring to your attention the fact that our conclusions are an expression of professional judgment and are not a guarantee of a result. Sincerely, ARTER HADDEN HAYNES & MILLER 0=4/94 D-2 m12-1853 EXHIBIT E COUNTY OF CONTRA COSTA MULTIFAMILY HOUSING REVENUE BONDS (GNMA Collateralized -- Crescent Park Apartments Project) 1994 Series A and COUNTY OF CONTRA COSTA MULTIFAMILY HOUSING REVENUE BONDS (GNMA Collateralized -- Crescent Park Apartments Project) Taxable 1994 Series A-T CERTIFICATE OF TRI CAPITAL CORPORATION IN THE CAPACITY SET FORTH BELOW This Certificate is made and delivered by the undersigned officer of TRI Capital Corporation, a California corporation (the "Lender") in connection with the issuance by the County of Contra Costa (the "Issuer") of $ in aggregate principal amount of Multifamily Housing Revenue Bonds (GNMA Collateralized -- Crescent Apartments Project) 1994 Series A and $ in aggregate principal amount of Multifamily Housing Revenue Bonds (GNMA Collateralized -- Crescent Apartments Project) Taxable 1994 Series A-T (collectively, the "Bonds") and in accordance with Section 7(d)(vi) of the Bond Purchase Agreement dated March _, 1994 (the "Bond Purchase Agreement") among the Issuer, EAH - Contra Costa, Inc. (the 'Borrower"), and Kirkpatrick, Pettis, Smith, Polian Inc. and Charles A. Bell Securities Corp. Capitalized terms used herein and not defined shall have the meanings ascribed thereto in the Official Statement relating to the Bonds. 1. The making of the Mortgage Loan, the delivery of the GNMA Securities, and the consummation of the transactions contemplated hereby and thereby, do not conflict with or constitute a breach of or a default under the Lender's organizational documents or under the terms and conditions of any agreement or commitment to which the Lender is a party or by which the Lender is bound. 2. The Lender is, and shall take no action which would jeopardize its ability to remain until the acquisition of all the GNMA Securities by the Trustee, (i) approved by FHA to originate and service mortgage loans insured by FHA under Section 241(f) of the National Housing Act and applicable regulations thereunder, and (ii) approved by GNMA to issue 02/24/94 E-1 m12-1853. mortgage-backed securities guaranteed by GNMA pursuant to Section 306(g) of the National Housing Act and applicable regulations thereunder. 3. The information relating to the Lender contained in the section of the Official Statement of the Issuer with respect to the Bonds (the "Official Statement") titled "THE PROJECT AND THE BORROWER -- The Mortgage Lender/Servicer" does not contain an untrue statement of a material fact or fails to state a material fact necessary in order to make the statements made not misleading as of the date hereof. 4. There is no action, suit, proceeding, inquiry or investigation, at law or in equity, or before or by any court, public board or body, pending or, to the best knowledge of the Lender, threatened against or affecting the Lender wherein an unfavorable decision, ruling or finding might result in any material adverse change in the business, operations, properties, assets, liabilities or conditions (financial or other) of the Lender. IN WITNESS WHEREOF, the undersigned officer of TRI Capital Corporation executed this Certificate as of this day of April, 1994. TRI CAPITAL CORPORATION By: Title: 02124/94 E-2 m12-1853 Financing Agreement [OH AFT OF 11 MARCH 19941 'a FINANCING AGREEMENT Dated as of 1, 1994 by and among COUNTY OF CONTRA COSTA, EAH-CONTRA COSTA, INC., a California nonprofit corporation and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Trustee Relating to COUNTY OF CONTRA COSTA MULTIFAMILY HOUSING REVENUE BONDS (FHA INSURED MORTGAGE LOAN - CRESCENT PARK APARTMENTS PROJECT) 1994 SERIES C SF2-28089.1 40511-90-MS 1-03/11/94 TABLE OF CONTENTS PAGE RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE I Definitions Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.2. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II The Loan Payments and Additional Payments Section 2.1. Amount and Terms of the FHA Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 2.2. Additional Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2.3. Investment of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2.4. Adequate Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ARTICLE III Maintenance, Insurance, Damage, Destruction and Eminent Domain Section 3.1. Maintenance, Taxes and Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 3.2. Removal of Portions of the Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 3.3. Damage, Destruction and Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 3.4. Right of Access to the Project and Records . . . . . . . . . . . . . . . . . . . . . . . . 3 ARTICLE IV Warranties, Representations and Special Covenants Section 4.1. Representations and Warranties of Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 4.2. Representations, Covenants and Warranties of the Borrower . . . . . . . . . . . . . . 4 Section 4.3. Borrower's Approval of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 4.4. Tax-Exempt Status of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE V Indemnification; Limitation of Liability Section 5.1. Indemnification of the Issuer and the Trustee . . . . . . . . . . . . . . . . . . . . . . . 8 Section 5.2. Limitation on Personal Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 5.3. Limitation on Liability of Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 5.4. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 ARTICLE VI Assignment Section 6.1. Assignment by Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 6.2. Mortgage and Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 SF228089.1 i 40511-90-MS1-03/11/94 PAGE ARTICLE VII Additional Agreements Section 7.1. Nature of Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 7.2. No Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 7.3. Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 7.4. Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7.5. No Default Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7.6 Maintenance of Existence; Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7.7. Statement of Compliance; Notice of Certain Events . . . . . . . . . . . . . . . . . . . 13 Section 7.8. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 7.9. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE VIII Miscellaneous Section 8.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 8.2. Continuing Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 8.3. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 8.4. Concerning Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 8.5. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 8.6. Modifications in Writing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 8.7. Further Assurances and Corrective Instruments . . . . . . . . . . . . . . . . . . . . . . 14 Section 8.8. Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 8.9. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 8.10. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 8.11. Amounts Remaining in Bond Fund or Other Funds . . . . . . . . . . . . . . . . . . . 15 Section 8.12. Effective Date and Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 8.13. HUD and FHA Requirements to Control . . . . . . . . . . . . . . . . . . . . . . . . . . 15 EXECUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SF2-28089.1 11 40511-90-MS1-03/11/94 FINANCING AGREEMENT THIS FINANCING AGREEMENT(as supplemented and amended, this "Agreement") is entered into as of 1, 1994, by and among the COUNTY OF CONTRA COSTA, a legal subdivision and body corporate and politic existing under the laws of the State of California (together with its successors and assigns, the "Issuer"), EAH-CONTRA COSTA, INC., a California nonprofit corporation (together with its successors and assigns, the "Borrower"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as trustee (together with its successors and assigns, the "Trustee") under a Trust Indenture of even date herewith between the Issuer and the Trustee (as supplemented and amended, the "Indenture"). Recitals (1) This Agreement is being executed in connection with the issuance of the Issuer's Multifamily Housing Revenue Bonds (FHA Insured Mortgage Loan - Crescent Park Apartments Project), 1994 Series C (the 'Bonds"). The proceeds of the Bonds will be loaned to the Borrower and used to finance the acquisition and rehabilitation of a 378-unit multifamily rental housing project located in the City of Richmond, County of Contra Costa, California, known as Crescent Park (the "Project"). NOW, THEREFORE, in consideration of the Recitals and the mutual covenants and representations hereinafter contained, the parties hereto agree as follows: ARTICLE I Definitions Section 1.1. Definitions. All words and phrases used herein shall have the meanings defined in Article I of the Trust Indenture dated as of the date hereof between the Issuer and the Trustee. The terms "herein," "hereunder," "hereby," "hereto", "hereof" and any similar terms refer to this Financing Agreement; the term "heretofore" means before the date of execution of this Financing Agreement; and the term "hereafter" means after the date of execution of this Financing Agreement. Section 1.2. Interpretation. Words importing persons include firms, associations and corporations. Words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders. Words importing the singular number shall include the plural number and vice versa unless the context shall otherwise dictate. References to Articles, Sections and other subdivisions of this Financing Agreement are the Articles, Sections and other subdivisions of this Financing Agreement as originally executed. The headings of this Financing Agreement are for convenience and shall not define or limit the provisions hereof. ARTICLE H The Loan Payments and Additional Payments Section 2.1. Amount and Terms of the FHA Note. The Issuer agrees, subject to the terms and conditions in this Financing Agreement, to make the Mortgage Loan to the Borrower in an amount equal to the aggregate principal amount of the Bonds for the purpose of acquisition and rehabilitation of the Project. The proceeds of the Bonds shall be deposited with the Trustee and used as provided in the Indenture. SF2-28089.1 40511-90-MSI-03/11/94 The Borrower agrees to repay the Mortgage Loan, in accordance with the terms of the FHA Note, to enter into such agreements as are necessary to modify the Mortgage Loan to reflect the assumption by the Borrower of the obligation evidenced thereby, and to make loan payments under the FHA Note as provided therein. Section 2.2. Additional Payments. In addition to payments required of the Borrower under the Indenture and the FHA Documents, the Borrower also agrees to pay, to the extent funds are not available for such purposes from Available Fee Revenues under the Indenture, (1) within thirty(30) days after receipt of request for payment thereof, all reasonable extraordinary out-of-pocket expenses of the Issuer (not including salaries and wages of employees of the Issuer) related to the Project and the financing thereof which are not otherwise required to be paid by the Borrower under the terms of this Agreement and are not paid from the Cost of Issuance Fund under the Indenture, including, without limitation, legal fees and expenses incurred in connection with the interpretation and enforcement of any documents relating to the Project or the Bonds; (2) on the Closing Date the sum of$ to the Issuer; and (3) on each Interest Payment Date thereafter, commencing , 1995 and ending on , 20 , an amount equal to one-sixteenth of one percent (1/16 of I%) of$ (the initial aggregate principal amount of Bonds issued), in each case without demand or notice, and in each case in payment of the semiannual fee of the Issuer. The Borrower also agrees to pay the reasonable fees, charges and expenses of the Trustee as trustee, paying agent, and the fees of any other paying agent for the Bonds under the Indenture including, without limitation, those items described in Section 7.06 of the Indenture, to the extent funds are not available for such purpose from Available Fee Revenues. The Borrower also agrees to pay, or cause the Trustee to pay from amounts received from the Borrower or otherwise, any fees and other costs required to be incurred by the Issuer and/or the Trustee to comply with the provisions of the Indenture and the Tax Certificate relating to rebate calculations, including but not limited to any expenses related to computations to determine if moneys are required to be rebated to the United States, to the extent not paid from the Rebate Fund established under the Indenture. In addition, in the event that amounts held in the Rebate Fund under the Indenture are insufficient to make any transfer or payment to the United States, the Borrower shall promptly pay the amount of the insufficiency to the Trustee. The obligations of the Borrower to make the payments required by this Section and to perform and observe the other agreements on its part contained herein shall be absolute and unconditional, irrespective of any defense or any rights of set-off, recoupment or counterclaim it might otherwise have against the Issuer or the Trustee, and during the term of this Agreement, the Borrower shall pay absolutely net the payments required hereunder, free of any deductions and without abatement, diminution or set-off. Until such time as the principal of, premium, if any, and interest on the Bonds shall have been fully paid, or provision for the payment thereof shall have been made as required by the Indenture, the Borrower (i) will not suspend or discontinue any payments provided for in this Section; (ii) will perform and observe all of its other covenants contained in this Agreement and (iii)will not terminate this Agreement for any cause, including, without limitation, the occurrence of any act or circumstances that may constitute failure of consideration, destruction of or damage to the Project, commercial frustration of purpose, any change in the tax or other laws of the United States of America or of the State of California or any political subdivision or either of these, or any failure of the Issuer or the Trustee to perform and observe any covenant, whether express or implied, or any duty, liability or obligation arising out of or connected with this Agreement or the Indenture, except to the extent permitted by this Agreement. The Issuer shall as its sole remedy upon the Borrower's failure to comply with this Section 2.2 require the Trustee to cause a foreclosure of the Mortgage and under no circumstances shall the Issuer have the right to obtain a judgment against the Borrower for the Borrower's failure to comply with this Section 2.2. Section 2.3. Investment of Funds. Any moneys held as a part of any funds established under the Indenture shall be invested or reinvested by the Trustee in accordance with the Indenture. The Trustee may make any and all such investments through its own investment department. All earnings on such investments shall, however, in no event reduce the obligation of the Borrower pursuant to the FHA Note. SF2-28089.1 2 40511-90-MSI-03/11/94 Section 2.4. Adequate Payments. The Borrower reconfirms that, to the best of its knowledge, the amounts required to be paid by the Borrower pursuant to the FHA Note, plus other amounts available pursuant to the Indenture, will be sufficient at all times to pay the principal of and interest on the Bonds, to make all other payments required by the Indenture and to maintain all other funds established under the Indenture at their required levels. ARTICLE III Maintenance, Insurance, Damage, Destruction and Eminent Domain Section 3.1. Maintenance, Taxes and Insurance. So long as any of the Bonds are outstanding within the meaning of the Indenture, the Borrower shall, as required under the FHA Documents, keep and maintain the Project, and the Borrower hereby reconfirms its agreement in the Mortgage, subject to the nonrecourse provisions thereof, to pay all costs of maintenance and repair with respect to the Project, all taxes and assessments and related governmental charges, insurance premiums (including public liability insurance and insurance against damage to or destruction of the Project) concerning or in any way related to the Project, or any part thereof, and any expenses or renewals hereof, and any other governmental charges and impositions whatsoever, including taxes, foreseen or unforeseen, and all utility and other charges and assessments concerning or in any way related to the Project. Section 3.2. Removal of Portions of the Project. The Borrower shall have the right from time to time to substitute personal property or fixtures for any portions of the Project, provided such actions are permitted under the FHA Documents. Removal of any portion of the Project pursuant to this Section shall be made only with the prior written concurrence of FHA. Section 3.3. -Damage, Destruction and Eminent Domain. If, prior to full payment of all Bonds outstanding(or provision for payment thereof having been made in accordance with the provisions of the Indenture), the Project or any portion thereof is destroyed or damaged as a whole or in part by fire or other casualty, or title to, or the temporary use of, the Project or any portion thereof shall have been taken by the exercise of the power of eminent domain, and the Issuer, the Borrower or Trustee receives Net Proceeds from insurance or any condemnation award in connection therewith, such proceeds shall be applied as provided in the FHA Documents and the Indenture. Section 3.4. Right of Access to the Proiect and Records. The Borrower agrees that during the term of this Agreement the Issuer, the Trustee and the duly authorized agents of either of them shall have the right at all reasonable times and upon reasonable notice during normal business hours to enter upon the site of the Project to examine and inspect the Project and to have access to the books and records of the Borrower with respect to the Project. ARTICLE IV Warranties, Representations and Special Covenants Section 4.1. Representations and Warranties of Issuer. The Issuer represents and warrants that: (a) The Issuer is a legal subdivision and body corporate and politic, duly organized and existing under laws of the State. Under the provisions of the Act, the Issuer has the power to enter into this Agreement, the Indenture and the Issuer Regulatory Agreement and the transactions contemplated hereunder and thereunder and to carry out its obligations hereunder and thereunder. By proper action, the Issuer has duly authorized the execution and delivery of this Agreement, the Indenture and the Issuer Regulatory Agreement. SF2-28089.1 3 40511-90-MS1-03/11/94 (b) The Issuer is issuing the Bonds, at the request of the Borrower, in order to provide for the financing of the acquisition and rehabilitation of the Project. (c) To its knowledge and in reliance upon the advice of counsel, neither the execution nor the delivery of the Bonds, this Agreement, the Bond Purchase Agreement, the Issuer Regulatory Agreement or the Indenture conflicts with or results in a breach of any of the terms, conditions or provisions of any constitutional provisions or statute of the State, or of any agreement, instrument,judgment, order or decree to which the Issuer is now a party or by which it is bound, or constitutes a default under any of the foregoing. (d) The Issuer hereby confirms its findings relating to the issuance of the Bonds contained in the Bond Resolution. Section 4.2. Representations, Covenants and Warranties of the Borrower. As a condition to the Issuer's entering into this Financing Agreement, the Borrower represents, warrants and covenants that: (a) The Borrower (i) is a nonprofit corporation duly organized and existing, in good standing, under the laws of the State of California, (ii) has the power to own its property and to carry on its business as now being conducted and as contemplated by this Agreement, the Issuer Regulatory Agreement and the FHA Documents, (iii) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned by it therein or in which the transaction of its business makes such qualification necessary, including, but not limited to, the State, (iv) is an organization described in Section 501(c)(3) of the Code and is exempt from federal income tax under Section 501(a) of the Code, and (v) the Borrower's acquisition and operation of the Project pursuant to (and subject to requirements set forth in) the Indenture, this Financing Agreement and the Issuer Regulatory Agreement, will not give rise to an "unrelated trade or business" of the Borrower within the meaning of Section 513(a) of the Internal Revenue Code of 1986. (b) The Borrower has full power and authority to execute and deliver this Financing Agreement, the Issuer Regulatory Agreement, the FHA Documents, the Tax Certificate and all other documents and instruments required in connection with the refinancing of the Mortgage Loan and the issuance of the Bonds (collectively, the "Borrower Documents"), and to carry out the transactions provided for herein and therein. The Borrower Documents have by proper action been duly authorized, executed and delivered by the Borrower and all actions necessary have been taken to constitute the Borrower Documents, when executed and delivered by the respective parties thereto, valid and binding obligations of the Borrower. (c) The execution, delivery and performance by the Borrower of the Borrower Documents and the consummation of the transactions contemplated hereby and thereby (i) do not and will not violate or, as applicable, have not violated any provision of law, rule or regulation applicable to the Borrower or of any writ or decree of any court or governmental instrumentality or of the partnership agreement of the Borrower, or of any mortgage, indenture, contract, agreement or other undertaking to which the Borrower is a party or that purports to be binding upon the Borrower or upon any of its assets, and (ii) will not violate or, as applicable, have not violated any provision of any indenture, agreement or other instrument, or result in the creation of imposition of any lien, charge or encumbrance of any nature other than the liens created hereby and thereby. (d) The use and operation of the Project will be in accordance with the Act, and the Project does not and will not conflict with any zoning, planning, building, water and air pollution and other similar regulations of all governmental authorities having jurisdiction of the Project, and all necessary permits, licenses, consents and permissions have been obtained as of the date of execution of this Financing Agreement and the Project conforms to all applicable environmental regulations. (e) There is no litigation or proceeding pending or, to the knowledge of the Borrower, threatened against the Borrower or the Project before any court or administrative agency which, in the opinion of the Borrower or its counsel, if determined adversely to the Borrower, will materially adversely affect the Borrower or the Project, or the authority of the Borrower to enter into this Agreement, the Issuer Regulatory Agreement or any of the FHA Documents executed and delivered by the Borrower. SF2-28089.1 4 40511-90-MS1-03/11/94 (f) There is (i) no provision of the Borrower's articles of incorporation, dated 199_, bylaws, dated , 199_, or other organizational documents or resolutions of the Borrower and no provision of any existing mortgage, indenture, contract or agreement binding on the Borrower or affecting any of the Borrower's property, and (ii) to the best of the Borrower's knowledge, no provision of law or order of court binding upon the Borrower or affecting any of the Borrower's property, in either case which would conflict with or in any way prevent the execution, delivery, or performance of the terms of this Agreement, the Bond Purchase Agreement, the Issuer Regulatory Agreement or any of the FHA Documents executed and delivered by the Borrower, or which would be in default or violated as a result of such execution, delivery or performance. The Borrower is not in material default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any material agreement or instrument to which it is a party, other than its defaults under the Mortgage Loan and related documents which will be cured by the transactions contemplated hereby. (g) No assessments of any nature with respect to the Project are delinquent, including but not limited to assessments relating to streets, roads, entrances, water lines, sanitary and storm sewers, gas lines and all other utilities including acreage fees and trunk sewers. (h) The Borrower shall do or cause to be done all things necessary to preserve, maintain and keep in full force and effect its legal existence and comply with all laws applicable to it. (i) The Borrower agrees promptly to give notice in writing to the Trustee and the Issuer of the occurrence or existence of any material litigation, labor dispute or governmental proceeding or investigation affecting the Borrower that could reasonably be expected to interfere substantially with its normal operations or materially and adversely affect its financial condition. 0) The Borrower lawfully owns and is possessed of the real property and interests therein described in the Mortgage and has good and marketable title and fee simple estate therein subject only to such encumbrances as are described in the Trustee's policy of title insurance and approved by FHA, and it will defend the title thereto and every part thereof against the claims and demands of all persons whomsoever. (k) No counterclaim, offset, defense or right of rescission exists that can be asserted and maintained by the Borrower against the Issuer. (1) The statements made in any official statement relating to the Bonds (the "Official Statement") that are descriptive of the Borrower, the Project and its prior Operating History, have been prepared or reviewed by the Borrower and did not, as of the date of the Official Statement, do not as of the date hereof, and will not on the date of delivery of the Bonds contain any untrue statement of a material fact or omit to state any material fact necessary in order to make such statements, in the light of the circumstances under which they were made, not misleading. (m) The Borrower will prepare or cause to be prepared at its expense all audits of the Borrower or of the Project required by HUD in accordance with HUD regulations. (n) The Borrower agrees to pay all of the fees and expenses of counsel, any certified public accountant and any other necessary consultants employed by the Borrower, the Trustee or the Issuer in connection with any of the rebate calculation requirements imposed by the Indenture. The Borrower shall provide or cause to be provided all information and moneys (including moneys necessary to make deposits to the Rebate Fund required by the Indenture) to the Trustee to enable the Trustee to perform the duties imposed on the Trustee by the Indenture with respect to any excess nonpurpose obligation earnings under Section 148 of the Internal Revenue Code of 1986 and investment of amounts held under the Indenture. SF2-28089.1 5 40511-90-MS 1-03/11/94 (o) The Borrower covenants and agrees that from the date hereof until payment in full of all of the obligations hereunder, unless the Issuer and Trustee shall otherwise consent in writing, the Borrower will pay all Ordinary and Extraordinary Trustee/Mortgage Servicer Fees and Expenses to the extent not available under the Indenture, and will not: (i) Incur, create, assume or suffer to exist any mortgage, pledge, security interest, lien, charge or other encumbrance of any nature on any of the Borrower's assets, now or hereafter owned other than (1) any liens, taxes or other governmental charges which are not yet due and payable, (2) any pledge relating to syndication of the Project, (3) any lien, including, but without limiting the generality of the foregoing, mechanics' liens, or other liens resulting from a good-faith dispute on the part of the Borrower, which dispute the Borrower agrees to resolve diligently, or which liens are insured over by a title insurance company acceptable to FHA, (4) other liens or encumbrances approved by FHA, and (5) such other pledges as may be approved in writing by the Trustee; (ii) Create, incur, assume or suffer to exist any indebtedness for borrowed money or any other obligation whatsoever, regardless of how evidenced or secured, except indebtedness of the Borrower to the Issuer or the Trustee or provided for in the FHA Note, the Mortgage, the Indenture and the documents referred to therein or in the normal course of business. (p) The Borrower may not sell, transfer or exchange or permit the sale, transfer, conveyance or encumbrance of the Project or any part thereof(except for unit leases) unless the Borrower shall notify in writing and obtain the agreement of any buyer or successor or other person acquiring the Project or any interest therein that such acquisition is subject to the requirements of this Financing Agreement and the Issuer Regulatory Agreement. This provision shall not act to waive any other restriction on such sale, transfer or exchange contained in the Issuer Regulatory Agreement. (q) The Borrower shall not discriminate on the basis of race, creed, color, sex, age or national origin in the lease, use or occupancy of the Project or in connection with the employment or application for employment of persons for the operation and management of the Project. (r) The Borrower shall not: (i) grant commercial leases of portions of the Project in excess of 10% of the net available square footage of the Project; (ii) demolish any part of the Project or substantially subtract from any real or personal property of the Project, except as required by or necessary to comply with any federal, state or local law; or (iii) permit the use of the unit for any purpose other than rental housing during the term of this Agreement. (s) The Borrower warrants that it has not and will not execute any other agreement with provisions contradictory to, or in opposition to, the provisions hereof, and that in any event the requirements of this Agreement are paramount and controlling as to the rights and obligations herein set forth and supersede any other requirements in conflict herewith; provided, however, that in the case of any conflict with the FHA documents relating to the Mortgage Loan, the FHA documents shall control. (t) The Borrower shall operate or cause the Project to be operated as a housing project pursuant to Section 221(d)(b) of the National Housing Act of 1934. (u) All work performed in connection with the Project was, to the best of the Borrower's knowledge, performed in strict compliance with all applicable federal, state, county and municipal laws, ordinances, rules and regulations now in force or that may be enacted hereafter. SF2-28089.1 6 40511-90-MS I-03/11/94 • • (v) The Indenture has been submitted to the Borrower for its examination, and the Borrower acknowledges, by execution of this Agreement, that it has reviewed the Indenture, and it hereby approves the Indenture. The Borrower agrees to perform fully and faithfully all the duties and obligations which the Issuer has covenanted and agreed in the Indenture to cause the Borrower to perform and any duties and obligations which the Borrower or the Issuer is required by the Indenture to perform. The foregoing shall not apply to any duty or undertaking of the Issuer which by its nature cannot be delegated or assigned. (w) If the Borrower becomes aware of any situation, event or condition which would result in the interest on the Bonds being included in gross income for federal income tax purposes, the Borrower shall promptly give written notice thereof to the Issuer and the Trustee. (x) The Project is of the type authorized and permitted by the Act and has at all times been operated in compliance with the provisions of the Act and the provisions of the Code applicable thereto. The Borrower will use due diligence to cause the Project to be operated in accordance with the Act and all other laws, rulings, regulations and ordinances of the State and the departments, agencies and political subdivisions thereof. The Borrower has obtained or will cause to be obtained all requisite approvals of the State and of other federal, state, regional and local governmental bodies for the operation of the Project. (y) The Borrower acknowledges, represents and warrants that it understands the nature and structure of the transactions relating to the financing of the Project; that 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; that it understands the risks inherent in such transactions, including without limitation the risk of loss of the Project; 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. Section 4.3. Borrower's Approval of Indenture. The Indenture has been submitted to the Borrower for examination, and the Borrower acknowledges, by execution of this Financing Agreement, that it has approved the Indenture. Section 4.4. Tax-Exempt Status of Bonds. (a) It is the intention of the parties hereto that interest on the Bonds shall be and remain exempt from federal income taxation, and to that end the covenants and agreements of the Issuer and the Borrower in this Section and in Section 4.2 are for the benefit of the Trustee on behalf of and for each and every holder of the Bonds. The Borrower covenants and agrees that it will take or cause to be taken all such actions as are within its power to be taken so that interest on the Bonds shall be and remain excluded from gross income for federal income tax purposes, and more specifically agrees as hereinafter provided. (b) The Borrower covenants and agrees that it will not use or permit the use of any of the funds provided by the Issuer hereunder or any other funds of the Borrower, directly or indirectly, or direct the Trustee to invest any funds held by it hereunder or under the Indenture, in such manner as would, or enter into, or allow any "related person" (as defined in Section 147(a)(2) of the Code) to enter into, any arrangement, formal or informal, for the purchase of the Bonds that would, or take or omit to take any other action that would, to the knowledge of the Borrower, cause any Bond to be an "arbitrage bond" within the meaning of Section 148 of the Code or "federally guaranteed" within the meaning of Section 149(b) of the Code and applicable regulations promulgated from time to time thereunder. (c) In the event that at any time the Borrower is of the opinion or is otherwise aware that for purposes of this Section 4.4 it is necessary to restrict or to limit the yield on the investment of any moneys held by the Trustee under the Indenture, the Borrower shall notify the Issuer, and the Trustee shall comply with the written instructions of the Issuer. SF2-28089.1 7 40511-90-MSI-03/11/94 • 0 - (d) The Borrower specifically covenants to comply with the covenants and procedures set forth in the Tax Certificate and to deposit in the Rebate Fund such amounts as may be necessary to increase the amount on deposit in the Rebate Fund to the Rebate Requirement. (e) Notwithstanding any provisions of this Section 4.4, if the Issuer shall provide to the Trustee an opinion of Bond Counsel that any specified action required under this Section 4.4 Indenture is no longer required or that some further or different action is required to maintain the exclusion from gross income for federal income tax purposes of interest on the Bonds, the Trustee, the Issuer and the Borrower may conclusively rely on such opinion in complying with the requirements of this Section and be protected in so doing, and the covenants hereunder shall be deemed to be modified to that extent. (f) The Borrower further agrees that it shall not discriminate on the basis of race, creed, color, sex or national origin in the lease, use or occupancy of the Project or in connection with the employment or application for employment of persons for the construction, operation and management of the Project. (g) The Borrower further warrants and covenants that it has not executed and will not execute any other agreement, or any amendment or supplement to any other agreement, with provisions contradictory to, or in opposition to, the provisions hereof, of the Indenture and of the Issuer Regulatory Agreement, and that in any event, the requirements of this Agreement and the Issuer Regulatory Agreement are paramount and controlling as to the rights and obligations herein set forth and supersede any other requirements in conflict herewith and therewith. ARTICLE V Indemnification; Limitation of Liability Section 5.1. Indemnification of the Issuer and the Trustee. The Borrower releases the Issuer and the Trustee and their respective officials, officers, employees and agents from, and shall protect, indemnify, and save harmless the Issuer and the Trustee and their respective officials, officers, employees and agents against and from any and all liabilities, suits, actions, claims, demands, losses, expenses and costs of every kind and nature incurred by, or asserted or imposed against, the Issuer, the Trustee and their respective officials, officers, agents or employees, or any of them, (a) by reason of any default or event of default by the Borrower or its successors or assigns under this Agreement, the Issuer Regulatory Agreement or any of the FHA Documents; or (b) by reason of any accident, injury (including death) or damage to any person or property, however caused (other than, in the case of the Trustee, the negligence or willful misconduct of the Trustee or its officers, agents or employees), resulting from, connected with or growing out of any act of commission or omission of the Borrower, or any officers, employees, agents, assignees, contractors or subcontractors of the Borrower or any use, non-use, possession, occupation, condition, operation, service, design, construction, acquisition, maintenance or management of, or on, or in connection with, the Project or any part thereof; or (c) resulting from any and all claims, actions, settlements, or liability for acts or failure to act by any person, including, without limitation, the Borrower, the Issuer, the Trustee or their respective officials, officers, agents and employees in connection with the Project as set forth in this Section (other than, in the case of the Trustee, the negligence or willful misconduct of the party claiming indemnification, or its officers, agents or employees); or (d) insofar as such liabilities, suits, actions, claims, demands, losses, expenses and costs arise out of or are based upon any untrue statement or allegedly untrue statement of a material fact contained in any offering documents distributed in connection with the issuance of the Bonds or the omission or alleged omission to state therein a material fact necessary or allegedly necessary in order to make the statements and information therein not misleading (other than a statement or omission resulting from the fraud or bad faith of the party claiming indemnification, or its respective officials, officers, agents or employees, or any information describing the issuer or the Trustee, as the case may be); or (e) as to the Issuer and its officers, agents and employees, for any other reason in connection with the issuance of the Bonds, the financing or refinancing of the Project; in any case regardless of whether such liabilities, suits, actions, claims, demands, damages, losses, expenses and costs SF2-28089.1 8 40511-90-MS1-03111194 be against or be suffered or sustained by the Issuer or the Trustee or any of their respective officials, officers, agents or employees, or be against or be suffered or sustained by legal entities, officials, officers, agents, or other persons to whom the Issuer or the Trustee or any of their respective officials, officers, agents or employees may become liable therefor. The Issuer and the Trustee shall not be liable for any damage or injury occurring to the persons or property of the Borrower or any of its officers, agents, including operating personnel, contractors and employees, or any other person or entity who or which may be upon the Project, except for, as to the Trustee, such damage or injury caused by such entity's willful misconduct or negligence. The Borrower shall undertake to defend, at its sole cost and expense, any and all suits, actions and proceedings brought against the Issuer or the Trustee or any of their respective officials, officers, agents or employees in connection with any of the matters indemnified against in this Section. The persons so indemnified may also retain separate counsel in connection with such actions, suits or proceedings, but the Borrower shall have no responsibility for the fees and expenses of such counsel. The Issuer and the Trustee shall give the Borrower timely notice of and shall forward to the Borrower every demand, notice, summons or other process received with respect to any claim or legal proceedings within the purview hereof, but the failure of the Issuer or the Trustee to give such notice shall not affect its right to indemnification hereunder. All acts, including any failure to act, relating to the Project and the Bonds by the Issuer or the Trustee or any agent, representative or designee of the Issuer or the Trustee are performed solely for the benefit of the Issuer, the Trustee, and the Bondholders to assure repayment of the Mortgage Loan, maintenance of the tax status of the interest on the Bonds and increase and maintenance of residential rental housing in the jurisdiction of the Issuer, and are not for the benefit of the Borrower or the benefit of any other person, unless, as to the Trustee, the failure to give notice shall have deprived the Borrower of a reasonable opportunity to contest any such matter. The obligations of the Borrower under this Section shall survive the termination of this Agreement and the payment and performance of all of the other obligations of the Borrower hereunder and under the FHA Documents and the Issuer Regulatory Agreement. Section 5.2. Limitation on Personal Liability of Borrower. Notwithstanding anything contained in this Financing Agreement to the contrary, the liabilities of the Borrower shall be limited to assets securing the Mortgage Loan and the partners of the Borrower shall not have any personal liability for the payment of principal or interest on the Bonds or any other obligation hereunder, including any and all claims for reimbursement or indemnity hereunder. The foregoing specifically relates to the obligation of payment of principal and interest on the Bonds and any other obligation hereunder, and nothing contained in this Financing Agreement shall affect the parties' obligations and limitations of liability as set forth in the FHA Note and the Mortgage. Section 5.3. Limitation on Liability of Issuer. The Issuer shall not be obligated to pay the principal of, or premium, if any, or interest on the Bonds, except from Pledged Revenues, but excluding any amounts on.deposit in the Rebate Fund. The Borrower hereby acknowledges that the Issuer's sole source of moneys to repay the Bonds and to pay expenses related thereto will be provided by the payments made by the Borrower pursuant to this Agreement, together with other Pledged Revenues, including any investment income on certain funds and accounts (except the Rebate Fund) held by the Trustee under the Indenture, and hereby confirms that amounts available to pay all principal of, and premium, if any, and interest on the Bonds as the same shall become due (whether by maturity, redemption, acceleration or otherwise), have been calculated to be at all times sufficient for such purpose. No recourse under or upon any obligation, covenant, warranty or agreement contained in this Agreement 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 Agreement, shall be had against any supervisor, officer or employee of the Issuer, as such, past, present or future, either directly or through the Issuer or otherwise, for the payment for or to the Issuer or any receiver thereof, or for or to the holder of any Bond, or otherwise, of SF2-28089.1 9 40511-90-MSI-03/11/94 • • 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 any such commissioner, officer or employee, as such, to respond, by reason of any act or omission on his or her part or otherwise, for the payment or to the holder of any Bond or otherwise of any sum that may remain due and unpaid upon the Bonds secured by the Indenture or any of them is, by the acceptance thereof, expressly waived and released as a condition of and in consideration for the execution of this Agreement and the issuance of the Bonds. Neither the issuance of the Bonds nor the delivery of this Agreement shall, directly or indirectly or contingently, obligate the Issuer to levy any form of taxation therefor or to make any appropriation for their payment. Nothing in the Bonds or in the Indenture or this Agreement or the proceedings of the Issuer authorizing the Bonds or in the Act or in any other related document shall be construed to authorize the Issuer to create a debt of the Issuer within the meaning of any constitutional or statutory provision of the State of California. Section 5.4. Expenses. The Borrower covenants and agrees to pay the Issuer and the Trustee all costs and charges, including reasonable fees and disbursements of attorneys, accountants, consultants and other experts, incurred in good faith in connection with the enforcement of this Agreement, the Issuer Regulatory Agreement, the Bonds or the Indenture. ARTICLE VI Assignment Section 6.1. Assignment by Borrower. This Financing Agreement may not be assigned as a whole or in part by the Borrower, except in accordance with a transfer of the ownership of the Project pursuant to HUD regulations and procedures, and upon the prior written consent of the Issuer, which consent shall not be unreasonably withheld. Section 6.2. Mortgage and Pledge. The Borrower shall mortgage the Project and the Issuer shall pledge the Pledged Revenues and assign its rights under and interest in this Financing Agreement and, among other things, loan payments under the FHA Note and money receivable hereunder, to the Trustee pursuant to the Indenture as security for payment of the principal of and interest and any premium on the Bonds and shall not make any further such assignment or pledge except as may be necessary or required to enforce or secure payment of principal of and interest and any premium on the Bonds. ARTICLE VII Additional Agreements Section 7.1. Nature of Obligation. The obligations of the Borrower under this Financing Agreement shall remain in full force and effect until the earlier of(i) the entire principal of, premium, if any, and interest on all Bonds shall have been paid or provisions for provided for, or (ii) the FHA Note shall have been paid in full, or (iii) such date as the Trustee receives full payment pursuant to the terms of the Contract of Mortgage Insurance, or (iv) such date as the Trustee receives full payment of the net proceeds from any casualty insurance or of the net proceeds from any condemnations awards and such proceeds are not used to repair, restore, reconstruct or replace the Project or to reimburse the Borrower for same pursuant to the Mortgage, and such obligations shall not be affected, modified or impaired upon the happening from time to time of any event, including without limitation any of the following, whether or not with notice to, or the consent of, the Borrower: (a) the compromise, settlement, release or termination of any or all of the obligations, covenants or agreements of the Issuer under the Indenture; SF2-28089.1 10 40511-90-MSI-03111/94 (b) the failure to give notice to the Borrower of the occurrence of an event of default under the terms and provisions of this Financing Agreement, the Indenture or the FHA Documents; (c) the waiver of the payment, performance or observance by the Issuer or the Borrower of any of the obligations, covenants or agreements of either of them contained in the Indenture, the FHA Documents or this Financing Agreement; (d) the extension of the time for payment of any principal of, premium, if any, or interest on any Bond, or under this Financing Agreement, or of the time for performance of any other obligations, covenants or agreements under or arising out of the Indenture, the FHA Documents or this Financing Agreement or the extension or the renewal of either thereof; (e) the modification or amendment (whether material or otherwise) of any obligation, covenant or agreement set forth in the Indenture or the FHA Documents; (f) the taking or the omission of any of the actions referred to in the Indenture, the Issuer Regulatory Agreement, the FHA Documents and any actions under this Financing Agreement; (g) subject to Section 5.1 hereof, any failure, omission, delay or lack on the part of Issuer or the Trustee to enforce, assert or exercise any right, power or remedy conferred on the Issuer or the Trustee in this Financing Agreement or any document relating to the Bonds or the Indenture, or any other act or acts on the part of the Issuer, the Trustee or any of the Borrowers from time to time of the Bonds; (h) the voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all the assets, marshalling of assets and liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition with creditors or readjustment of, or other similar proceedings affecting the Borrower or the Issuer or any of the assets of either of them, or any allegation or contest of the validity of this Financing Agreement in any such proceeding; (i) to the extent permitted by law, the release or discharge of the Borrower from the performance or observance of any obligation, covenant or agreement contained in this Financing Agreement by operation of law; or 0) the default or failure of the Borrower fully to perform any of its obligations set forth in this Financing Agreement. Without limiting any of the other terms or provisions hereof, it is understood and agreed that, in order to hold the Borrower liable hereunder, there shall be no obligation on the part of the Trustee or any owner of any Bond to resort in any manner or form for payment to the Issuer or to any other person, firm or corporation, their properties or estates. Section 7.2. No Defense. No setoff, counterclaim, reduction or diminution of any obligation, or any defense of any kind or nature which the Borrower has or may come to have against the Issuer or the Trustee shall be available hereunder to the Borrower against the Trustee other than with respect to violations of the Trustee's fiduciary obligations to the owners of the Bonds. Section 7.3. Waiver of Notice. The Borrower hereby expressly waives notice from the Trustee or the owners from time to time of any of the Bonds of their acceptance and reliance on this Financing Agreement. The Borrower agrees to pay all costs, expenses and fees, including all reasonable attorney's fees which may be incurred by the Trustee in enforcing or attempting to enforce this Financing Agreement following any default on the part of the Borrower hereunder, whether the same shall be enforced by suit or otherwise. The Trustee shall be entitled to the benefits of Sections 7.03(a) and 7.03(h) of the Indenture in the exercise of its rights and duties hereunder. SF2-28089.1 1 1 40511-90-MS1-03/11/94 • • Section 7.4. Enforcement. This Financing Agreement is entered into by the Borrower for the benefit of the Trustee, the Issuer and any successor trustee or trustees under the Indenture, all of whom shall be entitled to enforce performance and observance of this Financing Agreement to the same extent as if they were parties signatory hereto. Failure by the Borrower to comply with any provision contained herein shall not permit the Borrower to invalidate this Agreement. Section 7.5. No Default Certificate. The Issuer and the Trustee agree, upon the request of the Borrower or its successors in interest, promptly to execute and deliver to the Borrower or its successors in interest or to any potential or actual purchaser, mortgager or encumbrancer of the project, a written certificate stating, if the same be true, that the Issuer and Trustee have no knowledge of any violation or default by the Borrower of any of its covenants hereunder or under the Financing Agreement, or if there are such violations or defaults, the nature of the same. Section 7.6 Maintenance of Existence; Ass4mnents. (a) The Borrower agrees that during the term of this Agreement it will remain in good standing and qualified to do business in the State of California and will maintain its existence as a limited partnership, will not dissolve or otherwise dispose of all or substantially all of its assets and will not combine or consolidate with or merge into another entity or permit one or more other entities to consolidate with or merge into it; provided, however, that the Borrower may so combine, consolidate with, or merge into another entity existing under the laws of one of the states of the United States, or permit one or more other entities to consolidate with or merge into it, or sell or otherwise transfer to another entity all or substantially all of its assets as an entirety and thereafter dissolve, provided that the surviving, resulting or transferee entity, as the case may be, (i) assumes and agrees in writing to pay and perform all of the obligations of the Borrower hereunder, (ii) qualifies to do business in the State of California if such qualification is legally required, and (iii) the Issuer shall have received (1) an opinion of Bond Counsel to the effect that such change in ownership will not cause%interest on the Bonds to be included in gross income for federal income tax purposes, and (2) an Borrower Compliance Certificate. (b) The rights and obligations of the Borrower under this Agreement may be assigned by the Borrower to any person in whole in connection with any conveyance of all of the Project permitted by Section 7 of the Issuer Regulatory Agreement; provided that (i) the assignee shall assume in writing the obligations of the Borrower hereunder to the extent of the interest assigned, and a copy of such instrument of assumption shall be delivered to the Issuer and the Trustee within ten (10) days after the execution thereof; and (ii) the Borrower shall remain liable for its obligations hereunder to the extent of any interest not so assigned. (c) The rights and obligations of the Borrower under this Agreement may also be assigned by the Borrower to any person in whole or in part, subject, however, to each of the following conditions: (i) No assignment other than pursuant to subsection(a) or (b) of this Section shall relieve the Borrower from primary liability for any of its obligations hereunder, and in the event of any assignment not pursuant to subsection (a) or (b) of this Section the Borrower shall continue to remain primarily liable for the payments specified in Section 2.2 hereof and for performance and observance of the other agreements on its part herein provided to be performed and observed by it. (ii) Any assignment from the Borrower shall retain for the Borrower such rights and interests as will permit it to perform its remaining obligations under this Agreement, if any, and any assignee from the Borrower shall assume the obligations of the Borrower hereunder to the extent of the interest assigned. (iii) The Borrower shall, within thirty days after delivery thereof, furnish or cause to be furnished to the Issuer and the Trustee a true and complete copy of each such assignment together with (1) an instrument of assumption, and (2) an opinion of Bond Counsel to the effect that such SF2-28089.1 12 40511-90-MSI-03/11/94 assignment will not cause interest on the Bonds to be included in gross income for federal income tax purposes. (d) The Borrower shall notify the Trustee, the Issuer in writing of any new or additional general partners or guarantors of the Borrower or, in the event the Project is sold, of any new Borrower prior to such event, which notice shall specify the nature of the change, the effective date and the identity of the relevant parties. Section 7.7. Statement of ComRliance; Notice of Certain Events. (a) The Borrower will deliver to the Issuer and the Trustee, on 1 of each year, a written statement signed by an Authorized Borrower Representative stating, as to the signer thereof, that (1) a review of the activities of the Borrower during such year and of performance under this Agreement and the Issuer Regulatory Agreement has been made under their supervision, and (2) to the best of the knowledge of such Representative, based on such review, the Borrower has fulfilled all its obligations hereunder and under the Issuer Regulatory Agreement throughout such year, or, if there has been a default in the fulfillment of any such obligation, specifying each such default known to such Representative and the nature and status thereof. (b) The Borrower hereby covenants to notify the Issuer and the Trustee in writing of the occurrence of any Event of Default hereunder or any event which, with the passage of time or service of notice, or both, would constitute an Event of Default hereunder, specifying the nature and period of existence of such event and the actions being taken or proposed to be taken with respect thereto. Such notice shall be given promptly, and in no event less than ten (10) Business Days after the Borrower receives notice or knowledge of the occurrence of any such event. The Borrower further agrees that it will give prompt written notice to the Trustee if insurance proceeds or condemnation awards are received with respect to the Project and are not used to repair or replace the Project, which notice shall state the amount of such proceeds or award. Section 7.8. Insurance. The Borrower agrees to insure the Project or cause the Project to be insured during the term of this Agreement for such amounts and for such occurrences as are required under the Mortgage. The Borrower further agrees to provide the Issuer and the Trustee with evidence of such insurance and to certify compliance with the insurance requirements by not later than 1 of each year. Section 7.9. Financial Statements. On or before 1 of each year, the Borrower shall provide to the Issuer and the Trustee financial statements of the Borrower (in the form provided to HUD). The Trustee shall provide without charge to any Bondholder a copy of such financial statements upon the written request of such Bondholder. ARTICLE VIII Miscellaneous Section 8.1. Notices. All notices, certificates or other communications hereunder shall be sufficiently given by hand delivery or certified mail and shall be deemed given when hand delivered, or three days after mailing if mailed by certified mail, postage prepaid, return receipt requested, addressed to the Issuer, the Borrower, the Trustee, the Lender, or any other person to whom any such notice, certificate or other communication is to be given, at the appropriate address set forth in Section 10.04 of the Indenture. The Issuer, the Borrower, the Lender and the Trustee, by notice given hereunder, may designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent. Section 8.2. Continuing Obligation. The obligations of the Borrower hereunder shall arise when the Bonds shall have been issued, sold and delivered by the Issuer and the proceeds thereof paid to the Trustee, and shall continue until this Agreement is terminated pursuant to Section 8.12. SF2-28089.1 13 40511-90-MS1-03/11/94 Upon the sale, exchange, assignment or other transfer of the Project, the Borrower shall be released from all liability hereunder, provided, however, that any and all successors in interest to the Project shall assume, in writing, all of the obligations of the Borrower hereunder. Section 8.3. Remedies. No remedy herein conferred upon or reserved to 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 given under this Financing Agreement or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default, omission or failure of performance hereunder shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Trustee to exercise any remedy reserved to it in this Financing Agreement, it shall not be necessary to give any notice, other than such notice as may be herein expressly required. In the event any provision contained in this Financing Agreement should be breached by the Borrower and thereafter duly waived by the Trustee, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. No waiver, amendment, release or modification of this Financing Agreement shall be established by conduct, custom or course of dealing, but shall be solely by an instrument in writing duly executed by the Trustee. If at any time the Borrower shall request the consent of the Trustee to any such proposed amendment, change or modification of this Financing Agreement, and if the consent of Bondholders is required pursuant to the Indenture, the Trustee shall, upon being satisfactorily indemnified with respect to expenses, cause notice of such proposed amendment, change or modification to be circulated in the same manner as provided in the Indenture with respect to supplemental indentures. Such notice shall briefly set forth the nature of such proposed amendment, change or modification and shall state that copies of the instrument embodying the same are on file at the.principal office of the Trustee for inspection by all Bondholders. Nothing contained herein shall permit or be construed as permitting any amendment, change or modification of this Financing Agreement which would (a) reduce or eliminate any amount payable by the Borrower hereunder, (b) change the time for payment of the amounts payable by the Borrower hereunder or (c) change the unconditional nature of this Financing Agreement. Section 8.4. Concerning Successors and Assignns. All covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto or to the Indenture shall survive the financing herein contemplated and the execution and delivery of the Borrower Documents and shall continue in full force and effect so long as the obligations hereunder and under the FHA Note are outstanding and unpaid. Whenever in this Financing Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Borrower which are contained in this Financing Agreement shall bind its successors and assigns and inure to the benefit of the successors and assigns of the Issuer. Section 8.5. Governing Law. This Financing Agreement and the exhibits attached hereto shall be construed in accordance with and governed by the laws of the State and where applicable the laws of the United States of America. Section 8.6. Modifications in Writing. Modification or the waiver of any provision of this Financing Agreement, the FHA Note or the Mortgage, or consent to any departure by the Borrower therefrom, shall in no event be effective unless the same shall be in writing approved by the parties thereto and by FHA, if FHA so requires, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given and so long as the interests of any Bondholders are not adversely affected and Trustee assents thereto. No notice to or demand on the Borrower in any case shall entitle it to any other or further notice or demand in the same circumstances. Section 8.7. Further Assurances and Corrective Instruments. The Issuer, the Trustee and the Borrower agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for correcting any inadequate or incorrect description of the performance of this Financing Agreement. SF2-28089.1 14 40511-90-MSI-03/11/94 Section 8.8. Captions. The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Financing Agreement. Section 8.9. Severability. In the event any provision of this Financing Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision thereof. Section 8.10. Counterparts. This Financing Agreement may be signed in any number of counterparts with the same effect as if the signatures thereto and hereto were upon the same instrument. Section 8.11. Amounts Remaining in Bond Fund or Other Funds. It is agreed by the parties hereto that any amounts remaining in the Bond Fund or other Funds established under the Indenture, upon expiration or sooner termination of the term hereof, as provided below, after payment in full of the Bonds (or provision for payment thereof having been made in accordance with the provisions of the Indenture) and the fees and expenses of the Trustee and any paying agents in accordance with the Indenture, shall be paid only in accordance with the Indenture. Section 8.12. Effective Date and Term. This Financing Agreement, and all of the covenants of the Borrower contained herein, shall become effective upon its execution and delivery by the parties hereto, shall remain in full force from such date and, subject to the express provisions hereof, shall terminate on the earliest to occur of(i) such date as the Trustee receives full payment pursuant to the terms of the Contract of Mortgage Insurance, or (ii) receives full payment of the net proceeds from any casualty insurance or of the net proceeds from any condemnation awards and such proceeds are not used to repair, restore, reconstruct or replace the Project or to reimburse the Borrower therefor pursuant to the Mortgage, or (iii)payment in full of the FHA Note, or (iv) payment of principal, premium, if any, and interest on all Outstanding Bonds. Section 8.13. HUD and FHA Requirements to Control. (a) Notwithstanding anything in the Indenture or this Financing Agreement to the contrary, the provisions hereof are subject and subordinate to the National Housing Act, all applicable HUD insurance regulations and related administrative requirements and the FHA Documents, and all applicable FHA regulations and related administrative requirements; and in the event of any conflict between the provisions of said Indenture or this Financing Agreement and the provisions of the National Housing Act, any applicable HUD regulations, related HUD administrative requirements, or the FHA Documents, or the FHA regulations and related administrative requirements, the said National Housing Act, regulations, related administrative requirements or FHA Documents shall be controlling in all respects. (b) This Financing Agreement shall not be construed to restrict or affect adversely the duties and obligations of the Mortgage Servicer under the Contract of Mortgage Insurance with respect to the Mortgage Loan. (c) Neither the Issuer, the Trustee, nor any of the Bondholders has or shall be entitled to assert any claim against the Project, the Mortgage proceeds, any reserve or deposit required by HUD in connection with the Mortgage Loan, or the rents or income of the property other than "surplus cash" as defined in the Issuer Regulatory Agreement, or as otherwise permitted by HUD; provided, however, that the foregoing shall not restrict any rights of the Issuer, the Trustee, the Mortgage Servicer or any of the Bondholders against any guarantor of the obligations of the Borrower, if any, with respect to this Financing Agreement. SF2-28089.1 15 40511-90-MS1-03/11/94 • i IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first above written. COUNTY OF CONTRA COSTA By: Deputy Director-Redevelopment BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Trustee By: Title: EAH-CONTRA COSTA, INC., a California nonprofit corporation By: Managing General Partner SF2-28089.1 16 40511-90-MSI-03/11/94 Preliminary Purchase Agreement PRELIMI*Y OFFICIAL STATEMENT DAT& MARCH _, 1994 o NEW ISSUE-Book-Entry Only Standard&Poor'a:" (See"RATING"herein) = m In the opinion of Orrick,Herrington&Sutcli e,Bond Counsel,the 1994 Series A Bonds are qualified 501(c)(3)bonds and,under existing law and assuming - compliance by:he Issuer and the Borrower with applicable requirements of the Internal Revenue Code of 1986,as amended,includingarbitrage and arbitrage rebate requirements,that must be satisfied subsequent to the issuance of the 1994 Series A Bonds,interest on the 1994 Series A Bonds is excluded from gross income of registered ami $ owner for federal income tax Purposes under existing federal tax law,and is not an item of tax prejercnce or' r purposes o the alternativeminimum fax applicable to E individuals. However, while interest on the 1994 Series A Bonds also is not an item of tax preferences purposes offthe alternative minimum tax applicable to corporations,interest on the 1994 Serio A Bonds received by c:t-t tions is taken into account to the computation of adjusted current earnings for purposes of the a alternative minimum tax applicable to corporations,interest on thSen u A Bonds received by terrain corporations may be subject to an environmental tax,interest N on the 1994 Series A Bonds received by terrain S cotporatioru bject to tx,andinterest on the 1994 Series A Bonds received byforeign corporations with United States branches may be subifect to a foreign branchprofits fax Ion the Taxable 1994 Series A-T Bonds is not excludable from gross income for federal income a tax purpose. In addition,in the opinion of Bond Counsel,interest on the 1994 Series A Bonds and the Taxable 19�Series A-T Bonds u exempt from personal income c taxation imposed by the Stare oJCaiifornia See rhe captions'TAX EXEMPTION'and'CERTAIN OTHER TAX CONSEQUENCES'herein O ° C $ COUNTY OFCONTRA COSTA a MULTIFAMILY HOUSING REVENUE BONDS (GNMA Collateralized -- Crescent Park Apartments Project) 1994 Series A S C and $ E COUNTY of CONTRA COSTA MULTIFAMILY HOUSING REVENUE BONDS Zi (GNMA Collateralized - Crescent Park Apartments Project) 2 2 Taxable 1994 Series A-T L � = Dated: March 1, 1994 Due:as shown below 5 ; The Bonds are issuable only as fully registered bonds without coupons in the denomination of$1,000 principal amount or any integral multiple thereof.Interest e on the Bondi will be ayable on April 20 and October 20 of each year,commencing October 20, 1994. Purchasers of the Bonds will not receive certificates representing E o their interests in the Bonds purchased. Bonds will be registered in the name of Code&Co.,as registered owner and nominee of The Depository Trust Company,New E York,New York. Principal of and interest on the Bond;is ayable by Bank of America National Trust and Savings Association,Los Angeles,California,as trustee(the _ ..°-° "Trustee"),to Cede&Co. See"BOOK ENTRY ONLY SYSTEM"herein. Ew The Bonds are beeng issued pursuant to a Trust Indenture,dated as of March 1, 1994(the"Indenture"),by and between the County of Contra Costa(the c "Issuer")and the Trustee to make a mortgage loan(the"Mortgage Loan")to EAH-Contra Costa,Inc.,a California nonprofit corporation(the"Borrower")in order to `o c finance the acquisition and rehabilitation of a 378 unit multifamily rental housing project located in the City of Richmond,County of Contra Costa,California,for low- = m income persons and to pay certain costs associated with the issuance of the Bonds. o c ° It is anticipated that the Bonds will be secured primarily by fully-modified pass-through mortgage backed securities(the"GNMA Securities")guaranteed as aM to timely payment of principal and interest by the Government National Mortgage Association("GNMA') issued by TRI Capital Corporation(the"Lender"),and held E rby the Trustee. The GNMA Securities are backed by the Mortgage Loan and issued by the Lender pursuant to a financing agreement(the"Financing Agreement")among o the Issuer,the Borrower,the Trustee and the Lender. Prior to acquisition of the GNMA Securities the Bonds will be secured by certain of the Bond proceeds invested c m by the Trustee pursuant to certain investment agreements described herein. See"SECURITY AND SOURCES OF PAYMENT FOR THE BONDS"herein. m The Bonds are subject to redemption prior to maturity as described herein. Persons who purchase Bonds at a price in excess of their principal amount risk o ere the loss of any premium paid in the event the Bonds are redeemed prior to maturity. See"THE BONDS"and"CERTAIN BONDHOLDERS'RISKS"herein. :a (a w MATURITY SCHEDULE* Maturity Date Principal Amount Interest Rate 40 d m S m d O _ Pike: % 10 r (Plus accrued interest rr—om March 1, 1994) c _ ° THE BONDS AND THE INTEREST THEREON ARE LIMITED OBLIGATIONS OF THE ISSUER,PAYABLE SOLELY FROM THE REVENUES AND c w THE TRUST ESTATE,WHICH ARE SPECIFICALLY ASSIGNED AND PLEDGED TO SUCH PURPOSES. NEITHER THE UNITED STATES OF AMERICA, 'P c HUD,FHA,ANY OTHER AGENCY OF THE UNITED STATES OF AMERICA,GNMA,THE STATE OF CALIFORNIA, NOR ANY POLITICAL SUBDIVISION E THEREOF(EXCEPT THE ISSUER,TO THE LIMITED EXTENT SET FORTH HEREIN)WILL IN ANY EVENT BE LIABLE FOR THE PAYMENT OF THE PRINCIPAL OF, PREMIUM(IF c ANY)OR INTEREST ON THE BONDS OR FOR THE PERFORMANCE OF ANY PLEDGE,OBLIGATION OR AGREEMENT OF ANY KIND WHATSOEVER OF HE ISSUER,AND NONE OF THE BONDS OR ANY OF THE ISSUER'S AGREEMENTS OR OBLIGATIONS WILL 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 w FOREGOING WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION WHATSOEVER. THE BONDS AND THE PREMIUM,IF ANY,AND INTEREST THEREON WELL NEVER CONSTITUTE A DEBT,INDEBTEDNESS OR PLEDGE OR A LOAN OF THE FAITH OR CREDIT OR THE ° TAXING POWER OF THE ISSUER,THE STATE OF CALIFORNIA, OR ANY POLITICAL CORPORATION,SUBDMSION OR AGENCY THEREOF WITHIN m THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION. ;THE BONDS ARE NOT AND NEVER WILL BECOME GENERAL OBLIGATIONS OF THE ISSUER AND WILL NOT BE PAYABLE FROM THE GENERAL REVENUES OF THE ISSUER,AND NEITHER THE ISSUER NOR THE STATE OF m ° CALIFORNIA OR ANY POLITICAL CORPORATION,SUBDIVISION,OR AGENCY THEREOF WILL BE LIABLE THEREON,NOR IN ANY EVENT WILL THE E c BONDS BE PAYABLE OUT OF ANY FUNDS OR PROPERTIES OTHER THAN THOSE OF THE ISSUER SPECIFICALLY PLEDGED THEREFOR. NO HOLDER r «. OF ANY BONDS HAS THE RIGHT TO COMPEL ANY EXERCISE OF THE TAXING POWER OF THE ISSUER TO PAY THE BONDS OR THE INTEREST OR 10 THE REDEMPTION•PREMIUM,IF ANY,THEREON,AND THE BONDS WILL NOT BE CONSTRUED.TO CREATE ANY MORAL OBLIGATION ON THE PART to 2 OF THE ISSUER WITH RESPECT TO THE PAYMENT OF THE BONDS. W o v m This cover page contains only a brief description of the Issuer,the Bonds and the security therefor. It is not intended to be a summary of material information Cwith respect to the Bonds. Investors should read this entire Official Statement to obtain information necessary to make an informed investment decision. ° The Bonds are offered when,as and if issued and received by the Underwriters,subject to the a��roving opinion of Orrick, Herrington&SutcliffJ�e,San em Francisco,Calijomia,Bond Counsel. Certain legal matters will be passed upon ley Aster Hadden Haynes&Miller,Counsel to the Underwriters. Certain legal matters E p will be passed uponfor the Borrower by its counsel,Michaud&Hoshiyama,San Francisco,Caliromia andfor the Lender by Paul Renno,Esq.,its Corporate Counsel. —y kis expected that ter will be available for delivery to The Depository Trust Company in New York,New Yost,on or about March_,1994. a` w Kirkpatrick, Pettis, Smith, Polian Inc. Charles A. Bell Securities Corp. The date of this Official Statement is March_, 1994 retmtnary;subject to change. I { F r +i ! Y No broker, dealer, salesman or other person has been authorized by the Issuer, the Borrower, the Lender or the Underwriters 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 the Issuer, the Borrower, the Lender or the Underwriters. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor will there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein has been obtained from the Borrower, the Lender and the Issuer and other sources believed by the Underwriters to be reliable. This information is not guaranteed as to accuracy and is not to be construed as a representation of such by the Underwriters,the Borrower,the Lender or the Issuer. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder will,under any circumstances, create any implication that there has been no change in the information or opinions set forth herein since the date hereof. No registration statement relating to the Bonds has been filed with the 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 UNDERWRITERS MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH TEND TO STABILIZE OR MAINTAIN THE MARKET PRICE FOR THE BONDS ABOVE THE LEVELS WHICH ;WOULD OTHERWISE PREVAIL. SUCH ACTIVITIES, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. TABLE OF CONTENTS Page I INTRODUCTORY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . I THEISSUER . . . . . . . . . . . . . . . . . . . . . . . . . i . . . . . . . . . . . . . . . . . . . . . . . . . . 4 THEBONDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 BOOK ENTRY ONLY SYSTEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS . . . . . . . . . . . . . . . . . . . 13 THE GNMA MORTGAGE-BACKED SECURITIES PROGRAM . . . . . . . . . . . . . . . . . . . . 14 THE MORTGAGE NOTE AND MORTGAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 THE PROJECT AND THE PRIVATE PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . 18 CERTAIN BONDHOLDERS' RISKS . . . . . . . . . . ! . . . . . . . , . 20 TAX EXEMPTION . . . . . . . . . . . . . . . . . . . . f . . . , . . . . . . . . . . . . . . . . . . . . . . 23 CERTAIN OTHER TAX CONSEQUENCES . . . . . I. . . . . . . . . . . . . . . . . . . . . . . . . . . 24 UNDERWRITING I . , . . . . 25 RATING . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . � . . . . . 26 CERTAIN LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . 26 ABSENCE OF LITIGATION . . . . . . . . . . . . . . { . . . . . . . . . . . . . . . . . . . . . . . . . . 27 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . I. . . . . . . . , . . . . . . . . . . . . . . . . . . 27 APPENDIX A CERTAIN DEFINITIONS A-1 APPENDIX B SUMMARY OF THE INDENTURE B-1 APPENDIX C SUMMARY OF THE FINANCING AGREEMENT C-1 APPENDIX D SUMMARY OF THE REGULATORY;AGREEMENT AND DECLARATION . OF RESTRICTIVE COVENANTS I D-I it 02124194 m12-1854 !i I . 1 1W . • OFFICIAL STATEMENT COUNTY OF CONTRA COSTA MULTIFAMH.Y HOUSING REVENUE BONDS (GNMA Collateralized -- Crescent Park Apartments Project) 1994 Series A and COUNTY OF CONTRA COSTA MULTIFAMELY HOUSING REVENUE BONDS (GNMA Collateralized -- Crescent Park Apartments Project) Taxable 1994 Series A-T INTRODUCTORY STATEMENT This Official Statement sets forth certain information concerning the County of Contra Costa(the "Issuer"), a political subdivision and body corporate and politic organized and existing under the Constitution and laws of the State of California and the issuance and sale of $ * aggregate principal amount of its Multifamily Housing Revenue Bonds, (GNMA Collateralized -- Crescent Park Apartments Project) 1994 Series A (the "1994 Series A Bonds") and$ *Multifamily Housing Revenue Bonds(GNMA Collateralized--Crescent Park Apartments Project) Taxable 1994 Series A-T (the "Taxable 1994 Series A-T") (collectively, the "Bonds"). The Bonds will be issued pursuant to a bond resolution adopted by the Issuer on March _, 1994, and secured by a Trust Indenture dated as of March 1, 1994 (the "Indenture") between the Issuer and Bank of America National Trust and Savings Association, Los Angeles, California, as Trustee (the "Trustee") for the purpose of providing the funds to make a mortgage loan to EAH-Contra Costa, Inc., a California nonprofit corporation (the "Borrower"), in order to finance the acquisition and rehabilitation of a 378 unit multifamily rental housing project located in the City of Richmond, County of Contra Costa, California, for low-income persons (the "Project") and to pay certain costs associated with the issuance of the Bonds. The following is a summary of certain information contained in this Official Statement, to which reference should be made for a complete statement thereof. The Bonds are offered to potential investors only by means of the entire Official Statement, including the cover page, this introductory statement and the Appendices hereto. No person is authorized to detach this introductory statement from the Official Statement or otherwise use it without the entire *Preliminary; subject to change. 02/24/94 m12-1854 0 0 Official Statement. Capitalized terms used but not defined herein will have the meanings ascribed to them in the Indenture, the Financing Agreement or the Regulatory Agreement and Declaration of Restrictive Covenants or as set forth under "CERTAIN DEFINITIONS" attached hereto as APPENDIX A. Issuer The issuer of the $ aggregate principal amount of Multifamily Housing Revenue Bonds (GNMA Collateralized Crescent Park Apartments Project) 1994 Series A and $ *principal amount of Multifamily Housing Revenue Bonds(GNMA Collateralized- -Crescent Park Apartments Project)Taxable 1994 Series A-T is the County of Contra Costa (the "Issuer"). See "THE ISSUER" herein. Security for the Bonds The principal of, premium, if any, and interest on the Bonds are payable from the payments on the GNMA Securities and from any other security pledged under the Indenture. Prior to the acquisition of the GNMA Securities by the Trustee, Bonds will be secured by certain of the Bond proceeds held in the Bond Fund and invested by the Trustee pursuant to an investment agreement with (the "Investment Agreement"). See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS" and "CERTAIN BOND- HOLDERS' RISKS" herein. GNMA Security The Bonds are to be secured primarily by fully modified mortgage-backed securities in the aggregate principal amount of$ (the'"GNMA Securities"), to be issued by TRI Capital Corporation, a California corporation (the !"Lender"), guaranteed as to principal and interest by the Government National Mortgage Association ("GNMA") and backed by the Mortgage Loan from the Lender to the Borrower as evidenced by the Mortgage Note. See "THE GNMA MORTGAGED-BACKED SECURITIES PROGRAM" herein. The Bonds The Bonds are available in book-entry only form. See "BOOK-ENTRY ONLY SYSTEM" herein. So long as Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"), is the registered owner of the Bonds, references herein to the Bondholders or registered owners of the Bonds means Cede&Co. and not the beneficial owners of the Bonds. The Bonds are issued in fully registered form without coupons in the denomination of $1,000 principal amount or any integral multiple thereof. See "THE BONDS" herein. 02/24/94 - 2 - :1 m12-1854 0 The Bonds are subject to optional redemption prior to maturity as a whole at any time on or after 19 2004, upon payment of the,redemption prices set forth under "THE BONDS -- Redemption - Optional Redemption" herein. The Bonds are also subject to special mandatory redemption and scheduled mandatory redemption as described under "THE BONDS- -. Redemption -- Special Mandatory Redemption" and "-- Scheduled Mandatory Redemption" herein. Any person who purchases a Bond above par should consider the risk that such premium may be lost in the event that the Bond is redeemed prior to maturity. See "CERTAIN BONDHOLDERS' RISKS" herein. Tax Exemption In the opinion of Bond Counsel, under existing law and assuming continuous compliance with certain provisions of the Indenture, the Financing Agreement and the Regulatory Agreement and Declaration of Restrictive Covenants designed t'p meet the requirements of the Code, the 1994 Series A Bonds are qualified 501(c)(3)bonds and the interest on the 1994 Series A Bonds, including any original issue discount, (a) is excludable from gross income for federal income tax purposes and (b) will not be an item of tax preference for purposes of the federal alternative minimum income tax imposed on individuals and corporations. Such interest may be included in the calculation of a corporation's alternative minimum tax and a holder may be subject to other federal tax consequences as described in the section "TAX EXEMPTION" and "CERTAIN OTHER TAX CONSEQUENCES" herein. Certain Legal and Other Matters The Issuer has appointed Bank of America National Trust and Savings Association, Los Angeles, California, to serve as the Trustee under the Indenture. Certain legal matters relating to the authorization and validity of the Bonds will',be passed upon by Orrick, Herrington & Sutcliffe, San Francisco, California, as Bond Counsel. Certain legal matters will be passed upon for the Borrower by its counsel, Michaud & Hoshiyama, San Francisco, California and for the Lender by Paul Reno, Esq., its Corporate Counsel.:, Certain legal matters will be passed upon by Arter Hadden Haynes & Miller, Washington, D.C., counsel to the Underwriters. Issuer; Issuance and Delivery of Bonds The Bonds are being issued under authority contained in Chapter 8 of Part 5 of Division 31 of the Health and Safety Code of the State of California (the "Act"). The Bonds are offered when, as and if issued and received by the Underwriters, subject to the approving opinion of Bond Counsel. It is expected that the Bonds will be available for delivery in book-entry only form to DTC in New York, New York, on or about March 1994. 02/24/94 - 3 - m12-1854 .. 0 V Miscellaneous The information contained herein is current as of the date of this Official Statement set forth on the cover page hereof. The information contained herein is subject to change after such date. The Issuer has not provided information regarding GNMA or the Borrower, and does not certify as to the accuracy or sufficiency of the information regarding GNMA or the Borrower, and is not responsible for such information provided herein. Additional Information Brief descriptions of the Issuer, the Bonds, the security for the Bonds, the Borrower, the Project, the Indenture, the Financing Agreement, the Regulatory Agreement and Declaration of Restrictive Covenants and the Mortgage Note and Mortgage are included in this Official Statement and the Appendices hereto. All references herein to the Indenture, the Financing Agreement, the Regulatory Agreement and Declaration of Restrictive Covenants the Mortgage Note and Mortgage and other documents and agreements are qualified in their entirety by reference to such documents and agreements, copies of which are available for inspection at the offices of the Trustee and the Issuer. THE ISSUER The Issuer is a political subdivision and body corporate and politic organized and existing under the Constitution and the laws of the State of California. The Issuer is empowered to engage in certain activities related to the provision of housing for persons of low or moderate income in the County of Contra Costa, California, including the power to finance housing and housing rehabilitation through the issuance of obligations such as the Bonds. Board of Supervisors The Board of Supervisors (the "Board") is the principal legislative and governing body of the Issuer. The five-member Board of Supervisors and the Chairman are elected for four-year terms. The Board of the Issuer, the years in which their respective terms expire and their positions are as follows: Board Term Expires Position Tom Powers January, 1995 Chairman Gayle Bishop January, 1997 Vice-Chair Tom Torlakson January, 1997 Supervisor Sunne Wright McPeak January, 1995 Supervisor Jeff Smith January, 1997 Supervisor 02/24/94 - 4 mit-1854 The Issuer will have no responsibility with respect to the management and operation of the Project, the servicing of the Mortgage Loan or the collection, transfer or payment of any moneys derived therefrom. Staff Members The Issuer's staff consists of four people. The staff members of the Issuer function under the management of the Deputy Director - Redevelopment who is appointed by the County Administrator. At present, the Deputy Director - Redevelopment and senior staff members are: Position Name Director - Community Development Harvey E. Bragdon Deputy Director - Redevelopment James Kennedy The main offices of the Issuer are located at 651 Pine Street, North Wing, 4th Floor, Martinez, California 94553-0095. The Issuer's telephone number is (510)646-4076. THE BONDS The Bonds are available in book-entry only form. See "BOOK-ENTRY ONLY SYSTEM" below. So long as Cede & Co.; as nominee of DTC, is the registered owner of the Bonds, references herein to the Bondholders or holders or registered owners or owners of the Bonds mean Cede & Co. and not the beneficial owners of the Bonds. General The Bonds are issuable in the denominations of$1,000 principal amount or any integral multiple thereof. The Bonds will be dated March 1, 1994, and will mature on the dates and in the amounts and bear interest from their date at the rate set forth on the cover page hereof. Interest will be payable semiannually on April 20 and October 20 of each year, commencing October 20, 1994 (each a "Payment Date") in accordance with the provisions of the Indenture, whether at maturity, upon acceleration or otherwise as provided therein. Interest will be calculated and be due on a basis of a 360-day year consisting of twelve 30-day months. Principal of, premium, if any, and interest on the Bonds will be Payable by the Trustee to Cede & Co. Limited Obligations The Bonds and the interest thereon are limited obligations of the Issuer, payable solely from the Revenues and the Trust Estate, which are specifically assigned and pledged to such purposes. Neither the United States of America, HUD, FHA, any other agency of the United States of America, GNMA, the State of California, nor any political subdivision thereof(except the Issuer, to the limited extent set forth in the first and last sentences of this section) will in any 02/24/94 - 5 - m12-1854 v 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 none of the Bonds or any of the Issuer's agreements or obligations will 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 provision whatsoever. The Bonds and the premium, if any, and interest thereon will never constitute a debt, indebtedness or pledge or a loan of the faith or credit or the taxing power of the Issuer, the State of California, or any political corporation, subdivision or agency thereof within the meaning of any constitutional or statutory provision. The Bonds are not and never will become general obligations of the Issuer and will not be payable from the general revenues of the Issuer, and neither the Issuer nor the State of California or any political corporation, subdivision, or agency thereof will be liable thereon, nor in any event will the Bonds be payable out of any funds or properties other than those of the Issuer specifically pledged therefor. No holder of any Bonds has the right to compel any exercise of the taxing power of the Issuer to pay the Bonds or the interest or the redemption premium, if any, thereon, and the Bonds will not be construed to create any moral obligation on the part of the Issuer with respect to the payment of the Bonds. No recourse shall be had for the payment of the principal of, premium, if any, or interest on any of the Bonds or for any claim based thereon or upon any obligation, covenant or agreement in the Indenture contained, against the Issuer, any past, present or future member of its governing body, its officers, attorneys, accountants, financial advisors, agents or staff, or the officers, attorneys, accountants, financial advisors, agents or staff of any successor public entity, as such, either directly or through the Issuer or any successor public entity, under any rule of law or penalty or otherwise, and all such liability of the Issuer, any member of its governing body and its officers, attorneys, accountants, financial advisors, agents and staff is, and by the acceptance of the Bonds, expressly waived and released as a condition of, and in consideration for, the execution of the Indenture and the issuance of any of the Bonds. It is recognized that notwithstanding any other provision of the Indenture, neither the Borrower, the Trustee nor any Bondholder will look to the Issuer for damages suffered by the Borrower, the Trustee or such Bondholder as a result of the failure of the Issuer to perform any covenant, undertaking or obligation under the Indenture, the Financing Agreement, the Bonds, the Regulatory Agreement and Declaration of Restrictive Covenants, any of the FHA Loan Documents or any of the other documents referred to the Indenture, or as a result of the incorrectness of any representation made by the Issuer in any of such documents, nor for any other reason. Although the Indenture recognizes that such documents will not give rise to any pecuniary liability of the Issuer, nothing contained in the Indenture will be construed to preclude in any way any action or proceeding (other than that element of any action or proceeding involving a claim for monetary damages against the Issuer) in any court or before any governmental body,agency or instrumentality or otherwise against the Issuer or any of its offices or employees to.enforce the provisions of any of such documents which the Issuer is obligated to perform and the performance of which the Issuer has not assigned to the Trustee or any other person. 02/24194 - 6 - m12-1854 Redemption Optional Redemption. The Bonds are subject to redemption on any date on or after 9 2004, in whole or in part, from payments on the GNMA Security representing voluntary prepayments on the Mortgage Loan, or otherwise at the option of the Issuer from the proceeds of refunding bonds or other funds of the Issuer, at the redemption prices set forth in the table below, expressed as percentages of the principal amount of the Bonds to be redeemed, plus accrued interest to the redemption date, as follows: Redemption Dates Redemption Prices , 2004 through 92005 104% , 2005 through 2006 103 , 2006 through 2007 102 , 2007 through 2009 101 2009 and thereafter 100 In the event of an optional redemption of Bonds on a date on which the redemption price includes a redemption premium, the Bonds will not be redeemed unless the Trustee will have either (i)(A) had in its possession, for a period of at least 91 days prior to the redemption date, an amount equal to the prepayment premium on the Bonds, and (B) received a certificate of an Authorized Borrower Representative to the effect that the Borrower has neither commenced a voluntary case under Title 11 of the United States Code as from time to time in effect nor authorized by appropriate proceedings of its board of directors the commencement of such a voluntary case, and (ii) received an opinion of Bond Counsel or bankruptcy counsel acceptable to the Trustee to the effect that the.sums to be utilized to pay the prepayment premium are not subject to the provisions of Sections 362(a), 547 and 550 of the Federal Bankruptcy Code. Special Mandatory Redemption. The Bonds are subject to redemption, in whole or in part, at any time on the earliest practical date, at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date: . (a) to the extent that any payment on the GNMA Security exceeds a level payment of principal and interest thereon as a result of payments representing (i) casualty insurance proceeds or condemnation awards applied to the prepayment of the Mortgage Loan following a partial or total destruction or condemnation of the Project, (ii) mortgage insurance proceeds or other amounts received with respect to the Mortgage Loan following the acceleration thereof upon the occurrence of an event of default thereunder, (iii) a prepayment of the Mortgage Loan required by the applicable rules, regulations, policies and procedures of HUD or GNMA, or(iv) a prepayment if HUD determines that prepayment will avoid a Mortgage Insurance claim and is therefore in the best interest of the Federal Government; or (b) to the extent that the Trustee receives payments on the GNMA Security representing prepayments on the Mortgage Loan made by the Borrower without notice or prepayment penalty while under the supervision of a trustee in bankruptcy. 02/24/94 7 - m12-1854 If less than all of the Outstanding Bonds will be called for redemption pursuant to this section, an amount of Bonds of each maturity will be redeemed so that the resulting decrease in the debt service on the Bonds for the six-month period ending on each Interest Payment Date is proportional, as nearly as practicable, to the decrease in the payments on the GNMA Security in each such six-month period, provided that no 1994 Series A Bonds will be redeemed pursuant to this section while any Taxable 1994 Series A-T Bonds remain Outstanding. The Trustee agrees to notify the Rating Agency promptly after it receives any partial payment of the GNMA Security in excess of regularly scheduled payments thereon. Scheduled Mandatory Redemption. The 1994 Series A Bonds and the Taxable 1994 Series A-T Bonds are subject to scheduled mandatory redemption on the respective Interest Payment Dates set forth in the schedules below, at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date, in the following principal amounts, subject to pro-rata reduction of such scheduled mandatory redemption payments to the extent that such 1994 Series Bonds and Taxable 1994 Series A-T Bonds are redeemed prior to maturity otherwise than pursuant to such scheduled mandatory redemption; 1994 Series A Bonds Due , Principal Principal Redemption Dates Amount Redemption Dates Amounts Taxable 1994 Series A-T Bonds Due , Principal Principal Redemption Dates Amount Redemption Dates Amounts 02124194 - g - m12.1854 If less than all of the 1994 Series A Bonds or Taxable 1994 Series A-T Bonds are to be redeemed other thanin accordance with the scheduled mandatory redemption provisions of this section, the Bonds so to be redeemed will be selected by maturity and the scheduled mandatory redemption requirements for each maturity described above will be adjusted so that the resulting decrease in debt service on the Bonds (including scheduled mandatory redemption payments) during each six-month period commencing on each Interest Payment Date.is proportional, as nearly as practicable, to the decrease in the payments on the GNMA Security during each six- month period, and by lot within a maturity. Selection of Bonds for Redemption. The Bonds may be redeemed only in Authorized Denominations. If less than all of the Bonds are redeemed, in the case of redemption pursuant to scheduled.mandatory redemption, Bonds will be redeemed in accordance with the respective schedules set forth in such section. In the event the Bonds are redeemed in part and not in whole other than in accordance with scheduled mandatory redemption, the Bonds to be redeemed will be selected by maturity and the scheduled mandatory redemption requirements for each maturity described above will be adjusted so that the resulting decrease in debt service on the Bonds (including scheduled mandatory redemption payments) during each six-month period commencing on each Interest Payment Date is proportional, as nearly as practicable, to the decrease in the payments on the GNMA Security during each such six-month period. All Bonds to be redeemed within the same maturity will be selected by lot. Except as otherwise described above, any Bonds to be called for redemption will be selected by the Trustee in such manner as the Trustee in its absolute discretion will determine, such selection to be made prior to the date on which notice of such redemption must be given. Bonds will be redeemed as soon as practicable after an event causing a redemption will have occurred. If it is determined that less than all of the principal amount represented by any Bond is to be called for redemption, then, following notice of intention to redeem such principal amount, the holder thereof will surrender such Bond to the Trustee on or before the applicable redemption date for (a) payment on the redemption date to such Bondholder of the redemption price of the amount called for redemption and (b) delivery to such Bondholder of a new Bond or Bonds in an aggregate principal amount equal to the unredeemed balance of such Bond, which will be an Authorized Denomination. A new Bond representing the unredeemed balance of such Bond will be issued to the registered owner thereof, without charge therefor. If the registered owner of any Bond or integral multiple of the Authorized Denomination selected for redemption will fail to present such Bond to the Trustee for payment and exchange as aforesaid, such Bond Will, nevertheless, become due and payable on the date fixed for redemption to the extent of the amount called for redemption (and to that extent only). Notice of Redemption. Except as provided below, notice of redemption will be given by registered mail or other secure means, postage prepaid, to the registered holder of each Bond to be redeemed, at the address of such registered holder shown on the Bond Register. All such redemption notices will be given not less than 30 days nor more than 60 days prior to the date fixed for redemption, except that (a) any notice of redemption following receipt of casualty 02/24194 - 9 - m12-1854 insurance proceeds or condemnation awards will be given no less than 15 days prior to the date fixed for redemption, and (b) any notice of redemption pursuant to subparagraph (b) under "Special Mandatory Redemption" will be given not less than 13 days nor more than 60 days prior to the date fixed for redemption. No redemption notices will be given prior to receipt by the Trustee of sufficient funds (together with investment earnings thereon from the date of deposit to the date fixed for redemption) to redeem all Bonds subject to such notice, unless the Trustee will have determined that it will have available, as a result of receipt of proceeds of refunding obligations, an amountsufficient to redeem such Bonds. Each notice will specify the CUSIP numbers and the series and certificate numbers of the Bonds to be redeemed and the principal amount of each Bond being redeemed (if the Bonds are to be redeemed in part), the date of issue of the Bonds as originally issued, the complete official name of the Bonds including the series designation, the redemption date, the redemption price and the place or places where -amounts due upon such redemption will be payable, the name, address and telephone number of the Trustee together with a contact person of the Trustee, the interest rate, the maturity date on the Bonds to be redeemed together with the date of the redemption notice; provided, however, that any errors in the CUSIP numbers set forth in such notice will not affect the validity of any redemption. Such notice will further state that payment of the applicable redemption price plus accrued interest to the date fixed for redemption will be made upon presentation and surrender of the Bonds. A second notice of redemption will be given within 60 days after the redemption date in the manner described above to the registered holder of redeemed Bonds which have not been presented for payment within 30 days after the redemption date. Neither failure to give notice by mailing to the registered owner of any Bond designated for redemption nor any defect in such notice will affect the validity of the proceedings for the redemption of any Bond with respect to which no such failure or defect has occurred nor will failure to give or defect in the second notice described above constitute a defect in the notice of redemption of any Bond. Notice of such redemption will also be sent by registered mail, or other secure means, postage prepaid, to certain municipal registered Securities Depositories (described below) which are known to the Trustee to be holding Bonds, and to at least two of the national Information Services (described below) that disseminate securities redemption notices, at least 35 days but not more than 65 days prior to the redemption date (except in the case of redemption following receipt of casualty insurance proceeds or condemnation awards); provided, however, that neither the failure to receive such notice or any defect in any notice so mailed will affect the sufficiency of the proceedings for the redemption of any Bonds. Securities Depositories include The Depository Trust Company, 711 Steward Avenue, Garden City, New York 11530; Midwest Securities,Trust Company, Capital Structures-Call Notification, 440 South LaSalle Street, Chicago, Illinois 60605; Philadelphia Depository Trust Company, Reorganization Division, 1900 Market Street, Philadelphia, Pennsylvania 19103, Attention: Bond Department; 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. 02/24/94 _ 10 - m12-1854 Information services include Financial Information, Inc., "Daily Called Bond Service," 30 Montgomery Street, 10th Floor, Hersey City, New Jersey 07302, Attention: Editor; Kenny Information Services, "Called Bond Services," 55 Broad Street, 28th 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 Corporation, "Called Bond Record," 25 Broadway, New York, New York 10004; or, in accordance with the then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other services providing information with respect to called bonds, or any other such services as the Issuer may designate in writing to the Trustee. Notwithstanding the foregoing or any other provision of the Indenture, in the event of a redemption by reason of the Trustee receiving payments on the GNMA Security representing payments on the Mortgage Loan made by the Borrower without notice or prepayment penalty while under the supervision of a trustee in bankruptcy, notice of redemption of Bonds will not be required if the circumstances do not permit the Trustee to give such notice in accordance with the preceding paragraphs of this section. Notice of redemption having been given in the manner provided above (or not required as provided in the immediately preceding paragraph)-, and money sufficient for the redemption being held by the Trustee for that purpose, the Bonds so called for redemption will become due and payable on the redemption date, and interest thereon will cease to accrue; and the holders 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 Bonds. Moneys deposited with and held by the Trustee due to non-presentment of Bonds on any redemption date will be retained by the Trustee for a period of at least one year after the final maturity date of the Bonds, or the maximum amount of time allowed under the laws of the State. BOOK ENTRY ONLY SYSTEM The Bonds will be available in book-entry form only in the principal amount of $1,000 and any integral multiple thereof. Purchasers of the Bonds will not receive certificates representing their interests in the Bonds purchased. The Bonds will be held by The Depository Trust Company, New York, New York ("DTC"), as securities depository. The ownership of one fully registered Bond for each maturity is registered in the name of Cede & Co., as nominee for DTC. DTC is a limited- purpose trust company organized under the laws of the State of New York, 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 "Participants") and to facilitate the clearance and settlement of securities transactions among Participants in such securities through electronic book-entry changes in accounts of the Participants, thereby eliminating the need for physical movement of securities certificates. Participants include securities brokers and dealers, banks, trust companies, clearing 02/24/94 m12-1854 corporations, and certain other organizations, some of whom (and/or their representatives) own DTC. Access to the DTC system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (the "Indirect Participants"). Ownership interests in the Bonds may be purchased by or through Participants. Such Participants and the persons for whom they acquire interests in the Bonds as nominees will not receive certificated Bonds, but each Participant is to receive a credit balance in the records of DTC in the amount of such Participant's interest in the Bonds, which is to be confirmed in accordance with DTC's standard procedures. Each such person for whom a Participant acquires an interest in the Bonds, as nominee, may desire to make arrangements with such Participant to receive a credit balance in the records of such Participant, and may desire to make arrangements with such Participant to have all notices of redemption or other communications to DTC, which may affect such persons, be forwarded in writing by such participant and to have notification made of all interest payments. Neither the Issuer nor the Trustee will have any responsibility or obligation to such 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 Participant; the payment by DTC or any Participant or any amount in respect of the principal or redemption price of or interest on the Bonds; any notice that is permitted or required to be given to Bondholders under the Indenture; the selection by DTC of any Participant of any person to receive payment in the event of a partial redemption of the Bonds; or any consent given or other action taken by DTC as Bondholder. In this Official Statement, the term "Beneficial Owner" includes the person for whom the Participant acquires an interest in the Bonds. SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE BONDS, AS NOMINEE OF DTC, REFERENCE HEREIN TO THE BONDHOLDERS OR REGISTERED OWNERS OF THE BONDS MEANS CEDE & CO., NOT THE BENEFICIAL OWNERS OF THE BONDS. In the event of any inconsistency between the provisions of the Indenture and the provisions of the Letter of Representations relating to the same matter or matters, the provisions of the Letter of Representations, to the extent of such inconsistency, will control. DTC is to receive payments from the Trustee to be remitted to the Participants for subsequent disbursement to the Beneficial Owners. The ownership interest of each Beneficial Owner in the Bonds is to be recorded on the records of the Participants, whose ownership interests are to be recorded on a computerized book-entry system operated by DTC. When reference is made to any action that is required or permitted to be taken by the Beneficial Owner, such reference only relates to those permitted to act (by statute, regulation or otherwise) on behalf of such Beneficial Owners for such purposes. When notices are given, they are to be sent by the Trustee to DTC only. DTC is responsible for notifying Participants, and Participants and Indirect Participants are responsible for notifying the Beneficial Owners. Neither the Trustee nor the Issuer is responsible for sending notices to Beneficial Owners. 02/24/44 - 12 - m12-1854 t Beneficial Owners are to receive a written confirmation of their purchase detailing the terms of the Bonds acquired. Notwithstanding anything to the contrary in the Indenture, transfers of ownership interests in the Bonds are to be accomplished by book entries made by DTC and by the Participants who act on behalf of the Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interest in the Bonds, except as specifically provided in the Indenture. Interest and principal are to be paid by the Trustee to DTC in clearing house funds, then paid by DTC to the Participants and thereafter paid by the Participants to the Beneficial Owners when due. For every transfer and exchange of the Bonds, the Beneficial Owner may be charged a sum sufficient to cover any tax, fee or other government charge that may be imposed in relation thereto. DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving notice to the Issuer and the Trustee and discharging its responsibilities with respect thereto under applicable law. Under such circumstances (if there is not a successor securities depository) certificated Bonds are required to be delivered as described in the Indenture. The Issuer or the Trustee 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, or the Issuer may decide to discontinue the use of the system of book-entry. In such event, certificated Bonds are required to be delivered as described in the Indenture. In the event that the book-entry only system is discontinued, Bonds may be exchanged for an equal aggregate principal amount of certificated Bonds in authorized denominations. The transfer of any certificated Bond may be registered on the books maintained by the Trustee for such purpose only upon the surrender thereof to the Trustee with a duly executed assignment in form satisfactory to the Trustee. For every exchange or transfer of registration of certificated Bonds, the Issuer and the Trustee may make a charge sufficient to reimburse them for any tax or other governmental charge required to be paid with respect to such exchange or registration of transfer, but no other charge may be made to the Beneficial Owner for any exchange or registration of transfer of the Bonds. SECURITY AND SOURCES OF PAYMENT FOR THE BONDS The Bonds will be secured under the Indenture by (a) all right, title and interest of the Issuer in and to all Revenues, derived or to be derived by the Issuer or the Trustee for the account of the Issuer under the terms of the Indenture and the Financing Agreement (other than the Reserved Rights of the Issuer), together with all Revenues received by the Trustee for the account of the Issuer arising out of or on account of the Trust Estate; (b) all right, title and interest of the Issuer in and to the GNMA Security, including all payments with respect thereto and any interest, profits or other income derived from the investment thereof; (c) all right, title and interest of the Issuer in and to, and remedies under, the Financing Agreement and the 02/24/94 - 13 - m12-1854 Regulatory Agreement and Declaration of Restrictive Covenants; (d) all funds, moneys and securities and any and all other rights and interests in property whether tangible or intangible from time to time 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. The Bonds and the interest thereon are limited obligations of the Issuer, payable solely from the Revenues and the Trust Estate, which are specifically assigned and pledged to such purposes. Neither the United States of American, HUD, FHA, any other agency of the United States of America, GNMA, the State of California, nor any political subdivision thereof(except the issuer, to the limited extent set forth under the caption "THE BONDS -- Limited Obligations") will 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 none of the Bonds or any of the Issuer's agreements or obligations will 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 provision whatsoever. The Bonds and the premium, if any, and interest thereon will never constitute a debt, indebtedness or pledge or a loan of the faith or credit or the taxing power of the Issuer, the State of California, or any political corporation, subdivision or agency thereof within the meaning of any constitutional or statutory provision. The Bonds are not and never will become general obligations of the Issuer and will not be payable from the general revenues of the Issuer, and neither the Issuer nor the State of California or any political corporation, subdivision, or agency thereof will be liable thereon, nor in any event will the bonds be payable out of any funds or properties other than those of the Issuer specifically pledged therefor. No Holder of any Bonds has the right to compel any exercise of the taxing power of the Issuer to pay the bonds or the interest or the redemption premium, if any, thereon, and the Bonds will not be construed to create any moral obligation on the part of the Issuer with respect to the payment of the Bonds. THE GNMA MORTGAGE-BACKED SECURITIES PROGRAM The summary and explanation of the GNMA Mortgage-Backed Securities Program and the other documents referred to herein do not purport to be complete, and reference is made to the GNMA I Mortgage-Backed Securities Guide(GNMA Handbook 5500.1 REV-6, as amended) and to said documents for full and complete statements of their provisions. The Government National Mortgage Association ("GNMA") is a non-stock corporate instrumentality of the United States within the Department of Housing and Urban Development ("HUD") with its principal office in Washington, D.C. 42/24/94 - 14 - m12-1854 - • 0 The GNMA Securities will be "fully modified pass-through" mortgage-backed securities issued and serviced by the Lender. The total face amount of the GNMA Securities will be in the same amount as the Mortgage Note. The Lender will be required to pass through to the Trustee, as the holder of the GNMA Securities, by the 15th day of each month the monthly scheduled installments of principal and interest (interest only on the Construction Loan Certificates) on the Mortgage Note (less the GNMA guarantee fee and the Lender's servicing fee), whether or not the Lender receives such payment from the Borrower, plus any unscheduled prepayments of principal of the Mortgage Note received by the Lender. GNMA guarantees the timely payment of the principal of and interest on the GNMA Securities. GNMA Guaranty GNMA is authorized by Section 306(8) of Title III of the National Housing Act, as amended (the "National Housing Act"), to guarantee the timely payment of the principal of, and interest on, securities which are based on and backed by mortgage pools consisting of a single mortgage insured by the Federal Housing Administration ("FHA") pursuant to Section 241(0 of the National Housing Act. Section 306(g) of the National Housing Act further provides that "[T]he full faith and credit of the United States is pledged to the payment of all amounts which may be required to be paid under any guaranty under this subsection." An opinion, dated December 12, 1969, of the then Assistant Attorney General of the United States, states that such guaranties under Section 306(8) of mortgage-backed securities of the type being delivered to the Trustee on behalf of the Issuer are authorized to be made by GNMA and "would constitute general obligations of the United States backed by its full faith and credit." Pursuant to such authority,GNMA, upon delivery of a GNMA Security to the Lender in accordance with the related GNMA Guaranty Agreement, will have guaranteed the timely payment of the principal of and interest on such GNMA Security. GNMA Borrowing Authority In order to meet its obligations under such guaranty, GNMA, in its corporate capacity under Section 306(d) of Title III of the National Housing Act, may issue its general obligations to the United States Treasury Department (the "Treasury") in an amount outstanding at any one time sufficient to enable GNMA, with no limitations as to amount, to perform its obligations under its guaranty of the timely payment of the principal of and interest on the GNMA Security. The Treasury is authorized to purchase any obligations so issued by GNMA and has indicated in a letter dated February 13, 1970, from the then Secretary of the Treasury to the then Secretary of HUD that the Treasury will make loans to GNMA, if needed, to implement the aforementioned guaranty. GNMA warrants to the holder of the GNMA Securities in the related GNMA Guaranty Agreement (as hereinafter defined), that, in the event it is called upon at any time to make good its guaranty of the payment of principal of and interest on the GNMA Securities, it will, if necessary, in accordance with Section 306(d), apply to the Treasury for a loan or loans in amounts sufficient to make payments of principal and interest on the GNMA Securities. 02/24/94 - 15 - m12-1854 Servicing of Mortgage Loans The Lender is responsible for servicing and otherwise administering the Mortgage in accordance with generally accepted practices of the mortgage banking industry and the GNMA Servicer's Guide. The monthly remuneration of the Lender, for its servicing and administrative functions, and the guaranty fee charged by GNMA, are based on the unpaid principal amount of the GNMA Securities outstanding. The total of the servicing and guaranty fees with respect to the GNMA Securities is 0.25% per annum, payable monthly, calculated on the principal balance of the GNMA Securities outstanding on the last day of the month preceding such date of calculation. 4f the 0.25% total fee, part is paid to GNMA as a guaranty fee, and the remainder is retained by the Lender as a servicing fee. The GNMA Securities carry interest rates that are 0.25% per annum less than the interest rate on the Mortgage Note because the servicing and guaranty fee is deducted from payments on the Mortgage Note. It is expected that interest and principal payments on the Mortgage Note will be the source of moneys for payments on the GNMA Securities. If such payments are less than what is due, the Lender may advance its own funds to ensure timely payment of scheduled installments of principal and interest due on the GNMA Securities. GNMA guarantees such timely payment in the event of the failure of the Lender to pass through such scheduled principal and interest payments when due. The Lender is required to advise GNMA in advance of any impending default on scheduled payments on the GNMA Securities so that GNMA as guarantor will be able to continue such payments as scheduled on the 15th day of each month. If, however, such payments are not received as scheduled, the Trustee, on behalf of the Issuer, has recourse directly to GNMA. The guaranty agreements to be entered into by GNMA and the Lender in connection with the issuance of the GNMA Securities (collectively, the "GNMA Guaranty Agreement") will provide that, in the event of a default by the Lender, including (i) a request to GNMA to make a payment of principal or interest on the GNMA Securities when the Borrower is not in default under the Mortgage Note, (ii) insolvency of the Lender, or (iii) default by the Lender under any other guaranty agreement with GNMA, GNMA will have the right, by letter to the Lender, to effect and complete the extinguishment of the Lender's interest in the Mortgage Note, and the Mortgage Note will thereupon become the absolute property of GNMA, subject only to the unsatisfied rights of the holder of the GNMA Securities. In such event, the GNMA Guaranty Agreement will provide that on and after the time GNMA directs such a letter of extinguishment to the Lender, GNMA will be the successor in all respects to the Lender in its capacity under the GNMA Guaranty Agreement and the transaction and arrangements set forth or arranged for therein, and will be subject to all responsibilities, duties, and liabilities (except the Lender's indemnification of GNMA), theretofore placed on the Lender by the terms and provisions of the GNMA Guaranty Agreement, provided that at any time, GNMA may enter into an agreement with any other eligible issuer of GNMA securities under which the latter undertakes and agrees 02124194 - 16 - m12.1854 to assume any part or all such responsibilities, duties or liabilities theretofore placed on the Lender, and provided that, no such agreement will detract from or diminish the responsibilities, duties or liabilities of GNMA.in its capacity as guarantor of the GNMA Securities, or otherwise adversely affect the rights of the holders thereof. Payment of Principal and Interest on the GNMA Securities Payment of interest on the GNMA Security is required to be made in monthly installments on or before the 15th day of each month commencing the month next following the date of issue of the GNMA Security, subject to prepayment due to prepayment or acceleration of the Mortgage Note. Each'installment on the GNMA Security is applied first to interest and then in reduction of the principal balance then outstanding on the GNMA Security. The amount of principal due on the GNMA Security is the scheduled principal amortization currently due on the Mortgage Note. The monthly installments are subject to adjustment by reason of any prepayments or other early or unscheduled recoveries of principal on the Mortgage Note. The Lender is required to pay to the Trustee, as holder of the GNMA Securities, monthly installments of not less than the interest due on the GNMA Securities at the rate specified in the GNMA Securities, together with any scheduled installments of principal, whether or not collected from. the Borrower, and any prepayments or early recoveries of principal. Liability of Lender The GNMA Securities will not constitute a liability of nor evidence any recourse against the Lender. The GNMA Securities are based on and backed by the Mortgage on the real property securing the Mortgage Note. Recourse may be had by the Trustee only to GNMA in the event of any failure of timely payment as provided for in the GNMA Guaranty Agreement appended to the GNMA Securities. THE MORTGAGE NOTE AND MORTGAGE This summary and explanation of the Mortgage Note and Mortgage does not purport to be comprehensive and is qualified in its entirety by reference to the Mortgage Note and Mortgage for full and complete statements of their provisions. The Mortgage from the Borrower to the Lender secures the Mortgage Note. The Mortgage Loan proceeds will be disbursed by the Lender and the Lender will be reimbursed for such advances upon the purchase of the GNMA Security by the Trustee. Upon the purchase of GNMA Security, the Lender will make payments thereon which may differ from the Mortgage Note payments. Upon the purchase of the GNMA Security from the Lender by the Trustee, on behalf of the Issuer, monthly scheduled installments of principal and interest on the Mortgage Note(less the GNMA guaranty fee and the Lender's servicing fee) will be passed through to the Trustee as scheduled payments of principal and interest on the GNMA Security. 02/24/94 - 17 - m12-1854 The Mortgage Loan, as evidenced by the Mortgage Note and Mortgage which are modified by certain modification agreements, (i) is insured by FHA pursuant to and in accordance with the provisions of Section 241(f) of the National Housing Act and applicable regulations thereunder, as evidenced by the endorsement by FHA of the Mortgage Note evidencing the Mortgage Loan; (ii)is in the principal amount of$ (iii)bears interest at the rate of % per annum; (iv) has a final maturity of 1, _; payable in equal monthly installments of principal and interest, commencing on _ 1, _; (vi) is secured on a nonrecourse basis; and (vii) is not subject to prepayment prior to 1, 2004, without the consent of the holder of the Mortgage Note except that (A) the Mortgage Note is subject to mandatory prepayment in whole or in part at any time without premium or penalty, from the proceeds of any casualty insurance or condemnation awards received following a partial or total destruction or condemnation of the Project, in the event and to the extent that such casualty proceeds or condemnation awards, are not applied to the repair or restoration of the Project in accordance with the FHA Loan Documents, (B) the Mortgage Note is subject to prepayment in whole or in part at the option of the Borrower, on _ 1, 2004, or at any time thereafter, upon at least 30 days' advance written notice to the Lender, and upon payment of the principal amount of the Mortgage Note then outstanding together with the applicable prepayment premium attributable to the balance of the Mortgage Note plus interest to the end of the month in which the prepayment is made, and (C) the Mortgage Note is subject to mandatory prepayment in whole or in part without the consent of the mortgagee and without prepayment penalty if HUD determines that prepayment will avoid an FHA insurance claim and therefore is in the best interest of the Federal government, notwithstanding any prepayment prohibition imposed and/or penalty required by the Mortgage Note with respect to prepayments made prior to 1, 2004. In the event of a partial prepayment described in subparagraphs (A) and (B) above, the Mortgage Note may be reamortized to reflect its reduced principal amount. If the Borrower makes any such prepayment on the Mortgage Note, the amount prepaid will be paid to the Lender and passed through to the Trustee, as a prepayment on the GNMA Security, and applied to the redemption of Bonds, as described under "THE BONDS -- Redemption." THE PROJECT AND THE PRIVATE PARTICIPANTS The following information concerning the Project and the private participants has been provided by representatives of the Borrower and the other private participants and has not been independently confirmed or verified by either the Underwriters, Bond Counsel or the Issuer. No representation is made herein as to the accuracy or adequacy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof. 02/24/94 - 18 - m12-1854 The Project The Project known as Crescent Park Apartments is located at in the City of Richmond, County of Contra Costa, California, consisting of 378 apartment units as follows: Projected Number Type Approximate Rent of Units of Unit Size Per Unit Each Apartment unit is equipped with The Project has on site parking for vehicles. Sources of Revenue [TO COME] Borrower The Borrower is a California nonprofit corporation., The principal office of the Borrower is located at 2169 East Franciso Boulevard, Suite B, San Rafael, California 94901. The Borrower is a single purpose corporation created for the sole purpose of acquiring, rehabilitating and ensuring the permanent affordability of the apartment units. The Directors of the Borrower are —. The Directors will have general responsibility and sole authority for supervising the operations of the Borrower, and will be responsible for the development, rehabilitation and management of the Project subject to regulation, supervision and inspection by HUD. Architect The design and inspecting architect for the Project is Kodama Associates(the "Architect") located at 1701 Montgomery Street, San Francisco, California 94111. The Architect is a diversified architectural and planning firm which has been in existence since 1978. The principal of the firm is Steve Kodama, who has been practicing architecture for over thirty years 02/24/94 - 19 - ti�12-1854 and has special expertise in community and user-oriented projects such as community housing developments, special needs housing, and residential complexes for seniors. The senior associates are James Stetson and Robert Anderson, while Matt Anderson is an associate. The Architect has extensive experience in a wide range of areas. These include a multitude of housing types, resort and recreational developments, commercial facilities, offices, restaurants, educational projects, and interiors. As required by HUD, the architect will certify that, to the best of its knowledge, belief and professional judgment, rehabilitation of the Project in accordance with the plans and specifications is permissible under all applicable state and local codes, ordinances and regulations, and will comply with HUD's minimum property standards and other applicable HUD design requirements. The duty of the architect is to review and inspect the construction of the Project in order to provide sufficient assurance to the Trustee of completion of the Project. The Mortgage Lender/Servicer TRI Capital Corporation, a California corporation, is the Lender. The Lender is a HUD- approved lender under Sections 223(f) and 221(d)(4) of the National Housing Act, and a GNMA-approved issuer of GNMA Securities. The Lender was formed in 1987 and is located in San Francisco, California. As of December 31, 1993 the Lender had made approximately 166 mortgage loans with a total commitment amount of approximately $867 million. To be approved by GNMA to.issue modified pass-through securities with respect to a long-term mortgage on multi-family projects, the Lender is required to have a net worth (based on audited financial statements) equal to at least $500,000 plus 0.2 percent of any securities outstanding in excess of$35 million. The principal corporate office of the Lender is located in San Francisco, California. The Trustee Bank of America National Trust and Savings Association, will serve as Trustee under the Indenture. The Trustee is a national banking association organized under the laws of the United States of America, having all of the powers of a bank, including fiduciary powers and is a member of the Federal Deposit Insurance Corporation and the Federal Reserve System. CERTAIN BONDHOLDERS' RISKS The purchase of the Bonds will involve a number of risks. The following is a summary, which does not purport to be comprehensive or definitive, of some of such risk factors. 02/24/94 - 20 - m12-1854 Early Redemption and Loss of Premium Purchasers of Bonds, including those who purchase Bonds at a price in excess of their principal amount or who hold such a Bond trading at a price in excess of par, should consider the fact that the Bonds are subject to redemption at a redemption price equal to their principal amount plus accrued interest in the event such Bonds are redeemed prior to maturity. This could occur, for example, in the event the GNMA Security is not delivered by the date required under the Indenture (as,such date may be extended pursuant to the Indenture) or is delivered in a principal amount less than $ . in the event that the Mortgage Note is prepaid as a result of a casualty or condemnation award payments affecting the Project or there is a default under the Mortgage. See "THE BONDS -- Redemption -- Special Mandatory Redemption." The Underwriters expects that in the event of a special mandatory redemption under the circumstances described in clause (a) or (b) under the caption "THE BONDS -- Special Mandatory Redemption" approximately $ will be available to pay the related redemption premium. No assurance, however, can be given that funds will be available under the Indenture to pay any portion of the related premium in the event that the Project Loan Certificate is not delivered on or prior to 1, _ or has a principal balance less than $ on the date of purchase by the Trustee. Limited Security The Bonds are limited obligations of the Issuer payable solely from certain funds pledged to and held by the Trustee pursuant to the Indenture. See "THE Bonds -- Limited Obligations" herein. Taxability of 1994 Series A Bonds THE 1994 SERIES A BONDS ARE NOT SUBJECT TO REDEMPTION, AND THE RATE OF INTEREST ON THE 1994 SERIES A BONDS IS NOT SUBJECT TO ADJUSTMENT, BY REASON OF THE INTEREST ON THE 1994 SERIES A BONDS BEING INCLUDED IN GROSS INCOME FOR PURPOSES OF FEDERAL INCOME TAXATION. Such event could occur if the Borrower (or any subsequent owners of the Project) does not comply with the provisions of the Regulatory Agreement and Declaration of Restrictive Covenants and the Financing Agreement which are designed, if complied with, to satisfy the continuing compliance requirements of the Code in order for the interest on the 1994 Series A Bonds to be excludable from gross income for purposes of federal income tax. Enforcement of the Regulatory Agreement and Declaration of Restrictive Covenants As a condition of FHA's insuring the Mortgage Note, the Regulatory Agreement and Declaration of Restrictive Covenants is made expressly subordinate to the obligations under the Mortgage, and enforcement of the Regulatory Agreement and Declaration of Restrictive Covenants is expressly limited so that enforcement will not serve as the basis for a declaration of default under the Mortgage or an acceleration of the Mortgage Note or result in any claim 02/24/94 - 21 - m12-1954 under the Mortgage Note, or claim against the Project, the Mortgage Note proceeds, any reserve or deposit made with the Lender or another person or entity required by HUD in connection with the Mortgage Note transaction, or against the rents or other income from the Project for payment under the Regulatory Agreement and Declaration of Restrictive Covenants. Consequently, the rights of the Issuer or the Trustee to enforce a claim for money damages would be severely restricted and, among other things, it would not be possible to accelerate the debt evidenced by the Mortgage Note or to seek FHA Insurance benefits. There is no provision in the 1994 Series A Bonds or the Indenture for an acceleration of the indebtedness evidenced by the 1994 Series A Bonds or payment of additional interest in the event interest on the 1994 Series A Bonds were declared taxable, and the Issuer will not be liable under the 1994 Series A Bonds or the Indenture for any such payment on the 1994 Series A Bonds whatsoever. See APPENDIX D -- "Summary of the Regulatory Agreement and Declaration of Restrictive Covenants." Issuance of GNMA Securities It is anticipated that the Trustee will acquire the GNMA Security on or before 1, as such acquisition date may be extended pursuant to the terms of the Indenture. The purchase of each GNMA Security is subject to the following conditions, among others: (i) the submission by the Lender to GNMA of certain documents required by GNMA in form and substance satisfactory to GNMA, (ii) the Lender's continued compliance, on the date of issuance of the GNMA Security, with all of GNMA's eligibility requirements, specifically including, but not limited to, certain net worth requirements and (iii) the Lender's continued ability to issue and deliver each GNMA Security, as such ability may be affected by the Lender's bankruptcy, insolvency or reorganization. In the event that the GNMA Security is not issued as a result of a failure of any of the conditions listed above, the Bonds will be subject to early redemption in whole or in part as discussed under "THE BONDS -- Special Mandatory Redemption" herein. Investment Agreement Amounts held in the Bond Fund will be invested by the Trustee in the Investment Agreement with at the rate of % per annum; provided that amounts held in the Sinking Fund Account will be invested at a rate of % per annum. The Investment Agreement represents the unsecured general obligation of to provide repayment to the Trustee of moneys invested in the Investment Agreement pursuant to the Indenture at the rate of return set forth therein. For information with respect to, purchasers of the Bonds should write to . The Issuer and the Underwriters make no representation as to the ability of the provider of the Investment Agreement to make payments thereunder in amounts necessary to make scheduled payments of debt service on the Bonds. The rating shown on the cover page of this Official Statement is dependent in part on the fact that certain funds will be invested in the Investment Agreement. A downgrading of the long-term credit rating of may have an adverse effect on the rating for the Bonds. 02/24/94 - 22 - m12-1854 Secondary Markets and Prices The Underwriters will not be obligated to repurchase any of the Bonds, and no representation is made concerning the existence of any secondary market for the Bonds. No assurance can be given that any secondary market will develop following the completion of the offering of the Bonds, and no assurance can be given that the Bonds can be resold at their initial offering prices for any period of time. Competing Facilities The Issuer and persons who may be affiliated with the Issuer and the Borrower and persons who may be affiliated with each may finance, develop, construct, and operate other facilities that could compete with the Project for tenants. Any competing facilities, if so constructed, could adversely affect occupancy and revenues of the Project. TAX EXEMPTION Exclusion from Gross Income In the opinion of Orrick, Herrington &Sutcliffe, Bond Counsel, the 1994 Series A Bonds are qualified 501(c)(3) bonds and, assuming compliance by the Issuer and the Borrower with applicable requirements of the Code, including arbitrage and arbitrage rebate requirements under Section 148 of the Code, that must be satisfied subsequent to the date of issuance,of the 1994 Series A Bonds, interest on the 1994 Series A Bonds is excluded from gross income for federal income tax purposes under existing federal law and is not an item of tax preference for purposes of the alternative minimum tax applicable to individuals. Interest on the Taxable 1994 Series A-T bonds is not excludable from gross income for federal income tax purposes. In addition, in the opinion of Bond Counsel, interest on the 1994 Series A Bonds and Taxable 1994 Series A-T Bonds is exempt from personal income taxation imposed by the State of California. The Issuer and the Borrower have covenanted in the Indenture and Financing Agreement to comply with applicable arbitrage and arbitrage rebate requirements of the Code as necessary to preserve the exclusion of interest on the 1994 Series A Bonds from gross income of the Owners of the 1994 Series A Bonds for federal income tax purposes. However, a failure to comply with arbitrage rebate requirements, to the extent applicable, could result in interest on the 1994 Series A Bonds becoming taxable retroactive to the date of issuance of the 1994 Series A Bonds. Corporate Alternative Minimum Tax While interest on the 1994 Series A Bonds also is not an item of tax preference for purposes of the alternative minimum tax applicable to corporations under Section 55 of the Code, tax-exempt interest, including interest on the 1994 Series A Bonds, received by corporations is taken into account in the computation of adjusted current earnings for purposes 02124/94 - 23 - m12-1854 - of the alternative minimum tax applicable to corporations (as defined for federal income tax purposes). Under the Code, alternative minimum taxable income of a corporation will be increased by 75% of the excess of the corporation's adjusted current earnings (including any tax- exempt interest) over the corporation's alternative minimum taxable income determined without regard to such increase. A corporation's alternative minimum taxable income, so computed, that is in excess of an exemption of$40,000, which exemption will be reduced (but not below zero) by 25% of the amount by which the corporation's alternative minimum taxable income exceeds $150,000, is then subject to a 20% minimum tax. Corporate Environmental Tax Section 59A of the Code imposes for taxable years beginning before January 1, 1996, an environmental tax of 0.12% ($1.20 per $1,000) on the amount of a corporation's alternative minimum taxable income (increased for certain book income and adjusted current earnings, including any tax-exempt interest, as described in the preceding paragraph) that exceeds $2,000,000 for the taxable year. The environmental tax is imposed whether or not the taxpayer is subject to the alternative minimum tax, but is deductible from gross income for federal income tax purposes. Tax on Certain Passive Investment Income of S Corporations Under Section 1375 of the Code, certain excess net passive investment income, including interest on the 1994 Series A Bonds, received by an S Corporation (a corporation treated as a partnership for most federal tax purposes) that has Subchapter C earnings and profits at the close of its taxable year may be subject to federal income taxation at the highest rate applicable to corporations, if more than 25% of the gross receipts of such S corporation is passive investment income. Foreign Branch Profits Tax Interest on the 1994 Series A Bonds may be subject to the foreign branch profits tax imposed by Section 884 of the Code when the 1994 Series A Bonds are owned by, and effectively connected with a trade or business of, a United States branch of a foreign corporation. CERTAIN OTHER TAX CONSEQUENCES 1994 Series A Bonds Not "Qualified Tax-Exempt Obligations" for Financial Institutions Section 265 of the Code provides that 100% of any interest expense incurred by banks and other financial institutions for interest allocable to tax-exempt obligations acquired after August 7, 1986, will be disallowed as a tax deduction. However, if the tax-exempt obligations are obligations other than private activity bonds, are issued by a governmental unit that, together with all entities subordinate to it, does not reasonably anticipate issuing more than $10,000,000 02/24/94 - 24 - m12-1854 of tax-exempt obligations (other than private activity bonds and other obligations not required to be included in such calculation) in the current calendar year, and are designated by the governmental unit as "qualified tax-exempt obligations," only 20% of any interest expenses deduction allocable to those obligations will be disallowed. For this purpose, qualified 501(c)(3) bonds such as the 1994 Series A Bonds are not treated as private activity bonds. The Issuer does not reasonably anticipate issuing less than $10,000,000 of tax-exempt obligations (other than private activity bonds and other obligations not required to be included in such calculation) during the current calendar year and has not designated the 1994 Series A Bonds as "qualified tax-exempt obligations" for purposes of the 80% financial institution interest expense deduction. Therefore, no interest expense of a financial institution allocable to the 1994 Series A Bonds is deductible for federal income tax purposes. Reduction of Loss Reserve Deductions for Property and Casualty Insurance Companies Under Section 832 of the Code, interest on the 1994 Series A Bonds received by property and casualty insurance companies will reduce tax deductions for loss reserves otherwise available to such companies by an amount equal to 15% of tax-exempt interest received during the taxable year. Effect on Certain Social Security and Retirement Benefits Section 86 of the Code requires Owners of the 1994 Series A Bonds who are also recipients of certain Social Security and certain Railroad Retirement benefits to take receipts or accruals of interest on the 1994 Series A Bonds into account in determining gross income. Other Possible Tax Consequences Although Bond Counsel expects to render opinions that interest on the 1994 Series A Bonds and the Taxable 1994 Series A-T Bonds is exempt from California personal income taxes and that interest on the 1994 Series A Bonds is excluded from gross income for federal income tax purposes, the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may otherwise affect a bondholder's federal or state tax liability. The nature and extent of these other tax consequences will depend upon the particular tax status of the Bondholders or Bondholders' other items of income or deduction. Bond Counsel expresses no opinion regarding any such consequences. UNDERWRITING v Kirkpatrick, Pettis, Smith, Polian Inc. and Charles A. Bell Securities Corp. (collectively, the "Underwriters") have agreed to purchase the Bonds from the Issuer at a price of $ plus accrued interest for which they will receive a fee of $ . The Bond Purchase Agreement provides that the Underwriters will purchase all of the Bonds if they are issued, the obligation to make such purchase being subject to certain terms and conditions set 02/24/94 - 25 - m12-1854 0 forth in the Bond Purchase Agreement, the approval of certain legal matters by counsel, and certain other information. The Underwriters intend to offer the Bonds to the public initially at the offering price shown on the cover page hereof, which price may subsequently change without requirement of prior notice. The Underwriters reserve the right to join with other dealers and underwriters in offering the Bonds to the public. The Underwriters may offer and sell the Bonds to certain dealers at prices lower than the public offering prices. The Borower has agreed to indemnify the Issuer and the Underwriters against certain liabilities. RATING Standard & Poor's Ratings Group ("S&P")has assigned a rating of " to the Bonds. The rating reflects only the view of S&P at the time the rating was issued and an explanation of the significance of such rating may be obtained from S&P. There is no assurance that any such rating will c'ontinue for any given period of time or that it will not be revised downward or withdrawn entirely by such rating agency if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of such rating can be expected to have an adverse effect on the market price of the Bonds. The rating shown on the cover page of this Official Statement is dependent in part on the fact that certain funds will be invested in the Investment Agreement. A downgrading of the long-term credit rating of_ may have an adverse effect on the rating for the Bonds. CERTAIN LEGAL MATTERS Certain legal matters relating to the authorization and validity of the Bonds will be subject to the approving opinion of Orrick, Herrington & Sutcliffe, San Francisco, California, as Bond Counsel. Certain legal matters will be passed upon for the Borrower by I its counsel, Michaud &Hoshiyama, San Francisco, California; and for the Lender by Paul Renno, Esq., its Corporate Counsel. Certain legal matters will be passed upon by Arter Hadden Haynes & Miller, Washington, D.C., counsel to the Underwriters. ,Bond Counsel's opinion will be limited to matters relating to authorization and validity of the Bonds. Bond Counsel has not been engaged to investigate the Project, the financial resources of the providers of the Investment Agreements or the Borrower or any other source of payment of the Bonds, and its opinion will make no statement as to such matters or as the accuracy or completeness of this Official Statement or any other information that may have been relied on by anyone in making the decision to purchase the Bonds. Payment of the fees of Orrick, Herrington & Sutcliffe and Arter Hadden Haynes & Miller is contingent upon the closing of the Bonds. 02/24/94 - 26 - m12-1854 r r ABSENCE OF LITIGATION On the date of delivery of the Bonds, the Issuer will deliver a certificate to the effect that there are no legal proceedings pending or, to the Issuer's knowledge, threatened to restrain or enjoin the issuance, sale or delivery of the Bonds or the payment, collection or application of the proceeds thereof or of the revenues and other'moneys and securities pledged or to be pledged under the Indenture or in any way contesting or affecting any authority for or the validity of the Bonds or the Indenture. MISCELLANEOUS Any statements herein involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the Issuer and the purchasers or owners of any of the Bonds. COUNTY OF CONTRA COSTA By: Chairman 02124194 - 27 - m12-1854 APPENDIX A CERTAIN DEFINITIONS In addition to the words and terms defined elsewhere in this Official Statement, the following words and terms as used herein will have the following meanings unless the context or use clearly indicates another or different meaning or intent. "Act" means Chapter 8 of Part 5 of Division 31 of the Health and Safety Code of the State of California. "Authorized Denomination" means $1,000 or any integral multiple thereof. "Authorized Issuer Representative" means the Chair of the Board of Supervisors, Director of Community Development, County Administrator, Director of the Growth Management and Economic Development Agency or Deputy Director Redevelopment of the Issuer, or any other person designated to act in such capacity by a Certificate of the Issuer containing the specimen signature of such person, which certificate may designate an alternate or alternates. "Authorized Borrower Representative" means any general partner of the Borrower, or any other person designated to act in such capacity by a certificate of such general partner containing the specimen signature of such person, which certificate may designate an alternate or alternates. "Bond Counsel" means any attorney at law or firm of attorneys selected by the Issuer, of nationally recognized standing in matters pertaining to the validity of, and exclusion from gross income for federal income tax purposes of interest on, bonds issued by states and political subdivisions, and duly admitted to practice law before the highest court of any state of the United States of America. "Bond Obligation" means as of any date of calculation, the aggregate principal amount of all outstanding Bonds or, with respect to any series, all outstanding Bonds of such series. "Bondholder" or "holder" or "registered owner," when used with respect to any Bond, means the person or persons in whose name such Bond is registered. "Bond Purchase Agreement" means the Bond Purchase Agreement among the Issuer, the Borrower and the Underwriters relating to the Bonds. "Bond Register" and "Bond Registrar" have the respective meanings specified in the Indenture. 02124/94 A-1 m12-1954 "Bond Year" means, with respect to a series of Bonds, the period beginning on the date of issuance of such series and ending on March 31, 1995, and each twelve-month period thereafter. The last Bond Year will end on the date,of final payment of such series of Bonds. "Business Day" or "business day" means a day on which (a)banks located in New York, New York, or in the city in which the Trust Office of the Trustee is located, are not required or authorized by law or executive order to close for business, and (b) The New York Stock Exchange is not closed. "Certificate of the Issuer, "Request of the Issuer,, "Requisition of the Issuer" and "Statement of the Issuer" mean, respectively, a written certificate, request, requisition or statement signed in the name of the Issuer by an Authorized Issuer Representative. Any such instrument and supporting opinions or representations, it any, may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined will be read and construed as a single instrument. "Closing Date" means the date of delivery of the Bonds in exchange for the purchase price thereof. "Code" means the Internal Revenue Code of 1986. Each reference to a section of the Code will be deemed to include the United States Treasury Regulations in effect or proposed from time to time with respect thereto and applicable to the Project or the Bonds or the use of the proceeds thereof. "Compliance Certificate" means a certificate of an Authorized Borrower Representative to the effect that, as of the date of such certificate, the Borrower is in compliance with all requirements of the Regulatory Agreement and Declaration of Restrictive Covenants, the Financing Agreement, the other Financing Documents and the FHA Loan Documents (with such exceptions as will be acceptable to the Issuer). "Costs of Issuance" means all fees, costs and expenses payable or reimbursable directly or indirectly by the Issuer or the Borrower and related to the authorization, issuance and sale of the Bonds. "Defaulted Interest" means any interest on any Bond which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date. "Event of Default" or "event of default" means any of the events so specified or defined in the Indenture. THA" means the Federal Housing Administration, an organizational unit within HUD, its successors and assigns. 02/24/94 A-2 m12-1854 "FHA Loan Documents" means, collectively,the Mortgage Note, the Mortgage, the FHA Regulatory Agreement, and all other documents required in connection with the endorsement of the Mortgage Loan by FHA for Mortgage Insurance. "FHA Regulations" means the regulations promulgated by FHA regarding insurance under Sections 221(d)(4) and 244 of the National Housing Act. "FHA Regulatory Agreement" means the Regulatory Agreement for Insured Multi-family Projects dated March _, 1994, by and between the Borrower and HUD, together with any and all supplements thereto. "Financing Agreement" means the Financing Agreement, dated as of March 1, 1994, among the Issuer, the Trustee, the Lender and the Borrower, together with any and all supplements thereto. "Financing Documents" will mean the Indenture, the Financing Agreement, the Regulatory Agreement and Declaration of Restrictive Covenants, the Tax Certificate, the GNMA Guaranty Agreement and the GNMA Security. "GNMA" means Government National Mortgage Association, its successors and assigns. "GNMA Guaranty Agreement" means the GNMA Guaranty Agreement between GNMA and the Lender, together with all Supplements thereto. "GNMA Security" means the fully-modified, mortgage-backed security in the principal amount of$ to be issued by the Lender and registered in the name of the Trustee and dated April_, 1994, which security is backed by the Mortgage Note and the Mortgage and is guaranteed as to timely payment of principal and interest by GNMA, pursuant to Section 306(g) of Title m of the National Housing Act and the regulations promulgated thereunder, and bearing interest at the rate of_% per annum. "HUD" means the United States Department of Housing and Urban Development, any authorized representative thereof or any successor thereto. "Indenture" means the Trust Indenture, dated as of March 1, 1994, between the Issuer and the Trustee, together with all supplements thereto. "Interest Payment Date" means each April 20 and October 20, commencing 20, 199_. "Investment Agreement" means an Investment Agreement for the Bond Fund between the Trustee and providing for investment of moneys in the Bond Fund at the rate of_% per annum from the Closing Date until 02124194 A-3 m12-1854 "Mortgage" means the deed of trust from the Borrower securing the Mortgage Note, as amended. "Mortgage Insurance" means the insurance against certain losses under the Mortgage Loan provided by the FHA, as evidenced by the endorsed Mortgage Note. "Mortgage Loan" means the loan made by the Lender to the Borrower in connection with the issuance of the Bonds and in a principal amount equal to the aggregate principal amount of the Bonds, in order to provide financing for the Project. "Mortgage Note" means the deed of trust note from the Borrower in favor of the Lender evidencing the Mortgage Loan. "National Housing Act" means the National Housing Act of 1934, as amended. "Outstanding," when used with respect to the Bonds means all Bonds theretofore authenticated and delivered under the Indenture, except: (a) Bonds theretofore cancelled by the Trustee or theretofore delivered to the Trustee for cancellation; (b) Bonds for the payment or redemption of which moneys or obligations will have been theretofore deposited with the Trustee in accordance with the Indenture; and (c) Bonds in exchange for or in lieu of which other Bonds have been authenticated and delivered under the Indenture. Qualified Investments" means any of the following if and to the extent permitted by law: (i) direct obligations of the United States of America backed by the full faith and credit of the United States; (ii) obligations of United States government agencies the principal of and interest on which are guaranteed by the full faith and credit of the United States of America; (iii) time deposits, certificates of deposit or other obligations issued by any state or national bank which has combined capital, surplus and undivided profits of not less than $50,000,000 (including the Trustee), or any savings and loan institution having combined capital, surplus and retained earnings of not less than $100,000,000, which time deposits, other accounts, certificates of deposit or other obligations are fully insured by the Federal Deposit Insurance Corporation and which are rated by the Rating Agency at least P-1 for investments of less than 365 days and Aa-2 or higher for investments over one year; (iv) the Investment Agreement or any other investment agreement, having the same terms as said Investment Agreement with respect to interest rate and maturity date, with an institution rated at least P-1 if the investment is for less than 365 days and Aa-2 or higher if the investment is for one year or longer) by the Rating Agency; and (v) money market funds (including money market funds sponsored by the Trustee or its affiliates) investing solely in investments described in clauses (i)and (ii)above and rated Aaa by the Rating Agency. 02/24/94 A-4 m12-1854 "Rating Agency" means Standard & Poor's Ratings Group, and its successors and assigns. "Rebate Amount" means the amount, if any, which is to be paid to the United States of America pursuant to Section 148(f) of the Code and the Tax Certificate and the Indenture. "Rebate Analyst" means Orrick, Herrington & Sutcliffe or any other qualified person acceptable to the Issuer and retained by the Borrower to calculate the Rebate Amount or, in the event that the Borrower fails to so retain a Rebate Analyst one month prior to any date on which calculations are required to be made under the Tax Certificate, any qualified person retained by the Trustee to calculate the Rebate Amount. "Regular Record Date" means, with respect to an Interest Payment Date, the close of business on April 5 or October 5, as the case may be, next preceding such Interest Payment Date, whether or not a business day. "Regulatory Agreement and Declaration of Restrictive Covenants" means the Regulatory Agreement and Declaration of Restrictive Covenants, dated as of March 1, 1994, between the Borrower and the Issuer, together with any and all supplements thereto. "Reserved Rights of the Issuer" means (a) all rights which the Issuer or its officers, officials, agents or employees may have under the Indenture and the Financing Agreement to indemnification by the Borrower and by any other persons and to payments for expenses incurred by the Issuer itself, or its officers, officials, agents or employees; (b) the right of the Issuer to receive notices, reports or other information, make determinations and grant approvals under the Indenture and under the other Financing Documents; (c) all rights of the Issuer to enforce the representations, warranties, covenants and agreements of the Borrower pertaining in any manner or way, directly or indirectly to the requirements of the Housing Law or any requirements imposed by the Issuer with respect to the Project, or necessary to assure that interest on the 1994 Series A Bonds is excluded from gross income for federal income tax purposes, as are set forth in any of the Financing Documents or in any other certificate or agreement executed by the Borrower; (d) all rights of the Issuer in connection with any amendment to or modification of the Financing Documents; and (e) all enforcement remedies with respect to the foregoing. "Responsible Officer" means the President or any vice president, assistant vice president or trust officer of the Trustee. "Revenues" means the revenues, receipts, interest, income, investment earnings and other moneys received or to be received by the Issuer or the Trustee from the Project, including moneys received or to be received from the GNMA Security or the Borrower under the Financing Documents and all investment earnings derived or to be derived on any moneys or investments held by the Trustee under the Indenture, but excluding (a) amounts paid as fees, reimbursement for expenses or for indemnification of the Issuer and the Trustee, (b) amounts 02/24194 A-5 m12-1854 paid to or collected by the Issuer in connection with any Reserved Rights of the Issuer and (c) any Rebate Amount. "State" means the State of California. "Tax Certificate" means the Tax Certificate and Agreement dated the Closing Date between the Issuer and the Borrower, together with any and all supplements thereto. "Taxes" means all taxes, water rents, sewer rents, assessments and other governmental or municipal or public or private dues, fees, charges and levies and any liens (including federal tax liens) which are or may be levied, imposed or assessed upon the Project or any part thereof, or upon any leases pertaining thereto, or upon the rents, issues, income or profits thereof, whether any or all of the aforementioned be levied directly or indirectly or as excise taxes or as income taxes. "Trustee" means Bank of America National Trust and Savings Association, a national banking association, its successors and assigns. "Trust Estate" means the property rights, money, securities and other amounts pledged and assigned to the Trustee pursuant to the granting clauses of the Indenture. "Trust Office" means the appropriate trust office of the Trustee located at the address set forth in the Indenture, or such other offices as may be specified in writing to the Issuer by the Trustee. "Underwriters" means Kirkpatrick, Pettis Smith, Polian Inc. and Charles A. Bell Securities Corp. 02/24/94 A=6 m12-1854 APPENDIX B SUMMARY OF THE INDENTURE The following is a summary, which does not purport to be comprehensive or definitive, of certain provisions of the indenture, and which is qualified in its entirety by reference to the Indenture. Security for the Bonds Under the Indenture, as security for payment of the principal of, premium, if any, and interest on the Bonds and for funds advanced by the Trustee pursuant thereto, the Issuer pledges and assigns to, and grants a security interest to the Trustee in, the following described property: (a) all right, title and interest of the Issuer in and to all Revenues, derived or to be derived by the Issuer or the Trustee for the account of the Issuer under the terms of the Indenture and the Financing Agreement (other than the Reserved Rights of the Issuer), together with all Revenues received by the Trustee for the account of the Issuer arising out of or on account of the Trust Estate; (b) all right, title and interest of the Issuer in and to the GNMA Security, including all payments with respect thereto and any interest, profits or other'income derived from the investment thereof; (c) all right, title and interest of the Issuer in and to, and remedies under, the Financing Agreement and the Regulatory Agreement and Declaration of Restrictive Covenants; (d) all funds, moneys and securities and any and all other rights and interests in property whether tangible or intangible from time to time 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. Establishment of Funds for the Bonds The following funds, will be established and maintained by the Trustee under the Indenture for the benefit of the Bonds: (i) Acquisition Fund; 00 Bond Fund (and therein a Sinking Fund Account); (iii) Expense Fund; (iv) Cost of Issuance Fund; and (v) Rebate Fund. 02/24/94 B-1 m12-1854 • i i Application of Bond Proceeds and Other Amounts Upon issuance of the Bonds, the proceeds of the Bonds and other amounts received in connection with such issuance will be deposited as follows: (a)the interest accrued on the Bonds between the dated date of such Bonds and the date of delivery thereof ($_____) will be deposited in the Bond Fund; (b)$ of the 1494 Series A Bond proceeds will be deposited in the Acquisition Fund; (c) $ of the 1994 Series A Bond proceeds will be deposited in the Costs of Issuance Fund; (d) $ of the 1994 Series A Bond proceeds will be transferred to the Borrower; and (e) $ of the 1994 Series A-T Bonds proceeds will be deposited into the Costs of Issuance Fund. Acquisition Fund Amounts will be deposited in the Acquisition Fund as provided above and will be applied as provided below; provided that no amounts will be transferred or disbursed from the Acquisition Fund until the Trustee will have received evidence of the recordation of any amendments to the Regulatory Agreement and Declaration of Restrictive Covenants, which may be telephonic notice from the title company responsible for such recordation. On the date of issuance of the Bonds, the Trustee will acquire the GNMA Security in accordance with clause (i) below, and will (A) confirm that the aggregate principal amount of the GNMA Security is$ plus accrued interest, if any, or such lesser amount in the event that the GNMA Security is delivered subsequent to any pass through of principal on the Mortgage Note and that the GNMA Security bears interest at the rate of % per annum; and (B) notify the Rating Agency in writing of the acquisition; and (C) after receipt of the GNMA Security, apply the moneys on deposit in the Acquisition Fund as follows: (i) the Trustee will acquire the GNMA Security from the Lender for the account of the Issuer and will remit to the Lender, but only to the extent of available funds, an amount not to exceed the principal amount of the GNMA Security, plus accrued and unpaid interest thereon, if any; and (ii) the Trustee will transfer to the Bond Fund any remaining balance in the Acquisition Fund. Bond Fund (a) The Trustee will deposit into the Bond Fund (i) the amounts required above; (ii) all income, revenue, proceeds and other amounts received from or in connection with the GNMA Security; (iii.) all earnings and gains from the investment of moneys held in the Bond Fund accruing after the acquisition of the GNMA Security by the Trustee; and (iv) any other amount received by the Trustee which are subject to the lien and pledge of the Indenture. 42/24194 13-2 m12-1854 The GNMA Security will, upon its acquisition, be held for the account of the Bond Fund and registered in the name of the Trustee so that the Trustee maintains a first perfected security interest in such GNMA Security at all times. (b) At the earliest practicable time, the Trustee will give immediate telephonic notice (to be followed by written notice on the 16th day of any month) to GNMA of the failure of the Lender to make any payment on the GNMA Security on the 15th day of such month (or the next succeeding Business Day if the 15th day is not a Business Day) and demand payment under the terms of GNMA's guaranty thereof. (c) The Trustee will apply amounts in the Bond Fund (other than amounts in the Sinking Fund Account) on each Interest Payment Date (or any other date on which Bonds are to be redeemed), in the following order of priority: (i) First to pay interest on the Bonds and .then to pay the principal of all Bonds maturing on such date and the redemption prices of all Bonds required to be redeemed on such date; (ii) Amounts on deposit in the Bond Fund will be transferred to the Expense Fund in an amount sufficient to pay the expenses set forth under the Expense Fund below; (iii) Amounts on deposit in the Bond Fund will be transferred to the Expense Fund in an amount or amounts sufficient to pay other expenses as required under the Expense Fund below, provided that amounts in the Bond Fund will never be reduced below $5,000; and (iv) Notwithstanding the provisions of clause (i) above, amounts held in the .Sinking Fund Account will be exclusively used to pay the principal of the Bonds maturing on , 2004 or in a manner which results in a discharge of the Indenture. (d) The Trustee will also apply moneys in the Bond Fund which are (i) transferred from the Acquisition Fund pursuant to the Indenture derived from payments on the GNMA Security that exceed level payments of principal of and interest on the Mortgage Loan, to the redemption of Bonds in accordance with the redemption provisions herein. (e) All scheduled principal payments received by the Trustee on the GNMA Security on or prior to , 2004, will be deposited by the Trustee into the Sinking Fund Account until the amount therein equals $ and will be used to pay the principal of the Series A Bonds maturing on , 2004. Any investment earnings on money held in the Sinking Fund Account will be deposited in the Bond Fund. 02/24/94 B-3 m12-1854 Expense Fund The Trustee will apply moneys on deposit in the Expense Fund solely for the following purposes, on each Interest Payment Date, in the following order of priority: (i) to transfer money to the Bond Fund on any Interest Payment Date to the extent necessary to pay debt service on the Bonds on such date but only if there are insufficient moneys held to the credit of the Bond Fund on that date; (ii) to transfer to the Rebate Fund the Rebate Amount (if any); (iii) to pay one-half of the annual administrative fees and expenses of the Trustee in a semiannual amount equal to $ (iv) to pay the fees and expenses of the Rebate Analyst in an amount not to exceed $ in any five year period in which calculations are required to be made by the Rebate Analyst pursuant to the Tax Certificate; and (V) to pay one-half the annual fee of the Issuer in a semiannual amount equal to one-sixteenth of one percent of the initial aggregate principal amount of the Bonds issued. In the event moneys in the Expense Fund are not sufficient to pay the fees and expenses of the Trustee, the Rebate Analyst or the Issuer, the Trustee will seek payment of any such deficiency from the Borrower. Rebate Fund The purpose of the Rebate Fund is to facilitate compliance with section 148(f) of the code. Any Rebate Amount deposited in such Fund will be for the sole benefit of the United States of America and will not be subject to the lien of the Indenture or to the claim of any other person, including, without limitation, the Bondholders and the Issuer. The requirements of this section are subject to, and will be interpreted in.accordance with, section 148(f) of the Code and the Treasury regulations applicable thereto (the "Regulations"), and will apply except to the extent(i)the Trustee is furnished with an opinion of Bond Counsel or other satisfactory evidence that the Regulations contain an applicable exception; or (ii) the Trustee in its judgment determines that such requirements will diminish the security of the Bondholders; provided that in the case of clause (ii), the Trustee will obtain an opinion of Bond Counsel to the effect that failing to take such action would not adversely affect the exclusion of interest on the Tax-Exempt Bonds from federal income taxation. Promptly upon the close of each Bond Year and also upon the retirement of the Bonds, the Trustee will provide the Borrower with a statement of earnings on funds and accounts held under the Indenture during any period not covered by a prior statement, and a final statement or a supplement thereto covering the period ending Each statement will include 02/24/94 B-4 m12-1854 the purchase and sale prices of each investment, if any, (including any commission paid thereon which will be separately stated if such information is available), the dates of each investment transaction, information as to whether such transactions were made at a discount or premium, and such other information known or reasonably available to the Trustee as the Borrower or Rebate Analyst will reasonably require. If so requested by the Owner at any time, the Trustee will create within the Bond Fund separate accounts for purposes of accounting for earnings on amounts attributable to the 1994 Series A Bonds and the Taxable 1994 Series A-T Bonds, respectively. The Trustee will promptly transfer to the Rebate Fund each amount required to be deposited therein pursuant to the Tax Certificate, first from earnings in the Acquisition Fund, and second, to the extent amounts in the Acquisition Fund are insufficient, from revenues which have been deposited into the Bond Fund and earnings thereon. To the extent that the amount to be deposited into the Rebate Fund exceeds the amount which can be transferred from such Funds, the Trustee will promptly notify the Borrower and an amount equal to such deficiency will be paid promptly by the Borrower to the Trustee for deposit into the Rebate Fund. The Borrower and the Trustee, on behalf of the Issuer, will keep such records as will enable them to fulfill their respective responsibilities under this section and section 148(f) of the code, and the Borrower (or the Trustee upon the written request of the Issuer) will engage a Rebate Analyst as may be necessary in connection with such responsibilities. The fees and expenses of the Rebate Analyst will be paid by the Trustee as described under the Expense Fund. For purposes of the computation of the Rebate Amount required under the Tax Certificate, the Trustee will make available to the Borrower and the Issuer during normal business hours all information in the Trustee's control which is necessary to such computations. Costs of Issuance Fund The Trustee will pay Costs of Issuance upon the written direction of the Issuer, which Costs of Issuance will not exceed the amounts set forth in the Bond Purchase Agreement. Any funds remaining in the Costs of Issuance Fund six months after the Closing Date, and not specifically committed to the payment of Costs of Issuance, will be deposited in the Bond Fund. Investments The Trustee will invest all moneys in the Bond Fund in the Investment Agreement described in clause (iv) of the definition of Qualified Investments. Subject to the provisions of the foregoing sentence and the Tax Certificate, any moneys held as part of any fund created by the Indenture, including the Expense Fund, will be invested or reinvested from time to time by the Trustee upon receipt by the Trustee of the written directions of the Borrower in Qualified Investments having a maturity not exceeding the shorter of(i) the date on which such Funds may be needed under the Indenture, or (ii) six months, in its sole discretion unless directed by the Borrower to invest such moneys in Qualified Investments specified by the Borrower, in which event it will follow such direction. In no event will a maturity be longer than the longest maturity of the Bonds. The investments so made will be held by the Trustee and will be deemed 02/24/94 B-S m12-1$54 at all times to be a part of the fund in which such moneys were held; provided that for purpose of investment moneys held in any of the funds established under the Indenture may be commingled. The Trustee will sell and reduce to cash a sufficient amount of such investments whenever the cash balance in any fund will be insufficient to cover a proper disbursement therefrom. For the purpose of determining the amount in any fund, Qualified Investments(other than an Investment Agreement) credited to such fund or account will be valued at their cost (exclusive or accrued interest after the first payment of interest following acquisition) or market value, whichever is less. The Trustee will invest at the highest yields prudently available consistent with the Indenture. If any moneys held under the Indenture other than the Expense Fund are not invested in the -Investment Agreement, such moneys will be invested only in accordance with the written instructions of the Borrower, upon the advice,of Bond Counsel. No Disposition of GNMA Security The Trustee will not, without the written consent of the holders of 100% of the Bond Obligation, sell or otherwise dispose of the GNMA Security after its acquisition for an amount less than an amount sufficient, together with other amounts then held under the Indenture and available for the payment of principal of and interest on the Bonds, to provide for the payment of the Bonds in accordance with the Indenture. Events of Default; Acceleration; Remedies Each of the following events will be an Event of Default under the Indenture: (a) default in the due and punctual payment of any interest on any Bond; or (b) default in the due and punctual payment of the principal of or premium, if any, on any Bond whether at the stated maturity thereof, or on proceedings for redemption thereof, or on the maturity thereof by declaration; or (c) default in the performance or observance of any other of the covenants, agreements or conditions on the part of the Issuer,in the Indenture or in the Bonds (subject to an opportunity to cure); or (d) approval by a court of competent jurisdiction of any petition for reorganization of the Issuer or rearrangement or readjustment of the obligations of the Issuer under the provisions of any bankruptcy law. The Borrower's failure to pay obligations owing to the Lender will not constitute an Event of Default under the Indenture. The occurrence of an Event of Default under this section with respect to one series does not of itself constitute an Event of Default with respect to any other series of the Bonds. 02/24/44 B-6 m12-1854 The Trustee will give written notice to tle.Rating Agency of the occurrence of any Event of Default described in paragraph (a) or (b) above within 15 days after a Responsible Officer of the Trustee has notice or knowledge thereof. If an Event of Default described in subparagraph (a) or (b) above has occurred and is continuing with respect to Bonds, the Trustee may, and upon the written request of the holders of at least 25% of the Bond Obligation of such series the Trustee will, by notice in writing delivered to the Issuer and the Borrower, declare the principal of all Bonds then outstanding and the interest accrued thereon immediately due and payable without premium, and such principal and interest will thereupon become and be immediately due and payable. If an Event of Default described in subparagraph (c) or (d) has occurred and is continuing, the Trustee will, upon the written request of the holders of 100% of the Bond Obligation, by notice in writing delivered to the Issuer and the Borrower, declare the principal of all Bonds then outstanding and the interest accrued thereon immediately due and payable without premium, and such principal and interest will thereupon become and be immediately due and payable. The foregoing provisions of the two immediately preceeding paragraphs, however, are subject to the condition that if at any time after the principal of the Bonds of such series will have been so declared due and payable, and before any judgment or decree for the payment of the money due will have been obtained or entered as hereinafter provided, there will be paid or deposited with the Trustee a sum sufficient to pay all principal of the Bonds of such series matured (or due upon mandatory redemption) prior to such declaration and all matured installments of interest (if any) upon all the Bonds of such series, with interest at the rate borne by the Bonds on such overdue.principal and premium, if any, and (to the extent legally enforceable) on such overdue installments of interest (other than in the payment of principal of and interest on the Bonds due and payable solely by reason of such declaration), and the reasonable expenses of the Trustee will have been made good or cured or adequate provisions will have bee made therefor, then and in every case, the holders of at least a majority of the Bond Obligation of such series, by written notice to the Trustee and the Issuer, may direct the Trustee on behalf of the holders of all the Bonds of such series to rescind and annul such declaration and its consequences, but no such rescission and annulment will extend to or will affect any subsequent default, nor will it impair or exhaust any right or power consequent thereon. Nothing in the Indenture will be construed to obligate the Issuer to make a payment or deposit referred to herein from any revenues other than the revenues derived from the Trust Estate. Upon the occurrence of an Event of Default, the Trustee will have the power to proceed with any right or remedy granted by the Constitution and laws of the State, as it may deem best, including any suit, action or special proceeding in equity or at law for the specific performance of any covenant or agreement contained herein or under the GNMA Security or for the enforcement of any proper legal or equitable remedy as the Trustee will deem most effectual to protect the rights aforesaid, insofar as such may be authorized by law. 02124/94 B-7 m12-1854 . No remedy by the terms of the Indenture conferred upon or reserved to the Trustee or to the Bondholders is intended to be exclusive of any other remedy, but each and every such remedy will be cumulative and will be in addition to any other remedy given to the Trustee or to the Bondholders hereunder,or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default or event of default will impair any such right or power or will be construed to be a waiver of any such default or event of default or acquiescence therein, and every such right and power may be exercised from time to time and as often as may be deemed expedient. No waiver of any default or event of default hereunder, whether by the Trustee or by the Bondholders, will extend to or will affect any subsequent default or event of default or will impair any rights or remedies consequent thereto. Rights of Bondholders If any Event of Default will have occurred and if requested in writing so to do by the holders of not less than a majority of the Bond Obligation of the series with which there is a default, and if indemnified as provided in the Indenture, the Trustee will be obligated to exercise such one or more of the rights and powers conferred by the Indenture and to proceed to protect its rights and the rights of the Bondholders under applicable law, the GNMA Security, the GNMA Guaranty Agreement, the Financing Agreement and the Indenture, as the Trustee, being advised by counsel, will deem most expedient in the interest of the Bondholders. Anything in the Indenture to the contrary notwithstanding, but subject to the provisions of the Indenture, the holders of a majority of such Bond Obligation will have the right at any time, by an instrument in writing executed and delivered to the Trustee, to direct the time, method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of the Indenture, or for the appointment of a receiver or any other proceedings hereunder, in accordance with the provisions of law, the Indenture and the GNMA Security. Supplemental Indentures Not Requiring Consent of Bondholders The Issuer and the Trustee may, without the consent of or notice to any of the Bondholders, enter into an indenture or indentures supplemental to the Indenture as will not be inconsistent with the terms and provisions hereof or materially adverse to the interests of the holders of the Bonds, including without limitation for any one or more of the following purposes: (a) to cure any ambiguity or to cure or correct any defect or inconsistent provisions contained in the Indenture or to make such provisions in regard to matters or questions arising under the Indenture as may be necessary or desirable and not contrary to or inconsistent with the Indenture or adverse to the Bondholders; (b) to change or modify any provision of the Indenture so as to harmonize to the maximum extent practicable to the provisions hereof with existing rules, regulations and procedures of FHA; 02/24/94 B-g m12-1854 (c) to add to the covenants and agreements of the Issuer in the Indenture other covenants and agreements, or to surrender any right or power reserved or conferred upon the Issuer if such surrender will not, in the judgment of the Trustee, materially adversely affect the interests of the Bondholders, the Trustee being authorized to rely on an opinion of counsel (including counsel to the Issuer) with respect thereto; (d) to confirm, as further assurance, any pledge of or lien on the Financing Agreement or the Revenues or of any other moneys, securities or funds subject to the lien of the Indenture; (e) to modify any of the provisions hereof relating to the use of a book-entry system for registration of the Bonds; (f) to preserve the exclusion of interest on the 1994 Series A Bonds from gross income for federal income tax purposes, as set forth in an opinion of Bond Counsel; (g) to subject to the lien and pledge of the Indenture additional revenues, properties or collateral; (h) 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 any of them; or (i) to modify, amend or supplement the Indenture or any indenture supplemental thereto in such manner as to permit the qualification thereof under the Trust Indenture Act of 1939 or any similar federal statute hereafter in effect or under any state securities laws. Supplemental Indentures Requiring Consent of Bondholders With the consent of the holders of not less than two-thirds of the Bond Obligation of each series affected thereby, the Issuer and the Trustee may, from time to time, enter into supplemental indentures for the purpose of modifying, altering, amending, adding to or rescinding any of the terms or provisions contained in the Indenture or in any supplemental indenture; provided, however, that nothing contained in this section will permit, or be construed as permitting (a) an extension of the stated maturity of or a reduction in the principal amount of or reduction in the interest rate on, or an extension of time of payment of interest on, or reduction of any premium payable on the redemption of, any Bonds, without the consent of the registered owner of such Bonds; or (b) the creation of any lien on all or any portion of the Trust Estate prior to or on a parity with the lien of the Indenture, without the consent of the holders of all of the Bonds, or (c) a reduction in the amount of Bond Obligation, the.holders of which are required to approve any such supplemental indenture, without the consent of the holders of all the Bonds at the time Outstanding which would be affected by the action to be taken; or (d) a privilege or priority of any Bond over any other Bonds without the consent of the holders of all Bonds adversely affected thereby; or (e) any action which may result in the loss of the exclusion of interest on the 1994 Series A Bonds from federal income taxation; or (f) an 02124194 B-9 m12-1854 amendment of the section of the Indenture relating to disposition of the GNMA Security or the second paragraph of the section of the Indenture relating to acceleration upon and Event of Default under subparagraph (c) or (d) of such section), without in each case the consent of the holders of all the Bonds then Outstanding. If at any time the Issuer will request the Trustee to enter into any such supplemental indenture for any of the purposes of this section, the Trustee will, upon being satisfactorily indemnified with respect to, expenses, cause notice of the proposed execution of such supplemental indenture to be mailed, postage prepaid, to all Bondholders. Such notice will briefly set forth the nature of the proposed supplemental indenture and will state that copies thereof are on file at the Trust Office of the Trustee for inspection by all Bondholders. If, within 60 days following the mailing of such notice, the holders of the required portion of Bonds at the time of the execution of any such supplemental indenture will have consented to and approved the execution thereof as herein provided, no holder of any Bond will have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or the Issuer from executing the same or from taking any action pursuant to the provisions thereof. Upon the execution of any such supplemental indenture as is in this section permitted and provided, the Indenture will be and be deemed to be modified and amended in accordance therewith. Bonds owned or held by or for the account of the Issuer or the Borrower or any Person controlling, controlled by or under common control with either of them will not be deemed Outstanding for the purpose of consent or any calculation of Outstanding Bonds provided for in the Indenture. At the time of any such calculation, the Issuer will furnish the Trustee a certificate of an Authorized Representative of the Issuer, upon which the Trustee may rely, describing all Bonds held by the Issuer to be so excluded. Discharge of Indenture If the Issuer (i) will pay or cause to be paid to the holders of the Bonds the principal, interest and premium, if any, to become due thereon at the times and in the manner stipulated therein and in the Indenture, and will pay or cause to be paid all fees and expenses of the Trustee, and (ii) will keep, perform and observe all and singular the covenants and promises in the Bonds and in the Indenture expressed as to be kept, performed and observed by it or on its part, then these presents and the estate and rights granted will, cease, determine and be void, and thereupon the Trustee will cancel and discharge the lien of the Indenture and execute and deliver to the Issuer such instruments in writing as will be requisite to satisfy the lien of the Indenture, will convey to the Borrower the estate, and will assign and deliver to the Borrower any interest in property at the time subject to the lien of the Indenture which may then be in its possession, except amounts held by the Trustee for the payment of principal of and interest and premium, if any, on the Bonds. 02/24/94 B-10 m12-2854 All Outstanding Bonds will, prior to the maturity or redemption date thereof, be deemed to have been paid within the meaning and with the effect expressed in item (i) of the first paragraph of this section if the following conditions will have been fulfilled: (a) there will be on deposit with the Trustee either moneys (which are not subject to Sections 544, 547 or 554 of the United States Bankruptcy Code or any other banking laws of the United States) or direct noncallable obligations of the United States of America(which are purchaser with moneys which are not subject to Sections 544, 547 or 550 of the United States Bankruptcy Code or any other banking laws of the United States) in an amount sufficient to pay when due the principal or redemption price, if applicable, and interest due and to become due on the Bonds on and prior to the redemption date or maturity date thereof, as the case may be; (b) if any of the Bonds are to be redeemed on any date prior to their maturity, the Issuer will have given to the Trustee, in form satisfactory to it, irrevocable instructions to mail, as provided in the Indenture, notice of redemption of such Bonds on such date; (c) the Issuer will have given the Trustee irrevocable instructions to mail, as soon as practicable, in the manner prescribed by the Indenture, a notice to the holders of such Bonds that the deposit required by this paragraph has been made with the Trustee and that the Bonds are deemed to have been paid in accordance with this section and stating the redemption date upon which moneys are to be available for the payment of the principal or redemption price, if applicable, on said Bonds; and (d) the Trustee will have received the opinion required by the paragraph immediately below. No deposit under this section will be made or accepted and no use made of any such deposit unless the Trustee will have received an opinion of Bond Counsel to the effect that such deposit and use would not adversely affect the exclusion of interest on the 1994 Series A Bonds from gross income for federal income tax purposes. The Trustee The Trustee pursuant to the Indenture accepts the trusts and obligations imposed upon it by the Indenture and agrees to perform such trusts and obligations, but only upon and subject to the following express terms and conditions and no implied covenants or obligations will be read into the Indenture against the Trustee: (a) The Trustee may execute any of the trusts or powers of the Indenture and perform any of its duties by or through attorneys, agents, receivers or employees, and will be entitled to advice of counsel concerning all matters of the trusts thereof and the duties under the Indenture, and may in all cases pay such reasonable compensation to all such attorneys, agents, receivers and employees as may be reasonably employed in connection with the trusts thereof. The Trustee may act upon the opinion or advice of any attorney, who may be the attorney or attorneys for the Issuer, and the Trustee will not be responsible for any loss or damage resulting from any action or inaction taken in good faith in reliance upon such opinion or advice. 02124194 B-11 m12-1854 (b) The Trustee will not be responsible for any recital in the Indenture, or in the Bonds (except in respect to the authentication certificate of the Trustee endorsed on the Bonds), or for the validity of the execution by the Issuer of the Indenture or of any supplements to the Indenture or instruments of further assurance, or for the sufficiency of the security for the Bonds issued under the Indenture or intended to be secured thereby. (c) The Trustee may become the owner or pledgee of the Bonds secured by the Indenture and otherwise deal with the Issuer and the Borrower with the same rights which it would have if not Trustee. (d) To the extent permitted under the Indenture, the Trustee may rely and will be protected in acting upon any notice, request, consent, certificate, order, affidavit, letter, telegram or other paper or document reasonably believed to be genuine and correct and to have been signed or sent by the proper person or persons, and the Trustee will not be bound to make any investigation into the facts or matters stated in any such document so delivered and signed unless requested in writing so to do by the holders of a majority of the Bond Obligation. (e) The permissive rights of the Trustee to do things enumerated in the Indenture will not be construed as a duty unless so specified herein. (f) At any and all reasonable times, the Trustee and its duly authorized agents, attorneys, experts, engineers, accountants and representatives will have the right, but will not be required, to inspect the Project fully, including all books, papers and records of the Issuer pertaining to the Project and the Bonds, and to take such memoranda from and in regard thereto as may be desired. (g) Notwithstanding anything elsewhere in the Indenture contained, the Trustee will have the right, but will not be required, to demand in respect of the authentication of any Bonds, the withdrawal of any moneys, the release, of any interest in property, or any action whatsoever within the purview of the Indenture, any showings, certificates, opinions, appraisals or other information, or official action or evidence thereof, in addition to those required in the Indenture. (h) Before taking any action under the Indenture the Trustee may require that a satisfactory indemnity bond be furnished for the reimbursement of all expenses to which it may be put and to protect it against all liability, except liability which is adjudicated to have resulted from its negligence or willful misconduct by reason of any action so taken. (i) All moneys received by the Trustee or any paying agent will, until used or applied or invested as provided in the Indenture, be held in trust for the purposes for which they were received but need not be segregated from other funds except to the extent required by law or by the Indenture. Neither the Trustee nor any paying agent will be under any liability for interest on any moneys received under the Indenture except such as may be agreed upon in writing with the Issuer or the Borrower. 02/24/94 B-12 m12-1854 (j) The Trustee undertakes to perform such duties as are specifically set forth in the Indenture. In case an event of default has occurred which has not been cured, the Trustee will exercise the rights, duties and powers vested in it by the Indenture in good faith and with that degree of diligence, care and skill which a reasonable person would exercise under similar circumstances in like situations. (k) The Trustee will not be responsible for insuring the Project or for collecting any insurance moneys. 0) Whether or not expressly provided for herein, every provision of the Indenture relating to the conduct of or affecting the liability of the Trustee will be subject to the provisions of this section. The immunities and exceptions from liability of the Trustee will extend to its officers, employees and agents. Amendment of Certain Documents The Issuer and the Trustee may make or consent to any amendment, change or modification of the Financing Agreement, the GNMA Security and the Regulatory Agreement and Declaration of Restrictive Covenants, for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective or inconsistent provision contained therein, or in regard to matters or questions arising under said documents, as the Issuer and the Trustee may deem necessary or desirable and not inconsistent with said documents or the Indenture and which will not adversely affect the interests of the holders of the 1994 Series A Bonds. Except for the amendments, changes or modifications as provided in the paragraph immediately above, the Trustee will not consent to or approve any other amendment, change or modification of any of the Financing Documents (other than the Indenture) without notice to and the written approval or consent of the Issuer, the Lender, the Borrower and the owners of not less than two-thirds of the Bond Obligation given and procured as provided in the Indenture. If, at any time, either the Borrower or the Issuer will request the consent to or approval of the Trustee to any such proposed amendment, change or modification of any of the Financing Documents (other than the Indenture), the Trustee will, upon being satisfactorily indemnified by the Borrower with respect to expenses, cause notice of such proposed amendment, change or modification to be given in the same manner as provided in the Indenture with respect to supplemental indentures. Such notice will briefly set forth the nature of such proposed amendment, change or modification and will state that copies of the instrument embodying the same are on file at the principal corporate trust office of the Trustee for inspection by all Bondholders. If, within 60 days or such longer period as will be prescribed by the Trustee following the giving of such notice, the holders of not less than two-thirds of the Bond Obligation at the time of the execution of such proposed amendment will have consented to and approved the execution thereof as provided in the Indenture, subject to the provisions of the second paragraph under the "-- Supplemental Indentures Requiring Consent of Bondholders," no holder of any Bond will have any right to object to any of the terms and provisions contained in the Indenture, or the operation of the Indenture, or in any manner to question the propriety of the execution of the Indenture, or to enjoin or restrain the Trustee from agreeing to the 02/24/94 B-13 m12-1854 execution of the Indenture. Upon the execution of any such amendment as in this section is permitted and provided, the Financing Documents will be and be deemed to be modified and amended in accordance therewith. 02/24/94 B-14 m12-1854 APPENDIX C SLINEWARY OF FINANCING AGREEMENT The following is a summary, which does not purport to be complete, comprehensive or definitive, of certain provisions of the Financing Agreement, which is qualified in its entirety by reference to the Financing Agreement. General Terms of the Financing (a) In order to provide a portion of the funds necessary to acquire the Project, the Issuer will issue, sell and deliver the Bonds in accordance with the Bond Purchase Agreement and upon the terms and subject to the conditions contained in the Financing Agreement and the Indenture, and will cause the Underwriters to deliver the proceeds thereof to the Trustee. (b) The Lender will deliver the GNMA Security to the Trustee on the Closing Date. (6) The Borrower unconditionally promises (i) to repay the principal of the Mortgage Loan with interest thereon as provided in the Mortgage Note, and (ii) to comply with the provisions of the Financing Agreement, the FHA LoanDocuments and the Regulatory Agreement and Declaration of Restrictive Covenants as pro I vided therein, provided that such promise is subject to the provisions of the Financing Agreement. (d) The Lender agrees to make all payments on the GNMA Security when due and to meet all its obligations under the GNMA Mortgage-Backed Securities Guide and the GNMA Guaranty Agreement. Sufficiency of Funds The Issuer does not make any warranty, either express or implied, that the moneys deposited in the Acquisition Fund under the Indenture and available for payment of the costs of acquiring the GNMA Security will be sufficient to pay all the costs thereof. The Borrower agrees that if the Borrower should pay any costs relating to the acquisition of the GNMA Security other than from the Bond proceeds, the Borrower will not be entitled to any reimbursement therefor from the Lender, the Issuer, the Trustee or the Bondholders; provided, however that the Borrower will incur such costs as a result of the negligent or willful misconduct of either the Lender or the Trustee or as a result of the willful misconduct of the Issuer, the Borrower may be entitled to reimbursement therefor. Acquisition of the GNMA Security The Trustee agrees to acquire the GNMA Security on behalf of the Issuer; provided, however, that the Trustee's obligation in such respect will be limited to the moneys available for such purpose in the Acquisition Fund, and provided further that the Trustee will not have any 02/24/94 m12-1854 C-1 obligation to acquire the GNMA Security unless there will have been delivered to the Trustee, along with the GNMA Security, the following: (a) a copy of the executed FHA Loan Documents; (b) evidence that the Regulatory Agreement and Declaration of Restrictive Covenants has been duly filed of record in the Recorder's Office of the County of Contra Costa, California; and (c) a certificate of the Borrower dated the date of acquisition of the GNMA Security stating that (i) all representations and warranties of the Borrower set forth in the Financing Agreement and the Regulatory Agreement and Declaration of Restrictive Covenants remain true and correct in all material respects as of the date of such certificate and (ii) the Borrower is in full material compliance with all covenants and undertakings of the Borrower set forth in the Financing Agreement, the Regulatory Agreement and Declaration of Restrictive Covenants and the FHA Loan Documents, as of the date of such certificate. Upon delivery of the foregoing to the Trustee, the Lender will be entitled to receive, as payment for the GNMA Security, but solely from and to the extent of moneys available for such purpose, moneys contained in the Acquisition Fund. Remaining balances in the Acquisition Fund after acquisition of the GNMA Security will be transferred to the Bond Fund as provided in the Indenture. Operation of the Project The Borrower will operate or cause the Project to be operated as a housing project pursuant to Section 241(f) of the National Housing Act and in accordance with the requirements of the Regulatory Agreement and Declaration of Restrictive Covenants, the Code, the Act and the requirements set forth in the Plan of Action between the Borrower and HUD pursuant to Title II of the Housing and Community Development Act of 1987. Absolute and Unconditional Obligation; Limited Recourse The obligations of the Borrower under the Financing Agreement will be absolute and unconditional and will remain in full force and effect until (i) the entire principal of and premium, if any, and interest on the Bonds will have been paid or provided for, or (ii) the Mortgage Note will have been paid in full, and such obligations will not be affected, modified or impaired upon the happening from time to time of any event, including without limitation any of the following, whether or not with notice to, or the consent of, the Borrower: (a) the compromise, settlement, release or termination of any or all of the obligations, covenants or agreements of the Issuer under the Indenture; 02/24/94 m12-1854 C-2 (b) the failure to give notice to the Borrower of the occurrence of an event of default under the terms and provisions of the Financing Agreement, the FHA Regulatory, Agreement, the Indenture, the Mortgage Note, the Mortgage or the Regulatory Agreement and Declaration of Restrictive Covenants; (c) the waiver of the payment, performance or observance by the Issuer or the 'Borrower of any of the obligations,-covenants or agreements of them contained in the Indenture, the Mortgage Note, the Mortgage, the Regulatory Agreement and Declaration of Restrictive Covenants, the FHA Regulatory Agreement or the Financing Agreement. (d) the extension of the time for payment of any principal of, premium, if any, or interest on any Bond or under the Financing Agreement, or of the time for performance of any other obligations, covenants or agreements under or arising out of the Indenture, the Mortgage Note,the Mortgage, the FHA Regulatory Agreement, the Regulatory Agreement and Declaration of Restrictive Covenants or the Financing Agreement; (e) the modification or amendment(whether material or otherwise) of any obligation, covenant or agreement set forth in the Indenture, the Mortgage Note, the Mortgage, the FHA Regulatory Agreement or the Regulatory Agreement and Declaration of Restrictive Covenants; (f) the taking or the omission of any of the actions referred to in the Indenture, the Mortgage Note, the Mortgage, the FHA Regulatory Agreement or the Regulatory Agreement and Declaration of Restrictive Covenants or any actions under the Financing Agreement; (g) any failure, omission, delay or lack on the part of Issuer or the Trustee to enforce, assert or exercise any right, power or remedy conferred on the Issuer or the Trustee in the Financing Agreement or any document relating to the Bonds or the Indenture, or any act or acts on the part of the Issuer, the Trustee or any of the holders from time to time of the Bonds; (h) the voluntary or involuntary liquidation, dissolution, 'Sale or other disposition of all or substantially all the assets, marwilling of assets and liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition with creditors or readjustment of, or other similar proceedings affecting, the'Borrower or the Issuer or any of the assets of either of them, or any allegation or contest of the validity of the Financing Agreement in any such proceeding; (i) to the extent permitted by law, the release or discharge of the Borrower from the performance or observance of any obligation, covenant or agreement contained in the Financing Agreement by operation of law (other than the release or discharge from payment on the Mortgage Note); or the default or failure of the Borrower fully to perform any of its obligations set forth in the Financing Agreement. 02/24/94 m12-1854 C-3 The specific enumeration of the above-mentioned acts, failures or omissions will not be deemed to exclude any other acts, failures or omissions, though not specifically mentioned above, it being the purpose and intent of this paragraph that the obligations of the Borrower will be absolute and unconditioned to the extent herein specified and will not be discharged, impaired or varied except by the happening of any of the events specified in the first paragraph of this section. Without limiting any of the other terms or provisions of the Financing Agreement, it is understood and agreed that, in order to hold the Borrower liable under the Financing Agreement, there will be no obligation on the part of the Trustee or any Bondholder to resort in any manner or form for payment to the Issuer or to any other person, firm or occupation; their properties or estates. Notwithstanding the foregoing or any other provision or obligation to the contrary contained in the Financing Agreement, (i) the liability of the Borrower under the Financing Agreement and any other document relating to the Bonds to any person or entity, including, but not limited to, the Trustee or the Issuer and their successors and assigns, is limited to the Borrower's interest in the Project and the amounts held in the funds and accounts created under the Indenture or other documents relating to the Bonds or any rights of the Borrower under any guarantees relating to the Project, and such persons and entities will look exclusively thereto, or to such other security as may from time to time be given for the payment of obligations arising out of the Financing Agreement or any other agreement securing the obligations of the Borrower under the Financing Agreement; and (ii) from and after the date of the Financing Agreement, no deficiency or other personal judgment, nor any order or decree of specific performance (other than pertaining to the Financing Agreement, any agreement pertaining to the Project or any other agreement securing the Borrower's obligations under the Financing Agreement), will be rendered against the Borrower, the assets of the Borrower (other than the Borrower's interest in the Project, the Financing Agreement, amounts held in the funds and accounts created under the documents relating to the Bonds, any rights of the Borrower under the documents relating to the Bonds or any rights of the Borrower under any guarantees relating to the Project), its partners, officers, directors or members or their heirs, personal representatives, successors, transferees or assigns, as the case may be, in any action or proceeding arising out of the Financing Agreement and the Indenture or any agreement securing the obligations of the Borrower under the Financing Agreement, or any judgment order or decree rendered pursuant to any such action or proceeding. Nothing contained in the Financing Agreement will in any way be construed to limit any indemnification provided by the Borrower to the Issuer, the Trustee or any other person pursuant to any other agreement to which the Borrower is a party. Assignment No assignment or transfer of title to the Project will be made except as permitted by the Regulatory Agreement and Declaration of Restrictive Covenants and unless (1) the Lender and HUD consent to such assignment or transfer, as long as the Mortgage Loan is held by the Lender and insured by FHA, and (2) the transferee or assignee, as the case may be, assumes all of the dudes of the Borrower under the Financing Agreement, the Regulatory Agreement and 02/24/94 m12-1854 C-4 Declaration of Restrictive Covenants and the FHA Loan Documents, subject to the provisions of such documents. Upon the assumption of the duties of the Borrower by an assignee as provided in the Financing Agreement, the Borrower will be released from all executory obligations so assumed. Nothing contained in this section will be construed to supersede any provisions regarding assignment and transfer of the Project contained in the FHA Loan Documents. Tax Covenants The Issuer, the Trustee, the Lender and the Borrower have entered into the Financing Agreement with the intention that the interest on the 1994 Series A Bonds be and remain excluded from gross income under the Code. Accordingly, for the benefit of the Issuer, the Trustee and each Bondholder, the Borrower covenants that it will not(a)take any action, (b) fail to take any action, or (c) make any use of the Project or the proceeds of the 1994 Series A Bonds, which would cause the interest on any of the 1994 Series A Bonds to be or become includable in the gross income of the Bondholders for federal income tax purposes. Without limiting the generality of the foregoing, the Borrower confirms each of its representations set forth in, and covenants and agrees that it will comply with each of the provisions of the Regulatory Agreement and Declaration of Restrictive Covenants and the Tax Certificate. The Borrower recognizes that certain of the facts, estimates and circumstances required to be set forth in the Tax Certificate and the other instruments of the Issuer, including Form 8038, will be based upon the representations of the Borrower. The Borrower covenants to provide, or cause to be provided, such facts, estimates and circumstances as are necessary to enable the Issuer to execute and deliver the Tax Certificate and such other instruments. The Borrower further covenants that (a) such facts, estimates and circumstances will be based on the Borrower's reasonable expectations on the Closing Date and will be, to the best of the knowledge of the representative of the Borrower furnishing such facts, estimates and circumstances, true, correct and complete as of that date, and (b) the Borrower will make reasonable inquiries to insure such truth, correctness and completeness. The Borrower and the Lender recognize that (a) the Trustee will hold and invest the proceeds of the 1994 Series A Bonds within its control in accordance with the expectations of the Issuer and the Borrower set forth in the Tax Certificate; (b) if the Issuer is of the opinion, upon receipt of written advice of Bond Counsel, that it is necessary to further restrict or limit the yield on the investment of any proceeds of the 1994 Series A Bonds in order to avoid the 1994 Series A Bonds being considered "arbitrage bonds" within the meaning of Section 148 of the Code, the Issuer will deliver to the Trustee a written certificate to such effect (along with appropriate written instructions and a copy of the written advice of Bond Counsel), in which event the Trustee will promptly deliver a copy of all such material to the Borrower and will take such action as is necessary to restrict or limit the yield on such investment in accordance with such certificate and instructions. The parties to the Financing Agreement recognize that the Issuer will incur no liability in connection with any certificate or instructions delivered by the Issuer to the Trustee as contemplated in the Financing Agreement. 02124/94 m12-1854 C-S The obligations of the Borrower under this section will survive the termination of the Financing Agreement and the payment and performance of the other obligations of the Borrower hereunder and under the FHA Loan Documents and the Regulatory Agreement and Declaration of Restrictive Covenants. Events of Default; Remedies Upon receipt by a Responsible Officer of the Trustee of notice of a violation by the Borrower of, or default by the Borrower under any of the provisions of the Financing Agreement, the FHA Loan Documents or the Regulatory Agreement and Declaration of Restrictive Covenants, the Trustee will give written notice thereof to the Borrower by certified mail, postage prepaid, return-receipt requested. If either (a) a violation or default by the Borrower of any of the provisions of the Financing Agreement is not corrected to the reasonable satisfaction of the Trustee within 30 days after the date such notice is mailed or, if the violation or default (other than a payment default) cannot be corrected within such period, within such longer period as may be necessary, in the reasonable opinion of the Trustee, to correct such violation, provided that the Borrower has commenced and is diligently pursuing appropriate action to correct such violation and there will be no material adverse effect on the rights of the Issuer, the Trustee, the Lender or the Bondholders under the Financing Agreement, the Regulatory Agreement and Declaration of Restrictive Covenants, any of the FHA Loan Documents or the Indenture as a result of such extension, or (b) a violation of or default under any of the provisions of the Regulatory Agreement and Declaration of Restrictive Covenants is not corrected or cured within any cure period provided therein, without further notice the Trustee may declare a default under the Financing Agreement effective on the date of such declaration of default, and upon such default the Issuer, the Lender or the Trustee may apply to any state or federal court having jurisdiction (i) for specific performance of the Financing Agreement or for an injunction against any violation of the Financing Agreement, since the injury to the Issuer, the Lender and the Trustee arising from a default under any of the terms of the Financing Agreement, since the injury to the Issuer, the Lender and the Trustee arising from a default to ascertain, or (ii) for other relief in law or equity which may be appropriate. A default under the Financing Agreement will not constitute an Event of Default under the Indenture. In addition, subject to the provisions of the Indenture, the Lender will be entitled to exercise such remedies as may be available under the FHA Loan Documents and the Regulatory Agreement and Declaration of Restrictive Covenants. Except as provided in the Financing Agreement, nothing included herein will permit the Issuer to recover actual monetary damages from the Borrower upon the occurrence of an Event of Default under the Financing Agreement. Option to Prepay Loan The Borrower will have and is granted the option to prepay the Mortgage Loan in full or in part prior to the payment and discharge of all the outstanding Bonds, but only in accordance with the provisions of the Financing Agreement, the Mortgage Note and the Indenture. 02/24/94 m12-1854 C-6 The Lender will within 24 hours notify the Trustee by telephone of the receipt of any notice of prepayment by the Borrower and of the receipt of any prepayment or prepayment penalties paid by the Borrower pursuant to the terms of the Mortgage .Note and will promptly confirm any such notice or receipt in writing. The written notice will state the date such prepayment will be passed through to the GNMA Security holder, which date will be not later than the 15th day of the month following the month in which such prepayment occurs and will state the effect such prepayment(if a partial prepayment)would have on the remaining scheduled tpayments on the GNMA Security. The Lender will transfer to the Trustee, immediately upon receipt, the portion of any prepayment penalties paid by the Borrower pursuant to the Mortgage Note which are attributable to the GNMA Security, which prepayment penalties will comply with the requirements of the Indenture. If such prepayment is not made by the time required therefor by the terms of the Mortgage Note, any prepayment premiums previously received by the Lender will be returned to the Borrower by the person holding such prepayment. FHA Loan Documents and Regulation Control To the extent that there is any inconsistency or ambiguity between or among the Financing Agreement, including without limitation, the tax covenants of the Borrower in the Financing Agreement, and any of the FHA Loan Documents, the National Housing Act and the regulations under such Acts, the FHA Loan Documents, the National Housing Act and the regulations under such Acts, will be deemed to be controlling and any such ambiguity or inconsistency will be resolved in favor of, and pursuant to the terms of, the FHA Loan Documents, the National Housing Act and the regulations under such Acts, as applicable. 02124194 m22-1854 C-7 APPENDIX D SUMMARY OF THE REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS The following is a summary, which does not purport to be comprehensive or definitive, of certain provisions of the Regulatory Agreement and Declaration of Restrictive Covenants, which is qualified in its entirety by reference to the Regulatory Agreement and Declaration of Restrictive Covenants. Project Restrictions The Borrower acknowledges and agrees that the Project is to be owned, managed and operated as a "qualified project" (within the meaning of the Code) and, to that end, the Borrower represents, warrants and covenants that: (a) The Project has been and will be operated for the purpose of providing multifamily residential rental housing and the Borrower will own, manage and operate (or cause the management and operation of) the Project as a project to provide multifamily rental housing comprised of a building or structure or several interrelated buildings or structures, each consisting of more than one dwelling unit and facilities functionally related and subordinate thereto, and no other facilities. As used in the Regulatory Agreement and Declaration of Restrictive Covenents, facilities functionally related and subordinate to the Project will include facilities for use by the tenants, including, for example, swimming pools, other recreational facilities, parking areas, and other facilities which are reasonably required for the Project, for example, heating and cooling equipment, trash disposal equipment or units for resident managers or maintenance personnel. (b) All of the dwelling units in the Project were and are similarly constructed, and each dwelling unit in the Project does and will contain facilities for living, sleeping, eating, cooking and sanitation for a single person or a family which are complete, separate and distinct from other dwelling units in the Project and does and will include a sleeping area, bathing and sanitation facilities and cooking facilities equipped with a cooking range, refrigerator and sink. (c) The Borrower does not and will not knowingly permit any of the dwelling units in the Project to be used on a transient basis and will not rent any of the units for a period of less than 30 consecutive days, and none of the dwelling units in the Project will at any time be leased or rented for use as a hotel, motel, dormitory, fraternity house, sorority house, rooming house, hospital, nursing home, sanitarium, rest home or trailer court or park or place of business. (d) No part of the Project'has been or will at any time be owned or used by a cooperative housing corporation. 02/24/94 D-1 m12-1854 . (e) The site of the Project consists of a parcel or parcels that are contiguous (parcels are contiguous if their boundaries meet at one or more points) except for the interposition of a road, street or stream, and the Project comprises a single geographically and functionally integrated project for multifamily rental housing, as evidenced by the common ownership, management, accounting and operation of the Project. (f) The Borrower will not sell any of the dwelling units within the Project. (g) All of the units in the Project will be leased, rented, or available for lease or rental on a continuous basis to members of the general public (other than units for a resident manager or maintenance personnel. (h) The Borrower will not restrict Qualifying Tenants (as defined below) or tenants of the Reserved Units (as defined below) from the enjoyment of unrestricted access to all common facilities and common areas of the Project. (i) The Borrower will give priority consideration, in accepting tenants, to holders of federal certificates for rent subsidies pursuant to the existing program under Section 8 of the United States Housing Act of 1937, or its successor ("Section 8 Certificate Holders"). 0) The Borrower will not knowingly and voluntarily take or omit to take, as is applicable, any action if such action or omission would in any way cause the use and operation of the Project in a manner contrary to the requirements of the Regulatory Agreement and Declaration of Restrictive Covenants. (k) The Borrower will not discriminate on the basis of race, creed, color, sex, age or national origin or source of income if from a federal, state or local governmental body or such other sources of income as approved by the Issuer e.g., AFDC or SSI payments) or, except to the extent appropriate in the interests of the health and safety of the tenants, physical disability, in the lease, use, or occupancy of the Project or in connection with the employment or application for employment of persons for the operation and management of the Project. (1) The Borrower will not knowingly and voluntarily take or omit to take, as is applicable, any action if such action or omission would in any way cause the proceeds from the sale of the Bonds to be applied in a manner contrary to the requirements of the Agreement. (m) The Borrower will operate the Project in the manner described in its Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code submitted by the Borrower to the Internal Revenue Service on July 6, 1993. 02/24/94 D-2 m12-1854 Occupancy Restrictions The Borrower represents, warrants and covenants that: (a)(1) At least forty-nine percent (49%) of the total number of units in the Project ("Reserved Units") will be occupied continuously or held available for occupancy (or treated as occupied as provided herein)by (i) individuals or families whose adjusted gross income does not exceed 50% of the median adjusted gross income for the area, as adjusted gross income may from time to time be determined pursuant to Section 8 of the United States Housing Act of 1937, as amended; 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 very low income households as deemed by Section 50105 of the Health and Safety Code of the State of California ("Very Low Income Tenants"). Median adjusted gross income for the area with respect to Very Low Income Tenants is to be adjusted for family size. (2) The determination of whether an individual or family is within the prescribed income limitations will be made only at the time the tenancy commences. Any unit occupied by an individual or family who is a Very Low Income Tenant during their tenancy in such unit even though such individual or family subsequently ceases to be of very low, low or moderate income. Any completed unit vacated by a Very Low Income Tenant will be treated as being occupied by such prior Very Low Income Tenant until reoccupied by another occupant, other than for a temporary period not to exceed 31 days. (3) The Borrower will use its Best Efforts to rent the next available Reserved Unit to a Section 8 Certificate Holder. For purposes of this provision, "Best Efforts" will mean that the Borrower has(a)notified the County of Contra Costa of the availability of the Reserved Unit for Section 8 Certificate Holders, and(ii)held the Reserved Unit available exclusively to Section 8 Certificate Holders for a period of at least fifteen (15) days. (b) The Reserved Units will consist of one bedroom units, two bedroom units, (_) three bedroom units, and (�) four bedroom units and will be made available at nor more than affordable rents. The term "affordable rents" is defined for (i) for all Reserved Units occupied by Section 8 Certificate Holders, as 100% of the existing Section 8 Fair Market Rents, as published annually by the United States Department of Housing and Urban Development, less the utility allowance then in effect, and (ii) for all Reserved Units occupied by Very Low Income Tenants who are not Section 8 Certificate Holders, as the amount derived by multiplying 30 percent times 50 percent of the median adjusted gross income for the area, adjusted for family size by computing income on the basis of two persons in the case of a one-bedroom unit, three persons in the case of a two-bedroom unit, four persons in the case of a three-bedroom unit and five persons in the case of a four-bedroom unit. In the event that the existing Section 8 Housing Assistance Program ceases to exist, affordable rents with respect to Very Low Income Tenants will be adjusted in corresponding proportion to rents associated with a successor program; or, in the event that no successor program is enacted, commencing with the first anniversary of the last determination of affordable rents under the Section 8 02124/94 D-3 m12-1854 Housing Assistance Program, or its successor, affordable rents with respect to Very Low Income Tenants will be increased by the lesser of (i) eight percent per annum, or (ii) the annual percentage increase in the Contra Costa County median income for all personal income tax returns as published by the State Franchise Tax Board, but in no event will the increase be less than five percent. Nothing in this paragraph (b) will be construed as a waiver of the Borrower's right to request HUD to preempt, pursuant to 24 CFR part 403, any local controls on the Project's rents should such controls jeopardize the financial viability of the Project. (c) As a condition to occupancy, each person who is intended to be Very Low Income Tenant will be required to sign and deliver to Borrower an Income Computation and Certification (the "Income Certification"), in which the prospective Very Low Income Tenant certifies that he or his family qualifies as being of very low, low or moderate income. In addition, such person will be required to provide whatever other information, documents or certifications are deemed necessary by the Issuer or the Trustee to substantiate the Income Certification. (d) The form of lease to be utilized by the Borrower in renting any units in the project to any person who is intended to be a Very Low Income Tenant will provide for termination of the lease and consent by such person to immediate eviction for failure to qualify as a Very Low Income Tenant as a result of any material misrepresentation made by such person with respect to the Income Certification. The Borrower has reviewed the addendum to the form of lease for the Project prepared by the County of Contra Costa and its management policies will not conflict with the provisions in such addendum. The Borrower agrees to include the provisions of such addendum only in its leases with holders of Section 8 certificates. (e) All tenant lists, applications, and waiting lists relating to the Project, to the extent that such information is maintained will at all times be kept separate and identifiable from any other business of the Borrower which is unrelated to the Project, as required by the Issuer or the Trustee from time to time, in a reasonable condition for proper audit and subject to examination during business hours upon reasonable notice by representatives of the Issuer or the Trustee. (f) The Borrower will utilize a maximum occupancy standard not less than that required by Section 8 of the United States Housing Act of 1937 on the dated date of the Regulatory Agreement and Declaration of Restrictive Covenants, that is three individuals for a one bedroom unit(or such greater number as may be allowed by the Department of Housing and Urban Development), four individuals for a two bedroom unit (or such greater number as may be allowed by the Department of Housing and Urban Development, _ individuals for a three bedroom unit (or such greater number as may be allowed by the Department of Housing and Urban Development), and_individuals for a four bedroom unit (or such greater number as may be allowed by the Department of Housing and Urban Development). 02/24/94 D-4 m12-1854 i (g) The Borrower will submit to the Issuer any information or completed forms requested by the Issuer to comply with State and/or IRS reporting requirements. Such information will be submitted to the Issuer within 15 days of receipt of a written request from the Issuer. (h) The Borrower will not apply or permit the application of, management policies or lease provisions with respect to the Project which have the effect of precluding occupancy of Reserved Units by holders of Section 8 certificates. The Issuer acknowledges that it is the Borrower's responsibility to screen and select tenants for desirability and creditworthiness, and that such selection is within the Borrower's discretion. If written management policies exist, or exist in the future, with respect to the Project, the Issuer may review such written policies and may require changes in such policies, if necessary, to reasonably comply with the provisions of the Regulatory Agreement and Declaration of Restrictive Covenants and the requirements of the Section 8 Program as set forth in the first paragraph of this subparagraph (h). (i) The Borrower will submit to the Issuer (i) at the time of initial occupancy of any Very Low Income Tenant, (ii) upon the reoccupancy of any unit held available for Very Low Income Tenants, and (iii) as often as necessary to comply with the requirements of the Issuer, Income Certifications, which are subject to independent investigation and verification by the Issuer. Income Certifications will be maintained on file at the Project with respect to each Very Low Income Tenant who resides in a Project unit or resided therein during the immediately preceding calendar year. In addition, the Borrower agrees to obtain and maintain on file the following with respect to each.prospective Very.Low Income Tenant: qualification forms as required by Section 8 for Section 8 Certificate Holders or employment verifications or verifications of other sources of income for noncertificate holders or such other forms of certification that may be required by the Issuer from time to time. Provided that such documentation has been obtained, the Borrower may rely upon the Income Certifications of the prospective tenants unless the Borrower has actual knowledge that they are inaccurate. 0) The Borrower will maintain complete and accurate records pertaining to the Reserved.Units, and will permit any duly authorized representative of the Issuer or the Trustee to inspect the books and records of the Borrower pertaining to the incomes of Very Low Income Tenants- residing in the Project, the rent levels for the Reserved Units and other records necessary to determine compliance with this Agreement. (k) On the fifteenth day of each month or such later date as may be specified in writing by the Issuer, the Borrower will submit to the Issuer and the Trustee a certificate executed by the Borrower stating the percentage of units of the Project which were occupied by Very Low Income Tenants at all times during the preceding month and identifying Very Low Income Tenants who commenced or terminated occupancy of the Project during such month. In addition, the Borrower will prepare and submit to the Issuer within 30 days after April 1 in each 02/24/94 D-5 mit-1854 w year a "Certificate of Continuing Program Compliance" executed by the Borrower, stating (i) the percentage of the dwelling units in the Project which were occupied by Very Low Income Tenants (or held vacant and available for occupancy as provided in paragraph 0) above) during such period, and (ii) that to the knowledge of the Borrower, no default has occurred under this Agreement. Tax-Exempt Status of 1994 Series A Bonds The Borrower and the Issuer, as applicable, each hereby represents, warrants and agrees as follows: (a) The Borrower 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 1994 Series A 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 Borrower represents, covenants and agrees that it will maintain its status as an organization described in Section 501(c)(3) of the Code and exempt from federal income tax under Section 501(a) of the Code (a "501(c)(3) Organization"). (c) The Borrower will not use or permit the use of more than 5 % of the Project by persons other than a 501(c)(3) Organization or by a 501(c)(3) Organization (including the Borrower) in an "unrelated trade or business" within the meaning of Section 513(a) of the Code, if the payments received in respect of such uses total more than 5% of the principal or interest on the 1994 Series A Bonds. For purposes of this covenant, "use" that would not be counted for purposes of the "private business use test" described in Section 141(b)(1) of the Code will be disregarded, including "use" not counted if 501(c)(3)Organizations were treated as governmental units with respect to their activities which do not constitute unrelated trade or businesses, determined by applying Section 513(a). This covenant will not be deemed to restrict the rental of units in the Project to tenants for the occupancy of such units as their residences. (d) The Borrower represents that it has not, and covenants and agrees that it will not, become a test period beneficiary of any tax-exempt non-hospital bonds issued on or before the Closing Date, the aggregate face amount of which allocable to it when added to the aggregate face amount of the 1994 Series A Bonds exceeds $150,000,000, all as described in Section 145(b)of the Code. The Borrower represents that no 501(c)(3)Organization with which it shares common management and control ("Affiliated Organization") is, and covenants and agrees that it will not permit any Affiliated Organization to become, a test period beneficiary of any Tax-Exempt non hospital bonds issued on or before the Closing Date, the aggregate face amount of which allocable to it, when added to the aggregate face amount of the 1994 Series A Bonds, exceeds $150,000,000, all as described in Section 145(b) of the Code. 02/24/94 D-6 m12-2854 r w (e) The Borrower will not permit the use of the Project by any 501(c)(3)Organization who is a test period beneficiary of any tax-exempt non-hospital bonds issued on or before the Closing Date, the aggregate face amount of which allocable to it, when added to the aggregate face amount of the 1994 Series A Bonds allocable to such 501(c)(3) Organization, exceeds $150,000,000, all as described in Section 145(b) of the Code. (f) The Borrower will comply with Section 145(d) of the Code, including in particular, Section 145(d)(2)(B). (g) The Borrower represents and covenants that at least 40% of the total number of units in the Project will be occupied by individuals or families whose income does not exceed 60% of the median income for the area. Additional Requirements of the Act In addition to the requirements set forth above, so long as any Bonds are outstanding the Borrower agrees to comply with each of the requirements of Section 52102 of the Act set forth in this section, as follows: (a) Not less than 20% of the total number of units in the Project will be for occupancy on a priority basis by lower income households, as defined by Section 50079.5 of the California Health and Safety Code (as in effect on the Closing Date, persons whose income does not exceed the qualifying limits for lower income families as established and amended from time to time pursuant to Section 8 of the Housing Act). (b) Not less than one-half of the units required to be available for occupancy pursuant to paragraph (a) of this section will be occupied by, or made available only to, Very Low Income Tenants. (c) 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) will not exceed 30% of an amount equal to 50% of the medianadjusted gross income for the area. If the Borrower elects to establish a base rent for units reserved as required by subparagraphs (a) and (b) of this section, the base rents will be adjusted for household size, and in making such adjustments it will 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. (d) If at the time of acquisition of the Project any of the units are occupied by ineligible households, that fact alone will neither constitute a cause for the tenant's eviction nor render the Project ineligible. Upon vacation of any unit initially occupied by an ineligible household, that unit will be rented to an eligible household until the required residency by eligible households is attained 02124194 D-7 m12.1854 (e) The units reserved for occupancy as required by subparagraph (a) of this section will remain available on a priority basis for occupancy for the term of the Bonds (and any refunding bonds) or 30 years, whichever is greater. (f) - The covenants and conditions of the Regulatory Agreement and Declaration of Restrictive Covenants will be binding upon successors in interest of the Borrower. (g) The Regulatory Agreement and Declaration of Restrictive Covenants will be recorded in the office of the county recorder of the County of Contra Costa and will be recorded in the grantor-grantee index to the names of both the property owner and the Borrower as grantor and to the name of the Issuer as grantee. Terms of Restrictions Occupancy and Rental-Restrictions: The term of the restrictions set forth in the Regulatory Agreement and Declaration of Restrictive Covenants will commence on the date of execution hereof and will end on the latest of the following: (i) the date which is 15 years after the date on which 50% of the dwelling units in the Project were first occupied, or (ii) the date which is a "qualified number of days" after the date on which any of the dwelling units in the Project were occupied; or (iii) the date on which any assistance provided with respect to the Project under Section 8 of the United States Housing Act of 1937 terminates including the initial term and any extension thereof; or (iv) For purposes of clause (ii), the term "qualified number of days" means, with respect to the Bonds, fifty percent (50%) of the total number of days from the date of issuance of the Bonds to and including the final stated maturity date of the Bonds or the scheduled maturity date of any bonds issued to refund the Bonds. Termination of Restrictions: Notwithstanding the provisions of (a) of this section, the Regulatory Agreement and Declaration of Restrictive Covenants and all other restrictions under the Regulatory Agreement and Declaration of Restrictive Covenantswill terminate upon the happening of any event set forth in the Regulatory Agreement and Declaration of Restrictive Covenants. In addition, the Regulatory Agreement and Declaration of Restrictive Covenants and the restrictions thereunder will also cease to apply in the event of an involuntary noncompliance caused by unforeseen events such as fire, seizure, requisition, a change in federal law or an action of a federal agency after the date of issuer which prevents the Issuer from enforcing the requirements of the Regulatory Agreement and Declaration of Restrictive Covenants, or condemnation, provided that (i) the Bonds are retired at the first available call date; or (ii) any insurance proceeds or condemnation award or other amounts received as a result of such loss or destruction are used to provide a project which meets the requirements of Section 142(d) of the Code and Treasury 02/24/94 D-8 m12-1854 n Subordination of Agreement The Regulatory Agreement and Declaration of Restrictive Covenants and the restrictions thereunder are subordinate to the FHA Insured Mortgage. In the event of foreclosure or transfer of title by deed-in-lieu of foreclosure, the Regulatory Agreement and Declaration of Restrictive Covenants and the restrictions thereunder will automatically terminate, subject to the provisions of the Regulatory Agreement and Declaration of Restrictive Covenants. , 02/24/94 D-4 mI2-1$54 Trust Indenture I j [OH*RAFT OF 11 MARCH 19941 TRUST INDENTURE Dated as of 1, 1994 By and Between COUNTY OF CONTRA COSTA and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Trustee Relating to COUNTY OF CONTRA COSTA $ MULTIFAMILY HOUSING REVENUE BONDS (FHA INSURED MORTGAGE LOAN - CRESCENT PARK APARTMENTS PROJECT) 1994 SERIES C SF2-28088.1 40511-90-MS1-03/11/94 • TABLE OF CONTENTS • Page ARTICLE I Definitions and Interpretation Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 1.02. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 1.03. Content of Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE II The Bonds Section 2.01. Authorized Amount and Terms of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 2.02. Limited Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 2.03. Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 2.04. Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 2.05. Mutilated, Lost, Stolen or Destroyed Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 2.06. Registration, Transfer and Exchange of Bonds; Persons Treated as Owners . . . . . . . . . . . 11 Section 2.07. Temporary Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 2.08. Delivery of the Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 ARTICLE III Redemption of Bonds Prior to Maturity Section 3.01. Redemption of Bonds Prior to Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 3.02. Redemption of Bonds upon Prepayment of FHA Note . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 3.03. Damage, Destruction or Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 3.04. Selection of Bonds for Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 3.05. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 3.06. Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 3.07. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE IV Funds; Investments Section 4.01. Establishment of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 4.02. Application of Bond Proceeds and Other Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 4.03. Disbursements from Acquisition Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 4.04. Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 4.05. Debt Service Reserve Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 4.06. Costs of Issuance Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 4.07. Rebate Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 4.08. Custody of Funds; Moneys Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 4.09. Investment of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 4.10. Nonpresentment of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 4.11. Final Balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 4.12. Cancellation of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 SF2-28088.1 i 40511-90-MS1-03/11/94 Page ARTICLE V General Covenants and Representations Section 5.01. Payment of Principal and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 5.02. FHA Note; Instruments of Further Assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 5.03. Inspection of Project Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 5.04. Recordation and Filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 5.05. No Modification of Security; Additional Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 5.06. Existence and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 5.07. Servicing the Mortgage Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 5.08. Required Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 5.09. No Disposition of Mortgage Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 5.10. Tax Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 ARTICLE VI Default Provisions and Remedies of Trustee and Bondholders Section 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 6.02. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 6.03. Mortgage Insurance Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 6.04. Opportunity to Cure Default Under Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 6.05. Rights of the Bondholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 6.06. Rights of Bondholders to Direct Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 6.07. Waiver by Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 6.08. Application of Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 6.09. Remedies Vested in Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 6.10. Rights and Remedies of Bondholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 6.11. Waivers of Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 6.12. Notice of Defaults; Opportunity of the Issuer and the Borrower to Cure Defaults . . . . . . . 29 Section 6.13. Powers of Trustee upon Default under the FHA Note . . . . . . . . . . . . . . . . . . . . . . . . 29 ARTICLE VII The Trustee Section 7.01. Certain Duties and Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 7.02. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 7.03. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 7.04. Not Responsible for Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 7.05. Trustee May Hold Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 7.06. Compensation of the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 7.07. Maintenance of Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 7.08. Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Section 7.09. Resignation by the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Section 7.10. Removal of the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Section 7.11. Appointment of Successor Trustee by the Bondholders; Temporary Trustee . . . . . . . . . . . 33 Section 7.12. Concerning Any Successor Trustee . . I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Section 7.13. Successor Trustee as Trustee, Paying Agent and Bond Registrar . . . . . . . . . . . . . . . . . . 34 Section 7.14. Co-Trustee or Separate Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 I SF2-28088.1 11 40511-90-MS 1-03/11/94 i • Page Section 7.15. Additional Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 7.16. Representation by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 7.17. Appointment, Resignation or Removal of Paying Agent; Successors . . . . . . . . . . . . . . . 35 Section 7.18. FHA-Approved Mortgagees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 7.19. Additional Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 ARTICLE VIII Supplemental Indentures Section 8.01. Supplemental Indentures Not Requiring Consent of Bondholders . . . . . . . . . . . . . . . . . . 37 Section 8.02. Supplemental Indentures Requiring Consent of Bondholders . . . . . . . . . . . . . . . . . . . . 37 Section 8.03. Amendment of Certain Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 ARTICLE IX Satisfaction and Discharge of Indenture Section 9.01. Discharge of Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 9.02. Payment and Discharge of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 9.03. No Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 9.04. Survival of Certain Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 ARTICLE X Miscellaneous Section 10.01. Consents and Other Instruments of Bondholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 10.02. Limitation of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 10.03. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 10.04. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 10.05. Notices to Rating Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 10.06. Trustee as Paying Agent and Bond Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 10.07. Payments Due on Saturdays, Sundays and Holidays . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 10.08. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 10.09. Laws Governing Indenture and Situs and Administration of Trust . . . . . . . . . . . . . . . . 42 Section 10.10. No Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 10.11. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 ARTICLE XI Provisions Relating to FHA Section 11.01. Approvals of FHA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 11.02. FHA Documents Controlling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 EXHIBIT A - Form of Bond EXHIBIT B -Estimated Debt Service Schedule SF2-28088.1 iii 40511-90-MS1-03111194 INDENTURE THIS TRUST INDENTURE, dated as of , 1994, is between the County of Contra Costa (the "Issuer"), a legal subdivision and body corporate and politic of the State of California, duly organized and existing under and by virtue of the Constitution and laws of the State of California, (together with any successors and assigns and any surviving, resulting or transferee entity, the "Issuer"), and Bank of America National Trust and Savings Association, as Trustee (the "Trustee"), a national banking association duly organized and existing under the laws of the United States of America, and authorized to accept and execute trusts of the character herein set out, as Trustee (together with any successors and assigns and any surviving, resulting or transferee entity, the "Trustee"). Recitals WHEREAS, the Issuer is authorized pursuant to Chapter 8 of Part 5 of Division 31 of the Health and Safety Code of the State of California(the "Act"), to issue bonds to provide funds to be loaned by the Issuer to a nonprofit organization exempt from federal income taxation under Section 501(c)(3) of the Internal Revenue Code of 1986 (the "Code"), for use by the organization to finance the acquisition and rehabilitation of multifamily rental housing to provide housing within the territorial jurisdiction of the Issuer in accordance with the organization's tax-exempt purposes under the Code, subject to the requirements of the Act, including the requirement that the bonds satisfy the requirements of Section 145 of the Code; WHEREAS, EAH-Contra Costa, Inc. (the "Borrower"), has requested that the Issuer issue bonds and lend the proceeds thereof to the Borrower in order to enable the Borrower to acquire and rehabilitate a multifamily rental housing development known as Crescent Park Apartments located within the jurisdiction of the Issuer in Richmond, California(the "Project"); WHEREAS, the Borrower has represented to the Issuer that the Borrower is a nonprofit organization exempt from federal income taxation under Section 501(c)(3) of the Code, and has represented and covenanted to comply with all requirements necessary to satisfy Section 145 of the Code; WHEREAS, pursuant to and in accordance with the Act, the Issuer desires to provide funds to finance the acquisition and rehabilitation of the Project by issuing its Multifamily Housing Revenue Bonds (FHA Insured Mortgage Loan - Crescent Park Apartments Project) Series 1994 B (the "Bonds"), in the principal amount of$ , pursuant to this Indenture; and WHEREAS, the proceeds of the Bonds will be loaned to the Borrower. Upon acquisition of the Project, the Borrower will assume the outstanding mortgage loan (the "Mortgage Loan") on the Project to be evidenced by the Borrower's deed of trust note, as modified(the "FHA Note" or the "Note") and secured by a deed of trust on the Project, as modified (the "Mortgage"). The FHA Note has been finally endorsed for insurance by the Federal Housing Administration("FHA")pursuant to Section 221(d)(3) of the National Housing Act of 1934, as amended; WHEREAS, the Issuer has expressly determined and hereby confirms that the issuance of the Bonds will accomplish a valid public purpose of the Issuer by enabling the Issuer to require the Borrower to comply with the provisions of the Financing Agreement of even date herewith (the "Financing Agreement"), among the Issuer, the Borrower and the Trustee, and the Regulatory Agreement and Declaration of Restrictive Covenants of even date hereof(the "Issuer Regulatory Agreement"), among the Issuer, the Borrower and the Trustee; and WHEREAS, the execution and delivery of this Indenture and the issuance and sale of the Bonds have been in all respects duly and validly authorized by a resolution duly adopted by the Issuer, and all things necessary to make the Bonds, when authenticated by the Trustee and issued as provided in this Indenture, the valid, binding and legal obligations of the Issuer according to the import thereof, and to constitute this Indenture a valid assignment and pledge of the Trust Estate for payment of the principal of, premium, if SF2-28088.1 40511-90-MSI-03/11/94 • 0 * any, and interest on the Bonds have been done and performed, and the creation, execution and delivery of this Indenture, and the creation, execution and issuance of the Bonds, subject to the terms hereof, have in all respects been duly authorized; NOW, THEREFORE, the Issuer, in consideration of the premises and the acceptance by the Trustee of the trusts hereby created and of the purchase and acceptance of the Bonds by the holders and owners thereof, and for other good and valuable consideration, the receipt of which is hereby acknowledged, in order to secure the payment of the principal of, premium, if any, and interest on the Bonds according to their tenor and effect and the performance and observance by the Issuer of all the covenants expressed or implied herein and in the Bonds, does hereby bargain, sell, convey, pledge, assign and grant a security interest unto the Trustee in and to the following, subject only to the provisions of this Indenture permitting the application thereof for or to the purposes and on the terms and conditions set forth herein (said property being herein referred to as the "Trust Estate"), to wit: GRANTING CLAUSES 1. All right, title and interest of the Issuer in and to all Prepared Revenues (as herein defined), derived or to be derived by the Issuer or the Trustee for the account of the Issuer under the terms of this Indenture and the Financing Agreement (other than the Reserved Rights of the Issuer), together with all other Revenues received by the Trustee for the account of the Issuer arising out of or on account of the Trust Estate; R. All right, title and interest of the Issuer in and to the Mortgage Loan and the security therefor, including the FHA Note, the Mortgage, all Mortgage Insurance or casualty insurance benefits or condemnation awards payable with respect thereto, and any interest, profits and other income derived from the investment thereof. III. All right, title and interest of the Issuer in and to, and remedies under, the Financing Agreement and the Regulatory Agreement. 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 hereunder for the Bonds by the Issuer or by anyone on its behalf or with its written consent to the Trustee, which is hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms hereof. TO HAVE AND TO HOLD all the same with all privileges and appurtenances hereby conveyed and assigned, or agreed or intended so to be, to the Trustee and its successors in said trust and to them and their assigns forever (it being understood by the parties hereto that the requirements of FHA do not permit a gross revenue pledge and that the Trustee may hold certain other funds in connection with the Project pursuant to documents entered into with FHA, which funds shall not be subject to the lien of this Indenture); IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth for the equal and proportionate benefit, security and protection of all holders and owners of the Bonds issued under and secured by this Indenture without privilege, priority or distinction as to the lien or otherwise of any of the Bonds over any of the others of the Bonds except as set forth in this Indenture; SF2-28088.1 2 40511-90-MSI-03/11/94 • • PROVIDED,HOWEVER, that if the Issuer shall pay or cause to be paid to the holders and owners of the Bonds the principal, interest and premium, if any, to become due thereon at the times and in the manner provided in Article IX and if the Issuer shall keep, perform and observe, or cause to be kept, performed and observed all of its covenants, warranties and agreements contained herein, this Indenture and the estate and rights hereby granted shall, at the option of the Issuer, cease and be void, and thereupon the Trustee shall cancel and discharge the lien of this Indenture and reconvey to the Issuer any property at the time subject to the lien of this Indenture which may then be in its possession, except funds held by the Trustee for the payment of interest on, premium, if any, and principal of the Bonds; otherwise this Indenture shall be and remain in full force and effect, and upon the trusts and subject to the covenants and conditions hereinafter set forth. ARTICLE I Definitions and Interpretation Section 1.01. Definitions. The terms defined in this Section 1.01 or in the Recitals hereto (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.01 or in the Recitals hereto. "Act" means Chapter 8 of Part 5 of Division 31 of the Health and Safety Code of the State of California. "Act of Bankruptcy" means the filing of a petition in bankruptcy (or other commencement of a bankruptcy or similar proceeding) by or against the Borrower or any guarantor of the Borrower, or the Issuer, under any applicable bankruptcy, insolvency or similar law as now or hereafter in effect. "Authorized Borrower Representative" means the President of the Borrower, or any other person designated to act in such capacity by a resolution of the Board of Directors of the Borrower. "Authorized Issuer Representative" means the Chair or the Vice-Chair of the Board of Supervisors, the Director of Community Development of the County, the County Administrator, the Director of the Growth Management and Economic Development Agency, Deputy Director-Redevelopment of the Issuer or any other person designated to act in such capacity by a Certificate of the Issuer containing the specimen signature of any of such persons, which certificate may designate an alternate or alternates. "Available Amounts" means moneys which are continuously on deposit with the Trustee in trust for the benefit of Bondholders in a separate and segregated account in which only Available Amounts are held and are (a) moneys deposited by or on behalf of the Borrower which have been held by the Trustee in the Available Amounts Account for at least 367 days prior to the date of notice of redemption relating to the use of such moneys to make payments on the Bonds, provided that no Act of Bankruptcy shall have occurred during the period after such moneys were deposited in the Available Amounts Account; provided, however, that such 367-day period may be reduced hereunder (and under the prepayment provisions of the FHA Note) upon receipt by the Trustee of an opinion(which may assume that no owner of Bonds is an "insider" within the meaning of the Bankruptcy Code) of Bond Counsel or nationally recognized counsel experienced in bankruptcy matters to the effect that the use of such moneys to pay the principal of, premium, or interest on the Bonds would not be recoverable from Bondholders pursuant to Section 362(a) or 550 of the Bankruptcy Code as avoidable preferential payments under Sections 544 and 547 of the Bankruptcy Code in the event of the occurrence of an Act of Bankruptcy; and (b)proceeds of the investment of funds qualifying as Available Amounts under the foregoing clause. In determining whether an Act of Bankruptcy of the Borrower or guarantor of the Borrower has occurred, the Trustee may rely on a certificate or certificates of such party to that effect. "Available Fee Revenues" means amounts to be utilized for the payment of Ordinary Trustee/Mortgage Servicer Fees and Expenses from revenues which are excluded from Pledged Revenues but are SF2-28088.1 3 40511-90-MSI-03/11/94 derived from payments to the Trustee on the FHA Note in an amount equal to % per annum of the outstanding principal balance of the FHA Note, calculated and payable monthly, commencing with the first Note payment made by the Borrower on the FHA Note following delivery of the Bonds. "Bond" means the $ aggregate principal amount County of Contra Costa Multifamily Housing Revenue Bonds (FHA Insured Mortgage Loan - Crescent Park Apartments Project) 1994 Series C. "Bond Counsel" means any attorney at law or firm of attorneys selected by the Issuer, of nationally recognized standing in matters pertaining to the validity of, and exclusion from gross income for federal income tax purposes of interest on, bonds issued by states and political subdivisions, and duly admitted to practice law before the highest court of any state of the United States of America. "Bond Form" means the form of Bonds attached to this Indenture as an Exhibit. "Bondholder," or "holder" or "owner" of the Bonds means the person or persons in whose name any Bond is registered from time to time. "Bond Obligation" means, as of any date of calculation, the principal amount of all Outstanding Bonds. "Bond Purchaser" means, collectively, Kirkpatrick, Pettis, Smith, Polian Inc. and Charles A. Bell Securities Corp. "Bond Purchase Agreement" means the agreement of that name dated , 1994, among the Bond Purchaser, the Borrower and the Issuer. "Borrower" means EAH-Contra Costa, Inc., a nonprofit corporation organized and existing under the laws of the State of California. "Business Day" or "business day" means a day, other than Saturday or Sunday, on which(a) banks located in New York, New York, or in the city in which the Trust Office of the Trustee is located, are not required or authorized by law or executive order to close for business, and (b) The New York Stock Exchange is not closed. "Certificate of the Issuer," "Statement of the Issuer," "Request of the Issuer" and "Requisition of the Issuer" mean, respectively, a written certificate, statement, request or requisition signed in the name of the Issuer by an Authorized Issuer Representative or such other person as may be designated and authorized to sign for the Issuer. Any such instrument and supporting opinions or representations, if any, may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument. "Closing" or "Closing Date" means , 1994. "Code" means the Internal Revenue Code of 1986. Each reference to a section of the Code shall be deemed to include the United States Treasury Regulations in effect or proposed from time to time with respect thereto and applicable to the Project or the Bonds or the use of the proceeds thereof. "Contract of Mortgage Insurance" means the contract by and between FHA and the Trustee pursuant to the National Housing Act, as evidenced by the endorsed FHA Note and providing for insurance against certain losses under the Mortgage Loan. "Debt Service" means the scheduled amount of interest and amortization of principal payable on the Bonds during the period of computation, excluding amounts scheduled during such period which relate to principal that has been retired before the beginning of such period. SF2-28088.1 4 40511-90-MS1-03/11/94 "Debt Service Reserve Requirement" means, on any date of calculation by the Trustee, the sum of(i) an amount equal to one payment of principal and interest on the FHA Note, (ii) an amount equal to one-twelfth(1/12) of the difference between (a) the product of the principal amount of Bonds Outstanding multiplied by the highest rate of interest payable on any Bond Outstanding and (b) the product of 99% of the unpaid principal balance on the FHA Note multiplied by the rate of interest on the Bond Fund Investment Agreement, and (iii) 8/6 of the maximum semiannual principal and interest payment on the Bonds. In making such determination, the Trustee shall refer to the debt service schedule attached as Exhibit B hereto, as such schedule may be revised in the event of a redemption of Bonds in part otherwise than pursuant to Section 3.01 (c) hereof. Debt Service Reserve Requirement on the Closing Date is $ "Defeasance Obligations" means (i) direct, non-callable obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury of the United States of America), or obligations the timely payment of the principal of and interest on which is unconditionally guaranteed by the United States of America, which obligations will not adversely affect the rating on the Bonds as determined by written confirmation of the Rating Agency, and (ii) certificates which evidence ownership of the right to the payments of the principal of and interest on obligations described in clause (i) or in specified portions thereof, including without limitation, portions consisting solely of the principal thereof or solely of the interest thereon. "Event of Default" means any of those events specified in and defined by the applicable provisions of Article VI hereof to constitute an Event of Default. "Extraordinary Fees and Expenses" means those fees and expenses in excess of the Ordinary Trustee/Mortgage Servicer Fees and Expenses in connection with an Event of Default under Article VI hereof, but in no event shall such amount exceed the sum of$ from moneys held under the Indenture. "FHA" means the Federal Housing Administration, an organizational unit within HUD, and may refer to any authorized representative or the successor thereof. "FHA Documents" means the FHA Note, the Mortgage, the FHA Regulatory Agreement and any other documents which are required by HUD in connection with the Mortgage Loan. "FHA Note" or "Note" means the nonrecourse promissory note of the Borrower evidencing the Mortgage Loan, as modified by the Modification of Deed of Trust Note and Deed of Trust. "FHA Regulations" means the regulations promulgated by FHA regarding insurance under Section 221(d)(3) of the National Housing Act. "FHA Regulatory Agreement" means the Regulatory Agreement dated as of 1, 1994 between the Borrower and HUD relating to the Project. "Financing Agreement" means the agreement of that name dated as of the date hereof among the Issuer, the Borrower and the Trustee. "HUD" means the United States Department of Housing and Urban Development, and its successors and assigns. "Indenture" means this Trust Indenture and all indentures supplemental hereto. "Information Services" means Financial Information, Inc.'s "Daily Called Bond Service," 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302, Attention: Editor; Kenny Information Services', "Called Bond Service," 55 Broad Street, 28th 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 &Poor's Corporation "Called Bond Record," 25 Broadway, SF2-28088.1 5 40511-90-MSI-03/11194 New York, New York 10004; or, in accordance with then current guidelines of the Securities and Exchange Commission, to 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. "Interest Payment Date" means each April_and October_, commencing on October 1994. "Investment Agreement(s)" means the agreement or agreements providing for the investment of moneys held hereunder between the Trustee and or any substituted agreement which shall be in substantially the same form as the initial agreement(s) and which shall have no adverse impact on the Rating Agency's rating of the Bonds'as determined by written confirmation of the Rating Agency. "Issuer" means the County of Contra Costa, a legal subdivision and body corporate and politic of the State. "Modification of Deed of Trust Note and Deed of Trust" means the agreement of that name dated as of the date hereof relating to the modification of certain terms and provisions of the FHA Note and the Mortgage. "Mortgage" means the deed of trust encumbering the Project and securing payment of the Mortgage Loan, as modified by the Modification of Deed of Trust Note and Deed of Trust. "Mortgage Insurance" means the insurance provided for by the Contract of Mortgage Insurance. "Mortgage Loan" means the permanent loan assumed by the Borrower, as evidenced by the FHA Note, as modified, and secured by the Mortgage and all related documents required by HUD to obtain and maintain the Mortgage Insurance. "Mortgage Servicer" means or its successor as servicer under the Mortgage Servicing Agreement. "Mortgage Servicing Agreement" means the agreement of that name dated the date hereof by and between the Trustee and the Mortgage Servicer, as from time to time amended. "National Housing Act" means the National Housing Act of 1934, as amended. "Net Proceeds," when used with respect to any insurance proceeds or condemnation award, means the amount remaining after deducting from the gross proceeds thereof all expenses (including attorneys' fees) incurred in the collection of such proceeds or award. "Opinion of Counsel" means an opinion in writing signed by an attorney or firm of attorneys who may be counsel to the Issuer, the Borrower or the Trustee but shall not be a full-time employee of the Issuer, the Borrower or the Trustee. "Ordinary Trustee/Mortgage Servicer Fees and Expenses" means the combined ordinary fees and expenses of the Trustee and Mortgage Servicer pursuant to Section 7.06 hereof. "Outstanding," when used with respect to the Bonds means all Bonds theretofore authenticated and delivered under this Indenture, except: (a) Bonds theretofore cancelled by the Trustee or theretofore delivered to the Trustee for cancellation; SF2-28088.1 - 6 40511-90-MS1-03/11/94 (b) Bonds for the payment or redemption of which moneys or obligations shall have been theretofore deposited with the Trustee in accordance with Article IX; and (c) Bonds in exchange for or in lieu of which other Bonds have been authenticated and delivered under this Indenture. "Paying Agent" means the Trustee acting as paying agent and not in its capacity as Trustee. "Pledged Revenues" means (a) the payments on the FHA Note (which payments exclude Available Fee Revenues), (b) subject to the provisions of this Indenture with respect to the Trustee holding moneys for the benefit of the Holders of particular Bonds in trust after notice of redemption has been given and upon defeasance pursuant to Article IX hereof, all other moneys received by the Issuer, or the Trustee for the account of the Issuer, with respect to the Financing Agreement, except the Reserved Rights of the Issuer, (c) any moneys on deposit in all of the funds (except the Rebate Fund) and accounts held under this Indenture, (d) the income and profit from the investment of any moneys while held in the funds and accounts held under this Indenture (excluding earnings on the Rebate Fund), and (e) all moneys (and/or debentures, as the case may be) paid pursuant to the Contract of Mortgage Insurance and other benefits thereunder. "Project" means the multifamily rental housing project known as Crescent Park Apartments, located on and including the land described in Exhibit A to the Issuer Regulatory Agreement. "Qualified Investments" means: (a) Government Obligations; (b) Federal Housing Administration's debentures; (c) Federal Home Loan Mortgage Corporations's (FHLMC) participation certificates (excluding stripped mortgage securities which are purchased at prices exceeding their principal amounts) which guarantee timely payment of principal and interest and senior debt obligations; (d) Farm Credit Banks' (Federal Land Banks, Federal Intermediate Credit Banks and Banks for Cooperatives) consolidated systemwide bonds and notes; (e) Federal Home Loan Banks consolidated debt obligations; (f) Federal National Mortgage Association's (FNMA) mortgage-backed securities (excluding stripped mortgage securities which are purchased at prices exceeding their principal amounts) and senior debt obligations; (g) Student Loan Marketing Association's (Sallie Mae) senior debt obligations (excluding securities that do not have a fixed par value and/or whose terms do not promise a fixed dollar amount at maturity or call date) and letter of credit backed issues; (h) Resolution Funding Corp.'s (REFCORP) debt obligations; (i) Federal funds, certificates of deposit, time deposits and bankers' acceptances (having original maturities of not more than 365 days) of any bank, the unsecured short term obligations of which are rated "A-1+" by Standard &Poor's; (j) Deposits which are fully insured by the Federal Deposit Insurance Corp. (FDIC); SF2-28088.1 7 40511-90-MSI-03/11/94 (k) Debt obligations rated "AAA" by Standard & Poor's (excluding securities that do not have a fixed par value and/or whose terms do not promise a fixed dollar amount at maturity or call date); (1) Commercial paper (Having original maturities of not more than 270 days) rated "A-1+" by Standard &Poor's; (m) Money market funds rated "AAAm" or "AAAm-G") by Standard's &Poor's; (n) Repurchase agreements with any institution the unsecured, uninsured and unguaranteed debt obligations of which are rated "AAA" by Standard &Poor's or commercial paper of which is rated "A-1+" by Standard &Poor's; (o) Any stripped securities assessed or rated "AAA" by Standard &Poor's; and (p) The Investment Agreements. "Rating Agency" means Standard &Poor's Corporation and its successors and assigns. "Rebate Amount" means the amount described in the Tax Certificate. "Rebate Analyst" means Orrick, Herrington& Sutcliffe or any other qualified person acceptable to the Issuer and retained by the Borrower to calculate the Rebate Amount or, in the event that the Borrower fails to so retain a Rebate Analyst one month prior to any date on which calculations are required to be made under the Tax Certificate, any qualified person retained by the Trustee to calculate the Rebate Amount. "Registrar" means the Trustee acting as registrar. "Regulations" means the Income Tax Regulations promulgated or proposed by the Department of the Treasury pursuant to the Code from time to time or pursuant to any predecessor statute to the Code. "Reserved Rights of the Issuer" means (a) all rights which the Issuer or its officers, officials, agents or employees may have under this Indenture and the Financing Agreement to indemnification by the Borrower and by any other persons and to payments for expenses incurred by the Issuer itself, or its officers, officials, agents or employees; (b) the right of the Issuer to receive notices, reports or other information, make determinations and grant approvals hereunder and under the other Financing Documents; (c) the right of the Issuer to receive its fee pursuant to Section 2.2 of the Financing Agreement; (d) all rights of the Issuer to enforce the representations, warranties, covenants and agreements of the Borrower pertaining in any manner or way, directly or indirectly to the requirements of the Act or any requirements imposed by the Issuer with respect to the Project, or necessary to assure that interest on the Bonds is excluded from gross income for federal income tax purposes,.as are set forth in any of the Financing Documents or in any other certificate or agreement executed by the Borrower; (e) all rights of the Issuer in connection with any amendment to or modification of the Financing Documents; and (f) all enforcement remedies with respect to the foregoing. "Securities Depositories" means The Depository Trust Company, 711 Stewart Avenue, Garden City, New York 11530, Fax (516) 227-4039 or 4190; Midwest Securities Trust Company, Capital Structures-Call Notification, 440 South LaSalle Street, Chicago, Illinois 60605, Fax (312) 663-2343; Pacific Securities Depository Trust Company, Pacific and Company, P.O. Box 7041, San Francisco, California 94120, Fax (415) 393-4128; Philadelphia Depository Trust Company, Reorganization Division, 1900 Market Street, Philadelphia, Pennsylvania 19103, Attention: Bond Department, Fax (215) 496-5058; or, in accordance with the then current guidelines of the Securities and Exchange Commission, to such other addresses and/or such other securities depositories or any such other securities depositories as the Issuer may designate in writing to the Trustee. SF2-28088.1 8 40511-90-MSt-03/11/94 • 0 "Sinking Account Payment" means the amount required by this Indenture to be paid by the Issuer on any single date at or prior to maturity for the retirement of Bonds. "State" means the State of California. "Regulatory Agreement" means the Regulatory Agreement and Declaration of Restrictive Covenants, dated as of 1, 1994, among the Borrower, the Issuer and the Trustee, together with any and all Supplements thereto. "Supplements" means all extensions, renewals, modifications, amendments, supplements and substitutions. "Tax Certificate" means the Tax Certificate and Agreement dated , 1994 between the Issuer and the Borrower together with any and all supplements thereto. "Trustee" means the person named as the "Trustee" in the first paragraph of this Indenture until a successor shall have become Trustee pursuant to this Indenture, and thereafter such successor. Section 1.02. Interpretation. The words "hereof," "herein," "hereunder," "hereto," and other words of similar import refer to this Indenture in its entirety. The terms "agree" and "agreements" contained herein are intended to include and mean "covenant" and "covenants." References to Articles, Sections, and other subdivisions of this Indenture are to the designated Articles, Sections and other subdivisions of this Indenture. The headings of this Indenture are for convenience only and shall not define or limit the provisions hereof. All references made (a) in any gender shall be deemed to have been made in all genders, and (b) in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well. Any reference to particular sections or subsections of the Code and applicable Income Tax Regulations shall include any successor provisions of law or regulations, to the extent the same shall apply to the Bonds. The parties acknowledge that each party, the Borrower and its respective counsel have participated in the drafting and revision of this Indenture, the Financing Agreement and the Issuer Regulatory Agreement. Accordingly, the parties agree that any rule of construction which would disfavor the drafting party shall not apply in the interpretation of this Indenture, the Financing Agreement or the Issuer Regulatory Agreement or any Supplement or exhibit hereto or thereto. Section 1.03. Content of Certificates and Opinions. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture or the Financing Agreement shall include(a) a statement that the person or persons making or giving such certificate or opinion have read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) 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 such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of the signers, such condition or covenant has been complied with. SF2-28088.1 9 40511-90-MS1-03/11/94 Any such certificate or opinion made or given by an officer of the Issuer 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 opinion or representations with respect to the matters upon which his or her certificate or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should have known that the same were erroneous. Any such certificate or opinion made or given by counsel may be based, insofar as it relates to factual matters (with respect to which information is in the possession of the Issuer), upon the certificate or opinion of or representations by an officer of the Issuer, unless such counsel knows that the certificate or opinion or representations with respect to the matters upon which his or her opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should have known that the same were erroneous. ARTICLE II The Bonds Section 2.01. Authorized Amount and Terms of Bonds. Bonds may not be issued under this Indenture except in accordance with this Article. The Bonds shall be in the form of the Bond Form. The total principal amount of Bonds that may be issued hereunder is expressly limited to $ . The Bonds shall be issued only as fully registered bonds, without coupons, and shall be in the denomination of[$5,000] or any integral multiple thereof requested by the registered owner thereof; provided, however, that each Bond shall have only one principal maturity date. The Bonds shall be numbered from 1 upward. All of the Bonds are equally and ratably secured under this Indenture. Each Bond shall be dated as of the date of this Indenture and shall bear interest (computed on the basis of a 360-day year consisting of twelve 30-day months)until paid from the Interest Payment Date next preceding the date of registration thereof unless it is registered as of a day during the period from the sixteenth day of the month next preceding any Interest Payment Date to such Interest Payment Date, inclusive, in which event it shall bear interest from such Interest Payment Date, or unless it is registered before December 15, 1994, in which event it shall bear interest from , 1994; provided however, that if, at the time of registration of any Bonds, interest is in default on Outstanding Bonds, such Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment on the Outstanding Bonds. Bonds shall bear interest payable semiannually on each Interest Payment Date, shall mature on the dates and in the amounts, and shall bear interest at the rate or rates, as set forth below: Maturity Principal Amount Interest Rate Principal of and premium on the Bonds shall be paid only upon presentation and surrender thereof for cancellation at the principal corporate trust of the Trustee in Los Angeles, California. Payment of principal, premium and interest shall be made in such coin or currency of the United States as at the time of payment is legal tender for payment of private and public debts. Payment of the interest on any Bond shall be made to the person whose name appears on the Bond registration books of the Trustee as the registered owner thereof as of the close of business on the fifteenth day of the calendar month next preceding an Interest Payment Date, whether or not such day is a Business Day (the "Record Date"), such interest to be paid by check or draft mailed to such registered owner at its address as it appears on such registration books; provided, that at the written request addressed to the Trustee of a Holder of$1,000,000 or more in aggregate principal amount of Bonds, such payments of interest and (upon presentation and surrender of Bonds)principal or redemption price shall be made by wire transfer of funds (on the same day as described above for payment by check) to an account at a financial institution in the United States designated to the Trustee by such Bondholder no later than SF2-28088.1 10 40511-90-MSI-03111/94 • five (5) days prior to the corresponding Record Date. The Trustee shall cause notice of the proposed payment of defaulted interest and the record date of such payment (a "Special Record Date") to be mailed, first class, to each Bondholder at the addresses shown on the Bond registration books of the Trustee, not less than 10 days before such Special Record Date. The Bonds shall be subject to redemption prior to maturity as provided in Article III hereof. Section 2.02. Limited Obligations. The Bonds and the interest thereon are limited obligations of the Issuer, payable solely from the revenues, receipts and security pledged therefor in the Granting Clauses hereof. Neither the faith and credit nor the taxing power of the Issuer or the State is pledged to the payment of the principal of or premium or interest on the Bonds. The Bonds are not a debt of the United States of, America, HUD or any other governmental agency and are not guaranteed by the full faith and credit of the United States. Neither the United States of America nor HUD, nor any other agency of the United States of America, nor the State, nor any political subdivision or agency thereof(except the Issuer, to the limited extent set forth in this Section) 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 none of the Bonds or 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 provision whatsoever. Section 2.03. Execution. The Bonds shall be executed on behalf of the Issuer by the manual or facsimile signature of the Chair of its Board of Supervisors, attested by the manual or facsimile signature of the County Administrator and Clerk of its Board of Supervisors under the official seal, or a facsimile thereof, of the Issuer. Any facsimile signatures shall have the same force and effect as if said officers had manually signed the Bonds. Any reproduction of the official seal of the Issuer on the Bonds shall have the same force and effect as if the official seal of the Issuer had been impressed on the Bonds. In case any officer whose signature or 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 2.04. Authentication. Only such Bonds as shall have endorsed thereon a certificate of authentication and registration substantially in the form set forth in the Bond Form duly executed by the Trustee shall be entitled to any right or benefit under this Indenture. No Bond shall be valid or obligatory for any purpose unless and until such certificate of authentication and registration shall have been duly 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 and registration on any Bond shall be deemed to have been executed by it if signed by an authorized signatory of the Trustee, but it shall not be necessary that the same person sign the certificate of authentication and registration on all the Bonds. Section 2.05. Mutilated, Lost, Stolen or Destroyed Bonds. In the event any Bond is mutilated, lost, stolen or destroyed, the Issuer may execute and the Trustee may authenticate and deliver a new Bond in lieu of such mutilated, lost, stolen or destroyed Bond, of like date, number, series, maturity and denomination-as that mutilated, lost, stolen or destroyed. Any mutilated Bond shall first be surrendered to the Issuer; and in the case of any lost, stolen or destroyed Bond, there shall first be furnished to the Trustee evidence of such loss, theft or destruction satisfactory to it together with indemnity satisfactory to it. In the event any such Bond shall have matured, instead of issuing a duplicate Bond the Trustee may pay the same without surrender thereof. The Trustee may charge the holder or owner of such Bond with its reasonable fees and expenses. Section 2.06. Registration, Transfer and Exchange of Bonds; Persons Treated as Owners. The Trustee as Bond Registrar shall cause a bond register to be kept for the registration of transfers of Bonds. Any Bond may be transferred only upon an assignment duly executed by the registered owner or his duly SF2-28088.1 I I 40511-90-MS 1-03111/94 authorized representative in such form as shall be satisfactory to the Bond Registrar, and upon surrender of such Bond to the Trustee for cancellation. Whenever any Bond or Bonds shall be surrendered for transfer, the Issuer shall execute and the Trustee shall authenticate and deliver to the transferee a new fully registered Bond or Bonds, of like series and maturity, of authorized denomination or denominations and for the amount of such Bond or Bonds so surrendered. Any Bond may be exchanged at the office of the Trustee for a new Bond or Bonds of the same series and maturity and of any authorized denomination or denominations for the aggregate amount of such Bond then remaining Outstanding. In all cases in which Bonds shall be transferred or exchanged hereunder, the Trustee may make a charge sufficient to reimburse it for any tax, fee or other governmental charge required to be paid with respect to such transfer or exchange. The Trustee shall not be required to transfer any Bond after the selection of such Bond for redemption has been made, or during the period of fifteen days next preceding the selection of Bonds for redemption. The person in whose name any Bond shall be registered shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of or on account of the principal of and premium and interest on any such Bond shall be made only to or upon the order of the registered owner thereof, or his legal representative, and neither the Issuer nor the Trustee shall be affected by any notice to the contrary. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums to be paid. Section 2.07. Temporary Bonds. Until definitive Bonds are ready for delivery, there may be executed, and upon the request of the Issuer the Trustee shall authenticate and deliver, in lieu of definitive Bonds, one or more temporary typewritten, printed, engraved or lithographed Bonds, in any appropriate denomination, in fully registered form, and in substantially the tenor set forth in the Bond Form, with such appropriate omissions, insertions and variations as may be required. If temporary Bonds shall be issued, the Issuer shall cause the definitive Bonds to be prepared and to be executed and delivered to the Trustee, and the Trustee, upon presentation to it at its principal corporate trust office of any temporary Bond, shall cancel the same and authenticate and deliver in exchange therefor, without charge to the owner thereof, a definitive Bond or Bonds of an equal aggregate principal amount, of the same series and maturity and bearing interest at the same rate as the temporary Bond surrendered. Until so exchanged, the temporary Bonds shall in all respects be entitled to the same benefit and security of this Indenture as the definitive Bonds to be issued and authenticated hereunder. Interest on temporary Bonds, when due and payable, if the definitive Bonds shall not be ready for exchange, shall be paid on presentation of such temporary Bonds for notation of such payment thereon by the Trustee. Section 2.08. Delivery of the Bonds. Upon the execution and delivery of this Indenture, the Issuer shall execute and deliver to the Trustee and the Trustee shall authenticate the Bonds and deliver them to or upon the order of the Issuer upon receipt by the Trustee of the following: (a) An executed counterpart of this Indenture, and an executed counterpart or copy, as executed, of the Financing Agreement, the Regulatory Agreement, the Tax Certificate and the Deed of Trust Note and Deed of Trust; (b) an approving opinion of Bond Counsel with respect to the validity of the Bonds; (c) a resolution, certified by the County Administrator and Clerk of the Board of Supervisors of the Issuer, or Deputy Clerk (or another authorized official) authorizing the execution and delivery of this Indenture and other necessary documents and the issuance, sale and delivery of the Bonds; (d) the Bond Purchase Agreement, duly executed by each party thereto; SF2-28088.1 12 40511-90-MS1-03/11/94 (e) the original of the Mortgage and FHA Note endorsed for insurance by HUD, and copies of the amendments to the Mortgage and FHA Note duly executed by the Borrower, the Trustee and HUD; (f) conformed copies of all other FHA Documents assigned to or in the name of the Trustee as mortgagee; (g) certified true and exact copy of the policy of title insurance in the face amount of the FHA Note together with original endorsements and copies of any easements, to include coverage against all liens that may arise from labor performed or materials supplied prior to the date of such policy, insuring the Trustee in its capacity hereunder as the holder thereof that the Mortgage constitutes a valid first lien upon the Project; (h) a letter of instructions from the Issuer directing the Trustee to authenticate and deliver the Bonds against receipt of the purchase price therefor; (i) evidence of payment to the Trustee of its acceptance fee; and (j) such other opinions and documents as Bond Counsel or the Trustee, or both, may reasonably request. ARTICLE III Redemption of Bonds Prior to Maturity Section 3.01. Redemption of Bonds Prior to Maturity. The Bonds are subject to redemption prior to maturity as set forth in this Section, Section 3.02 and Section 3.03 hereof. (a) Mandatory Redemption. The Bonds are subject to mandatory redemption prior to maturity at a redemption price equal to 100% of the principal amount thereof, without premium, on the earliest practicable date for which notice of redemption can be given in accordance with Section 3.05 hereof, plus accrued interest to the date fixed for redemption (i) on any date, in whole or in part, if Mortgage Insurance proceeds are payable to the Trustee (in which event funds held by the Trustee shall be applied in the order set forth in Section 6.08), or (ii) on any date, in whole or in part, as provided in Section 3.03, if Net Proceeds as a result of damage to the Project or condemnation are applied to the prepayment of the.FHA Note, or (iii)in whole or in part in the event the Borrower becomes subject to bankruptcy proceedings and the trustee in bankruptcy causes or directs the prepayment of the FHA Note(along with a proportionate reduction of and redemption from the Debt Service Reserve Fund as described in Section 3.04 hereof). (b) Optional Redemption. The Bonds maturing on or after 1, 200_are also subject to redemption prior to maturity on the earliest practicable date on or after September 1, 2003, in whole or in part, from the proceeds of any refunding obligations of the Issuer or other funds provided by the Issuer and to the extent of any prepayment of the FHA Note by the Borrower as described in Section 3.02 hereof, together with an appropriate reduction of and redemption from the Debt Service Reserve Fund as described in Section 3.05 hereof, during the periods and at the redemption prices (expressed as percentages of the principal amount) set forth in the table below, together with interest accrued thereon to the date fixed for redemption, as follows: SF2-28088.1 13 40511-90-MS1-03/11194 • • Redemption Dates Redemption Prices The Trustee shall not give notice of redemption pursuant to this subsection unless the Trustee has received and has on deposit(i) Available Amounts sufficient to redeem the Bonds represented by the principal prepayment of the FHA Note(principal, premium and accrued interest) or (ii) proceeds of refunding obligations of the Issuer or other funds provided by the Issuer, plus the amount required to redeem Bonds pursuant to Section 3.04 hereof. All moneys deposited with the Trustee pursuant to this paragraph shall be invested in Qualified Investments until used for redemption. (c) Sinking Account Redemption. The Bonds are subject to sinking account redemption on the respective Interest Payment Dates set forth in the schedule below, at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date, in the following principal amounts, subject to pro-rata reduction of such scheduled mandatory redemption payments to the extent that such Bonds are redeemed prior to maturity otherwise than pursuant to such sinking account redemption: Bonds Due , Principal Principal Redemption Dates Amount Redemption Dates Amount * Maturity Section 3.02. Redemption of Bonds upon Prepayment of FHA Note. In the event the Borrower exercises its option to prepay the FHA Note or any part thereof according to its terms, the Trustee shall deposit the proceeds of such prepayment in the Bond Fund and shall use such proceeds to redeem Bonds at the applicable redemption price specified in Section 3.01(b)hereof without any action on the part of the Issuer. Prior to notice of redemption being given as provided in Section 3.05 hereof, there shall be deposited in the Bond Fund an amount which, in addition to other moneys, if any, available and held by the Trustee for such purpose, will be sufficient to redeem at the redemption price thereof, plus interest accrued to the redemption date, all the Bonds to be redeemed, including Bonds to be redeemed through a reduction of the Debt Service Reserve Fund as provided in Section 3.04 hereof to the extent of a reduction in monthly payments on the FHA Note. The 367-day period for notice of prepayment and deposit of available funds as set forth in the FHA Note shall be subject to reduction as provided in the definition of "Available Amounts" set forth in Section 1.01 hereof. The Borrower may, on or before the forty-fifth day next preceding any such redemption payment date, SF2-28088.1 14 40511-90-MS 1-03/11/94 deliver Bonds to the Trustee for payment and cancellation on such redemption date in an aggregate principal amount not to exceed the principal amount of Bonds to be redeemed on such date pursuant to this subsection. In such event, the amount of Bonds to be redeemed shall be reduced by the principal amount of Bonds delivered to the Trustee by the Borrower. Section 3.03. Damage, Destruction or Condemnation. If, as a result of fire or other casualty, the Project, or any part thereof, is damaged or destroyed, or the Project, or any part thereof, shall be condemned or acquired for public use, the Borrower shall, within thirty (30) days after receiving actual notice of such damage, destruction or condemnation, and after written notice has been given to the Trustee, select one of the two alternatives set forth below: (a) Alternative A -Restoration. If the Project can be repaired or restored to substantially the same condition as it existed prior to the event causing such damage or destruction, or the effect of the condemnation can be relieved so that the status of the Project will be restored to substantially the same status as it existed prior to the event causing such condemnation, without, in either case,jeopardizing repayment of the principal of and interest on the Bonds, all in accordance with the opinion of an expert or experts selected as referred to below, then, upon receipt by the Trustee of the written consent of HUD, the Borrower may so repair and restore the Project and the Borrower may and/or the Trustee shall apply the net proceeds of any insurance relating to such damage, destruction or condemnation or any condemnation award to the payment or the reimbursement of the costs of such repair or restoration. The Trustee may rely on the advice of architects, engineers, accountants, financial consultants, attorneys and other experts reasonably selected by it in the foregoing matters. (b) Alternative B - Prepayment of Note; Redemption of Bonds. If Alternative A is not selected, the Trustee shall apply the Net Proceeds of any insurance or condemnation award to the reduction of indebtedness under the FHA Note. In such event, the Trustee shall deposit such Net Proceeds in the Bond Fund for application to the redemption of Bonds in accordance with Section 3.01 hereof(along with a proportionate reduction of and redemption from the Debt Service Reserve Fund as described in Section 3.04 hereof). Section 3.04. Selection of Bonds for Redemption. If less than all the Bonds then Outstanding shall be called for redemption upon application of Net Proceeds to a prepayment of the FHA Note, upon a partial prepayment of the FHA Note by the Borrower, or because of the receipt of Mortgage Insurance proceeds, the Trustee shall redeem an amount of Bonds of each maturity so that the resulting decrease in debt service on the Bonds during each six-month period ending on an Interest Payment Date is proportional, as nearly as practicable, to the decrease in payments on the FHA Note in each such six-month period. If less than all Bonds of the same maturity are to be redeemed under the provisions of this Indenture other than pursuant to Section 3.01(c), the Bonds to be redeemed shall be selected by the Trustee by lot in such manner as the Trustee shall determine; provided, however, that the Bonds shall be redeemed only in integral multiples of$5,000 and, in selecting Bonds for redemption, the Trustee shall treat each Bond as representing that number of Bonds which is obtained by dividing the principal amount of such Bond by $5,000. Upon surrender of any Bond redeemed in part only, the Issuer shall execute and the Trustee shall authenticate and deliver to the registered owner thereof, without expense to such owner, a new Bond or Bonds of the same series and maturity, bearing interest at the same rate, and of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bond surrendered. In the event a portion of the Bonds are to be redeemed because of a reduction in the outstanding principal amount of the FHA Note which reduces the monthly payment thereon, then an additional portion of the Bonds shall be redeemed from amounts on deposit in the Debt Service Reserve Fund in an amount which bears the same proportion as nearly as practicable to the amount held in the Debt Service Reserve Fund as the amount of the reduction in the principal amount of the FHA Note and the Mortgage bears to the principal amount of the FHA Note and the Mortgage immediately prior to such reduction. SF2-28088.1 15 40511-90-MS 1-03/11/94 Section 3.05. Notice of Redemption. Notice of the intended redemption of each Bond shall be given by the Trustee by first class mail, postage prepaid, to the registered owner of each Bond to be redeemed at the address of such owner shown on the Trustee's bond register. In the case of a redemption pursuant to (i) Section 3.01(a), notice of redemption shall be given only if sufficient funds for redemption are in the Trustee's possession on the date of notice; (ii) Section 3.01(b), notice of redemption shall be given only in accordance with the provisions of that Section; and (iii) Section 3.01(c), notice of redemption shall not be given unless sufficient funds for redemption either (a) are in the Trustee's possession on the date of notice, or (b) as calculated by the Trustee and in the absence of a default on the Mortgage Loan, will be in the Trustee's possession through a combination of those amounts for redemption in the Trustee's possession on the date of notice plus all amounts for redemption that are due the Trustee through the date of redemption. Notice by publication shall not be required. All such redemption notices shall be given not less than thirty (30) days nor more than forty-five (45) days prior to the date fixed for redemption. Each notice shall specify the complete official name of the Bond issue, including the series number(s), CUSIP number(s), the amounts being called of each certificate (in the case of partial redemption); the issue date, maturity date, interest rate(s), the numbers of the Bonds being called, the notice date, the redemption date, the redemption price and the place or places where amounts due upon such redemption shall be payable, including the redemption agent's name, address and telephone number. Such notice shall further state that interest on Bonds to be redeemed will cease to accrue after the designated redemption date, and that payment of the redemption price plus accrued interest to the date fixed for redemption will be made upon presentation and surrender of the Bonds, which in the case of a Bond redeemed in part will be replaced with a new Bond in a principal amount equal to the then outstanding principal amount thereof after said partial redemption. Notice of such redemption also shall be sent to certain municipal registered Securities Depositories which are known to the Trustee to be holding Bonds and, if required under then current guidelines of the Securities and Exchange Commission, notice of such redemption also shall be sent to at least two of the national Information Services that disseminate securities redemption notices. When possible, such notice shall be given to the Securities Depositories at least two (2) days prior to the mailing of other notices required by this paragraph and the immediately preceding paragraph, but in any event at least 30 days, but not more than 45 days, prior to the redemption date. Neither failure to give all or any portion of such further notice nor any defect in any notice so mailed shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given to the Bondholders as prescribed in the preceding paragraph. Failure to give notice by mailing to the registered owner of any Bond designated for redemption shall not affect the validity of the proceedings for the redemption of any Bond with respect to which no such failure has occurred. Any notice mailed as described above shall be presumed conclusively to have been duly given, whether or not the registered owner receives the notice. Section 3.06. Effect of Notice of Redemption. Notice of redemption having been given in the manner provided in this Article III, and money sufficient for the redemption being held by the Trustee for that purpose, thereupon the Bonds or portions thereof so called for redemption shall become due and payable on the redemption date, and interest thereon (or on such portion) shall cease to accrue on such date (whether or not such Bonds are then presented and surrendered for payment); and such Bonds or portions thereof shall thereafter no longer be entitled to any security or benefit under this Indenture except the right to receive payment of the redemption price thereof from moneys held by the Trustee and, to the extent provided in Section 3.04 hereof, to receive Bonds for any unredeemed portions of such Bonds. On the date fixed for redemption, the amount of such Bonds so called for redemption shall be deemed paid and no longer Outstanding. Section 3.07. Cancellation. All Bonds which shall have been redeemed shall be canceled and destroyed by the Trustee and shall not be reissued. A counterpart of the certificate of destruction evidencing such destruction shall be furnished by the Trustee to the Issuer. SF2-28088.1 16 40511-90-MSI-03/11/94 ARTICLE IV Funds: Investments Section 4.01. Establishment of Funds. The following funds shall be established and maintained by the Trustee under this Indenture for the benefit of the Bonds: (a) the Acquisition Fund; (b) the Bond Fund, which shall contain the Available Amounts Account and the Sinking Account therein; (c) the Debt Service Reserve Fund; (d) the Costs of Issuance Fund; and - (e) the Rebate Fund, and within that Fund, the Investment Earnings Account and the Excess Investment Earnings Account. Section 4.02. Application of Bond Proceeds and Other Deposits. (A) After making the initial deposits described below, the Trustee shall deposit to the Bond Fund all payments on the FHA Note and all interest, profits or other income derived from the investment of amounts in any fund, except the Rebate Fund established hereunder and except as otherwise provided in Section 4.05 hereof. Upon the issuance and delivery of the Bonds, all proceeds of the sale of the Bonds shall be deposited by the Trustee as follows: (a) To the Acquisition Fund, $ from Bond proceeds. (b) To the Debt Service Reserve Fund, $ from Bond proceeds. (c) To the Bond Fund, $ from accrued interest on the Bonds. (d) To the Costs of Issuance Fund, $ from Bond proceeds. (e) To the Borrower, $ from Bond proceeds. The Rebate Fund shall receive no initial deposit. Section 4.03. Disbursements from Acquisition Fund. On the Closing Date, the Trustee shall transfer the amount deposited in the Acquisition Fund to[current owner of mortgage loan], against transfer, assignment and delivery to the Trustee of the FHA Note, the Mortgage, the related FHA Documents and all other documents evidencing or'securing the Mortgage Loan executed by the Borrower, together with evidence of HUD's written consent to the terms thereof. Upon acquisition of the FHA Note, the Mortgage and the related FHA Documents, the Acquisition Fund shall be terminated. The transfer and assignment of any right, title and interest of the Issuer in and to the Mortgage Loan and the security therefor pursuant to the Granting Clauses hereof shall attach, be perfected and be valid and binding from and after the time of the delivery of the Bonds by the Trustee to the Bond Purchaser. Section 4.04. Bond Fund. The Trustee shall deposit in the Bond Fund the amount required to be deposited therein pursuant to Section 4.02 hereof, all Mortgage Insurance benefits (when and if received), all Pledged Revenues received with respect to the FHA Note payments, and all interest earnings on all of the Funds and Accounts held hereunder, except the Rebate Fund and except as otherwise provided in Section 4.05. Moneys to be applied to the prepayment of Bonds shall be deposited in the Available Amounts Account of the SF2-28088.1 17 40511-90-MSI-03/11/94 Bond Fund. The Trustee shall withdraw moneys from the Bond Fund on each Interest Payment Date, for and in the following order of priority: (i) Pay interest and principal due on the Bonds on such date; (ii) redeem Bonds pursuant to Section 3.01(c)hereof; and (iii) transfer to the Investment Earnings Account of the Rebate Fund the amount if any, required pursuant to Section 4.07 hereof and the Tax Certificate. Moneys held in the Bond Fund shall be deposited or invested pursuant to Section 4.09 hereof. All amounts in the Bond Fund shall be used and withdrawn by the Trustee solely for the purpose of paying the principal of, premium, if any, and interest on the Bonds when due and payable, whether by scheduled maturity or by earlier redemption of the Bonds. All amounts in the Sinking Account within the Bond Fund shall be used and withdrawn by the Trustee solely to redeem or pay at maturity the Bonds in accordance with the provisions of Article III hereof. Section 4.05. Debt Service Reserve Fund. The Trustee shall hold and maintain, for the security of the Bonds, for so long as the Bonds or any interest thereon is Outstanding and unpaid, the Debt Service Reserve Fund which shall be held separate and apart from all other funds and accounts established under this Indenture and from all other moneys of the Trustee. If, on any Interest Payment Date, the amount in the Bond Fund after making all required deposits therein shall be insufficient to pay the interest and principal then due on the Bonds and the Notice of Default and/or Notice of Intention and Election to Assign the Mortgage have been filed, the Trustee shall, subject to the limitations set forth below, transfer to the Bond Fund from the Debt Service Reserve Fund the amount of the deficit; provided, however, that any such transfer by the Trustee shall not relieve the Borrower of any of its obligations under the FHA Note or under the Mortgage. The Trustee shall value the Debt Service Reserve Fund on each Interest Payment Date at the lower of cost or market value, except that an Investment Agreement shall be valued at its face amount, and to the extent the value therein is less than the Debt Service Reserve Requirement, the Trustee shall retain interest earnings within this Fund until the Debt Service Reserve Requirement has been met. Unless the Debt Service Reserve Fund is valued at less than the Debt Service Reserve Requirement, interest earnings on the Debt Service Reserve Fund shall be transferred to the Bond Fund on each Interest Payment Date. Whenever the amount held in the Debt Service Reserve Fund, together with any other available moneys then held under this Indenture, is sufficient to provide for the redemption in whole or payment upon final maturity of all Outstanding Bonds, and to pay interest to accrue to the date of redemption or payment and any applicable redemption premium, such amount shall be transferred by the Trustee to the Bond Fund and applied to such redemption or payment at final maturity of all Outstanding Bonds. In the event of a default under the Mortgage Loan and assignment of the FHA Note and Mortgage to FHA in connection with a claim under the Mortgage Insurance, and upon final receipt of all Mortgage Insurance benefits, the Trustee shall transfer the entire balance remaining in the Debt Service Reserve Fund to the Bond Fund for application to the redemption of Bonds pursuant to Section 3.01(a)hereof. Notwithstanding the foregoing, however, no moneys in the Debt Service Reserve Fund shall be used for the payment of principal of and interest on the Bonds until the Trustee has filed its election of intention to assign the FHA Note to FHA except pursuant to Section 3.04 hereof or when all Outstanding Bonds are to be redeemed in whole or paid upon final maturity as aforesaid. SF2-28088.1 18 40511-90-MS1-03/11/94 Whenever the Bonds are to be redeemed in part in connection with a reduction in the outstanding principal amount of the FHA Note, the Trustee shall transfer to the Bond Fund from the Debt Service Reserve Fund the amount calculated pursuant to the last paragraph of Section 3.04 hereof. Section 4.06. Costs of Issuance Fund. The Trustee shall deposit in the Costs of Issuance Fund the amounts required to be deposited therein pursuant to Section 4.02 hereof, which shall be applied only as provided in this Section. Amounts in the Cost of Issuance Fund shall be used to pay costs incurred in connection with the issuance of the Bonds. Before each payment is made from the Costs of Issuance Fund by the Trustee, there shall be filed with the Trustee, a Written Requisition, accompanied by copies of appropriate invoices or other evidence of amounts due, and stating with respect to each payment to be made: (i) the requisition number; (ii) the name and address of the person to whom payment is due (which may be the Issuer if the payment is to reimburse the Issuer for amounts previously paid) (a "Payee"); (iii)the purpose for which the payment is to be made; (iv) the amount to be paid; (v) that each obligation mentioned therein has been properly incurred and is a proper charge against the Costs of Issuance Fund; and (vi) that none of the items for which payment is requested has been previously paid or reimbursed from the Costs of Issuance Fund. Any amounts remaining ning in the Costs of Issuance Fund on the date one (1)year after the Closing Date shall be transferred by the Trustee to the Bond Fund. No Payee shall be entitled to any lien or claim on the Pledged Revenues or on any other Fund established under this Indenture for amounts payable as costs incurred in connection with the issuance of the Bonds. Such costs shall be payable exclusively from the Costs of Issuance Fund and, by accepting payment therefrom, each Payee agrees that no claim may be made for any reason against the Pledged Revenues or any other Fund established under this Indenture. Section 4.07. Rebate Fund. The purpose of the Rebate Fund is to facilitate compliance with section 148(f) of the Code. Any Rebate Amount deposited in such Fund shall be for the sole benefit of the United States of America and shall not be subject to the lien of the Indenture or to the claim of any other person, including, without limitation, the Bondholders and the Issuer. The requirements of this Section 406 are subject to, and shall be interpreted in accordance with, section 148(f) of the Code and the Treasury regulations applicable thereto (the 'Regulations"), and shall apply except to the extent(i) the Trustee is furnished with an opinion of Bond Counsel or other satisfactory evidence that the Regulations contain an applicable exception; or (ii) the Trustee in its judgment determines that such requirements will diminish the security of the Bondholders; provided that in the case of clause (ii), the Trustee shall obtain an opinion of Bond Counsel to the effect that failing to take such action would not adversely affect the exclusion of interest on the Tax-Exempt Bonds from federal income taxation. Promptly upon the close of each Bond Year and also upon the retirement of the Bonds, the Trustee shall provide the Borrower with a statement of earnings on funds and accounts held under this Indenture during any period not covered by a prior statement, and a final statement or a supplement thereto covering the period ending . Each statement shall include the purchase and sale prices of each investment, if any, (including any commission paid thereon which shall be separately stated if such information is available), the dates of each investment transaction, information as to whether such transactions were made at a discount or premium, and such other information known or reasonably available to the Trustee as the Borrower or Rebate Analyst shall reasonably require. If so requested by the Owner at any time, the Trustee shall create within the Bond Fund separate accounts for purposes of accounting for earnings on amounts attributable to the Series A Bonds and the Series A-T Bonds, respectively. The Trustee shall promptly transfer to the Rebate Fund each amount required to be deposited therein pursuant to the Tax Certificate, first from earnings in the Acquisition Fund, and second, to the extent SF2-28088.1 19 40511-90-MSI-03/11/94 • • amounts in the Acquisition Fund are insufficient, from revenues which have been deposited into the Bond Fund and earnings thereon. To the extent that the amount to be deposited into the Rebate Fund exceeds the amount which can be transferred from such Funds, the Trustee shall promptly notify the Borrower and an amount equal to such deficiency shall be paid promptly by the Borrower to the Trustee for deposit into the Rebate Fund. The Borrower and the Trustee, on behalf of the Issuer, shall keep such records as will enable them to fulfill their respective responsibilities under this Section 406 and section 148(f) of the Code, and the Borrower (or the Trustee upon the written request of the Issuer) shall engage a Rebate Analyst as may be necessary in connection with such responsibilities. The fees and expenses of the Rebate Analyst shall be paid by the Trustee pursuant to Section 405(iv)hereof. For purposes of the computation of the Rebate Amount required under the Tax Certificate, the Trustee shall make available to the Borrower and the Issuer during normal business hours all information in the Trustee's control which is necessary to such computations. Section 4.08. Custody of Funds; Moneys Held in Trust. The funds created under this Indenture for the benefit of the Bonds shall be held in trust by the Trustee. The Issuer hereby authorizes and directs the Trustee to withdraw moneys from said Funds for the purposes specified herein, which authorization and direction the Trustee hereby accepts. All moneys required to be deposited with the Trustee under any provision of this Article IV shall be held by the Trustee in trust, and except for moneys deposited with the Trustee for the redemption of Bonds, notice of redemption of which has been duly given, such moneys shall while held by the Trustee constitute part of the security for the Bondholders and be subject to the lien hereof. Section 4.09. Investment of Funds. The Trustee is hereby authorized and directed to enter into the original Investment Agreements. The Trustee shall maintain said Investment Agreements unless directed by the Borrower with the prior written consent of the Issuer to obtain substitute Investment Agreements and such procurement is consistent with the terms of the existing Investment Agreements. Except for moneys invested pursuant to the Investment Agreements, any moneys held as part of any fund or account created by this Article shall be invested or reinvested, from time to time, by the Trustee at the direction of the Borrower with the prior consent of the Issuer in Qualified Investments. If the Borrower fails to give such Instructions or the Issuer fails to consent thereto, the Trustee shall invest all moneys other than those invested in the Investment Agreements in investments described in clause (v)under the definition of the term "Qualified Investments" herein. Any such investments shall mature not later than the earlier of(i) the date six months after the date of investment, or (ii) the next succeeding Interest Payment Date or redemption payment date on the Bonds. The investments so made shall be held by the Trustee and shall be deemed at all times to be a part of the fund in which such moneys were held; provided, that for purpose of investment moneys held in any of the funds established hereunder may be commingled. The Trustee may act as principal or agent in the making or disposing of any investment. The Trustee is directed to sell and reduce to cash a sufficient amount of such investments whenever the cash balance in any fund shall be insufficient to cover a proper disbursement from any fund. All interest, profits or other income derived from the investment of any Fund or Account created by this Article, except earnings arising from the Rebate Fund and except as otherwise provided in Section 4.05, shall be deposited when and as received in the Bond Fund. The Trustee shall not be liable for any losses resulting from any such investments made in accordance with this Section. For the purpose of determining the amount on deposit to the credit of any Fund, obligations purchased as an investment of moneys therein shall be valued on the most recent Interest Payment Date at the lower of cost or market value of any investments therein, inclusive of accrued interest, except that an Investment Agreement shall be valued at its face amount. Section 4.10. Nonpresentment of Bonds. If any Bond is not presented for payment when the final payment of principal thereof becomes due (whether at maturity, by acceleration or call for redemption or otherwise), all liability of the Issuer to the Holder thereof for the payment of such Bond and interest due thereon shall forthwith cease, terminate and be completely discharged if funds sufficient to pay such Bond and interest due thereon shall be held by the Trustee for the benefit of the Holder thereof, and thereupon it shall be the duty of the Trustee to hold such funds, without liability for interest thereon, for the benefit of the Holder of such SF2-28088.1 20 40511-90-MS1-03/11/94 Bond, who shall thereafter be restricted exclusively to such funds for any claim of whatever nature on his part under this Indenture or on, or with respect to, such Bond. Notwithstanding any provision of this Indenture, any money deposited with the Trustee or any other paying agent in trust for the payment of the principal of or interest or premium on any Bonds and remaining unclaimed for two (2)years after such payment shall have become due and payable (whether at maturity or upon call for redemption) shall then be repaid to the Issuer upon its written request, and the Holders of such Bonds shall thereafter be entitled to look only to the Issuer for repayment thereof, and all liability of the Trustee or any other paying agent with respect to such money shall thereupon cease. In the event of the repayment of such money to the Issuer as aforesaid, the Holders of the Bonds in respect of which such money was deposited shall thereafter be deemed to be unsecured creditors of the Issuer for amounts equivalent to the respective amounts deposited for the payment of such Bonds and so repaid to the Issuer (without interest thereon). Section 4.11. Final Balances. Upon final payment of all principal of, premium, if any, and interest on the Bonds, and upon satisfaction of all claims against the Issuer and the Trustee hereunder, including the payment of all fees, charges and expenses of the Trustee, the Issuer and the Mortgage Servicer that are properly due and payable hereunder, or upon the making of adequate provision for the payment of such amounts, as permitted hereby, all money remaining in all Funds (other than the Rebate Fund) shall be paid to the Borrower. Unless such payment of the Bonds is made from Mortgage Insurance benefits as a result of a Mortgage Loan default by the Borrower, if the FHA Note is still held by the Trustee following such payment of the Bonds, the Trustee shall mark the FHA Note "PAID" and return it to the Borrower, and shall record a full reconveyance of the Mortgage and any other instruments securing the FHA Note. Section 4.12. Cancellation of Obligations. Upon the redemption or payment of all the Outstanding Bonds in accordance with the terms of this Indenture, the Issuer and the Trustee shall take whatever steps may be necessary, if the FHA Note is not in default, to cancel the FHA Note and release the lien of the Mortgage. ARTICLE V General Covenants and Representations Section 5.01. Payment of Principal and Interest. The Issuer shall promptly pay, but only out of the Pledged Revenues and other assets herein specified, the principal of, premium, if any, and interest on, every Bond issued under this Indenture, and shall punctually pay or cause to be paid all Sinking Account Payments, at the place, on the dates and in the manner provided herein and in the Bonds. The Bonds are limited obligations of the Issuer payable solely from certain of the revenues and receipts pledged by this Indenture, and the income and interest thereon. The Bonds are not a debt of the United States of America, the Issuer or any other political subdivision or agency of the State. Section 5.02. FHA Note: Instruments of Further Assurance. The Trustee shall defend its title to the FHA Note and the Mortgage for the benefit of the holders and owners of the Bonds against the claims and demands of all persons whomsoever and the Issuer and the Trustee shall do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, such indentures supplemental hereto, and such further acts, instruments and transfers as the Trustee may reasonably require for the better assuring, transferring, conveying, pledging, assigning and confirming unto the Trustee all and singular its interest in the property herein described and the revenues, receipts and other amounts pledged hereby to the payment of the principal of, premium, if any, and interest on the Bonds. Any and all interest in property hereafter acquired which is of any kind or nature herein provided to be and become subject to the lien hereof shall and without any further conveyance, assignment or act on the part of the Issuer or the Trustee become and be subject to the lien of this Indenture as fully and completely as though specifically described herein, but nothing contained in this sentence shall be deemed to modify or change the obligations of the Issuer under this Section. SF2-28088.1 21 40511-90-MS 1-03/11/94 • 0 Section 5.03. Inspection of Project Books. The Issuer shall open all its books and documents relating to the Project at all times to inspection by such accountants or other agents as the Trustee may from time to time reasonably designate. Section 5.04. Recordation and Filing. The Issuer at its expense will cause a financing statement with respect to the Trust Estate described in this Indenture and/or a notice of pledge of the FHA Note and the Mortgage to be at all times filed in such manner and in such places as may be required by law in order to fully preserve and protect the rights of the Trustee hereunder and to perfect the security interest created by this Indenture in the Trust Estate described herein. To the extent possible under the Uniform Commercial Code or other applicable law, as in effect in the jurisdiction(s)in which the Trust Estate is located, the Issuer will maintain the priority of the security interest herein created in the Trust Estate as a first lien thereon, and will warrant, protect, preserve and defend its interest in the Trust Estate and the security interest of the Trustee therein and all rights of the Trustee under this Indenture against all actions, proceedings, claims and demands of all persons. Section 5.05. No Modification of Security: Additional Indebtedness. The Issuer shall not, without the written consent of the Trustee, alter, modify or cancel, or agree to consent to alter, modify or cancel any agreement which relates to or affects the security for the Bonds. The Issuer shall not incur any additional indebtedness prior to or on a parity with the Bonds, except to the extent authorized herein. Section 5.06. Existence and Authority. The Issuer is validly existing as a legal subdivision and body corporate and politic of the State under and pursuant to the laws of the State, and the Issuer has all necessary power and authority to execute and deliver this Indenture, to execute, deliver and issue the Bonds and to perform its duties and discharge its obligations hereunder and thereunder. So long as any of the Bonds shall be Outstanding the Issuer shall do or cause to be done all things necessary to preserve and keep in full force and effect its existence and to maintain its status as a legal subdivision and body corporate and politic. The revenues and assets pledged for the payment of the Bonds are and will be free and clear of any pledge, lien or encumbrance prior to, or equal with, the pledge created by this Indenture, and all action on the part of the Issuer to that end has been duly and validly taken. The Issuer shall at all times, to the extent permitted by law, defend and protect the pledge created hereunder against any and all claims whatsoever. Section 5.07. Servicing the MortgLge Loan. The Trustee covenants and agrees that the Mortgage Loan will be serviced in accordance with acceptable practices of prudent lending institutions, all applicable provisions of the National Housing Act, and all applicable rules and regulations thereunder. The Trustee shall engage an FHA-approved mortgage banking company or financial institution to service the Mortgage Loan. Initially, the Mortgage Servicer has been engaged for such servicing by the Issuer. In the event the Trustee subsequently engages another company or institution to service the Mortgage Loan, the Trustee shall enter into a servicing agreement with such company or institution,which agreement shall be substantially similar to the initial mortgage servicing agreement with the Mortgage Servicer. The Trustee further covenants and agrees that it shall at all times do and perform all acts permitted by law and necessary in order to assure that the Mortgage Insurance remains in full force and effect for as long as the Bonds are Outstanding pursuant to the provisions of this Indenture. Such acts include assuring the timely payment of casualty insurance premiums, that the annual inspection required by FHA is accomplished and that FHA is given notice of any default under the FHA Note or other FHA Documents, including notice that the source of financing is tax-exempt obligations. The Trustee is not authorized to give its consent to the Borrower to prepay in whole or in part the FHA Note prior to the date stated therein, and thereafter the Trustee shall only give such permission if the amount of money to be received by it as a result of the proposed prepayment will be sufficient to enable the Trustee to (i) redeem Bonds in a principal amount equal to the balance of the FHA Note proposed to be prepaid at the then applicable price specified in the FHA Note, (ii) pay interest on the Bonds to be redeemed for the period between the time the FHA Note is credited with the principal reduction and the date of redemption, if any, and (iii)pay the premium and expenses associated with the redemption of Bonds. The Issuer consents to and approves the selections and other actions to be taken by the Trustee pursuant to this Section. SF2-28088.1 12 40511-90-MS 1-03/11/94 0 Section 5.08. Required Insurance. The Borrower has covenanted in the Financing Agreement to maintain all insurance policies required by FHA to be maintained pursuant to the Mortgage Loan. All such policies shall include standard loss payable provisions naming the Trustee, the Issuer and the Secretary of HUD as loss payees as their interest appear, and all proceeds of such insurance shall be applied in accordance with the provisions of Section 3.03 hereof. Section 5.09. No Disposition of Mortgage Loan. Without the consent of the holders of 100% of the Bond Obligation, neither the Issuer nor the Trustee shall sell or otherwise dispose of the Mortgage Loan after its acquisition(i) in connection with any arrangement that would result in a redemption of Bonds not expressly permitted under Article III hereof, or-(ii) for an amount less than an amount sufficient, together with other amounts then held under the Indenture and available for the payment of principal of and interest on the Bonds in accordance with Article IX hereof, and then only upon the prior delivery to the Trustee of an opinion of Bond Counsel that such action would not affect adversely the exclusion of interest on the Bonds from federal income taxation. Section 5.10. Tax Covenants. (a) The Issuer covenants to the holders of the Bonds that, notwithstanding any other provisions hereof or of any other instrument, to the extent it exercises any control, it will neither make nor cause to be made any investment or other use of the Acquisition Fund, the Bond Fund or the Debt Service Reserve Fund or other proceeds of the Bonds which would cause the Bonds to be arbitrage bonds under Section 148 of the Code and the regulations thereunder or otherwise cause the interest on the Bonds to be included in gross income for federal income tax purposes; and 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 created hereunder and all moneys on deposit to the credit of any such fund. (b) The Issuer and, subject to the provisions of Section 6.01, the Trustee covenant for the benefit of the Bondholders to enforce all obligations of the Borrower under the Issuer Regulatory Agreement and to seek to correct any violation of the Issuer Regulatory Agreement within a reasonable period after any such violation is first discovered; provided, however that any provision contained in this Indenture or the Issuer Regulatory Agreement which requires the Borrower to take any action necessary to preserve the tax status of the Bonds (or prohibits the Borrower from taking any action that might jeopardize the tax status of the Bonds) is qualified to except actions prohibited(or required) by HUD pursuant to the National Housing Act, FHA Regulations, the FHA Loan Documents or, if applicable, Section 8 of the United States Housing Act of 1937, as amended, and.the regulations thereunder. (c) The Issuer (to the extent it exercises control) and the Trustee each covenants to the registered holders of the Bonds at any time outstanding that it shall not use or invest or permit the use or investment of any proceeds of the Bonds or any other Revenues, directly or indirectly, in any manner, which would cause any of the Bonds to be an obligation that is "federally guaranteed" within the meaning of Section 149(b) of the Code. To that end, so long as any of the Bonds are outstanding, the Issuer (to the extent it exercises control) and the Trustee, with respect to such proceeds and other Revenues, shall comply with all requirements of said Section 149(b) and any regulations proposed or promulgated thereunder, as the same exist on this date or may from time to time hereafter be amended, supplemented or revised. (d) The Issuer covenants that it shall not use or cause the use of any proceeds of Bonds or any other funds of the Issuer, directly or indirectly, in any manner, and shall not take or cause to be taken any other action or actions, or fail to take any action or actions, which would result in interest on any of the Bonds becoming includable in gross income of any holder thereof. The Issuer further covenants that it shall 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 shall be excluded from the gross income of the recipients thereof for federal income tax purposes. SF2-28088.1 23 40511-90-MS 1-03/11/94 (e) In furtherance of the covenants in this Section, the Issuer and the Borrower shall execute, deliver and perform the Tax Certificate, which is by this reference incorporated herein and made a part hereof as if set forth herein in full, and by its acceptance of this Indenture the Trustee acknowledges receipt of the Tax Certificate and acknowledges its incorporation herein by reference. ARTICLE VI Default Provisions and Remedies of Trustee and Bondholders Section 6.01. Events of Default. Each of the following shall be an "Event of Default": (a) Default in the due and punctual payment of any installment of interest on any Bond; or (b) default in the due and punctual payment of the principal of or premium, if any, on any Bond whether at the stated maturity thereof, or on proceedings for redemption thereof, or on the maturity thereof by declaration; or (c) default in the performance or observance of any other of the covenants, agreements or conditions on the part of the Issuer in this Indenture or in the Bonds, respectively. The Trustee and the Issuer agree that, notwithstanding the provisions hereof, no default under the terms of this Indenture shall be construed as resulting in a default under the FHA Note, the Mortgage or related FHA Documents unless such event also constitutes a default thereunder, and a default under the Mortgage Loan shall not constitute a default with respect to the Bonds. Section 6.02. Remedies. If any Event of Default as described in Section 6.01(a) or 6.01 (b) occurs, the Trustee may, and upon request of the Holders of a majority of the Bond Obligation shall, by notice in writing to the Issuer, declare the principal of all Bonds then Outstanding to be immediately due and payable. No acceleration shall be declared pursuant to this Section 6.02 by reason of an Event of Default described in Section 6.01(c). Upon such declaration such principal, together with interest accrued thereon, shall become due and payable immediately at the place of payment provided therein, anything in this Indenture or in the Bonds to the contrary notwithstanding. Upon the occurrence of an Event of Default, the Trustee shall have the power to proceed with any right or remedy granted by the constitution and laws of the State, as it may deem best, including any suit, action or special proceeding in equity or at law for the specific performance of any covenant or agreement contained herein or for the enforcement of any proper legal or equitable remedy as the Trustee shall deem most effectual to protect the rights aforesaid, insofar as such may be authorized by law, and to the right to appointment, as a matter of right and without regard to the sufficiency of the security afforded by the Trust Estate, of a receiver for all or any part of the Trust Estate and the earnings, rents and income thereof. The rights herein specified are to be cumulative to all other available rights, remedies or powers and shall not exclude any such rights, remedies or powers. No remedy by the terms of this Indenture conferred upon or reserved to the Trustee or to the Bondholders is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given to the Trustee or to the Bondholders hereunder or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or SF2-28088.1 24 40511-90-MS 1-03/11/94 acquiescence therein; and every such right and power may be exercised from time to time and as often as may be deemed expedient. No waiver of any Event of Default hereunder, whether by the Trustee or by the Bondholders, shall extend to or shall affect any subsequent default or Event of Default or shall impair any consequent rights or remedies. Section 6.03. Mortme Insurance Benefits. In the event the Borrower fails to make any payment due under the FHA Note or to perform any other covenant required under the FHA Documents, the Trustee shall take all steps necessary to obtain Mortgage Insurance benefits. The Trustee shall: (a) Submit to HUD Central in Washington, D.C., immediately upon becoming entitled to claim Mortgage Insurance benefits (30 days after the date on which an FHA Note payment is due but not made in full): (i) a Notice of Default, (ii) a Notice of Intention and Election to Assign the Mortgage, (iii) a schedule showing payments received and anticipated Bond Debt Service requirements, and (iv) a request for all forms and instructions necessary to assign the Note to FHA. Copies of all such submissions shall be sent by certified or registered mail to the HUD Area Office, the Rating Agency and the Bond Purchaser at the same time as submitted to HUD Central. The Trustee shall also submit legal documents to the HUD Office of General Counsel within five days following receipt of forms and instructions from FHA and shall submit fiscal/legal documents required by the HUD Office of Multifamily Insurance and Accounting as soon as possible, but in no event later than 30 days after recordation of the Mortgage assignment. (b) The Trustee may request an extension of no more than three (3) months from the time prescribed by HUD for filing its Election to Assign the Mortgage, but only if the Trustee informs HUD that it is making such request in consideration of the FHA partial claim payment option and only after receiving written confirmation from the Rating Agency that the extension and partial payment option provided by HUD would not adversely affect the rating on the Bonds. Copies of the Trustee's request as well as the Rating Agency's written confirmation shall be sent to the Bond Purchaser. If at any time during the extension period the Trustee determines that a workout is not feasible, the Trustee immediately shall advise and request HUD to make a similar determination and shall submit (or resubmit if previously submitted) the Notice of Intention and Election to Assign the Mortgage. The Trustee shall continue to pursue a full assignment of the FHA Note during any period in which a partial payment option is under consideration. (c) Immediately request a cash payment from FHA pursuant to its Notice of Intention and Election to Assign the Mortgage if a Notice of default has been filed and the Trustee projects, on the first business day of any month next preceding an Interest Payment Date, that moneys in the Bond Fund (including interest earnings under the Investment Agreements) will be insufficient to pay Debt Service on the Bonds. The Trustee shall also advise the Rating Agency in writing of the projected shortfall. As soon as practicable after filing the Notice of Intention and Election to Assign the Mortgage or upon requesting a three-month extension from HUD, whichever is earlier, the Trustee shall (i) file its application for Mortgage Insurance benefits requesting payment in cash, and (ii) record the assignment of the Mortgage to FHA. The Trustee shall not foreclose on the Mortgage without written instructions from HUD Central in Washington, D.C. Upon receipt of Mortgage Insurance benefits, such moneys shall be deposited in the Bond Fund and used to redeem Bonds pursuant to Section 3.01(a) hereof. Notwithstanding the foregoing provisions of this Section, the Trustee shall not consent to any adjustments or revisions of the Contract of Mortgage Insurance, or take, or fail to take, any action involving a default under the Mortgage Loan which would cause there to be insufficient moneys available for the scheduled payment of Debt Service on the Bonds or the payment of Ordinary Trustee/Mortgage Servicer Fees and Expenses, or request any extension of the time for filing its election to assign the FHA Note beyond any extension period granted by HUD, as described above, without first notifying the Rating Agency and the Bond SF2-28088.1 25 40511-90-MS 1-03/11/94 • • Purchaser and receiving confirmation from the Rating Agency that such a request would not adversely affect the rating on the Bonds. If a request for a further extension made pursuant to this paragraph is not granted by HUD, the Trustee immediately shall submit its Notice of Election to Assign the Mortgage to HUD Central in Washington, D.C. Section 6.04. Opportunity to Cure Default Under Note. Prior to the date the FHA Note and the Mortgage are assigned to FHA pursuant to Section 6.03 hereof, the Trustee may allow the Borrower to cure any default under the FHA Note and the Mortgage. However, the Trustee must continue to pursue Mortgage Insurance benefits until the Borrower complies fully with the following conditions: (1) The Borrower must pay to the Trustee (a) any overdue payments of principal and interest on the FHA Note, plus (b) an amount equal to the amount of interest which would have been earned on FHA Note payments had the payments been made when due, plus (c) any escrow payments in arrears or other amounts necessary to bring the FHA Note current, plus (d) any late fees due the Trustee in its capacity as the holder of the Note. (2) The Borrower must cure any non-monetary defaults under the Mortgage and the Financing Agreement to the satisfaction of the Trustee. (3) If any moneys have been withdrawn from the Investment Agreement for the Debt Service Reserve Fund to be used in connection with the default, the Borrower must: (a) redeposit under the same Investment Agreement, with at least the same rate of interest and with the consent of the issuer of the Investment Agreement, an amount at least equal to the amount withdrawn plus an amount equal to the amount of earnings which would have been earned under the Investment Agreement if no withdrawal had been made, or (b) provide the Trustee with an amount at least equal to the amount withdrawn, which amount is invested under a new Investment Agreement with a bank whose long-term debt rating by the Rating Agency is at least as high as the rating on the Bonds, has the same notice and cure provisions as the original Investment Agreement, has a term not less than the term of the original Investment Agreement, and provides for payment of at least the same amount of earnings as would have been earned under the original Investment Agreement, or (c) provide the Trustee with cash and/or a letter of credit, surety bond, insurance policy or other security device (the "Reserve Facility") (from a bank or insurance company whose long-term debt obligations are rated at least equal to the rating on the Bonds) in a form acceptable to the Trustee and the Rating Agency which (i) provides a source for the payment of the principal and interest on the Bonds, and (ii) is in an amount at least equal to the amount withdrawn under the Investment Agreement plus an amount equal to the interest which would have been earned on the amount withdrawn under the original Investment Agreement, and (d) provide to the Trustee an unqualified opinion(s) of counsel, satisfactory to the Trustee (and approved by the Trustee's counsel or other national recognized bankruptcy counsel) with respect to the deposit specified in(a), (b) or (c) above and which opinion(i) if the deposit is in the form of a Reserve Facility, states that the Reserve Facility is a valid and binding obligation of the bank or insurance company issuing the Reserve Facility and is enforceable against the bank or insurance company, or (ii) if the deposit is in any other form, states that such amounts are Available Amounts, and (e) the Rating Agency shall have been notified if any Project reserve is used for the purpose of debt service payment on the FHA Note or to cure any default under the FHA Documents. SF2-28088.1 26 40511-90-MS 1-03/11/94 (4) The Borrower must deposit with the Trustee an amount equal to any loss of investment income resulting from the failure to make any FHA Note payments when due and provide to the Trustee an opinion of counsel of the type described in paragraph (3)(d) above with respect thereto. (5) The Trustee must receive written confirmation from FHA that the withdrawal of any notice of assignment of the FHA Note and Mortgage which had been given under Section 6.03 hereof will not affect adversely the Mortgage Insurance on the FHA Note or be construed as a waiver or reduction thereof. (6) There shall be delivered to the Trustee independently prepared cash flows demonstrating that after the action(s) taken under (3) above, the timely payment of the principal of and interest on the Bonds and the Ordinary Trustee/Mortgage Servicer Fees and Expenses, as set forth in the original cash flows, will not be affected adversely. (7) The Trustee shall not acknowledge a cure of the default unless the Trustee has received a written confirmation from the Rating Agency that such cure will not adversely affect the rating on the Bonds. (8) The Borrower shall pay all fees and expenses of the Issuer, the Mortgage Servicer and the Trustee, extraordinary or otherwise (and including, without limitation, any legal fees incurred in connection with such default) and provide to them the opinion of counsel of the type described in Section 6.04(3)(d)hereof with respect thereto. The allowance by the Trustee of any cure upon a default under the Note will not affect any subsequent default proceedings with respect to the Mortgage Insurance or any claims thereunder. Section 6.05. Rights of the Bondholders. If an Event of Default shall have occurred and be continuing, and if requested so to do by the Holders of not less than twenty-five percent (25%) of the Bond Obligation, and if indemnified as provided herein, the Trustee shall be obliged to exercise such one or more of the rights and powers conferred by this Article as the Trustee, being advised by counsel, shall deem most expedient in the interest of the Bondholders. Section 6.06. Rights of Bondholders to Direct Proceedings. Any provision in this Indenture to the contrary notwithstanding, the Holders of a majority of the Bond Obligation shall have the right at any time, by an instrument or concurrent instruments in writing executed and delivered to the Trustee, to direct the time, 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 hereunder, in accordance with the provisions of law and of this Indenture; provided, however, that such direction shall not be otherwise than in accordance with the provisions of law and this Indenture; and provided further, that the Holders of the Bonds shall look solely to the Trustee for the benefits of the Mortgage Insurance and FHA may make payment of any claim on the Mortgage Insurance to the Trustee without any liability or accountability to the Holders of the Bonds to see to the application of the benefits of the Mortgage Insurance. Section 6.07. Waiver by Issuer. Upon the occurrence of an Event of Default, to the extent that such right may then lawfully be waived, neither the Issuer, nor anyone claiming through or under it, shall set up, claim, or seek to take advantage of any appraisement, valuation, stay, extension or redemption laws now or hereafter in force, in order to prevent or hinder the enforcement of the Indenture; and the Issuer, for itself and all who may claim through or under it, hereby waives, to the extent that it lawfully may do so, the benefit of all such laws and all right of appraisement and redemption to which it may be entitled under the laws of the State. Section 6.08. Application of Moneys. All moneys received by the Trustee pursuant to any right given or action taken under the provisions of this Article shall, after payment of the cost and expenses of the proceedings resulting in the collection of such moneys and of the Ordinary Trustee's Fees and Expenses and Extraordinary Fees and Expenses incurred or made by the Trustee, be deposited in the Bond Fund. All moneys in the Bond Fund shall be applied, together with the other moneys held by the Trustee hereunder, as follows: SF2-28088.1 27 40511-90-MSI-03/11/94 • 0 (a) Unless the principal of all the Bonds shall have become due and payable, all such moneys in the Bond Fund shall be applied: FIRST- to the payment to the persons entitled thereto of all installments of interest then due on the Bonds, in the order of the maturity of the installments of such interest and, if the amount available shall not be sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the persons entitled thereto, without any discrimination or privilege; SECOND - to the payment to the persons entitled thereto of the unpaid principal of and premium, if any, on any of the Bonds which shall have become due (other than Bonds called for redemption for the payment of which money shall be held pursuant to the provisions of this Indenture), with interest on such Bonds from the date upon which they become due and, if the amount available shall not be sufficient to pay in full principal of, premium, if any, and interest on the Bonds on any particular date, then to the payment ratably, according to the amount of the principal, interest, and premium, if any, due on such date, to the persons entitled thereto without any discrimination or privilege; and THIRD - to the payment of Ordinary Trustee's Fees and Expenses. (b) If the principal of all the Bonds shall have become due and payable, all such moneys in the Bond Fund shall be applied to the payment of the principal, premium, if any, 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, premium, if any, and interest, to the persons entitled thereto without any discrimination or privilege. To the extent that the Trustee is entitled to compensation or reimbursement, or both, in excess of the Extraordinary Fees and Expenses in connection with any action taken under this Article, such amount shall constitute an obligation of the Borrower, but shall not constitute additional indebtedness hereunder and the Trustee shall not be entitled to any lien or claim thereafter on any amounts held or collected by it hereunder. Whenever moneys are to be applied pursuant to the provisions of this Section, such moneys shall be applied at such times, and from time to time as the Trustee shall determine, having due regard to the amount of such moneys available for such application in the future. Whenever the Trustee shall apply such funds, it shall fix the date (which shall be an Interest Payment Date unless it shall deem another date more suitable) upon which such application is to be made, and upon such date interest on the amounts of principal to be paid on such 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 Holder of any Bond until such Bond.shall be presented to the Trustee for appropriate endorsement or for cancellation if fully paid. Section 6.09. Remedies Vested in Trustee. All rights of action, including the right to file proof of claims, under this Indenture or under any of the Bonds may be enforced by the Trustee without the possession of any of the Bonds or the production thereof in any trial or other proceedings relating thereto and any such suit or proceeding instituted by the Trustee shall be brought in its name as Trustee without the necessity of joining as plaintiffs or defendants any Holders of the Bonds, and any recovery or judgment shall be for the equal benefit of the Holders of the Outstanding Bonds. Section 6.10. Rights and Remedies of Bondholders. No Holder of any Bond shall have any right to institute any suit, action or proceeding in equity or at law for the enforcement of this Indenture or for the execution of any trust hereunder or for the appointment of a receiver or any other remedy hereunder, unless an Event of Default has occurred and the Trustee has been notified as provided herein and the Holders of at least twenty-five percent (25%) of the Bond Obligation shall have made written request to the Trustee and shall SF2-28088.1 28 40511-90-MSI-03/11/94 have offered the Trustee reasonable opportunity either to proceed to exercise the powers hereinbefore granted or to institute such action, suit or proceeding in its own name; nor unless also they have offered to the Trustee indemnity as provided herein; nor unless the Trustee shall thereafter fail or refuse to exercise the powers hereinbefore granted, or to institute such, action, suit or proceeding within 60 days after receiving such notice and indemnity by the Holders; and such notification, request and offer of indemnity are hereby declared in every case at the option of the Trustee to be conditions precedent to the execution of the powers and trusts of this Indenture, and to any action or cause of action for the enforcement of this Indenture, or for any other remedy hereunder, it being understood and intended that no one or more Holders of the Bonds shall have any right in any manner whatsoever to affect, disturb or prejudice the lien of this Indenture by any action or to enforce any right hereunder except in the manner herein provided, and that all proceedings at law or in equity shall be instituted, had and maintained in the manner herein provided and for the equal benefit of the Holders of all Bonds then Outstanding. Nothing contained in this Indenture shall, however, affect or impair the right of any Bondholder to enforce the payment of the principal of, premium, if any, and interest on any Bond at and after the maturity thereof, or the obligation of the Issuer to pay the principal of, premium, if any, and interest on each of the Bonds issued hereunder to the respective Holders thereof at the time, place, from the source and in the manner in said Bonds expressed. Section 6.11. Waivers of Events of Default. The Trustee shall waive any Event of Default hereunder and its consequences and rescind any declaration of maturity of principal of and interest on the Bonds upon the written request of the Holders of a majority of the Bond Obligation;provided, however, that there shall not be waived (a) any Event of Default in the payment of the principal of any Outstanding Bonds at the date of maturity specified therein, or for mandatory redemption, or (b) any Event of Default in the payment when due of the interest or premium 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, and all arrears of payments of principal or premium, if any, when due (whether at the stated maturity thereof or for mandatory redemption, as the case may be), and all expenses of the Trustee, in connection with such Event of Default shall have been paid or provided for, and in case of any such waiver or rescission, or in case any proceeding taken by the Trustee on account of any such Event of Default shall have been discontinued or abandoned or determined adversely, then and in every such case the Issuer, Trustee and Bondholders shall be restored to their former positions and rights hereunder, respectively, but no such waiver or rescission shall extend to any subsequent or other Event of Default, or impair any right consequent thereto. Section 6.12. Notice of Defaults; Opportunity of the Issuer and the Borrower to Cure Defaults. Anything herein to the contrary notwithstanding,no Event of Default under 6.01(c)hereof(other than an Event of Default occasioned by the nonpayment of money) shall constitute an Event of Default until actual notice of such Event of Default by registered or certified mail shall be given by the Trustee or by the Holders of not less than twenty-five percent (25%) of the Bond Obligation to the Borrower and the Issuer, and the Borrower and Issuer shall have had 30 days after receipt of such notice to correct said default or cause said default to be corrected, and shall not have corrected said default or caused said default to be corrected within the applicable period; provided, however, if said default be such that it cannot be corrected within the applicable period, it shall not constitute an Event of Default if corrective action is instituted by the Borrower or the Issuer, as the case may be, within the applicable period and diligently pursued until the default is corrected. With regard to any alleged Event of Default concerning which notice has been given to the Borrower under the provisions of this Section, the Issuer hereby grants the Borrower full authority for the account of the Issuer to perform any covenant or obligation alleged in said notice to constitute a default, in the name and stead of the Issuer with full power to do any and all things and acts to the same extent that the Issuer could do and perform any such things and acts and with power of substitution. Section 6.13. Powers of Trustee upon Default under the FHA Note. If the amounts required to be paid by the Borrower as required by the FHA Note or the Mortgage shall not be paid at the times required thereunder, or in case an Event of Default in the payment of principal of, premium, if any, or interest on any Bonds shall occur and be continuing, the Trustee, in its own name and as trustee of an express trust, shall be SF2-28088.1 29 40511-90-MSI-03/11/94 • • entitled and empowered to institute any action or proceedings at law or in equity for the collection of all sums due and unpaid under the FHA Note, the Mortgage or the Bonds, and may prosecute any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against any obligor thereon, and collect in the manner provided by law out of the property of any obligor thereon wherever situated the moneys adjudged or decreed to be payable. ARTICLE VII The Trustee Section 7.01. Certain Duties and Responsibilities. (a) Except during the continuance of an Event of Default: (1) The Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may rely conclusively, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture, but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (b) In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) This subsection (c) shall not be construed to limit the effect of subsection(a) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a responsible officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with directions received pursuant to Section 6.05 hereof or the direction of the holders of a majority of the Bond Obligation relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture. (d) No provisions of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers. (e) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. SF2-28088.1 30 40511-90-MS1-03/11/94 • 0 Section 7.02. Notice of Default. Within 90 days after the occurrence of any default hereunder of which the Trustee is deemed to have notice hereunder by virtue of Section 7.03(i)hereof, the Trustee shall transmit by mail, to the registered owners of all Bonds then Outstanding, notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of, premium, if any, or interest on any Bond when due, the Trustee shall be protected in withholding such notice if and so long as the Trustee in good faith determines that the withholding of such notice is in the interests of the holders of the Bonds. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an event of default. Section 7.03. Certain Rights of Trustee. Except as otherwise provided in Section 10.01: (a) The Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any Request or order of the Issuer mentioned herein shall be sufficiently evidenced by an order signed by an Authorized Issuer Representative and any resolution of the Issuer may be sufficiently evidenced by a Certificate of the Issuer; (c) any notice, request, direction, election, order or demand of the Borrower mentioned herein shall be sufficiently evidenced by an instrument purporting to be signed in the name of the Borrower by any general partner of the Borrower (unless other evidence in respect thereof be herein specifically prescribed), and any resolution or certification of the Borrower may be evidenced to the Trustee by a copy thereof certified by a general partner of the Borrower; (d) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon a Certificate of the Issuer; (e) the Trustee may consult with counsel, architects and engineers and other experts, and the written advice of such counsel, architects or engineers and other experts shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; M the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the holders of the Bonds pursuant to this Indenture, unless such holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (g) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent order or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuer relating to the Project, personally or by agent or attorney; (h) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; SF2-28088.1 31 40511-90-MSI-03/11/94 (i) the Trustee shall not be required to take notice or be deemed to have notice of any default or Event of Default hereunder or under the Financing Agreement except nonpayment of any of the payments to the Trustee required to be made by Article IV hereof unless the Trustee shall be specifically notified in writing of such default by the Issuer, the Mortgage Servicer or the holders of at least twenty-five percent (25%) of the Bond Obligation or if the Trustee has actual notice of such default or Event of Default at its principal corporate trust office set forth in Section 10.04; and 0) all notices or other instruments required by this Indenture to be delivered to the Trustee must, in order to be effective, be delivered at the principal corporate trust office of the Trustee at the address set forth in Section 10.04 hereof. Section 7.04. Not Responsible for Recitals. The recitals contained herein and in the Bonds, except the certificates of authentication, shall be taken as the statements of the Issuer, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Bonds. Section 7.05. Trustee May Hold Bonds. The Trustee in its individual or any other capacity may become the owner or the pledgee of Bonds and may otherwise deal with the Issuer with the same rights it would have if it were not Trustee. Section 7.06. Compensation of the Trustee. The Trustee shall be entitled to Ordinary Trustee's Fees and Expenses for all services rendered and expenses incurred by it in the execution of the trusts hereby created and in the exercise and performance of any of the powers and duties hereunder of the Trustee (to include those activities relating to mortgage servicing, the payment to the Issuer of its quarterly administrative fee payable pursuant to Section 2.2 of the Financing Agreement, the payment to the Rating Agency of its annual monitoring fee and annual payment of rebate calculation fees). If any property, other than cash, shall at any time be held by the Trustee subject to this Indenture, or any supplemental indenture, as security for the Bonds, the Trustee, if and to the extent authorized by a receivership, bankruptcy or other court of competent jurisdiction or by the instrument subjecting such property to the provisions of this Indenture as such security for the Bonds, shall be entitled to make advances for the purpose of preserving such property or of discharging tax liens or other liens or encumbrances thereon. The Trustee shall also be indemnified by the Borrower as provided in Article V of the Financing Agreement. The obligations under this Section to compensate the Trustee and the Mortgage Servicer for services and to pay or reimburse the Trustee for expenses, disbursements, liabilities and advances, shall not constitute additional indebtedness hereunder but shall be obligations of the Borrower. The Issuer shall have no liability for Trustee's fees, costs or expenses. Notwithstanding any other provision hereof, the Trustee shall not be entitled to any lien or claim on the Pledged Revenues for Ordinary Trustee/Mortgage Servicer Fees and Expenses, but shall look to the Borrower for payment of such fees or expenses, or both, to the extent Available Fee Revenues are insufficient for the payment thereof. Section 7.07. Maintenance of Office. There shall at all times be a Trustee hereunder which shall be a corporation or association organized and doing business under the laws of the United States of America or any state thereof authorized under such laws to exercise corporate trust powers, having its principal office and place of business in any state, having a combined capital and surplus of at least Fifty Million Dollars ($50,000,000), and subject to supervision or examination by federal or state authority which will at all times be an FHA-approved lender. If such corporation or association publishes reports of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this Section the combined capital and surplus of such corporation or association shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition, so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect specified in Section 7.09 hereof. SF2-28088.1 32 40511-90-MS1-03/11/94 Section 7.08. Successor Trustee. 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 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 it is a party shall be and become successor Trustee hereunder vested with all the title to the whole property or Trust Estate and all the trusts, powers, discretion, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any instruments or any further act, deed or conveyance on the part of any of the parties hereto, anything herein to the contrary notwithstanding. Section 7.09. Resignation by the Trustee. The Trustee and any successor Trustee may at any time resign from the trusts hereby created by giving written notice to the Issuer and to the Borrower, and notice by registered or certified mail to each registered owner of the Bonds then Outstanding; provided, however, that no such resignation shall take effect until a successor Trustee is appointed. Such notice to the Issuer and to the Borrower may be served personally or sent by registered mail. If no successor Trustee shall have been appointed and have accepted appointment within thirty (30) days following delivery or publication of all required notices of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. Section 7.10. Removal of the Trustee. Except during an Event of Default, the Trustee may be removed at any time by an instrument or concurrent instruments in writing delivered to the Trustee, the Issuer and the Borrower, and signed by the Holders of a majority of the Bond Obligation or by the Issuer. Section 7.11. Appointment of Successor Trustee by the Bondholders; Temporary Trustee. In case the Trustee hereunder shall resign or be removed, or be dissolved, or shall be in course of dissolution or liquidation, or otherwise become incapable of acting hereunder, or in case it shall be taken under the control of any public officer or officers, or of a receiver appointed by a court, a successor may be appointed by the Holders of a majority of the Bond Obligation or by the Issuer, by an instrument or concurrent instruments in writing signed liy such owners, or by their duly authorized attorneys or by the Issuer, as the case may be. Every such Trustee appointed pursuant to the provisions of this Section shall be a trust company or bank organized under the laws of the United States of America or any state thereof and which is in good standing, within or outside the State, having a reported capital and surplus of not less than $50,000,000 and at least $50,000,000 in trust assets under management if there be such an institution willing, qualified and able to accept the trust upon reasonable or customary terms and qualified to act as an FHA-approved mortgagee. The Rating Agency shall be notified of the appointment of a successor Trustee. Section 7.12. Concerning Any Successor Trustee. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to its predecessor and also to the Issuer an instrument in writing accepting such appointment hereunder, accepting all duties and responsibilities of its predecessor hereunder and under the Mortgage Servicing Agreement, and accepting assignment of the FHA Note to it as mortgagee, and thereupon such successor, without any further act, deed or conveyance, shall become fully vested with all the estates, properties, rights, powers, trusts, duties and obligations of its predecessor, but such predecessor shall, nevertheless, on the written request of the Issuer, or of its successor, and upon payment of all amounts due such predecessor, execute and deliver an instrument transferring to such successor Trustee all the estates, properties, rights, powers and trusts of such predecessor hereunder; and every predecessor Trustee shall deliver all securities and moneys held by it as Trustee hereunder to its successor. Should any instrument in writing from the Issuer be required by a successor Trustee for more fully and certainly vesting in such successor the estate, rights, powers and duties hereby vested or intended to be vested in the predecessor, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the Issuer. The resignation of any Trustee and the instrument or instruments removing any Trustee and appointing a successor hereunder, together with all other instruments provided for in this Article, shall be filed or recorded, or both, by the successor Trustee in each recording office where the Indenture shall have been filed or recorded, or both. SF2-28088.1 33 40511-90-MSI-03111/94 The successor Trustee shall give immediate written notice to the Rating Agency that it has been appointed as successor Trustee pursuant to the Indenture. Section 7.13. Successor Trustee as Trustee, Paving Agent and Bond Registrar. In the event of a change in the office of Trustee, the predecessor Trustee which shall have resigned or shall have been removed shall cease to be trustee and paying agent on the Bonds and the bond registrar, and the successor Trustee shall become such Trustee, Paying Agent and Bond Registrar. Section 7.14. Co-Trustee or Separate Trustee. At any time, but subject to compliance with all applicable regulations, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the trust estate may at the time be located, the Issuer and the Trustee shall have power to appoint an additional institution or individual as a co-trustee or separate trustee, and upon the request of the Trustee or of the Holders of at least ten percent (10%) of the Bond Obligation the Issuer shall for such purpose join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint such institution or individual to act as co-trustee jointly with the Trustee or as a separate trustee of all or any part of the trust estate, and to vest in such person or institution,in such capacity, such title to the trust estate, or any part thereof, and such rights, powers, duties, trusts or obligations as the Issuer and the Trustee may consider necessary or desirable, subject to the remaining provisions of this Section. If the Issuer shall not have made such appointment within thirty (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, the Trustee alone shall have the power to make such appointment. The Trustee, the Issuer and the Borrower 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, but to such extent only, be appointed subject to the following terms, namely: (a) The Bonds shall be authenticated and delivered, and all rights, powers, trusts, duties and obligations by this Indenture conferred upon the Trustee in respect of the custody, control or management of money, papers, securities and other personal property shall be exercised solely by the Trustee; (b) all rights, powers, trusts, duties and obligations conferred or imposed upon the Trustee shall be conferred or imposed upon or 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 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; (c) any request in writing by the Trustee to any co-trustee or separate trustee to take or refrain from taking any action hereunder shall be sufficient warrant for the taking or the refraining from taking of such action by such co-trustee or separate trustee; (d) any co-trustee or separate trustee to the extent permitted by law may delegate to the Trustee the exercise of any right, power, trust, duty or obligation, discretionary or otherwise; (e) the Trustee at any time by an instrument in writing and with the concurrence of the Issuer as evidenced by certified legislation may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section and in case an Event of Default shall have occurred and be continuing, the Trustee shall have power to accept the resignation of or remove any such co-trustee or separate trustee without the concurrence of the Issuer, and 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 SF2-28088.1 34 - 40511-90-MSI-03/11/94 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; (f) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; (g) any demand, request, direction, appointment, removal, notice, consent, waiver or other action in writing executed by the Bondholders and delivered to the Trustee shall be deemed to have been delivered to each such co-trustee or separate trustee; and (h) any money, papers, securities or other items of personal property received by any such co-trustee or separate trustee hereunder shall forthwith, so far as may be permitted by law, be turned over to the Trustee. Upon the acceptance in writing of such appointment, any such co-trustee or separate trustee shall be vested with such title to the Trust Estate or any part thereof, 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 and the Issuer. In case any co-trustee or separate trustee shall die, become incapable of acting, resign or be removed, the title to the Trust Estate and all rights, powers, trusts, duties and obligations of said co-trustee or separate trustee shall, so far as permitted by law, vest in and be exercised by the Trustee unless and until a successor co-trustee or separate trustee shall be appointed in the manner herein provided. Section 7.15. Additional Security. It is hereby expressly provided that the Trustee shall have a set-off against any moneys in its custody from any funds created by this instrument, except the Rebate Fund, to pay interest on or principal of any Bonds secured hereby if, for any reason, the Pledged Revenues and other income pledged hereunder are insufficient at any time to pay Debt Service on the Bonds. Section 7.16. Representation by Trustee. The Trustee hereby represents and warrants that as of the date of execution of this Indenture: (a) It is duly organized and validly existing in good standing under the laws of the jurisdiction of its organization and has the power and authority to enter into and perform its obligations under this Indenture; (b) it is an FHA-approved mortgagee at the time of execution of this Indenture and will maintain that status at all times that it serves as Trustee; and (c) this Indenture has been duly authorized, executed and delivered by it. Section 7.17. Appointment, Resignation or Removal of Paving Agent; Successors. The Trustee is hereby designated and, by executing this Indenture, agrees to act as Paying Agent for and in respect to the Bond. The Issuer from time to time may appoint one or more additional Paying Agents and, in the event of the resignation or removal of any Paying Agent, successor Paying Agents by an instrument signed by an officer of the Issuer and delivered to such Paying Agent and the Trustee. Any such additional Paying Agent or successor Paying Agent shall be a national banking association, trust company or bank which is authorized by law to perform all the duties imposed upon a Paying Agent by this Indenture and has a combined capital and surplus of at least $25,000,000. Any such additional Paying Agent or successor Paying Agent shall signify its acceptance of the duties and obligations imposed upon it by this Indenture by executing and delivering to the Issuer and the Trustee a written acceptance thereof. SF2-28088.1 35 40511-90-MS1-03/11/94 The Paying Agents shall enjoy the same protective provisions in the performance of their duties hereunder as are specified in Section 7.01 hereof with respect to the Trustee, insofar as such provisions may be applicable. Any bank or trust company with or into which any Paying Agent other than the Trustee may be merged or consolidated, or to which the assets and business of such Paying Agent may be sold, shall be deemed the successor of such Paying Agent for the purposes of this Indenture. The principal office of each Paying Agent is hereby designated as the respective office or agency of the Issuer for the payment of the principal of, premium, if any, and interest on the Bonds. Any additional Paying Agent shall hold all moneys received by it for the payment of the principal of, premium, if any, and interest on the Bonds in trust for the Holders of such Bonds. Any additional Paying Agent, and its directors, officers, employees or agents, may in good faith buy, sell, own, hold and deal in any of the Bonds, and may join in any action which any Bondholder may be entitled to take with like effect as if such association, bank or trust company were not such Paying Agent. A Paying Agent may at any time resign and be discharged of the duties and obligations created by this Indenture by giving at least thirty (30) days' written notice to the Issuer and the Trustee. A Paying Agent may be removed at any time on at least thirty(30) days' prior written notice by an instrument signed by the Issuer and delivered to such Paying Agent and the Trustee. In the event of the resignation or removal of a Paying Agent such Paying Agent shall pay over, assign and deliver any money held by it as Paying Agent to its successor or if there be no successor, to the Trustee. Section 7.18. FHA-Approved Mortgagees. The Trustee and the Mortgage Servicer under this Indenture shall be FHA-approved Mortgagees at all times. Section 7.19. Additional Duties. Notwithstanding any provisions hereof to the contrary, the Trustee shall have the following duties: (1) The Trustee shall provide the Rating Agency such information as it shall reasonably require from time to time in order to maintain a rating on the Bonds; (2) the Trustee shall assume and perform (or cause to be performed) the duties of Mortgage Servicer under the Mortgage Servicing Agreement in the event that the Mortgage Servicer is removed, resigns or is unable to perform its duties thereunder, but the Trustee shall act only on an interim basis for a reasonable period of time until it is able to engage another FHA-approved mortgage banking company or financial institution to service the Mortgage Loan; (3) to the extent permitted by FHA Regulations and the terms of the FHA Note, the Trustee shall consent to any prepayment of the FHA Note only if and to the extent such prepayment will not result in insufficient moneys being available to pay the applicable principal, premium, if any, and interest on the Bonds; and (4) the Trustee shall notify the Rating Agency of the occurrence of any default under this Indenture and any monetary or other material default under the Mortgage Loan which necessitates a claim by the Trustee for the Mortgage Insurance benefits and of any prepayment of the FHA Note. SF2-28088.1 36 40511-90-MS 1-03/11/94 • • ARTICLE VIII Supplemental Indentures Section 8.01. Supplemental Indentures Not Requiring Consent of Bondholders. With the prior consent of HUD, if then required by applicable law or regulations of HUD, the Issuer and the Trustee may, without the consent of or notice to any of the Bondholders, enter into an indenture or indentures supplemental to this Indenture as shall not be inconsistent with the terms and provisions hereof or materially adverse to the interests of the holders of the Bonds for any one or more of the following purposes: (a) To cure any ambiguity or formal defect or omission in this Indenture; (b) to change or modify any provision of this Indenture so as to harmonize to the maximum extent practicable the provisions hereof with existing rules, regulations and procedures of HUD and FHA; (c) to subject to the lien and pledge of this Indenture additional revenues, properties or collateral; (d) 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 either of them; (e) to provide for the issuance of refunding bonds not requiring the consent of Bondholders; (f) to modify, amend or supplement this Indenture or any indenture supplemental hereto in such manner as to permit the qualification hereof and thereof under the Trust Indenture Act of 1939 or any similar federal statute hereafter in effect or under any state Blue Sky law; (g) to modify, amend or supplement this Indenture or any indenture supplemental hereto in such manner as in the opinion of Bond Counsel shall be necessary to maintain the federal tax exempt status of interest on the Bonds; or (h) to modify, amend or supplement this Indenture in any other manner which, in the reasonable judgment of the Trustee, does not materially adversely affect the interests of Bondholders, and in making such determination, the Trustee may conclusively rely on an Opinion of Counsel and not be liable therefor. Prior to the execution and delivery of any such Supplemental Indenture, there shall be delivered to the Trustee an opinion of Bond Counsel that the execution and delivery of such Supplemental Indenture is permitted under the terms of the Indenture and will not adversely affect the exclusion of interest on the Bonds from federal income taxation. Section 8.02. Supplemental Indentures Requiring Consent of Bondholders. The Holders of not less than two-thirds of the Bond Obligation shall have the right, with the prior consent of HUD, if then required by applicable law or regulations of HUD, from time to time, anything contained in this Indenture to the contrary, to consent to and approve the execution by the Issuer and the Trustee of such indenture or indentures supplemental hereto as shall be deemed necessary and desirable by the Issuer for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Indenture or in any supplemental indenture; provided, however, that nothing in this Section contained shall permit, or be construed as permitting (a) an extension of the stated maturity or reduction in the principal amount or reduction in the rate, or extension of time of payment of interest on, or reduction of any premium payable on the redemption of, any Bonds, without the consent of the Holders of all Bonds then Outstanding, or (b) the SF2-28088.1 37 40511-90-MS1-03/11/94 • • creation of any lien prior to, on a parity with, or subordinate to, the lien of this Indenture, or (c) a reduction in the aforesaid aggregate principal amount of Bonds the Holders of which are required to consent to any such supplemental indenture, without the consent of the Holders of all the Bonds at the time Outstanding which would be affected by the action to be taken, or (d) any reduction in the principal amount of or interest rate or term remaining on the FHA Note, or (e) the modification of the rights, duties or immunities of the Trustee, without the written consent of the Trustee, or (f) a privilege or priority of any Bond or Bonds, or (g) any action which might result in interest on the Bonds being included in gross income for federal income tax purposes; provided further, however, that prior to the execution and delivery of any such Supplemental Indenture, there shall be delivered to the Trustee an opinion of Bond Counsel that the execution and delivery of such Supplemental Indenture is permitted under the terms of the Indenture and will not adversely affect the exclusion of interest on the Bonds from federal income taxation. If at any time the Issuer shall request the Trustee to enter into any such supplemental indenture for any of the purposes of this Section, the Trustee shall, upon being satisfactorily indemnified with respect to expenses, cause notice of the proposed execution of such supplemental indenture to be mailed, postage prepaid, to all Bondholders. Such notice shall briefly set forth the nature of the proposed supplemental indenture and shall state that copies thereof are on file at the corporate trust office of the Trustee for inspection by all Bondholders. If, within sixty days or such longer period as shall be prescribed by the Issuer following the final mailing of such notice, the holders of not less than two-thirds of the Bond Obligation at the time of the mailing of such notice shall have consented to and approved the execution thereof as herein provided, no holder of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or the Issuer from executing the same or from taking any action pursuant to the provisions thereof. Failure to give notice by mailing to the registered owner of any Bond or any defect in such notice shall not affect the validity of the proceedings for the execution of such supplemental indenture. Upon the execution of any such supplemental indenture as in this Section permitted and provided, this Indenture shall be and be deemed to be modified and amended in accordance therewith. The Trustee may rely upon an opinion of counsel as conclusive evidence that execution and delivery of a supplemental indenture has been effected in compliance with the provisions of this Article. Section 8.03. Amendment of Certain Documents. The Issuer and the Trustee may make or consent to any amendment, change or modification of the FHA Note, the Mortgage, the Financing Agreement and the Supplemental Regulatory Agreement for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective or inconsistent provision contained therein, or in regard to matters or questions arising under said documents, as the Issuer and the Trustee may deem necessary or desirable and not inconsistent with said documents or this Indenture and which shall not adversely affect the interests of the holders of the,Bonds; provided, however, that no such amendment, change or modification shall result in a reduction or delay in the payments under the FHA Note. ARTICLE IX Satisfaction and Discharge of Indenture Section 9.01. Discharge of Lien. If the Issuer or the Borrower shall pay or cause to be paid to the Holders of the Bonds the principal, interest and premium, if any, to become due thereon at the times and in the manner stipulated therein and herein, and shall have paid or provided for the payment of all fees and expenses of the Trustee and the Mortgage Servicer, and if the Issuer shall keep, perform and observe all and singular the covenants and promises in the Bonds and in this Indenture expressed as to be kept, performed and observed by it or on its part, then these presents and the estate and rights hereby granted shall cease, terminate and be void, and thereupon the Trustee shall cancel and discharge the lien of this Indenture and execute and deliver to the Issuer such instruments in writing as shall be requisite to satisfy the lien hereof, shall reconvey to the Issuer the estate hereby conveyed, and shall assign and deliver to the Issuer any interest in property at the time subject to the lien of this Indenture which may then be in its possession(other than the FHA Note, which SF2-28088.1 38 40511-90-MSI-03/11/94 shall be delivered to the Borrower), except amounts held by the Trustee for the payment of principal of and interest and premium, if any, on the Bonds, and except amounts to be paid to the Borrower pursuant to Section 4.11 hereof. Section 9.02. Payment and Discharge of Bonds. All Outstanding Bonds of shall, prior to the maturity or redemption date thereof, be deemed to have been paid within the meaning and with the effect expressed in the first paragraph of this Section if the following conditions shall have been fulfilled: (a) in case any of the Bonds are to be redeemed on any date prior to their maturity, the Issuer shall have given to the Trustee, in form satisfactory to it, irrevocable instructions to give, as provided in Article III hereof, notice of redemption of such Bonds on said date; (b) there shall be on deposit with the Trustee either moneys (which are not subject to Section 547 of the Bankruptcy Code) or noncallable Defeasance Obligations(which are purchased with moneys which are not subject to Section 547 of the Bankruptcy Code and which are not subject to redemption prior to maturity), in each case with an Opinion of Counsel to such effect acceptable to the Rating Agency, in an amount sufficient to pay when due the principal or redemption price, if applicable, and interest due and to become due on the Bonds on and prior to the redemption date or maturity date thereof, as the case may be; (c) there shall be delivered to the Trustee the report of an independent certified public accountant or firm of such accountants, acceptable to the Trustee, to the effect that the principal amount of the moneys or Defeasance Obligations and the interest or other income thereon will be sufficient to pay, without further investment or reinvestment of either the principal amount thereof or the interest earnings therefrom (which earnings are to be held likewise in trust and so committed, except as provided herein), as the same become due at maturity or upon redemption, the principal or redemption price, if applicable, and interest due or to become due on the Bonds to their maturity or designated redemption dates; and (d) the Trustee shall have received an Opinion of Bond Counsel to the effect that all conditions precedent to the satisfaction and discharge of this Indenture have been satisfied and that such payment and discharge will not adversely affect the exclusion of interest on the Bonds from federal income taxation; provided however, that the lien of this Indenture shall not be discharged unless and until all Bonds and all interest due thereon are deemed to have been paid within the meaning of this Article IX. Except as provided in the following paragraph, neither direct or guaranteed obligations of the United States of America nor moneys deposited with the Trustee pursuant to this Section nor principal or interest payments on any such securities shall be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the principal of, premium, if any, and interest on the Bonds for which such deposit was made. At the written request of the Borrower and with the consent of the Issuer, which consent shall not be unreasonably withheld, and upon compliance with the conditions hereinafter stated, the Trustee shall have the power to sell, transfer or otherwise dispose of or request the redemption of Defeasance Obligations acquired hereunder and to substitute other Defeasance Obligations of such maturities and interest payment dates and bearing interest as will, without further investment or reinvestment of either the principal amount thereof or the interest earnings thereon, be sufficient to pay the principal of and interest and premium, if any, on the Bonds when due. The foregoing transaction may be effected only if(i) an Independent Certified Public Accountant shall certify that after such transaction the principal amount of and interest income from the Defeasance Obligations to be substituted will be sufficient to pay, as the same becomes due at maturity or upon redemption, the principal or redemption price, if applicable, and interest due or to become due on the Bonds and (ii) the Trustee shall receive an unqualified opinion of nationally recognized bond counsel to the effect that such disposition and substitution or purchase would not cause any of the Bonds to become an "arbitrage bond" within the meaning of Section 103 and 148 of the Code. Any moneys held by the Trustee for the payment of principal or redemption price, if applicable, and interest on the Bonds may be invested by the Trustee only in noncallable Defeasance Obligations having maturity dates, or redemption dates not later than the date or dates at which moneys will be required for the purposes described in this Section. To the extent that any income or interest earned by, or increment to, the investments held under this Section is determined from time to time by the Trustee to be in excess of the amount required to be held by the Trustee for the purposes of this Section, that income, interest or increment shall be transferred at the time of that determination in the manner provided in Section 4.10 hereof. SF2-28088.1 39 40511-90-MSI-03/11/94 The Issuer, to the extent it shall have any control over any deposit hereunder, and the Trustee, to the extent it shall have any discretion with respect to the use of any such deposit, hereby severally covenant that no deposit will be made or accepted hereunder and no use made of any such deposit or direction as to such use given which would cause the Bonds to be classified as "arbitrage bonds" within the meaning of Section 148 of the Code and any regulations in effect thereunder, as the same exist on the date hereof or may from time to time hereafter be amended, supplemented or revised. Section 9.03. No Amendment. Anything in Article VIII to the contrary notwithstanding, if moneys or Defeasance Obligations have been deposited or set aside with the Trustee pursuant to this Article for the payment of the principal or redemption price of the Bonds and the interest thereon and the principal or redemption price of such Bonds and the interest thereon shall not have in fact been actually paid in full, no amendment to the provisions of this Article shall be made without the consent of the owner of each of the Bonds affected thereby. Section 9.04. Survival of Certain Provisions. Notwithstanding the foregoing, those provisions relating to the purchase of Bonds, the maturity of Bonds, interest payments and dates thereof, and the Trustee's remedies with respect thereof, and provisions relating to exchange, transfer and registration of Bonds, replacement of mutilated, destroyed, lost or stolen Bonds, the safekeeping and cancellation of Bonds, nonpresentment of Bonds, the holding of moneys in trust, and repayments to the Borrower from the Funds held under this Indenture and the duties of the Trustee in connection with all of the foregoing and the fees, expenses and indemnities of the Trustee, shall remain in effect and shall be binding upon the Trustee, the Issuer, the Borrower and the Bondholders notwithstanding the release, discharge and satisfaction of this Indenture. The provisions of this Article shall survive the release, discharge and satisfaction of this Indenture. ARTICLE X Miscellaneous Section 10.01. Consents and Other Instruments of Bondholders. Any consent, request, direction, approval, waiver, objection, appointment or other instrument required by this Indenture to be signed and executed by the Bondholders may be signed and executed in any number of concurrent writings of similar tenor and may be signed or executed by such Bondholders in person or by agent appointed in writing. Proof of the execution of any such instrument, 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 under such instrument, namely: (a) The fact and date of the execution by any person of any such instrument may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer of any jurisdiction authorized by the laws thereof to take acknowledgments of deeds, certifying that the person signing such instrument acknowledged to him the execution thereof. Where such execution is by an officer of a corporation or association or a member of a partnership on behalf of such corporation, association or partnership, such affidavit or certificate shall also constitute sufficient proof of his authority. (b) The ownership of Bonds shall be proved by the bond register. (c) Any request, consent or vote of the holder of any Bond shall bind every future holder of the same Bond and the holder of every Bond issued in exchange therefor or in lieu thereof in respect of anything done or permitted to be done by the Trustee or the Issuer pursuant to such request, consent or vote. (d) In determining whether the holders of the requisite percentage of the Bond Obligation have concurred in any demand, request, direction, consent or waiver under this Indenture, Bonds which are owned by the Issuer or the Borrower or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer or the Borrower shall be disregarded and deemed not to SF2-28088.1 40 40511-90-MS1-03/11/94 ! i be Outstanding for the purpose of determining whether the Trustee shall be protected in relying on any such demand, request, direction, consent or waiver. Only Bonds which the Trustee knows to be so owned shall be disregarded. Bonds so owned which have been pledged in good faith may be regarded as Outstanding for the purposes of this Section if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right to vote such Bonds. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the.Trustee. Section 10.02. Limitation of Rights. With the exception of rights herein expressly conferred, nothing expressed or to be implied from this Indenture or the Bonds is intended or shall be construed to give to any person other than the parties hereto, the Borrower and the holders of the Bonds any legal or equitable right, remedy or claim under or in respect to this Indenture or any covenants, conditions and provisions hereof. Section 10.03. Severability. If any provision of this Indenture shall be held or deemed to be or shall in fact be inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions or in all jurisdictions, or in all cases because it conflicts with any other provision or provisions hereof or any constitution, statute, rule of law or public policy, or for any other reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions herein contained invalid, inoperative, or unenforceable to any extent whatever. The invalidity of any one or more phrases, sentences, clauses or sections in this Indenture contained shall not affect the remaining portions of this Indenture or any part thereof. Section 10.04. Notices. All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed given when mailed by first-class mail, postage prepaid, or dispatched by facsimile transmission, addressed, unless notice of a different address is given as provided in this Section, as follows: (a) As to the Issuer: County of Contra'Costa Community Development Department Administration Building 651 Pine Street 4th Floor, North Wing Martinez, California 94553 Attention: Deputy Director - Redevelopment (b) As to the Borrower: EAH-Contra Costa, Inc. 2169 E. Francisco Boulevard, Suite B San Rafael, California 94901 (c) As to the Trustee: Bank of America National Trust and Savings Association 333 South Beaudray Avenue, 25th Floor Los Angeles, California 90071 Attention: (d) As to the Mortgage Servicer: Attention: SF2-28088.1 41 40511-90-MSI-03/11/94 • • (e) As to the Rating Agency: Standard &Poor's Corporation 26 Broadway, 20th Floor New York, New York 10004 Attention: Housing Surveillance Group Section 10.05. Notices to Rating Agency. The Trustee shall give the Rating Agency notice, in addition to other required notices specified herein, of any prepayment of the FHA Note. Section 10.06. Trustee as Paying Agent and Bond Registrar. The Trustee is hereby designated and agrees to act as Paying Agent, separate and apart from its duties as Trustee hereunder, and as Bond Registrar for and in respect to the Bonds. Section 10.07. Payments Due on Saturdays, Sundays and Holidays. In any case where the date of maturity of interest on or principal of the Bonds, or the date fixed for redemption of any Bonds, shall be a Saturday, Sunday, legal holiday or a day on which banking institutions are authorized by law to close, then payment of interest or principal need not be made on such date but may be made on the next succeeding Business Day with the same force and effect as if made on the date of maturity or the date fixed for redemption, and no interest shall accrue for the period after such date. Section 10.08. Counterparts. This Indenture may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall constitute an original, but all of which, when taken together, shall constitute but one and the same instrument, and shall become effective when copies hereof shall be delivered to each of the parties hereto, which copies, when taken together, bear the signature of each of the parties hereto. Section 10.09. Laws Governing Indenture and Situs and Administration of Trust. The effect and meanings of this Indenture and the rights of all parties hereunder shall be governed by and construed according to the laws of the State, but it is the intention of the Issuer that the situs of the trust created by this Indenture be in the state in which is located the principal corporate trust office of the Trustee from time to time acting under this Indenture. The word "Trustee" as used in the preceding sentence shall not be deemed to include any additional individual or institution appointed as a separate or co-trustee pursuant to the Indenture. Section 10.10. 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 any commissioner, officer or employee of the Issuer, as such, past, present or future, either directly or through the Issuer or otherwise, for the payment for or to the Issuer or any receiver thereof, or for or to the holder 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 any such commissioner, officer or employee, as such, to respond, by reason of any act or omission on his or her part or otherwise, for the payment or to the holder of any Bond or otherwise of any sum that may remain due and unpaid upon the Bonds hereby secured or any of them is, by the acceptance thereof, expressly waived and released as a condition of and in consideration for the execution of this Indenture and the issuance of the Bonds. Section 10.11. Successors and Assigns. All the covenants and representations contained in this Indenture, by or on behalf of the Issuer, shall bind and inure to the benefit of its successors and assigns, whether so expressed or not. SF2-28088.1 42 40511-90-MSI-03/11/94 ARTICLE XI Provisions Relating to FHA Section 11.01. Approvals of FHA. Whenever any provision of this Indenture requires the approval of FHA, any such provision shall be understood to require the prior written approval of FHA. Section 11.02. FHA Documents Controllins. No provisions of this Indenture or related documents, including the Financing Agreement and the Supplemental Regulatory Agreement (collectively, the "Financing Documents") are intended to alter or conflict with Title 24 of the Code of Federal Regulations or the Contract of Mortgage Insurance or the FHA closing documents executed in connection with the Mortgage Loan (collectively, the "FHA Documents"), and to the extent that they do so, in the opinion of the Secretary of Housing and Urban Development or his successors, the Financing Documents shall be amended or shall be deemed to be amended so as not to alter or conflict with the FHA Documents. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first above written. COUNTY OF CONTRA COSTA By: Deputy Director-Redevelopment BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Trustee By: Title: SF2-28088.1 43 40511-90-MS1-03/11/94 EXHIBIT A Form of Bond [Form of Face of Bond] No. R- $ COUNTY OF CONTRA COSTA MULTIFAMILY HOUSING REVENUE BOND (FHA INSURED MORTGAGE LOAN - CRESCENT PARK APARTMENTS PROJECT) THE PRINCIPAL OR REDEMPTION PRICE OF, AND INTEREST ON, THIS BOND ARE PAYABLE SOLELY FROM THE FUNDS PLEDGED PURSUANT TO THE INDENTURE. THIS BOND DOES NOT CONSTITUTE A DEBT OR A PLEDGE OF THE FAITH AND CREDIT OF THE UNITED STATES OF AMERICA, THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT OR ANY SUBDIVISION THEREUNDER, THE ISSUER, THE STATE OF CALIFORNIA OR ANY OTHER POLITICAL SUBDIVISION THEREOF. THE OWNER OF THIS BOND HAS NO RIGHT TO HAVE TAXES LEVIED BY THE ISSUER, THE STATE OF CALIFORNIA OR ANY OTHER POLITICAL SUBDIVISION THEREOF FOR THE PAYMENT OF THE PRINCIPAL OR REDEMPTION PRICE OF, AND INTEREST ON, THIS BOND. DATED DATE MATURITY DATE INTEREST RATE CUSIP NO. 1994 REGISTERED Borrower: PRINCIPAL SUM: DOLLARS The COUNTY OF CONTRA COSTA (the "Issuer"), a legal subdivision and body corporate and politic, duly organized and existing under the laws of the State of California, for value received, hereby promises to pay, but solely from the sources hereinafter described, to the Registered Owner set forth above or registered assigns, on the Maturity Date set forth above (unless previously called for redemption) the Principal Sum set forth above, together with interest thereon at the rate set forth above (computed on the basis of a 360-day year consisting of twelve 30-day months) from the interest payment date next preceding the date of registration of this Bond(unless this Bond is registered as of a day during the period from the sixteenth day of the month next preceding any interest payment date to such interest payment date, in which event it shall bear interest from such interest payment date, or unless this Bond is registered before December 15, 1994, in which event it shall bear interest from the Dated Date set forth above) until the principal amount hereof shall have been fully paid, at the rate set forth above per annum, payable on 1 and September 1 of each year, commencing on 1, 1994 (each an "Interest Payment Date"). Payment of principal of and premium, if any, on this Bond are payable in lawful money of the United States of America upon surrender at the principal corporate trust office of Bank of America National Trust and Savings Association, San Francisco or Los Angeles, California(the "Trustee"). Payment of interest shall be made to the person in whose name this Bond is registered at the close of business on the fifteenth day (whether or not a business day) of the month next preceding an Interest Payment Date ('Record Date") by check or draft mailed by first class mail on the Interest Payment Date (or on the next succeeding business day if such date is not a business day) to such person at his address as such address shall appear on the registration books for the Bonds; provided, that at the written request of a Holder of$1,000,000 or more in aggregate principal amount of Bonds, such payments of interest SF2-28088.1 A-1 40511-90-MS 1-03/11/94 shall be made by wire transfer of funds (on the same day as described above for payment by check) to a bank account in the United States designated by such Bondholder prior to the Record Date. This Bond is one of a duly authorized issue of bonds of the Issuer known as County of Contra Costa Multifamily Housing Revenue Bonds (FHA Insured Mortgage Loan - Crescent Park Apartments Project) 1994 Series C issued in the aggregate principal amount of$ (the 'Bonds") pursuant to Chapter 8 of Part 5 of Division 31 of the Health and Safety Code of the State of California, as amended, and under and pursuant to a Resolution adopted by the Board of Supervisors of the Issuer. 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 1994, between the Issuer and the Trustee (as supplemented and amended, the "Indenture"). Reference is hereby made to the Indenture, which is on file at the aforesaid office of the Trustee, 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, the rights of the holders thereof to all of which the holder of this Bond, by acceptance hereof, accepts and agrees. The terms and provisions contained in the Indenture are hereby incorporated herein by reference, and the owner of this Bond, by purchase hereof, assents to all of such terms and provisions. All capitalized, undefined terms used herein will have the meanings ascribed to them in the Indenture. REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON THE REVERSE HEREOF. SUCH PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH HEREIN. No officer, agent or employee of the Issuer, and no officer, official, agent or employee of the State of California, nor any person executing this Bond, shall in any event be subject to any personal liability or accountability by reason of the issuance of the Bonds. The Bonds are not a pledge of the faith and credit of the County of Contra Costa, nor the State of California, nor any of its political subdivisions and neither are they liable on the Bonds, nor are the Bonds payable out of any funds or properties other than those of the Issuer pledged for the payment thereof. The Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation. It is hereby 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 the time, form and manner as required by law; that payment in full for the Bonds has been received; and that the Bonds do not exceed or violate any constitutional or statutory limitation. G 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 Trustee's execution of the certificate hereon. SF2-28088.1 A-2 40511-90-MSI-03/11/94 • IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed in its name by the facsimile signature of the Chairman of its Board of Supervisors under a facsimile of its official seal and attested by the facsimile signature of the County Administrator and Clerk of its Board of Supervisors, all as of the Dated Date set forth above. COUNTY OF CONTRA COSTA By: Chair of the Board of Supervisors [SEAL] Attest: County Administrator and Clerk of the Board of Supervisors By: [Form of] CERTIFICATE OF AUTHENTICATION This Bond is one of the Bonds issued under the provisions of and described in the within-mentioned Indenture. Date of Authentication: Bank of America National Trust and Savings Association, as Trustee By: Authorized Signatory [Form of Back of Bonds] The Bonds are limited obligations of the Issuer payable solely from certain of the revenues, receipts and funds pledged therefor under the Indenture, including revenues and receipts derived from the repayment of the nonrecourse mortgage loan described below. The Bonds will be secured by a nonrecourse mortgage loan (the "Mortgage Loan") made to EAH-Contra Costa, Inc., a California nonprofit corporation(the "Borrower"), and used to acquire and rehabilitate a 378-unit multifamily rental housing project located in the City of Richmond, Contra Costa County, California identified as FHA Project No. (the "Project"). The Borrower's obligation to repay the Mortgage Loan is evidenced by a nonrecourse deed of trust note (the "FHA Note") and secured by a deed of trust on the Project (the "Mortgage"). The Secretary of Housing and Urban Development("HUD"), acting through the Federal Housing Administration("FHA"), has insured the FHA Note pursuant to Section 221(d)(3)of the National Housing Act of 1934, as amended. Payment of principal, premium, if any, or interest on the Bonds is not insured by FHA. SF2-28088.1 A-3 40511-90-MSI-03/11/94 The Bonds are subject to mandatory redemption at a redemption price equal to the principal amount thereof plus interest accrued to the date fixed for redemption (i) on any date, in whole or in part, if FHA mortgage insurance proceeds are payable to the Trustee, or (ii) on any date, in whole or in part, as provided in the Indenture, if insurance proceeds as a result of damage to the Project or condemnation awards are applied to the prepayment of the FHA Note, or (iii)in whole or in part in the event the Borrower becomes subject to bankruptcy proceedings and the trustee in bankruptcy causes or directs the prepayment of the FHA Note(along with a proportionate reduction of and redemption from the Debt Service Reserve Fund as provided in the Indenture). If any of such events shall occur, the Trustee will call Bonds for redemption as aforesaid on the earliest practicable date for which notice of redemption can be given in accordance with the provisions of the Indenture. The Bonds are also subject to sinking account redemption prior to maturity on each Interest Payment Date at a price of 100% of the principal amount thereof from any moneys remaining in the Bond Fund in excess of the minimum balance required under the Indenture in accordance with the provisions of the Indenture. The Bonds maturing on or after 1, 20 are also subject to redemption prior to maturity on the earliest practicable date on or after 1, 20_, in whole or in part, from the proceeds of any refunding obligations of the Issuer or other funds provided by the Issuer and to the extent of any prepayment of the FHA Note by the Borrower, together with an appropriate reduction of and redemption from the Debt Service Reserve Fund as described in the Indenture, during the periods and at the redemption prices (expressed as percentages of the principal amount of the Bonds) set forth in the table below, together with interest accrued to the date fixed for redemption, as follows: Redemption Dates Redemption Prices Bonds redeemed pursuant to the Sinking Account provisions shall be called in accordance with the provisions of the Indenture. If less than all the Bonds then outstanding shall be called for redemption upon application of casualty insurance proceeds or condemnation awards to a prepayment of the FHA Note or upon a partial prepayment of the FHA Note by the Borrower, an amount of Bonds of each maturity shall be redeemed so that the resulting decrease in the debt service on the Bonds during each six-month period ending on an Interest Payment Date is proportional, as nearly as practicable, to the decrease in the payments on the FHA Note in such six-month period. In the event of such redemption in connection with a reduction in the outstanding principal amount of the FHA Note which reduces the monthly payment thereon, then an additional portion of the Bonds shall be redeemed from amounts in the Debt Service Reserve Fund in an amount which bears the same proportion as nearly as practicable to the amount held in the Debt Service Reserve Fund as the amount of the reduction in the principal amount of the FHA Note and the Mortgage bears to the principal amount of the FHA Note and the Mortgage immediately prior to such reduction. If less than all the Bonds of the same maturity are to be redeemed under the provisions of the previous paragraph, the Bonds to be redeemed shall be selected by the Trustee in accordance with the provisions of the Indenture. Except as provided in the Indenture, notice of redemption shall be given by first class mail to the registered owner at the address of such owner shown on the Trustee's bond register. All such redemption notices shall be given not less than thirty (30) days nor more than forty-five(45) days prior to the date fixed for redemption. Failure to give notice by mailing to the registered owner of any Bond designated for redemption or any defect in such notice shall not affect the validity of the proceedings for the redemption of any Bond with SFZ-28088.1 A-4 40511-90-MS 1-03/11/94 respect to which no such failure or defect has occurred if notice of such redemption shall have been mailed in accordance with applicable provisions of the Indenture. The owner of this Bond shall have no right to enforce the provisions of the Indenture or to obtain the benefits of the FHA Insurance or to institute action to enforce the covenants therein, or to take any action with respect to any event of default thereunder, or to institute, appear in or defend any suit or other proceeding with respect thereto, except as provided in the Indenture. The Issuer and the Trustee may deem and treat the registered holder hereof as the absolute owner hereof for the purpose of receiving payment of or on account of principal hereof and premium, if any, hereon and interest due hereon and for all other purposes, and neither the Issuer nor the Trustee shall be affected by any notice to the contrary. Modifications or alterations of the Indenture or of any indenture supplemental thereto may be made only to the extent and in the circumstances permitted by the Indenture and with the prior consent of HUD. Subject to the limitations and upon payment of the charges provided in the Indenture, Bonds may be exchanged for a like aggregate principal amount of Bonds of the same maturity of other authorized denominations. This Bond is transferable by the registered owner hereof in person or by attorney duly authorized in writing at the principal corporate trust office of the Trustee, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, and upon surrender and cancellation of this Bond. Upon such transfer a new registered Bond or Bonds of the same, maturity and interest rate and of authorized denomination or denominations for the same aggregate principal amount will be issued to the transferee in exchange therefor. The principal hereof may be declared or may become due on the conditions and in the manner and at the time set forth in the Indenture upon the occurrence of an event of default as provided in the Indenture. SF2-28088.1 A-5 40511-90-MS1-03/11/94 (FORM OF ASSIGNMENT) For value received the undersigned hereby sells, assigns and transfers unto (Name, Address and Tax Identification or Social Security Number of Assignee) the within-registered Bond and hereby irrevocably constitute(s)and appoint(s) attorney, to transfer the same on the registration books of the Trustee with full power of substitution in the premises. Dated: Signature: Note: The signature(s) on this Assignment must correspond with the name(s) as written on the face of the within Bond in every particular without alteration or enlargement or any change whatsoever. Signature Guaranteed: Note: Signature(s) must be guaranteed by an eligible guarantor institution. SF2-28088.1 A-6 40511-90-MS 1-03/11/94 EXHIBIT B Estimated Debt Service Schedule SF2-28088.1 B-1 40511-90-MSI-03/11/94 Regulatory Agreement & Declaration of Restrictive Covenents i • [OH&S OFT OF 11 MARCH 19941 WHEN RECORDED RETURN TO: Orrick, Herrington &Sutcliffe Attn: Michelle W. Sexton 400 Sansome Street San Francisco, CA 94111 REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS between COUNTY OF CONTRA COSTA and EAH-CONTRA COSTA, INC., a California nonprofit corporation Dated as of 1, 1994 SF2-27266.2 40511-90-MS1-03111194 TABLE OF CONTENTS Page 1. Subordination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2. Representations, Covenants and Warranties of the Borrower . . . . . . . . . . . . . . . . . . . . . 2 3. Term of Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 (a) Occupancy and Rental Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 (b) Termination of Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 (c) Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4. Project Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 5. Occupancy Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 6. Tax-Exempt Status of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 7. Transfer Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 8. Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 9. Agent of the Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 10. Administration by Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 11. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 12. Successors Bound . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 13. Agreement to Record . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 14. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 15. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 16. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 17. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 18 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 SF2-27266.2 40511-90-MS1-03/11/44 REGULATORY AGREEMENT AND DECLARATIONS OF RESTRICTIVE COVENANTS THIS REGULATORY AGREEMENT AND DECLARATIONS OF RESTRICTIVE COVENANTS (including Exhibits A, B and C attached hereto), dated as of 1, 1994, is by and between EAH-Contra Costa, Inc., a California nonprofit corporation, and its successors and assigns as owner of the project identified below (the "Borrower"), and the County of Contra Costa, a legal subdivision and body corporate and politic of the State of California, duly organized and existing under the laws of the State of California (the "Issuer"). WITNESSETH : WHEREAS, the Issuer proposes to issue its Multifamily Housing Revenue Bonds (GNMA Collateralized - Crescent Park Apartments Project) Series 1994 B, in the aggregate principal amount of$ (the "Series B Bonds"), and its Multifamily Housing Revenue Bonds (GNMA Collateralized - Crescent Park Apartments Project) Taxable Series 1994 B-T, in the aggregate principal amount of$ (the "Series A-T Bonds" and, collectively with the Series A Bonds, the "Bonds"), pursuant to and in compliance with Chapter 8 of Part 5 of Division 31 of the Health and Safety Code of the State of California (the "Act"), and will lend the proceeds of the Bonds to the Corporation pursuant to the Financing Agreement of even date herewith (as supplemented and amended from time to time, the "Financing Agreement"), between the Issuer and the Borrower, in order to enable the Borrower to finance the acquisition and rehabilitation of a 378-unit multifamily rental housing project known as Crescent Park Apartments, and located on the leasehold site described in Exhibit A hereto (the "Project"); and WHEREAS, in order to assure the Issuer and the owners of the Series B Bonds that interest on certain of 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 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; WHEREAS, interest on the Series A Bonds is exempt from federal income tax only if the Project continuously complies with requirements of the Internal Revenue Code of 1986, as amended (the "Code"); and WHEREAS, the Code and the regulations and rulings promulgated with respect thereto and with respect to the Internal Revenue Code of 1986 prescribe that the financing, use and operation of the Project be restricted in certain respects and in order to ensure that the Project will be financed, used and operated in accordance with said Code, regulations, and rulings the Issuer and the Borrower have determined to enter into this Regulatory Agreement and Declaration of Restrictive Covenant (the "Agreement"); and NOW, THEREFORE, in consideration of 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 and the Borrower hereby agree as follows: SF2-27266.2 40511-90-MS1-03/11/91 Section 1. Subordination of Agreement. This Agreement and the restrictions hereunder are subordinate to the FHA Insured Mortgage. In the event of foreclosure or transfer of title by deed-in-lieu of foreclosure, this Agreement and the restrictions hereunder will automatically terminate, subject to the provisions of Section 3(c). Section 2. Representations, Covenants and Warranties of the Borrower. (a) The Borrower hereby incorporates herein, as if set forth in full herein, each of the representations, covenants and warranties of the Borrower contained in the Tax Certificate and the Financing Agreement relating to the acquisition and operation of the Project. (b) The Borrower hereby represents and warrants that the Project is located entirely within the City of Richmond, County of Contra Costa, California. (c) The Borrower acknowledges, represents and warrants that it understands the nature and structure of the transactions contemplated by this 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 Borrower in acquiring the Project. (d) The Borrower has no knowledge of any action taken by it or by any agency that would indicate that the Borrower's tax-exempt status under Section 501(c)(3) of the Code has been revoked or is being considered for revocation; the Borrower believes that it has not undertaken any action that would cause such status to be revoked; and the Borrower intends to continue to operate in such a manner as to continue to qualify as a Section 501(c)(3) tax-exempt organization. Section 3. Term of Restrictions. (a) Occupancy and Rental Restrictions: The term of the restrictions set forth in Section 5 of this Agreement shall commence on the date of execution hereof and shall end on the latest of the following: (i) the date which is 15 years after the date on which 50% of the dwelling units in the Project were first occupied; or (ii) the date which is a "qualified number of days" after the date on which any of the dwelling units in the Project were occupied; or (iii) the date on which any assistance provided with respect to the Project under Section 8 of the United States Housing Act of 1937 terminates including the initial term and any extension thereof, (iv) , 2034; or (v) the term of any bonds issued to refund the Bonds. For purposes of clause (ii), the term "qualified number of days" means, with respect to the Bonds, fifty percent (50%) of the total number of days from the date of issuance of the Bonds to and including the final stated maturity date of the Bonds or the scheduled maturity date of any bonds issued to refund the Bonds. (b) Termination of Restrictions: Notwithstanding the provisions of (a) of this Section 3, this Agreement and all other restrictions hereunder shall terminate upon the happening of any event set forth in Section 1. In addition, this Agreement and the restrictions hereunder shall also cease to apply in the event of an involuntary noncompliance caused by unforeseen events such as fire, seizure, requisition, a change in federal law or an action of a federal agency after the date of issue which prevents the Issuer from enforcing the requirements of this Agreement, or condemnation, provided that (i) the Bonds are retired at the first available call date; or (ii) any insurance proceeds or condemnation award or other amounts received as a result of such loss or destruction are used to provide a project which meets the requirements of Section 142(d) of the Code and Treasury SF2-27266.2 2 40511-90-MS1-03/11/94 Regulations Section 1.103-8(b), as amended, or any successor law or regulation. However, the foregoing provisions of this paragraph shall cease to apply in the event of foreclosure, transfer of title by deed-in-lieu of foreclosure or similar event if, at any time subsequent to such event and during the period set forth in paragraph (a) of this Section 3, the obligor on the purpose investment (as defined in Sections 1.148-1(b) and 1.148-8(e)(10) of the Treasury Regulations) or a related person (as defined in Section 1.103-10(e) of the Treasury Regulations) obtains an ownership interest in the Project for federal tax purposes. (c) Termination of Agreement: This Agreement and all restrictions hereunder shall terminate upon the earlier of(i) termination of the Occupancy and Rental Restrictions as provided in paragraph (a) of this Section, or (ii) a termination pursuant to the provisions of paragraph (b) of this Section. Section 4. Project Restrictions. The Borrower acknowledges and agrees that the Project is to be owned, managed and operated as a "qualified project" (within the meaning of the Code) and, to that end, the Borrower represents, warrants and covenants that: (a) The Project has been and will be operated for the purpose of providing multifamily residential rental housing and the Borrower shall own, manage and operate (or cause the management and operation of) the Project as a project to provide multifamily rental housing comprised of a building or structure or several interrelated buildings or structures, each consisting of more than one dwelling unit and facilities functionally related and subordinate thereto, and no other facilities. As used herein, facilities functionally related and subordinate to the Project shall include facilities for use by the tenants, including, for example, swimming pools, other recreational facilities, parking areas, and other facilities which are reasonably required for the Project, for example, heating and cooling equipment, trash disposal equipment or units for resident managers or maintenance personnel. (b) All of the dwelling units in the Project were and are similarly constructed, and each dwelling unit in the Project does and will contain facilities for living, sleeping, eating, cooking and sanitation for a single person or a family which are complete, separate and distinct from other dwelling units in the Project and does and will include a sleeping area, bathing and sanitation facilities and cooking facilities equipped with a cooking range, refrigerator and sink. (c) The Borrower does not and will not knowingly permit any of the dwelling units in the Project to be used on a transient basis and will not rent any of the units for a period of less than thirty (30) consecutive days, and none of the dwelling units in the Project will at any time be leased or rented for use as a hotel, motel, dormitory, fraternity house, sorority house, rooming house, hospital, nursing home, sanitarium, rest home or trailer court or park or place of business. (d) No part of the Project has been or will at any time be owned or used by a cooperative housing corporation. (e) The site of the Project consists of a parcel or parcels that are contiguous (parcels are contiguous if their boundaries meet at one or more points) except for the interposition of a road, street or stream, and the Project comprises a single geographically and functionally integrated project for multifamily rental housing, as evidenced by the common ownership, management, accounting and operation of the Project. (f) The Borrower will not sell any of the dwelling units within the Project. SF2-27266.2 3 40511-90-MSI-03/11/94 (g) All of the units in the Project will be leased, rented, or available for lease or rental on a continuous basis to members of the general public (other than units for a resident manager or maintenance personnel). (h) The Borrower shall not restrict Qualifying Tenants (as defined below) or tenants of the Reserved Units (as defined below) from the enjoyment of unrestricted access to all common facilities and common areas of the Project. (i) The Borrower will give priority consideration, in accepting tenants, to holders of federal certificates for rent subsidies pursuant to the existing program under Section 8 of the United States Housing Act of 1937, or its successor ("Section 8 Certificate Holders"). (j) The Borrower will not knowingly and voluntarily take or omit to take, as is applicable, any action if such action or omission would in any way cause the use and operation of the Project in a manner contrary to the requirements of this Agreement. (k) The Borrower shall not discriminate on the basis of race, creed, color, sex, age, sexual orientation, marital status or national origin or source of income if from a federal, state or local governmental body or such other sources of income as approved by the Issuer (e.g., AFDC or SSI payments) or, except to the extent appropriate in the interests of the health and safety of the tenants, physical disability, in the lease, use, or occupancy of the Project or in connection with the employment or application for employment of persons for the operation and management of the Project. (1) The Borrower will not knowingly and voluntarily take or omit to take, as is applicable, any action if such action or omission would in any way cause the proceeds from the sale of the Bonds to be applied in a manner contrary to the requirements of this Agreement. (m) The Borrower will operate the Project in the manner described in its Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code submitted by the Borrower to the Internal Revenue Service on July 6, 1993. (n) As of the date of this Agreement, at least forty-nine percent (49%) of the total number of units in the Project are occupied by Very Low Income Tenants (as defined below). (o) 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. If the Borrower elects to establish a base rent for all or part of the units for lower income households and Very Low Income households, the base rents shall be adjusted for household size, 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. Section 5. Occupancy Restrictions. The Borrower represents, warrants and covenants that: SF2-27266.2 4 40511-90-MSI-03/11/94 ! • (a)(1) At least forty-nine percent (49%) of the total number of units in the Project ("Reserved Units") shall be occupied continuously or held available for occupancy (or treated as occupied as provided herein) by (i) individuals or families whose adjusted gross income does not exceed 50 percent of the median adjusted gross income for the area, as adjusted gross income may from time to time be determined pursuant to Section 8 of the United States Housing Act of 1937, as amended; 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 very low income households as defined by Section 50105 of the Health and Safety Code of the State of California ("Very Low Income Tenants"). Median adjusted gross income for the area with respect to Very Low Income Tenants is to be adjusted for family size. (2) The determination of whether an individual or family is within the prescribed income limitations shall be made only at the time the tenancy commences. Any unit occupied by an individual or family who is a Very Low Income Tenant during their tenancy in such unit even though such individual or family subsequently ceases to be of very low, low or moderate income. Any completed unit vacated by a Very Low Income Tenant shall be treated as being occupied by such prior Very Low Income Tenant until reoccupied by another occupant., other than for a temporary period not to exceed 31 days. (3) The Borrower will use its Best Efforts to rent the next available Reserved Unit to a Section 8 Certificate Holder. For purposes of this provision, "Best Efforts" shall mean that the Borrower has (a) notified the Housing Authority of the County of Contra Costa of the availability of the Reserved Unit for Section 8 Certificate Holders, and (ii) held the Reserved Unit available exclusively to Section 8 Certificate Holders for a period of at least fifteen(15) days. (b) The Reserved Units shall consist of seventy-seven (77) one bedroom units, one hundred and three (103) two bedroom units, one hundred and twenty-four (124) three bedroom units, and thirty-seven (37) four bedroom units and shall be made available at no more than affordable rents. The term "affordable rents" is defined for (i) for all Reserved Units occupied by Section 8 Certificate Holders, as 100% of the existing Section 8 Fair Market Rents, as published annually by the United States Department of Housing and Urban Development, less the utility allowance then in effect, and (ii) for all Reserved Units occupied by Very Low Income Tenants who are not Section 8 Certificate Holders, as the amount derived by multiplying 30 percent times 50 percent of the median adjusted gross income for the area, adjusted for family size by computing income on the basis of two persons in the case of a one-bedroom unit, three persons in the case of a two-bedroom unit, four persons in the case of a three-bedroom unit and five persons in the case of a four-bedroom unit. Nothing in this paragraph (b) shall be construed as a waiver of the Borrower's right to request HUD to preempt, pursuant to 24 CFR part 403, any local controls on the Project's rents should such controls jeopardize the financial viability of the Project. (c) As a condition to occupancy, each person who is intended to be Very Low Income Tenant shall be required to sign and deliver to Borrower an Income Computation and Certification in the form attached hereto as Exhibit B (the "Income Certification"), in which the prospective Very Low Income Tenant certifies that he or his family qualifies as being of very low, low or moderate income. In addition, such person shall be required to provide whatever other information, documents or certifications are deemed necessary by the Issuer or the Trustee to substantiate the Income Certification. SF2-27266.2 5 40511-90-MSI-03/11/94 • • (d) The form of lease to be utilized by the Borrower in renting any units in the project to any person who is intended to be a Very Low Income Tenant shall provide for termination of the lease and consent by such person to immediate eviction for failure to qualify as a Very Low Income Tenant as a result of any material misrepresentation made by such person with respect to the Income Certification. The Borrower has reviewed the addendum to the form of lease for the Project prepared by the Housing Authority of the City of Richmond and its management policies will not conflict with the provisions in such addendum. The Borrower agrees to include the provisions of such addendum only in its leases with holders of Section 8 certificates. (e) All tenant lists, applications, and waiting lists relating to the Project, to the extent that such information is maintained shall at all times be kept separate and identifiable from any other business of the Borrower which is unrelated to the Project, as required by the Issuer or the Trustee from time to time, in a reasonable condition for proper audit and subject to examination during business hours upon reasonable notice by representatives of the Issuer or the Trustee. (f) The Borrower shall utilize a maximum occupancy standard not less than that required by Section 8 of the United States Housing Act of 1937 on the date hereof, that is three individuals for a one bedroom unit (or such greater number as may be allowed by the Department of Housing and Urban Development), four individuals for a two bedroom unit (or such greater number as may be allowed by the Department of Housing and Urban Development, [seven] individuals for a three bedroom unit (or such greater number as may be allowed by the Department of Housing and Urban Development), and [nine] individuals for a four bedroom unit (or such greater number as may be allowed by the Department of Housing and Urban Development). (g) The Borrower shall submit to the Issuer any information or completed forms requested by the Issuer to comply with the reporting requirements of the State of California, including without limitation information necessary to file the annual report required by Section 8855.5 of the California Government Code, and the Internal Revenue Service, including without limitation the information necessary to file IRS Form 8703. Such information shall be submitted to the Issuer within 15 days of receipt of a written request from the Issuer. (h) The Borrower shall not apply or permit the application of, management policies or lease provisions with respect to the Project which have the effect of precluding occupancy of Reserved Units by holders of Section 8 certificates. The Issuer acknowledges that it is the Borrower's responsibility to screen and select tenants for desirability and creditworthiness, and that such selection is within the Borrower's discretion. If written management policies exist, or exist in the future, with respect to the Project, the Issuer may review such written policies and may require changes in such policies, if necessary, to reasonably comply with the provisions of this Agreement and the requirements of the Section 8 Program as set forth in the first paragraph of this clause (h). (i) The Borrower will submit to the Issuer (i) at the time of initial occupancy of any Very Low Income Tenant, (ii) upon the reoccupancy of any unit held available for Very Low Income Tenants, and (iii) as often as necessary to comply with the requirements of the Issuer, Income Certifications in the form attached hereto as Exhibit B, which are subject to independent investigation and verification by the Issuer. Income Certifications will be maintained on file at the Project with respect to each Very Low Income Tenant who resides in a Project unit or resided therein during the immediately preceding calendar year. SF2-27266.2 6 40511-90-MSI-03/11/94 In addition, the Borrower agrees to obtain and maintain on file the following with respect to each prospective Very Low Income Tenant: qualification forms as required by Section 8 for Section 8 Certificate Holders or employment verifications or verifications of other sources of income for noncertificate holders or such other forms of certification that may be required by the Issuer from time to time. Provided that such documentation has been obtained, the Borrower may rely upon the Income Certifications of the prospective tenants unless the Borrower has actual knowledge that they are inaccurate. (j) The Borrower will maintain complete and accurate records pertaining to the Reserved Units, and will permit any duly authorized representative of the Issuer or the Trustee to inspect the books and records of the Borrower pertaining to the incomes of Very Low Income Tenants residing in the Project, the rent levels for the Reserved Units and other records necessary to determine compliance with this Agreement. (k) On the fifteenth day of each month or such later date as may be specified in writing by the Issuer, the Borrower will submit to the Issuer and the Trustee a certificate executed by the Borrower stating the percentage of units of the Project which were occupied by Very Low Income Tenants at all times during the preceding month and identifying Very Low Income Tenants who commenced or terminated occupancy of the Project during such month. In addition, the Borrower will prepare and submit to the Issuer within thirty (30) days after April 1 in each year a "Certificate of Continuing Program Compliance" substantially in the form attached hereto as Exhibit "C" executed by the Borrower, stating (i) the percentage of the dwelling units in the Project which were occupied by Very Low Income Tenants (or held vacant and available for occupancy as provided in paragraph 0) above) during such period, and (ii) that to the knowledge of the Borrower, no default has occurred under this Agreement. Section 6. Tax-Exempt Status of Bonds. The Borrower and the Issuer, as applicable, each hereby represents, warrants and agrees as follows: (a) The Borrower 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 Tax-Exempt 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 Borrower represents, covenants and agrees that it will maintain its status as an organization described in Section 501(c)(3) of the Code and exempt from federal income tax under Section 501(a) of the Code (a "501(c)(3) Organization"). (c) The Borrower will not use or permit the use of more than 5% of the Project by persons other than a 501(c)(3) Organization or by a 501(c)(3) Organization (including the Borrower) in an "unrelated trade or business" within the meaning of Section 513(a) of the Code, if the payments received in respect of such uses total more than 5% of the principal or interest on the Tax-Exempt Bonds. For purposes of this covenant, "use" that would not be counted for purposes of the "private business use test" described in Section 141(b)(1) of the Code shall be disregarded, including "use" not counted if 501(c)(3) Organizations were treated as governmental units with respect to their activities which do not constitute unrelated trade or businesses, determined by applying Section 513(a). This covenant shall not be deemed to restrict the rental of units in the Project to tenants for the occupancy of such units as their residences. SF2-27266.2 7 40511-90-MSI-03/11/94 • . (d) The Borrower represents that it has not, and covenants and agrees that it will not, become a test period beneficiary of any Tax-Exempt non-hospital bonds issued on or before the Closing Date, the aggregate face amount of which allocable to it when added to the aggregate face amount of the Tax-Exempt Bonds exceeds $150,000,000, all as described in Section 145(b) of the Code. The Borrower represents that no 501(c)(3) Organization with which it shares common management and control ("Affiliated Organization") is, and covenants and agrees that it will not permit any Affiliated Organization to become, a test period beneficiary of any Tax-Exempt non- hospital bonds issued on or before the Closing Date, the aggregate face amount of which allocable to it, when added to the aggregate face amount of the Tax-Exempt Bonds, exceeds $150,000,000, all as described in Section 145(b) of the Code. (e) The Borrower will not permit the use of the Project by any 501(c)(3) Organization who is a test period beneficiary of any Tax-Exempt non-hospital bonds issued on or before the Closing Date, the aggregate face amount of which allocable to it, when added to the aggregate face amount of the Tax-Exempt Bonds allocable to such 501(c)(3) Organization, exceeds $150,000,000, all as described in Section 145(b) of the Code. (f) The Borrower will comply with Section 145(d) of the Code, including in particular, Section 145(d)(2)(B). (g) The Borrower represents and covenants that at least 40% of the total number of units in the Project shall be occupied by individuals or families whose income does not exceed 60% of the median income for the area. Section 7. Transfer Restrictions. The Borrower covenants and agrees that the Borrower will cause or require as a condition precedent to any conveyance, transfer, assignment or any other disposition of the Project prior to the termination of the Rental Restrictions and Occupancy Restrictions provided herein (the "Transfer") that the transferee of the Project pursuant to the Transfer assume in writing, in a form acceptable to the Issuer, the Trustee and HUD, all duties and obligations of the Borrower under this Agreement, including this Section, in the event of a subsequent Transfer by the transferee prior to expiration of the Rental Restrictions and Occupancy Restrictions provided herein (the "Assumption Agreement"). The Borrower shall deliver the Assumption Agreement to the Issuer prior to the Transfer. This limited transfer restriction does not affect the rights of HUD to approve the proposed transfer as required under the FHA Regulatory Agreement. Section 8. Enforcement. (a) The Borrower shall permit any duly authorized representative of the Issuer, including Bank of America National Trust and Savings Association, as trustee under the Indenture (the "Trustee"), to inspect any books and records of the Borrower regarding the Project and with respect to the incomes of Very Low Income Tenants which pertain to compliance with the provisions of this Agreement and Section 145(d) of the Code. (b) In addition to the information provided for in Section 5(e), the Borrower shall submit any other information, documents or certifications requested by the Issuer or the Trustee which any of them deem reasonably necessary to substantiate the Borrower's continuing compliance with the provisions of this Agreement, the Act and Section 145(d) of the Code. (c) The Issuer and the Borrower each covenants that it will not knowingly take or permit any action (other than an action required by Section 241(f) of the National Housing Act of SF2-27266.2 8 40511-90-MS1-03/11/94 1934, as amended, or the regulations thereunder, or by any documents executed in connection with the FHA Insured Mortgage Loan) that would adversely affect the exemption from federal income taxation of in on the Bonds. Moreover, each covenants to take, subject to the prior approval of HUD, any lawful action (including amendment of this Agreement as may be necessary , in the opinion of nationally recognized bond counsel) to comply fully with the requirements of the Act and 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 obligations the interest on which is tax-exempt under Section 145(d) of the Code and affecting the Project. (d) The Borrower covenants and agrees to inform the Issuer, the Trustee and TRI Capital Corporation, the mortgage servicer for the FHA Insured Mortgage Loan (the "Servicer"), or any successor mortgage servicer, by written notice of any violation of the Borrower's obligations hereunder within five (5) days of first discovering any such violation, and the Issuer covenants and agrees to inform the Borrower by written notice of any violation of the Borrower's obligations hereunder within five (5) days of first discovering a violation and to provide the Borrower a period of time in which to correct such violation. If any such violation is not corrected to the satisfaction of the Issuer and the Trustee within the period of time specified by the Issuer and the Trustee, which shall be at least thirty (30) days after the date any notice to the Borrower is mailed, or within such further time as the Issuer and the Trustee determine is necessary to correct the violation without loss of tax exemption of interest on the Bonds, but not to exceed any limitations set by applicable regulations, without further notice the Issuer shall declare a default under this Agreement effective on the date of such declaration of default, and upon such default the Borrower hereby agrees to pay the Issuer (but only to the extent of any available "surplus cash," as defined in the FHA Regulatory Agreement) any rents or other amounts received by the Borrower for any units in the Project which were in violation of this Agreement during the period such violation continued, and the Issuer shall apply to any court, state or federal, for specific performance of this Agreement or an injunction against any violation of this Agreement or any other remedies at law or in equity or any such other actions as shall be necessary or desirable so as to correct noncompliance with this Agreement. (e) The Borrower and the Issuer each acknowledges that the primary purposes for requiring compliance by the Borrower with the restrictions provided in this Agreement are to comply with the requirements of the Act and to preserve the federal income tax exemption of interest on the Tax-Exempt Bonds to the Bondholders, and that the Trustee on behalf of the Bondholders who are declared to be third party beneficiaries of this Agreement shall be entitled, for any breach of the provisions hereof, to all remedies both at law and in equity in the event of any default hereunder. (f) Notwithstanding the foregoing, enforcement of this Agreement shall not serve as a basis for a declaration of default under the FHA Insured Mortgage or acceleration of the FHA Insured Mortgage Loan or result in any claim under such Mortgage Loan, or claim against the Project, the FHA Insured Mortgage Loan proceeds, any reserve or deposit made with the mortgagee or another person or entity required by HUD in connection with the FHA Insured Mortgage Loan transaction, or against the rents or other income from the Project (other than available surplus cash) for payment hereunder. Section 9. Agent of the Issuer. The Issuer shall have the right to appoint an agent to carry out any of its duties and obligations hereunder, and shall inform the Borrower of any such agency appointment by written notice. SF2-27266.2 9 40511-90-MS1-03/11/94 • • Section 10. Administration by Issuer. The Borrower agrees to pay an administration fee to the Issuer pursuant to the Financing Agreement, semiannually in arrears, in the amount of 1/8 of 1% per annum of the original aggregate principal amount of the Bonds, on every April 20 and October 20 thereafter, commencing October 20, 1994 until the payment of the principal of, and premium, if any, and interest on all Bonds, and the discharge of the Indenture in accordance with its terms, or the termination of this Agreement (if later). Section 11. Indemnification. The Borrower releases the Issuer from, and covenants and agrees that the Issuer shall not be liable for, and covenants and agrees, to the extent permitted by law, to indemnify and hold harmless the Issuer and its officers, employees and agents from and against, (1) any and all losses, claims, damages, liabilities and expenses (or actions in respect thereof) arising out of or based upon or in any way relating to the acquisition, construction, equipping or operation of the Project, (2) any and all losses, claims, damages, liabilities and expenses (or actions in respect thereof) that arise out of or are based upon any untrue statement or alleged untrue statement of any material fact relating either to the Borrower or the Project as set forth in the Official Statement or the Preliminary Official Statement for the Bonds, or arise out of or are based upon the omission or alleged omission therefrom of any statement or information relating to the Borrower or the Project necessary to make the statement or information relating to the Borrower or the Project necessary to make the statements therein not misleading in any material respect in the light of the circumstances under which they were made, and (3) amounts paid in settlement of any litigation commenced or threatened arising from a claim based upon any such untrue statement or alleged untrue statement or omission or alleged omission if such settlement is effected with the written consent of the Borrower; and will reimburse any legal or other expenses reasonably incurred by the Issuer in connection with investigating or defending any such loss, claim, damage, liability or action. The Borrower will not make any indemnity in respect of wrongful acts of the Issuer. The Issuer has the right to select independent counsel to be paid by the Borrower only to the extent necessary to enforce the obligations of the Borrower hereunder, and the Issuer has the right to approve any settlement. The provisions of this Section shall survive the retirement of the Bonds. The Borrower also shall pay and discharge (i) any lien or charge upon payments by the Borrower to the Issuer and the Trustee hereunder and (ii) any taxes (including, without limitation, all ad valorem taxes and sales taxes), assessments, impositions and other charges in respect of any portion of the Project, and in the event any moneys are paid by the Issuer on behalf of the Borrower, the Borrower shall promptly reimburse the Issuer for such amounts. If any such claim is asserted, or any such lien or charge upon payments, or any such taxes, assessments, impositions or other charges, are sought to be imposed, the Issuer shall give prompt notice to the Borrower and the Borrower shall have the sole right and duty to assume, and will assume, the defense thereof, with full power to litigate, compromise or settle the same in its sole discretion. In addition thereto, the Borrower 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. Notwithstanding anything in this Section 12 to the contrary, the Borrower shall not have any personal liability for the payment of principal or interest on the Bonds or any other obligation hereunder, including any and all claims for reimbursement or indemnity hereunder. Section 12. Successors Bound. This Agreement and the covenants and conditions contained herein shall run with the land and shall bind, and the benefits shall inure to, respectively, the Borrower and its successors and assigns and all subsequent owners of the Project or any interest SF2-27266.2 10 40511-90-MS1-03/11/94 • • therein, and the Issuer and its successors and assigns, for the period specified in Section 3(a) hereof, unless terminated sooner pursuant to Section 3(c) hereof. Section 13. Agreement to Record. The Borrower hereby represents, warrants and covenants that it will cause this Agreement to be recorded in the grantor-grantee index to the names of both the property owner and the Borrower as grantor and to the name of the Issuer as grantee in the real property records of Contra Costa County, California, and in such other places as the Issuer or the Trustee may reasonably request. The Borrower shall pay all fees and charges incurred in connection with any such recording. Section 14. Interpretation. Any terms not defined in this Agreement shall have the same meaning as terms defined in the Indenture or in Section 145 of the Code and Treasury Regulations thereunder. Section 15. Amendment. This Agreement may be amended with the prior written approval of HUD to reflect changes in the Act or in Section 145 of the Code, the Treasury Regulations and any revenue rulings promulgated thereunder. No amendment to this Agreement may be made without the prior written approval of the Trustee and HUD. Section 16. Severability. The invalidity of any clause, part or provision of this Agreement shall not affect the validity of the remaining portions thereof. Section 17. Notices. All notices to be given pursuant to this Agreement shall be in writing and shall be deemed given when mailed by certified or registered mail, return receipt requested, to the parties hereto at the addresses set forth below, or to such other place as a party may from time to time designate in writing. To the Issuer: County of Contra Costa Community Development Department Administration Building 651 Pine Street 4th Floor, North Wing Martinez, California 94553-0096 Attention: Deputy Director - Development To the Borrower: EAH-Contra Costa, Inc. 2169 E. Francisco Boulevard, Suite B San Rafael, California 94901 Attention: To the Trustee: Bank of America National Trust and Savings Association 333 South Beaudry Avenue, 25th Floor Los Angeles, California 90071 Attention: To the Servicer: TRI Capital Corporation 100 Pine Street, Suite 2300 San Francisco, California 94111 Attention: SF2-27266.2 11 40511-90-MSI-03/11/44 • 0 To HUD: United States Department of Housing and Urban Development 450 Golden Gate Avenue San Francisco, California 94102 Attention: Loan Management A duplicate copy of each notice, certificate or other communication given hereunder by the Issuer or the Borrower shall also be given to the Trustee and the Servicer. The Issuer, the Borrower, the Trustee, the Servicer and HUD/FHA may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent. Section 18 Governing Law. This Agreement shall be governed by the laws of the State of California and, where applicable, the laws of the United States of America. SF2-27266.2 12 40511-90-MS1-03/11/94 IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first above written. COUNTY OF CONTRA COSTA By: Deputy Director-Redevelopment EAH-CONTRA COSTA, INC., a California nonprofit corporation By: SF2-27266.2 13 40511-90-MS1-03/11/94 • • ACKNOWLEDGEMENT STATE OF CALIFORNIA ) ss. COUNTY OF ) On before me, , personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Notary Public My Commission Expires: SF2-27266.2 40511-90-MS1-03/11/94 ACKNOWLEDGEMENT STATE OF CALIFORNIA ) ss. COUNTY OF ) On before me, , personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Notary Public My Commission Expires: SF2-27266.2 40511-90-MS1-03/11/94 EXHIBIT A LEGAL DESCRIPTION SF2-27266.2 A-1 40511-90-MS1-03/11/94 • 0 EXHIBIT B INCOME COMPUTATION AND CERTIFICATION [FORM OF INCOME CERTIFICATION] VERIFICATION OF INCOME RE: [name and address of Project] Apartment Number: 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: 1. 2. 3. 4. 5. Name of Members Relationship Social of the to Head of Security Place of Household Household Ase Number Emmployment HEAD 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 forth above includes all of the following income (unless such income is described in (b) 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); (iii) interest and dividends(include all income from assets as set forth in item 7(b); (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; SF2-27266.2 B-1 40511-90-MS1-03/11/94 • 0 (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 H 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; (xi) payments received under the Alaska Native Claims Settlement Act; (xii) 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 SF2-77266.2 B-2 40511-90-MS1-03/11/94 • • (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 1 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 1 above be or have they been full- time students during five calendar months of this calendar year at an educational institution(other than a correspondence school) with regular faculty and students? Yes No (b) (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 We acknowledge that all of the above information is relevant to the status under federal income tax law of the interest on bonds issued to (mance construction 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 agent of the Treasury Department or Internal Revenue'Service. Date: Head of Household Spouse SUBSCRIBED AND SWORN to before me this day of (NOTARY SEAL) Notary Public in and for the State of My Commission Expires: NOTE TO PROJECT Borrower: A vacant unit previously occupied by individuals or a family of low or moderate income, may be treated as occupied by individuals or a family or low or moderate 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. SF2-27266.2 B-3 40511-90-MS1-03/11/94 • FOR COMPLETION BY PROJECT Borrower ONLY: I. Calculation of eligible income: (A) Enter amount entered for entire household in 6 above: $ (B) If the amount entered in 7(a) above is greater than $5,000, enter: (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)): $ H. Qualification as individuals or a family of low or moderate or very low income: (A) Is the amount entered in line 1(c) less than 80% of Median Gross Income for the Area*9. Yes No (B) (i) If line H(A) is "No", then the household does not qualify as individuals or a family of low or moderate income; skip to item III. (ii) If line H(A) above is "Yes" and 8(a) above is "No", then the household qualifies as individuals or a family of low or moderate income; skip to item II(G). (iii) If line II(A) above is "Yes" and 8(b) above is "Yes", then the household qualifies as individuals or a family of low or moderate income; skip to item H(G). (iv) If neither (ii) nor (iii) is applicable, then the household does not qualify as individuals or a family of low or moderate income. (C) Is the amount entered in line I(C) less than 50% of Median Gross Income for the Area*? Yes No (D) (i) If line H(C) is "No", then the household does not qualify as very low income; skip to item III. (ii) If line II(C) above is "Yes" and 8(a) above is "No", then the household qualifies as very low income; skip to item III. (iii) If line H(C) above is "Yes" and 8(b) above is "Yes", then the household qualifies as very low income; skip to item III. (iv) If neither (ii) nor (iii) is applicable, then the household does not qualify as very low income. * "Median Gross Income for the Area" means the median income for the area where the Project is located as determined by the Secretary of Housing and Urban Development under Section 8(f)(3)of the United States Housing Act of 1937,as amended,or if programs under Section 8(f)are terminated,median income determined under the method used by the Secretary prior to the termination. SF2-27266.2 B-4 40511-90-MS1-03/11/94 III. (Check one) The household does not qualify as individuals or a family of low or moderate income. The household qualifies as individuals or a family of low or moderate income. The household does not qualify as very low income. The household qualifies as very low income. IV. Number of apartment unit assigned: (enter here and on page one) Borrower SF2-27266.2 B-5 40511-90-MS1-03/11/44 OCCUPANCY CERTIFICATE (To be filed with the Issuer and the Trustee along with a Verification of Income upon the rental of a unit to any Low or Moderate Income Tenant.) Project: The tenant identified in the attached Verification of Income has entered into a lease with respect to a unit in the above-described Project. Such tenant is/is not(circle one) a Low or Moderate Income Tenant. Such tenant is/is not(circle one) 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 Issuer Regulatory Agreement to which the Borrower is a party. Witness Borrower Date: SF2-27266.2 B-6 40511-90-MS1-03111/94 i r EXHIBIT C CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE WITNESSETH that on this day of the undersigned, having borrowed certain funds consisting of the proceeds of the County of Contra Costa Multifamily Housing Revenue Bonds (GNMA Collateralized - Crescent Park Apartments Project) 1994 Series A and 1994 Series A-T for the purpose of refinancing a multifamily rental housing development, does hereby certify that (1) the "Project" as that term is defined in the Supplemental Regulatory Agreement (the "Regulatory Agreement") executed by the undersigned and filed in the official public records of Contra Costa County, California is in continuing compliance with the Regulatory Agreement (including the requirement that all units be and remain rental units)and that no default has occurred thereunder; (2) during the past year no less than percent (_%) of the dwelling units in the Project have been occupied by Very Low Income Tenants or Section 8 Certificate Holders (as such term is defined in the Regulatory Agreement). EAH-CONTRA COSTA, INC. By: SF2-27266.2 C-1 40511-90-MS1-03/11/94 Financing Agreement [OH&S DRAFT OF 11 MARCH 19941 FINANCING AGREEMENT Dated as of 1, 1994 by and among COUNTY OF CONTRA COSTA, EAH-CONTRA COSTA, INC., a California nonprofit corporation BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Trustee and TRI CAPITAL CORPORATION Relating to COUNTY OF CONTRA COSTA MULTIFAMILY HOUSING REVENUE BONDS (GNMA COLLATERALIZED - CRESCENT PARK APARTMENTS PROJECT) 1994 SERIES B MULTIFAMILY HOUSING REVENUE BONDS (GNMA COLLATERALIZED - CRESCENT PARK APARTMENTS PROJECT) TAXABLE 1994 SERIES B-T SF2-27262.2 40511-90-MS1-03/11/94 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.2. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE H REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS SECTION 2.1. Representations and Findings of the Issuer . . . . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 2.2. Representations, Warranties and Undertakings by the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 2.3. Representations, Warranties and Undertakings of the Lender . . . . . . . . . . . . . . 4 SECTION 2.4. Warranty of Truth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ARTICLE III THE FINANCING TRANSACTION SECTION 3.1. General Terms of the Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 3.2. Sufficiency of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 3.3. Lender Loan to Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 3.4. Investment of Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 3.5. Acquisition of the GNMA Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE IV PAYMENTS; SPECIAL COVENANTS OF THE BORROWER SECTION 4.1. Adequate Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 4.2. Operation of the Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 4.3. Compliance with Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 4.4. Payments by Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE V ADDITIONAL COVENANTS AND AGREEMENTS SECTION 5.1. Absolute and Unconditional Obligation; Limited Recourse . . . . . . . . . . . . . . . 8 SECTION 5.2. No Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 5.3. Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 5.4. Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 5.5. Reports and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 5.6. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 SECTION 5.7. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 SECTION 5.8. Indemnification of Issuer and Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 SECTION 5.9. Mortgage Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 5.10. Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 SF2-27262.2 i 40511-90-MS1-03/11/94 Page ARTICLE VI SPECIAL TERMS AND PROVISIONS SECTION 6.1. No Pecuniary Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 6.2. Further Assurances and Corrective Instruments . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 6.3. Tax Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE VII EVENTS OF DEFAULT; REMEDIES SECTION 7.1.' Events of Default; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 7.2. No Remedy Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 7.3. No Additional Waiver Implied by One Waiver . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 7.4. Payment of Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 ARTICLE VIII TERMINATION AND PREPAYMENT SECTION 8.1. Option to Terminate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 8.2. Option to Prepay Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 8.3. Notice of Prepayment; Timing of Prepayment . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE IX MISCELLANEOUS SECTION 9.1. Term of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 9.2. Assignment by the Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 9.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 9.4. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 9.5. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 9.6. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 9.7. Amendments, Changes and Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 9.8. Execution of Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . : . . 16 SECTION 9.9. Law Governing Construction of Agreement . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 9.10. Amounts Remaining in Bond Fund or Other Funds . . . . . . . . . . . . . . . . . . . . 16 SECTION 9.11. FHA Loan Documents and Regulations Control . . . . . . . . . . . . . . . . . . . . . . 16 Exhibit A - Form of Income Certification Exhibit B - Form of Certificate of Continuing Program Compliance Exhibit C - Form of Statistical Report to Issuer SF2-27262.2 11 40511-90-MS1-03/11/94 FINANCING AGREEMENT THIS FINANCING AGREEMENT(as supplemented and amended, this "Agreement") is entered into as of 1, 1994, by and among the COUNTY OF CONTRA COSTA, a legal subdivision and body corporate and politic existing under the laws of the State of California (together with its successors and assigns, the "Issuer"), EAH-CONTRA COSTA, INC., a California nonprofit corporation (together with its successors and assigns, the 'Borrower"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as trustee (together with its successors and assigns, the "Trustee") under a Trust Indenture of even date herewith between the Issuer and the Trustee (as supplemented and amended, the "Indenture"), and TRI CAPITAL CORPORATION, a California corporation (together with its successors and assigns, the "Lender"). RECITALS WHEREAS, the Borrower has requested the assistance of the Issuer in financing the acquisition and rehabilitation of a very low income rental housing development, as described in Exhibit A hereto; and WHEREAS, upon the request of the Borrower, the Issuer has determined to issue under the Indenture its Multifamily Housing Revenue Bonds (GNMA Collateralized - Crescent Park Apartments Project) 1994 Series B, in the aggregate principal amount of$ (the "Series B Bonds"), and its Multifamily Housing Revenue Bonds (GNMA Collateralized - Crescent Park Apartments Project) Taxable 1994 Series B-T, in the aggregate principal amount of$ (the "Series B-T Bonds," and collectively with the Series B Bonds, the 'Bonds"). WHEREAS, the Trustee shall use the proceeds of the Series B Bonds to purchase from the Lender a fully-modified mortgage-backed security (the "GNMA Security") which will be guaranteed as to timely payment of principal and interest by the Government National Mortgage Association ("GNMA"), and will use the proceeds of the Series B-T Bonds to pay certain costs in connection with the issuance of the Bonds. The GNMA Security will represent an undivided interest in the Mortgage. The Issuer, the Borrower, the Trustee and the Lender each represents as to itself that it has power and authority to enter into this Agreement. AGREEMENTS NOW, THEREFORE, in consideration of the respective representations, covenants and agreements hereinafter contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1. Definitions. Terms used in this Agreement and defined in the Indenture or in the Regulatory Agreement and Declaration of Restrictive Covenants, dated as of 1, 1994, as amended, among the Issuer, the Borrower and the Trustee (the "Issuer Regulatory Agreement") shall have the meanings given to them by the Indenture or the Issuer Regulatory Agreement, respectively, unless the context clearly indicates otherwise. SECTION 1.2. Rules of Construction. The words "hereof", "herein" "hereunder," "hereto" and other words of similar import refer to this Agreement in its entirety. SF2-27262.2 40511-90-MSI-03/11/94 • The terms "agree" and "agreements" contained herein are intended to include and mean "covenant" and "covenants." References to Articles, Sections, and other subdivisions of this Agreement are to the designated Articles, Sections, and other subdivisions of this Agreement as originally executed. The headings of this Agreement are for convenience only and shall not define or limit the provisions hereof. The parties acknowledge that each party and its respective counsel have participated in the drafting and revision of this Agreement, the Indenture and the Issuer Regulatory Agreement. Accordingly, the parties agree that any rule of construction which would disfavor the drafting party shall not apply in the interpretation of this Agreement, the Indenture or the Issuer Regulatory Agreement or any Supplement or exhibit hereto or thereto. ARTICLE H REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS SECTION 2.1. Representations and Findings of the Issuer. The Issuer makes the following representations and warranties: (a) The Issuer is a legal subdivision and body corporate and politic, duly organized and existing under laws of the State. Under the provisions of the Act, the Issuer has the power to enter into this Agreement, the Indenture and the Issuer Regulatory Agreement and the transactions contemplated hereunder and thereunder and to carry out its obligations hereunder and thereunder. By proper action, the Issuer has duly authorized the execution and delivery of this Agreement, the Indenture and the Issuer Regulatory Agreement. (b) The Issuer is issuing the Bonds, at the request of the Borrower, in order to provide for the financing of the acquisition and rehabilitation of the Project. (c) To its knowledge and in reliance upon the advice of counsel, neither the execution nor the delivery of the Bonds, this Agreement, the Bond Purchase Agreement, the Issuer Regulatory Agreement or the Indenture conflicts with or results in a breach of any of the terms, conditions or provisions of any constitutional provisions or statute of the State, or of any agreement, instrument,judgment, order or decree to which the Issuer is now a party or by which it is bound, or constitutes a default under any of the foregoing. (d) The Issuer hereby confirms its findings relating to the issuance of the Bonds contained in the Bond Resolution. SECTION 2.2. Representations, Warranties and Undertakings by the Borrower. The Borrower makes the following representations and warranties: (a) Good Standing. The Borrower (i) is a nonprofit corporation duly organized and existing, in good standing, under the laws of the State of California, (ii)has the power to own its property and to carry on its business as now being conducted and as contemplated by this Agreement, the Issuer Regulatory Agreement and the FHA Loan Documents, (iii) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned by it therein or in which the transaction of its business makes such qualification necessary, including, but not limited to, the State, (iv) is an organization described in Section 501(c)(3) of the Code and is exempt from federal income tax under Section 501(a) of the Code, and (v) the Borrower's acquisition and operation of the Project pursuant to (and subject to requirements set forth in) the Indenture, this Financing Agreement and the Regulatory Agreement, will not give rise to an "unrelated trade or business" of the Borrower within the meaning of Section 513(a) of the Internal Revenue Code of 1986. SF2-27262.2 2 40511-90-MSI-03/11/94 (b) Authori . The Borrower has full power and authority to execute and deliver this Agreement, each of the FHA Loan Documents executed and delivered by it and the Issuer Regulatory Agreement, to make the borrowing under the FHA Loan Documents, and to incur the obligations provided for herein and therein, all of which have been duly authorized by all proper and necessary corporate action. All consents or approvals of any public authority which, to the best of the Borrower's knowledge, are required as a condition to the validity of this Agreement, the Issuer Regulatory Agreement or any of the FHA Loan Documents executed and delivered by the Borrower have been obtained. (c) Binding Agreements. This Agreement, the Issuer Regulatory Agreement and each of the FHA Loan Documents executed and delivered by the Borrower have been properly executed by the duly authorized officer of the Borrower, constitute valid and legally binding obligations of the Borrower, and are fully enforceable against the Borrower in accordance with their respective terms, subject to bankruptcy, insolvency or other laws affecting creditors' rights generally, and with respect to certain remedies which require, or may require, enforcement by a court of equity, such principles of equity as the court having jurisdiction may impose. (d) Litigation. There is no litigation or proceeding pending or, to the knowledge of the Borrower, threatened against the Borrower or the Project before any court or administrative agency which, in the opinion of the Borrower or its counsel, if determined adversely to the Borrower, will materially adversely affect the Borrower or the Project, or the authority of the Borrower to enter into this Agreement, the Issuer Regulatory Agreement or any of the FHA Loan Documents executed and delivered by the Borrower. (e) Conflicts, Defaults. There is (i) no provision of the Borrower's articles of incorporation, dated 199_, bylaws, dated , 199_, or other organizational documents or resolutions of the Borrower and no provision of any existing mortgage, indenture, contract or agreement binding on the Borrower or affecting any of the Borrower's property, and (ii) to the best of the Borrower's knowledge, no provision of law or order of court binding upon the Borrower or affecting any of the Borrower's property, in either case which would conflict with or in any way prevent the execution, delivery, or performance of the terms of this Agreement, the Bond Purchase Agreement, the Issuer Regulatory Agreement or any of the FHA Loan Documents executed and delivered by the Borrower, or which would be in default or violated as a result of such execution, delivery or performance. The Borrower is not in material default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any material agreement or instrument to which it is a party, other than its defaults under the Mortgage Loan and related documents which will be cured by the transactions contemplated hereby. (f) Title to Property. The Borrower has good and marketable title to the land constituting the site of the Project free and clear of any liens or encumbrances (other than encumbrances on the Project approved by FHA). (g) Indenture. The Indenture has been submitted to the Borrower for its examination, and the Borrower acknowledges, by execution of this Agreement, that it has reviewed the Indenture, and it hereby approves the Indenture. The Borrower agrees to perform fully and faithfully all the duties and obligations which the Issuer has covenanted and agreed in the Indenture to cause the Borrower to perform and any duties and obligations which the Borrower or the Issuer is required by the Indenture to perform. The foregoing shall not apply to any duty or undertaking of the Issuer which by its nature cannot be delegated or assigned. (h) Events Affecting Tax Exemption. If the Borrower becomes aware of any situation, event or condition which would result in the interest on the Tax-Exempt Bonds being included in gross income for federal income tax purposes, the Borrower shall promptly give written notice thereof to the Issuer and the Trustee. (i) Compliance with Laws. The Project is of the type authorized and permitted by the Act and has at all times been operated in compliance with the provisions of the Act and the provisions of the Code applicable thereto. The Borrower will use due diligence to cause the Project to be operated in accordance with SF2-27262.2 3 40511-90-MSI-03/11/94 • 0 the Act and all other laws, rulings, regulations and ordinances of the State and the departments, agencies and political subdivisions thereof. The Borrower has obtained or will cause to be obtained all requisite approvals of the State and of other federal, state, regional and local governmental bodies for the operation of the Project. 0) No Reliance on Issuer. The Borrower acknowledges, represents and warrants that it understands the nature and structure of the transactions relating to the financing of the Project; that 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; that it understands the risks inherent in such transactions, including without limitation the risk of loss of the Project; 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. SECTION 2.3. Representations, Warranties and Undertakings of the Lender. In addition to the other representations and covenants of the Lender contained herein, the Lender hereby represents and warrants as follows: (a) Corporate Authority. The Lender (i) is a duly and lawfully organized California corporation and is duly authorized to transact business in the State, (ii) is organized and operated for the purposes, among others, of making mortgage loans to provide financing for the acquisition and rehabilitation of multifamily rental residential developments and of issuing mortgage-backed securities guaranteed by GNMA to obtain funds to make such mortgage loans, (iii)has full lawful power and authority under its organizational documents and applicable laws to execute and deliver this Agreement, to issue, execute and deliver the GNMA Security and to perform its obligations hereunder and thereunder, and (iv) by proper action has duly authorized the execution and delivery of this Agreement and the issuance, execution and delivery of the GNMA Security. (b) Binding_Agreements. This Agreement and the GNMA Security constitute the legal valid and binding obligations of the Lender enforceable in accordance with their respective terms, subject to bankruptcy, insolvency or other laws affecting creditors' rights generally, and with respect to certain remedies which require, or may require, enforcement by a court of equity, such principles of equity as the court having jurisdiction may impose. (c) No Conflicting Agreements. The execution and delivery of this Agreement and the issuance, execution and delivery of the GNMA Security, and the consummation of the transactions contemplated hereby and thereby, do not conflict with or constitute a breach of or a default under the Lender's organization documents or under the terms and conditions of any agreement or commitment to which the Lender is a party or by which the Lender is bound. (d) Litigation. There is no action, suit, proceeding, inquiry or investigation by or before any court, governmental agency, public board or body pending or, to the knowledge of the Lender, threatened against the Lender, which questions or affects the power or authority of the Lender to carry out the transactions contemplated by, or to be performed under, this Agreement or the GNMA Security. (e) Lender as FHA-Approved Servicer. The Lender is (i) approved by FHA to originate and service mortgage loans insured by FHA under Section 241(f) of the National Housing Act and applicable regulations thereunder, (ii) meets all the issuer eligibility requirements of(including net worth requirements) and is approved by GNMA to issue mortgage-backed securities guaranteed by GNMA pursuant to Section 306(8) of the National Housing Act and applicable regulations thereunder. (f) Eligibility of Mortgage for GNMA Guarantee. The Project, including the Mortgage, meets the eligibility requirements set forth in the GNMA Mortgage-Backed Securities Guide as of the Closing Date. (g) Approval of Indenture. The Indenture has been submitted to the Lender for examination, and the Lender acknowledges, by execution of this Agreement, that it has reviewed and understands the Indenture SF2-27262.2 4 40511-90-MSI-03/11/94 • • with respect to the payment to the Lender for the GNMA Security and it hereby approves the Indenture as it relates to the GNMA Security and in so far as it affects the Lender. (h) Events Affecting Tax Exemption. The Lender shall not knowingly take any action that would adversely affect the exclusion of interest on the Tax-Exempt Bonds from gross income for purposes of federal income taxation. (i) Fees of Lender. The fees charged by the Lender in connection with making the Mortgage Loan are reasonable and customary for financings of the kind represented by the Mortgage Loan and do not exceed the fees that would have been charged by the Lender for making the Mortgage Loan if the funds for the financing had been provided other than from the Bonds or from any other obligation, the interest on which is exempt from federal income taxes. 0) Delivery of Documents and Certificates. The Lender shall deliver such documents and certificates to the Trustee as shall be required hereunder and under the Indenture in connection with the disbursement of the moneys in the Acquisition Fund and the delivery of the GNMA Security. (k) Lender's Certificate. The Lender covenants that the certifications in the Lender Certificate, a form of which is attached as Exhibit E to the Bond Purchase Agreement, are true and correct, and agrees that they shall be incorporated herein by reference. SECTION 2.4. Warranty of Truth. The Borrower covenants that no information, certificate, statement in writing or report required by this Agreement or the Issuer Regulatory Agreement or otherwise furnished by the Borrower to the Issuer or the Trustee 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. The Lender covenants that no information, certificate, statement in writing or report required by this Agreement or otherwise furnished by the Lender to the Issuer or the Trustee 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. ARTICLE III THE FINANCING TRANSACTION SECTION 3.1. General Terms of the Financing. (a) In order to provide a portion of the funds necessary to acquire the Project, the Issuer will issue, sell and deliver the Bonds in accordance with the Bond Purchase Agreement and upon the terms and subject to the conditions contained in this Agreement and the Indenture, and will cause the Underwriters to deliver the proceeds thereof to the Trustee. (b) The Lender will deliver the GNMA Security to the Trustee on the Closing Date. (c) The Borrower unconditionally promises (i) to repay the principal of the Mortgage Loan with interest thereon as provided in the Mortgage Note, and (ii) to comply with the provisions of this Agreement, the FHA Loan Documents and the Issuer Regulatory Agreement as provided therein, provided that such promise is subject to the provisions of Section 9.11 hereof. (d) The Lender agrees to make all payments on the GNMA Security when due and to meet all its obligations under the GNMA Mortgage-Backed Securities Guide and the GNMA Guaranty Agreement. SECTION 3.2. Sufficiency of Funds. The Issuer does not make any warranty, either express or implied, that the moneys deposited in the Acquisition Fund under the Indenture and available for payment of the SF2-27262.2 5 40511-90-MS 1-03/11/94 costs of acquiring the GNMA Security will be sufficient to pay all the costs thereof. The Borrower agrees that if the Borrower should pay any costs relating to the acquisition of the GNMA Security other than from the Bond proceeds, the Borrower shall not be entitled to any reimbursement therefor from the Lender, the Issuer, the Trustee or the Bondholders; provided, however that the Borrower shall incur such costs as a result of the negligent or willful misconduct of either the Lender or the Trustee or as a result of the willful misconduct of the Issuer, the Borrower may be entitled to reimbursement therefor. SECTION 3.3. Lender Loan to Borrower. The Lender and the Borrower represent, and the Issuer and the Trustee acknowledge, that the Mortgage Loan (a) is insured by FHA pursuant to and in accordance with the provisions of Section 241(f) of the National Housing Act and applicable regulations thereunder, as evidenced by the endorsement by FHA of the note evidencing the Mortgage Loan; (b) is in the principal amount of$ ; (c) bears interest at the rate of % per annum; (d) has a final maturity of , 2034; (e) is payable in equal monthly installments of principal and interest, commencing on , 1994; (f) is secured on a nonrecourse basis pursuant to the FHA Loan Documents; and (g) is not subject to prepayment prior to maturity; except that(i) the Mortgage Loan is subject to mandatory prepayment as a whole or in part at any time upon 15 days' prior written notice to the Lender without premium or penalty, from the proceeds of any casualty insurance or condemnation awards received following a partial or total destruction or condemnation of the Project, in the event and to the extent that such casualty proceeds or condemnation awards are not applied to the repair or restoration of the Project in accordance with the FHA Loan Documents; (ii) the Mortgage Note shall be subject to prepayment in whole but not in part, at the option of the Borrower, on , 2004, or on any date thereafter, upon at least 30 days' advance written notice to the Lender, and upon payment of the principal amount of the Mortgage Note then outstanding together with all costs necessary to redeem the Bonds, including the applicable prepayment premium attributable to the balance of the Mortgage Loan plus accrued interest to the date of redemption of the Bonds less investment earnings on such sums paid from the date of payment to the date fixed for prepayment of the Mortgage Note and redemption of the Bonds; (iii) the Mortgage Note shall also be subject to prepayment in whole or in part without premium upon at least 30 days' advance written notice to the Lender to the extent, if any, required by applicable rules, regulations, policies and procedures of HUD and GNMA; and (iv) notwithstanding any prepayment prohibition imposed and/or penalty required by the Mortgage Note with respect to prepayments made prior to , 2004, the indebtedness may be prepaid in part or in full without the consent of the mortgagee and without prepayment penalty, upon at least 30 days' advance written notice to the Lender, if HUD determines that prepayment will avoid a mortgage insurance claim and is therefore in the best interest of the Federal Government. SECTION 3.4. Investment of Moneys. Any moneys held as part of any fund created under the Indenture shall be invested or reinvested, from time to time, by the Trustee in Qualified Investments as provided in Section 410 of the Indenture. The Lender and the Borrower have reviewed those provisions of the Indenture relating to investment of funds held under the Indenture and the use of such investment earnings, and have reviewed the Trustee's proposed initial investment of funds deposited to the various funds under the Indenture in the Investment Agreement for such funds, and hereby approve the same. SECTION 3.5. Acquisition of the GNMA Security. The Trustee hereby agrees to acquire the GNMA Security on behalf of the Issuer; provided, however, that the Trustee's obligation in such respect shall be limited to the moneys available for such purpose in the Acquisition Fund, and provided further that the Trustee shall not have any obligation to acquire the GNMA Security unless there shall have been delivered to the Trustee, along with the GNMA Security, the following: (a) a copy of the executed FHA Loan Documents; (b) evidence that the Issuer Regulatory Agreement has been duly filed of record in the Recorder's Office of the County of Contra Costa, California; and SF2-27262.2 6 40511-90-MSI-03/11/94 0 • (c) a certificate of the Borrower dated the date of acquisition of the GNMA security stating that (i) all representations and warranties of the Borrower set forth in this Financing Agreement and the Issuer Regulatory Agreement remain true and correct in all material respects as of the date of such certificate and (ii) the Borrower is in full material compliance with all covenants and undertakings of the Borrower set forth in this Financing Agreement, the Issuer Regulatory Agreement and the FHA Loan Documents, as of the date of such certificate. ARTICLE IV PAYMENTS; SPECIAL COVENANTS OF THE BORROWER SECTION 4.1. Adequate Payments. The Borrower covenants to pay the Rebate Amount, if any, payable to the United States Government as provided in the Tax Certificate and the Indenture. The Borrower further reconfirms its agreement in the Mortgage, subject to the nonrecourse provisions thereof, to pay all costs of maintenance and repair, all Taxes and assessments, insurance premiums (including public liability insurance and insurance against damage to or destruction of the Project) concerning or in any way related to the Project, or any part thereof, and any expenses or renewals thereof, and any other governmental charges and impositions whatsoever, foreseen or unforeseen, and all utility and other charges and assessments concerning or in any way related to the Project. In the event the Borrower is in default under any provision of this Agreement, the FHA Loan Documents or the Issuer Regulatory Agreement, the Borrower shall be liable to and upon demand shall pay to the Issuer, the Trustee and the Lender all reasonable fees and disbursements of such persons and their agents (including attorneys' fees and expenses) which are reasonably incurred in connection with the default or incidental thereto except to the extent such fees and disbursements are paid from moneys available therefor under the Indenture; provided, however, that the Borrower shall not be liable to the Trustee or the Lender for any fees and disbursements arising out of a default caused by the negligence or willful misconduct of the Trustee or the Lender, respectively, and shall not be liable to the Issuer for any fees and disbursements arising out of a default caused by the willful misconduct of the Issuer. The provisions of this Section are in addition to and not in limitation of the provisions of Sections 5.7, 5.8 and 6.1 of this Agreement. SECTION 4.2. Operation of the Project. The Borrower shall operate or cause the Project to be operated as a housing project pursuant to Section 241(f) of the National Housing Act and in accordance with the requirements of the Issuer Regulatory Agreement, the Code, the Act and the requirements set forth in the Plan of Action between the Borrower and HUD pursuant to Title II of the Housing and Community Development Act of 1987. SECTION 4.3. Compliance with Applicable Laws. All work performed in connection with the Project shall be performed in strict compliance with all applicable federal, state, county and municipal laws, ordinances, rules and regulations now in force or that may be enacted hereafter. SECTION 4.4. Payments by Borrower. The Borrower agrees that it shall pay all expenses incurred by it, including the expenses of its counsel and those incurred in closing the Mortgage Loan, and the fees and expenses of the Trustee required pursuant to Section 405 of the Indenture. The Borrower shall also pay the costs of filing any financing statements pursuant to Section 504 of the Indenture, and all costs and other amounts mentioned in Sections 5.7, 5.8, 6.1 and 7.4 hereof. SF2-27262.2 7 40511-90-MS1-03/11/94 ARTICLE V ADDITIONAL COVENANTS AND AGREEMENTS SECTION 5.1. Absolute and Unconditional Obligation; Limited Recourse. The obligations of the Borrower under this Agreement shall be absolute and unconditional and shall remain in full force and effect until (i) the entire principal of and premium, if any, and interest on the Bonds shall have been paid or provided for, or (ii) the Mortgage Note shall have been paid in full, and such obligations shall not be affected, modified or impaired upon the happening from time to time of any event, including without limitation any of the following, whether or not with notice to, or the consent of, the Borrower: (a) the compromise, settlement, release or termination of any or all of the obligations, covenants or agreements of the Issuer under the Indenture; (b) the failure to give notice to the Borrower of the occurrence of an event of default under the terms and provisions of this Agreement, the FHA Regulatory Agreement, the Indenture, the Mortgage Note, Mortgage or the Issuer Regulatory Agreement; (c) the waiver of the payment, performance or observance by the Issuer or the Borrower of any of the obligations, covenants or agreements of them contained in the Indenture, the Mortgage Note, the Mortgage, the Issuer Regulatory Agreement, the FHA Regulatory Agreement or this Agreement; (d) the extension of the time for payment of any principal of, premium, if any, or interest on any Bond or under this Agreement, or of the time for performance of any other obligations, covenants or agreements under or arising out of the Indenture, the Mortgage Note, the Mortgage, the FHA Regulatory Agreement, the Issuer Regulatory Agreement or this Agreement; (e) the modification or amendment (whether material or otherwise) of any obligation, covenant or agreement set forth in the Indenture, the Mortgage Note, the Mortgage, the FHA Regulatory Agreement or the Issuer Regulatory Agreement; (f) the taking or the omission of any of the actions referred to in the Indenture, the Mortgage Note, the Mortgage, the FHA Regulatory Agreement or the Issuer Regulatory Agreement or any actions under this Agreement; (g) any failure, omission, delay or lack on the part of Issuer or the Trustee to enforce, assert or exercise any right, power or remedy conferred on the Issuer or the Trustee in this Agreement or any document relating to the Bonds or the Indenture, or any act or acts on the part of the Issuer, the Trustee or any of the holders from time to time of the Bonds; (h) the voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all the assets, marshalling of assets and liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition with creditors or readjustment of, or other similar proceedings affecting, the Borrower or the Issuer or any of the assets of either of them, or any allegation or contest of the validity of this Agreement in any such proceeding; (i) to the extent permitted by law, the release or discharge of the Borrower from the performance or observance of any obligation, covenant or agreement contained in this Agreement by operation of law (other than the release or discharge from payment on the Mortgage Note); or 0) the default or failure of the Borrower fully to perform any of its obligations set forth in this Agreement. SF2-27262.2 8 40511-90-MS1-03/11/94 • 0 The specific enumeration of the above-mentioned acts, failures or omissions shall not be deemed to exclude any other acts, failures or omissions, though not specifically mentioned above, it being the purpose and intent of this paragraph that the obligations of the Borrower shall be absolute and unconditional to the extent herein specified and shall not be discharged, impaired or varied except by the happening of any of the events specified in the first paragraph of this Section 5.1. Without limiting any of the other terms or provisions hereof, it is understood and agreed that, in order to hold the Borrower liable hereunder, there shall be no obligation on the part of the Trustee or any Bondholder to resort in any manner or form for payment to the Issuer or to any other person, firm or occupation, their properties or estates. Notwithstanding the foregoing or any other provision or obligation to the contrary contained in this Agreement, (i) the liability of the Borrower under this Agreement and any other document relating to the Bonds to any person or entity, including, but not limited to, the Trustee or the Issuer and their successors and assigns, is limited to the Borrower's interest in the Project and the amounts held in the funds and accounts created under the Indenture or other documents relating to the Bonds or any rights of the Borrower 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 Agreement or any other agreement securing the obligations of the Borrower under this Agreement; and (ii) from and after the date of this Agreement, no deficiency or other personal judgment, nor any order or decree of specific performance (other than pertaining to this Agreement, any agreement pertaining to the Project or any other agreement securing the Borrower's obligations under this Agreement), shall be rendered against the Borrower, the assets of the Borrower (other than the Borrower's interest in the Project, this Agreement, amounts held in the funds and accounts created under the documents relating to the Bonds, any rights of the Borrower under the documents relating to the Bonds or any rights of the Borrower under any guarantees relating to the Project), its partners, officers, directors or members or their heirs, personal representatives, successors, transferees or assigns, as the case may be, in any action or proceeding arising out of this Agreement and the Indenture or any agreement securing the obligations of the Borrower under this Agreement, or any judgment order or decree rendered pursuant to any such action or proceeding. Nothing contained herein shall in any way be construed to limit any indemnification provided by the Borrower to the Issuer, the Trustee or any other person pursuant to any other agreement to which the Borrower is a party. SECTION 5.2. No Defense. No setoff, counterclaim, reduction or diminution of any obligation, or any defense of any kind or nature which the Borrower has or may come to have against the Issuer or the Trustee shall be available hereunder to the Borrower against the Trustee other than the payment of sums owing. SECTION 5.3. Waiver of Notice. The Borrower hereby expressly waives notice from the Trustee or the owners from time to time of any of the Bonds of their acceptance and reliance on this Agreement. The Borrower agrees to pay all reasonable costs, expenses and fees, including all reasonable attorneys' fees which may be incurred by the Trustee in enforcing or attempting to enforce this Agreement following any default on the part of the Borrower hereunder, whether the same shall be enforced by suit or otherwise; provided, however that the Borrower shall not be liable for any costs, expenses or fees incurred by the Trustee as a result of the Trustee's willful misconduct or breach of this Agreement or the Indenture. The Trustee shall be entitled to the benefits of Article VII of the Indenture in the exercise of its rights and duties hereunder. SECTION 5.4. Inspections. The Borrower agrees that all equipment, buildings,plans, offices, apparatus, devices, books, contracts, records, documents, and other papers relating to the Project shall at all times be maintained in reasonable condition for proper audit, and shall,upon prior written notice and during regular business hours, be subject to examination and inspection at any reasonable time by the Issuer, the Trustee, the Lender or their authorized agents. SECTION 5.5. Reports and Information. At the request of the Issuer or the Trustee, their agents, employees or attorneys, the Borrower shall furnish to the Issuer and the Trustee, concurrently with delivery to SF2-27262.2 9 40511-90-MS1-03/11/94 • 1 0 the Lender or HUD, copies of any reports and information furnished to the Lender or HUD pursuant to the FHA Loan Documents. Additionally, the Borrower shall furnish to the Issuer and the Trustee, if so requested, (i) such information as may be reasonably requested in writing from time to time relative to compliance by the Borrower with the provisions of this Agreement and the Issuer Regulatory Agreement; and (ii) such other information as may be necessary to enable the Issuer to complete and file all forms and reports required by the laws of the State and the Code in connection with the Project and the Bonds. So long as any Bonds are Outstanding, the Borrower shall deliver to the Trustee (i) quarterly unaudited financial statements with respect to the Project, within 45 days after the close of each calendar quarter; and (ii) audited financial statements with respect to the Project as soon as the same are available, but in any event within sixty days after the close of each calendar year. The Borrower hereby further agrees that it shall obtain and file with the Issuer and the Trustee (i) at the time of initial occupancy of any tenant in the Project, (ii)upon the vacancy and reoccupancy of any unit in the Project, and (iii) as often as necessary to comply with the requirements of the Code, the Act and the Issuer Regulatory Agreement, an Income Certification, consisting of a Verification of Income and an Occupancy Certificate, each in the form set forth in Exhibit A to this Agreement or in such other form as may be provided to the Borrower by the Issuer, and each of which shall be subject to independent investigation and verification by the Issuer and the Trustee upon request. During the Qualified Project Period, on or before the fifteenth (15th) day of each January, April, July and October, the Borrower shall file with the Issuer and the Trustee (1) a Certificate of Continuing Program Compliance, in the form set forth in Exhibit B to this Agreement or in such other form as may be provided to the Borrower by the Issuer, and (2) a statistical report to the Issuer in the form set forth in Exhibit C to this Agreement or in such other form as may be provided to the Borrower by the Issuer, in each case setting forth the required information for the preceding calendar quarter. The books and records of the Borrower pertaining to the incomes of tenants residing in the Project shall be open to inspection by any authorized representative of the Issuer and the Trustee. SECTION 5.6. Assi ng ment. No assignment or transfer of title to the Project shall be made except as permitted by the Issuer Regulatory Agreement and unless (1) the Lender and HUD consent to such assignment or transfer, as long as the Mortgage Loan is held by the Lender and insured by FHA, and (2) the transferee or assignee, as the case may be, assumes all of the duties of the Borrower under this Agreement, the Issuer Regulatory Agreement and the FHA Loan Documents, subject to the provisions of such documents. Upon the assumption of the duties of the Borrower by an assignee as provided herein, the Borrower shall be released from all executory obligations so assumed. Nothing contained in this Section shall be construed to supersede any provisions regarding assignment and transfer of the Project contained in the FHA Loan Documents. SECTION 5.7. Fees and Expenses. The Borrower agrees to pay, whether out of the proceeds of the Mortgage Loan or other funds, all reasonable fees and expenses of the Issuer, the Trustee and the Rebate Analyst (including the reasonable fees and expenses of their counsel) in connection with the issuance of the Bonds and the performance of their duties in connection with the transactions contemplated hereby, including, without limitation, all costs of recording and filing, to the extent such fees and expenses are not otherwise paid from the Costs of Issuance Fund or the Expense Fund in accordance with Section 405 of the Indenture. All such amounts shall be paid directly to the parties entitled thereto for their own account as and when such amounts become due and payable. The Borrower will also pay any reasonable expenses in connection with any redemption of the Bonds. Specifically, and without limiting the foregoing, the Borrower agrees to pay (i) to the Issuer or to any payee designated by the Issuer, within thirty(30) days after receipt of request for payment thereof, all reasonable expenses of the Issuer related to the Project and the financing thereof which are not paid from the funds held under the Indenture, including, without limitation, legal fees and expenses incurred in connection with the interpretation, performance, enforcement or amendment of any documents relating to the Project or the Bonds or in connection with questions or other matters arising under such documents; and (ii) to the Issuer, on the Closing Date, the sum of$ ; and on , 1994, the sum of$ , and on each Interest Payment Date thereafter, commencing , 1995 and ending on , 2034, an amount equal to one-sixteenth of one percent (1/16 of 1%) of$ (the initial aggregate principal SF2-27262.2 10 40511-90-MSI-03/11/94 amount of Bonds issued), in each case without demand or notice, and in each case in payment of the semiannual fee of the Issuer for monitoring compliance by the Project with the Issuer Regulatory Agreement (the "Issuer's Fee"); provided, however, that to the extent the amount on deposit in the Expense Fund pursuant to Section 405(v) of the Indenture is insufficient to pay the Issuer's Fee when due, the Borrower shall, not later than 5 days after notification from the Trustee of such deficiency, pay such amount directly to the Issuer,-that the amount payable to or for the benefit of the Issuer under clause (ii) of this Section 5.7 shall not exceed any limitation under Section 148 of the Code. SECTION 5.8. Indemnification of Issuer and Trustee. The Borrower releases the Issuer and the Trustee and their respective officials, officers, employees and agents from, and shall protect, indemnify, and save harmless the Issuer and the Trustee and their respective officials, officers, employees and agents against and from any and all liabilities, suits, actions, claims, demands, losses, expenses and costs of every kind and nature incurred by, or asserted or imposed against, the Issuer, the Trustee and their respective officials, officers, agents or employees, or any of them, (a) by reason of any default or event of default by the Borrower or its successors or assigns under this Agreement, the Issuer Regulatory Agreement or any of the FHA Loan Documents; or (b) by reason of any accident, injury (including death) or damage to any person or property, however caused (other than, in the case of the Trustee, the negligence or willful misconduct of the Trustee or its officers, agents or employees), resulting from, connected with or growing out of any act of commission or omission of the Borrower, or any officers, employees, agents, assignees, contractors or subcontractors of the Borrower or any use, non-use, possession, occupation, condition, operation, service, design, construction, acquisition, maintenance or management of, or on, or in connection with, the Project or any part thereof; or (c) resulting from any and all claims, actions, settlements, or liability for acts or failure to act by any person, including, without limitation, the Borrower, the Issuer, the Trustee or their respective officials, officers, agents and employees in connection with the Project as set forth in this Section (other than, in the case of the Trustee, the negligence or willful misconduct of the party claiming indemnification,or its officers, agents or employees); or (d) insofar as such liabilities, suits, actions, claims, demands, losses, expenses and costs arise out of or are based upon any untrue statement or allegedly untrue statement of a material fact contained in any offering documents distributed in connection with the issuance of the Bonds or the omission or alleged omission to state therein a material fact necessary or allegedly necessary in order to make the statements and information therein not misleading (other than a statement or omission resulting from the fraud or bad faith of the party claiming indemnification, or its respective officials, officers, agents or employees, or any information describing the issuer or the Trustee, as the case may be); or (e) as to the Issuer and its officers, agents and employees, for any other reason in connection with the issuance of the Bonds, the financing or refinancing of the Project; in any case regardless of whether such liabilities, suits, actions, claims, demands, damages, losses, expenses and costs be against or be suffered or sustained by the Issuer or the Trustee or any of their respective officials, officers, agents or employees, or be against or be suffered or sustained by legal entities, officials, officers, agents, or other persons to whom the Issuer or the Trustee or any of their respective officials, officers, agents or employees may become liable therefor. The Issuer and the Trustee shall not be liable for any damage or injury occurring to the persons or property of the Borrower or any of its officers, agents, including operating personnel, contractors and employees, or any other person or entity who or which may be upon the Project, except for, as to the Trustee, such damage or injury caused by such entity's willful misconduct or negligence. The Lender shall indemnify and hold harmless the Issuer and its officials, officers, employees, attorneys and agents, including the Trustee, from and against any and all claims arising from any act or omission of the Lender or any of its respective agents, contractors, servants, employees or licensees in connection with the Mortgage Loan prior to the delivery of the GNMA Security to the Trustee and all costs, counsel fees, expenses or liabilities incurred in connection with any such claim or proceeding brought thereon. The Borrower or the Lender, as the case may be, shall undertake to defend, at its sole cost and expense, any and all suits, actions and proceedings brought against the Issuer or the Trustee or any of their respective officials, officers, agents or employees in connection with any of the matters indemnified against in this Section. The persons so indemnified may also retain separate counsel in connection with such actions, suits or proceedings, but the Borrower or the Lender, as the case may be, shall have no responsibility for the fees sF2-z7262.2 1 1 40511-90-MSI-03/11194 0 • and expenses of such counsel. The Issuer and the Trustee shall give the Borrower or the Lender, as the case may be, timely notice of and shall forward to the Borrower or the Lender, as the case may be, every demand, notice, summons or other process received with respect to any claim or legal proceedings within the purview hereof, but the failure of the Issuer or the Trustee to give such notice shall not affect its right to indemnification hereunder. All acts, including any failure to act, relating to the Project and the Bonds by the Issuer or the Trustee or any agent, representative or designee of the Issuer or the Trustee are performed solely for the benefit of the Issuer, the Trustee, and the Bondholders to assure repayment of the Mortgage Loan, maintenance of the tax status of the interest on the Tax-Exempt Bonds and increase and maintenance of residential rental housing in the jurisdiction of the Issuer, and are not for the benefit of the Borrower or the benefit of any other person, unless, as to the Trustee, the failure to give notice shall have deprived the Borrower or the Lender, as the case may be, of a reasonable opportunity to contest any such matter. The obligations of the Borrower and the Lender under this Section shall survive the termination of this Agreement and the payment and performance of all of the other obligations of the Borrower and the Lender hereunder and under the FHA Loan Documents and the Issuer Regulatory Agreement. SECTION 5.9. Mortgage Loan Documents. In connection with the making of the Mortgage Loan, the Lender and the Borrower shall execute and deliver such documents as may be customarily utilized for mortgage loans to be insured under the provisions of Section 241(f) of the National Housing Act and applicable regulations thereunder, with such omissions, insertions and variations as may be permitted by such regulations and as may be consistent with the terms and provisions of this Agreement. SECTION 5.10. Insurance Proceeds. The Lender covenants that in the event of a default on the Mortgage Loan resulting in a claim by the Lender for insurance proceeds pursuant to Section 241(f) of the National Housing Act, the Lender shall request that such claim be paid only in cash and not debentures. ARTICLE VI SPECIAL TERMS AND PROVISIONS SECTION 6.1. No Pecuniary Liability. The parties intend that by reason of making this Agreement, by reason of the issuance of the Bonds, by reason of the performance of any act required of the Issuer by this Agreement, the Issuer Regulatory Agreement or the Indenture, or by reason of the performance of any act requested of the Issuer by the Borrower, or for any other reason, no indebtedness or obligation or pledge of the faith and credit of the Issuer or a debt or pledge of the faith and credit of the State shall occur. Nevertheless, if the Issuer shall incur any such pecuniary liability, then in such event the Borrower shall indemnify and hold the Issuer harmless by reason thereof. The Borrower agrees to pay the Issuer (or, if the Issuer so elects, to pay directly to the person entitled to payment) for the expenses, if any, incurred by the Issuer in the administration of this Agreement, of the Mortgage Loan, of the Bonds and of the Issuer Regulatory Agreement, or for any reason in connection with the issuance of the Bonds, as more specifically set forth in Section 5.7. It is recognized that notwithstanding any other provision of this Agreement, neither the Borrower, the Trustee nor the Lender shall look to the Issuer for damages suffered by the Borrower, the Trustee, the Lender or any Bondholder as a result of the Issuer's performance, failure to perform or insufficient performance of any covenant, undertaking or obligation under this Agreement, the Indenture, the Bonds, the Issuer Regulatory Agreement, any of the FHA Loan Documents or any of the other documents referred to herein, nor as a result of the incorrectness of any representation made by the Issuer in any of such documents. Although this Agreement recognizes that such documents shall not give rise to any pecuniary liability of the Issuer, nothing contained in this Agreement shall be construed to preclude in any way any action or proceeding (other than that SF2-27262.2 12 40511-90-MS]-03/11/94 element of any action or proceeding involving a claim for monetary damages against the Issuer) in any court or before any governmental body, agency or instrumentality or otherwise against the Issuer or any of its officers or employees to enforce the provisions of any of such documents which the Issuer is obligated to perform and which the Issuer has not assigned to the Trustee or any other person. The obligation of the Borrower under this Section shall survive the termination of this Agreement and the payment and performance of all of the other obligations of the Borrower hereunder and under the FHA Loan Documents and the Issuer Regulatory Agreement. SECTION 6.2. Further Assurances and Corrective Instruments. The Issuer, the Trustee, the Lender and the Borrower agree that they will, from time to time, execute and deliver or cause to be executed and delivered such supplements hereto and such further instruments as may reasonably be required for carrying out the intention of the parties to, or facilitating the performance of, this Agreement. SECTION 6.3. Tax Covenants. The Issuer, the Trustee, the Lender and the Borrower have entered into this Agreement with the intention that the interest on the Tax-Exempt Bonds be and remain excluded from gross income under the Code. Accordingly, for the benefit of the Issuer, the Trustee and each Bondholder, the Borrower covenants that it will not(a) take any action, (b) fail to take any action, or (c) make any use of the Project or the proceeds of the Bonds, which would cause the interest on any of the Tax-Exempt Bonds to be or become includable in the gross income of the Bondholders for federal income tax purposes. Without limiting the generality of the foregoing, the Borrower confirms each of its representations set forth in, and covenants and agrees that it will comply with each of the provisions of, the Issuer Regulatory Agreement and the Tax Certificate. The Borrower recognizes that certain of the facts, estimates and circumstances required to be set forth in the Tax Certificate and other instruments of the Issuer, including Form 8038, will be based upon the representations of the Borrower. The Borrower covenants to provide, or cause to be provided, such facts, estimates and circumstances as are necessary to enable the Issuer to execute and deliver the Tax Certificate and such other instruments. The Borrower further covenants that(a) such facts, estimates and circumstances will be based on the Borrower's reasonable expectations on the Closing Date and will be, to the best of the knowledge of the representative of the Borrower furnishing such facts, estimates and circumstances, true, correct and complete as of that date, and (b) the Borrower will make reasonable inquiries to insure such truth, correctness and completeness. The Borrower and the Lender recognize that(a) the Trustee will hold and invest the proceeds of the Bonds within its control in accordance with the expectations of the Issuer and the Borrower set forth in the Tax Certificate; (b) if the Issuer is of the opinion, upon receipt of written advice of Bond Counsel, that it is necessary to further restrict or limit the yield on the investment of any proceeds of the Bonds in order to avoid the Tax-Exempt Bonds being considered "arbitrage bonds" within the meaning of Section 148 of the Code, the Issuer shall deliver to the Trustee a written certificate to such effect (along with appropriate written instructions and a copy of the written advice of Bond Counsel), in which event the Trustee will promptly deliver a copy of all such material to the Borrower and will take such action as is necessary to restrict or limit the yield on such investment in accordance with such certificate and instructions. The parties to this Agreement recognize that the Issuer shall incur no liability in connection with any certificate or instructions delivered by the Issuer to the Trustee as contemplated in this Agreement. The obligations of the Borrower under this Section shall survive the termination of this Agreement and the payment and performance of the other obligations of the Borrower hereunder and under the FHA Loan Documents and the Issuer Regulatory Agreement. SF2-27262.2 13 40511-90-MSI-03/11/94 ARTICLE VII EVENTS OF DEFAULT; REMEDIES SECTION 7.1. Events of Default; Remedies. Upon receipt by a Responsible Officer of the Trustee of notice of a violation by the Borrower of, or default by the Borrower under any of the provisions of this Agreement, the FHA Loan Documents or the Issuer Regulatory Agreement, the Trustee shall give written notice thereof to the Borrower by certified mail, postage prepaid, return-receipt requested. If either (a) a violation or default by the Borrower of any of the provisions of this Agreement is not corrected to the reasonable satisfaction of the Trustee within 45 days after the date such notice is mailed or, if the violation or default(other than a payment default) cannot be corrected within such period, within such longer period as may be necessary, in the reasonable opinion of the Trustee, to correct such violation,provided that the Borrower has commenced and is diligently pursuing appropriate action to correct such violation and there will be no material adverse effect on the rights of the Issuer, the Trustee, the Lender or the Bondholders under this Agreement, the Issuer Regulatory Agreement, any of the FHA Loan Documents or the Indenture as a result of such extension, or (b) a violation of or default under any of the provisions of the Issuer Regulatory Agreement is not corrected or cured within any cure period provided therein, without further notice the Trustee may declare a default under this Agreement effective on the date of such declaration of default, and upon such default the Issuer, the Lender or the Trustee may apply to any state or federal court having jurisdiction(i) for specific performance of this Agreement or for an injunction against any violation of this Agreement, since the injury to the Issuer, the Lender and the Trustee arising from a default under any of the terms of this Agreement would be irreparable, and the amount of damage would be difficult to ascertain, or (ii) for other relief in law or equity which may be appropriate. A default hereunder shall not constitute an Event of Default under the Indenture. In addition, subject to the provisions of the Indenture, the Lender shall be entitled to exercise such remedies as may be available under the FHA Loan Documents and the Issuer Regulatory Agreement. Except as provided in Section 4.1 hereof, nothing included herein shall permit the Issuer to recover actual monetary damages from the Borrower upon the occurrence of an Event of Default hereunder. SECTION 7.2. No Remedy Exclusive. No remedy conferred upon or reserved to the Issuer, the Lender or the Trustee by this Agreement is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right to power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Issuer, the Lender or the Trustee to exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice, other than such notice as may be expressly required herein. SECTION 7.3. No Additional Waiver Implied by One Waiver. In the event any agreement contained in this Agreement should be breached by any party and thereafter waived by the other parties, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. SECTION 7.4. _Payment of Costs. In the event the Borrower is in default under any provision of this Agreement, the FHA Loan Documents or the Issuer Regulatory Agreement, the Borrower shall be liable to, and upon demand shall pay to the Issuer, the Trustee and the Lender all reasonable fees and disbursements of such persons and their agents (including attorneys' fees and expenses) which are reasonably connected therewith or incidental thereto except to the extent such fees and disbursements are paid from moneys available therefor under the Indenture. SF2-27262.2 14 40511-90-MS1-03/11/94 ARTICLE VIII TERMINATION AND PREPAYMENT SECTION 8.1. QRttion to Terminate. The Borrower shall have the option to terminate this Agreement at any time when (i) the Indenture shall have been discharged pursuant to Article IX thereof, and (ii) sufficient moneys are on deposit with the Trustee or the Issuer, or either of them, to meet all additional payments due or to become due through the date on which the last of the Bonds are then scheduled to be retired or redeemed, or, with respect to additional payments to become due, provisions satisfactory to the Trustee and the Issuer are made for paying such amounts as they come due. SECTION 8.2. Option to Proaay Loan. The Borrower shall have and is hereby granted the option to prepay the Mortgage Loan in full or in part prior to the payment and discharge of all the outstanding Bonds, but only in accordance with the provisions of Section 3.4 hereof, the Mortgage Note and the Indenture. SECTION 8.3. Notice of Prepayment; Timing of Prepayment. The Lender shall within 24 hours notify the Trustee by telephone of the receipt of any notice of prepayment by the Borrower and of the receipt of any prepayment or prepayment penalties paid by the Borrower pursuant to the terms of the Mortgage Note and shall promptly confirm any such notice or receipt in writing. The written notice shall state the date such prepayment will be passed through to the GNMA Security holder, which date shall be not later than the 15th day of the month following the month in which such prepayment occurs and shall state the effect such prepayment (if a partial prepayment) would have on the remaining scheduled payments on the GNMA Security. The Lender shall transfer to the Trustee, immediately upon receipt, the portion of any prepayment penalties paid by the Borrower pursuant to the Mortgage Note which are attributable to the GNMA Security, which prepayment penalties shall comply with the requirements of Section 304 of the Indenture. If such prepayment is not made by the time required therefor by the terms of the Mortgage Note, any prepayment premiums previously received by the Lender shall be returned to the Borrower by the person holding such prepayment. ARTICLE IX MISCELLANEOUS SECTION 9.1. Term of Agreement. This Agreement shall remain in full force and effect from the date hereof to and including the earliest to occur of the maturity date of the GNMA Security, the final maturity of the Bonds, or such time as all of the Bonds shall have been fully paid (or provision made for such payment pursuant to the Indenture), subject to the provisions of this Agreement which are expressed herein to survive the termination hereof. SECTION 9.2. Assignment by the Issuer. The Issuer has, simultaneously with the delivery of this Agreement, by execution and delivery of the Indenture, assigned to the Trustee, as security for the Issuer's obligations under the Bonds and the Indenture (among other things), all of the Issuer's right, title and interest in and to and remedies under this Agreement (excepting only the Reserved Rights of the Issuer, including without limitation, its right to indemnification by the Borrower and to payments to the Issuer (or for its account) for expenses incurred by the Issuer itself, or its officials, officers, agents or employees on its behalf). SECTION 9.3. Notices. All notices, certificates or other communications hereunder shall be sufficiently given by hand delivery or certified mail and shall be deemed given when hand delivered, or three days after mailing if mailed by certified mail, postage prepaid, return receipt requested, addressed to the Issuer, the Borrower, the Trustee, the Lender, or any other person to whom any such notice, certificate or other communication is to be given, at the appropriate address set forth in Section 1004 of the Indenture. The Issuer, the Borrower, the Lender and the Trustee, by notice given hereunder, may designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent. SF2-27262.2 15 40511-90-MSI-03/11/94 SECTION 9.4. BindingEffect.ffect. This Agreement shall inure to the benefit of and shall be binding upon the Issuer, the Borrower, the Trustee, the Lender and their respective successors and assigns, subject to the limitation that any obligation of the Issuer created by or arising out of this Agreement shall not be an indebtedness or a charge against the general credit or taxing powers of the Issuer or the State or any political subdivision thereof, or give rise to any pecuniary liability of the Issuer, but shall be payable solely out of the Revenues pledged under the Indenture. SECTION 9.5. Successors and Assigns. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Borrower which are contained in this Agreement shall bind its successors and assigns and inure to the benefit of the successors and assigns of the Issuer. SECTION 9.6. Severability. In the event any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision thereof. SECTION 9.7. Amendments, Changes and Modifications. This Agreement may be amended, changed, modified, altered or terminated only by a written instrument executed by each of the parties hereto, and only as permitted by Article VIII of the Indenture. SECTION 9.8. Execution of Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 9.9. Law Governing Construction of Agreement. This Agreement is prepared and entered into with the intention that the laws of the State and, where applicable, the United States of America, shall govern its construction. SECTION 9.10. Amounts Remaining in Bond Fund or Other Funds. It is agreed by the parties hereto that upon the expiration or sooner termination of this Agreement, and after payment in full of(a) the principal of and redemption premium, if any, and interest on the Bonds (or after provision has been made for the payment thereof as provided in the Indenture), (b) the Rebate Amount and (c) the fees and expenses of the Trustee, the Rebate Analyst and the Issuer, any moneys remaining in the Bond Fund and in any other fund established under the Indenture shall be paid only in accordance with the Indenture. SECTION 9.11. FHA Loan Documents and Regulations Control. To the extent that there is any inconsistency or ambiguity between or among this Agreement, including without limitation, the covenants of the Borrower in Section 6.3 of this Agreement, and any of the FHA Loan Documents, the National Housing Act and the regulations under such Acts, the FHA Loan Documents, the National Housing Act and the regulations under such Acts, will be deemed to be controlling, and any such ambiguity or inconsistency will be resolved in favor of, and pursuant to the terms of, the FHA Loan Documents, the National Housing Act and the regulations under such Acts, as applicable. SF2-27262.2 16 40511-90-MS 1-03/11/94 IN WITNESS WHEREOF, the parties hereto have executed this Agreement by their respective duly authorized representatives, all as of the date first above written. COUNTY OF CONTRA COSTA, By: Deputy Director-Redevelopment BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Trustee By: Title: EAH-CONTRA COSTA, INC., a California nonprofit corporation By: Title: TRI CAPITAL CORPORATION By: Title: SF2-27262.2 17 40511-90-MSI-03/11/94 Exhibit A [FORM OF INCOME CERTIFICATION] VERIFICATION OF INCOME RE: [name and address of Project] Apartment Number: 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: 1. 2. 3. 4. 5. Name of Members Relationship Social of the to Head of Security Place of Household Household Age Number Employment HEAD 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 forth above includes all of the following income (unless such income is described in (b) 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); (iii) interest and dividends(include all income from assets as set forth in item 7(b); (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; SF2-27262.2 A-1 40511-90-MS 1-03/11/94 0 (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 H 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; (xi) payments received under the Alaska Native Claims Settlement Act; (xii) 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. SF2-27262.2 A-2 40511-90-MS1-03/11/94 • • 7. If any of the persons described in column 1 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 1 above be or have they been full-time students during five calendar months of this calendar year at an educational institution(other than a correspondence school)with regular faculty and students? Yes No (b) (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 We acknowledge that all of the above information is relevant to the status under federal income tax law of the interest on bonds issued to finance construction 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 agent of the Treasury Department or Internal Revenue Service. Date: Head of Household Spouse SUBSCRIBED AND SWORN to before me this day of (NOTARY SEAL) Notary Public in and for the State of My Commission Expires: NOTE TO PROJECT Borrower: A vacant unit previously occupied by individuals or a family of low or moderate income, may be treated as occupied by individuals or a family or low or moderate 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. FOR COMPLETION BY PROJECT Borrower ONLY: I. Calculation of eligible income: (A) Enter amount entered for entire household in 6 above: $ SF2-27262.2 A-3 40511-90-MSI-03/11/94 (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)): $ H. Qualification as individuals or a family of low or moderate or very low income: (A) Is the amount entered in line 1(c) less than 80% of Median Gross Income for the Area*9. Yes No (B) (i) If line II(A) is "No", then the household does not qualify as individuals or a family of low or moderate income; skip 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 low or moderate income; skip to item H(G). (iii) If line II(A) above is "Yes" and 8(b) above is "Yes", then the household qualifies as individuals or a family of low or moderate income; skip to item H(G). (iv) If neither (ii) nor (iii) is applicable, then the household does not qualify as individuals or a family of low or moderate income. (C) Is the amount entered in line I(C) less than 50% of Median Gross Income for the Area*9. Yes No (D) (i) If line II(C) is "No", then the household does not qualify as very low income; skip to item III. (ii) If line II(C) above is "Yes" and 8(a) above is "No", then the household qualifies as very low income; skip to item III. (iii) If line H(C) above is "Yes" and 8(b) above is "Yes", then the household qualifies as very low income; skip to item III. (iv) If neither (ii) nor (iii)is applicable, then the household does not qualify as very low income. in. (Check one) The household does not qualify as individuals or a family of low or moderate income. The household qualifies as individuals or a family of low or moderate income. * "Median Gross Income for the Area"means the median income for the area where the Project is located as determined by the Secretary of Housing and Urban Development under Section 8(f)(3)of the United States Housing Act of 1937,as amended,or if programs under Section 8(f)are terminated,median income determined under the method used by the Secretary prior to the termination. SF2-27262.2 A-4 40511-90-MS1-03/11/94 The household does not qualify as very low income. The household qualifies as very low income. IV. Number of apartment unit assigned: (enter here and on page one) Borrower SF2-27262.2 A-5 40511-90-MSI-03111/94 OCCUPANCY CERTIFICATE (To be filed with the Issuer and the Trustee along with a Verification of Income upon the rental of a unit to any Low or Moderate Income Tenant.) Project: The tenant identified in the attached Verification of Income has entered into a lease with respect to a unit in the above-described Project. Such tenant is/is not (circle one) a Low or Moderate Income Tenant. Such tenant is/is not(circle one) 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 Issuer Regulatory Agreement to which the Borrower is a party. Witness Borrower Date: SF2-27262.2 A-6 40511-90-MSI-03/11194 Exhibit B [FORM OF CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE] CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE Witnesseth that on this_ day of , the undersigned, having borrowed certain funds from the (the "Issuer") for the purpose of constructing a multifamily rental housing development (the "Project"), does hereby certify that during the preceding quarter (i) such Project was continually in compliance with the Issuer Regulatory Agreement executed in connection with such loan from the Issuer, and (ii)_% of the units in the Project were occupied by Very Low Income Tenants (minimum 49%), at Affordable Rents; and does hereby further certify that the representations set forth herein are true and correct to the best of the undersigned's knowledge and belief. Set forth below are the names of Very Low Income Tenants who commenced or terminated occupancy during the preceding quarter. Commenced Occupancy Terminated Occupancy 1. 1. 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 quarter. Witness Borrower Date: SF2-27262.2 B-1 40511-90-MS1-03/11/94 . � � # � A � . . \ \ � \ 0 � \ % # $» ¥ $ � $ . & . \ 7 % \ $ a � / 2 % % \ \ \ '\ \ \ $ � 7 % « ƒ ' ° � % \ $ % $ ¥ § \ « � k # ° � / � � o � ¥� � % � # « � $ k � . \ � : � Exhibit C [Form of] STATISTICAL REPORT TO ISSUER Reporting Period: , _. Date: As of the date hereof- 1. ereof:1. Total units: ; units occupied by Very Low Income Tenants: ; vacant units most recently occupied by Very Low Income Tenants: ; other vacant units: 2. Total units occupied by households with children: ; Very Low Income Units so occupied: ; 3. Total units occupied by elderly households with a member of age 62 or over: ; Very Low Income Units so occupied: 4. The percentage of units currently occupied by white, black, Hispanic and Asian persons and American Indians are as follows: white _ black _ Hispanic Asian _ American Indian 5. The number of Very Low Income Tenants who terminated their rental agreements during the previous twelve (12) month period is_ 6. The number of units rented to new Very Low Income Tenants during the last twelve (12) month period is_ 7. The family names of each household currently occupying a Very Low Income Unit are listed on the schedule attached hereto. 8. The number of Very Low Income Units of various sizes is: studio: one-bedroom: two-bedroom: three-bedroom: [Name of Borrower] By Borrower Representative SF2-27262.2 C-1 40511-90-MSI-03/11/94 Trust Indenture • [OHARAFT OF 11 MARCH 19941 TRUST INDENTURE Dated as of 1, 1994 By and Between COUNTY OF CONTRA COSTA and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Trustee Relating to COUNTY OF CONTRA COSTA $ MULTIFAMILY HOUSING REVENUE BONDS (GNMA COLLATERALIZED - CRESCENT PARK APARTMENTS PROJECT) 1994 SERIES B and $ MULTIFAMILY HOUSING REVENUE BONDS (GNMA COLLATERALIZED - CRESCENT PARK APARTMENTS PROJECT) TAXABLE 1994 SERIES B-T SF2-27261.2 40511-90-MS1-03/11/94 TABLE OF CONTENTS (This Table of Contents is not part of the Trust Indenture and is only for convenience of reference.) Page RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 GRANTING CLAUSES AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE I DEFINITIONS AND INTERPRETATION Section 101. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 102. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 103. Content of Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE IT THE BONDS Section 201. Terms of the Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 202. Authentication, Sale and Delivery of the Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 203. Limited Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 204. Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 205. Authentication of Bonds Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 206. Mutilated, Lost, Stolen or Destroyed Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 207. Transfer and Exchange of Bonds; Persons Treated as Holders . . . . . . . . . . . . . . . . . . . . 13 Section 208. Temporary Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 209. Cancellation and Destruction of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 210. Form of the Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 211. Book-Entry System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 ARTICLE III REDEMPTION OF BONDS Section 301. Redemption of the Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 302. Special Mandatory Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 303. Scheduled Mandatory Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 304. Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 305. Selection of Bonds for Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 306. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE IV FUNDS; INVESTMENTS Section 401. Establishment of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 402. Application of Bond Proceeds and Other Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 403. Acquisition Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 404. Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 405. Expense Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 406. Rebate Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 407. Costs of Issuance Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 408. Custody of Funds; Moneys Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 409. Nonpresentment of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 410. Investment of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 411. Payments of Funds Upon Discharge of Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 SF2-27261.2 i 40511-90-MSI-03/11/94 i • • Page ARTICLE V GENERAL COVENANTS AND REPRESENTATIONS Section 501. Payment of Bonds; Priority of Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 502. Instruments of Further Assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 503. No Disposition of GNMA Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 504. Recordation and Filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 505. Modification of Security; Additional Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 506. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 507. Power to Issue Bonds and Make Pledge and Assignment . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 508. Tax Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 509. Issuer's Obligation Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 510. Role of Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 511. Trustee to Retain Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 ARTICLE VI DEFAULT AND REMEDIES Section 601. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 602. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 603. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 604. Rights of Bondholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 605. Waiver by Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 606. Application of Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 607. Remedies Vested in Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 608. Remedies of Bondholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 609. Termination of Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 610. Waivers of Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 611. Notice of Defaults: Opportunity to Cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 ARTICLE VII THE TRUSTEE Section 701. Acceptance of the Trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 702. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 703. Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 704. Intervention by the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 705. Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 706. Resignation by the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 707. Removal of the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 708. Appointment of Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Section 709. Concerning Any Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Section 710. Trustee Protected in Relying Upon Instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Section 711. Trustee as Paying Agent and Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 ARTICLE VIII SUPPLEMENTAL INDENTURES AND AMENDMENTS OF OTHER FINANCING DOCUMENTS Section 801. Supplemental Indentures Not Requiring Consent of Bondholders . . . . . . . . . . . . . . . . . . . 34 Section 802. Supplemental Indentures Requiring Consent of Bondholders . . . . . . . . . . . . . . . . . . . . . . 34 Section 803. Required Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 804. Amendment of Certain Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 805. Amendment by Unanimous Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 806. Opinions; Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 SF2-27261.2 ii 40511-90-MS1-03/11/94 Page Section 807. Effect of Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 ARTICLE IX SATISFACTION AND DISCHARGE OF INDENTURE Section 901. Discharge of Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 ARTICLE X MISCELLANEOUS Section 1001. Consents and Other Instruments of Bondholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 1002. Limitation of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 1003. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 1004. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 1005. Payments Due on Saturdays, Sundays and Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 1006. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 1007. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 1008. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 1009. Limitation of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 EXHIBIT A - FORM OF SERIES B OR B-T BOND SF2-27261.2 111 40511-90-MS1-03/11/94 r • . TRUST INDENTURE THIS TRUST INDENTURE is entered into as of 1, 1994, by and between the COUNTY OF CONTRA COSTA, a legal subdivision and body corporate and politic organized and existing under the Constitution and laws of the State of California (together with any successors and assigns and any surviving, resulting or transferee entity, the "Issuer"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association duly organized and existing under the laws of the United States of America, and authorized to accept and execute trusts of the character herein set out, as Trustee (together with any successors and assigns and any surviving, resulting or transferee entity, the "Trustee"). RECITALS The Issuer is authorized pursuant to Chapter 8 of Part 5 of Division 31 of the Health and Safety Code of the State of California(the "Act"), to issue bonds to provide funds to be loaned by the Issuer to a nonprofit organization exempt from federal income taxation under Section 501(c)(3) of the Internal Revenue Code of 1986 (the "Code"), for use by the organization to finance the acquisition and rehabilitation of multifamily rental housing to provide housing within the territorial jurisdiction of the Issuer in accordance with the organization's tax-exempt purposes under the Code, subject to the requirements of the Act, including the requirement that the bonds satisfy the requirements of Section 145 of the Code; WHEREAS, EAH-Contra Costa, Inc. (the "Borrower"), has requested that the Issuer issue bonds and lend the proceeds thereof to the Borrower in order to enable the Borrower to acquire and rehabilitate a multifamily rental housing development known as Crescent Park Apartments located within the jurisdiction of the Issuer in Richmond, California(the "Project"); WHEREAS, the Borrower has represented to the Issuer that the Borrower is a nonprofit organization exempt from federal income taxation under Section 501(c)(3) of the Code, and has represented and covenanted to comply with all requirements necessary to satisfy Section 145 of the Code; WHEREAS, pursuant to and in accordance with the Act, the Issuer desires to provide funds to finance the acquisition and rehabilitation of the Project by issuing its Multifamily Housing Revenue Bonds (GNMA Collateralized - Crescent Park Apartments Project) Series 1994 B (the "Series B Bonds"), and County of Contra Costa Multifamily Housing Revenue Bonds (GNMA Collateralized - Crescent Park Apartments Project) Taxable 1994 Series B-T (the "Series B-T Bonds"), in the respective principal amounts of$ and $ (collectively, the 'Bonds"), pursuant to this Indenture; and WHEREAS, the Issuer has expressly determined and hereby confirms that the issuance of the Bonds will accomplish a valid public purpose of the Issuer by enabling the Issuer to require the Borrower to comply with the provisions of the Financing Agreement of even date herewith (the "Financing Agreement"), among the Issuer, the Borrower, the Trustee and TRI Capital Corporation(the "Lender"), and the Regulatory Agreement and Declaration of Restrictive Covenants of even date hereof(the "Issuer Regulatory Agreement"), among the Issuer, the Borrower and the Trustee; and WHEREAS, the execution and delivery of this Indenture and the issuance and sale of the Bonds have been in all respects duly and validly authorized by a resolution duly adopted by the Issuer, and all things necessary to make the Bonds, when authenticated by the Trustee and issued as provided in this Indenture, the valid, binding and legal obligations of the Issuer according to the import thereof, and to constitute this Indenture a valid assignment and pledge of the Trust Estate for payment of the principal of, premium, if any, and interest on the Bonds have been done and performed, and the creation, execution and delivery of this Indenture, and the creation, execution and issuance of the Bonds, subject to the terms hereof, have in all respects been duly authorized; SF2-27261.2 40511-9D-MSI-03/11/94 GRANTING CLAUSES AND AGREEMENTS NOW, THEREFORE, the Issuer, in consideration of the premises and the acceptance by the Trustee of the trusts hereby created and of the purchase and acceptance of the Bonds by the holders thereof, and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and in order to secure the payment of the principal of, premium, if any, and interest on the Bonds according to their tenor and effect and the performance and observance by the Issuer of all the covenants expressed or implied herein and in the Bonds, does hereby bargain, sell, convey, pledge, assign and grant a security interest unto the Trustee in and to the following, subject only to the provisions of this Indenture permitting the application thereof to the purposes and on the terms and conditions set forth herein (such property being herein referred to as the "Trust Estate"), to wit: 1. All right, title and interest of the Issuer in and to all Revenues (as herein defined), derived or to be derived by the Issuer or the Trustee for the account of the Issuer under the terms of this Indenture and the Financing Agreement (other than the Reserved Rights of the Issuer), together with all other Revenues received by the Trustee for the account of the Issuer arising out of or on account of the Trust Estate; H. All right, title and interest of the Issuer in and to the GNMA Security, including all payments with respect thereto and any interest, profits or other income derived from the investment thereof, in. All right, title and interest of the Issuer in and to, and remedies under, the Financing Agreement and the Issuer Regulatory Agreement; and 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 hereunder for the Bonds by the Issuer or by anyone on its behalf or with its written consent to the Trustee, which is hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms hereof; PROVIDED, HOWEVER, that there shall be excluded from the granting clauses of this Indenture all the Reserved Rights of the Issuer, including all amounts paid or collected by the Issuer in connection therewith, and all amounts on deposit in the Rebate Fund, which shall be held for the sole benefit of the United States of America; and provided further that moneys and other assets on deposit in any account established with respect to a Series of Bonds shall be held solely for the holders of Bonds of such Series; TO HAVE AND TO HOLD all the same with all privileges and appurtenances hereby conveyed and assigned, or agreed or intended so to be, to the Trustee and its successors in said trust and to them and their assigns forever; IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth, for the equal and proportionate benefit, security and protection of all holders from time to time of the Bonds issued under and secured by this Indenture without privilege, priority or distinction as to the lien or otherwise of any Bonds over any of the other Bonds, except as set forth in this Indenture; PROVIDED, HOWEVER, that if the Issuer shall pay or cause to be paid to the holders of the Bonds the principal, interest and premium, if any, to become due thereon at the times and in the manner SF2-27261.2 2 40511-90-MSI-03/11/94 0 0 • provided in Article IX and if the Issuer shall keep, perform and observe, or cause to be kept, performed and observed all its covenants, warranties and agreements contained herein, and if the Rebate Amount shall be paid in full, this Indenture and the estate and rights hereby granted shall cease and be void, and thereupon the Trustee shall cancel and discharge the lien of this Indenture and execute and deliver to the Issuer such instruments in writing as shall be requisite to satisfy the lien hereof, and reconvey to the Issuer any property at the time subject to the lien of this Indenture which may then be in its possession, except as provided in Section 411 hereof and funds held by the Trustee for the payment of interest on, premium, if any, and principal of the Bonds and for payment of the Rebate Amount; otherwise this Indenture shall be and remain in full force and effect, and upon the trusts and subject to the covenants and conditions hereinafter set forth. ARTICLE I DEFINITIONS AND INTERPRETATION Section 101. Definitions. The terms defined in this Section 101 or in the Recitals hereto (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section 101 or in the Recitals hereto. "Acquisition Fund" means the Acquisition Fund established pursuant to Section 401 hereof. "Act" means Chapter 8 of Part 5 of Division 31 of the Health and Safety Code of the State of California. "Authorized Denomination" means $1,000 or any integral multiple thereof. "Authorized Borrower Representative" means the President of the Borrower, or any other person designated to act in such capacity by a resolution of the Board of Directors of the Borrower. "Authorized Issuer Representative" means the Chair or Vice-Chair of the Board of Supervisors, Director of Community Development, County Administrator, Director of the Growth Management and Economic Development Agency or Deputy Director-Redevelopment of the Issuer, or any other person designated to act in such capacity by a Certificate of the Issuer containing the specimen signature of such person, which certificate may designate an alternate or alternates. "Bond" means any of the Series B Bonds or Series B-T Bonds issued under and secured by this Indenture. "Bond Counsel" means any attorney at law or firm of attorneys selected by the Issuer, of nationally recognized standing in matters pertaining to the validity of, and exclusion from gross income for federal income tax purposes of interest on, bonds issued by states and political subdivisions, and duly admitted to practice law before the highest court of any state of the United States of America. "Bond Fund" means the Bond Fund established in Section 401 hereof. "Bondholder" or "holder" or "registered owner," when used with respect to any Bond, means the person or persons in whose name such Bond is registered. "Bond Obligation" means as of any date of calculation, the aggregate principal amount of all outstanding Bonds or, with respect to any Series, all outstanding Bonds of such Series. "Bond Purchase Agreement" means the Bond Purchase Agreement among the Issuer, the Borrower and the Underwriters relating to the Bonds. SF2-27261.2 3 40511-90-MSI-03/11/94 "Bond Register" and 'Bond Registrar" have the respective meanings specified in Section 207. "Bond Resolution" means the Resolution adopted by the Governing Body of the Issuer on March _, 1994, authorizing the issuance of the Bonds and the execution of this Indenture, the Financing Agreement and other documents in connection therewith. "Bond Year" means the period beginning on the date of issuance of the Bonds and ending on 1995, and each twelve-month period thereafter. The last Bond Year will end on the date of final payment of the Bonds. "Borrower" means EAH-Contra Costa, Inc., a nonprofit corporation organized and existing under the laws of the State of California. "Business Day" or "business day" means a day, other than a Saturday or Sunday, on which (a) banks located in New York, New York, or in the city in which the Trust Office of the Trustee is located, are not required or authorized by law or executive order to close for business, and (b) The New York Stock Exchange is not closed. "Certificate of the Issuer," "Request of the Issuer," 'Requisition of the Issuer" and "Statement of the Issuer" mean, respectively, a written certificate, request, requisition or statement signed in the name of the Issuer by an Authorized Issuer Representative. Any such instrument and supporting opinions or representations, if any, may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument. "Closing Date" means the date of delivery of the Bonds in exchange for the purchase price thereof. "Code" means the Internal Revenue Code of 1986. Each reference to a section of the Code shall be deemed to include the United States Treasury Regulations in effect or proposed from time to time with respect thereto and applicable to the Project or the Bonds or the use of the proceeds thereof. "Compliance Certificate" means a certificate of an Authorized Borrower Representative to the effect that, as of the date of such certificate, the Borrower is in compliance with all requirements of the Issuer Regulatory Agreement, the Financing Agreement, the other Financing Documents and the FHA Loan Documents (with such exceptions as shall be acceptable to the Issuer). "Costs of Issuance" means all fees, costs and expenses payable or reimbursable directly or indirectly by the Issuer or the Borrower and related to the authorization, issuance and sale of the Bonds. "Costs of Issuance Fund" means the Costs of Issuance Fund established in Section 401 hereof. "Defaulted Interest" means any interest on any Bond which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date. "Event of Default" or "event of default" means any of the events so specified or defined in Section 601 hereof. "Expense Fund" means the Expense Fund established in Section 401 hereof. "FHA" means the Federal Housing Administration, an organizational unit within HUD, its successors and assigns. "FHA Loan Documents" means, collectively, the Mortgage Note, the Mortgage, the FHA Regulatory Agreement, and all other documents required in connection with the endorsement of the Mortgage Loan by FHA for Mortgage Insurance. SF2-27261.2 4 40511-90-MSI-03/11/914 • • "FHA Regulations" means the regulations promulgated by FHA regarding insurance under Section 241(f) of the National Housing Act. "FHA Regulatory Agreement" means the Regulatory Agreement for Insured Multi-family Projects dated March _, 1994, by and between the Borrower and HUD, together with any and all Supplements thereto. "Financing Agreement" means the Financing Agreement of even date herewith among the Issuer, the Trustee, the Lender and the Borrower, together with any and all Supplements thereto. "Financing Documents" shall mean this Indenture, the Financing Agreement, the Issuer Regulatory Agreement, the Tax Certificate, the GNMA Guaranty Agreement and the GNMA Security. "GNMA" means Government National Mortgage Association, its successors and assigns. "GNMA Guaranty Agreement" means the GNMA Guaranty Agreement between GNMA and the Lender, together with all Supplements thereto. "GNMA Security" means the fully-modified, mortgage-backed security in the principal amount of$ to be issued by the Lender and registered in the name of the Trustee and dated April 1, 1994, which security is backed by the Mortgage Note and the Mortgage and is guaranteed as to timely payment of principal and interest by GNMA, pursuant to Section 306(g) of Title III of the National Housing Act and the regulations promulgated thereunder, and bearing interest at the rate of % per annum. "Governing Body" of the Issuer means the Board of Supervisors of the Issuer or any body succeeding to the functions thereof. "HUD" means the United States Department of Housing and Urban Development, any authorized representative thereof or any successor thereto. "Indenture" means this Trust Indenture, together with all Supplements hereto. "Interest Payment Date" means each April 20 and October 20, commencing October 20, 1994. "Investment Agreement" means an Investment Agreement for the Bond Fund between the Trustee and providing for investment of moneys in the Bond Fund (other than amounts in the Sinking Fund Account) at the rate of % per annum from the Closing Date until and providing for investment of moneys in the Sinking Fund Account at the rate of % per annum from the Closing Date to "Issuer" means the County of Contra Costa, and its successors and assigns. "Issuer Regulatory Agreement" means the Regulatory Agreement and Declaration of Restrictive Covenants, dated as of 1, 1994, among the Borrower, the Issuer and the Trustee, together with any and all Supplements thereto. "Lender" means TRI Capital Corporation, a California corporation, its successors and assigns. "Mortgage" means the deed of trust from the Borrower securing the Mortgage Note, as amended. "Mortgage Insurance" means the insurance against certain losses under the Mortgage Loan provided by the FHA, as evidenced by the endorsed Mortgage Note. SF2-27261.2 5 40511-90-MS1-03/11/94 "Mortgage Loan" means the loan made by the Lender to the Borrower in connection with the issuance of the Bonds and in a principal amount equal to the aggregate principal amount of the Bonds, in order to provide financing for the Project. "Mortgage Note" means the deed of trust note from the Borrower in favor of the Lender evidencing the Mortgage Loan. "National Housing Act" means the National Housing Act of 1934, as amended. "Outstanding", when used with respect to the Bonds means all Bonds theretofore authenticated and delivered under this Indenture, except: (a) Bonds theretofore cancelled by the Trustee or theretofore delivered to the Trustee for cancellation; (b) Bonds for the payment or redemption of which moneys or obligations shall have been theretofore deposited with the Trustee in accordance with Article IX; and (c) Bonds in exchange for or in lieu of which other Bonds have been authenticated and delivered under this Indenture. "Project" means the multifamily rental housing project known as Crescent Park Apartments, located on and including the land described in Exhibit A to the Issuer Regulatory Agreement. "Qualified Investments" means: (a) Government Obligations; (b) Federal Housing Administration's debentures; (c) Federal Home Loan Mortgage Corporations's (FHLMC)participation certificates (excluding stripped mortgage securities which are purchased at prices exceeding their principal amounts) which guarantee timely payment of principal and interest and senior debt obligations; (d) Farm Credit Banks' (Federal Land Banks, Federal Intermediate Credit Banks and Banks for Cooperatives) consolidated systemwide bonds and notes; (e) Federal Home Loan Banks consolidated debt obligations; (f) Federal National Mortgage Association's (FNMA) mortgage-backed securities (excluding stripped mortgage securities which are purchased at prices exceeding their principal amounts) and senior debt obligations; (g) Student Loan Marketing Association's (Sallie Mae) senior debt obligations(excluding securities that do not have a fixed par value and/or whose terms do not promise a fixed dollar amount at maturity or call date) and letter of credit backed issues; (h) Resolution Funding Corp.'s (REFCORP) debt obligations; (i) Federal funds, certificates of deposit, time deposits and bankers' acceptances (having original maturities of not more than 365 days) of any bank, the unsecured short term obligations of which are rated "A-1+" by Standard & Poor's; (j) Deposits which are fully insured by the Federal Deposit Insurance Corp. (FDIC); SF2-27261.2 6 40511-90-MSI-03/11/94 (k) Debt obligations rated "AAA" by Standard &Poor's (excluding securities that do not have a fixed par value and/or whose terms do not promise a fixed dollar amount at maturity or call date); (1) Commercial paper (Having original maturities of not more than 270 days) rated "A- 1+" by Standard &Poor's; (m) Money market funds rated "AAAm" or "AAAm-G") by Standard's &Poor's; (n) Repurchase agreements with any institution the unsecured, uninsured and unguaranteed debt obligations of which are rated "AAA" by Standard &Poor's or commercial paper of which is rated "A-1+" by Standard &Poor's; (o) Any stripped securities assessed or rated "AAA" by Standard & Poor's; and (p) The Investment Agreements. "Rating Agency" means Standard & Poor's Corporation, and its successors and assigns. "Rebate Amount" means the amount, if any, which is to be paid to the United States of America pursuant to Section 148(f) of the Code and the Tax Certificate and Section 406 hereof. "Rebate Analyst" means Orrick, Herrington& Sutcliffe or any other qualified person acceptable to the Issuer and retained by the Borrower to calculate the Rebate Amount or, in the event that the Borrower fails to so retain a Rebate Analyst one month prior to any date on which calculations are required to be made under the Tax Certificate, any qualified person retained by the Trustee to calculate the Rebate Amount. "Regular Record Date" means, with respect to an Interest Payment Date, the close of business on April 5 or October 5, as the case may be, next preceding such Interest Payment Date, whether or not a business day. "Reserved Rights of the Issuer" means (a) all rights which the Issuer or its officers, officials, agents or employees may have under this Indenture and the Financing Agreement to indemnification by the Borrower and by any other persons and to payments for expenses incurred by the Issuer itself, or its officers, officials, agents or employees; (b) the right of the Issuer to receive notices, reports or other information, make determinations and grant approvals hereunder and under the other Financing Documents; (c) the right of the Issuer to receive its fee pursuant to Section 5.7 of the Financing Agreement; (d) all rights of the Issuer to enforce the representations, warranties, covenants and agreements of the Borrower pertaining in any manner or way, directly or indirectly to the requirements of the Act or any requirements imposed by the Issuer with respect to the Project, or necessary to assure that interest on the Bonds is excluded from gross income for federal income tax purposes, as are set forth in any of the Financing Documents or in any other certificate or agreement executed by the Borrower; (e) all rights of the Issuer in connection with any amendment to or modification of the Financing Documents; and (f) all enforcement remedies with respect to the foregoing. "Responsible Officer" means the President or any Vice President, Assistant Vice President or Trust Officer of the Trustee. "Revenues" means the revenues, receipts, interest, income, investment earnings and other moneys received or to be received by the Issuer or the Trustee from the Project, including moneys received or to be received from the GNMA Security or the Borrower under the Financing Documents and all investment earnings derived or to be derived on any moneys or investments held by the Trustee hereunder, but excluding (a) amounts paid as fees, reimbursement for expenses or for indemnification of the Issuer and the Trustee, (b) amounts paid to or collected by the Issuer in connection with any Reserved Rights of the Issuer and (c) any Rebate Amount. SF2-27261.2 7 40511-90-MSI-03/11/94 • 0 "Series" means any series of Bonds issued pursuant to this Indenture. "Series B Bonds" means the $ aggregate principal amount County of Contra Costa Multifamily Housing Revenue Bonds (GNMA Collateralized - Crescent Park Apartments Project) 1994 Series B. "Series B-T Bonds" means the $ aggregate principal amount County of Contra Costa Multifamily Housing Revenue Bonds (GNMA Collateralized - Crescent Park Apartments Project) Taxable 1994 Series B-T. "Special Record Date" has the meaning specified in Section 201 hereof. "State" means the State of California. "Supplements" means all extensions, renewals, modifications, amendments, supplements and substitutions. "Tax Certificate" means the Tax Certificate and Agreement dated the Closing Date between the Issuer and the Borrower, together with any and all Supplements thereto. "Taxes" means all taxes, water rents, sewer rents, assessments and other governmental or municipal or public or private dues, fees, charges and levies and any liens (including federal tax liens) which are or may be levied, imposed or assessed upon the Project or any part thereof, or upon any leases pertaining thereto, or upon the rents, issues, income or profits thereof, whether any or all of the aforementioned be levied directly or indirectly or as excise taxes or as income taxes. "Tax-Exempt Bonds" means the Series B Bonds. "Term Bonds" means the Series B Bonds maturing on , 2034. "Trustee" means Bank of America National Trust and Savings Association, a national banking association, its successors and assigns. "Trust Estate" means the property rights, money, securities and other amounts pledged and assigned to the Trustee pursuant to the Granting Clauses hereof. "Trust Office" means the appropriate trust office of the Trustee located at the address set forth in Section 1004 hereof, or such other offices as may be specified in writing to the Issuer by the Trustee. "Underwriters" means Kirkpatrick, Pettis, Smith, Polian Inc. and Charles A. Bell Securities Corp. Section 102. Interpretation. The words "hereof," "herein," "hereunder," "hereto," and other words of similar import refer to this Indenture in its entirety. The terms "agree" and "agreements" contained herein are intended to include and mean "covenant" and "covenants." References to Articles, Sections, and other subdivisions of this Indenture are to the designated Articles, Sections and other subdivisions of this Indenture. The headings of this Indenture are for convenience only and shall not define or limit the provisions hereof. SF2-27261.2 8 40511-90-MSI-03/11/94 All references made (a) in any gender shall be deemed to have been made in all genders, and (b) in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well. Any reference to particular sections or subsections of the Code and applicable Income Tax Regulations shall include any successor provisions of law or regulations, to the extent the same shall apply to the Bonds. The parties acknowledge that each party, the Borrower, the Lender and their respective counsel have participated in the drafting and revision of this Indenture, the Financing Agreement and the Issuer Regulatory Agreement. Accordingly, the parties agree that any rule of construction which would disfavor the drafting party shall not apply in the interpretation of this Indenture, the Financing Agreement or the Issuer Regulatory Agreement or any Supplement or exhibit hereto or thereto. Section 103. Content of Certificates and Opinions. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture or the Financing Agreement shall include (a) a statement that the person or persons making or giving such certificate or opinion have read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) 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 such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of the signers, such condition or covenant has been complied with. Any such certificate or opinion made or given by an officer of the Issuer 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 opinion or representations with respect to the matters upon which his or her certificate or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should have known that the same were erroneous. Any such certificate or opinion made or given by counsel may be based, insofar as it relates to factual matters (with respect to which information is in the possession of the Issuer), upon the certificate or opinion of or representations by an officer of the Issuer, unless such counsel knows that the certificate or opinion or representations with respect to the matters upon which his or her opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should have known that the same were erroneous. ARTICLE II THE BONDS Section 201. Terms of the Bonds. Bonds may not be issued under this Indenture except in accordance with this Article. The total principal amount of Bonds that may be issued hereunder is expressly limited to $ , consisting of Bonds in the aggregate principal amount of$ designated "County of Contra Costa Multifamily Housing Refunding Revenue Bonds (GNMA Collateralized - Crescent Park Apartments Project) 1994 Series B"; and Bonds in the aggregate principal amount of$ designated "County of Contra Costa Multifamily Housing Revenue Bonds (GNMA Collateralized - Crescent Park Apartments Project) Taxable 1994 Series B-T." The Bonds shall be issued as fully registered bonds, without coupons, in Authorized Denominations, and the Bonds of each Series shall bear the prefix "A" or "A-T," as appropriate, and shall be numbered separately from 1 upward in the order of their issuance. SF2-27261.2 9 40511-90-MS 1-03/11/94 The Series B Bonds shall mature on the dates and in the principal amounts, and shall bear interest at the rates per annum, set forth in the following table: Maturity Principal Interest Date Amount Rate , 2004 $ , 2034 The Series B-T Bonds shall mature on , 19 , and shall bear interest at the rate of per annum. The Bonds shall be dated as of 1, 1994. Except as otherwise provided in this Section, each Bond shall bear interest (computed on the basis of a 360-day year of twelve 30-day months and payable on each Interest Payment Date) from the later of its date or the most recent Interest Payment Date to which interest has been paid or duly provided for; except that when there is no existing default in the payment of interest on the Bonds, each Bond authenticated after the Regular Record Date for any Interest Payment Date but prior to such Interest Payment Date shall bear interest from such Interest Payment Date. The person in whose name any Bond is registered at the Regular Record Date with respect to an Interest Payment Date shall be entitled to receive the interest payable on such Interest Payment Date (unless such Bond has been called for redemption on a redemption date which is prior to such Interest Payment Date) notwithstanding the cancellation of such Bond upon any registration of transfer or exchange thereof subsequent to such Regular Record Date and prior to such Interest Payment Date; provided, however, that if and to the extent the Issuer shall default in the payment of the interest due on any Interest Payment Date, such defaulted interest shall be paid as provided in the next paragraph. Any interest on any Bond which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Bondholder on the relevant Regular Record Date by virtue of having been such Bondholder. The Trustee shall elect to make payment of any Defaulted Interest to the persons in whose names the Bonds (or their respective predecessor Bonds) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Trustee shall determine the amount of Defaulted Interest proposed to be paid on each Bond and the date of the proposed payment, and shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than fifteen nor less than ten days prior to the date of the proposed payment, and shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first class, postage prepaid, to each Bondholder at its address as it appears in the Bond Register not less than ten days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the persons in whose names the Bonds (or their respective predecessor Bonds) are registered on such Special Record Date. Payment of principal of, premium (if any) and interest on the Bonds shall be made in such coin or currency of the United States as at the time of payment is legal tender for payment of private and public debts. Principal of and premium (if any) on the Bonds shall be paid only upon presentation and surrender thereof for cancellation at the Trust Office of the Trustee. Payment of the interest on and principal of each Bond shall be made by check or draft mailed to the person entitled thereto at its address as it appears on the Bond Register. Upon the request of a registered holder of at least $1,000,000 principal amount of Outstanding Bonds of any Series, all payments of interest on the Bonds of such Series owned by such registered holder, shall be paid by wire transfer of immediately available funds to an account designated by such registered holder. SF2-27261.2 10 40511-90-MS1-03/11/94 CUSIP number identification with appropriate dollar amounts for each CUSIP number must accompany all payments of principal, interest or premium, whether by check or by wire transfer. The Bonds shall be subject to redemption as provided in Article III hereof. Section 202. Authentication, Sale and Delivery of the Bonds. Upon execution and delivery of this Indenture, the Trustee shall authenticate the Bonds and deliver them to the Underwriters, but only upon receipt of the payment to the Trustee for the account of the Issuer of the principal amount of the Bonds plus accrued interest, if any, thereon to the date of delivery and upon receipt of the following: (1) An executed copy of this Indenture; (2) A request and authorization from an Authorized Issuer Representative to the Trustee requesting and authorizing the Trustee (i) to authenticate the Bonds; (ii) to deliver the Bonds as authenticated, upon receipt of the purchase price therefor; and (iii) to deposit the proceeds from the sale of the Bonds, including any premium thereon, and the moneys to be paid by the Borrower as provided in Article IV of this Indenture; (3) A duly certified copy of the Bond Resolution; (4) An executed copy of a document indicating FHA's commitment to insure the Mortgage under Section 241(f) of the National Housing Act; (5) A GNMA Security in the principal amount of$ (6) An executed copy of the Issuer Regulatory Agreement in form satisfactory for recording; (7) An executed copy of the Financing Agreement; (8) An executed copy of the Investment Agreement; and (9) A copy of final cash flow statements prepared by Arter Hadden Haynes &Miller. Section 203. Limited Obligations. The Bonds and the interest thereon are limited obligations of the Issuer, payable solely from the Revenues and the Trust Estate, which are hereby specifically assigned and pledged to such purposes in the manner and to the extent provided herein. Neither the United States of America, HUD, FHA, any other agency of the United States of America, GNMA, the State, nor any political subdivision thereof(except the Issuer, to the limited extent set forth in the first and last sentences of this Section) 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 none of the Bonds or 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 provision whatsoever. The Bonds and the premium, if any, and interest thereon shall not constitute a debt, indebtedness or pledge or a loan of the faith or credit or the taxing power of the Issuer, the State, or any political corporation, subdivision or agency thereof within the meaning of any constitutional or statutory provision. The Bonds are not general obligations of the Issuer and shall not be payable from the general revenues of the Issuer, and neither the Issuer nor the State or any political corporation, subdivision, or agency thereof shall be liable thereon, nor in any event shall the Bonds be payable out of any funds or properties other than those of the Issuer specifically pledged therefor. No holder of any Bonds has the right to compel any SF2-27261.2 1 1 40511-90-MSI-03/11/94 exercise of the taxing power of the Issuer to pay the Bonds or the interest or the redemption premium, if any, thereon, and the Bonds shall not be construed to create any moral obligation on the part of the Issuer with respect to the payment of the Bonds. No recourse shall be had for the payment of the principal of, premium, if any, or interest on any of the Bonds or for any claim based thereon or upon any obligation, covenant or agreement in this Indenture contained, against the Issuer, any past, present or future member of its Governing Body, its officers, attorneys, accountants, financial advisors, agents or staff, or the officers, attorneys, accountants, financial advisors, agents or staff of any successor public entity, as such, either directly or through the Issuer or any successor public entity, under any rule of law or penalty or otherwise, and all such liability of the Issuer, any member of its Governing Body and its officers, attorneys, accountants, financial advisors, agents and staff is hereby, and by the acceptance of the Bonds, expressly waived and released as a condition of, and in consideration for, the execution of this Indenture and the issuance of any of the Bonds. It is recognized that notwithstanding any other provision of this Indenture, neither the Borrower, the Trustee nor any Bondholder shall look to the Issuer for damages suffered by the Borrower, the Trustee or such Bondholder as a result of the failure of the Issuer to perform any covenant, undertaking or obligation under this Indenture, the Financing Agreement, the Bonds, the Issuer Regulatory Agreement, any of the FHA Loan Documents or any of the other documents referred to herein, or as a result of the incorrectness of any representation made by the Issuer in any of such documents, nor for any other reason. Although this Indenture recognizes that such documents shall not give rise to any pecuniary liability of the Issuer, nothing contained in this Indenture shall be construed to preclude in any way any action or proceeding (other than that element of any action or proceeding involving a claim for monetary damages against the Issuer) in any court or before any governmental body, agency or instrumentality or otherwise against the Issuer or any of its officers or employees to enforce the provisions of any of such documents which the Issuer is obligated to perform and the performance of which the Issuer has not assigned to the Trustee or any other person. Section 204. Execution. The Bonds shall be executed in the name of the Issuer and on its behalf by the manual or facsimile signature of the Chair of the Board of Supervisors of the Issuer, and the official seal of the Issuer or a facsimile thereof shall be impressed or otherwise reproduced thereon and attested by the manual or facsimile signature of the County Administrator and Clerk of the Board of Supervisors of the Issuer. In case any officer whose signature or 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 he or she had remained in office until delivery. Section 205. Authentication of Bonds Required. Only such Bonds as shall have endorsed thereon a certificate of authentication substantially in the form set forth in Exhibit A hereto manually executed by the Trustee shall be entitled to any right or benefit under this Indenture. No Bond shall be valid or obligatory for any purpose unless and until such certificate of authentication shall have been duly 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 certificate of authentication on all the Bonds. The Trustee shall not use a facsimile signature to authenticate the Bonds. Section 206. Mutilated, Lost, Stolen or Destroyed Bonds. In the event any Bond is mutilated, lost, stolen or destroyed, the Issuer may execute and, if so executed, the Trustee shall authenticate and deliver a new Bond in lieu of such mutilated, lost, stolen or destroyed Bond, of like Series, maturity and denomination as that mutilated, lost, stolen or destroyed. Any mutilated Bond shall first be surrendered to the Trustee; and in the case of any lost, stolen or destroyed Bond, there shall first be furnished to the Trustee evidence of such loss, theft or destruction satisfactory to it together with indemnity satisfactory to it. In the event any such Bond shall have matured, instead of issuing a duplicate Bond the Trustee shall pay the same without surrender thereof. The Trustee may charge the registered owner of such Bond with its reasonable fees and expenses. SF2-27261.2 12 40511-90-MS 1-03/11/94 • 0 Section 207. Transfer and Exchange of Bonds; Persons Treated as Holders. The Trustee is hereby appointed Bond Registrar and shall cause a register (herein sometimes referred to as 'Bond Register") to be kept for the registration of Bonds and the registration of transfers of Bonds. The registration of any Bond may be transferred only upon an assignment duly executed by the registered holder or its duly authorized representative in such form as shall be satisfactory to the Trustee, and upon surrender of such Bond to the Trustee for cancellation. Whenever any Bond or Bonds shall be surrendered for registration of transfer, the Issuer shall execute and the Trustee shall authenticate and deliver to the transferee a new Bond or Bonds of like Series and maturity of Authorized Denomination or Denominations and for the amount of such Bond or Bonds so surrendered. Any Bond may be exchanged at the office of the Trustee, for a new Bond or Bonds, of the same Series and maturity, of any Authorized Denomination or Denominations and for the aggregate amount of such Bond then remaining Outstanding. Notwithstanding the foregoing, no Bonds may be transferred or exchanged in violation of any applicable federal or state securities laws. In all cases in which the registration of Bonds shall be transferred or Bonds shall be exchanged hereunder, the Trustee may make a charge sufficient to reimburse it for any tax, fee or other governmental charge required to be paid with respect to such transfer or exchange. The Trustee shall not be required to transfer any Bond after the mailing of notice calling such Bond for redemption has been made, or during the period of fifteen (15) days next preceding mailing of a notice of redemption of any Bonds. The person in whose name any Bond shall be registered shall be deemed and regarded as the absolute owner thereof for all purposes and payment of or on account of the principal of and premium and interest on any such Bond shall be made only to or upon the order of the registered holder thereof, or its legal representative, and neither the Issuer nor the Trustee shall be affected by any notice to the contrary. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums to be paid. Section 208. Temporary Bonds. Until definitive Bonds are ready for delivery, there may be executed, and upon the written request of the Issuer the Trustee shall authenticate and deliver, in lieu of definitive Bonds, one or more temporary typewritten, printed, engraved, or lithographed Bonds, in any appropriate denomination, in fully registered form, and in substantially the tenor set forth in Exhibit A hereto, and with such appropriate omissions, insertions, and variations as may be required. If temporary Bonds shall be issued, the Issuer, at the expense of the Borrower, shall cause the definitive Bonds to be prepared and to be executed and delivered to the Trustee, and the Trustee, upon presentation to it at its Trust Office of any temporary Bond, shall cancel the same and authenticate and deliver in exchange therefor, without charge to the holder thereof, a definitive Bond or Bonds of an equal aggregate principal amount, of the same Series and maturity and bearing interest at the same rate as the temporary Bond surrendered. Until so exchanged, the temporary Bonds shall in all respects be entitled to the same benefit and security of this Indenture as the definitive Bonds to be issued and authenticated hereunder. Interest on temporary Bonds, when due and payable, if the definitive Bonds shall not be ready for exchange, shall be paid by check or draft mailed to the registered owners thereof. Section 209. Cancellation and Destruction of Bonds. All Bonds which have been surrendered for payment or redemption, for registration of transfer or for exchange pursuant to the provisions hereof shall be cancelled and destroyed by the Trustee and shall not be reissued, and a counterpart of the certificate of destruction evidencing such destruction shall be furnished by the Trustee to the Issuer and the Borrower. Any Bonds so cancelled may be retained by the Trustee for such period of time as the Trustee may determine and shall be destroyed by the Trustee at the end of such period. Any Bond so cancelled shall thereafter no longer be considered Outstanding for any purpose of this Indenture. Section 210. Form of the Bonds. The Bonds shall be issued substantially in the form set forth in Exhibit A attached hereto and made a part hereof; in each case with such variations, omissions and insertions SF2-27261.2 13 40511-90-MS1-03/11/94 as are permitted or required by this Indenture. If appropriate, any portion of the text of any Bond as shown on said Exhibit A may be printed on the back of such Bond, and in such case there shall be inserted in place of such text a legend referring thereto to the following effect: "Reference is hereby made to the further provisions of this Bond set forth on the back hereof, and such further provisions are hereby incorporated by this reference as if set forth here in full." Section 211. Book-Entry System. (a) Notwithstanding any of the foregoing provisions of this Article II or other provisions of this Indenture, the Bonds initially shall be issued in the form of a single authenticated fully registered bond for each stated maturity of each Series of the Bonds, representing the aggregate principal amount of the Bonds of such maturity and Series; and the Bonds shall be governed by the provisions of this Section 211. For purposes of this Section, the term "DTC" means The Depository Trust Company and its successors and assigns; the term "Participants" means those broker-dealers, banks and other financial institutions from time to time for which DTC holds the Bonds as securities depository; and the term "Representation Letter" means the Letter of Representations from the Issuer and the Trustee to DTC with respect to the Bonds, and any similar letter or other agreement with any successor depository for the Bonds. (b) Except as provided in this paragraph (b) and in paragraph (d) of this Section, all of the Outstanding Bonds shall be registered in the registration books kept by the Bond Registrar in the name of Cede & Co., as nominee of DTC. With respect to the Bonds registered in the name of Cede & Co., as nominee of DTC, the Issuer, the Trustee, the Bond Registrar, any paying agent and the Borrower shall have no responsibility or obligation to any Participant or to any person on behalf of which a Participant holds an interest in the Bonds. Without limiting the immediately preceding sentence, the Issuer, the Trustee, the Bond Registrar, any paying agent and the Borrower shall have no responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co. or any Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any Participant or any other person, other than a Bondholder, as shown in the registration books kept by the Bond Registrar, of any notice with respect to the Bonds, including any notice of redemption, or (iii)the payment to any Participant or any other person, other than a Bondholder, as shown in the registration books kept by the Bond Registrar, of any amount with respect to principal of, premium if any, or interest on the Bonds. The Issuer, the Trustee, the Bond Registrar, any paying agent and the Borrower may treat and consider the person in whose name each Bond is registered in the registration books kept by the Bond Registrar as the holder and absolute owner of such Bond for the purpose of payment of principal, premium and interest with respect to such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever. The Trustee shall pay all principal of, premium, if any, and interest on the Bonds only to or upon the order of the respective Bondholders, as shown in the registration books kept by the Bond Registrar as provided in Section 207, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the Issuer's obligations with respect to payment of principal of, premium, if any, and interest on the Bonds to the extent of the sum or sums so paid. No person other than a Bondholder, as shown in the registration books kept by the Bond Registrar, shall receive a certificated Bond evidencing the obligation of the Issuer to make payments of principal, premium, if any, and interest pursuant to the Indenture. Upon delivery by DTC to the Issuer or 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 herein with respect to Regular Record Dates, the words "Cede & Co." in this Indenture shall refer to such new nominee of DTC. (c) The delivery by the Issuer of the Representation Letter shall not in any way limit the provisions of paragraph (b) of this Section or in any other way impose upon the Issuer any obligation whatsoever with respect to persons having interests in the Bonds other than the Bondholders, as shown on the registration books kept by the Bond Registrar. The Trustee shall take all action necessary for all representations of the Issuer in the Representation Letter with respect to the Trustee to be complied with at all times. (d) DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving reasonable written notice to the Issuer and the Trustee and discharging its responsibilities with respect thereto under applicable law. With the consent of the Issuer, the Borrower, in its sole discretion and without the consent of any other person, may terminate the services of DTC with respect to the Bonds. Upon the discontinuance or termination of the services of DTC with respect to the Bonds, unless a substitute SF2-27261.2 14 40511-90-M S 1-03/11/94 securities depository is appointed to undertake the functions of DTC hereunder, the Issuer is obligated to deliver Bond certificates at the expense of the beneficial owners of the Bonds, as described in the Indenture, and the Bonds shall no longer be restricted to being registered in the name of Cede & Co. as nominee of DTC, but may be registered in whatever name or names Bondholders transferring or exchanging Bonds shall designate, in accordance with the provisions of the Indenture. (e) Notwithstanding any other provision of the Indenture to the contrary, so long as any Bond is registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal or, premium, if any, and interest on such Bond and all notices with respect to such Bond shall be made and given, respectively, in the manner provided in the Representation Letter. Bondholders shall have no lien or security interest in any rebate or refund paid by DTC to the Trustee which arises from the payment by the Trustee of principal of or interest on the Bonds in immediately available funds to DTC. (f) The Trustee is hereby authorized and requested to execute and deliver the Representation Letter and, in connection with any successor nominee for DTC or any successor depository, enter into comparable arrangements, and shall have the same rights with respect to its actions thereunder as it has with respect to its actions under this Indenture. ARTICLE III REDEMPTION OF BONDS Section 301. Redemption of the Bonds. The Bonds are subject to redemption prior to maturity, as provided in the form of the Bonds and as provided in this Article III. Section 302. Special Mandatory Redemption. The Bonds are subject to redemption, in whole or in part, at any time on the earliest practical date, at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date: (a) to the extent that any payment on the GNMA Security exceeds a level payment of principal and interest thereon as a result of payments representing (i) casualty insurance proceeds or condemnation awards applied to the prepayment of the Mortgage Loan following a partial or total destruction or condemnation of the Project, (ii) mortgage insurance proceeds or other amounts received with respect to the Mortgage Loan following the acceleration thereof upon the occurrence of an event of default thereunder, (iii)a prepayment of the Mortgage Loan required by the applicable rules, regulations, policies and procedures of HUD or GNMA, or (iv) a prepayment if HUD determines that prepayment will avoid a Mortgage Insurance claim and is therefore in the best interest of the Federal Government; or (b) to the extent that the Trustee receives payments on the GNMA Security representing prepayments on the Mortgage Loan made by the Borrower without notice or prepayment penalty while under the supervision of a trustee in bankruptcy. If less than all of the Outstanding Bonds shall be called for redemption pursuant to this Section, an amount of Bonds of each maturity shall be redeemed so that the resulting decrease in the debt service on the Bonds for the six-month period ending on each Interest Payment Date is proportional, as nearly as practicable, to the decrease in the payments on the GNMA Security in each such six-month period; provided that no Series B Bonds shall be redeemed pursuant to this Section while any Series B-T Bonds remain Outstanding. The Trustee agrees to notify the Rating Agency promptly after it receives any partial payment of the GNMA Security in excess of regularly scheduled payments thereon. Section 303. Scheduled Mandatory Redemption. The Term Bonds and the Series B-T Bonds are subject to scheduled mandatory redemption on the respective Interest Payment Dates set forth in the SF2-27261.2 15 40511-90-MS 1-03/11/94 schedules below, at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date, in the following principal amounts, subject to pro-rata reduction of such scheduled mandatory redemption payments to the extent that such Term Bonds and Series B-T Bonds are redeemed prior to maturity otherwise than pursuant to such scheduled mandatory redemption: Series B Bonds Due , 2034 Principal Principal Redemption Dates Amount Redemption Dates Amount * Maturity Series B-T Bonds Due , 19_ Principal Principal Redemption Dates Amount Redemption Dates Amount * Maturity If less than all of the Term Bonds or Series B-T Bonds are to be redeemed other than in accordance with the scheduled mandatory redemption provisions of this Section 303, the Bonds so to be redeemed shall be selected by maturity and the scheduled mandatory redemption requirements for each maturity described above shall be adjusted so that the resulting decrease in debt service on the Bonds (including scheduled mandatory redemption payments) during each six-month period commencing on each Interest Payment Date is proportional, as nearly as practicable, to the decrease in the payments on the GNMA Security during each such six-month period, and by lot within a maturity. Section 304. Optional Redemption. The Bonds are also subject to redemption on any date on or after April 20, 2004, in whole or in part, from payments on the GNMA Security representing voluntary prepayments on the Mortgage Loan, or otherwise at the option of the Issuer from the proceeds of refunding bonds or other funds of the Issuer, at the redemption prices set forth in the table below, expressed as SF2-27261.2 16 40511-90-MSI-03/11/94 percentages of the principal amount of the Bonds to be redeemed, plus accrued interest to the redemption date, as follows: Redemption Dates Redemption Prices April 20, 2004 through April 19, 2005 105% April 20, 2005 through April 19, 2006 104 April 20, 2006 through April 19, 2007 103 April 20, 2007 through April 19, 2009 102 April 20, 2009 through April 19, 2010 101 April 20, 2010 and thereafter 100 In the event of an optional redemption of Bonds on a date on which the redemption price includes a redemption premium, the Bonds shall not be redeemed unless the Trustee shall have either (i) (A) had in its possession, for period of at least 91 days prior to the redemption date, an amount equal to the prepayment premium on the Bonds, and (B) received a certificate of an Authorized Borrower Representative to the effect that the Borrower has neither commenced a voluntary case under Title 11 of the United States Code as from time to time in effect nor authorized by appropriate proceedings of its board of directors the commencement of such a voluntary case, or (ii) received an opinion of Bond Counsel or bankruptcy counsel acceptable to the Trustee to the effect that the sums to be utilized to pay the prepayment premium are not subject to the provisions of Sections 362(a), 547 and 550 of the Federal Bankruptcy Code. Section 305. Selection of Bonds for Redemption. The Bonds may be redeemed only in Authorized Denominations. If less than all of the Bonds are redeemed, in the case of redemption pursuant to Section 303, Bonds shall be redeemed in accordance with the respective schedules set forth in such Section. In the event the Bonds of any Series are redeemed in part and not in whole other than in accordance with Section 303, the Bonds of such Series to be redeemed shall be selected by maturity and the scheduled mandatory redemption requirements for each maturity described in Section 303 above shall be adjusted so that the resulting decrease in debt service on the Bonds (including scheduled mandatory redemption payments) during each six-month period commencing on each Interest Payment Date is proportional, as nearly as practicable, to the decrease in the payments on the GNMA Security during each such six-month period. All Bonds to be redeemed within the same maturity shall be selected by lot. Except as otherwise described above, any Bonds to be called for redemption shall be selected by the Trustee in such manner as the Trustee in its absolute discretion shall determine, such selection to be made prior to the date on which notice of such redemption must be given. Bonds shall be redeemed as soon as practicable after an event causing a redemption shall have occurred. If it is determined that less than all of the principal amount represented by any Bond is to be called for redemption, then, following notice of intention to redeem such principal amount, the holder thereof shall surrender such Bond to the Trustee on or before the applicable redemption date for (a) payment on the redemption date to such Bondholder of the redemption price of the amount called for redemption and (b) delivery to such Bondholder of a new Bond or Bonds of such Series in an aggregate principal amount equal to the unredeemed balance of such Bond, which shall be an Authorized Denomination. A new Bond of such Series representing the unredeemed balance of such Bond shall be issued to the registered owner thereof, without charge therefor. If the registered owner of any Bond or integral multiple of the Authorized Denomination selected for redemption shall fail to present such Bond to the Trustee for payment and exchange as aforesaid, such Bond shall, nevertheless, become due and payable on the date fixed for redemption to the extent of the amount called for redemption (and to that extent only). Section 306. Notice of Redemption. Except as provided below, notice of redemption shall be given by registered mail or other secure means, postage prepaid, to the registered holder of each Bond to be SF2-27261.2 17 40511-90-MSI-03/11/94 redeemed, at the address of such registered holder shown on the Bond Register. All such redemption notices shall be given not less than 30 days nor more than 60 days prior to the date fixed for redemption, except that any notice of redemption following receipt of casualty insurance proceeds or condemnation awards shall be given no less than 15 days prior to the date fixed for redemption. No redemption notices shall be given prior to receipt by the Trustee of sufficient funds (together with investment earnings thereon from the date of deposit to the date fixed for redemption) to redeem all Bonds subject to such notice, unless the Trustee shall have determined that it will have available, as a result of receipt of proceeds of refunding obligations, an amount sufficient to redeem such Bonds. Each notice shall specify the CUSIP numbers and the Series and certificate numbers of the Bonds to be redeemed and the principal amount of each Bond being redeemed (if the Bonds of any Series are to be redeemed in part), the date of issue of the Bonds as originally issued, the complete official name of the Bonds including the series designation, the redemption date, the redemption price and the place or places where amounts due upon such redemption will be payable, the name, address and telephone number of the Trustee together with a contact person of the Trustee, the interest rate, the maturity date on the Bonds to be redeemed together with the date of the redemption notice; provided, however, that any errors in the CUSIP numbers set forth in such notice shall not affect the validity of any redemption. Such notice shall further state that payment of the applicable redemption price plus accrued interest to the date fixed for redemption will be made upon presentation and surrender of the Bonds. A second notice of redemption shall be given within 60 days after the redemption date in the manner described above to the registered holder of redeemed Bonds which have not been presented for payment within 30 days after the redemption date. Neither failure to give notice by mailing to the registered owner of any Bond designated for redemption nor any defect in such notice shall affect the validity of the proceedings for the redemption of any Bond with respect to which no such failure or defect has occurred nor shall failure to give or defect in the second notice described above constitute a defect in the notice of redemption of any Bond. Notice of such redemption shall also be sent by registered mail, or other secure means, postage prepaid, to certain municipal registered Securities Depositories (described below) which are known to the Trustee to be holding Bonds, and to at least two of the national Information Services (described below) that disseminate securities redemption notices, at least 35 days but not more than 65 days prior to the redemption date (except in the case of redemption following receipt of casualty insurance proceeds or condemnation awards); provided, however, that neither the failure to receive such notice or any defect in any notice so mailed shall affect the sufficiency of the proceedings for the redemption of any Bonds. Securities Depositories include The Depository Trust Company, 711 Stewart Avenue, Garden City, New York 11530; Midwest Securities Trust Company, Capital Structures-Call Notification, 440 South LaSalle Street, Chicago, Illinois 60605; Philadelphia Depository Trust Company, Reorganization Division, 1900 Market Street, Philadelphia, Pennsylvania 19103, Attention: Bond Department; 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. 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 Services," 55 Broad Street, 28th 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 Corporation, "Called Bond Record," 25 Broadway, New York, New York 10004; or, in accordance with the then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other services providing information with respect to called bonds, or any other such services as the Issuer may designate in writing to the Trustee. Notwithstanding the foregoing or any other provision of this Indenture, in the event of a redemption by reason of the Trustee receiving payments on the GNMA Security representing payments on the Mortgage Loan made by the Borrower without notice or prepayment penalty while under the supervision of a trustee in bankruptcy, notice of redemption of Bonds shall not be required if the circumstances do not permit the Trustee to give such notice in accordance with the preceding paragraphs of this Section. SF2-27261.2 18 40511-90-MSI-03/11/94 Notice of redemption having been given in the manner provided above (or not required as provided in the immediately preceding paragraph), and money sufficient for the redemption being held by the Trustee for that purpose, the Bonds so called for redemption shall become due and payable on the redemption date, and interest thereon shall cease to accrue; and the holders of the Bonds so called for redemption shall thereafter no longer have any security or benefit under this Indenture except to receive payment of the redemption price for such Bonds. Moneys deposited with and held by the Trustee due to non-presentment of Bonds on any redemption date shall be retained by the Trustee for a period of at least one year after the final maturity date of the Bonds, or the maximum amount of time allowed under the laws of the State. ARTICLE IV FUNDS; INVESTMENTS Section 401. Establishment of Funds. The following funds and accounts shall be established and maintained by the Trustee under this Indenture for the benefit of the Bonds: (a) Acquisition Fund; (b) Bond Fund, including therein a Sinking Fund Account; (c) Expense Fund; (d) Costs of Issuance Fund; and (e) Rebate Fund. The funds and accounts created under this Indenture shall be held in trust in the custody of the Trustee with the corporate trust department of the Trustee. The Issuer authorizes and directs the Trustee to withdraw moneys from said funds and accounts for the purposes specified herein, which authorization and direction the Trustee hereby accepts. All moneys required to be deposited with or paid to the Trustee under any provision of this Indenture shall be held by the Trustee in trust and shall, while held by the Trustee, constitute a part of the Trust Estate and be subject to the lien hereof. Section 402. Application of Bond Proceeds and Other Amounts. Upon issuance of the Bonds of each Series, the proceeds of such Series and other amounts received in connection with such issuance shall be deposited as follows: (a) the interest accrued on such Series of Bonds between the date of such Bonds and the date of delivery thereof($ )shall be deposited in the Bond Fund; (b) $ of the Series B Bond proceeds shall be deposited in the Acquisition Fund; (c) $ of the Series B Bond proceeds shall be deposited in the Costs of Issuance Fund; (d) $ of the Series B Bond proceeds shall be transferred to the Borrower; (e) $ of the Series B-T Bond proceeds shall be deposited into the Costs of Issuance Fund. Section 403. Acquisition Fund. Amounts shall be deposited in the Acquisition Fund as provided in subsection (a) of this Section and shall be applied as provided in subsections (b) through (d) of this SF2-27261.2 19 40511-90-MSI-03/11/94 • • Section; provided that no amounts shall be transferred or disbursed from the Acquisition Fund until the Trustee shall have received evidence of the recordation of the Issuer Regulatory Agreement, which may be telephonic notice from the title company responsible for such recordation. (a) The Trustee shall deposit into the Acquisition Fund in the amount of the amounts required to be deposited pursuant to Section 402 hereof. (b) On the date of issuance of the Bonds, the Trustee shall acquire the GNMA Security from the Lender for the account of the Issuer and shall remit to the Lender, but only to the extent of available funds, an amount not to exceed the principal amount of the GNMA Security, plus accrued and unpaid interest thereon, if any. Section 404. Bond Fund. (a) The Trustee shall deposit into the Bond Fund(i) the amounts required by Section 402; (ii)all income, revenue, proceeds and other amounts received from or in connection with the GNMA Security; and(iii)any other amounts received by the Trustee which are subject to the lien and pledge of this Indenture. The GNMA Security shall be held for the account of the Bond Fund and registered in the name of the Trustee so that the Trustee maintains a first perfected security interest in such GNMA Security at all times. (b) At the earliest practicable time, the Trustee shall give immediate telephonic notice(to be followed by written notice on the 16th day of any month) to GNMA of the failure of the Lender to make any payment on the GNMA Security on the 15th day of such month(or the next succeeding Business Day if the 15th day is not a Business Day) and demand payment under the terms of GNMA's guaranty thereof. (c) The Trustee shall apply amounts in the Bond Fund(other than amounts in the Sinking Fund Account)on each Interest Payment Date (or any other date on which Bonds are to be redeemed), in the following order of priority: (i) first to pay interest on the Bonds and then to pay the principal of all Bonds maturing on such date and the redemption prices of all Bonds required to be redeemed on such date; (ii) Amounts on deposit in the Bond Fund shall be transferred to the Expense Fund in an amount sufficient to pay the expenses set forth in Section 405(ii)and(iii); (iii) Amounts on deposit in the Bond Fund shall be transferred to the Expense Fund an amount or amounts sufficient to pay other expenses as required in Section 405 hereof, provided that amounts in the Bond Fund shall never be reduced below$5,000; and (iv) Notwithstanding the provisions of clause (i)above, amounts held in the Sinking Fund Account shall be exclusively used to pay the principal of the Bonds maturing on , 2004 or in a manner which results in a discharge of the Indenture pursuant to Article IX. (d) The Trustee shall also apply moneys in the Bond Fund which are derived from payments on the GNMA Security that exceed level payments of principal of and interest on the Mortgage Loan, to the redemption of Bonds in accordance with the redemption provisions provided herein. (e) All scheduled principal payments received by the Trustee on the GNMA Security on or prior to ,2004, shall be deposited by the Trustee into the Sinking Fund Account until the amount therein equals $ and shall be used to pay the principal of the Series B Bonds maturing on ' 2004. Any investment earnings on money held in the Sinking Fund Account shall be deposited in the Bond Fund. (f) If any GNMA Security is in book-entry only form, then the following shall apply: Sn27261.2 20 40511-e0-Msi-03/11/94 • • (i) the GNMA Security must be registered in the name of the Trustee at the depository for such book-entry designation at the time of purchase of the GNMA Security by the Trustee and the Trustee shall have a first-lien position perfected security interest in the GNMA Security; (ii) the Trustee shall be or shall become a participant in the Participants Trust Co. ("PTC") or shall have entered into a custody agreement with respect to the GNMA Certificate with a participant of PTC; (iii) the Trustee or the participant acting on behalf of the Trustee (in either case, the 'Receiving participant") shall establish a limited purpose account with PTC for this Indenture to be called the "Limited Purpose Account"; (iv) the Receiving Participant shall deliver an irrevocable instruction to PTC to the effect that all fees arising in connection with the Limited Purpose Account are to be charged to another account maintained by PTC for the Receiving Participant; (v) PTC shall deliver a certificate to the Receiving Participant acknowledging that Receiving Participant will not charge the specified Limited Purpose Account at all times that the instruction in paragraph (iv) above remains in effect (with exceptions only for mistake or to secure and repay any advance of principal and interest made by PTC); (vi) there must be written evidence from PTC or the Receiving Participant that PTC has made an appropriate entry in its records of the transfer of such book-entry security to the Receiving Participant's account; and (vii) the GNMA Security has been transferred and received into the Limited Purpose Account free of any payment obligation other than the Trustee's obligation to pay the Lender for the GNMA Security. The Trustee may rely on representations made by the Lender regarding compliance with the foregoing requirements. The provisions of paragraphs (iii), (iv), (v) and (vii) shall not apply if the Trustee receives written evidence from PTC and the Receiving Participant that PTC will not offset its fees against the Receiving Participant's custodial account. Section 405. Expense Fund. The Trustee shall deposit into the Expense Fund the amounts required by Section 404. The Trustee shall apply moneys on deposit in the Expense Fund solely for the following purposes, on each Interest Payment Date, in the following order of priority: (i) to transfer money to the Bond Fund on any Interest Payment Date to the extent necessary to pay debt service on the Bonds on such date but only if there are insufficient moneys held to the credit of the Bond Fund on that date; (ii) to transfer to the Rebate Fund the Rebate Amount (if any); (iii) to pay one-half of the annual administrative fees and expenses of the Trustee in a semiannual amount equal to $ ; (iv) to pay the fees and expenses of the Rebate Analyst in an amount not to exceed $ in any five year period in which calculations are required to be made by the Rebate Analyst pursuant to the Tax Certificate; and [(v) to pay one-half the annual fee of the Issuer in a semiannual amount equal to one-sixteenth of one percent of the initial aggregate principal amount of the Bonds issued.] SF2-27261.2 21 40511-90-MSI-03/11/94 • • In the event moneys in the Expense Fund are not sufficient to pay the fees and expenses of the Trustee, the Rebate Analyst or the Issuer, the Trustee shall seek payment of any such deficiency from the Borrower. Section 406. Rebate Fund. The purpose of the Rebate Fund is to facilitate compliance with section 148(f) of the Code. Any Rebate Amount deposited in such Fund shall be for the sole benefit of the United States of America and shall not be subject to the lien of the Indenture or to the claim of any other person, including, without limitation, the Bondholders and the Issuer. The requirements of this Section 406 are subject to, and shall be interpreted in accordance with, section 148(f) of the Code and the Treasury regulations applicable thereto (the "Regulations"), and shall apply except to the extent (i) the Trustee is furnished with an opinion of Bond Counsel or other satisfactory evidence that the Regulations contain an applicable exception; or (ii) the Trustee in its judgment determines that such requirements will diminish the security of the Bondholders; provided that in the case of clause (ii), the Trustee shall obtain an opinion of Bond Counsel to the effect that failing to take such action would not adversely affect the exclusion of interest on the Tax-Exempt Bonds from federal income taxation. Promptly upon the close of each Bond Year and also upon the retirement of the Bonds, the Trustee shall provide the Borrower with a statement of earnings on funds and accounts held under this Indenture during any period not covered by a prior statement, and a final statement or a supplement thereto covering the period ending , 2034. Each statement shall include the purchase and sale prices of each investment, if any, (including any commission paid thereon which shall be separately stated if such information is available), the dates of each investment transaction, information as to whether such transactions were made at a discount or premium, and such other information known or reasonably available to the Trustee as the Borrower or Rebate Analyst shall reasonably require. If so requested by the Owner at any time, the Trustee shall create within the Bond Fund separate accounts for purposes of accounting for earnings on amounts attributable to the Series B Bonds and the Series B-T Bonds, respectively. The Trustee shall promptly transfer to the Rebate Fund each amount required to be deposited therein pursuant to the Tax Certificate, first from earnings in the Acquisition Fund, and second, to the extent amounts in the Acquisition Fund are insufficient, from revenues which have been deposited into the Bond Fund and earnings thereon. To the extent that the amount to be deposited into the Rebate Fund exceeds the amount which can be transferred from such Funds, the Trustee shall promptly notify the Borrower and an amount equal to such deficiency shall be paid promptly by the Borrower to the Trustee for deposit into the Rebate Fund. The Borrower and the Trustee, on behalf of the Issuer, shall keep such records as will enable them to fulfill their respective responsibilities under this Section 406 and section 148(f) of the Code, and the Borrower (or the Trustee upon the written request of the Issuer) shall engage a Rebate Analyst as may be necessary in connection with such responsibilities. The fees and expenses of the Rebate Analyst shall be paid by the Trustee pursuant to Section 405(iv)hereof. For purposes of the computation of the Rebate Amount required under the Tax Certificate, the Trustee shall make available to the Borrower and the Issuer during normal business hours all information in the Trustee's control which is necessary to such computations. Section 407. Costs of Issuance Fund. The Trustee shall deposit in the Costs of Issuance Fund the amounts set forth in Section 402 hereof and shall pay Costs of Issuance upon the written direction of the Issuer, which Costs of Issuance shall not exceed the amounts set forth in Schedule H to the Bond Purchase Agreement. Any funds remaining in the Costs of Issuance Fund six months after the Closing Date, and not specifically committed to the payment of Costs of Issuance, shall be deposited in the Bond Fund. Section 408. Custody of Funds; Moneys Held in Trust. The funds created under this Indenture for the benefit of the Bondholders shall be held in trust by the Trustee. The Issuer hereby authorizes and directs the Trustee to withdraw moneys from the funds hereunder for the purposes specified herein, which authorization and direction the Trustee hereby accepts. All moneys required to be deposited with or paid to the Trustee under any provisions of this Article shall be held by the Trustee in trust, and except for moneys SF2-27261.2 22 40511-90-MS1-03/11/94 • • deposited with or paid to the Trustee for the redemption of the Bonds, notice of redemption of which has been duly given, or for the payment of principal and interest on Bonds which have become due at the stated maturity thereof, shall while held by the Trustee constitute part of the security for the registered owners of Outstanding Bonds, and be subject to the lien hereof. Section 409. Nonpresentment of Bonds. In the event any Bonds shall not be presented for payment when the principal thereof becomes due, either at maturity or at the date fixed for redemption thereof or otherwise, if moneys sufficient to pay such Bonds shall have been made available to the Trustee (whose duty it shall be to hold such moneys, without liability to the Issuer, any Bondholder or any other person for interest thereon) for the benefit of the registered holders thereof and shall have remained unclaimed for a period up to six months prior to the date when such moneys would escheat under applicable law after such principal or interest has become due and payable, such funds shall be paid to the Issuer; and all liability of the Trustee to the registered holders thereof for the payment of such Bonds shall forthwith cease, determine and be completely discharged; provided, however, that the Trustee, before being required to dispose of such funds as stated above, shall cause to be published once in a financial newspaper or journal of general circulation in New York, New York or San Francisco, California, notice that such moneys remain unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such moneys then remaining will be paid to the Issuer. The cost of such publication shall be paid from the unclaimed funds so held by the Trustee. The obligation of the Trustee under this Section to pay any such funds to the Issuer shall be subject to any other provisions of law applicable to the Trustee or to such funds providing other requirements for disposition of unclaimed property. Section 410. Investment of Funds. The Trustee shall invest all moneys in the Bond Fund in the Investment Agreement described in clause (iv) of the definition of Qualified Investments. Subject to the provisions of the foregoing sentence and the Tax Certificate, any moneys held as part of any fund created by this Article, including the Expense Fund, shall be invested or reinvested from time to time by the Trustee upon receipt by the Trustee of the written directions of the Borrower in Qualified Investments having a maturity not exceeding the shorter of(i) the date on which such Funds may be needed under the Indenture, or (ii) six months, in its sole discretion unless directed by the Borrower to invest such moneys in Qualified Investments specified by the Borrower, in which event it shall follow such direction. In no event shall a maturity be longer than the longest maturity of the Bonds. The investments so made shall be held by the Trustee and shall be deemed at all times to be a part of the fund in which such moneys were held; provided that for purpose of investment moneys held in any of the funds established hereunder may be commingled. The Trustee shall sell and reduce to cash a sufficient amount of such investments whenever the cash balance in any fund shall be insufficient to cover a proper disbursement therefrom. For the purpose of determining the amount in any fund, Qualified Investments (other than an Investment Agreement) credited to such fund or account shall be valued at their cost (exclusive of accrued interest after the first payment of interest following acquisition)or market value, whichever is less. The Trustee shall invest at the highest yields prudently available consistent with this Indenture. If any moneys held under this Indenture other than the Expense Fund are not invested in the Investment Agreement, such moneys shall be invested only in accordance with the written instructions of the Borrower. Section 411. Payments of Funds Upon Discharge of Lien. Upon discharge of the lien of this Indenture in accordance with Article IX hereof, any moneys remaining in any funds created by this Indenture shall be paid by the Trustee to: (a) the Lender if, upon inquiry by the Trustee (and the Trustee shall so inquire), the Lender advises the Trustee in writing that an event of default has occurred and is continuing under any of the FHA Loan Documents (and if the Lender shall fail to respond to such inquiry by the Trustee within 30 days after such inquiry the Lender shall be deemed to have stated that no such event of default has occurred and is continuing, provided that the Trustee shall notify the Lender in such inquiry of the provisions of this parenthetical clause); or (b) otherwise, to the Borrower. SF2-27261.2 23 40511-90-MSI-03/11/94 ARTICLE V GENERAL COVENANTS AND REPRESENTATIONS Section 501. Payment of Bonds; Priority of Lien. The Issuer shall promptly pay, but only out of the Revenues and the Trust Estate and not from any other fund or source of the Issuer, the principal of, premium, if any, and interest on, every Bond issued under this Indenture at the place, on the dates and in the manner provided herein and in the Bonds, according to the true intent and meaning thereof. Nothing in this Indenture or the Bonds shall be considered as assigning or pledging any other funds or assets of the Issuer other than the Trust Estate. Section 502. Instruments of Further Assurance. The Trustee shall defend its title to the GNMA Security for the benefit of the holders of the Bonds against the claims and demands of all persons whomsoever and shall do, execute, acknowledge and deliver, such indentures supplemental hereto, and such further acts, instruments and transfers as the Trustee may reasonably require for the better assuring, transferring, conveying, pledging, assigning and confirming unto the Trustee all its interest in the property herein described and the revenues, receipts and other amounts pledged hereby to the payment of the principal of, premium, if any, and interest on the Bonds. Any and all interest in property hereafter acquired which is of any kind or nature herein provided to be and become subject to the lien hereof shall and without any further conveyance, assignment or act on the part of the Issuer or the Trustee, become and be subject to the lien of this Indenture as fully and completely as though specifically described herein, but nothing contained in this sentence shall be deemed to modify or change the obligations of the Issuer under this Section. Section 503. No Disposition of GNMA Security. The Trustee shall not, without the written consent of the holders of 100% of the Bond Obligation, sell or otherwise dispose of the GNMA Security after its acquisition for an amount less than an amount sufficient, together with other amounts then held under this Indenture and available for the payment of principal of and interest on the Bonds, to provide for the payment of the Bonds in accordance with Article IX. Section 504. Recordation and Filine. The Trustee will cause financing statements with respect to the Trust Estate described in this Indenture and the pledge of the GNMA Security to be at all times filed in such manner and in such places as required by law in order to fully preserve and protect the rights of the Trustee hereunder and to perfect the security interest created by this Indenture in the Trust Estate described herein. To the extent possible under applicable law, as in effect in the jurisdiction in which the Trust Estate is located, the Trustee will maintain the priority of the security interest herein created in the Trust Estate as a first lien thereon, and warrant, protect, preserve and defend its interest in the Trust Estate and the security interest of the Trustee therein and all rights of the Trustee under this Indenture against all actions, proceedings, claims and demands of all persons, all paid solely from the Trust Estate. Section 505. Modification of Security; Additional Indebtedness. The Issuer shall not, without the written consent of the Trustee, alter, modify or cancel, or agree to consent to alter, modify or cancel any agreement which relates to or affects the security for the Bonds. Such consent of the Trustee may be given only as provided in Article VIII hereof. No additional indebtedness prior to or on a parity with the Bonds may be issued under this Indenture or otherwise. Section 506. Reports. The Trustee shall furnish annually to any Bondholder who requests in writing copies thereof, and furnishes an address to which such reports and statements are to be sent, at the sole cost and expense of such Bondholder, copies of(a) any reports furnished to the Trustee with regard to the Project and (b) annual statements of the Trustee with regard to fund balances under this Indenture. The Trustee shall also furnish to the Rating Agency such information as may be reasonably requested by the Rating Agency in order to maintain the rating on the Bonds. Section 507. Power to Issue Bonds and Make Pledge and Assignment. The Issuer is duly authorized pursuant to the laws of the State, including the Act, to issue the Bonds and to enter into this Indenture and to assign the Revenues and other assets purported to be assigned under this Indenture in the SF2-27261.2 24 40511-90-MSI-03/1 1/94 manner and to the extent provided in this Indenture. The Bonds and the provisions of this Indenture are and will be the legal, valid and binding limited obligations of the Issuer in accordance with their terms. So long as any of the Bonds shall be Outstanding, the Issuer shall do or cause to be done all things necessary to preserve and keep in full force and effect its existence and to maintain its status as such. Section 508. Tax Covenants. (a) The Issuer covenants to the holders of the Tax-Exempt Bonds that, notwithstanding any other provisions hereof or of any other instrument, to the extent it exercises any control, it will neither make nor cause to be made any investment or other use of the Acquisition Fund, the Bond Fund or the Expense Fund or other proceeds of the Bonds which would cause the Tax-Exempt Bonds to be arbitrage bonds under Section 148 of the Code and the regulations thereunder or otherwise cause the interest on the Tax-Exempt Bonds to be included in gross income for federal income tax purposes; and 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 Tax-Exempt Bonds, to all funds created hereunder and all moneys on deposit to the credit of any such fund. (b) The Issuer and, subject to the provisions of Section 701, the Trustee covenant for the benefit of the Bondholders to enforce all obligations of the Borrower under the Issuer Regulatory Agreement and to seek to correct any violation of the Issuer Regulatory Agreement within a reasonable period after any such violation is first discovered; provided, however that any provision contained in this Indenture or the Issuer Regulatory Agreement which requires the Borrower to take any action necessary to preserve the tax status of the Tax-Exempt Bonds (or prohibits the Borrower from taking any action that might jeopardize the tax status of the Tax-Exempt Bonds) is qualified to except actions prohibited (or required) by HUD pursuant to the National Housing Act, FHA Regulations, the FHA Loan Documents or, if applicable, Section 8 of the United States Housing Act of 1937, as amended, and the regulations thereunder. (c) The Issuer (to the extent it exercises control) and the Trustee each covenants to the registered holders of the Tax-Exempt Bonds at any time outstanding that it shall not use or invest or permit the use or investment of any proceeds of the Bonds or any other Revenues, directly or indirectly, in any manner, which would cause any of the Tax-Exempt Bonds to be an obligation that is "federally guaranteed" within the meaning of Section 149(b) of the Code. To that end, so long as any of the Tax-Exempt Bonds are outstanding, the Issuer (to the extent it exercises control) and the Trustee, with respect to such proceeds and other Revenues, shall comply with all requirements of said Section 149(b) and any regulations proposed or promulgated thereunder, as the same exist on this date or may from time to time hereafter be amended, supplemented or revised. (d) The Issuer covenants that it shall not use or cause the use of any proceeds of Bonds or any other funds of the Issuer, directly or indirectly, in any manner, and shall not take or cause to be taken any other action or actions, or fail to take any action or actions, which would result in interest on any of the Tax- Exempt Bonds becoming includable in gross income of any holder thereof. The Issuer further covenants that it shall 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 Tax-Exempt Bonds shall be excluded from the gross income of the recipients thereof for federal income tax purposes. (e) In furtherance of the covenants in this Section, the Issuer and the Borrower shall execute, deliver and perform the Tax Certificate, which is by this reference incorporated herein and made a part hereof as if set forth herein in full, and by its acceptance of this Indenture the Trustee acknowledges receipt of the Tax Certificate and acknowledges its incorporation herein by reference. Section 509. Issuer's Obligation Limited. The obligations of the Issuer hereunder shall be limited as provided in Section 203 hereof. To implement such provisions, it is recognized that, notwithstanding any other provision of this Indenture, the holders of the Bonds shall not look to the Issuer for damages suffered by the holders of the Bonds as a result of the Issuer's failure to perform any covenant, undertaking or obligation under this Indenture, the Bonds, the Issuer Regulatory Agreement or any other document, nor as a result of the M-27261.2 25 40511-90-MS1-03/11/94 incorrectness of any representation made by the Issuer in this Indenture, the Financing Agreement or any other document to which the Issuer is a party, nor for any other reason. Although this Indenture recognizes that the documents shall not give rise to any pecuniary liability of the Issuer, nothing in the provisions of this Indenture shall be deemed to preclude in any way any action or proceeding (other than that element of any action or proceeding involving a claim for monetary damages against the Issuer) in any court or before any governmental body, agency or instrumentality or otherwise against the Issuer or any of its officers, agents or employees to enforce the provisions of any document, which the Issuer is obligated to perform and the performance of which the Issuer has not assigned to the Trustee or any other person. Although the Issuer shall have the right to seek remedies in the event of a default by the Borrower, by this Indenture the Issuer assigns to the Trustee the right, the burden and the duty of taking action, in order to implement the purposes and intent of the Act, without the Issuer's incurring any pecuniary obligation or liability. In any case where action by the Trustee requires simultaneous or subsequent action by the Issuer, the Issuer shall cooperate with the Trustee and take any and all action necessary to effectuate the purposes and intent of this Indenture upon receipt of indemnification satisfactory to the Trustee. Notwithstanding the foregoing, the Issuer hereby reserves the Reserved Rights of the Issuer, including, without limitation, (a) its rights to indemnification, to the payment of Taxes and payment of its fees and expenses, and to receive notices and give consents to the extent provided herein and in the other documents referred to herein, and (b) the right to take all action necessary to assure and enforce compliance with the restrictions, covenants and provisions contained in the Issuer Regulatory Agreement, without in any way limiting the rights of the Trustee thereunder or hereunder, either on its own behalf or as the assignee of the Issuer. Section 510. Role of Issuer. The Issuer shall not be required to take any action not expressly provided for herein. In addition, the Issuer shall have no obligation to review, control or oversee the activities of the Trustee or any other person in connection with this Indenture or the Bonds. Furthermore, the Issuer shall not be obligated to take any action which might in its reasonable judgment involve it in any expense or liability unless it shall have been furnished with assurance of payment or reimbursement for any expense and with reasonable indemnity for liability of the Issuer, its officers, officials and employees. Section 511. Trustee to Retain Information. So long as any of the Bonds shall be outstanding, the Trustee shall retain all certificates, financial statements and other written information furnished to it by or on behalf of the Borrower or any other person under the Financing Agreement and any other agreement or instrument pertaining to the Bonds and shall make such documentation available to any Bondholder for review after reasonable notice during regular business hours at the Trust Office of the Trustee. The Trustee shall permit such reviewers to take copies of all or any part of such documentation, subject to their payment of such reasonable copying and handling charges as the Trustee may impose. ARTICLE VI DEFAULT AND REMEDIES Section 601. Events of Default. Each of the following shall be an "Event of Default" or "event of default" hereunder: (a) default in the due and punctual payment of any interest on any Bond; or (b) default in the due and punctual payment of the principal of or premium, if any, on any Bond whether at the stated maturity thereof, or on proceedings for redemption thereof, or on the maturity thereof by declaration; or (c) default in the performance or observance of any other of the covenants, agreements or conditions on the part of the Issuer in this Indenture or in the Bonds (subject to Section 611 hereof); or SF2-27261.2 26 40511-90-MSI-03/11%94 • • (d) approval by a court of competent jurisdiction of any petition for reorganization of the Issuer or rearrangement or readjustment of the obligations of the Issuer under the provisions of any bankruptcy law. The Borrower's failure to pay obligations owing to the Lender shall not constitute an Event of Default hereunder. The Trustee shall give written notice to the Rating Agency of the occurrence of any Event of Default described in subsections (a) or (b) above within 15 days after a Responsible Officer of the Trustee has notice or knowledge thereof. Section 602. Acceleration. If an Event of Default described in Section 601(a) or (b) has occurred and is continuing with respect to a Bond, the Trustee may, and upon the written request of the holders of at least 25% of the Bond Obligation the Trustee shall, by notice in writing delivered to the Issuer and the Borrower, declare the principal of all Bonds then outstanding and the interest accrued thereon immediately due and payable without premium, and such principal and interest shall thereupon become and be immediately due and payable. If an Event of Default described in Section 601(c) or (d)has occurred and is continuing, the Trustee shall, upon the written request of the holders of 100% of the Bond Obligation, by notice in writing delivered to the Issuer and the Borrower, declare the principal of all Bonds then outstanding and the interest accrued thereon immediately due and payable without premium, and such principal and interest shall thereupon become and be immediately due and payable. The foregoing provisions of this Section 602, however, are subject to the condition that if at any time after the principal of the Bonds shall have been so declared due and payable, and before any judgment or decree for the payment of the money due shall have been obtained or entered as hereinafter provided, there shall be paid or deposited with the Trustee a sum sufficient to pay all principal of the Bonds matured (or due upon mandatory redemption) prior to such declaration and all matured installments of interest (if any) upon all the Bonds, with interest at the rate borne by the Bonds on such overdue principal and premium, if any, and (to the extent legally enforceable) on such overdue installments of interest (other than in the payment of principal of and interest on the Bonds due and payable solely by reason of such declaration), and the reasonable expenses of the Trustee shall have been made good or cured or adequate provisions shall have been made therefor, then and in every case, the holders of at least a majority of the Bond Obligation, by written notice to the Trustee and the Issuer, may direct the Trustee on behalf of the holders of all the Bonds to rescind and annul such declaration and its consequences; but no such rescission and annulment shall extend to or shall affect any subsequent default, nor shall it impair or exhaust any right or power consequent thereon. Nothing herein shall be construed to obligate the Issuer to make a payment or deposit referred to herein from any revenues other than the revenues derived from the Trust Estate. Section 603. Remedies. Upon the occurrence of an Event of Default, the Trustee shall have the power to proceed with any right or remedy granted by the Constitution and laws of the State, as it may deem best, including any suit, action or special proceeding in equity or at law for the specific performance of any covenant or agreement contained herein or under the GNMA Security or for the enforcement of any proper legal or equitable remedy as the Trustee shall deem most effectual to protect the rights aforesaid, insofar as such may be authorized by law. No remedy by the terms of this Indenture conferred upon or reserved to the Trustee or to the Bondholders is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given to the Trustee or to the Bondholders hereunder or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default or event of default shall impair any such right or power or shall be construed to be a waiver of any such default or event of default or acquiescence therein, and every such right and power may be exercised from time to time and as often as may be deemed expedient. No waiver of any default or event of SF2-27261.2 27 40511-90-MS 1-03/11/94 default hereunder, whether by the Trustee or by the Bondholders, shall extend to or shall affect any subsequent default or event of default or shall impair any rights or remedies consequent thereto. Section 604. Rights of Bondholders. If any Event of Default shall have occurred and if requested in writing so to do by the holders of not less than a majority of the Bond Obligation, and if indemnified as provided herein, the Trustee shall be obligated to exercise such one or more of the rights and powers conferred by this Article and to proceed to protect its rights and the rights of the Bondholders under applicable law, the GNMA Security, the GNMA Guaranty Agreement, the Financing Agreement and this Indenture, as the Trustee, being advised by counsel, shall deem most expedient in the interest of the Bondholders. Anything in this Indenture to the contrary notwithstanding,but subject to the provisions of Sections 608 and 701(h) hereof, the holders of a majority of such Bond Obligation shall have the right at any time, by an instrument in writing executed and delivered to the Trustee, to direct the time, method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of this Indenture, or for the appointment of a receiver or any other proceedings hereunder, in accordance with the provisions of law, this Indenture and the GNMA Security. Section 605. Waiver by Issuer. Upon the occurrence of an Event of Default hereunder, to the extent that such right may then lawfully be waived, neither the Issuer nor anyone claiming through or under it shall set up, claim or seek to take advantage of any appraisal, valuation, stay, extension or redemption laws now or hereinafter in force, in order to prevent or hinder the enforcement of this Indenture; and the Issuer, for itself and all who may claim through or under it, hereby waives, to the extent that it lawfully may do so, the benefit of all such laws and all right of appraisement and redemption to which it may be entitled under the laws of the State. Section 606. Application of Mones. Any moneys received by the Trustee pursuant to this Article, together with available funds in the Acquisition Fund, the Bond Fund and the Expense Fund, shall, after payment of the costs and expenses of the proceedings with respect to a default pursuant to Section 501(a) or Section 601(b) of this Indenture, but prior to payment of costs and expenses of the proceedings with respect to a default under Section 601(c) or Section 601(d) of this Indenture and liabilities and advances incurred or made by the Trustee, be deposited in the Bond Fund and applied in the following order, at the date or dates fixed by the Trustee and, in the case of the distribution of such money on account of principal, or premium, if any, or interest, upon presentation of Bonds, and notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: (a) Unless the principal of all the Bonds shall have become or shall have been declared due and payable, all such moneys shall be applied: FIRST: to the payment to the persons entitled thereto of all installments of interest then due on the Bonds, in the order of the maturity of the installments of such interest and, if the amount available shall not be sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the persons entitled thereto, without any discrimination or privilege; and SECOND: to the payment to the persons entitled thereto of the unpaid principal of any of the Bonds which shall have become due, in the order of their due dates, with interest on such Bonds from the respective dates upon which they become due and, if the amount available shall not be sufficient to pay in full principal of and interest on the Bonds due on any particular date, then to the payment ratably, according to the amount of the principal and interest due on such date, to the persons entitled thereto. (b) If the principal of all the Bonds shall have become due or shall have been declared due and payable, (i) all such moneys shall be applied to the payment of all amounts then due on the Bonds for principal, premium, if any, and interest in respect of which or for the benefit of which money has been collected (other than Bonds which have matured or otherwise become payable prior to such event of default and money for the payment of which is held in the Bond Fund), ratably without preference or priority of any kind, SF2-27261.2 28 40511-90-MSI-03/11/94 according to the amounts due and payable on such Bonds, for principal, premium, if any, and interest respectively; and (ii) the remainder of any such moneys shall be paid to the Borrower. (c) If the principal of all the Bonds shall have been declared due and payable, and if such declaration shall thereafter have been rescinded and annulled under the provisions of this Article, then, subject to the provisions of subsection(a) hereof in the event that the principal of all the Bonds shall later become due or be declared due and payable, such moneys shall be applied in accordance with the provisions of paragraph (a) of this Section. Whenever moneys are to be applied pursuant to the provisions of this Section, such moneys shall be applied at such times and from time to time as the Trustee shall determine, having due regard to the amount of such moneys available for such application in the future. Whenever the Trustee shall apply such funds, it shall fix the date (which shall be an Interest Payment Date unless it shall deem another date more suitable) upon which such application is to be made, and upon such date interest on the amounts of principal to be paid on such 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 holder of any Bond until such Bond shall be presented to the Trustee for appropriate endorsement or for cancellation if fully paid. Section 607. Remedies Vested in Trustee. All rights of action, including the right to file proof of claims, under this Indenture or under any of the Bonds may be enforced by the Trustee without the possession of any of the Bonds or the production thereof in any trial or other proceedings relating thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its name as Trustee without the necessity of joining as plaintiffs or defendants any holders of the Bonds, and any recovery or judgment shall be for the equal benefit of the holders of the outstanding Bonds. Section 608. Remedies of Bondholders. No holder of any Bond shall have any right to institute any suit, action or proceeding in equity or at law for the enforcement of this Indenture or for the execution of any trust hereunder or for the appointment of a receiver or any other remedy hereunder, unless (a) a default shall have occurred of which the Trustee shall have been notified as provided herein; (b) such default shall have become an event of default; (c) the holders of at least a majority of the Bond Obligation shall have made written request to the Trustee and shall have offered reasonable opportunity to the Trustee either to proceed to exercise the powers hereinbefore granted or to institute such action, suit or proceeding in its own name; (d) such holders shall have offered to the Trustee indemnity as provided herein; and (e) the Trustee shall within 60 days thereafter fail or refuse to exercise the powers hereinbefore granted, or to institute such action, suit or proceeding. Such notification, request and offer of indemnity are hereby declared in every case at the option of the Trustee to be conditions precedent to the execution of the powers and trusts of this Indenture, and to any action or cause of action for the enforcement of this Indenture, or any other remedy hereunder; and it is understood and intended that no one or more holders of the Bonds shall have any right in any manner whatsoever to affect, disturb or prejudice the lien of this Indenture or the rights of any other holders of Bonds or to obtain priorityor preference over any other holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all holders of Bonds then Outstanding. Nothing contained in this Indenture shall, however, affect or impair the right of any Bondholder to enforce the payment of the principal of, the premium, if any, and interest on any Bond at the maturity thereof or the obligation of the Issuer to pay the principal of, premium, if any, and interest on the Bonds issued hereunder to the respective holders thereof, at the time, in the place, from the sources and in the manner expressed in said Bonds. Section 609. Termination of Proceedings. 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 and the Trustee shall be restored to their former positions and rights hereunder with respect to the Trust Estate herein conveyed, and all rights, remedies and powers of the Trustee shall continue as if no such proceedings had been taken. SF2-27261.2 29 40511-90-MS1-03/11/94 • • Section 610. Waivers of Events of Default. The Trustee shall waive any event of default hereunder and its consequences and rescind any declaration of maturity of principal of and interest on the Bonds upon the written request of the holders of a majority of the Bond Obligation; provided, however, that there shall not be waived (a) any event of default in the payment of the principal of any Bonds at the date of maturity specified therein, or upon proceedings for mandatory redemption, or (b) any default in the payment when due of the interest or premium 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 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 thereof or upon proceedings for mandatory redemption), as the case may be, and all expenses of the Trustee in connection with such default, shall have been paid or provided for, and in case of any such waiver or rescission, or in case any proceeding taken by the Trustee on account of any such default shall have discontinued or abandoned or determined adversely, then and in every such case the Issuer, the Trustee and the Bondholders shall be restored to their former positions and rights hereunder respectively, but no such waiver or rescission shall extend to any subsequent or other default, or impair any right consequent thereto. Section 611. Notice of Defaults: Opportunity to Cure. Anything herein to the contrary notwithstanding,no default under Section 601(c)hereof shall constitute an Event of Default until actual notice of such default by first class mail shall be given by the Trustee or by the holders of not less than a majority of the Bond Obligation to the Issuer and the Borrower, and the Issuer and the Borrower shall have had 30 days after receipt of such notice to correct said default or cause said default to be corrected, and shall not have corrected said default or caused said default to be corrected within the applicable period; provided, however, if said default be such that it cannot be corrected within the applicable period, it shall not constitute an Event of Default if the Issuer or the Borrower has commenced and is diligently pursuing appropriate action to cure such default, and there will be no material adverse effect on the rights of the Trustee or the Bondholders under this Indenture, the Financing Agreement, the Issuer Regulatory Agreement or the GNMA Security as a result of such extension. ARTICLE VII THE TRUSTEE Section 701. Acceptance of the Trusts. The Trustee hereby accepts the trust imposed upon it by this Indenture and agrees to perform said trusts upon the following terms and conditions: (a) The Trustee may execute any of the trusts or powers hereof and perform any of its duties by or through attorneys, agents, receivers or employees, and shall be entitled to advice of counsel concerning all matters of the trusts hereof and the duties hereunder, and may in all cases pay such reasonable compensation to all such attorneys, agents, receivers and employees as may be reasonably employed in connection with the trusts hereof. The Trustee may act upon the opinion or advice of any attorney, who may be the attorney or attorneys for the Issuer, and the Trustee shall not be responsible for any loss or damage resulting from any action or inaction taken in good faith in reliance upon such opinion or advice. (b) The Trustee shall not be responsible for any recital herein, or in the Bonds (except in respect to the authentication certificate of the Trustee endorsed on the Bonds), or for the validity of the execution by the Issuer of this Indenture or of any supplements hereto or instruments of further assurance, or for the sufficiency of the security for the Bonds issued hereunder or intended to be secured hereby. (c) The Trustee may become the owner or pledgee of the Bonds secured hereby and otherwise deal with the Issuer and the Borrower with the same rights which it would have if not Trustee. (d) To the extent permitted hereunder, the Trustee may rely and shall be protected in acting upon any notice, request, consent, certificate, order, affidavit, letter, telegram or other paper or document reasonably believed to be genuine and correct and to have been signed or sent by the proper person or SF2-27261.2 30 40511-90-MSI-03/11/94 • persons, and the Trustee shall not be bound to make any investigation into the facts or matters stated in any such document so delivered and signed unless requested in writing so to do by the holders of a majority of the Bond Obligation. (f) The permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as a duty unless so specified herein. (g) At any and all reasonable times, the Trustee and its duly authorized agents, attorneys, experts, engineers, accountants and representatives shall have the right, but shall not be required, to inspect the Project fully, including all books, papers and records of the Issuer pertaining to the Project and the Bonds, and to take such memoranda from and in regard thereto as may be desired. (h) Notwithstanding anything elsewhere in this Indenture contained, the Trustee shall have the right, but shall not be required, to demand in respect of the authentication of any Bonds, the withdrawal of any moneys, the release of any interest in property, or any action whatsoever within the purview of this Indenture, any showings, certificates, opinions, appraisals or other information, or official action or evidence thereof, in addition to those required herein. (i) Before taking any action hereunder the Trustee may require that a satisfactory indemnity bond be furnished for the reimbursement of all expenses to which it may be put and to protect it against all liability, except liability which is adjudicated to have resulted from its negligence or willful misconduct by reason of any action so taken. 0) All moneys received by the Trustee or any paying agent shall, until used or applied or invested as herein provided, be held in trust for the purposes for which they were received but need not be segregated from other funds except to the extent required by law or by this Indenture. Neither the Trustee nor any paying agent shall be under any liability for interest on any moneys received hereunder except such as may be agreed upon in writing with the Issuer or the Borrower. (k) The Trustee undertakes to perform such duties as are specifically set forth in this Indenture. In case an event of default has occurred which has not been cured, the Trustee shall exercise the rights, duties and powers vested in it by this Indenture in good faith and with that degree of diligence, care and skill which a reasonable person would exercise under similar circumstances in like situations. (1) The Trustee shall not be responsible for insuring the Project or for collecting any insurance moneys. (m) Whether or not expressly provided for herein, every provision of this Indenture relating to the conduct of or affecting the liability of the Trustee shall be subject to the provisions of this Section 701. The immunities and exceptions from liability of the Trustee shall extend to its officers, employees and agents. Section 702. Notice of Default. Within 30 days after the occurrence of any default hereunder of which the Trustee has or is deemed to have notice hereunder, the Trustee shall transmit by registered or certified or first class mail, to the holders of all Bonds then Outstanding, notice of such default unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of(or premium, if any) or interest on any Bond when due, the Trustee shall be protected in withholding such notice if and so long as the Trustee in good faith determines that the withholding of such notice is in the interests of the holders of the Bonds. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an event of default. Section 703. Compensation and Reimbursement. The following payments shall be made to the Trustee from amounts in the Expense Fund, from amounts paid by the Borrower pursuant to the Financing Agreement, or, after payment in full of the Bonds, from amounts in the Bond Fund: SF2-27261.2 31 40511-90-MS1-03/11/94 0 • (1) The Trustee shall be paid from time to time its annual administrative fee as reasonable compensation for all services rendered by it hereunder, as provided in Section 405(iii)hereof, and shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust; and (2) Except as otherwise expressly provided herein, the Trustee shall be reimbursed upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with the enforcement of any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel) and any extraordinary expense except any such expense, disbursement or advance as may be attributable to its negligence or bad faith. The Trustee shall also be entitled to indemnification in accordance with the Financing Agreement against any loss, liability or expense incurred without negligence or willful misconduct on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder until replaced by a successor Trustee; provided that payment therefor is payable only from funds received from the Borrower pursuant to Article V of the Financing Agreement. The Issuer shall be under no obligation to make the foregoing payments except from amounts in the Expense Fund or, after payment in full of the Bonds, from amounts in the Bond Fund. The Trustee agrees to continue to serve as trustee hereunder, whether amounts in the Expense Fund are sufficient therefor, until a successor is appointed, and if amounts in the Expense Fund are insufficient to pay and reimburse the Trustee as provided in this Section, the Trustee shall look only to the Borrower under the Financing Agreement. Upon the occurrence of an Event of Default hereunder, the Trustee shall have a first lien with the right of payment prior to the payment of any Bond upon the amounts held hereunder for its fees and the foregoing charges and expenses incurred by it. Section 704. Intervention by the Trustee. In any judicial proceeding to which the Issuer is a party and which in the opinion of the Trustee and its counsel has a substantial bearing on the interests of the holders of Bonds, the Trustee may intervene on behalf of such Bondholders and shall do so if requested in writing by the owners of at least 25% of the Bond Obligation. The rights and obligations of the Trustee under this Section are subject to the approval of a court of competent jurisdiction. Section 705. Successor Trustee. 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 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 it is a party shall, ipso facto, be and become successor Trustee hereunder and vested with all the title to the whole property or Trust Estate and all the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any instruments or any further act, deed or conveyance on the part of any of the parties hereto, anything herein to the contrary notwithstanding. Section 706. Resignation by the Trustee. The Trustee and any successor Trustee may at any time resign from the trusts hereby created by giving written notice by registered or certified mail to the Issuer, the Lender, the Borrower and each holder of the Bonds then Outstanding; provided that no such resignation shall take effect until either (i) a successor Trustee shall have been appointed and shall have accepted such appointment as provided in Section 709 or (ii) a temporary trustee shall be appointed as provided in Section 708. If no successor Trustee shall have been appointed and have accepted appointment within 30 days following the giving of all required notices of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. Section 707. Removal of the Trustee. The Trustee may be removed at any time, by an instrument or concurrent instruments in writing delivered to the Trustee, the Issuer, the Lender and the SF2-27261.2 32 40511-90-MSI-03/11/94 0 0 Borrower and signed by the holders of a majority of the Bond Obligation. So long as no Event of Default has occurred and is continuing hereunder, the Trustee may be removed at any time by an instrument in writing signed by an Authorized Issuer Representative and delivered to the Trustee, the Lender and the Borrower. Section 708. Appointment of Successor Trustee. In case the Trustee hereunder shall resign or be removed, or be dissolved, or shall be in course of dissolution or liquidation, or otherwise become incapable of acting hereunder, or in case it shall be taken under the control of any public officer or officers, or of a receiver appointed by a court, a successor may be appointed by the Issuer (with the concurrence of the Borrower) or, if an Event of Default has occurred and is continuing hereunder, by the holders of a majority of the Bond Obligation by an instrument or concurrent instruments in writing signed by such holders, or by their duly authorized attorneys. Every such Trustee appointed pursuant to the provisions of this Section shall be a trust company or bank organized under the laws of the United States of America or any state thereof and which is in good standing, within or outside the State, having a reported capital and surplus of not less than $75,000,000 and at least $50,000,000 in trust assets under management if there be such an-institution willing, qualified and able to accept the trust upon reasonable or customary terms. Section 709. Concerning Any Successor Trustee. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to its predecessor and also to the Issuer and the Borrower an instrument in writing accepting such appointment hereunder to it as mortgagee, and thereupon such successor, without any further act, deed or conveyance, shall become fully vested with all the estates, properties, rights, powers, trusts, duties and obligations of its predecessor; but such predecessor Trustee shall, nevertheless, on the written request of the Issuer, or of the successor Trustee, and upon payment of all amounts due such predecessor, execute and deliver an instrument transferring to such successor Trustee all the estates, properties, rights, powers and trusts of such predecessor hereunder; and every predecessor Trustee shall deliver all securities and moneys held by it as Trustee hereunder to its successor. Should any instrument in writing from the Issuer be required by a successor Trustee for more fully and certainly vesting in such successor the estate, rights, powers and duties hereby vested or intended to be vested in the predecessor, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the Issuer. The resignation of any Trustee and the instrument or instruments removing any Trustee and appointing a successor hereunder, together with all other instruments provided for in this Article, shall be filed or recorded by the successor Trustee in each recording office where the Indenture shall have been filed and/or recorded. Section 710. Trustee Protected in Relying Upon Instruments. The resolutions, opinions, certificates and other instruments provided for in this Indenture may be accepted by the Trustee as conclusive evidence of the facts and conclusions stated therein and shall be full warrant, protection and authority to the Trustee for the release of property hereunder. Section 711. Trustee as Paving Agent and Registrar. The Trustee is hereby designated and agrees to act as paying agent, separate and apart from its duties as Trustee hereunder, and as Bond Registrar for and in respect to the Bonds. In the event of a change in the office of Trustee, the predecessor Trustee which has resigned or has been removed shall cease to be Trustee, Paying Agent on the Bonds and Bond Registrar, and the successor Trustee shall become such Trustee, Paying Agent and Bond Registrar. SF2-27261.2 33 40511-90-MSI-03/11/94 ARTICLE VIII SUPPLEMENTAL INDENTURES AND AMENDMENTS OF OTHER FINANCING DOCUMENTS Section 801. Supplemental Indentures Not Requiring Consent of Bondholders. The Issuer and the Trustee may, without the consent of or notice to any of the Bondholders, enter into an indenture or indentures supplemental to this Indenture as shall not be inconsistent with the terms and provisions hereof or materially adverse to the interests of the holders of the Bonds, including without limitation for any one or more of the following purposes: (a) to cure any ambiguity or to cure or correct any defect or inconsistent provisions contained in this Indenture or to make such provisions in regard to matters or questions arising under this Indenture as may be necessary or desirable and not contrary to or inconsistent with this Indenture or adverse to the Bondholders; (b) to change or modify any provision of this Indenture so as to harmonize to the maximum extent practicable the provisions hereof with existing rules, regulations and procedures of FHA; (c) to add to the covenants and agreements of the Issuer in this Indenture other covenants and agreements, to surrender any right or power reserved or conferred upon the Issuer or amend or supplement any other provision hereof if the foregoing shall not, in the judgment of the Trustee, materially adversely affect the interests of the Bondholders, the Trustee being authorized to rely on an opinion of counsel (including counsel to the Issuer) with respect thereto; (d) to confirm, as further assurance, any pledge of or lien on the Financing Agreement or the Revenues or of any other moneys, securities or funds subject to the lien of this Indenture; (e) to modify any of the provisions hereof relating to the use of a book-entry system for registration of the Bonds; (f) to preserve the exclusion of interest on the Tax-Exempt Bonds from gross income for federal income tax purposes, as set forth in an opinion of Bond Counsel; (g) to subject to the lien and pledge of this Indenture additional revenues, properties or collateral; (h) 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 any of them; or (i) to modify, amend or supplement this Indenture or any indenture supplemental hereto in such manner as to permit the qualification hereof and thereof under the Trust Indenture Act of 1939 or any similar federal statute hereafter in effect or under any state securities laws. Section 802. Supplemental Indentures Requiring Consent of Bondholders. With the consent of the holders of not less than two-thirds of the Bond Obligation, the Issuer and the Trustee may, from time to time, enter into supplemental indentures for the purpose of modifying, altering, amending, adding to or rescinding any of the terms or provisions contained in this Indenture or in any supplemental indenture; provided, however, that nothing contained in this Section shall permit, or be construed as permitting(a) an extension of the stated maturity of or a reduction in the principal amount of or reduction in the interest rate on, or an extension of time of payment of interest on, or reduction of any premium payable on the redemption of, any Bonds, without the consent of the registered owner of such Bonds; or (b) the creation of any lien on all or any portion of the Trust Estate prior to or on a parity with the lien of this Indenture, without the consent of the holders of all of the Bonds; or (c) a reduction in the amount of Bond Obligation, the holders of which are SF2-27261.2 34 40511-90-MS1-03/11/94 required to approve any such supplemental indenture, without the consent of the holders of all the Bonds at the time Outstanding which would be affected by the action to be taken; or (d) a privilege or priority of any Bond over any other Bonds without the consent of the holders of all Bonds adversely affected thereby; or (e) any action which may result in the loss of the exclusion of interest on the Tax-Exempt Bonds from federal income taxation; or (f) an amendment of Section 503 hereof(relating to disposition of the GNMA Security) or the second paragraph of Section 602 hereof(relating to acceleration upon an Event of Default under Section 601(c) or (d) hereof), without in each case the consent of the holders of all the Bonds then Outstanding. If at any time the Issuer shall request the Trustee to enter into any such supplemental indenture for any of the purposes of this Section, the Trustee shall, upon being satisfactorily indemnified with respect to expenses, cause notice of the proposed execution of such supplemental indenture to be mailed, postage prepaid, to all Bondholders. Such notice shall briefly set forth the nature of the proposed supplemental indenture and shall state that copies thereof are on file at the Trust Office of the Trustee for inspection by all Bondholders. If, within 60 days following the mailing of such notice, the holders of the required portion of Bonds at the time of the execution of any such supplemental indenture shall have consented to and approved the execution thereof as herein provided, no holder of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or the Issuer from executing the same or from taking any action pursuant to the provisions thereof. Upon the execution of any such supplemental indenture as is in this Section permitted and provided, this Indenture shall be and be deemed to be modified and amended in accordance therewith. Section 803. Required Consents. Notwithstanding anything herein to the contrary, the Trustee shall not be required to enter into or consent to any supplemental indenture or any amendment of any other Financing Document which, in the sole judgment of the Trustee, might adversely affect the rights, obligations, powers, privileges, indemnities, immunities or other security provided the Trustee herein or therein, except to the extent necessary, as set forth in an opinion of Bond Counsel, to preserve the exclusion of interest on the Bonds from gross income for federal income tax purposes. In addition, except to the extent necessary, as set forth in an opinion of Bond Counsel, to preserve the exclusion of interest on the Tax-Exempt Bonds from gross income for federal income tax purposes, a supplemental indenture under this Article which affects any rights of the Borrower shall not become effective unless and until the Borrower shall have consented to the execution and delivery of such supplemental indenture. In this regard, the Trustee shall cause notice of the proposed execution and delivery of any such supplemental indenture to be mailed by certified+or registered mail to the Borrower at least 15 days prior to the proposed date of execution and delivery of any supplemental indenture. Section 804. Amendment of Certain Documents. (a) The Issuer and the Trustee may make or consent to any amendment, change or modification of the Financing Agreement, the GNMA Security and the Issuer Regulatory Agreement, for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective or inconsistent provision contained therein, or in regard to matters or questions arising under said documents, as the Issuer and the Trustee may deem necessary or desirable and not inconsistent with said documents or this Indenture and which shall not adversely affect the interests of the holders of the Bonds. (b) Except for the amendments, changes or modifications as provided in subsection(a) above, the Trustee shall not consent to or approve any other amendment, change or modification of any of the Financing Documents (other than the Indenture)without notice to and the written approval or consent of the Issuer, the Lender, the Borrower and the owners of not less than two-thirds of the Bond Obligation given and procured as in Section 802 provided. If, at any time, either the Borrower or the Issuer shall request the consent to or approval of the Trustee to any such proposed amendment, change or modification of any of the Financing Documents (other than the Indenture), the Trustee shall, upon being satisfactorily indemnified by the Borrower with respect to expenses, cause notice of such proposed amendment, change or modification to be given in the same manner as provided by Section 802 hereof with respect to supplemental indentures. Such notice shall briefly set forth the nature of such proposed amendment, change or modification and shall state that copies of the instrument embodying the same are on file at the principal corporate trust office of the Trustee for SF2-27261.2 35 40511-90-MS1-03/11/94 • • inspection by all Bondholders. If, within 60 days or such longer period as shall be prescribed by the Trustee following the giving of such notice, the holders of not less than two-thirds of the Bond Obligation at the time of the execution of such proposed amendment shall have consented to and approved the execution thereof as herein provided, subject to the provisions of the second paragraph of Section 802 hereof, no holder of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee from agreeing to the execution hereof. Upon the execution of any such amendment as in this Section is permitted and provided, the Financing Documents shall be and be deemed to be modified and amended in accordance therewith. (c) Anything herein to the contrary notwithstanding, the Issuer and the Trustee shall not consent to any amendment, change or modification of the GNMA Security which would reduce the Lender's obligations to make payments thereunder or GNMA's guarantee of such payments (other than as a result of a prepayment of the GNMA Security permitted pursuant to the terms thereof) without the consent of the holders of 100% of the Bond Obligation. Section 805. Amendment by Unanimous Consent. Notwithstanding any other provision of this Indenture, the Issuer and the Trustee may consent to any Supplement to any Financing Document upon receipt of the consent of the Lender, the Borrower and the holders of all Bonds then Outstanding. Section 806. Opinions; Certificate. The Trustee shall not enter into or consent to any supplemental indenture or any amendment of any provision of any other Financing Document unless there shall have been delivered to the Issuer and the Trustee an opinion of Bond Counsel stating that such supplemental indenture or such amendment is authorized or permitted by the Act and will not adversely affect the exclusion of interest on the Tax-Exempt Bonds from the gross income of the recipients thereof for federal income tax purposes. In addition, the Trustee (i) may obtain, and shall be protected in relying on, an opinion of counsel to the effect that such supplemental indenture or such amendment is authorized or permitted by this Indenture and complies with the terms hereof; and (ii) may require, as a condition to entering into or consenting to any such supplemental indenture or such amendment, a Compliance Certificate from the Borrower. Section 807. Effect of Amendments. Upon the execution and delivery of any supplemental indenture or any amendment to any other document pursuant to the provisions of this Article, this Indenture or such other document shall be, and be deemed to be, modified and amended in accordance therewith, and the respective rights, duties and obligations under the Financing Documents of the Issuer, the Trustee, the Borrower, the Lender and the Bondholders shall thereafter be determined, exercised and enforced hereunder and under the Financing Documents subject in all respects to such modifications and amendments. ARTICLE IX SATISFACTION AND DISCHARGE OF INDENTURE Section 901. Discharge of Lien. If the Issuer (i) shall pay or cause to be paid to the holders of the Bonds the principal, interest and premium, if any, to become due thereon at the times and in the manner stipulated therein and herein, and shall pay or cause to be paid all fees and expenses of the Trustee, and (ii) shall keep, perform and observe all and singular the covenants and promises in the Bonds and in this Indenture expressed as to be kept, performed and observed by it or on its part, then these presents and the estate and rights hereby granted shall, cease, determine and be void, and thereupon the Trustee shall cancel and discharge the lien of this Indenture and execute and deliver to the Issuer such instruments in writing as shall be requisite to satisfy the lien hereof, shall convey to the Borrower the estate hereby conveyed, and shall assign and deliver to the Borrower any interest in 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 and interest and premium, if any, on the Bonds. SF2-27261.2 36 40511-90-MS1-03/11/94 • • All Outstanding Bonds shall,prior to the maturity or redemption date thereof, be deemed to have been paid within the meaning and with the effect expressed in item (i) of the first paragraph of this Section if the following conditions shall have been fulfilled: (a) there shall be on deposit with the Trustee either moneys (which are not subject to Sections 544, 547 or 550 of the United States Bankruptcy Code or any other banking laws of the United States) or direct noncallable obligations of the United States of America (which are purchased with moneys which are not subject to Sections 544, 547 or 550 of the United States Bankruptcy Code or any other banking laws of the United States) in an amount sufficient to pay when due the principal or redemption price, if applicable, and interest due and to become due on the Bonds on and prior to the redemption date or maturity date thereof, as the case may be; (b) if any of the Bonds are to be redeemed on any date prior to their maturity, the Issuer shall have given to the Trustee, in form satisfactory to it, irrevocable instructions to mail, as provided in Article III hereof, notice of redemption of such Bonds on such date; (c) the Issuer shall have given the Trustee irrevocable instructions to mail, as soon as practicable, in the manner prescribed by Article III hereof, a notice to the holders of such Bonds that the deposit required by this paragraph has been made with the Trustee and that the Bonds are deemed to have been paid in accordance with this Article and stating the redemption date upon which moneys are to be available for the payment of the principal or redemption price, if applicable, on said Bonds; and (d) the Trustee shall have received the opinion required by the last paragraph of this Section. No deposit under this Article shall be made or accepted hereunder and no use made of any such deposit unless the Trustee shall have received an opinion of Bond Counsel to the effect that such deposit and use would not adversely affect the exclusion of interest on the Tax-Exempt Bonds from gross income for federal income tax purposes. ARTICLE X MISCELLANEOUS Section 1001. Consents and Other Instruments of Bondholders. Any consent, request, direction, approval, waiver, objection, appointment or other instrument required by this Indenture to be signed and executed by the Bondholders may be signed and executed in any number of concurrent writings of similar tenor and may be signed or executed by such Bondholders in person or by agent appointed in writing. Proof of the execution of any such instrument, 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 under such instrument, namely: (a) The fact and date of the execution by any person of any such instrument may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer of any jurisdiction, authorized by the laws thereof to take acknowledgements of deeds, certifying that the person signing such instrument acknowledged to him the execution thereof. Where such execution is by an officer of a corporation or association or a member of a partnership on behalf of such corporation, association or partnership, such affidavit or certificate shall also constitute sufficient proof of his authority. (b) The ownership of Bonds shall be proved by the Bond Register. (c) Any request, consent or vote of the holder of any Bond shall bind every future holder of the same Bond and the holder of every Bond issued in exchange therefor or in lieu thereof, in respect of anything done or permitted to be done by the Trustee or the Issuer pursuant to such request, consent or vote. (d) In determining whether the holders of the requisite amount of the Bond Obligation have concurred in any demand, request, direction, consent or waiver under this Indenture, Bonds which are owned by the Issuer or the Borrower or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer or the Borrower shall be disregarded and deemed not to be Outstanding for the purpose of determining whether the Trustee shall be protected in relying on any such demand, request, direction, consent or waiver. Only Bonds which the Trustee has evidence in the Bond SF2-27261.2 37 40511-90-MS 1-03/11/94 Register to be so owned shall be disregarded. Bonds so owned which have been pledged in good faith may be regarded as Outstanding for the purposes of this Section if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right to vote such Bonds. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. Section 1002. Limitation of Rights. Whenever under the provisions of this Indenture the approval of the Issuer, the Trustee or the Borrower is required for any action, and whenever the Issuer, the Trustee or the Borrower is required to deliver any notice or other writing, such approval or such notice or other writing shall be given, respectively, on behalf of the Issuer by an Authorized Issuer Representative or on behalf of the Trustee by a Responsible Officer or on behalf of the Borrower by an Authorized Borrower Representative, and the Issuer, the Trustee and the Borrower shall be authorized to act on any such approval or notice or other writing and neither party hereto nor the Borrower shall have any complaint against the others as a result of any such action taken. Section 1003. Severability. If any provision of this Indenture shall be held or deemed to be or shall in fact be inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions or in all jurisdictions, or in all cases because it conflicts with any other provision or provisions hereof or any constitution, statute, rule of law or public policy, or for any other reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstances, or of rendering any other provision or provisions herein contained invalid, inoperative, or unenforceable to any extent whatever. The invalidity of any one or more phrases, sentences, clauses or sections in this Indenture contained shall not affect the remaining portions of this Indenture or any part thereof. Section 1004. Notices. All notices, certificates, requests or other communications hereunder shall be sufficiently given and shall be deemed given when mailed by certified or registered mail, postage prepaid, or dispatched by telefax (with confirming copies via overnight courier) or telegram, addressed, unless notice of a different address is given as provided in this Section, 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 94553-0095 Attention: Deputy Director-Redevelopment If to the Borrower: EAH-Contra Costa, Inc. 2169 E. Francisco Boulevard, Suite B San Rafael, California 94901 Attention: If to the Trustee: Bank of America National Trust and Savings Association 333 South Beaudry Avenue, 25th Floor Los Angeles, California 90071 Attention: If to the Lender: TRI Capital Corporation 100 Pine Street, 23rd Floor San Francisco, California 94111 Attention: SF2-27261.2 38 40511-90-MS1-03/11/94 0 0 If to the Rating Agency: Standard & Poor's Corporation 25 Broadway, 21st Floor New York, New York 10004 Attention: Any of the foregoing may, by notice given hereunder to each of the others, designate any further or different addresses to which subsequent notices, certificates, requests or other communications shall be sent hereunder. Any registered owner (or beneficial owner in the event that all or part of the Bonds are registered in the name of any depository institution)of at least $1,000,000 principal amount of Outstanding Bonds of any Series may request that the Trustee send an additional copy of any notice of default, redemption or any other correspondence by first class mail to a second address simultaneously and in addition to the regular mailing of such notices to registered holders recorded on the books of the Trustee. Section 1005. Payments Due on Saturdays, Sundaes Holidays. In any case where the date of maturity of interest on or principal of the Bonds, or the date fixed for redemption of any Bonds, shall be a Saturday, Sunday, legal holiday or a day on which banking institutions are authorized by law to close, then payment of interest or principal need not be made on such date but may be made on the next succeeding business day with the same force and effect as if made on the date of maturity or the date fixed for redemption, and no interest shall accrue for the period after such date. Section 1006. Counterparts. This Indenture 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 1007. Governing Law. The effect and meanings of this Indenture and the rights of all parties hereunder shall be governed by and construed according to the laws of the State of California. Section 1008. Successors and Assigns. All the covenants and representations contained in this Indenture, by or on behalf of the Issuer, shall bind and inure to the benefit of its successors and assigns whether so expressed or not. Section 1009. Limitation of Rights. With the except of rights herein expressly conferred, nothing expressed or to be implied by this Indenture or the Bonds is intended or shall be construed to give to any person other than the parties hereto and the owners of the Bonds any legal or equitable right, remedy or claim under or in respect to this Indenture or any covenants, conditions and provisions hereof. SF2-27261.2 39 40511-90-MSI-03/11/94 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed by their duly authorized representatives, as of the date and year first above written. COUNTY OF CONTRA COSTA By: Deputy Director-Redevelopment BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Trustee By: Title: SF2-27261.2 40 40511-90-MS1-03/11/94 EXHIBIT A FORM OF SERIES B OR B-T BOND THE PRINCIPAL OR REDEMPTION PRICE OF, AND INTEREST ON, THIS BOND ARE PAYABLE SOLELY FROM THE FUNDS PLEDGED PURSUANT TO THE INDENTURE. THIS BOND DOES NOT CONSTITUTE A DEBT OR A PLEDGE OF THE FAITH AND CREDIT OF THE UNITED STATES OF AMERICA, THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT OR ANY SUBDIVISION THEREUNDER, THE ISSUER, THE STATE OF CALIFORNIA OR ANY OTHER POLITICAL SUBDIVISION THEREOF. THE OWNER OF THIS BOND HAS NO RIGHT TO HAVE TAXES LEVIED BY THE ISSUER, THE STATE OF CALIFORNIA OR ANY OTHER POLITICAL SUBDIVISION THEREOF FOR THE PAYMENT OF THE PRINCIPAL OR REDEMPTION PRICE OF, AND INTEREST ON, THIS BOND. COUNTY OF CONTRA COSTA MULTIFAMILY HOUSING REVENUE BOND (GNMA COLLATERALIZED - CRESCENT PARK APARTMENTS PROJECT) [TAXABLE] 1994 SERIES B/B-T Interest Rate Maturity Date Dated Date CUSIP REGISTERED OWNER: PRINCIPAL AMOUNT: The County of Contra Costa, a legal subdivision and body corporate and politic organized and existing under the laws of the State of California(the "Issuer"), for value received, hereby promises to pay (but only out of the revenues and other assets hereinafter referred to) to the Registered Owner specified above or registered assigns, on the Maturity Date specified above (subject to any right of prior redemption hereinafter mentioned), the Principal Amount specified above and to pay interest thereon from the Dated Date specified above, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, on and October 20 in each year commencing October 20, 1994 (each an "Interest Payment Date"), at the Interest Rate per annum specified above, until the principal hereof is duly paid, or provided for, in full. Notwithstanding the foregoing, if the date of authentication hereof is after a Regular Record Date for the payment of such interest (which shall be the fifth day of the month in which such interest payment is due) and before the following Interest Payment Date, and if the Issuer shall not default in the payment of interest due on such Interest Payment Date, this Bond shall bear interest from such Interest Payment Date. The interest so payable on any Interest Payment Date will, subject to certain exceptions provided in the Indenture referred to, below, be paid to the person in whose name this Bond (or one or more predecessor Bonds) is registered at the close of business on the Regular Record Date preceding such Interest Payment Date. Payment of principal of, premium (if any) and interest on this Bond shall be made in such coin or currency of the United States as at time of payment is legal tender for payment of private and public debts. The principal amount hereof and premium (if any) on this Bond shall be payable upon presentation and surrender hereof for cancellation at the office of ,in , or its successor in trust(the "Trustee"). Payment of interest on and principal of this Bond shall be made by check or draft mailed to the person entitled thereto as such address shall appear on the registration books for the Bonds (hereinafter defined). Upon the request of a Registered Owner of at least $1,000,000 principal amount of Outstanding Bonds, all payments of interest on the Bonds owned by such registered holder, and upon presentation and surrender thereof, the principal and premium of all such Bonds shall be paid by wire transfer of immediately available funds to an account designated by such Registered Owner. SF2-27261.2 A-1 40511-90-MSI-03/11/94 This Bond is one of a duly authorized issue of bonds of the Issuer known as County of Contra Costa Multifamily Housing Revenue Bonds (GNMA Collateralized - Crescent Park Apartments Project) [Taxable] 1994 Series B/B-T issued in the aggregate principal amount of$ / (the "Series B/B-T Bonds")pursuant to Chapter 8 of Part 5 of Division 31 of the Health and Safety Code of the State of California, as amended, and under and pursuant to a Resolution adopted by the Board of Supervisors of the Issuer. The Series B/B-T 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 1, 1994, between the Issuer and the Trustee (as supplemented and amended, the "Indenture"). In connection with the issuance of the Series B/B-T Bonds, the Issuer is issuing on a parity with the Series B/B-T Bonds other series of bonds in the aggregate principal amount of$ / ,all as more fully set forth in the Indenture (collectively with the Series B/B-T Bonds, the "Bonds", and each a "Series"). Reference is hereby made to the Indenture, which is on file at the aforesaid office of the Trustee, 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 holders thereof, to all of which the holder of this Bond, by acceptance hereof, accepts and agrees. The terms and provisions contained in the Indenture are hereby incorporated herein by reference, and the owner of this Bond, by purchase hereof, assents to all of such terms and provisions. All capitalized, undefined terms used herein will have the meanings ascribed to them in the Indenture. The Bonds are limited obligations of the Issuer payable solely from the Revenues and the Trust Estate as provided in the Indenture. Pursuant to and in accordance with a Financing Agreement dated as of April 1, 1994 (the "Financing Agreement") among the Issuer, EAH-Contra Costa, Inc., a California nonprofit corporation (the 'Borrower"), the Trustee and TRI Capital Corporation (the "Lender"), the Lender has made a secured loan in the amount of$ (the "Mortgage Loan") to provide for the acquisition and rehabilitation of a multifamily rental housing development located in the County of Contra Costa, California, known as Crescent Park Apartments (the "Project"). The Mortgage Loan is insured by the Federal Housing Administration(the "FHA"), an organizational unit within the United States Department of Housing and Urban Development ("HUD")pursuant to Section 241(f) of the National Housing Act of 1934, as amended (the "National Housing Act"). The Mortgage Loan will be evidenced by the Borrower's deed of trust note(the "Mortgage Note") in favor of the Lender and secured by a deed of trust (the "Mortgage") on the Project. In order to provide security for the Bonds, the Trustee is to use the proceeds of the Bonds to purchase from the Lender a fully-modified mortgage-backed security (the "GNMA Security") which will be guaranteed as to timely payment of principal and interest by the Government National Mortgage Association ("GNMA"). Payment of principal of and interest on the Bonds is not guaranteed by GNMA. Payments required to be made by GNMA pursuant to the GNMA Security and the earnings from such investment agreement, however, have been calculated to be sufficient to make payments of principal or redemption price of and interest on the Bonds. THE BONDS AND THE PREMIUM(IF ANY) AND INTEREST THEREON ARE NOT A GENERAL OBLIGATION OF THE ISSUER OR A PLEDGE OF THE FAITH AND CREDIT OF THE ISSUER OR A DEBT OR PLEDGE OF THE FAITH AND CREDIT OF THE STATE OF CALIFORNIA; AND EXCEPT TO THE EXTENT PAID FROM BOND PROCEEDS, THE PRINCIPAL OF AND INTEREST ON THIS BOND ARE PAYABLE SOLELY FROM THE REVENUES AND TRUST ESTATE (AS DEFINED IN THE INDENTURE). THE ISSUER MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND WITH RESPECT TO THE PROJECT, THE BORROWER, THE BONDS OR ANY SECURITY THEREFOR. The Bonds are subject to mandatory redemption, as soon as practicable, on any date, as a whole or in part, at a redemption price equal to the principal amount thereof, plus accrued interest to the redemption date (all without any redemption premiums) upon the occurrence of any of the following events (a) to the extent that any payment on the GNMA Security exceeds a level payment of principal and interest thereon as a result of payments representing (i) casualty insurance proceeds or condemnation awards applied to the prepayment of the Mortgage Loan following a partial or total destruction or condemnation of the Project, (ii) mortgage insurance proceeds or other amounts received with respect to the Mortgage Loan upon the occurrence of an event of default thereunder, (iii)a,prepayment of the Mortgage Loan required by the applicable rules, regulations, policies and procedures of HUD or GNMA, or (iv) a prepayment if HUD determines that prepayment will avoid a mortgage insurance claim and is therefore in the best interest of the Federal SF2-27261.2 A-2 40511-90-MSI-03/11194 Government; or (b) to the extent that the Trustee receives payments on the GNMA Security representing prepayments on the Mortgage Loan made by the Borrower without notice or prepayment penalty while under the supervision of a trustee in bankruptcy. If less than all of the Outstanding Bonds shall be called for redemption pursuant to this paragraph, an amount of Bonds of each maturity shall be redeemed so that the resulting decrease in the debt service on the Bonds for the six-month period ending on each Interest Payment Date is proportional, as nearly as practicable, to the decrease in the payments on the GNMA Security in each such six-month period. [Delete for Series B-T] The Bonds are also subject to optional redemption prior to maturity on any date on or after April 20, 2004, in whole, from payments on the GNMA Security representing optional prepayment of the Mortgage Loan, or otherwise at the option of the Issuer from the proceeds of refunding bonds or any other source of funds, at the redemption prices set forth in the table below, expressed as percentages of the principal amount of the Series B Bonds to be redeemed, plus accrued interest to the redemption date, as follows: Redemption Dates Redemption Prices April 20, 2004 through April 19, 2005 105% April 20, 2005 through April 19, 2006 104 April 20, 2006 through April 19, 2007 103 April 20, 2007 through April 19, 2009 102 April 20, 2009 through April 19, 2010 101 April 20, 2010 and thereafter 100 Notice of redemption is required to be given by first class mail, postage prepaid, to the registered holder of each Bond to be redeemed (and, in the case of any holder of$1,000,000 or more in aggregate principal amount of Bonds of any Series to be redeemed, by registered mail or other secure means), at the address of such registered owner as shown on the Bond Register, not less than 30 nor more than 60 days prior to the redemption date; except that(i) any notice of redemption following receipt of casualty insurance payments or condemnation awards shall be no less than 15 days prior to the date filed for redemption; and (ii) in the event of a redemption by reason of the Trustee receiving payments on the GNMA Security representing payments on the Mortgage Loan made by the Borrower without notice or prepayment penalty while under the supervision of a trustee in bankruptcy, notice of redemption of Bonds shall not be required if the circumstances do not permit the Trustee to give notice as described in the Indenture. Neither failure to give notice by mailing to the registered owner of any Bond designated for redemption nor any defect in such notice shall affect the validity of the proceedings for the redemption of any Bond with respect to which no such failure or defect has occurred. THE BONDS ARE NOT SUBJECT TO REDEMPTION OR ACCELERATION IN THE EVENT IT IS DETERMINED THAT THE INTEREST ON THE BONDS IS INCLUDABLE IN THE GROSS INCOME OF THE REGISTERED OWNERS THEREOF FOR PURPOSES OF FEDERAL INCOME TAXATION. [Delete for Series B-T.] THE INDENTURE CONTAINS NO PROVISION REQUIRING PUBLICATION OF NOTICE OF REDEMPTION OF ANY OR ALL OF THE BONDS UNDER ANY CIRCUMSTANCES. IN ACCORDANCE WITH THE INDENTURE, NOTICE OF REDEMPTION OF ANY BONDS IS REQUIRED TO BE GIVEN ONLY AT THE ADDRESS OF THE REGISTERED OWNERS THEREOF AS SHOWN ON THE BOND REGISTER. IN THE EVENT THAT ANY BOND IS CALLED FOR REDEMPTION, THE BOND SO CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE REDEMPTION DATE AND INTEREST THEREON SHALL CEASE TO ACCRUE FROM AND AFTER THE REDEMPTION DATE. SF2.27261.2 A-3 - 40511-90-MSI-03/11/94 The Registered Owner of this Bond shall have no right to enforce the provisions of the Indenture or to institute action to enforce the covenants therein, or to take any action with respect to any event of default thereunder, or to institute, appear in or defend any suit or other proceeding with respect thereto, except as provided in the Indenture. Modifications or alterations of the Indenture or of any indenture supplemental thereto may be made only to the extent and in the circumstances permitted by the Indenture. This Bond shall be registered on the books of the Issuer to be kept for that purpose by the Trustee, which shall act as bond registrar for the Bonds. This Bond may be exchanged, and its transfer may be effected, only by the Registered Owner hereof in person or by attorney duly authorized in writing at the aforesaid office of the Trustee, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, and upon surrender and cancellation of this Bond. Upon exchange or registration of such transfer a new registered Bond or Bonds of the same maturity and interest rate and of authorized denomination or denominations for the same aggregate principal amount will be issued in exchange therefor. The Issuer and the Trustee may deem and treat the person in whose name this Bond shall be registered on the Bond Register (as defined in the Indenture), as the absolute owner hereof for the purpose of receiving payment of or on account of principal hereof and interest due hereon and for all other purposes and neither the Issuer nor the Trustee shall be affected by any notice to the contrary. The Bonds are issuable only as registered Bonds without coupons in denominations of$1,000 principal amount and any integral multiple thereof. The principal hereof may be declared or may become due on the conditions and in the manner and at the time set forth in the Indenture upon the occurrence of an event of default as provided in the Indenture. No recourse shall be had for the payment of the principal of, premium, if any, or interest on this Bond or for any claim based thereon or upon any obligation, covenant or agreement in the Indenture contained, against the Issuer, any past, present or future member of its governing body, its officers, attorneys, accountants, financial advisors, agents or staff, or the officers, attorneys, accountants, financial advisors, agents or staff of any successor public entity, as such, either directly or through the Issuer or any successor public entity, under any rule of law or penalty or otherwise, and all such liability of the Issuer, any member of its governing body and its officers, attorneys, accountants, financial advisors, agents and staff is, by the acceptance of this Bond, expressly waived and released as a condition of, and in consideration for, the execution of the Indenture and the issuance of the Bonds. It is hereby 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 the time, form and manner as required by law. This Bond shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose until the Trustee shall have executed the Certificate of Authentication appearing hereon. SF2-27261.2 A-4 40511-90-MS1-03/11/94 • • IN WITNESS WHEREOF, the Issuer has caused this Bond to be duly executed in its name and on its behalf by the manual or facsimile signature of the Chair of the Board of Supervisors of the Issuer, and has caused its corporate seal or a facsimile thereof to be impressed or otherwise reproduced hereon and attested by the manual or facsimile signature of the County Administrator and the Clerk of the Board of Supervisors of the Issuer, all as of 1, 1994. (SEAL) COUNTY OF CONTRA COSTA ATTEST: By: County Administrator and Chair of the Board of Supervisors Clerk of the Board of Supervisors [Form of Certificate of Authentication] CERTIFICATE,OF AUTHENTICATION This Bond is one of the Bonds described in the within-mentioned Indenture. as Trustee By: Authorized Officer Date of Authentication: SF2-27261.2 A-5 40511-90-MSI-03/11/94 [Form of Assignment for Transfer] ASSIGNMENT FOR VALUE RECEIVED, the undersigned, hereby sells, assigns and transfers unto (Tax Identification or Social Security No. )the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer the within Bond on the books kept for registration thereof, with full power of substitution in the premises. Date: Signature guaranteed: NOTICE: Signatures must be guaranteed by NOTICE: The signatures to this assignment must a member firm of the New York Stock correspond with the name as it appears upon Exchange or a commercial bank the face of the within Bond in every particular, without alteration or enlargement or any change whatever SF2-27261.2 A-6 40511-90-MSI-03/11194