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HomeMy WebLinkAboutMINUTES - 04191994 - 1.165 rev I ..y, � •I V V Contra Costa TO: BOARD OF SUPERVISORS o County r� C •N FROM: Harvey E. Bragdon Director of Community Development DATE : April 19, 1994 SUBJECT: Bond Sale Resolution - Del .Norte Apartments, El Cerrito SPECIFIC REQUEST(S) OR RECOMNJENDATION(S) & BACKGROUND AND JUSTIFICATION RECOMMENDATIONS ADOPT resolution authorizing. the sale of Multi-Family Mortgage Revenue Refunding Bonds for the refinancing of the Del Norte Apartments, El Cerrito, and actions related thereto. FISCAL IMPACT None . County is compensated for costs incurred in the issuance process and for costs of monitoring compliance with regulatory agreements . BACKGROUND/REASONS FOR RECOMMENDATIONS In 1990 the County issued its $11, 000, 000 Multi-Family Mortgage Revenue Bonds for the Del Norte Apartments., a 135 unit development in El Cerrito. The project carries FHA insurance. The project is in default under the terms of the FHA-insured mortgage. The bonds are CONTINUED ON ATTACHMENT: YES SIGNATURE : RECOMMENDATION OF COUNTY ADMINISTRATOR REC NDATION O BOARD CO TTEE APPROVE OTHER S I GNATURE (S) ACTION OF BOARD ON Atiril 19 , 1994 APPROVED AS RECOMMENDED x OTHER VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A x UNANIMOUS (ABSENT I ) 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. Jim Kennedy 646-4076 cc: Community Development County Administrator ATTESTED April 19 , 1994 County Counsel PHIL BATCHELOR, CLERK OF via Community Development THE BOARD OF SUPERVISORS John Stewart Co. AND COUNTY ADMINISTRATOR Newman & Associates Jones Hall Hill & White El Cerrito Redevelopment BY ° DEPUTY JK:1h/sra13/de1norte.bos not in default, i.e. , all principal and interest due has been paid. To cure the mortgage default, sale of refunding bonds is being recommended. The refunding bonds will permit the mortgage to be rewritten at a significantly lower interest rate. In exchange for providing for the sale of refunding bonds, the County will secure an increase in the time period for which units must be reserved for very low income. That time period will increase from 15 to 30 years. The proceeds of the bonds will refinance the mortgage on the Del Norte Apartments. The bonds will be secured by a pledge of rents, reserve accounts, and by a policy of mortgage insurance issued by FHA. In addition, the mortgage and the bonds will be securitized through the GNMA security. The bonds will be additionally secured by a letter of credit issued by Sumitomo Bank, Ltd. The bonds' are expected to be rated AA. The underwriter in this transaction is Newman & Associates. The underwriter was determined pursuant to adopted Board policy for the selection of underwriters . The bond counsel is Jones Hall Hill & White, and Vaca & Vaca as co-counsel . Vaca & Vaca is a locally based MBE/WBE firm. The bond sale resolution authorizes a number of actions, a summary of which is included as Attachment A. The County, as required by Section 147 (f) of the Internal Revenue Code, has held a noticed public hearing to permit interested parties to comment on the project. The following comments were received: None. ATTACHMENT A The recommended resolution authorizes a number of actions, a summary of which follows: 1 . Authorizes the issuance of revenue bonds in an amount not to exceed $11 .5 million; 2 . Approves the Form of Trust Indenture between the County and the Trustee, Bank of America NT&SA; 3 . Approves the Form of Bond Purchase Agreement between the County, the owner (Del Norte Place, a California Limited Partnership) , and Newman & Associates as underwriter; 4 . Approves the Form of Financing Agreement between the County, Trustee, Owner, and TRI Capital Corporation, the FHA lender; 5. Approves the Form of Regulatory Agreement between the County, Trustee and the Owner; 6. Approves the Form of a Preliminary Official Statement; 7 . Designates Newman & Associates as Underwriter; 8 . Designates Jones Hall Hill & White as Bond Counsel and Vaca & Vaca as Co-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 the sale of bonds and assistance related thereto. J.3052-17 JHHW.PJT:JHE 4/22/94 $11,110,000 COUNTY OF CONTRA COSTA VARIABLE RATE DEMAND MULTIFAMILY HOUSING REVENUE REFUNDING BONDS,1994 SERIES A (GNMA COLLATERALIZED-DEL NORTE PLACE APARTMENTS) INCUMBENCY AND SIGNATURE CERTIFICATE The undersigned hereby state and certify: (i) that they are the duly elected or appointed, qualified and acting Vice-Chair of the Board of Supervisors and Clerk of the Board of Supervisors, respectively, of the County of Contra Costa,a public body, corporate and politic, duly organized and existing under the laws of the State of California (the "County") and, as such, are familiar with the facts herein certified and are authorized to certify the same; (ii) that the following are now, and have continuously been since the dates of the beginning of their respective current terms of office shown below, the duly appointed or elected, qualified and acting members of the Board of Supervisors of the County, and the dates of the beginning and ending of their respective current terms of office are hereunder correctly designated opposite their names: Date of Date of Beginning Date Ending Date Members of Current Term of Current Term Tom Powers January, 1991 January, 1995 Gayle Bishop January, 1993 January, 1997 Tom Torlakson January, 1993 January, 1997 Mark DeSaulnier January, 1991 January, 1995 Jeffrey V. Smith January, 1993 January, 1997 (iii) that the signatures set forth opposite the names and titles of the following persons are the true and correct specimens of, or are, the genuine signatures of such persons, each of whom holds the office designated below: Name/Title Signature Tom Powers, Chair of the Board of Supervisors Name/Title Signature Gayle Bishop, Vice-Chair of the ' Awiok- 44oz4 Board of Supervisors James Kennedy, Deputy Director - Redevelopment of the Community Development Department L Phil Batchelor, County Administrator and Clerk of the Board of Supervisors (iv) that the bonds issued by the County designated "County of Contra Costa Variable Rate Demand Multifamily Housing Revenue Refunding Bonds, 1994 Series A (GNMA Collateralized - Del Norte Place Apartments)", in the aggregate principal amount of $11,110,000 and dated the date hereof (the 'Bonds"), have.been executed by the facsimile signature of the within-named Chair of the Board of Supervisors and attested to by the facsimile signature of the within-named Clerk of the Board of Supervisors, and that the seal of the County is impressed hereon and is reproduced on the Bonds in facsimile. Dated: April 28, 1994 COUNTY OF CONTRA COSTA ByPAC4 Gayle Bfshop, Vice-Chair of the Board of Supervisors [SEAL] Phil Batchelor, Clerk of the Board of S rvis s and County Administrator ByAAM I Ddpqty i( RESOLUTION NO. 94/202 A RESOLUTION OF THE BOARD OF SUPERVISORS OF THE COUNTY OF CONTRA COSTA AUTHORIZING THE ISSUANCE, SALE AND DELIVERY OF COUNTY OF CONTRA COSTA VARIABLE RATE DEMAND MULTIFAMILY HOUSING REVENUE REFUNDING BONDS,1994 SERIES A (GNMA COLLATERALIZED—DEL NORTE PLACE APARTMENTS), AUTHORIZING THE EXECUTION AND DELIVERY OF AN INDENTURE, A FINANCING AGREEMENT, AN AMENDED AND RESTATED REGULATORY AGREEMENT, AN OFFICIAL STATEMENT AND A BOND PURCHASE AGREEMENT, AND AUTHORIZING THE EXECUTION AND DELIVERY OF AND APPROVING OTHER RELATED DOCUMENTS AND APPROVING OTHER RELATED ACTIONS IN CONNECTION THEREWITH WHEREAS, the County of Contra Costa (the "County") is authorized pursuant to Chapter 7 of Part 5 of Division 31 of the Health and Safety Code of the State of California (the "Act") to issue revenue bonds to ,provide funds to finance multifamily rental housing facilities; WHEREAS, the County has heretofore issued its $11,000,000 principal amount of County of Contra Costa Multifamily Housing Revenue Bonds (GNMA Collateralized - Del Norte Place Apartments) 1990 Series B (the "Prior Bonds"), and loaned the proceeds thereof to Del Norte Place A California Limited Partnership (the "Developer) for the purpose of financing the construction and development of a 135 residential unit mixed use multifamily housing and commercial rental project (the "Project") located at 11720 San Pablo Avenue in El Cerrito; WHEREAS, as a consequence of a default by the Developer on the mortgage loan with respect to the Project, the Prior Bonds will be paid in full with the proceeds of a GNMA Security issued by TRI Capital Corporation (the "Lender") in connection with the issuance of the Prior Bonds; and WHEREAS, the Developer has requested that the County issue bonds (the "Bonds") (a) to provide funds to acquire a new GNMA Security from the Lender and thereby refinance the Project, and (b) to provide additional monies to finance the Project, and the issuance of the Bonds to provide such additional monies is dependent upon an allocation from the State of California in respect thereof; WHEREAS, the County has applied to the State of California Debt Limit Allocation Committee ("CDLAC"), for an allocation (the "Allocation") in the amount of $600,000 in respect of such additional monies in accordance with Section 146 of the Internal Revenue Code of 1986 (the "Code") and Chapter 11.8 of Division 1 of Title 2 of the California Government Code; and WHEREAS, the Deputy Director—Redevelopment of the Community Development Department of the County has held a public hearing on the proposed issuance of the Bonds, as required under the Code, following published notice of such hearing; and 1 �f WHEREAS, upon the receipt of the Allocation from CDLAC, all conditions, things and acts required to exist, to have happened and to have been performed precedent to and in connection with the issuance of the Bonds as contemplated by this Resolution and the documents referred to herein will exist, have happened and have been performed in due time, form and manner as required by the laws of the State of California, including the Act. NOW, THEREFORE, BE IT RESOLVED by the Board of Supervisors of the County of Contra Costa, as follows: 1. The County hereby finds and declares that the above recitals are true and correct. 2. Pursuant to the Act and the Indenture (hereinafter defined), revenue bonds of the County designated as "County of Contra Costa, Variable Rate Demand Multifamily Housing Revenue Refunding Bonds, 1994 Series A (GNMA Collateralized - Del Norte Place Apartments) (the 'Bonds"), in an aggregate principal amount not to exceed $11,110,000, are hereby authorized to be issued, contingent upon receipt of the Allocation from CDLAC in an amount sufficient to issue all of the Bonds to be sold pursuant to the Purchase Contract (hereinafter defined). The Bonds shall be executed by the manual or facsimile signature of the Chair of the Board of Supervisors (the "Chair") , the facsimile of the seal of the County shall be reproduced thereon and attested by the manual or facsimile signature of the County Administrator and Clerk of the Board of Supervisors (the "County Administrator"), in the form set forth in and otherwise in accordance with the Indenture. 3. The trust indenture relating to the Bonds (the "Indenture") by and between the County and Bank of America National Trust and Savings Association, as trustee (the "Trustee"), in the form on file with the Clerk of the Board, is hereby approved. Any one of the Chair, the Vice-Chair of the Board of Supervisors, the County Administrator, the Director of Community Development and the Deputy Director-Redevelopment of the Community Development Department of the County (collectively, the "Designated Officers") is hereby authorized and directed, for and in the name and on behalf of the County, to execute and deliver the Indenture, and the County Administrator is hereby authorized and directed, for and in the name and on behalf of the County, to attest the Indenture in said form, together with such additions thereto or changes therein as are recommended or approved by the Designated Officer executing the Indenture upon consultation with the Deputy Director-Redevelopment of the Community Development Department of the County and Bond Counsel to the County (including such additions or changes as are necessary or advisable in accordance with Section 9 hereof, provided that no additions or changes shall authorize an aggregate principal amount of Bonds in excess of the amount set forth in Section 2 above), the approval of such additions or changes to be conclusively evidenced by the execution and delivery of the Indenture by the County. The date, maturity dates, interest rate or rates, privileges, manner of execution, place of payment, terms of redemption and other terms of the Bonds shall be as provided in the Indenture as finally executed. 4. The financing agreement relating to the Bonds (the "Financing Agreement") among the County, the Trustee, the Developer and the Lender, in the form on file with the Clerk of the Board, is hereby approved. Any one of the Designated Officers is hereby 2 authorized and directed to execute and deliver the Financing Agreement in said form, together with such additions thereto or changes therein as are recommended or approved by the Designated Officer executing the Financing Agreement upon consultation with the Deputy Director-Redevelopment of the Community Development Department of the County and Bond Counsel to the County (including such additions or changes as are necessary or advisable in accordance with Section 9 hereof), the approval of such changes to be conclusively evidenced by the execution and delivery of the Financing Agreement by the County. 5. The amended and restated regulatory agreement and declaration of restrictive covenants relating to the Bonds (the "Regulatory Agreement") among the County, the Trustee and the Developer, in the form on file with the Clerk of the Board, is hereby approved. Any one of the Designated Officers is hereby authorized and directed, for and in the name and on behalf of the County, to execute and deliver the Regulatory Agreement in said form, together with such additions thereto or changes therein as are recommended or approved by the Designated Officer executing the Regulatory Agreement upon consultation with the Deputy Director-Redevelopment of the Community Development Department of the County and Bond Counsel to the County (including such additions or changes as are necessary or advisable in accordance with Section 9 hereof), the approval of such additions or changes to be conclusively evidenced by the execution and delivery of the Regulatory Agreement by the County. 6. The bond purchase agreement for the Bonds (the 'Purchase Contract") among the County, Newman and Associates, Inc. (the "Underwriters") and the Developer in the form on file with the Clerk of the Board, is hereby approved. Any one of the Designated Officers is hereby authorized and directed, for and in the name and on behalf of the County, to accept the offer of the Underwriters to purchase the Bonds contained in the Purchase Contract (when such offer is made and if such offer is consistent with Section 2 of this Resolution) and to execute and deliver the Purchase Contract in said form, together with such additions thereto or changes therein as are recommended or approved by the Designated Officer executing the Purchase Contract upon consultation with the Deputy Director-Redevelopment of the Community Development Department of the County and Bond Counsel to the County including such additions or changes as are necessary or advisable in accordance with Section 9 hereof (provided that no such change shall increase the aggregate principal amount of the Bonds over the amount specified in Section 2 above and the initial interest rate to be borne by any maturity of the Bonds shall not be in excess of 4.0% and the Underwriter's fee and/or discount shall not be in access of 1.50% of the principal amount of the Bonds sold), the approval of such additions or changes to be conclusively evidenced by the execution and delivery of the Purchase Contract by the County. 7. The official statement relating to the Bonds (the "Official Statement") in the form on file with the Clerk of the Board, is hereby approved. Any one of the Designated Officers is hereby authorized and directed, for and in the name and on behalf of the County, to execute the Official Statement in said form, together with such additions thereto or changes therein as are recommended or approved by the Designated Officer executing the Official Statement upon consultation with the Deputy Director of Redevelopment of the Community Development Department of the County and Bond Counsel to the County, the 3 f r approval of such additions or changes to be conclusively evidenced by the execution and delivery of the Official Statement by the County. The Underwriters are hereby authorized to distribute copies of the executed Official Statement to persons who may be interested in the purchase of the Bonds and are directed to deliver such copies to all actual purchasers of the Bonds. Distribution by the Underwriters of a preliminary Official Statement relating to the Bonds is hereby approved and authorized, and any one of the Designated Officers is hereby authorized on behalf of the County, upon consultation with Bond Counsel to the County, to "deem final" the preliminary Official Statement within the meaning of Rule 15c2-12 promulgated under the Securities and Exchange Act of 1934 (except for the omission of certain final pricing, rating and related information as permitted by such rule). 8. 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 the County by any one of the Designated Officers of the County, which instructions said officer is hereby authorized and directed, for and.in the name and behalf of 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 Contract, upon payment of the purchase price therefor. 9. All actions heretofore taken by the officers and agents of the County with respect to the sale and issuance of the Prior Bonds and the Bonds are hereby approved, confirmed and ratified, and the proper officers of the County, including the Designated Officers, 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 any and all certificates, agreements and other documents, which they, or any of them, may deem necessary or advisable in order to consummate the lawful issuance and delivery of the Bonds in accordance with this Resolution and the redemption of the Prior Bonds, including but not limited to those certificates, agreements and other documents described in the Indenture, the Financing Agreement, the Regulatory Agreement, the Purchase Contract and the other documents herein approved and any certificates, agreements or documents as may be necessary to evidence credit support or additional security for the Bonds or to defease or redeem the Prior Bonds. 4 t 10. This Resolution shall take effect immediately upon its adoption. PASSED AND ADOPTED this 19th day of April, 1994 by the following vote: AYES: Bishop, Desaulnier, Smith, & Torlakson NOES: None ABSTAINING:. None ABSENT: Supervisor Powers Tice- Chair Actincl as the Chair ATTEST: Phil Batchelor County Administrator and Clerk of the Board of Supervisors By: Annn 011 A I J Deputy Clerk 13052-17:J1260 04/17/94 5 N:\CONTRA\LEG\BPA 4/12M DRAFT $11,110,000 COUNTY OF CONTRA COSTA Variable Rate Demand Multifamily Housing Revenue Refunding Bonds, 1994 Series A (GNMA COLLATERALIZED - DEL NORTE PLACE APARTMENTS) BOND PURCHASE AGREEMENT April_, 1994 County of Contra Costa 651 Pine Street North Wing, 4th Floor Martinez, California 94553-0095 Del Norte Place Limited Partnership, a California limited partnership c/o The John Stewart Company 2310 Mason Street San_Francisco, California 94117 Ladies and Gentlemen: Newman and Associates, Inc. (the "Underwriter"),offer to enter into this Bond Purchase Agreement with the County of Contra Costa(the "Issuer")and Del Norte Place Limited Partnership,a California limited partnership organized and existing under the laws of the State of California(the "Owner"), subject to acceptance at or prior to 10:00 a.m., Pacific time, on the date hereof. 1. Introductory. The Issuer is authorized to issue $11,110,000 aggregate principal amount of its Variable Rate Demand Multifamily Housing Revenue Refunding Bonds, 1994 Series A (GNMA Collateralized— Del Norte Place Apartments) (the "Bonds")pursuant to and in accordance with the authority contained in Chapter 7 of Part 5 of Division 31 of the Health and Safety Code of the State of California,as amended (the "Act"), which are issued(i)to refund the Issuer's outstanding Multifamily Housing Revenue Bonds (GNMA Collateralized— Del Norte Place Apartments) 1990 Series B (the "Prior Bonds")the proceeds of which were used to finance a mortgage loan made to the Owner, (ii)to reimburse the Owner for certain Project costs not previously reimbursed from the Prior Bonds and(iii)to pay certain costs of issuance. The Bonds will be issued pursuant to a trust indenture dated as of April 1, 1994 (the "Indenture"), between the Issuer and Bank of America National Trust and Savings Association, as Trustee (the "Trustee"), and will mature on the dates and in the amounts and will bear interest at the rates shown on Schedule I hereto. The Prior Bonds were issued to finance a mortgage loan (the "Loan"), the proceeds of which were used to fund a portion of the costs of the acquisition, construction and equipping by the Owner of a 135-unit mixed use, multifamily housing rental project(the "Project")located in the city of El Cerrito, California. The Loan is evidenced by a deed of trust note (the "Note"). The Note was finally endorsed for insurance by the Federal Housing Administration("FHA")pursuant to the provisions of Sections 221(d)(4)and 244 of the National Housing Act of 1934. The Prior Bonds were, and a portion of the Bonds are expected to be, serviced primarily by a fully-modified mortgage-backed security (the "GNMA Security") issued by TRI Capital Corporation (the "Lender") and guaranteed as to timely payment of principal and interest by the Government National Mortgage Association("GNMA"). 2. Purchase, Sale and Delivery of Bonds. On the basis of the representations, warranties and agreements contained herein,but subject to the terms and conditions herein set forth, the Underwriter hereby agrees to purchase from the Issuer, and the Issuer hereby agrees to sell to the Underwriter, the Bonds at a purchase price equal to % of the aggregate principal amount thereof. The estimated issuance expenses, including the fee of the Underwriter, are set forth in Schedule H hereto. The Issuer will deliver the Bonds to the Underwriter for the account of the Underwriter through DTC in book-entry only form against payment of the purchase price therefor by wire transfer payable in immediately available funds in a closing which will be held at the offices of Jones Hall Hill& White, A Professional Law Corporation, San Francisco, California,at 9:00 a.m., California time,on April 28, 1994, or at such other time and place thereafter as the Underwriter,the Issuer and the Owner shall mutually agree(the"Closing Date"). The Bonds so to be delivered will be delivered in definitive fully registered book-entry only form in such denominations as the Underwriter shall request at least two (2) business days prior to the Closing Date and will be made available for checking and packaging at least 24 hours prior to the Closing Date. Notwithstanding anything in this Section 2 to the contrary, the Underwriter may elect to take delivery of the Bonds in temporary form. In such event, Bonds in definitive form shall be delivered to the Underwriter within 10 days after the Closing Date. The terms and conditions of the Bonds shall be set forth in the Indenture and described in the Official Statement. For their services hereunder, the Underwriter shall receive a fee in the amount of $138,875 (the "Underwriting Fee"). The Underwriting Fee shall be in addition to any compensation to which Newman and Associates, Inc. may be entitled for serving as Remarketing Agent under the Remarketing Agreement. 3. Closing Documents. At or prior to the Closing Date, the Underwriter shall have received the following: (a) The Official Statement relating to the Bonds (the "Official Statement"), duly executed on behalf of the Issuer and the Owner. (b) The Indenture, duly executed by the Issuer and the Trustee. (c) The Financing Agreement(the "Financing Agreement"), duly executed by the Trustee,the Issuer, TRI Capital Corporation(the "Lender") and the Owner. (d) The Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants (the "Regulatory Agreement") duly executed by the Issuer, the Owner and the Trustee. (e) The investment agreement for the Acquisition Fund (the "Investment Agreement")duly executed by the Trustee and. (the "Investment Agreement Provider"). (f) A certified copy or copies of the resolutions of the Issuer,-as supplemented and amended, authorizing the issuance of the Bonds, and the execution and delivery of the Indenture, the Financing Agreement, the Regulatory Agreement and this Bond Purchase Agreement. (g) The Reimbursement Agreement (the "Reimbursement Agreement") duly executed by the Owner and The Sumitomo Bank, Limited(Chicago Branch) (the "Credit Enhancement Provider"). (h) The Remarketing Agreement, duly executed by the Underwriter as Remarketing Agent and the Owner. (i) Copies of such other documents which may be reasonably requested by the Underwriter or its counsel or Co-Bond Counsel. 4. Offering and Authorization. The Underwriter proposes to offer and sell the Bonds as set forth in the Official Statement. The Issuer and the Owner each acknowledges that it has been advised that the Underwriter may offer the Bonds at prices above or below their principal amounts. 2 5. Delivery of Official Statement. Prior to the acceptance of this Bond Purchase Agreement by the Issuer and the Owner(or such later date as the Underwriter may consent to),the Issuer delivered to the Underwriter for review a copy of the Preliminary Official Statement dated April_, 1994 relating to the Bonds (which, including all appendices thereto, is referred to as the "Preliminary Official Statement). The Issuer and the Owner each hereby ratifies the use of the Preliminary Official Statement by the Underwriter in the marketing of the Bonds. The Preliminary Official Statement was final as of the date of such review, except for final information as to the offering prices, interest rates, selling compensation, amount of proceeds, delivery dates, other terms depending on such factors, and other information permitted to be omitted under Rule 15c2-12(b)(1)under the Securities Exchange Act of 1934, as amended. The Issuer and the Owner each is providing or will provide to the Underwriter, concurrently with or within seven (7) business days after the date hereof, at the expense of the Owner, a quantity of final Official Statements, which shall include such final information listed in the previous sentence adequate to enable the Underwriter to meet the continuing obligations imposed on it by Rule 15c2-12 under the Securities Exchange Act of 1934. 6. Representations and Warranties of the Issuer. The Issuer represents and warrants to the parties hereto: (a) The Issuer is a legal subdivision and body corporate and politic organized and existing under the Constitution and laws of the State of California(the "State")and has full legal right, power and authority (i) to enter into this Bond Purchase Agreement, (ii) to execute and deliver the Indenture, the Financing Agreement and the Regulatory Agreement, (iii) to issue, sell and deliver the Bonds as provided herein, (iv) to use the proceeds of the Bonds to acquire the GNMA Security (the "GNMA Security"), and (v) to carry out the transactions contemplated by this Bond Purchase Agreement, the Indenture, the Financing Agreement and the Regulatory Agreement, as they may be amended or supplemented from time to time by the Issuer. (b) The information in the Preliminary Official Statement and the Official Statement under the captions "THE ISSUER" and"LITIGATION"will not on the date thereof contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading. (c) By official action of the Issuer prior to or concurrently with the acceptance hereof, the Issuer has duly authorized and approved the Preliminary Official Statement and the Official Statement, has duly authorized and approved the execution and delivery of, and the performance by the Issuer of the obligations on its part contained in,the Indenture,the Bonds, this Bond Purchase Agreement,the Financing Agreement and the Regulatory Agreement and has duly authorized and approved the consummation of all other transactions contemplated by this Bond Purchase Agreement. (d) To the best of its knowledge, the Issuer is not in breach of or default under any applicable law or administrative regulation of the State or the United States which would impair the performance of its obligations under this Bond Purchase Agreement or any applicable judgment or decree or any loan agreement, note, resolution, agreement or other instrument to which the Issuer is a party or is otherwise subject; and the execution and delivery of the Bonds, the Indenture, this Bond Purchase Agreement, the Financing Agreement and the Regulatory Agreement, and compliance with the provisions of each thereof, will not conflict with or constitute a breach of or default under any law, administrative regulation, judgment, decree, loan agreement, note, resolution, agreement or other instrument to which the Issuer is a party or is otherwise subject. (e) All approvals, consents and orders of any governmental authority,board, agency or commission having jurisdiction which would constitute a condition precedent to the performance by the Issuer of its obligations hereunder have been obtained. (f) The Issuer has received no notice of any action, suit, proceeding, inquiry or investigation,at law or in equity,before or by any court,public board or body,pending,and,without independent inquiry,has 3 no knowledge of any threatened, against the Issuer affecting the existence of the Issuer or the titles of its officials to their respective offices or seeking to prohibit,restrain or enjoin the sale, issuance or delivery of the Bonds or the pledge of revenues to be pledged to pay the principal of and interest on the Bonds, or in any way contesting or affecting the validity or enforceability of the Bonds, this Bond Purchase Agreement, the Indenture, the Financing Agreement or the Regulatory Agreement, or contesting in any way the completeness or accuracy of the Official Statement,or contesting the powers of the Issuer or any authority for the issuance of the Bonds, the execution and delivery of this Bond Purchase Agreement, the Indenture,the Financing Agreement or the Regulatory Agreement,wherein an unfavorable decision,ruling or finding would materially adversely affect the validity or enforceability of the Bonds, the Indenture, the Financing Agreement, the Regulatory Agreement or this Bond Purchase Agreement. (g) The Bonds, when issued, authenticated and delivered in accordance with the Indenture and sold to the Underwriter as provided herein, will be validly issued and outstanding limited revenue obligations of the Issuer enforceable in accordance with their terms and entitled to the benefits of the Indenture. (h) The Issuer has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that the Issuer is a bond issuer whose arbitrage certifications may not be relied upon. (i) The Issuer is not now in default, nor has the Issuer been in default at any time since December 31, 1975, as to principal or interest with respect to any obligations issued by the Issuer or any predecessor to the Issuer. . (j) This Bond Purchase Agreement constitutes, and, upon the execution and delivery thereof, the Indenture, the Financing Agreement and the Regulatory Agreement will constitute,legal,valid and binding obligations of the Issuer enforceable in accordance with their terms, except as limited by bankruptcy, insolvency, reorganization, moratorium and other laws for the relief of debtors. Any certificate signed by an authorized officer of the Issuer and delivered to the Underwriter shall be deemed a representation and warranty by the Issuer to the Underwriter as to the statements made therein. 7. Representations and Warranties of Owner. The Owner represents and warrants to the parties hereto: (a) The Owner(i) is a limited partnership organized and existing under the laws of the State of California, qualified to transact business under the laws of the State and is in good standing under the laws of the State, (ii) has the full legal right, power and authority to own its properties and assets, and to carry on its business as now being conducted by it, and as contemplated by the Financing Agreement, the Regulatory Agreement, this Bond Purchase Agreement, the Reimbursement Agreement, the Remarketing Agreement and the FHA Loan Documents(as defined in the Indenture), and(iii) has the full legal right, power and authority to execute and deliver the Financing Agreement, the Regulatory Agreement, the Reimbursement Agreement, the Remarketing Agreement, this Bond Purchase Agreement and the FHA Loan Documents and to perform all the undertakings of the Owner thereunder. (b) The execution and delivery of this Bond Purchase Agreement has been duly authorized by the Owner and this Bond Purchase Agreement has been duly executed and delivered by the Owner. (c) To the best knowledge of the Owner and upon reliance on advice of Owner's counsel, the execution and delivery by the Owner of this Bond Purchase Agreement, and the performance by the Owner of its obligations hereunder, and the consummation of the transactions contemplated hereby, will not violate any provision of law, rule or regulation applicable to the Owner, or any order or decree of any court or other agency or government or governmental instrumentality,or any provision of any certificate of incorporation or partnership agreement, by-laws or any resolution of the Owner, or of any mortgage, indenture, contract, agreement, document, instrument or other undertaking to which the Owner is a party or which purports to be binding upon the Owner or upon any of its assets. 4 (d) Assuming due authorization, execution and delivery hereof by the other parties hereto, this Bond Purchase Agreement is a legal, valid and binding obligation of the Owner enforceable against the Owner in accordance with its terms subject to(a) the exercise of judicial discretion in accordance with general principals of equity,and(b) .bankruptcy, insolvency,reorganization,moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted to the extent constitutionally applicable. (e) The information concerning the Project and the Owner submitted by the Owner to the Lender, the Underwriter or its representatives or the Issuer, including representations contained in the Tax Certificate,and the information in the Preliminary Official Statement and the Official Statement under the captions "THE MORTGAGE NOTE AND MORTGAGE," "CERTAIN RISKS TO BONDHOLDERS" and "THE OWNER AND THE PROJECT" does not make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, and such information in the Official Statement is "final" within the meaning of Rule 15c2-12(b) under the Securities Exchange Act of 1934. (f) The Indenture has been submitted to the Owner for examination, and the Owner acknowledges, by the execution of this Bond Purchase Agreement, that it has reviewed and approved the Indenture. (g) Neither the Issuer nor the Underwriter nor any party on behalf of the foregoing, prior to the date of the default on the Mortgage Note relating to the Project, encouraged the Owner to default on the Mortgage Note or to participate in the issuance of the Bonds and the redemption of the Prior Bonds as a means to facilitate the refinancing of the Mortgage Note. (h) The date on which the-first missed payment on the Mortgage Note was due was September 1, 1993, and prior to September 30, 1993, the Mortgage Note was not in default. (i) The Owner represents that it has operated and managed the Project in a professional and, appropriate manner and has taken all reasonable steps and used all available funds to continue to make all mortgage payments due under the Mortgage Loan, but due to economic conditions within Contra Costa County, California,area, beyond the control of the Owner, the market rents for the Project have produced insufficient revenues to cover the costs of operating and maintaining that Project and to pay the debt service required under the original terms of the Mortgage Loan,which resulted on September 30, 1993 in a default under the Mortgage Loan. Based on the Owner's projections for the Project and for the rental apartment market place in Contra Costa County, California, area, the Project could not have reached a break-even level of operations in the foreseeable future under the original terms of the Mortgage Loan. 8. Covenants of the Issuer. The Issuer covenants with the parties hereto that: (a) If between the date of this Bond Purchase Agreement and the date 90 days following the Closing Date an event occurs, which is known to the Issuer, affecting the Issuer, which would cause the Official Statement to contain an untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements therein with respect to the Issuer, in light of the circumstances under which they were made, not misleading,the Issuer shall notify the Underwriter and, if in the opinion of the Issuer or the Underwriter such event requires an amendment or supplement to the Official Statement, the Issuer, at the expense of the Owner, will amend or supplement the Official Statement in a form and in a manner jointly approved by the Issuer and the Underwriter; provided, however, if such event shall occur on or prior to the Closing Date, the Underwriter in its discretion shall have the right to terminate the obligations of the Underwriter hereunder by written notice to the Owner and the Issuer, and the Underwriter shall be under no obligation to purchase and pay for the Bonds. (b) The Issuer will furnish such information, execute such instruments and take such other action consistent with the provisions of the Indenture, the Financing Agreement and the Regulatory 5 Agreement in cooperation with the Underwriter as the Underwriter may reasonably request to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate; provided, however, the Issuer shall not be required to register as a dealer or broker in any such state or jurisdiction or be required to file a general consent to service of process or become subject to service of process in any jurisdiction in which the Issuer is not now subject to service of process. 9. Covenants of the Owner. The Owner covenants with the Issuer and the Underwriter that: (a) If between the date of this Bond Purchase Agreement and the date 90 days following the Closing Date an event occurs, which is known to the Owner, which would cause the Official Statement to contain an untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements therein with respect to the Owner or the Project, in light of the circumstances under which they were made, not misleading, the Owner shall notify the Issuer and the Underwriter and, if in the opinion of the Issuer or the Underwriter such event requires an amendment or supplement to the Official Statement, the Owner, at its expense, will amend or supplement the Official Statement in a form and in a manner jointly approved by the Issuer and the Underwriter;provided,however, if such event shall occur on or prior to the Closing Date, the Underwriter in its discretion shall have the right to terminate the obligations of the Underwriter•hereunder by written notice to the Issuer and the Owner, and the Underwriter shall die under no obligation to purchase and pay for the Bonds. (b) The Owner shall take all necessary action on its part to cause the Bonds to comply with the provisions of the laws and regulations of the State and the Bonds to comply with the provisions of the Internal Revenue Code of 1986 and the regulations promulgated thereunder or applicable thereto (the "Code"), and will not take any action, or permit any action within its control to be taken, which would violate such provisions or which would cause interest on the Bonds to lose its exclusion from gross income for federal income taxation. 10. Conditions to Obligations of Underwriter and Issuer. The obligation of the Underwriter to purchase and pay for the Bonds will be subject to(i)the accuracy of the representations and warranties of the Issuer and the Owner herein, (ii)the accuracy of the material representations and warranties made by the Trustee and the Owner pursuant to the Financing Agreement and by the Owner pursuant to the Regulatory Agreement, the Reimbursement Agreement and the Remarketing Agreement (iii)the performance by the Issuer and the Owner of their obligations hereunder, (iv) the receipt of the documents specified in Section 3 hereof, and (v) the following additional conditions precedent: (a) Except as may have been agreed to by the Underwriter, at the Closing Date, the Indenture, the Financing Agreement, the Reimbursement Agreement, the-Remarketing Agreement and the Regulatory Agreement, and all official action of the Issuer relating thereto shall be in full force and effect and shall not have been amended, modified or supplemented,and the Oficial Statement shall not have been amended or supplemented. (b) At the Closing Date, the Lender shall deliver the Mortgage Loan with respect to the Project providing for a principal amount equal to $10,586,300 bearing interest at a rate of 8.25% per annum. (c) The Issuer shall have received the approving opinions of Jones Hall Hill & White, a Professional Law Corporation, San Francisco, California, and Vaca & Vaca, Walnut Creek, California, Co-Bond Counsel, with respect to the Bonds and the Underwriter shall have received a letter from each said firm, dated the Closing Date and addressed to the Underwriter,to the effect that the Underwriter may rely upon such firm's opinion as if it were addressed to the Underwriter, and a supplemental opinion of Co-Bond Counsel dated the Closing Date and addressed to the Underwriter substantially in the form attached hereto as Exhibit A. 6 (d) The Underwriter shall have received written evidence that [Standard & Poor's Corporation]has.issued a rating of["AAA"]on the Bonds and the documents delivered at the Closing Date shall satisfy the conditions to the continuance of such rating; and as of the date of closing, the rating shall not have been suspended or withdrawn. (e) The Underwriter shall have received a certificate dated the Closing Date and signed by the Owner with respect to the matters set forth in Exhibit C hereto and the opinion of Michaud & Hoshiyama, San Francisco, California, Counsel to the Owner, substantially in the form of Exhibit D hereto. (f) The Underwriter shall have received an opinion of its Counsel, Ritter Eichner&Norris, Washington, D.C., dated the Closing Date and addressed to the Underwriter. In rendering such opinion, Ritter Eichner&Norris may assume to correctness of the approving opinions of Co-Bond Counsel referred to in Section 8(c) above with respect to the matters stated therein. (g) The Underwriter shall have received a certificate of the Lender substantially in the form of Exhibit E attached hereto and an opinion of Lender's counsel substantially in the form of Exhibit F, attached hereto. (h) The Underwriter shall have received an opinion of Hopkins& Sutter, Chicago, Illinois, the Credit Facility Provider's Counsel and of Special Japanese Counsel to the Credit Facility Provider in the form and substance acceptable to Co-Bond Counsel and the Underwriter and its Counsel. (i) The Owner shall have caused the Letter of Credit,issued and signed by the Credit Facility Provider and dated the Closing Date, to be delivered to the Trustee. (j) the Underwriter shall have received a certificate dated the Closing Date and signed by an authorized representative of the'Credit Facility Provider substantially in the form of Exhibit G hereto. (k) The Underwriter shall have received such additional legal opinions, certificates, proceedings, instruments and other documents as the Underwriter or Co-Bond Counsel may reasonably request. The obligation of the Issuer to deliver the Bonds to the Underwriter will be subject to (i) accuracy of representations and warranties of Owner herein and in the Financing Agreement, the Reimbursement Agreement, the Remarketing Agreement and the Regulatory Agreement, (ii) the performance by the Owner and Underwriter of their obligations hereunder, and (iii)satisfaction of the conditions set forth in(a) through (k) above. All the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Bond Purchase Agreement shall be deemed to be in compliance with the provisions hereof if, but only if, they are in form and substance satisfactory to the Issuer and Underwriter. 11. Termination. The Underwriter may terminate their obligations hereunder by written notice to the Issuer if, at any time subsequent to the date hereof and at or prior to the Closing Date: (a) (i) Legislation shall have been enacted by the Congress,or recommended to the Congress for passage by the President of the United States or the U.S. Department of the Treasury or the Internal Revenue Service or any member of the United States Congress, or favorably reported for passage to either House of.the Congress by any Committee of such House to which such legislation has been referred for consideration, or (ii) a decision shall have been rendered by a court established under Article III of the Constitution of the United States, or the United States Tax Court, or (iii) an order, ruling, regulation or communication(including a press release) shall have been issued by the Department of the Treasury of the United States or the Internal Revenue Service, in each case referred to in clauses(i), (ii) and(iii),with 7 the purpose or effect, and reasonable likelihood,directly or indirectly,of imposing federal income taxatign upon interest to be received by any holders of the Bonds. (b) Legislation shall have been enacted or any action taken by the Securities and Exchange Commission which, in the reasonable opinion of counsel to the Underwriter,has the effect of requiring the offer or sale of the Bonds to be registered under the Securities Act of 1933 or the Indenture to be qualified as an indenture under the Trust Indenture Act of 1939 or any event shall have occurred which, in their reasonable judgment, makes untrue or incorrect in any material respect any statement or information contained in the Official Statement or which, in their reasonable judgment, should be reflected therein in order to make the statements contained therein not misleading in any material respect. (c) (i) In the Underwriter's reasonable judgment,the market price of the Bonds is adversely affected because: (a) additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority or by any national securities exchange; (b) the New York Stock Exchange or other national securities exchange, or any governmental authority, shall impose, as to the Bonds or similar obligations,any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by, or the charge to the net capital requirements of, underwriters; (c) a general banking moratorium shall have been established by Federal, New York or California authorities;or(d) a war involving the United States of America shall have been declared, or any other national or international calamity shall have occurred, or any conflict involving the armed forces of the United States of America shall have escalated to such a magnitude as to materially affect the Underwriter's ability to market the Bonds; (ii) any litigation shall be instituted, pending or threatened to restrain or enjoin the issuance or sale of the Bonds or in any way contesting or affecting any authority or security for or the validity of the Bonds or the existence or powers of the Issuer; or(iii) legislation shall have been introduced in or enacted by the Legislature of the State with the purpose or effect,directly or indirectly,of imposing California income taxation upon interest to be received by any holders of the Bonds, or (iv) any action has been taken by any agency of the United States Government with the purpose or effect, directly or indirectly,of imposing federal income taxation upon interest to be received by any holders of the Bonds or which would,in the Underwriter's reasonable judgment,adversely affect the security for the Bonds. (d) there shall have occurred any change which, in the reasonable judgment of the Underwriter, makes unreasonable or unreliable any of the assumptions upon which(i) yield for purposes of Section 103 of the Code, (ii) payment of debt service on the Bonds or (iii) the basis for the exclusion of interest on the Bonds from gross income for federal income tax purposes, is predicated. 12. Expenses: (a) Except as provided in clauses(b)and(c)below,the Owner shall cause to be paid all costs of issuance of the Bonds, an estimate of which is set forth on Schedule II hereto. (b) Except as set forth in Schedule II hereto, the Owner, the Lender, the Credit Facility Provider and the Underwriter shall each pay their own expenses, including in the case of the Owner, the Credit Facility Provider and the Lender,,the fees and expenses of their counsel. (c) The Underwriter shall pay all advertising expenses incurred in connection with the public offering of the Bonds. 13. Indemnification and Contribution. (a) To the fullest extent permitted by applicable law, the Owner, its general partner and its general partners (jointly and severally) (each, an "Indemnifying Party" and collectively,the "Indemnifying Parties")agree to indemnify and hold harmless the Issuer, the Trustee, the Lender, the Credit Facility Provider and the Underwriter and the additional persons described in subsection(b)hereof(each, an "Indemnified Party" and collectively,the "Indemnified Parties") against any and all losses, damages, expenses (including legal and other fees and expenses), liabilities or claims (or actions in respect thereof),joint or several, 8 to which the Indemnified Parties, or any of them, may become subject under the federal or state securities laws or any other statutory law or at common law or otherwise, arising out of or based upon or in any way relating to: (i) the redemption of the Prior Bonds and/or the issuance, sale or delivery of the Bonds to the extent involving the redemption of the Prior Bonds, including,without limitation,any claim against any Indemnified Party by any person relating to the application of the residual funds held by the Prior Trustee under the Prior Indenture; any untrue statement or misleading statement or alleged untrue statement or alleged misleading statement of a material fact contained in the preliminary official statement or the official statement for the Prior Bonds or in the Preliminary Official Statement or the Official Statement for the Bonds relating to the matters described in paragraph (i) above, the Owner, the Project or the Mortgage Loan or any omission or alleged omission from the preliminary official statement or the official statement for the Prior Bonds or from the Preliminary Official Statement or the Official Statement for the Bonds of any material fact relating in any way to the matters described in paragraph (i) above, the Owner, the Project or the Mortgage Loan, necessary to be stated therein in order to make the statements made therein, in light of the circumstances under which they were made, not misleading; or (iii) claims against any Indemnified Party by the United States Department of Housing and Urban Development ("HUD").or any authorized agent or employee thereof asserting a right to indemnification (other than pursuant to a contractual arrangement) and/or defense against any loss or expense allegedly incurred by HUD as a result of any claim against HUD or such agent or employee relating to the redemption of the Prior Bonds and/or the issuance, sale or delivery of the Bonds for the purpose of redeeming the Prior Bonds or the defaulted Mortgage Loan. It is the intention of the parties that such indemnification shall cover liabilities,losses, damages, costs, expenses and fees(including reasonable legal and other fees and expenses)and claims(or actions in respect thereof) arising out of the negligence of any Indemnified Party and, to the fullest extent permitted by applicable law, that such indemnification shall also cover liabilities,losses,damages,costs,expenses and fees(including reasonable legal and other fees and expenses) and claims(or actions in respect thereof) arising out of conduct by the Indemnifying Parties which is deemed to involve "scienter" within the meaning of Rule lOb-5 under the Securities Exchange Act of 1934, as amended(the "1934 Act"), and, only in the case of the Issuer and its officers, employees, agents and attorneys, shall also cover conduct deemed to involve the gross negligence or willful misconduct of any Indemnified Party. This indemnification is in addition to any liability which each Indemnifying Party may otherwise have. (b) The indemnity provided under this Section 13 shall extend upon the same terms and conditions to each officer, supervisor, employee, agent and attorney of the Issuer, the Trustee, the Credit Facility Provider, the Underwriter, Co-Bond Counsel, and each person,-if any, who controls the Issuer, the Credit Facility Provider, the Trustee or the Underwriter within the meaning of Section 15 of the Securities Act of 1933, as amended(the "1933 Act")or Section 20 of the 1934 Act. Such indemnity shall also extend, without limitation, to any and all expenses (subject to paragraph.(c) below) whatsoever reasonably incurred by any Indemnified Party in connection with investigating,preparing for or defending against, or providing evidence, producing documents or taking any other reasonable action in respect of, any such loss, damage, expense, liability or claim(or action in respect thereof), whether or not resulting in any liability,and shall include any loss to the extent of the aggregate amount paid in settlement of any litigation,commenced or threatened, or of any claim whatsoever as set forth herein if such settlement is effected with the written consent of each Indemnifying Party. (c) Within a reasonable time after an Indemnified Party under paragraphs (a) and(b) of this Section 13 shall have been served with the summons or other first legal process or shall have received written notice of the threat of a claim in respect of which an indemnity may be claimed hereunder, such Indemnified Party shall, if a claim for indemnity in respect thereof is to be made against any Indemnifying Party under this Section 13, notify each Indemnifying Party from whom indemnity is sought in writing of the commencement thereof; but the omission so to notify an Indemnifying Party shall not relieve that Indemnifying Party from any liability that it may have to any Indemnified Party other than pursuant to 9 paragraphs(a)and(b)of this Section 13 and the omission so to notify an Indemnifying Party by the Issuer shall have no effect on the indemnification of the Issuer. The Indemnifying Party from which indemnity is sought shall be entitled to participate at its own expense in the defense, and if the Indemnifying Party so elects within a reasonable time after receipt of such notice, or all Indemnified Parties seeking indemnification in such notice so direct, the Indemnifying Party shall assume the defense of any suit brought to enforce any such claim, and in either such case, such defense shall be conducted by counsel chosen promptly by the Indemnifying Party and reasonably satisfactory to the Indemnified Party("Litigation Counsel"); provided,however, that if the defendants in any such action include such an Indemnified Party and one or more Indemnifying Parties or include more than one Indemnified Party, and any such Indemnified Party shall have been advised by Litigation Counsel that there may be legal defenses available to such Indemnified Party which are different from or additional to those available to one or more of the Indemnifying Parties or another defendant Indemnified Party, and which in the reasonable opinion of Litigation Counsel are sufficient to make it undesirable for the same counsel to represent such Indemnified Party and one or more of the Indemnifying Parties and/or another defendant Indemnified Party, such Indemnified Party shall have the right to employ separate counsel in such action (and the Indemnifying Party or Indemnifying Parties shall not be entitled to assume the defense thereof on behalf of such Indemnified Party), and in such event the reasonable fees and expenses of such counsel shall be borne by the Indemnifying Parties. Nothing contained in this paragraph (c) shall preclude any Indemnified Party, at its own expense, from retaining additional counsel to represent such party in any action with respect to which indemnity niay be sought.from the one or more of the Indemnifying Parties hereunder. - (d) In order to provide for just and equitable contribution in circumstances in which the indemnity provided for in paragraphs (a), (b) and (c) of this Section 13 is for any reason held to be unavailable from one or more of the Indemnifying Parties, or is inadequate, or the Issuer, the Trustee, the Credit Facility Provider, the Underwriter, the Lender or the Owner or its General Partner or the General Partners of the General Partner, or any person described in paragraph(b) hereof, has incurred any loss, damage, expense(including legal and other fees and expenses), liability or claim(or any action in respect thereof) of the nature described in subsection (a) above, then the Owner and its General Partner and its General Partners (jointly and severally)agree to contribute to any such loss, damage, expense (including legal and other fees and expenses), liability or claim(or action in respect thereof) in proportion to the net present value of the savings resulting from the refunding (computed at a discount rate equal to the yield on the Bonds) and the Underwriter agrees to contribute in proportion to their fee as set forth in Schedule I of this Bond Purchase Agreement; provided, however, that the total contribution of the Underwriter hereunder shall not exceed the fee of the Underwriter set forth in Schedule I of this Bond Purchase Agreement. Neither the Issuer, the Trustee, nor any other persons described in paragraph (b) above shall have any obligation to contribute. The contribution provided by this paragraph (d) shall also extend, without limitation,to any and all expenses whatsoever reasonably incurred in connection with investigating, preparing for or defending against, or providing evidence, producing documents or taking any other reasonable action in respect of, any such loss, damage, expense, liability or claim (or action in respect thereof), whether or not resulting in any liability,and shall include any loss to the extent of the aggregate amount paid in settlement of any litigation,commenced or threatened, or of any claim whatsoever as set forth herein if such settlement is effected with the written consent of the party from whom contribution is sought hereunder.- For purposes of this paragraph (d) each officer, supervisor, employee, agent or attorney of the Issuer, the Trustee,the Underwriter,the Credit Facility Provider, the Lender or the Owner or the undersigned General Partner and its general partners and each person, if any, who controls any of the foregoing within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall,under the same circumstances,have the same rights to contribution as do the Issuer, the Trustee,the Underwriter, the Credit Facility Provider,the Lender and the Owner and the undersigned General Partner and its general partners hereunder. Within a reasonable time after a person entitled to contribution under this paragraph (d) of Section 13 shall have been served with the summons or other first legal process or shall have received written notice of the threat of a claim in respect of which contribution may be sought hereunder, such person shall, if a claim for contribution is to be made against the foregoing contributing parties under this paragraph(d),notify the contributing parties in writing of the commencement thereof,but the omission so to notify the contributing parties shall not relieve the contributing parties from any liability that they or any of them may have other than pursuant to this paragraph (d); provided,however, that any notice given 10 by any Indemnified Party for purposes of, and as provided in, paragraph (c) of this Section 13 shall constitute notice for purposes of this paragraph (d). (e) The indemnity provided by paragraphs(a) through (c) of this Section 13 shall be in addition to any other liability that each Indemnifying Party may have, and the contribution provided in Section 13(d)hereof shall be in addition to any other liability which the Owner and the undersigned General Partner and its General Partners and the Underwriter may otherwise have hereunder, at common law or otherwise, and is provided solely for the benefit of the persons specified above, as applicable, and each commissioner, officer, employee, agent, attorney and controlling person referred to therein, and their respective successors, assigns and legal representatives,and no other person shall acquire or have any right under or by virtue of such provisions of this agreement. 14. HUD and FHA Requirements to Control. Notwithstanding anything in this Bond Purchase Agreement to the contrary, the provisions of this Bond Purchase Agreement are subject and subordinate to the National Housing Act, all applicable HUD insurance (and Section 8, if applicable) regulations and related administrative requirements and the Mortgage Loan Documents, and'all applicable FHA regulations and related administrative requirements in effect as of the date hereof, and in the event of any conflict between the provisions of this Bond Purchase Agreement and the provisions of the National Housing Act, any applicable HUD regulations, related administrative requirements and the Mortgage Loan Documents, and any applicable FHA regulations and related administrative requirements, the said National Housing Act, HUD regulations, related administrative requirements and Mortgage Loan Documents, and the said FHA regulations and related administrative requirements shall be controlling in all respects. 15. Survival of Covenants and Representations. The respective agreements, covenants, representations, warranties and other statements of the Issuer, the Owner, the Underwriter and their respective officers set forth in or made pursuant to this Bond Purchase Agreement will remain in full force and .effect, notwithstanding any investigation made by•or on behalf of any party hereto, and shall survive the delivery of and payment for the Bonds. 16. Notices. Any notice or other communication to be given to the Issuer under this Bond Purchase Agreement may be given by delivering the same in writing to the Owner or the Issuer at.their addresses set forth above, and any notice or other communication to be given to the Underwriter under this Bond Purchase Agreement may be given by delivering the same in writing to Newman and Associates,Inc., 1801 California Street,Suite 3700, Denver, Colorado 80202, Attn: Mr. Bradley B. James, Senior Vice President. 17. Successors. This Bond Purchase Agreement is made solely for the benefit of the Issuer, the Underwriter and the Owner(including their successors or assigns) and no other person shall acquire or have any right hereunder or by virtue hereof. The representations,warranties, and agreements contained herein shall remain operative and in full force and effect and shall survive delivery of and payment for the Bonds hereunder, regardless of any investigation made by or on behalf of the Underwriter. 18. Governing Law. This Bond Purchase Agreement shall be governed by the laws of the State of California. 19. Counterparts. This Bond Purchase Agreement may be executed in one or more counterparts, each of which shall be deemed to be one and the same document. 11 20. Effectiveness. This Bond Purchase Agreement shall become effective upon the execution of the acceptance hereof by the Issuer and the Owner. Very truly yours, NEWMAN AND ASSOCIATES, INC. By: Title: The foregoing is confirmed and accepted as of the date first above written. COUNTY OF CONTRA COSTA By: Title: Del Norte Place Limited Partnership, a California limited partnership By: The IBEX Group, a California General Partnership By: The John Stewart Company By: Title: John K. Stewart, President By: Title: James Babcock, General Partner By: Title: Richard Moran, General Partner By: Title: Roger Nelson, General Partner By: Title: Peter Wilson, General Partner 12 SCHEDULE I MATURITIES, PRINCIPAL AMOUNTS AND INTEREST RATES $11,110,000 % Term Bonds due October 20, 2032 SCHEDULE II ESTIMATED ISSUANCE EXPENSES Purpose Amount Issuance expenses: Issuer Fee $ Rebatable Arbitrage Co-Bond Counsel Fees and Expenses (Jones Hall Hill&White) Co-Bond Counsel Fees and Expenses (Vaca&Vaca) Financial Advisor Owner's Counsel Credit Facility Provider Official Statement Printing Cash Flow Verification Trustee's Set-Up Fee and Legal Expenses Rating Fee Underwriter's Fees and Expenses Underwriter's Counsel Fees and Expenses Contingency TOTAL $ EXHIBIT A FORM OF SUPPLEMENTAL OPINION OF CO-BOND COUNSEL [Letterhead of each Bond Counsel] (Closing Date) Newman and Associates, Inc. Denver, Colorado $11,110,000 COUNTY OF CONTRA COSTA Variable Rate Demand Multifamily Housing Revenue Refunding Bonds, 1994 Series A (GNMA Collateralized- Del Norte Place Apartments) Ladies and Gentlemen: This letter is addressed to you, as Purchaser, pursuant to Section 7(b) of the Bond Purchase Agreement, dated April_, 1994 (the "Purchase Contract"), among you, the County of Contra Costa(the "County"), and Del Norte Place Limited Partnership, a California limited partnership (the "Owner"), providing for the purchase of County of Contra Costa Multifamily-Housing Revenue Refunding Bonds, 1994 Series A (GNMA Collateralized- Del Norte Place Apartments)(the"Bonds")in the aggregate principal amount of$11,110,000. The Bonds are being issued pursuant to a trust indenture, dated.as of April 1, 1994 (the "Indenture"),between the County and Bank of America National Trust and Savings Association,as trustee(the"Trustee"). Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Indenture or, if not defined in the Indenture, in the Purchase Contract. On the date hereof, we delivered our final legal opinions addressed to the County concerning the validity of the Bonds and certain other matters. You may rely on such opinions to the same extent as if such opinions were addressed to you. In connection with our role as co-bond counsel, we have reviewed the Purchase Contract, the Indenture, the Financing Agreement,the Regulatory Agreement,the Reimbursement Agreement,the Remarketing Agreement, the Tax Certificate, certificates of the County, the Owner, the Trustee and others, opinions of counsel to the County, the Owner and the Trustee, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions and conclusions set forth herein. We have not undertaken to verify independently, and have assumed, the genuineness of such documents, certificates and opinions presented to us (whether as originals or as copies) and of the signatures thereon, the accuracy of the factual matters represented, warranted or certified therein and the due and legal execution and delivery thereof by, and validity against,any parties other than the County. The opinions and conclusions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities.Such opinions and conclusions may be effected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or occur, and we disclaim any obligation to update this letter. Our engagement with respect to the Bonds has concluded with their issuance. Furthermore,we have assumed compliance with the covenants and agreements contained in the documents referred to in the third paragraph hereof. We call attention to the fact that the rights and obligations under the Bonds, the Indenture, the Financing Agreement, the Regulatory Agreement, the Reimbursement Agreement, the Remarketing Agreement and the Purchase Contract may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors' rights, to the application of equitable principles, and to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against cities in the State of California. We express no opinion with respect to any indemnification,contribution,choice of law, choice of forum or waiver provisions contained therein. Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions or conclusions: 1. The Purchase Contract has been duly executed and delivered by the County and constitutes the valid and binding agreement of the County. 2. The Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Indenture is exempt from qualification under the Trust Indenture Act of 1939, as amended. 3. The statements contained in the Official Statement under the captions"THE BONDS," "SOURCES OF PAYMENT FOR THE BONDS," "TAX MATTERS" and "APPENDIX A--SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE,THE AGREEMENT AND THE REGULATORY AGREEMENT," insofar as such statements expressly summarize certain provisions of the Bonds, the Indenture, the Financing Agreement, the Regulatory Agreement and our opinion concerning certain tax matters relating to the Bonds, are accurate in all material respects. This letter is furnished by us as co-bond counsel. No attorney-client relationship has existed or exists between our firm and yourselves in connection with the Bonds or by virtue of this letter. This letter is delivered to you solely for your benefit as Underwriter and is not to be used, circulated,quoted or otherwise referred to or relied upon for any other purpose or by any other person. This letter is not intended to, and may not be, relied upon by holders of the Bonds. Very truly yours, A-2 EXHIBIT B MATTERS TO BE COVERED IN CLOSING CERTIFICATE OF THE COUNTY OF CONTRA COSTA (1) The Issuer is a legal subdivision body corporate and politic existing under the laws of the State of California. (2) The information in the Official Statement under the caption "THE ISSUER" is accurate. (3) Except as disclosed in the Official Statement, no litigation or other proceedings are pending or, to the knowledge of the undersigned against the Issuer, threatened in any court or other tribunal of competent jurisdiction, State or Federal, in any way (A) seeking to restrain or enjoin the issuance, sale or delivery of the Bonds, (B) questioning or affecting the validity of the Bond Purchase Agreement, the Bonds, the Indenture, the pledge to the Bondholders of any moneys or other security provided under the Indenture, the Financing Agreement or any other transaction referred to in the Official Statement, (C) questioning or affecting the validity of any of the proceedings for the authorization,sale, execution, issuance or delivery of the Bonds, (D) questioning or affecting the organization or existence of the Issuer or the title to office of the officers thereof or(E) questioning or affecting the power and authority of the Issuer to issue the Bonds, or to execute the Bond Purchase Agreement, the Indenture and the Financing Agreement. (4) Resolutions authorizing the transactions contemplated by the Official Statement were adopted at a meeting of the Board of Supervisors at which a quorum was present and acting throughout and all other actions requisite to the issuance of the Bonds has been taken and such resolutions and actions have not been rescinded or amended, modified or supplemented as of the date hereof and are in full force and effect on the date hereof. EXHIBIT C MATTERS TO BE COVERED IN CLOSING CERTIFICATE OF OWNER (1) To the best knowledge of the Owner, the representations and warranties of the Owner contained in the Bond Purchase Agreement are true and correct. (2) To the best knowledge of the Owner, the Owner has materially complied with all agreements and satisfied all material conditions contained in the Bond Purchase Agreement on its part to be performed or satisfied prior to the date hereof. (3) To the best knowledge of the Owner, there has not been any material adverse change in the financial position or'results of operation of the Owner in its businesses or which would impair the ability of the Owner to carry out the Project as contemplated by the Official Statement. (4) To the best of the knowledge of the Owner, the statements and information contained in the Preliminary Official Statement and Official Statement with respect to the Owner and the Project, including,without limitation,the statements and information under the captions "CERTAIN RISKS TO BONDHOLDERS" and "THE OWNER AND THE PROJECT", do not contain an untrue statement of a material fact or fail to state a material fact necessary in order to make the statements made not misleading as of the Closing Date. (5) To the best knowledge of the Owner, 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 Owner, threatened against or affecting the Owner, nor, to the best knowledge of the Owner, is there any reasonable basis therefor, wherein an unfavorable decision, ruling or finding would, in any way, adversely affect the transactionscontemplated by the Official Statement or which, in any way, would adversely affect the development or operation of the Project or which might result in any material adverse change in the business, operations, properties,assets, liabilities or condition(financial or other)of the Owner or which affects the information contained in the Official Statement. (6) The Owner has duly executed and delivered the Financing Agreement, the Regulatory Agreement, the Reimbursement Agreement,the Remarketing Agreement,the Bond Purchase Agreement,FHA Loan Documents, and the execution and delivery of the Financing Agreement, the Regulatory .Agreement, the Reimbursement Agreement, the Remarketing Agreement, the Bond Purchase Agreement, and the FHA Loan Documents and the performance by the Owner of its obligations thereunder will not constitute a breach of or default under its articles of partnership or other organizational documents or the terms and provisions of any agreement or commitment to which the Owner is presently a party or by which the Owner is presently bound. EXHIBIT D OPINION OF COUNSEL TO OWNER (Closing Date) County of Contra Costa 651 Pine Street North Wing, 4th Floor Martinez, California 94553-0095 Bank of America National Trust and Savings Association 333 South Beaudry Avenue 25th Floor Los Angeles, California 90017 Newman and Associates, Inc. 1801 California Street, Suite 3700 Denver, Colorado 80202 $11,110,000 COUNTY OF CONTRA COSTA Variable Rate Demand Multifamily Housing Revenue Refunding Bonds, 1994 Series A (GNMA Collateralized- Del Norte Place Apartments) Ladies and Gentlemen: In connection with the purchase on this date by Newman and Associates, Inc. (the "Underwriter") from the County of Contra Costa(the "Issuer"), of its Multifamily Housing Revenue Refunding Bonds 1994 Series A (GNMA Collateralized- Del Norte Place Apartments)in the aggregate principal amount of$11,110,000 (the "Bonds") to provide permanent refinancing for a mixed use multifamily rental housing project located in the city of El Cerrito, California(the "Project"), the undersigned, as counsel to Del Norte Place Limited Partnership, a California Limited PartnersAip (the "Owner"), have examined, among other things, the following: A. The Articles of Partnership and other organizational documents of the Owner. B. The proceedings of the Owner authorizing, among other things, the execution and delivery by the Owner of(i) that certain Financing Agreement, dated as of April 1, 1994 (the "Financing Agreement"), among the Issuer, the Owner, Bank of America National Trust and Savings Association, as Trustee (the "Trustee") and TRI Capital Corporation; (ii)that certain Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants, dated as of April 1, 1994 among the Owner, the Issuer and the Trustee (the "Regulatory Agreement"); (iii)that certain Bond Purchase Agreement, dated April_, 1994 (the "Bond Purchase Agreement"), among the Issuer, the Owner and the Underwriter; (iv) the FHA Loan Documents, as defined in the Indenture; (v) the Reimbursement Agreement dated April 1, 1994 (the "Reimbursement Agreement"), by and between the Owner and The Sumitomo Bank, Limited(Chicago Branch) (the "Bank"); and (vi) the Remarketing Agreement dated April 1, 1994 (the "Remarketing Agreement")by and between the Owner and the Underwriter. The documents described in clauses (i) through (vi) are hereinafter referred to as the "Owner Documents. C. Executed counterparts of the Owner Documents, the Preliminary Official Statement dated April 1994 (the "Preliminary Official Statement"), the Official Statement,dated April_, 1994 (the "Official Statement"), (hereinafter collectively referred to as the "Official Statement")relating to the issuance of the Bonds, and the Indenture of Trust between Issuer and the Trustee, dated as of April 1, 1994 ("Indenture"). D. Such other laws, matters and documents as we deem necessary for purposes of this opinion. Based upon the foregoing and upon such other information and documents as we believe necessary to enable us to render this opinion, we are of the opinion that: 1. The Owner is a limited partnership duly organized, validly existing and in good standing under the laws of the State of California. 2. Each of the Owner Documents has been duly authorized, executed and delivered by the Owner, and constitutes a valid, legally binding and enforceable obligation of the Owner in accordance with its terms, subject to conditions of title and the qualification that enforceability may be limited by bankruptcy, insolvency, reorganization and other similar laws affecting creditors rights generally and that certain rights and remedies contained in the Owner Documents may be rendered ineffective or limited by applicable laws or judicial decisions governing such provisions. 3. Except for any consent or approval regarding the application,or exemption therefrom, of any federal or state securities or blue-sky law, as to which no opinion is expressed, no consent or approval of any governmental body is required for the execution or delivery of the Owner Documents by the Owner or for such documents to be legally binding as to the Owner upon execution and delivery by other parties thereto. 4. The Owner has all necessary power and authority under its Articles of Partnership and applicable law to enter into and perform its obligations under the Owner Documents. 5. The execution and delivery of the Owner Documents by the Owner and the performance and observance by the Owner of the agreements and covenants on its part contained in any thereof do not conflict with, or constitute a violation of, any provision of the Articles of Partnership of the Owner or to the best of our knowledge, any law or any applicable judgment, order or regulation of any court or of any public or governmental agency or authority, and do not, to the best of our knowledge, result in a breach of, or constitute a violation of or a default under any agreement, indenture, mortgage, lease, note or other obligation or instrument to which the Owner is a party or by which it is bound, or constitute a breach or violation of any governmental order applicable to the Owner or any judgment, decree or court order by which the Owner is bound. 6. To the best of our knowledge, there is no action, suit, proceeding, inquiry or investigation at law or in equity or before or by any public board or body pending or threatened against the Owner wherein an unfavorable decision, ruling or finding would have a material adverse effect on the transactions described in the Bond Purchase Agreement or the Official Statement or the validity or enforceability of the Bonds, the Indenture or the Owner Documents. 7. To the best of our knowledge, the information in the Official Statement under the caption "THE OWNER AND THE PROJECT") (other than financial statements and other financial data contained or incorporated by reference therein, as to which no opinion is expressed) does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. Our opinions set forth herein are subject to the following qualifications: (i) In our examination and in rendering this opinion, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity,accuracy and completeness of all documents submitted to us as originals or made available to us by the Owner, the conformity to D-2 original documents of all documents submitted to us as certified or photostatic copies and the authenticity and completeness of the originals of such latter documents. We have assumed the authenticity and accuracy of certificates of public officials, government agencies and departments and corporate officers, and of statements of fact on which we are relying, and have made no independent investigations thereof. In rendering this opinion, we are not passing upon and do not assume any responsibility for the accuracy, sufficiency, completeness or fairness of any statements, representations,warranties, descriptions, information or financial data supplied to you with respect to the Owner Documents, or the transactions contemplated thereby, and we advise you that we have not independently verified the accuracy, sufficiency, completeness or fairness of any of the foregoing. (ii) All opinions rendered herein are limited to the existing laws of the State of California and laws of the United States of America, all as in effect on the date hereof, and we express no opinion as to any other laws, rules or regulations of such jurisdictions or as to laws, rules or regulations of any other jurisdiction;nor do we undertake, by delivery hereof or otherwise, to advise you of any changes in any such laws, rules or regulations, nor do we opine to you that any so-called "choice of law provisions" contained in any of the Owner Documents will be upheld or enforced. (iii) The opinions hereinbefore expressed are qualified to the extent that the validity or enforceability of any provisions in the Owner Documents or any rights granted pursuant thereto, may be subject to or affected by (i) the exercise of judicial discretion in accordance with general equitable principles; (ii)applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium, and similar statutory or decisional laws, heretofore or hereafter enacted or in effect, affecting the rights of creditors generally to the extent the same may constitutionally be applied including,without limitation,decisional or statutory law concerning recourse by creditors to security in absence of notice of a hearing and insofar as third parties, subject to applicable recording or filing requirements; and (iii) limitations on the availability or enforceability of the remedies of specific performance or of injunctive relief and of waivers contained in the Owner Documents, all of which may be limited by equitable principles or applicable laws, rules, regulations, court decisions and constitutional requirements in and of any applicable law; and no opinion is expressed herein as to whether any specific provision contained in the foregoing documentation may be unenforceable by reason of the same being contrary to the principles of public policy applicable generally. We express no opinion as to the enforceability of any provisions of the Owner Documents relating to waivers, subrogation rights, penalties or charges, powers of attorney, prohibitions of assignment, delay or omission of enforcement of rights or remedies, severability,marshalling of assets, requiring property insurance in excess of the full replacement value of the mortgaged property, or purporting to authorize any party to collect or make a claim against rents without taking actual possession of and exercising control over the property encumbered thereby. (iv) With respect to any references herein to "our knowledge" or words of similar import, such references mean the knowledge which attorneys employed by have obtained from (i) our review of the agreements, documents and instruments referred to in this opinion and (ii) the representations of officers of the Owner. Nothing has come to our attention in the course of such review which has caused us to believe that the statements so made herein "to our knowledge" are untrue or incorrect. However, except as specifically noted above, we have not made any independent review or investigation of any factual matter. This opinion is limited to the matters expressly set forth herein, and no opinion is implied or may be inferred beyond the matters expressly stated herein. This opinion is solely for your benefit and may not be relied upon in any matter by any other person. Respectfully submitted, D-3 EXHIBIT E LENDER CERTIFICATE The undersigned, , for and on behalf of TRI Capital Corporation, Inc. (the "Lender"), hereby certifies, represents and warrants to the Issuer, the Owner (each defined below) and the Underwriter of$11,110,000 principal amount of Variable Rate Demand Multifamily Housing Revenue Refunding Bonds, 1994 Series A(GNMA Collateralized-Del Norte Place Apartments)(the "Bonds")of the County of Contra Costa(the "Issuer"), as follows: (1) The Lender(i)is a duly and lawfully organized California corporation, and is duly authorized to transact business in the State of California,(ii)is organized and operated for the purposes, among others,of malting mortgage loans to provide financing for the acquisition and rehabilitation of residential rental housing apartment projects and of issuing a mortgage-backed security guaranteed as to timely payment of principal and interest by GNMA (the "GNMA Security") 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 the Financing Agreement dated as of April 1, 1994 (the "Financing Agreement"), among the Issuer, the Lender, Bank of America National Trust and Savings Association (the "Trustee") and Del Norte Place Limited Partnership, a California limited partnership organized and existing under the laws of the State of California(the "Owner"), and to issue the GNMA Security to the Trustee and to perform its obligations thereunder, (iv) by proper action has duly authorized the execution and delivery of the Financing Agreement, and the issuance and delivery of the GNMA Security, and(vi) the Financing Agreement constitutes,and the GNMA Security,when issued,will constitute,valid,legal and binding obligations of the Lender enforceable in accordance with their terms, except as.such enforcement may be limited by bankruptcy or other laws affecting creditors' rights generally. The foregoing representation is expressly limited, however, by the fact that the GNMA Security does not constitute a liability of, nor evidence any recourse against, the Lender, since it is based on and backed by the Mortgage, and recovery may be made from Government National Mortgage Association in the event of any'failure of timely payment as provided for in the GNMA Guaranty contained on the face of the GNMA Security. (2) The execution and delivery of the Financing Agreement and the issuance 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 organizational documents or, to the Lender's knowledge, under the terms and conditions of any agreement or'commitment to which the Lender is a party and by which the Lender is bound. (3) Each of the representations and warranties of the Lender contained in the Financing Agreement are true and correct as of the date hereof. _ (4) The Secretary of Housing and Urban Development("HUD"), acting by and through the Federal Housing Commissioner(the "Commissioner"),had approved the Lender to originate,service mortgage loans insured by the Secretary of Housing and Urban Development under Sections 221(d)(4)and 244 of the National Housing Act of 1934 (the "Act") and the regulations promulgated pursuant thereto in effect on the date of initial closing of the Mortgage Loan. (5) The Lender is, and shall, to the best of its ability, remain until the acquisition of the GNMA Security by the Trustee, (i)approved by FHA to service mortgage loans insured by FHA under Sections 221(d)(4) and 244 of the National Housing Act and applicable regulations thereunder, and (ii) approved by GNMA to issue mortgage-backed securities guaranteed by GNMA pursuant to Section 306(g) of the National Housing Act and applicable regulations thereunder. (6) The Lender reasonably expects to deliver to the Trustee for purchase in accordance with the Indenture the GNMA Security representing the fully-modified Mortgage Loan by no later than May_, 1994 and is not aware of any reason that it would be unable to do so. (7) To the best knowledge of the undersigned,the information contained in the Official Statement with respect to the Bonds (the "Official Statement")under the subcaptions "THE LENDER AND THE TRUSTEE-The Lender", "THE MORTGAGE NOTE AND MORTGAGE" and "THE GNMA MORTGAGE- BACKED SECURITIES PROGRAM" do not contain an untrue statement of a material fact or fail to state a material fact necessary in order to make the statements made not misleading as of the date hereof, and such information is "final" within the meaning of Rule 15c2-12(b) under the Securities Exchange Act of 1934. (8) 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 would, in any way, materially adversely affect the transactions contemplated by the Official Statement or which, in any way, would materially adversely affect the acquisition, rehabilitation or operation of the Project or which might result in any material adverse change in the business,operations,properties,assets,liabilities or conditions(financial or other)of the Lender or which materially adversely affects the information contained in the Official Statement. IN WITNESS WHEREOF, the undersigned has signed this certificate as of April_, 1994. TRI CAPITAL CORPORATION By: Title: E-2 EXHIBIT F (COUNSEL TO LENDER) (Closing Date) County of Contra Costa 651 Pine Street North Wing, 4th Floor ' Martinez, California 94553-0095 Bank of America National Trust and Savings Association 333 South Beaudry Avenue 25th Floor Los Angeles, California 90017 Newman and Associates, Inc. 1801 California Street, Suite 3700 J Denver, Colorado 80202 $11,110,000 COUNTY OF CONTRA COSTA Variable Rate Demand Multifamily Housing Revenue Refunding Bonds, 1994 Series A (GNMA Collateralized- Del Norte Place Apartments) Ladies and Gentlemen: I am counsel to TRI Capital Corporation(the"Lender"), the lender in connection with the above-referenced bond financing, and in such capacity have reviewed the following documents, instruments and agreements: (i) Financing Agreement(the "Financing Agreement"), dated as of April 1, 1994 among the County of Contra Costa(the "Issuer"), Bank of America National Trust and Savings Association(the "Trustee"),the Lender and Del Norte Place Limited Partnership, a California limited partnership organized and existing under the laws of the State of California(the "Borrower"); (ii) Commitment to Guaranty Mortgage-Backed Securities Number(the"GNMA Commitment"),dated , 1994, in connection with the mortgage-backed security (as defined in the Trust Indenture, dated as of April 1, 1994, by and between the Issuer and the Trustee, the "GNMA Security") issued by the Government National Mortgage Association("GNMA") to the Lender; (iii) A certificate of the Lender dated the date hereof to the Issuer and the Underwriter (the "Certificate"), (iv) The Official Statement of the Issuer relating to the above-referenced Bonds (the "Official Statement"). Based upon the foregoing and my review and consideration of such other documents, instruments, agreement, statutes,regulations and matters of law as I have deemed relevant and necessary to enable me to render this opinion, I am of the opinion that, as of the date of this letter: 1. The Lender (i) is a corporation duly and lawfully organized under the laws of the State of California and is duly qualified under the laws of the State of California to originate and service the Mortgage contemplated by the FHA Documents (as defined in the Trust Indenture); (ii) is organized and operated for the purposes, among others, of making mortgage loans to provide financing for the acquisition and rehabilitation of mixed use multifamily housing rental apartment projects 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, execute and deliver the GNMA Security and to perform its obligations under the Financing Agreement and the GNMA Security;and(iv)has duly authorized the execution and delivery of the Financing Agreement and the issuance, execution and delivery of the GNMA Security. 2. The execution and delivery of the Financing Agreement, the issuance, execution and delivery of the GNMA Security and the consummation of the transactions contemplated in the Financing Agreement and the GNMA Security do not conflict with or constitute a breach of or a default under the Lender's organizational documents. 3. The Secretary of Housing and Urban Development("HUD"), acting by and through the Federal Housing Commissioner(the "Commissioner"),has(a) approved the Lender to originate and service mortgage loans insured by the Secretary of Housing and Urban Development under Section 221(d)(4) and 244 of the National Housing Act of 1934 (the "Act") and the regulations promulgated pursuant thereto as in effect on the date of issuance of the Loan Commitment(the "Commitment")from FHA to the Borrower and(b)has issued to the Lender all approvals which are conditions precedent to initial endorsement of the Note. 4. 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 Act and the regulations promulgated pursuant thereto as in effect on the date hereof. 5. The 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(a)HUD's requirements as expressly set forth in Title 24, Part 241 of the Code of Federal Regulations (the "HUD Regulations") and (b) GNMA's requirements as expressly set forth in Title 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"). 6. 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, the enforcement of which is subject to (a) such principals of equity as the court, having jurisdiction may impose and (b) bankruptcy, insolvency, reorganization, moratorium and other similar laws or governmental authority relating to or affecting creditors' rights. 7. The Lender has duly authorized the issuance, execution and delivery of the GNMA Security, and, upon the approval thereof by GNMA, the issuance, execution and delivery by the Lender, such instrument will constitute the legal, valid and binding obligation of the Lender, subject to (a) the compliance by the Lender on the date of issuance of the GNMA Security with all issuer eligibility requirements of GNMA, provided that the enforcement of such obligation is subject to(a)such principles of equity as the court having jurisdiction may impose and (b) applicable,bankruptcy, insolvency, reorganization,moratorium and other similar laws affecting creditors' rights. - 8. Upon the valid issuance of the GNMA Security and the execution on the face thereof by GNMA of the Summary of Guaranty Agreement, as required under Section 390.13 of the GNMA Regulations and as particularly set forth in Appendix 42 of the GNMA Handbook, the GNMA Security will be guaranteed by GNMA as to timely payment of principal and interest pursuant to Section 306(8) of Title III of the Act and the regulations promulgated pursuant thereto as in effect on the date of issuance of the GNMA Commitment. 9. Nothing has come to my attention which would lead me to believe that the information appearing under the captions "THE LENDER AND THE TRUSTEE-The Lender", "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. Except as expressly stated F-2 herein, I express no opinion regarding the accuracy or completeness of any of the other information contained in any other section of the Official Statement. This opinion is intended solely for the reliance of the Issuer and the Trustee and may not be delivered to or relied upon by any other person without TRI's express prior written consent. Very truly yours, F-3 EXHIBIT G CERTIFICATE OF BANK The undersigned officer hereby certifies that he is a duly authorized officer of The Sumitomo Bank, Limited (the "Bank"), and further certifies that, as such, he is authorized to execute this certificate on behalf of the Bank as follows: 1. The information regarding the Bank contained in Appendix C of the Official Statement of the County of Contra Costa Variable Rate Demand Multifamily Housing Revenue Refunding Bonds, 1994 Series A (GNMA Collateralized- Del Norte Place Apartments), dated April_, 1994 (the "Official Statement"), is substantially accurate in all material respects as of the date hereof, and the Bank has authorized the inclusion of such information in the Official Statement. 2. The Chicago Branch of the Bank (the "Branch") is duly licensed by the Commissioner of Banks and Trust Companies of the State of Illinois and qualified to do business as an Illinois branch bank and has the power to execute, deliver and perform its obligations under the Letter of Credit and the Reimbursement Agreement dated as of April 1, 1994 (the "Agreement). 3. The execution, delivery and performance by the Branch of the letter f credit issued by the Branch pursuant to the Agreement on April_, 1994 (the "Letter of Credit") and the Agreement have been duly authorized by all necessary corporate action of the Bank and require no action by or in respect of, or filing with, any governmental body, agency or official(other than any such action or filing as may be required under any state blue sky or securities laws), and the Letter of Credit and the Agreement constitute the valid and legally binding obligations of the Bank, enforceable against the Bank in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization,liquidation,moratorium or other similar laws affecting the enforcement of creditors' rights in general heretofore or hereafter enacted, as such laws would apply in the event of insolvency, reorganization or liquidation of, or other similar occurrence with respect to, the Bank or the Branch or in the event of any moratorium or similar occurrence affecting the Bank or the Branch. 4. The obligations of the Bank under the Letter of Credit rand at least pari passu in priority of payment and in all other respects with all other unsecured obligations of the Bank under the laws of the State of Illinois, subject only to (i) mandatorily preferred obligations under applicable law, of which the only material preferred obligations are its liability for Federal and local taxes and the Bank's employee's rights for wages and other claims arising from employment relations,(ii)the limitations with respect to the enforceability of the Letter of Credit set forth in the first sentence of Paragraph 3 above, and(iii)the prior claims of depositors of the Branch, pursuant to Section of the Illinois Banking Law, to certain assets deposited by the Branch in accordance with Section of the Banking Law. IN WITNESS WHEREOF, I have hereunto set my hand this day of April, 1994. THE SUMITOMO BANK, LIMITED Acting through its Chicago Branch By: Name: Title: �• 13052-17 JHHW:PJT:cra 04/05/94 J1223 i� 04/17/94 TRUST INDENTURE between COUNTY OF CONTRA COSTA and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Trustee Dated as of April 1, 1994 Securing: $11,110,000 County of Contra Costa Variable Rate Demand Multifamily Housing Revenue Refunding Bonds, 1994 Series A (GNMA Collateralized — Del Norte Place Apartments) TABLE OF CONTENTS ARTICLE I DEFINITIONS AND INTERPRETATION Section101. Definitions.............................................................................................................5 Section102. Interpretation.......................................................................................................15 ARTICLE II THE BONDS Section 201. Authorized Amount of Bonds.................................................................................17 Section 202. Issuance of Bonds...................................................................................................17 Section 203. Weekly Variable Rate Period...............................................................................18 Section204. Fixed Rate Period.................................................................................................18 Section 205. Execution, Limited Obligations..............................................................................20 Section206. Authentication.....................................................................................................21 Section207. Form of Bonds........................................................................................................22 Section208. Delivery of Bonds.................................................................................................22 Section 209. Mutilated,Lost, Stolen or Destroyed Bonds............................................................23 Section 210. Exchangeability and Transfer of Bonds,Persons Treated as Owners.........................23 Section211. Cancellation.........................................................................................................25 Section212. Ratably Secured....................................................................................................25 Section 213. Redemption of Bonds; Partial Redemption of Bonds................................................25 Section 214. Notice of Redemption............................................................................................27 Section215. Book-Entry System................................................................................................29 ARTICLE III SECURITY; COVENANTS Section 301. Pledge of Trust Estate............................................................................................31 Section 302. Payment of Bonds and Performance of Covenants....................................................31 Section 303. Further Assurances................................................................................................31 Section 304. No Other Encumbrances.........................................................................................32 Section 305. No Personal Liability...........................................................................................32 Section 306. Credit Enhancement..............................................................................................32 Section 307. Instruments of Further Assurance............................................................................32 Section 308. No Disposition of GNMA Security.........................................................................32 Section 309. Filing of Continuation Statements..........................................................................32 Section310. Reports...................................................................................:.............................33 Section 311. Tax Covenants.......................................................................................................33 Section 312. Issuer's Obligation Limited...................................................................................34 Section 313. Role of Issuer......................................................................................:..................35 Section 314. Trustee to Retain Information................................................................................35 ARTICLE IV FUNDS Section 401. General Receipts Fund...........................................................................................36 Section402. Project Fund...........................................................................................................38 i Section 403. Debt Service Reserve Fund.....................................................................................41 Section404. Rebate Fund..........................................................................................................42 Section 405. Deposit of Bond Proceeds,Application of Borrower Funds.......................................42 Section406. Redemption Fund..................................................................................................43 Section407. Investments...........................................................................................................43 Section408. Records.................................................................................................................44 Section 409. Nonpresentment of Bonds.......................................................................................44 ARTICLE V DISCHARGE OF LIEN Section 501. Discharge of Lien and Security Interest..................................................................45 Section 502. Provision for Payment of Bonds..............................................................................45 Section 503. Discharge of this Indenture...................................................................................46 ARTICLE VI DEFAULT PROVISIONS AND REMEDIES Section601. Events of Default..................................................................................................47 Section 602. Acceleration; Other Remedies...............................................................................47 Section 603. Right of Bondholders and the Credit Enhancement Provider to Direct Proceedings...........................................................................................................48 Section 604. Discontinuance of Default Proceedings...................................................................49 Section605. Waiver.................................................................................................................49 Section 606. Application of Monies...........................................................................................49 Section 607. Obligation of Trustee to Draw Under Credit Enhancement......................................51 Section 608. Payments by Borrower...........................................................................................52 Section 609. Preservation of Security and Remedies if Draw Under Credit Enhancement is not Paid or is Insufficient,Rights of Bondholders...........................52 Section 610. Transfer and Extension of Credit Enhancement........................................................53 Section 611. Alternate Credit Enhancement..............................................................................53 Section 612. Rights of the Credit Enhancement Provider...........................................................54 ARTICLE VII THE TRUSTEE AND REMARKETING AGENT Section 701. Appointment of Trustee.........................................................................................55 Section702. Fees,Expenses.......................................................................................................58 Section 703. Intervention in Litigation......................................................................................58 Section 704. Resignation of Trustee...........................................................................................58 Section 705. Removal of Trustee................................................................................................59 Section 706. Appointment of Remarketing Agent.......................................................................59 Section 707. Resignation of Remarketing Agent.........................................................................59 Section 708. Removal of Remarketing Agent.............................................................................59 Section 709. Instruments of Bondholders....................................................................................60 Section 710. Power to Appoint Co-Trustees................................................................................60 Section 711. Filing of Financing Statements...............................................................................62 Section712. Tender Agent.........................................................................................................62 ii ARTICLE VIII AMENDMENTS; SUPPLEMENTAL INDENTURES Section 801. Supplemental Indentures.......................................................................................64 Section 802. Amendments to Indenture,Consent of Bondholders,the Credit Enhancement Provider and the Borrower................................................................65 Section 803. Amendments to Agreement Not Requiring Consent of Bondholders...........................65 Section 804. Amendments to Agreement Requiring Consent of Bondholders.................................66 Section 805. Amendments,Changes and Modifications to the Credit Enhancement.....................66 Section 806. Notice to and Consent of Bondholders....................................................................66 Section807. Waivers...............................................................................................................67 Section 808. Credit Enhancement Provider,Borrower and Remarketing Agent............................67 ARTICLE IX PURCHASE AND REMARKETING OF BONDS Section 901. Purchase of Bonds on Any Business Day..................................................................68 Section 902. Mandatory Purchase on a Conversion Date.............................................................69 Section 903. Remarketing of Bonds............................................................................................70 Section 904. Creation and Remarketing of Pledged Bonds..........................................................72 Section 905. No Sales After Default, No Purchase After Acceleration........................................73 ARTICLE X MISCELLANEOUS Section 1001. Limitation of Rights.............................................................................................74 Section1002. Severability.........................................................................................................74 Section 1003. Notices and Approvals..........................................................................................74 Section 1004. Rating Agency Notices...........................................................................................75 Section 1005. Payments Due on Non-Business Days......................................................................75 Section 1006. Binding Effect.......................................................................................................75 Section1007. Captions...............................................................................................................75 Section1008. Governing Law......................................................................................................76 Section1009. No Recourse..........................................................................................................76 EXHIBIT A — FORM OF BOND iii TRUST INDENTURE THIS TRUST INDENTURE, dated as of April 1, 1994, is by and between the County of Contra Costa, a public body, corporate and politic organized and existing under the laws of the State of California (the "Issuer"), and Bank of America National Trust and Savings Association, a national banking association organized and existing under the laws of the United States of America, as trustee (the "Trustee"). WITNESSETH: WHEREAS, the Issuer is authorized under Chapter 7 of Part 5 of Division 31 of the Health and Safety Code of the State of California (the "Act"), to issue bonds and loan the proceeds thereof to qualified borrowers for the purpose of financing multifamily housing projects for persons and families of low income residing within the State of California; and WHEREAS, the Issuer has issued its $11,000,000 Multifamily Housing Revenue Bonds (GNMA Collateralized — Del Norte Place Apartments) 1990 Series B (the "Prior Bonds") for the purpose of causing to be funded a mortgage loan (the "Project Loan") to Del Norte Place A California Limited Partnership (the 'Borrower") to finance the acquisition, construction and equipping of the housing portion of a 135-residential unit mixed use multifamily housing and commercial rental project located in the City of EI Cerrito, California (the "Project") pursuant to a Financing Agreement among the Issuer, the Borrower, Bank of America National Trust and Savings Association, as successor to Security Pacific National Bank, as Trustee (the "Prior Trustee") and TRI Capital Corporation (the "Lender"), dated as of October 15, 1990 (the "Prior Financing Agreement"); and WHEREAS, the Lender made the Prior Loan to the Borrower and obtained the funds therefor by issuing and delivering to the Prior Trustee on behalf of the Issuer, a fully modified mortgage-backed security (the "Prior GNMA Security") guaranteed as to timely payment of principal and interest by the Government National Mortgage Association ("GNMA") with respect to the Prior Loan; and WHEREAS, the Borrower is in default of its obligation to make payments under the note evidencing the Prior Loan, and the Lender has, therefore, the right to prepay the outstanding Prior GNMA Security pursuant to the provisions of the indenture pursuant to which the Prior Bonds were issued (the "Prior Indenture"); and WHEREAS, under the terms of the Prior Indenture, the Prior Bonds are subject to mandatory redemption at a redemption price equal to the principal amount plus accrued interest to the redemption date, as a whole or in part to the extent that the Prior Trustee receives payments on the Prior GNMA Security in excess of regularly scheduled payments (except optional prepayments) including (but not limited to) payment representing mortgage coinsurance proceeds or other amounts received in respect to the Mortgage Loan following the acceleration thereof upon the occurrence of an event of default thereunder; and -1- WHEREAS, the Lender has prepaid the Prior GNMA Security, and the Prior Trustee has received such prepayment and will redeem the Prior Bonds with such funds under and pursuant to said mandatory redemption provisions of the Prior Indenture; and WHEREAS, the Borrower has applied to the Issuer to issue its $11,110,000 Variable Rate Demand Multifamily Housing Revenue Refunding Bonds, 1994 Series A (GNMA Collateralized — Del Norte Place Apartments) (the 'Bonds"), the proceeds of which will be used among other purposes, to acquire a new GNMA Security (the "GNMA Security") from the Lender pursuant to the provisions of this Indenture; and WHEREAS, the Lender and the Federal Housing Administration have agreed to amend, reinstate and reinsure to the maximum insurable amount the Prior Loan to the Borrower in connection with a proposed refinancing of the Project and obtain the funds therefor by issuing and delivering to the Trustee on behalf of the Issuer, a GNMA Security (as defined herein) guaranteed as to timely payment of principal and interest by GNMA with respect to the amended and reinstated Prior Loan; and WHEREAS, the Issuer has determined that use of the proceeds of the Bonds to acquire the GNMA Security and to provide additional financing for the Project will promote and serve the intended purposes of and in all respects will conform to the provisions and requirements of the Act, and, in order to effect a refinancing of the Project the Issuer must issue the Bonds; 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 WHEREAS, all things necessary to make the Bonds, when authenticated by the Trustee and issued as in this Indenture provided, the valid, binding and legal obligations of the Issuer according to the import thereof, and to constitute this Indenture a valid lien on the properties, interests, revenues and payments herein pledged to the payment of the Bonds, have been done and performed, and the creation, execution and delivery of this Indenture, and the execution and issuance of the Bonds, subject to the terms hereof, have in all respects been duly authorized. NOW, THEREFORE, in consideration of the premises, the acceptance by the Trustee of its obligations hereunder and the purchase and acceptance of the Bonds by the registered owners thereof and the issuance of the Credit Enhancement (as hereinafter defined) by the Credit Enhancement Provider (as hereinafter defined), and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, in order to secure the payment of the principal of and interest on the Bonds according to their tenor and effect, to secure the obligations of the Borrower arising under the Reimbursement Agreement (as hereinafter defined) and the performance and observance by the Issuer of all the covenants expressed or implied herein and in the Bonds, the Issuer 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 (said property being herein referred to as the "Trust Estate"), to wit: -2- GRANTING CLAUSES I. 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; and II. All right, title and interest of the Issuer in and to the GNMA Security, including all payments and proceeds with respect thereto and any interest, profits or other income derived from the investment thereof; and M. All right, title and interest of the Issuer in and to the Credit Enhancement and any monies held under this Indenture by the Trustee (excluding amounts in the General Receipts Account which represent Issuer fees or amounts in the Rebate Fund), including the proceeds of the Bonds and the interest, profits and other income derived from the investment thereof, including the Investment Agreement (as hereinafter defined) and all certificates or other instruments representing the same, and all renewals thereof, additions thereto and replacements or substitutions therefor; and IV. All right, title and interest of the Issuer in and to, and remedies under, the Financing Agreement, reserving, however, the Reserved Rights of the Issuer; and V. All right, title and interest of the Issuer in 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; -3- 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 registered 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, and, except as set forth in this Indenture, for the payment of all amounts owed by the Borrower to the Credit Enhancement Provider pursuant to the Reimbursement Agreement; PROVIDED, HOWEVER, that if the Issuer or its successors or assigns shall pay or cause to be paid to the registered owners of the Bonds the principal and interest to become due thereon at the times and in the manner provided in Article V hereof, and no amount shall be owing by the Borrower to the Credit Enhancement Provider pursuant to the Reimbursement Agreement, 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 execute and deliver to the Issuer such instruments in writing as shall be requisite to satisfy the lien hereof, and, subject to Section 502, 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 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. -4- ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 101. DEFINITIONS. In addition to terms elsewhere defined in this Indenture, the following words and terms as used in this Indenture and the preambles hereto shall have the following meanings unless the context or use clearly indicates another or different meaning or intent, and such definitions shall be equally applicable to both the singular and plural forms of the terms and words herein defined. All capitalized terms not otherwise defined herein shall have the respective meanings provided for them in the Financing Agreement. "Act" means Chapter 7 of Part 5 of Division 31 of the Health and Safety Code of the State of California, as amended to the date hereof. "Additional Payments" means the payments required to be made by the Borrower pursuant to Sections 4.1 and 4.4 of the Agreement. "Agreement" has the same meaning as Financing Agreement, defined below. "Alternate Credit Enhancement" means any letter of credit or other credit facility as permitted by the Act and approved by the Issuer, including any extensions thereof then in effect and issued by an Alternate Credit Enhancement Provider to the Trustee pursuant to the requirements of Section 611 hereof. "Authorized Credit Enhancement Provider Representative" means a representative of the Credit Enhancement Provider duly authorized to act on behalf of the Credit Enhancement Provider with respect to any actions required of the Credit Enhancement Provider pursuant to this Indenture. "Alternate Credit Enhancement Provider" means the issuer of an Alternate Credit Enhancement which meets the standards set forth in Section 611 hereof, and its successors and assigns. "Authorized Denomination" means, during the Weekly Variable Rate Period, $100,000 or any integral multiple of $5,000 in excess thereof, and, during the Fixed Rate Period, $5,000 or any integral multiple thereof. "Authorized Officer" means the Chair of the Issuer, the County Administrator, the Director of Community Development, the Deputy Director—Redevelopment of the Community Development Department of the Issuer and any other officer or employee of the Issuer authorized by resolution of the Issuer to perform the act or sign the document in question. "Available Moneys" means with respect to any date of determination (i) moneys held by the Trustee in funds and accounts established under this Indenture and with respect to which the Trustee has received an opinion of counsel with expertise in bankruptcy matters to the effect that such moneys would not be deemed preferential transfers or -5- voidable in the event of a bankruptcy proceeding with respect to the Issuer, the Borrower or any general partner or guarantor of the Borrower, (ii) proceeds from a draw on the Credit Enhancement, (iii) proceeds of the remarketing of the Bonds pursuant to Section 903 hereof, and (iv) proceeds from the investment or reinvestment of moneys described in clauses (i) through (iii) above. "Bond" or "Bonds" means the Issuer's $11,110,000 Variable Rate Demand Multifamily Housing Revenue Refunding Bonds, 1994 Series A (GNMA Collateralized — Del Norte Place Apartments), authorized pursuant to Section 201 of this Indenture. "Bond Counsel" means any attorney at law or firm of attorneys, of nationally recognized standing in matters pertaining to the exclusion from gross income of interest on bonds for federal income tax purposes issued by states and political subdivisions, and selected by the Issuer, and duly admitted to practice law before the highest court of any state of the United States of America or the District of Columbia. "Bondholder," "holder" or "owner" means the registered owner of any Bonds. "Bondholder Tender Notice" means a written notice meeting the requirements of Section 901 of this Indenture. "Bond Resolution" means the resolution adopted by the Issuer on April 19, 1994, authorizing and approving the issuance and sale of the Bonds pursuant to this Indenture. "Bond Year" means with respect to the Bonds, the period beginning on the date of issuance of the Bonds, and ending on October 20, 1994, and each twelve-month period thereafter ending on the date of final payment of the Bonds. "Borrower" means Del Norte Place A California Limited Partnership, and its successors and assigns. "Business Day" means a day other than (a) a Saturday, a Sunday or any day on which banking institutions located in the city of New York, New York, or the city in which the principal corporate trust office of the Trustee or the office designated for payments under the Credit Enhancement is located (if different from the above), are required or authorized by law to close, or (b) a day upon which the New York Stock Exchange is closed. "Certificate of Continuing Program Compliance" means a certification as to the compliance of the Project with the Regulatory Agreement, in substantially the form set forth in Exhibit D to the Regulatory Agreement. "Code" means the Internal Revenue Code of 1986, as amended, and the Regulations thereunder, or any successor statute, together with corresponding and applicable final, temporary or proposed regulations and revenue rulings issued or amended with respect thereto by the Treasury Department or Internal Revenue Service of the United States. "Collateral Documents" means the Financing Agreement, the Regulatory Agreement and this Indenture. -6- "Conversion Date" mean the date on which the interest rate on the Bonds is converted to a Fixed Interest Rate. "Conversion Option" means the option granted to the Borrower in Section 204 hereof pursuant to which the interest rate on the Bonds is converted to a Fixed Interest Rate on the Conversion Date. "Costs of Issuance" means items of expense related to the authorization, sale and issuance of Bonds and the refunding of the Prior Bonds, including, without limitation, printing costs, costs of reproducing documents, fees and charges of the Trustee, fees and charges of the Credit Enhancement Provider, fees and expenses of the Issuer, fees and expenses of Bond Counsel, fees and expenses of the Issuer's financial advisor, underwriting fees and expenses, advertising expenses, legal and accounting fees and charges, professional consultants' fees and charges, costs of credit ratings, fees and charges for execution, transportation and safekeeping of Bonds, and other costs, charges and fees in connection with the foregoing. "Credit Enhancement" means the irrevocable direct pay letter of credit issued by the Credit Enhancement Provider to the Trustee in accordance with the requirements of Section 4.6 of the Agreement and any extensions of such Credit Enhancement. To the extent an Alternate Credit Enhancement is substituted for the Credit Enhancement hereunder, all references herein to "Credit Enhancement" shall mean and include such Alternate Credit Enhancement. "Credit Enhancement Interest Requirement" means (a) during the Weekly Variable Rate Period, 39 days' interest on the Outstanding Bonds (other than Pledged Bonds) at the Maximum Rate, and (b) during the Fixed Rate Period, if the Bonds are secured by Credit Enhancement, 210 days' interest at the Fixed Interest Rate, or such greater or lesser period as shall be required by the Rating Agency. "Credit Enhancement Provider" means The Sumitomo Bank, Limited, acting through its Chicago Branch, and its successors and assigns. To the extent an Alternate Credit Enhancement is substituted for the Credit Enhancement hereunder, all references herein to "Credit Enhancement Provider" shall mean and include the issuer of such Alternate Credit Enhancement. "Debt Service Reserve Fund" means the fund created by Section 403 of this Indenture. "Debt Service Reserve Fund Requirement" means (a) prior to the Conversion Date an amount equal to $ (the "Original Amount"), amounts deposited therein pursuant to Section 401, plus investment earnings on all amounts held in the Debt Service Reserve Fund, in any event only until the Debt Service Reserve Fund Requirement shall have increased to an amount equal to 3% of the principal amount of Bonds Outstanding, and thereafter "Debt Service Reserve Fund Requirement" shall be an amount equal to 3% of the principal amount of Bonds then Outstanding; and (b) subsequent to the Conversion Date, the amount required by the Rating Agency in order to achieve a rating on the Bonds pursuant to the provisions of this Indenture. -7- "Event of Default" or "Default" means any of the events specified in Section 601 hereof. "Extension Date" means a date which is ten (10) days prior to the then current expiration date of the Credit Enhancement. "FHA" means the Federal Housing Administration, an organizational unit within HUD, or any successor entity. "FHA Loan Documents" means, collectively, the Mortgage Note, the Mortgage, the Modification Agreement, the FHA Regulatory Agreement and any other documents generally 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 Section 221(d)(4) and Section 244 of the National Housing Act. "FHA Regulatory Agreement means the Regulatory Agreement for Insured Multifamily Housing Projects Coinsured by HUD dated April 1, 1991, by and between the Borrower and the Lender, together with any and all Supplements thereto. "Financing Agreement" or "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 GNMA Guaranty Agreement and the GNMA Security. "Fixed Interest Rate" means a fixed, non-floating annual interest rate on the Bonds established in accordance with Section 204 hereof. "Fixed Rate Period" means the period of time commencing with the Conversion Date and ending on the Maturity Date. During the Fixed Rate Period, interest will accrue on the Bonds from, and including, the Conversion Date to the Maturity Date. "General Receipts Fund" means the fund created by Section 401 of this Indenture. "GNMA" means Government National Mortgage Association, its successors and assigns. "GNMA Guaranty Agreement" means the GNMA Guaranty Agreement, dated as of May 1, 1994 between GNMA and the Lender, together with all Supplements thereto. "GNMA Security" means the fully-modified, mortgage-backed security in the principal amount of$10,586,300 to be issued by the Lender and registered in the name of the Trustee and dated May 1, 1994 and maturing on October 15, 2032, 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 -8- and the regulations promulgated thereunder, and bearing interest at the rate of 8.0% per annum. "Government Obligations" means bonds, notes, certificates of indebtedness, treasury bills or other securities now or hereafter issued, which are guaranteed as to their full and timely payment by the full faith and credit of the United States of America as to principal and interest. "HUD" means the Department of Housing and Urban Development or the Secretary of Housing and Urban Development of the United States or the authorized representative of such Secretary. "Improvements" means the 135-unit apartment building (and related facilities and commercial facilities) constructed and equipped on the Land. "Indenture" means this Trust Indenture, as it may be amended, modified or supplemented from time to time as permitted hereby. "Inducement Date" means August 22, 1989, the date on which a resolution was adopted evidencing preliminary approval of the issuance of bonds to finance the acquisition, construction and equipping of the Project. "Interest Payment Date" means (a) during any Weekly Variable Rate Period prior to the Conversion Date, the first Business Day of each calendar month, commencing May 2, 1994, (b) during the Fixed Rate Period, each April 20 and October 20 following the Conversion Date, and (c) the Conversion Date. "Investment Agreement" means the investment agreement between and the Trustee, dated as of April _, 1994. "Investment Income" means the earnings, profits and accreted value derived from the investment of moneys in the Project Fund, the Redemption Fund, the Debt Service Reserve Fund, and the General Receipts Fund pursuant to Section 407 hereof. "Issuer" means the County of Contra Costa, a public body, corporate and politic organized and existing under the laws of the State of California, and its successors and assigns. "Issuer's Fee" means an annual fee equal to .125% of the Principal Amount payable in advance in annual installments on each May 1 commencing May 1, 1995. "Land" means the Borrower's leasehold estate in the parcels of real property described in Exhibit A to the Regulatory Agreement. "Lender" means TRI Capital Corporation, a California corporation, and its successors and assigns. "Letter of Credit Fee" means an amount payable to the Credit Enhancer Provider for providing the Credit Enhancement which amount shall be payable at the times and in the -9- amounts set forth in the Reimbursement Agreement, as specified in writing by the Credit Enhancement Provider to the Trustee. "Loan" means the Prior Loan assigned by the Prior Trustee to the Trustee. "Maturity Date" means October 20, 2032. "Maximum Rate" means twelve percent (12%) per annum. "Modification Agreement" means the modification of Deed of Trust Note and Deed of Trust, dated April J 1994, between the Borrower and the Lender. "Mortgage" means the deed of trust executed by the Borrower for the benefit of the Lender and modified pursuant to the Modification Agreement. "Mortgage Insurance" means the coinsurance against certain losses under the Mortgage Loan provided by the FHA and the Lender, as evidenced by the endorsed Mortgage Note. "Mortgage Loan" means the loan made by the Lender to the Borrower in connection with the financing of the Project and in a principal amount equal to $10,586,300, as modified pursuant to the Modification Agreement. "National Housing Act" means the National Housing Act of 1934, as amended. "Note" or "Mortgage Note" means the Deed of Trust Note executed by the Borrower in favor of the Lender and in the maximum insurable amount of $10,586,300, as modified pursuant to the Modification Agreement. "Opinion of Counsel" means a written opinion of legal counsel, acceptable to the recipient(s) of such opinion. "Original Issue Date" means April 28, 1994. "Outstanding," when used with reference to the Bonds at any date as of which the amount of Outstanding Bonds is to be determined, means all Bonds which have been authenticated and delivered hereunder except: (a) Bonds canceled or delivered for cancellation at or prior to such date; (b) Bonds deemed to be paid in accordance with Section 502; (c) Bonds in lieu of which others have been authenticated under Sections 209, 210 and 213; and (d) For voting purposes only, Bonds held by the Borrower or any general partner of the Borrower, or the Credit Enhancement Provider. -10- "Permitted Investments" means any of the following which at the time of investment are legal investments under the laws of the State of California for trust funds held by the Trustee: (i) Government Obligations; (ii) obligations with a maturity of one year or less of any of the following federal agencies which obligations represent full faith credit of the United States of America, including: Export-Import Bank, Farmers Home Administration, General Services Administration, U.S. Maritime Administration, Small Business Administration, Government National Mortgage Association, U.S. Department of Housing & Urban Development, and Federal Housing Administration; (iii) bonds, notes or other evidences of indebtedness with a maturity of one year or less rated AAA by S&P issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation; (iv) U.S. dollar denominated deposit accounts, federal funds and banker's acceptances with domestic commercial banks which have a rating on their short term certificate of deposit of A-1+ or AA by S&P and maturing no more than 270 days after the date of purchase; (v) commercial paper which is rated A-1 or better by S&P; NO any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and (i) which are rated in the highest rating category of S&P and (ii)(A) which are fully secured as to principal and interest and redemption premium, if any, by a fund consisting only of cash or Government Obligations, which fund may be applied only to the payment of such principal of and interest and redemption premium, if any, in such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instruments, as appropriate, and (B) which fund is sufficient, as verified by an certified public accountant acceptable to S&P, to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates thereof or on the redemption date or dates specified in the irrevocable instructions referred to above, as appropriate; (vii) obligations with a maturity of one year or less by any corporation organized and operating within the United States of America having assets in excess of$500,000,000 which obligations are rated AA or better by S&P; (viii) any investment agreement, guarantee or other investment vehicle or security, in form and substance satisfactory to the Issuer and the Trustee, which has been submitted to and approved by S&P and the Credit Enhancement Provider, and is issued or secured by or otherwise representing a general obligation of a financial -11 - institution, whose long-term unsecured general obligations are rated AA or better by S&P; (ix) the Investment Agreement; and (x) any other investment approved by the Credit Enhancement Provider which is issued or secured by or otherwise representing a general obligation of a financial institution whose long-term unsecured general obligations are rated AA or better by S&P. "Person" means any natural person, firm, partnership, association, corporation or public both. "Pledge Agreement" means the Custody, Pledge and Security Agreement, dated as of April 1, 1994, among the Borrower, the Credit Enhancement Provider and the custodian named therein, as amended or supplemented from time to time, and any similar agreement relating to the Pledged Bonds between the Borrower and any Alternate Credit Enhancement Provider and, if applicable, any other person. "Pledged Bond" means any Bond during the period from and including the date of its purchase with amounts realized under the Credit Enhancement to but excluding the date on which such Bond is purchased by any person other than the Credit Enhancement Provider or the Borrower. "Principal Amount" means $11,110,000, the initial principal amount of the Bonds. "Prior Bonds" means the $11,000,000 Multifamily Housing Revenue Bonds (GNMA Collateralized — Del Norte Place Apartments) 1990 Series B, issued and outstanding under the Prior Indenture. "Prior Indenture" means the Indenture, dated as of October 15, 1990, by and between the Issuer and the Prior Trustee. "Prior Trustee" means Bank of America National Trust and Savings Association, successor by merger to Security Pacific National Bank, as trustee with respect to the Prior Bonds. "Project" means the Land and the Improvements. "Project Fund" means the fund created by Section 402 of this Indenture. "Qualified Project Period" shall have the meaning given to it in the Regulatory Agreement. "Rating Agency" means Moody's Investors Service, Inc. and/or Standard & Poor's Corporation, according to which of such rating agencies then rates the Bonds; provided that if neither of such rating agencies then rates the Bonds, the term "Rating Agency" shall refer to any national rating agency (if any) which provides such rating. -12- "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 Section 404 hereof. "Rebate Analyst" means any person or entity acceptable to the Issuer and retained to calculate the Rebate Amount. "Record Date" means (a) during the Weekly Variable Rate Period, the close of business on the third Business Day next preceding an Interest Payment Date, and (b) during the Fixed Rate Period, the close of business on the fifth day of the calendar month in which an Interest Payment Date occurs, or, if such day is not a Business Day, the Business Day next preceding such day. "Redemption Date" means the date or dates upon which Bonds are to be called for redemption pursuant to this Indenture. "Redemption Fund" means the fund created by Section 406 of this Indenture. "Register" means the register maintained by the Trustee pursuant to Section 210 hereof. "Regulatory Agreement" means that certain Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants, dated as of April 1, 1994, by and among the Trustee, the Issuer and the Borrower. "Reimbursement Agreement" means that certain Reimbursement Agreement, dated as of April 1, 1994, between the Borrower and the Credit Enhancement Provider, as amended, modified or supplemented from time to time. To the extent an Alternate Credit Enhancement is substituted for the Credit Enhancement hereunder, all references herein to "Reimbursement Agreement" shall mean and include the agreement relating to the reimbursement of funds paid under such Alternate Credit Enhancement. "Related Person" means a "related person" within the meaning of the Code. "Remarketing Agent" means Newman and Associates, Inc. or any qualified successor thereto. "Remarketing Agreement" means that certain Remarketing Agreement, dated as of April 1, 1994, by and between the Remarketing Agent and the Borrower or any agreement entered into in substitution therefor, as the same may be amended from time to time. "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) 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 -13- 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; (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 to whom any matter has been referred because of such officer's knowledge and familiarity with the particular subject. "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. "S&P" means Standard & Poor's Ratings Group, or any successor thereto. "State" means the State of California. "Substantial User" means with respect to any "facilities" (as the term "facilities" is used in the Code), a "substantial user" of such "facilities" within the meaning of the Code. "Supplements" means all extensions, renewals, modifications, amendments, supplements and substitutions. "Surplus Cash Flow" means any unrestricted cash remaining after: (a) the payment of (i) all sums due or currently required to be paid under the terms of the Mortgage or Note; (ii) all amounts required to be deposited in any replacement or operating surplus reserve; and (iii) all other obligations of the Project other than the Mortgage or Note unless funds for payment are set aside, or deferral of payment has been approved, by the Issuer; and (b) the segregation and recording of an amount equal to: (i) the aggregate of any special funds required to be maintained by the Project; and (ii) the Project's total liability for tenant security deposits. In computing Surplus Cash Flow, the Borrower must follow the administrative requirements prescribed by the Federal Housing Commissioner. "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. "Tender Agent" means BankAmerica National Trust Company, with its principal office located at 2 Rector Street, 9th Floor in the City of New York, New York, or any qualified successor thereto. -14- "Trust Estate" means the property, rights, money, securities and other amounts pledged and assigned pursuant to the Granting Clauses of this Indenture. "Trustee" means Bank of America National Trust and Savings Association, with its principal corporate trust office located at 333 South Beaudry Avenue, 25th Floor, Attention: Corporate Trust # ' in the City of Los Angeles, California 90017, or any permitted successor trustee under Article VII hereof. "U.C.C." means the Uniform Commercial Code of the State as now or hereafter amended, whether or not such Code is applicable to the parties or the transactions. "Weekly Variable Rate" means the variable interest rate per annum for the Bonds determined, for each Weekly Variable Rate Period, in accordance with Section 203 hereof. "Weekly Variable Rate Period" means initially the period of time commencing on the Original Issuance Date and ending on May 2, 1994; and thereafter the Weekly Variable Rate Period shall consist of seven-day periods from Tuesday of a calendar week for which the Weekly Variable Rate is to be determined to and including Monday of the next succeeding calendar week. During Weekly Variable Rate Period, interest will accrue on the Bonds from, and including, the Original Issuance Date to, but excluding, the earlier of the Conversion Date or the Maturity Date. "Underwriters" means Newman and Associates, Inc. in its capacity as the original purchasers of the Bonds. "Yield" means an actuarially computed interest cost, and is expressed as a nominal annual rate based on semiannual compounding. The Yield on any security acquired with proceeds of the Bonds (or with moneys deemed to be proceeds of the Bonds) which is subject to a yield restriction shall be computed using a purchase price equal to the lesser of (i) the actual purchase price of such security and (ii) the market price of such security. 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. 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. -15- 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 hereto, the Borrower, the Credit Enhancement Provider, the Trustee, the Lender and their respective counsel have participated in the drafting and revision of this Indenture and the Financing 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 or the Financing Agreement or any Supplement or exhibit hereto or thereto. -16- ARTICLE II THE BONDS SECTION 201. AUTHORIZED AMOUNT OF BONDS. No Bonds may be issued under the provisions of this Indenture except in accordance with this Article. Pursuant to the Bond Resolution, the total principal amount of Bonds that may be issued and outstanding hereunder is expressly limited to the Principal Amount, subject to the provisions of Sections 209, 210 and 213. SECTION 202. ISSUANCE OF BONDS. The Bonds (a) shall be designated (i) prior to the Conversion Date, "County of Contra Costa Variable Rate Demand Multifamily Housing Revenue Refunding Bonds, 1994 Series A (GNMA Collateralized — Del Norte Place Apartments)," and (ii) after the Conversion Date, "County of Contra Costa Multifamily Housing Revenue Refunding Bonds, 1994 Series A (GNMA Collateralized — Del Norte Place Apartments)" and shall be issued in the amount of the Principal Amount, (b) as originally issued hereunder shall be dated the Original Issue Date, (c) shall bear interest from the Original Issue Date at the rates as determined in Sections 203 and 204, payable on each Interest Payment Date, and (d) shall mature, subject to prior redemption as set forth therein, on October 20, 2032, on which date all unpaid principal and interest on the Bonds shall be due and payable. The Bonds shall be issued as registered bonds without coupons in Authorized. Denominations. The Bonds shall be numbered consecutively from R-1 upwards, bearing numbers not then contemporaneously outstanding (in order of issuance) according to the records of the Trustee. The principal of and the interest on the Bonds shall be payable in lawful money of the United States of America. The principal of all Bonds shall be payable at the principal corporate trust office of the Trustee upon the presentation and surrender of the Bonds as the same become due and payable. Regularly scheduled interest on the Bonds shall be paid by check drawn upon the Trustee and mailed by first class mail on the Interest Payment Date to the persons in whose names the Bonds are registered on the registration books maintained by the Trustee at the close of business on the Record Date, except that if the sole Bondowner is DTC or if a Bondholder holds Bonds in the amount of at least $1,000,000, any regularly scheduled interest payment on a Bond owned by such Bondholder shall be made by wire transfer of Federal Reserve Funds to any account in the United States of America designated by such Bondholder if such holder so directs by written notice delivered to the Trustee at least five (5) Business Days before the Record Date for such Interest Payment Date. Any such interest not paid or duly provided for when due shall forthwith cease to be payable to the owner on the regular Record Date therefor and shall be paid to the owner in whose name the Bond is registered at the close of business on a special record date for the payment of such defaulted interest to be fixed by the Trustee, notice of which shall be given to the owners by first-class mail not less than ten (10) days prior to such special record date. -17- SECTION 203. WEEKLY VARIABLE RATE PERIOD. (a) During each Weekly Variable Rate Period, the Bonds shall bear interest at the rate, not exceeding the Maximum Rate, determined by the Remarketing Agent to be the minimum rate of interest necessary, in the best professional judgment of the Remarketing Agent, taking into account prevailing market conditions, to enable the Remarketing Agent to sell all of the Bonds on the rate determination date at a price of 100% of the principal amount thereof plus accrued interest. Interest on the Bonds during each Weekly Variable Rate Period shall be computed on the basis of a 365- or 366-day year, as applicable, for the actual number of days elapsed. (b) With respect to the period from the Original Issuance Date to the first day of the next succeeding Weekly Variable Rate Period, the Weekly Variable Rate shall be _%. With respect to each Weekly Variable Rate Period thereafter, the Weekly Variable Rate shall be determined in accordance with Section 203(a) on Tuesday of each calendar week or on the next Business Day if such Tuesday is not a Business Day, and shall be effective for the Weekly Variable Rate Period commencing on Tuesday of that calendar week; provided, that the Weekly Variable Rate in effect on the Record Date for any Interest Payment Date shall remain in effect from such Record Date until and including such Interest Payment Date). The Remarketing Agent shall announce the Weekly Variable Rate by telephonic or telecopy notice to the Trustee and the Credit Enhancement Provider on each date on which such Weekly Variable Rate is determined, and shall confirm such notice promptly in writing. (c) The computation of the Weekly Variable Rate, if determined in accordance with the provisions of Section 203(b) hereof, shall be conclusive and binding upon the Issuer, the Credit Enhancement Provider, the Borrower, the Trustee, the Tender Agent, the Remarketing Agent and the holders of the Bonds. (d) In the event that the Remarketing Agent shall fail or refuse to determine the Weekly Variable Rate applicable for any Weekly Variable Rate Period or shall fail to give notice thereof on the date specified in (b) above, the interest rate to be borne by the Bonds during such Weekly Variable Rate Period shall be the Weekly Variable Rate in effect during the immediately preceding Weekly Variable Rate Period. (e) During the Weekly Variable Rate Period, the Bonds shall bear interest at the Weekly Variable Rate, payable monthly on each Interest Payment Date to and including the earlier of the Conversion Date or the Maturity Date. During the Fixed Rate Period, the Bonds shall bear interest at the Fixed Interest Rate, payable semi-annually on each Interest Payment Date (commencing on the first April 20 or October 20 after the Conversion Date) to the Maturity Date. Following the Conversion Date, interest on the Bonds shall be computed on the basis of a year of three hundred and sixty (360) days of twelve (12) thirty (30) day months. SECTION 204. FD(ED RATE PERIOD. (a) The interest rate on all outstanding Bonds shall be converted to the Fixed Interest Rate on any Interest Payment Date designated by the Borrower with the prior written consent of the Credit Enhancement Provider and the Issuer upon the exercise by the Borrower of its Conversion Option. -18- The Bonds shall be subject to mandatory tender for purchase by the holders thereof on the Conversion Date in accordance with Section 902 hereof. To exercise such option, the Borrower shall deliver written notice thereof to the Issuer, the Trustee, the Tender Agent, the Credit Enhancement Provider and the Remarketing Agent, together with the information required to be given by the Trustee as described in subsection (b) of this Section 204, at least thirty (30) Business Days prior to the Conversion Date and the Trustee shall give such notice to the Bondholders at least twenty-one (21) Business Days prior to the Conversion Date. Such notice from the Borrower shall be accompanied by an opinion of Bond Counsel (such opinion to be confirmed on the Conversion Date) acceptable to the Issuer and the Remarketing Agent stating that such conversion of the Bonds to the Fixed Interest Rate is authorized and permitted by this Indenture and the laws of the State (including the Act), and will not adversely affect the exclusion of the interest on the Bonds from gross income for federal income tax purposes. (b) The notice to be given by the Issuer to the Trustee, and by the Trustee to the Bondholders, pursuant to subsection (a) of this Section 204 shall be given in accordance with this subsection (b). Any notice given to the holders of any Bonds as provided in this subsection shall be conclusively presumed to have been duly given, whether or not the holder actually receives the notice. Said notice shall state in substance the following: (1) the Conversion Date; (2) that all Bonds are subject to mandatory purchase on the Conversion Date; and (3) the procedures for tendering the Bonds. (c) The Bonds shall bear interest at the Fixed Interest Rate from (and including) the Conversion Date until the maturity of the Bonds. The Fixed Interest Rate shall be that rate, not exceeding the Maximum Rate, determined by the Remarketing Agent to be the minimum rate of interest necessary, in the best professional judgment of the Remarketing Agent, taking into account prevailing market conditions, to enable the Remarketing Agent to sell on the rate determination date all of the Bonds at par plus accrued interest thereon. The Remarketing Agent shall determine the Fixed Interest Rate on the date specified in the notice delivered by the Borrower to the Trustee, the Tender Agent, the Credit Enhancement Provider'and the Remarketing Agent which shall not be more than fourteen (14) nor less than seven (7) Business Days prior to the Conversion Date as provided in Section 204(a). The Remarketing Agent shall promptly notify the Trustee of the determination of the Fixed Interest Rate on the date of determination. Following notification of the Fixed Interest Rate from the Remarketing Agent as described in the immediately preceding sentence, the Trustee shall promptly notify the Borrower, the Tender Agent, the Issuer, the Credit Enhancement Provider and the Issuer of such Fixed Interest Rate by first class mail sent not later than the day following the date of determination of the Fixed Interest Rate. (d) Once the Borrower has given the notice described in subsection (b) of this Section 204, the Borrower may elect to revoke or cancel the Conversion Option by giving notice of such revocation to the Issuer, the Trustee, the Tender Agent, the Remarketing Agent and the Credit Enhancement Provider on or prior to the date set for determination of the Fixed Interest Rate by the Remarketing Agent. In such event the Bondholders, the Issuer, the Borrower, the Trustee, the Tender Agent, the Credit Enhancement Provider and the Remarketing Agent shall be restored to their original positions, to the same effect as if such notice of proposed conversion had not been given. In such event any Bond held by the Trustee pursuant to the notice given in accordance with Section 204(b) shall be returned to -19- the registered owners thereof. In all events the Borrower shall bear, and shall promptly pay upon request therefor, all expenses associated with the proposed conversion of the interest rate on the Bonds whether or not such conversion actually occurs. In no event shall the failure of the Bonds to be converted to a Fixed Interest Rate for any reason be deemed to be a default or Event of Default under this Indenture. (e) Should the Borrower elect to secure the Bonds with a Credit Enhancement during the Fixed Rate Period, the Credit Enhancement, together with an Opinion of Counsel to the Credit Enhancement Provider (substantially in the form of the Opinion of Counsel to the original Credit Enhancement Provider delivered to the Trustee on the Original Issue Date) shall be delivered to the Trustee on the Conversion Date; such Credit Enhancement to be effective on or prior to the Conversion Date, to have a stated amount at least equal to the aggregate principal amount of the Bonds to be outstanding on the Conversion Date plus the Credit Enhancement Interest Requirement, to have a stated maturity of at least one (1) year from the Conversion Date and the Bonds shall be rated in the second highest rating category of the Rating Agency then providing a rating on the Bonds; provided, that such rating may be lower than the second highest rating category with the written consent of the Issuer. (f) Any Bond delivered for purchase to the Tender Agent pursuant to Section 901 of this Indenture from the date notice of a mandatory purchase is given through the Conversion Date shall not be remarketed by the Remarketing Agent except to a buyer who at the time of such purchase either (i) agrees to accept the Fixed Interest Rate when the Fixed Interest Rate becomes effective and acknowledges that the rating on the Bonds in effect prior to the Conversion Date may be reduced or withdrawn on and after the Conversion Date, or (ii) agrees to the purchase of the Bond pursuant to Section 902 hereof on the Conversion Date. SECTION 205. EXECUTION,LIMITED OBLIGATIONS. The Bonds shall be executed on behalf of the Issuer by the manual or facsimile signature of the Chair of the Board of Supervisors of the Issuer, attested by the manual or facsimile signature of the Clerk of the Board of Supervisors. 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 manually impressed on the Bonds. In case any officer whose signature or a facsimile of whose signature shall appear on any Bonds shall cease to be such officer before the delivery of such Bonds, such signature or such facsimile shall nevertheless be valid and sufficient for all purposes as if he had remained in office until delivery. 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, GNMA, any other agency of the United States of America, 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 -20- 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 never 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 and never shall become 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 exercise of the taxing power of the Issuer to pay the Bonds, 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, 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; provided, however that as a condition precedent to the Issuer proceeding pursuant to this Section, the Issuer shall have received satisfactory indemnification. SECTION 206. AUTHENTICATION. Only such Bonds as shall have endorsed thereon a certificate of authentication substantially in the form set forth in Exhibit A hereto duly executed by the Trustee or the Tender Agent shall be entitled to any right or benefit under -21 - 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 or the Tender Agent; 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 or Tender Agent'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 or the Tender Agent, but it shall not be necessary that the same person sign the certificates of authentication on all of the Bonds. SECTION 207. FORM OF BONDS. (a) The Bonds, the certificate of authentication and the form of assignment shall be in substantially the forms hereinafter set forth in Exhibit A hereto with such appropriate variations, omissions, substitutions and insertions as are permitted or required hereby or are required by law, and may have such letters, numbers or other marks of identification and such legends and endorsements placed thereon as may be required to comply with any applicable laws or rules or regulations, or as may, consistently herewith, be determined by the officers executing such Bonds, as evidenced by their execution of the Bonds. (b) 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 hereinabove set forth and 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 or the Tender Agent, and the Trustee or the Tender Agent, upon presentation to it of any temporary Bond, shall cancel the same and authenticate and deliver in exchange therefor, without charge to the owner thereof, a definitive Bonds or Bonds of an equal aggregate principal amount, of the same maturity and series, 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 208. DELIVERY OF BONDS. Upon the execution and delivery hereof, the Issuer shall execute the Bonds and deliver them to the Trustee or the Tender Agent, and the Trustee or the Tender Agent shall authenticate or cause the authentication of the Bonds and deliver them to such purchaser or purchasers as shall be directed by the Issuer as hereinafter in this Section; provided, there shall be filed with the Trustee the following items: (a) a copy, certified by the Clerk of the Board of Supervisors of the Issuer, of the Bond Resolution; -22- (b) an order of the Issuer directing the Trustee or the Tender Agent to authenticate and deliver the Bonds against receipt of the purchase price therefor; (c) original executed counterparts of this Indenture, the Financing Agreement and the Investment Agreement; (d) an original executed counterpart of the Regulatory Agreement; (e) the original executed Credit Enhancement; (f) an original executed counterpart of the Remarketing Agreement; (g) original executed counterparts of a certificate with respect to compliance with federal arbitrage requirements from the Issuer given in reliance on a certificate from the Borrower; (h) an opinion of Bond Counsel as to the validity of the Bonds; (i) an opinion of counsel for the Borrower in form and content acceptable to the Issuer; (j) payment to the Trustee, but for the account of the Issuer, of the purchase price for the Bonds; (k) a copy of the fully executed modification of the Mortgage and the Note; (1) a copy of final cash flow statements certified by ; and (m) $ in immediately available funds for deposit in the Costs of Issuance Account. SECTION 209. MUTILATED,LOST, STOLEN OR DESTROYED BONDS. If any Bond is mutilated, lost, stolen or destroyed, the Issuer may execute and the Trustee may authenticate and deliver a new Bond of the same maturity, interest rate, principal amount, series and tenor in lieu of and in substitution for the Bond mutilated, lost, stolen or destroyed; provided that in the case of any mutilated Bond, such mutilated Bond shall first be surrendered to the Trustee, and in the case of any lost, stolen or destroyed Bond, there shall be first furnished to the Trustee evidence satisfactory to it of the ownership of such Bond, and of such loss, theft or destruction, together with indemnity for the Issuer and the Trustee satisfactory to the Trustee and compliance with such other reasonable regulations as the Issuer and Trustee may prescribe. If any such Bond shall have matured or a redemption date pertaining thereto shall have passed, instead of issuing a new Bond the Trustee may pay the same without surrender thereof upon receipt of indemnity satisfactory to the Trustee. The Issuer and the Trustee may charge the holder of such Bond with their reasonable fees and expenses in this connection. SECTION 210. EXCHANGEABILITY AND TRANSFER OF BONDS, PERSONS TREATED AS OWNERS. The Issuer shall cause books for the registration of the Bonds and for the -23- registration of transfer of the Bonds as provided herein to be kept by the Trustee, which is hereby constituted and appointed the bond registrar for the Bonds. At any time subject to the express limitations contained in this Section 210, any holder of a Bond, in person or by his duly authorized attorney, may transfer title to his Bond on the Register kept by the Trustee, upon surrender thereof at the principal corporate trust office of the Trustee, together with a written instrument of transfer (in substantially the form of assignment, including signature guarantee, attached to the Bond) executed by the holder or his duly authorized attorney, and upon surrender for registration of transfer of any Bond, the Issuer shall execute and the Trustee shall authenticate and deliver in the name of the transferee or transferees a new Bond or Bonds of the same aggregate principal amount, rate, maturity, series and tenor as the Bond surrendered and of any Authorized Denomination. Bonds may be exchanged upon surrender thereof at the principal corporate trust office of the Trustee with a written instrument of transfer, including a signature guarantee satisfactory to the Trustee, executed by the Bondholder or his attorney duly authorized in writing, for an equal aggregate principal amount of Bonds of the same aggregate principal amount, rate, maturity, series and tenor as the Bonds being exchanged and of any Authorized Denomination. The Issuer shall execute and the Trustee shall authenticate and deliver Bonds which the Bondholder making the exchange is entitled to receive, bearing numbers not contemporaneously then outstanding. Such registrations of transfers or exchanges of Bonds shall be without charge to the holders of such Bonds, but any taxes or other governmental charges required to be paid with respect to the same shall be paid by the holder of the Bond requesting such registration of transfer or exchange as a condition precedent to the exercise of such privilege. Any service charge made by the Trustee for any such registration, transfer or exchange shall be paid by the Borrower. Except as provided in Section 901 hereof, the Trustee shall not be required to register any transfer or exchange of any Bond (or portion thereof) during the five-day period next preceding the selection of Bonds for redemption, and from and after notice calling such Bonds (or portion thereof) for redemption or partial redemption has been given and prior to such 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 either principal or interest shall be made only to or upon the order of the registered owner thereof or his duly authorized attorney, but such registration may be changed as hereinabove provided. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid. All Bonds issued upon any transfer or exchange of Bonds shall be legal, valid and binding limited obligations of the Issuer, evidencing the same debt, and entitled to the same security and benefits under this Indenture, as the Bonds surrendered upon such transfer or exchange. -24- In executing any Bond upon any exchange or transfer provided for in this Section, the Issuer may rely conclusively on a representation of the Trustee that such execution is required. SECTION 211. CANCELLATION. All Bonds which have been surrendered pursuant to Section 204 or 213 of this Indenture for payment upon maturity or redemption prior to maturity shall be canceled by the Trustee and shall not be reissued. SECTION 212. RATABLY SECURED. All Bonds issued hereunder are and are to be, to the extent provided in this Indenture, equally and ratably secured by this Indenture without preference, priority or distinction on account of the actual time or times of the authentication or delivery or maturity of the Bonds so that, subject as aforesaid, all Bonds at any time outstanding hereunder shall have the same right, lien and preference under and by virtue of this Indenture and shall all be equally and ratably secured hereby with like effect as if they had all been executed, authenticated and delivered simultaneously on the date hereof, whether the same, or any of them, shall actually be disposed of at such date, or whether they, or any of them, shall be disposed of at some future date. SECTION 213. REDEMPTION OF BONDS; PARTIAL REDEMPTION OF BONDS. The Bonds are subject to redemption prior to maturity at the times, under the circumstances, in the manner and at the redemption prices set forth below, and subject to the timing restrictions contained in the proviso of Section 607(a)(ii) of this Indenture as follows: (a) Optional Redemption (i) During the Weekly Variable Rate Period, the Bonds shall be subject to redemption by the Issuer, in whole or in part (but only in amounts of $25,000 or any integral multiple thereof), at the option of the Borrower, with the prior written consent of the Credit Enhancement Provider, on any Interest Payment Date, at a redemption price equal to one hundred percent (100%) of the principal amount redeemed plus accrued interest to the redemption date, without premium. (ii) During the Fixed Rate Period, the Bonds shall be subject to redemption by the Issuer, on any date after the tenth anniversary of the Conversion Date, in whole, 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 by the Issuer, at a redemption price equal to one hundred percent (100%) of the principal amount thereof plus accrued interest to the redemption date. (b) Mandatory Redemption The Bonds are subject to mandatory redemption in Authorized Denominations (except as provided in clause NO below) at any time at a redemption price equal to one hundred percent (100%) of the principal amount of the Bonds to be redeemed plus accrued interest thereon to the redemption date, in accordance with the following: (i) The Bonds shall be subject to mandatory redemption, in whole, in the event that the aggregate amount on deposit in the Debt Service Reserve Fund, the -25- Redemption Fund and the Receipts Account is sufficient to pay the principal of and interest on all Bonds Outstanding on such date. (ii) The Bonds shall be subject to mandatory redemption, in whole, due to an occurrence of an Event of Default (as defined in the Agreement); provided that the Credit Enhancement Provider, if required, shall have consented to the same constituting an Event of Default. (iii) The Bonds shall be subject to mandatory redemption, in whole, within ten (10) days of the receipt by the Trustee of a written notice from the Credit Enhancement Provider that a default under the Reimbursement Agreement has occurred and directing the Trustee to redeem all Outstanding Bonds. (iv) The Bonds shall be subject to mandatory redemption, in whole, (A) upon a wrongful dishonor of any conforming draft under the Credit Enhancement by the Credit Enhancement Provider, (B) if the Credit Enhancement Provider shall (I) fail to be open for the transaction of its general business on any Business Day absent extenuating circumstances of a nonfinancial nature; or (II) commence a proceeding under any federal or state insolvency, reorganization or similar law, or have such a proceeding commenced against it, and either have an order of insolvency or reorganization entered against it or have the proceeding remain undismissed and unstayed for ninety (90) days; or (III) have a receiver, liquidator or trustee appointed for it or for the whole or substantially all of its property, and (C) on the Business Day prior to the expiration date of the Credit Enhancement, in the event of a failure to obtain a commitment to extend the Credit Enhancement or obtain an Alternate Credit Enhancement by a date ten (10) Business Days prior to the expiration date of the Credit Enhancement, unless the Bonds have been converted to a Fixed Interest Rate pursuant to this Indenture without the security of the Credit Enhancement. (v) The Bonds shall be subject to mandatory redemption: (A) in whole or in part, at any time on the earliest practical date, 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 coinsurance claim and is therefore in the best interest of the Federal Government; and (B) in whole or in part, at any time on the earliest practical date as determined by the Trustee in its discretion, 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; and -26- (C) in whole on or before June 15, 1994, in the event that the conditions governing disbursement of the Project Fund to acquire the GNMA Security have not been met on or before June 1, 1994, or such later dates to which such dates have been extended as provided herein; and (D) in part on or before June 15, 1994 (as such date may be extended) to the extent that the GNMA Security delivered to Trustee is in a principal amount less than $10,586,300. NO The Bonds shall be subject to mandatory redemption in part on the first date for which notice of redemption can timely be given under Section 214 hereof, whenever amounts in the Redemption Fund as a result of transfers thereto from the Receipts Account of the General Receipts Fund total $25,000 ($100,000 or more following or $5,000 or more following the Conversion Date) or more, but only in amounts of $25,000 ($100,000 or more following or $5,000 or more following the Conversion Date) or any integral multiple thereof. 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. If less than all of the Bonds are to be called for redemption, the Trustee shall select by lot, in such manner as it shall in its discretion determine, the Bonds, or portions thereof in Authorized Denominations to be redeemed. If there shall be called for redemption less than the entire principal amount of a Bond, the Issuer shall execute and the Trustee shall authenticate and deliver, upon surrender of such Bond, without charge to the holder thereof, in exchange for the unredeemed principal amount of such Bond, at the option of such holder, Bonds of the same maturity, interest rate, principal amount, tenor in any Authorized Denomination. SECTION 214. NOTICE OF REDEMPTION. Except as provided below, notice of redemption shall be given by the Trustee not less than thirty (30) nor more than forty-five (45) days prior to the date fixed for redemption, by first class mail, postage prepaid, to the registered owner of each Bond to be redeemed, at the address of such registered owner shown on the Bond Register stating: (i) the numbers of the Bonds to be redeemed, by giving the individual certificate number of each Bond to be redeemed (or stating that all Bonds between two stated certificate numbers, both inclusive, are to be redeemed, or that all of the Bonds have been called for redemption); (ii) the CUSIP numbers of all Bonds being redeemed; (iii) in the case of a partial redemption of Bonds, the principal amount of each Bond being redeemed; (iv) the date of issue of the Bond as originally issued and the complete official name of the Bonds including the series designation; (v) the rate or rates of interest borne by each Bond being redeemed; (vi) the maturity date of each Bond being redeemed; (vii) the place or places where amounts due upon such redemption will be payable; (viii) the publication date, redemption date, and redemption price; and (ix) the address of the Trustee with respect to such redemption; provided, however, that in the event of a redemption by reason of clauses (iii), (iv) and (v) under Section 213(b) hereof the Trustee may redeem such Bonds by giving not less than five (5) days notice prior to the date fixed for redemption. The notice shall require that such Bonds be surrendered at the Principal corporate trust office of the Trustee for redemption at the redemption price and shall state that further interest on such Bonds will not accrue from and after the -27- redemption date. CUSIP number identification with appropriate dollar amounts for each CUSIP number also shall accompany all redemption payments. Notice of such redemption also shall be sent by registered mail, overnight delivery service or other secure means, postage prepaid, to the municipal registered Securities Depositories described below and to at least two of the national Information Services (described below) that disseminate securities redemption notices, when possible, at least two (2) days prior to the mailing of notices required by the first paragraph above, but in any event at least 30 days, but not more than 45 days, prior to the redemption date; provided that neither failure to receive such notice nor any defect in any notice so mailed shall affect the sufficiency of the proceedings for the redemption of such Bonds. Anything to the contrary herein notwithstanding, in the case of a redemption of the Bonds subsequent to the Conversion Date due to an optional prepayment of the Loan, the Trustee shall not give notice of redemption of the Bonds unless the Trustee has received moneys, from a source other than the Credit Enhancement, sufficient to pay principal of and interest on the Bonds to be redeemed from such Loan prepayment. Securities Depositories include: 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; 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, 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 prior to the notice date, 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 and Poor's Corporation "Called Bond Record," 25 Broadway, New York, New York 10004; or, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other services providing information with respect to called bonds, or any other such services as the Issuer may designate in writing to the Trustee. Neither the Issuer nor the Trustee shall have any responsibility for any defect in the CUSIP number that appears on any Bond, check, advice of payment or redemption notice, and any such document may contain a statement to the effect that CUSIP numbers have been assigned by an independent service for convenience of reference and that neither the Issuer nor the Trustee shall be liable for any inaccuracy in such numbers. Failure to give notice by mailing to the holder of any Bond designated for redemption shall not affect the validity of the proceedings for the redemption of any other Bond. -28- Notice of redemption having been given in the manner provided above, 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. SECTION 215. BOOK-ENTRY SYSTEM. (a) All Bonds shall be initially issued in the form of a separate single certificated fully registered Bond. Upon initial issuance, the ownership of each Bond shall be registered in the bond register in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"). Except as provided in Section 215(d) hereof, all Outstanding Bonds shall be registered in the Bond Register in the name of Cede & Co., as nominee of DTC. (b) With respect to Bonds registered in the Bond Register in the name of Cede& Co., as nominee of DTC, the Issuer and the Trustee shall have no responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co. or any Participant (as defined by DTC) 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 Bond Register, 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 Bond Register, of any amount with respect to principal of, premium, if any, interest on, or purchase price of the Bonds. The Issuer and the Trustee may treat and consider the person in whose name each Bond is registered in the Bond Register as the holder and absolute owner of such Bond for the purpose of payment of principal, premium, if any, the purchase price 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, the purchase price and interest on the Bonds only to or upon the order of the respective Bondholder, as shown in the Bond Register, as provided herein, 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, the purchase price 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 Bond Register, shall receive a certificated Bond evidencing the obligation of the Issuer to make payments of principal, premium, if any, the purchase price and interest pursuant to this Indenture. Upon delivery by DTC to the Trustee of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions herein with respect to record dates, the word "Cede & Co." in this Indenture shall refer to such new nominee of DTC. (c) The delivery of the Representation Letter ("Representation Letter" as used herein, means the Letter of Representation 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) by the Issuer and the Trustee shall not in any way limit the provisions of Section 215(b) hereof or in any other way impose upon the Issuer or the Trustee any obligation whatsoever with respect to persons having interests in the Bonds other than the Registered Owners, as shown on the Bond Register. The Trustee shall take -29- all action necessary for all representations in the Representation Letter with respect to the Trustee to at all times be complied with. (d) (i) DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving written notice to the Issuer, the Remarketing Agent, the Tender Agent and the Trustee and discharging its responsibilities with respect thereto under applicable law. (ii) The Issuer, in its sole discretion and without the consent of any other person, may terminate the services of DTC with respect to the Bonds if the Issuer determines that: (A) DTC is unable to discharge its responsibilities with respect to the Bonds, or (B) a continuation of the requirement that all Outstanding Bonds be registered in the Bond Register in the name of Cede & Co., or any other nominee of DTC, is not in the best interest of the beneficial owners of such Bonds. (iii) Upon the termination of the services of DTC with respect to the Bonds pursuant to subsection 215(d)(ii)(B) hereof, or upon the discontinuance or termination of the services of DTC with respect to the Bonds pursuant to subsection 215(d)(i) or subsection 215(d)(ii)(A) hereof after which no substitute securities depository willing to undertake the functions of DTC hereunder can be found which, in the opinion of the Issuer, is willing and able to undertake such functions upon reasonable and customary terms, the Issuer is obligated to deliver Bond certificates at the expense of the Borrower, as described in this Indenture and the Bonds shall no longer be restricted to being registered in the Bond Register in the name of Cede & Co. as nominee of DTC, but may be registered in whatever name or names Bondholder transferring or exchanging Bonds shall designate to the Trustee in writing, in accordance with the provisions of this Indenture. (e) Notwithstanding any other provisions of this Indenture to the contrary, as 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, the purchase price 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. (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 action under this Indenture. -30- ARTICLE III SECURITY;COVENANTS SECTION 301. PLEDGE OF TRUST ESTATE. The Bonds and the interest thereon shall be special, limited obligations of the Issuer as provided in Section 205, and shall be secured by and payable only from the Trust Estate. The Trust Estate is hereby pledged to the Trustee for the benefit of the Bondholders for the payment of the principal of and interest on the Bonds in accordance with the terms and provisions of this Indenture, and for the benefit of the Credit Enhancement Provider for the payment of all amounts owing to it by the Borrower under the Reimbursement Agreement, provided, however, that the Credit Enhancement and the proceeds thereof shall not secure Bonds during any period they are Pledged Bonds. This pledge shall be valid and binding from and after the date of execution of this Indenture and the Trust Estate hereby pledged shall immediately be subject to the lien of such pledge without any physical delivery thereof or further act and the lien of such pledge shall be valid and binding as against all parties having claims of any kind in tort, contract or otherwise against the Issuer, irrespective of whether such parties have notice thereof. SECTION 302. PAYMENT OF BONDS AND PERFORMANCE OF COVENANTS. The Issuer shall promptly pay, but only out of the Trust Estate, the principal of and interest on the Bonds at the place, on the dates and in the manner provided in the Bonds. The Issuer shall promptly perform and observe all covenants, undertakings and obligations set forth herein, in the Agreement or in the Bonds on its part to be performed or observed. The Issuer agrees that the Trustee in its name or in the name of the Issuer may enforce against the Borrower or any Person any rights of the Issuer under or arising from the Bonds, the Credit Enhancement or the Agreement whether or not the Issuer is in default hereunder or under the Agreement, but the Trustee shall not be deemed to have hereby assumed the obligations of the Issuer under the Agreement, but rather shall have no obligations under the Agreement except as specifically provided therein. The Issuer shall fully cooperate with the Trustee in the enforcement by the Trustee of any such rights. At the request of the Trustee, the Issuer, upon being reasonably indemnified, shall in its name commence legal action or take such other actions as the Trustee shall reasonably request to enforce the rights of the Issuer or the Trustee under or arising from the Bonds, the Credit Enhancement or the Agreement. SECTION 303. FURTHER ASSURANCES. The Issuer covenants that it will cooperate to the extent necessary with the Borrower, the Trustee and the Credit Enhancement Provider (subject to Section 612 hereof) in their defenses of the Trust Estate against the claims and demands of all persons, and will to, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, such indentures supplemental hereto and such further acts, financing statements, documents, instruments and transfers as the Trustee or the Credit Enhancement Provider may reasonably require to perfect and maintain perfected the security interest in the Trust Estate; provided that the entity requesting the assistance of the Issuer pays all costs of the Issuer in connection therewith. The Issuer shall not agree to any amendment, modification, supplement, waiver or consent with respect to the Agreement without the prior written consent of the Trustee and the -31 - Credit Enhancement Provider (subject to Section 612 hereof), which consent shall be governed by Article VIII of this Indenture. Notwithstanding anything contained herein to the contrary, (a) the Issuer expressly reserves its right to exercise the Reserved Rights of the Issuer without obtaining the consent or approval of the Borrower, the Trustee, and/or the Credit Enhancement Provider; and (b) nothing herein contained shall be construed as a waiver or relinquishment of the Reserved Rights of the Issuer. SECTION 304. NO OTHER ENCUMBRANCES. The Issuer covenants that, except as otherwise provided herein and in the Agreement, it will not sell, convey, mortgage, encumber or otherwise dispose of any portion of the Trust Estate. SECTION 305. NO PERSONAL LIABILITY. No Board Member, officer, agent, employee or attorney of the Issuer, including any person executing this Indenture or the Bonds, shall be liable personally on the Bonds or for any reason relating to the issuance of the Bonds. SECTION 306. CREDIT ENHANCEMENT. On or before the date of delivery of the Bonds to the original purchaser thereof, the Credit Enhancement Provider shall execute and deliver the Credit Enhancement to the Trustee. The Credit Enhancement shall be substantially in the form presented to the Issuer in connection with its approval of this Indenture. SECTION 307. INSTRUMENTS OF FURTHER ASSURANCE. Subject to the provisions of Article VII hereof, 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 the Issuer 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 308. NO DISPOSITION OF GNMA SECURITY. The Trustee shall not, without the prior written consent of the holders of 100% of the Bonds then outstanding, and, while the Credit Enhancement is in effect, without the prior written consent of the Credit Enhancer, 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 V. SECTION 309. FILING OF CONTINUATION STATEMENTS. The Trustee shall file continuation statements with respect to any financing statement filed with respect to the Trust Estate pursuant to Section 2.3(1) of the Financing Agreement. To the extent possible under applicable law, as in effect in the jurisdiction in which the Trust Estate is located, the -32- Trustee 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, all paid solely from the Trust Estate. SECTION 310. REPORTS. The Trustee shall, with the consent of the Issuer, 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 311. 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 direct control, it will neither make nor cause to be made any investment or other use of amounts in the funds created hereunder 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 as directed by the Issuer. 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) Subject to the provisions of Article VII, the Trustee covenants for the benefit of the Bondholders to enforce all obligations of the Borrower under this Indenture and to seek correction of any violation within a reasonable period after a Responsible Officer has actual knowledge of any such violation of this Indenture or the Financing Agreement; provided, however that any provision contained in this Indenture or the Financing Agreement which requires the Borrower or to take any action necessary to preserve the tax status of the Bonds (or prohibits the Borrower or 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 direct control) 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 direct control), 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. -33- (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. (e) The Issuer hereby covenants to cause the Trustee to calculate and rebate to the federal government, in accordance with the Regulations, excess investment earnings to the extent required by section 148(f) of the Code. The Trustee hereby agrees to cause such calculations to be made, and to demand in writing from the Borrower any amounts required to be rebated to the federal government pursuant to Section 404. Any fees or expenses incurred by the Trustee or the Issuer under or pursuant to this Section 311(e) or Section 404 shall be billed to and paid by the Borrower. In order to provide for the administration of this Section 311(e) and Section 404, the Trustee may provide for the employment of independent attorneys (including Bond Counsel), accountants and consultants compensated on such reasonable basis as the Trustee may deem appropriate, and the Issuer and the Trustee may rely conclusively upon and shall be fully protected from all liability in relying upon the opinions, calculations, determinations, directions and advice of such attorneys, accountants and consultants employed by the Trustee hereunder. (f) The Issuer shall assure that, from the proceeds of the Bonds received from the original purchaser thereof on the Original Issue Date and investment earnings thereon, an amount not in excess of two percent (2%) of the face amount of the Bonds shall be used to pay for, or provide for the payment of Costs of Issuance. For this purpose, if the fees of such original purchaser are retained as a discount on the purchase of the Bonds, such retention shall be deemed to be an expenditure of proceeds of the Bonds for said fees. (g) The Issuer shall take no action nor permit nor suffer any action to be taken if the result of the same would be to cause the Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the Code. (h) No portion of the proceeds of the Bonds shall be used to provide any airplane, skybox or other private luxury box, health club facility, facility primarily used for gambling, or store the principal business of which is the sale of alcoholic beverages for consumption off premises. No portion of the proceeds of the Bonds shall be used for an office unless the office is located on the premises of the facilities constituting the Project and unless not more than a de minimus amount of the functions to be performed at such office is not related to the day-to-day operations of the Project. SECTION 312. I SSUER'S OBLIGATION LIMITED. The obligations of the Issuer hereunder shall be limited as provided in Section 205 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 -34- under this Indenture, the Bonds, the Financing Agreement or any other document, nor as a result of the 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 Issuer. 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 this Indenture and the Financing 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 313. 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 314. 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 principal corporate 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 and subject to such reasonable regulations as to time, place and manner, as the Trustee may impose. -35- ARTICLE IV FUNDS SECTION 401. GENERAL RECEIPTS FUND. There is hereby created and established with the Trustee a special fund to be designated the "General Receipts Fund". There are hereby established and created within the General Receipts Fund two (2) separate accounts, designated the "Credit Enhancement Account," and the "Receipts Account." All proceeds of draws under the Credit Enhancement shall be deposited in the Credit Enhancement Account. No other moneys shall be deposited in the Credit Enhancement Account. There shall be deposited into the Receipts Account (i) all income, revenue, proceeds and other amounts received from or in connection with the GNMA Security; (ii) all earnings and gains from the investment of moneys held in the funds and accounts created hereunder, accruing after the acquisition of the GNMA Security by the Trustee and except as otherwise provided in Section 407 with respect to the Reserve Fund; and (iii) any other amounts received by the Trustee other than proceeds of draws on the Credit Enhancement which are subject to the lien and pledge of this Indenture. The GNMA Security shall, upon its acquisition, be held for the account of the General Receipts 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. The Trustee shall give written notice on the 17th day of any month to GNMA of the failure of the Lender to make any payment on the GNMA Security by the 17th day of such month (or the next succeeding Business Day if the 17th day is not a Business Day) and demand payment under the terms of GNMA's guaranty thereof. Except as provided in this Section 401 and Section 502, moneys in the General Receipts Fund shall be used solely for the payment of the principal of, the premium, if any, and interest on the Bonds as the same shall become due, whether at maturity or upon redemption or acceleration or otherwise. In making such payments, the Trustee shall (a) use amounts drawn by the Trustee under the Credit Enhancement, if any; and (b) then use Available Moneys held hereunder, other than proceeds of a draw under the Credit Enhancement. Monies in the General Receipts Fund shall be applied in the following manner and order of priority: (a) On each Interest Payment Date, Redemption Date or purchase date (under Section 901 or 902 hereof, the Trustee shall withdraw from the Credit Enhancement Account an amount equal to the amount of principal and/or interest, or purchase price (to the extent provided in Section 901 and 902 hereof), due on the Bonds on such date, and shall cause such amount to be applied to the payment of such interest and principal, or purchase price (to the extent not paid with the proceeds of the remarketing of the Bonds pursuant to Section 903 hereof), so due. When such payment is made from the Credit Enhancement Account, (i) on each Interest Payment Date the Trustee shall withdraw from the Receipts Account or (ii) on each Redemption Date the Trustee shall withdraw from the Redemption Fund (or in either case, to the extent of insufficient funds therein, the Debt Service Reserve -36- Fund), the amount necessary to fully reimburse the Credit Enhancement Provider under the Reimbursement Agreement, and shall pay such amount to the Credit Enhancement Provider. Should the amount in the Credit Enhancement Account be inadequate to pay the amount due on the Bonds, the Trustee shall apply Available Amounts in the Receipts Account if any, and then Available Amounts from the Debt Service Reserve Fund, for such purpose. (b) Provided that the amounts specified in subparagraph (a) above have been paid in full, on each Interest Payment Date, the Trustee shall withdraw from the Receipts Account and deposit in the Redemption Fund an amount equal to principal components of the payments on the Mortgage Loan and the GNMA received by the Trustee. (c) Prior to the Conversion Date, provided that the amounts specified in subparagraphs (a) and (b) above have been paid in full, on each Interest Payment Date, the Trustee shall withdraw from the-Receipts Account and deposit in the Debt Service Reserve Fund an amount, not to exceed the amount then on deposit in the Receipts Account, equal to (i) $9,258.33 plus (ii) the amount, if any, equal to the difference between $9,258.33 and the actual amount transferred from the Receipts Account to the Debt Service Reserve Fund on each prior Interest Payment Date; provided that no such transfer need be made to the Debt Service Reserve Fund under this clause (c) if the amount on deposit in the Debt Service Reserve Fund is equal to (i) prior to the Conversion Date, 3% of the principal amount of the Bonds then Outstanding, or (ii) after the Conversion Date, the then Debt Service Reserve Fund Requirement. (d) Provided that the amounts specified in subparagraphs (a), (b) and (c) above have been paid in full, on each Interest Payment Date, the Trustee shall withdraw from the Receipts Account (excluding amounts on deposit therein representing principal payments on the GNMA Security) such amount equal to the Letter of Credit Fee and pay such amount to the Credit Enhancement Provider. (e) Provided that the amounts specified in subparagraphs (a), (b), (c) and (d) above have been paid in full, on each Interest Payment Date, (i) the Trustee shall first withdraw from the Receipts Account such amount, if any, as shall be necessary to pay any obligations under the Reimbursement Agreement not theretofore paid and shall pay such amount to the Credit Enhancement Provider, only at the written direction of the Credit Enhancement Provider, and (ii) second, the Trustee shall withdraw from the Receipts Account such amount, if any, as shall be necessary to pay the Trustee's fees, Issuer Fee, fees of the Remarketing Agent, if any, and the Tender Agent, if any, and any other fees then due pursuant to this Indenture, and shall apply such amount to pay such fees, provided that, in each case, with the consent of the Credit Enhancement Provider, if any, moneys shall be paid to the Borrower to reimburse the Borrower for amounts paid by the Borrower which would otherwise be payable hereunder. (f) Prior to the Conversion Date, provided the amounts specified in subparagraphs (a) through (e) above have been paid in full, on each Interest Payment Date, the Trustee shall withdraw from the Receipts Account all amounts on deposit -37- therein and transfer. such amount to the Lender to be applied first, to the establishment of an operating reserve for the Project and then to the payment of the next succeeding payment due and payable on the Note. (g) Subsequent to the Conversion Date, on each Interest Payment Date, any amounts left in the Receipts Account after meeting the requirements of subparagraphs (a) through (e) above shall be withdrawn by the Trustee and transferred to the Lender to be applied to the payment of the next succeeding payment due and payable on the Note. Provided that any rebate requirements to the United States Treasury are first satisfied, any amounts remaining in the General Receipts Fund, the Project Fund, the Redemption Fund or the Debt Service Reserve Fund after payment in full of the principal and interest on the Bonds shall be applied to pay (a) to the Credit Enhancement Provider any amounts certified by the Credit Enhancement Provider to be due and unpaid under the Reimbursement Agreement, (b) all other amounts required to be paid under this Indenture or the Agreement, and (c) to the Borrower the balance upon the expiration or sooner cancellation or termination of the term of the Agreement as provided in the Agreement. With respect to amounts required to be paid under the Reimbursement Agreement, remaining amounts in the General Receipts Fund shall be paid to the Credit Enhancement Provider or its assigns up to an amount equal to the amount set forth in a written notice to the Trustee from the Credit Enhancement Provider stating the amount owing to the Credit Enhancement Provider under the Reimbursement Agreement. Amounts in the Receipts Account shall be withdrawn therefrom at any time that the amounts therein and amounts in the Redemption Fund and the Debt Service Reserve Fund are sufficient to pay the principal of and interest on all Bonds that remain Outstanding on such date and any fees and expenses due hereunder, and such amounts in the Receipts Account and the Debt Service Reserve Fund, after the payment of such fees and expenses, shall be deposited in the Redemption Fund and applied to the redemption of Bonds. SECTION 402. PROJECT FUND. (a) There is hereby created and established with the Trustee a special fund to be designated the "Project Fund" and within such Project Fund an "Acquisition Account", a "Project Costs Account" and a "Costs of Issuance Account." $ of the proceeds of the Bonds shall be delivered to the Trustee for deposit into the Acquisition Account of the Project Fund, $ of the proceeds of the Bonds shall be deposited in the Project Costs Account of the Project Fund, and $ of the proceeds of the Bonds shall be deposited in the Costs of Issuance Account of the Project Fund. (b) Moneys on deposit in the Cost of Issuance Account of the Project Fund shall be applied to pay Costs of Issuance. The Trustee shall disburse amounts from the Cost of Issuance Account of the Project Fund upon submission of a written request from a duly authorized officer or agent of the Issuer to the Trustee stating that the amount indicated thereon is due and owing, has not been the subject of another written request which has been paid, and is a proper cost of issuing the Bonds or implementing the financing for the Project. Interest earnings on amounts on deposit in the Cost of Issuance Account of the Project Fund shall remain in such Account. Any moneys remaining in the Cost of Issuance -38- Account of the Project on the 180th day following the Original Issue Date shall be transferred to the Borrower. (c) Amounts shall be deposited in the Acquisition Account of the Project Fund as provided in subsection (a) of this Section and shall be applied as provided in subsections (i) through (iv) of this Section; provided that no amounts shall be transferred or disbursed from the Acquisition Account of the Project Fund until the Trustee shall have received notification from the Prior Trustee to the effect that the liability of the Issuer with respect to the Prior Bonds has been discharged in accordance with the provisions of the Prior Indenture. (i) The Trustee shall deposit into the Acquisition Account of the Project Fund the proceeds of the Bonds in the amount of $ and, $ paid to the Trustee for deposit into the Acquisition Account of the Project Fund by the Prior Trustee on the Original Issue Date from amounts held in the Fund under the Prior Indenture. (ii) On the date on which the Trustee acquires the GNMA Security, the Trustee shall (A) confirm that the aggregate principal amount of the GNMA Security is $10,586,300 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 8.0% per annum and matures on October 15, 2032; 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 Account of the Project Fund as follows: (I) the Trustee shall transfer to the Receipts Account of the General Receipts Fund an amount sufficient to provide for the extraordinary redemption of the Bonds in a principal amount equal to the difference, if any, between the principal amount of the GNMA Security, as delivered, and the original aggregate principal amount of the Bonds; (II) the Trustee shall acquire the GNMA Security from the Lender for the account of the Issuer and the Credit Enhancement Provider 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; and (III) the Trustee shall transfer to the Receipts Account of the General Receipts Fund any remaining balance in the Acquisition Account of the Project Fund. (iii) If, on the first Business Day following June 1, 1994, the Trustee has not yet acquired the GNMA Security, the Trustee shall transfer to the Receipts Account of the General Receipts Fund all amounts on deposit in the Acquisition Account of the Project Fund for application to the extraordinary redemption of Bonds on June 15, 1994 pursuant to Section 213(b)(v)(C) of this Indenture and shall as soon as practicable give notice of such redemption to the holders of such Bonds; provided, however, that such transfer and such redemption shall be delayed one or more times -39- but not to dates later than June 1, 1995 and June 15, 1995, respectively, if the Trustee shall have received a timely written request from the Borrower or the Lender for such delay accompanied by (v) the consent of the Credit Enhancement Provider, if such dates are to be extended beyond August 1, 1994 and August 15, 1994, respectively; (w) a cash flow projection acceptable to the Rating Agency (evidence of such acceptance shall be in writing) demonstrating that (A) the sum of (I) the amount in the Acquisition Account of the Project Fund, (II) the investment earnings to accrue on the amounts held in the Acquisition Account of the Project Fund during the period ending 30 days after the end of any period of delay requested, and (III) any additional sums paid to the Trustee by or on behalf of the Borrower or the Lender (including amounts necessary to cover any "lag" and any reinvestment risk) for deposit into the Acquisition Account of the Project Fund or Receipts Account of the General Receipts Fund (accompanied by an opinion of Bond Counsel or bankruptcy counsel acceptable to the Trustee to the effect that such sums are not subject to the provisions of Sections 362(a) and 547 of the Federal Bankruptcy Code) will be at least equal to the debt service on the Bonds (including the redemption price of the Bonds) through the date which is 30 days after the end of any such extension period (assuming redemption of the Bonds in full on the 30th day after the end of such extension period) plus accrued and unpaid fees and expenses of the Trustee plus $5,000, and (B) assuming that the GNMA Security is delivered on the last day of such extension period, the sum of the amounts listed in (I), (II) and (III) of (A) above, plus the regularly scheduled payments on the GNMA Security payable on or before the maturity date of the Bonds will be sufficient to pay the principal (including regularly scheduled mandatory sinking fund redemptions) and interest on the Bonds at the times and in the amounts set forth in this Indenture; (x) evidence satisfactory to the Trustee that any GNMA commitment will not expire prior to the last day of such extension period; (y) arrangements satisfactory to the Trustee for the making of the investments contemplated by the cash flow projection, and (z) receipt of written confirmation of the rating then in effect for the Bonds from the Rating Agency. (iv) If, on an Interest Payment Date, the Trustee has not yet acquired the GNMA Security and the transfer of all moneys in the Acquisition Account of the Project Fund to the Receipts Account of the General Receipts Fund is not then required to be made in accordance with Section (iii) above, the Trustee shall transfer from the Acquisition Account of the Project Fund to the Receipts Account of the General Receipts Fund an amount equal to debt service on the Bonds to become due and payable on such Interest Payment Date and an amount equal to the accrued unpaid fees and expenses of the Trustee. (v) The Trustee represents that prior to the acquisition of the GNMA Security, it will have entered into a custody agreement with respect to the GNMA securities with a participant (the "Participant") of Participants Trust Co. ("PTC") and that it will have received assurances from the Participant and/or PTC prior to the acquisition of the GNMA that: (A) acting on behalf of the Trustee, the Participant has established a limited purpose account with PTC for the Indenture called the "Limited Purpose Account"; (B) the Participant has delivered 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 -40- Participant; (C) that PTC has delivered a certificate to the Participant acknowledging that PTC will not charge the specified Limited Purpose Account while the instruction remains in effect (with exceptions only for mistake or to secure and repay any advance of principal and interest made by PTC); (D) the Participant has received written evidence that PTC has made an appropriate entry in its records of the transfer of such book-entry securities to the Participant's account; and (E) the GNMA Security will be transferred and received into the Limited Purpose Account free of any payment obligation. (d) Amounts on deposit in the Project Costs Account of the Project Fund shall be paid to the Borrower upon receipt by the Trustee of certificate of the Borrower to the effect that the amount in such account will be used to reimburse the Borrower for Qualified Project Costs not theretofore reimbursed from the proceeds of the Prior Bonds, and such receipt by the Borrower will not otherwise result in any breach of any representation or warranty of the Borrower in any Collateral Documents. SECTION 403. DEBT SERVICE RESERVE FUND. There is hereby created and established with the Trustee a special fund to be designated the "Debt Service Reserve Fund." Deposits shall be made to the Debt Service Reserve Fund as required pursuant to Sections 401 and 405 hereof. Amounts on deposit in the Debt Service Reserve Fund shall be withdrawn and applied, to the extent that moneys in the General Receipts Fund are not available therefor pursuant to this Indenture, to pay principal of and interest on Outstanding Bonds on any Interest Payment Date, Maturity Date or Redemption Date, or to pay the obligations of the Borrower under the Reimbursement Agreement, to the extent necessary to satisfy any such deficiency. If, on any Interest Payment Date or date of redemption of Bonds, the amount in the Debt Service Reserve Fund exceeds the Debt Service Reserve Fund Requirement, the Trustee shall withdraw from the Debt Service Reserve Fund the amount of any excess therein over the Debt Service Reserve Fund Requirement as of the date of such withdrawal and deposit the moneys withdrawn into the Receipts Account. Amounts in the Debt Service Reserve Fund shall be withdrawn therefrom at any time as the amounts therein, the amounts in the Receipts Account and the amounts in the Redemption Fund are sufficient to pay the principal of and interest on all Bonds that remain Outstanding on such date and any fees and expenses due hereunder, and such amounts in the Receipts Account and the Debt Service Reserve Fund, after the payment of such fees and expenses, shall be deposited in the Redemption Fund and applied to the redemption of the Bonds. In the event that the Bonds are converted to a Fix'ed Interest Rate and there is no Credit Enhancement, moneys on deposit in the Debt Service Reserve Fund in excess of amounts required by the Rating Agency to be on deposit therein shall, at the direction of the Credit Enhancement Provider, be used on the Conversion Date to pay the obligations of the Borrower to the Credit Enhancement Provider. -41 - SECTION 404. REBATE FUND. The purpose of the Rebate Fund is to facilitate compliance with section 148(f) of the Code (the "Rebate Provision"). The requirements of this Section 404 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 the Trustee is furnished with an opinion of Bond Counsel or other satisfactory evidence that the Regulations contain an applicable exception. Promptly upon the close of each Bond Year and also upon the retirement of the Bonds, the Trustee shall provide the Borrower and the Rebate Analyst with a statement of earnings on Funds and Accounts with respect to the Bonds held under this Indenture during any period not covered by a prior statement, and (unless all of the Bonds have heretofore been retired) a final statement or a supplement thereto covering the period ending on October 20, 2032. 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 Rebate Analyst shall reasonably require. The Trustee shall promptly transfer to the Rebate Fund each amount required to be deposited therein pursuant to the Code, from revenues which have been deposited into the Receipt Account of the General Receipts 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 404, Section 311(e) and section 148(f) of the Code, and the Trustee shall engage a Rebate Analyst, as required by Section 311(e), as may be necessary in connection with such responsibilities. For purposes of the computation of the Rebate Amount required under Section 311(e), the Trustee shall make available to the Borrower, the Issuer and the Rebate Analyst during normal business hours, and subject to such other reasonable regulations as the Trustee may impose, all information in the Trustee's control which is necessary to such computations. The Trustee may conclusively rely upon and shall be fully protected from all liability in relying upon the calculations and determinations of the Rebate Analyst. Notwithstanding the foregoing, the Trustee shall not be required to take any action which in its judgment diminishes the security of the Bondholders if the Trustee obtains an opinion of Bond Counsel to the effect that failing to take such action would not adversely affect the exclusion of interest on the Bonds from federal income taxation. SECTION 405. DEPOSIT OF BOND PROCEEDS, APPLICATION OF BORROWER FUNDS. The proceeds from the sale of the Bonds shall be deposited by the Trustee as follows: $____ in the Project Cost Account of the Project Fund, $ in the Acquisition Account of the Project Fund, $ to the Costs of Issuance Account of the Project Fund, and $ to -42- The amounts ($_ ) received by the Trustee from the Prior Trustee representing a portion of the amount on deposit in the fund established for the Prior Bonds shall be deposited by the Trustee in the Debt Service Reserve Fund. Moneys delivered by the Borrower in the amount of $ in connection with the issuance and delivery of the Bonds shall be deposited by the Trustee as follows: (a) to the Debt Service Reserve Fund, an amount equal to $ ; and (b) to the Costs of Issuance Account of the Project Fund, an amount equal to $------- SECTION 406. REDEMPTION FUND. (a) There is hereby created and established with the Trustee a special fund to be designated the "Redemption Fund." The Redemption Fund will be funded from transfers from the Receipts Account of the General Receipts Fund pursuant to clause (b) of Section 401, and from other transfers required under the provisions of this Indenture. (b) Whenever, as a result of transfers pursuant to clause (b) of Section 401, the amount on deposit in the Redemption Fund is equal to or greater than $25,000 ($100,000 from and after , or $5,000 from and after the Conversion Date), the Trustee shall redeem Bonds as required by Section 213(b)(vi). In addition to the foregoing, the Trustee shall redeem the Bonds on any date of redemption of the Bonds as required pursuant to Section 213(b)(i). (c) If any redemption occurs prior to the Conversion Date pursuant to the preceding paragraph (b), following receipt of the proceeds of a draw on the Credit Enhancement to pay the redemption price of the Bonds on the Redemption Date, the Trustee shall remit amounts in the Redemption Fund equal to the amount of such draw to the Credit Enhancement Provider. If any such redemption occurs after the Conversion Date, the Trustee shall apply amounts on deposit in the Redemption Fund to pay the redemption price of the Bonds. SECTION 407. INVESTMENTS. Moneys held as part of the Project Fund, the General Receipts Fund, the Redemption Fund and the Debt Service Reserve Fund shall be invested and reinvested in Permitted Investments (subject to the limitations set forth in the Agreement); provided, however, that draws on the Credit Enhancement if expected to be applied as set forth herein within five (5) days must be held uninvested or if expected to be held for five (5) days or more must be invested in Government Obligations. Any Permitted Investments shall be held by or under the control of the Trustee. All interest accruing thereon and any income realized from Permitted Investments shall be deposited into the Receipts Account of the General Receipts Fund; provided that investment income on amounts in the Debt Service Reserve Fund shall be deposited into the Debt Service Reserve Fund until the amount on deposit therein is equal to the Debt Service Reserve Fund Requirement. The Trustee is authorized to cause to be sold and reduced to cash a sufficient amount of Permitted Investments whenever the cash balance is or will be insufficient to make a requested or required disbursement. The Trustee shall not be accountable for any depreciation in the value of any Permitted Investment or for any loss resulting from such sale. All Permitted Investments shall be made by the Trustee, at the written direction of the -43- Borrower, subject to the limitations contained herein. If no written direction is provided to the Trustee, the Trustee will invest such monies in investments described in clause (iv) of Permitted Investments, subject to the limitations contained herein (including, without limitation, the requirements contained in the proviso to the first sentence of this paragraph). In computing the amount in any Fund or Account held by the Trustee under the provisions of this Indenture, Permitted Investments if purchased at par shall be valued at principal cost plus accrued interest, or, if purchased at other than par, at principal cost plus amortized discount or less amortized premium (amortization to be on a straight-line basis to the date of stated maturity without regard to redemptions or repayments of principal which may occur prior thereto) plus accrued interest. Notwithstanding the foregoing, if a Permitted Investment is scheduled to mature, or if it can be redeemed or otherwise reduced to cash at the option of the Trustee, within 185 days from the date of valuation, it shall be valued at principal cost plus accrued interest. SECTION 408. RECORDS. During any period in which a Credit Enhancement is in effect, the Trustee, with respect to the Project Fund, the Redemption Fund the General Receipts Fund, and the Debt Service Reserve Fund shall cause to be kept and maintained adequate records pertaining thereto and all disbursements therefrom. During any period in which a Credit Enhancement is in effect, the Trustee shall file at least monthly an accounting thereof with the Issuer, the Credit Enhancement Provider and the Borrower, together with a certificate certifying as to the Trustee's possession of the GNMA Security; provided, however, if no Credit Enhancement is in effect, such accounting shall be filed at least annually. Subject to reasonable notice and such other reasonable regulations as the Trustee may impose, the Issuer, the Borrower, the Credit Enhancement Provider and their duly authorized agents shall have the right at all reasonable times to enter the offices of the Trustee to inspect and audit the books of the Trustee as they relate to the duties and trusts imposed under this Indenture, and the Issuer, the Borrower and the Credit Enhancement Provider and their duly authorized agents may make copies of any such records at their own expense. 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 funds sufficient to pay such Bonds shall have been made available to the Trustee for the benefit of the holder thereof and shall have remained unclaimed for two years after such principal or interest has become due and payable, such funds shall be paid to the Issuer; and all liability of the Issuer to the holder thereof for the payment of such Bond shall forthwith cease, determine and be completely discharged; provided, however, that the Trustee, before being required to make any such payment to the Issuer, may cause to be published once in a financial newspaper or journal of general circulation in New York, New York, notice that such moneys remain unclaimed and that, after a date specified 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 provisions of law applicable to the Trustee or to such funds providing other requirements for disposition of unclaimed property. -44- ARTICLE V DISCHARGE OF LIEN SECTION 501. DISCHARGE OF LIEN AND SECURITY INTEREST. Upon payment in full of the Bonds, this Indenture and the pledge and assignment hereunder shall cease, and thereupon the Trustee, upon receipt by the Trustee of an Opinion of Counsel stating that all conditions precedent to the satisfaction and discharge of this Indenture have been complied with, shall cancel and discharge this Indenture and the pledge and assignment hereunder, and shall execute and deliver to the Issuer and the Borrower such instruments in writing as shall be required to cancel and discharge this Indenture and the pledge and assignment hereunder and reconvey to the Issuer and the Borrower the Trust Estate, and assign and deliver to the Issuer and the Borrower so much of the Trust Estate as may be in its possession or subject to its control, except for moneys and Government Obligations held in the General Receipts Fund for the purpose of paying Bonds, provided, however, that in the event that the obligations of the Borrower to the Credit Enhancement Provider pursuant to the Reimbursement Agreement have not been fully satisfied, paid and discharged at the time this Indenture is discharged, the Trustee, upon receipt from the Credit Enhancement Provider of written notice to such effect, shall deliver such Trust Estate to the Credit Enhancement Provider, subject to and effective upon the cancellation of this Indenture in accordance with the foregoing provisions; and provided, further, that the Trustee agrees to take all action necessary, as promptly as possible after the payment in full of all the Bonds and reimbursement of any amounts paid under the GNMA Security (which amounts have not been reimbursed by the Borrower), and reimbursement of the Credit Enhancement Provider of all amounts paid by it for principal and interest on the Bonds, and payment of all other amounts owed to the Credit Enhancement Provider under the Reimbursement Agreement, to forgive or cause to be forgiven the outstanding balance of the Loan. Notwithstanding the foregoing, the cancellation and discharge of this Indenture shall not (i) reconvey the Trust Estate to the Borrower to the extent funds are owed to the Issuer, or (ii) terminate the powers and rights granted to the Trustee with respect to the payment, transfer and exchange of the Bonds; and provided, further, that the Reserved Rights of the Issuer, the rights of the Issuer to enforce those covenants of the Borrower in the Agreement and this Indenture related to applicable federal tax law, and the rights of the Issuer and the Trustee to indemnity and payment of all reasonable fees and expenses shall survive discharge of this Indenture. SECTION 502. PROVISION FOR PAYMENT OF BONDS. Subsequent to the Conversion Date, the Bonds shall be deemed paid within the meaning of Section 501 hereof if. (a) there shall have been irrevocably deposited with the Trustee (i) sufficient Available Moneys, or (ii) Government Obligations, which are not subject to early redemption and which are purchased with Available Moneys, of such maturities and interest payment dates and bearing such interest as will, without further investment or reinvestment of either the principal amount thereof or the interest earnings thereon (said earnings to be held in trust also), be sufficient together with any moneys -45- referred to in subsection (i) above for the payment on their respective maturity dates, or redemption dates prior to maturity, of the principal thereof and interest to accrue thereon to such maturity or redemption dates; provided, however, that the Trustee shall be provided an opinion from bankruptcy counsel that such Available Moneys or Government Obligations purchased with Available Moneys are not subject to avoidance under Section 547 or 544, and, as such, are not recoverable under Section 550(a), of the federal bankruptcy laws should there be a petition by or against the Borrower, any general partner of the Borrower or the Issuer under any bankruptcy act; (b) there shall have been paid all fees and expenses of the Trustee and the Issuer due or to become due hereunder or there shall be irrevocably deposited with the Trustee sufficient additional moneys to make said payments; and (c) if any Bonds are to be redeemed on any date prior to their maturity, the Trustee shall have received in form satisfactory to it instructions to redeem such Bonds on such date, and either evidence satisfactory to the Trustee that all redemption notices required by this Indenture have been given or irrevocable power authorizing the Trustee to give such redemption notices. Limitations elsewhere specified herein regarding the investment of moneys held by the Trustee shall not be construed to prevent the depositing and holding of the obligations described in the preceding subparagraph (a)(ii) for the purpose of defeasing the lien of this Indenture as to Bonds which have not yet become due and payable. In addition, all moneys so deposited with the Trustee as provided in this Section 502 may also be invested and reinvested, at the direction of the Borrower, in Government Obligations, maturing in the amounts and times as hereinbefore set forth, and all income from all Government Obligations in the hands of the Trustee pursuant to this Section 502 which has been identified by an independent certified public accountant as not required for the payment of the Bonds and interest thereon with respect to which such moneys shall have been so deposited shall be deposited with the Trustee as and when realized and collected for use and application as are other moneys deposited with the Trustee. SECTION 503. DISCHARGE OF THIS INDENTURE. Notwithstanding the fact that the lien of this Indenture upon the Trust Estate may have been discharged and cancelled in accordance with Section 501, this Indenture and the rights granted and duties imposed hereby, to the extent not inconsistent with the fact that the lien upon the Trust Estate may have been discharged and cancelled, shall nevertheless continue and subsist after payment in full of the Bonds until the Trustee shall, subject to the rebate requirements of the Federal government, have returned to the Borrower, the Issuer or the Credit Enhancement Provider, as appropriate, all funds held by the Trustee in the General Receipts Fund, the Debt Service Reserve Fund, the Redemption Fund and the Project Fund. -46- ARTICLE VI DEFAULT PROVISIONS AND REMEDIES SECTION 601. EVENTS OF DEFAULT. Any one of the following shall constitute an Event of Default hereunder: (a) Default in the payment of any interest on any Bond (other than Pledged Bonds) when and as the same shall have become due. (b) Default in the payment of the principal of any Bond or purchase price in event of tender of any Bond (other than Pledged Bonds) when and as the same shall become due, whether at the stated maturity thereof or upon any Interest Payment Date. (c) Default in the observance or performance of any other of the covenants, agreements or conditions on the part of the Issuer included in this Indenture or the Agreement or in the Bonds (other than a Default set forth in Section 601(a) or (b) above), and the continuance thereof for a period of 30 days after receipt of written notice to the Issuer, the Credit Enhancement Provider and the Borrower given by the Trustee. SECTION 602. ACCELERATION; OTHER REMEDIES. By notice in writing sent to the Issuer, the Trustee shall, upon the occurrence of any Event of Default described in Section 601 hereof declare the principal of all Bonds then Outstanding (if not then due and payable) and the interest accrued to be due and payable immediately, and, upon said declaration, such principal and interest shall become and be immediately due and payable and the Trustee shall draw on the Credit Enhancement, if any, pursuant to Section 607(a)(iii) hereof. Upon the happening and continuance of an Event of Default, the Trustee in its own name and as trustee of an express trust, on behalf and for the benefit and protection of the holders of all Bonds and the Credit Enhancement Provider, may, and upon the direction of the Credit Enhancement Provider, and to the extent indemnified to its satisfaction from any liability or expense, shall, also proceed to protect and enforce any rights of the Trustee and, to the full extent that the holders of such Bonds themselves might do, the rights of such Bondholders under the laws of the State or under this Indenture by such of the following remedies as the Trustee shall deem most effectual to protect and enforce such rights: (1) by mandamus or other suit, action or proceeding at law or in equity, to enforce the payment of the principal of, premium, if any, or interest on the Bonds then Outstanding, or for the specific performance of any covenant or agreement contained herein or in the GNMA Security, or to require the Issuer to carry out any other covenant or agreement with Bondholders; (2) by pursuing any available remedies under the GNMA Security; and (3) by action or suit in equity, to enjoin any acts or things which may be unlawful or in violation of the rights of the holders of Bonds. -47- 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 under the GNMA Security, 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 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 603. RIGHT OF BONDHOLDERS AND THE CREDIT ENHANCEMENT PROVIDER TO DIRECT PROCEEDINGS. (a) Upon the occurrence of an Event of Default under Section 601 hereof, the Credit Enhancement Provider (provided the Credit Enhancement is in effect and the Credit Enhancement Provider has not dishonored a proper and conforming draw thereon or asserted the invalidity or unenforceability thereof), or otherwise subject to the provisions of subsection (b) hereof the Bondholders of not less than a majority of the principal amount of Bonds Outstanding, shall have the right, at any time, by an instrument or 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 for the appointment of a receiver or any other proceedings thereunder; provided that such direction shall not be otherwise than in accordance with the provisions of law and of this Indenture. Anything in this Indenture to the contrary notwithstanding, provided the Credit Enhancement is in effect and the Credit Enhancement Provider has not dishonored a proper and conforming drawing under the Credit Enhancement or asserted the invalidity or unenforceability of, or delivered notice of termination of, the Credit Enhancement, the Trustee shall not be permitted to accelerate or waive acceleration of the maturity of the Bonds or exercise or waive any other remedy due to any Event of Default hereunder without the prior written consent of the Credit Enhancement Provider, (b) Anything in this Indenture to the contrary notwithstanding, but subject to the rights, if any, of the Credit Enhancement Provider to direct proceedings as provided above, the holders of at least a majority in aggregate principal amount of Bonds then outstanding shall have the right at any time, by an instrument or instruments in writing executed and delivered to the Trustee, to direct the method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of this Indenture, or any other proceedings hereunder; provided that such direction shall not be otherwise than in accordance with the provisions of law and of this Indenture, and provided that the Trustee shall be indemnified to its satisfaction (except for actions required under Section 602). No Bondholder shall individually have the right to collect amounts available under, or otherwise realize on, the Credit Enhancement. (c) No Bondholder shall have the right to institute any proceeding for the enforcement of this Indenture unless such Bondholder has given the Trustee, the Issuer, the Credit Enhancement Provider and the Borrower written notice of an Event of Default, the holders of a majority in aggregate principal amount of the Bonds then outstanding shall -48- have requested the Trustee in writing to institute such proceeding, the Trustee shall have been afforded a reasonable opportunity to exercise its powers or to institute such proceeding, and there shall have been offered to the Trustee indemnity, where required, and the Trustee shall have thereafter failed or refused to exercise such powers or to institute such proceeding within a reasonable time. Nothing in this Indenture shall affect or impair any right of enforcement conferred on any Bondholder hereof by the Act to enforce (a) the payment of the principal of, and interest on, Bonds at and after the maturity thereof, or (b) the obligation of the Issuer to pay the principal of, and interest on, Bonds to such Bondholder at the time, place, from the source and in the manner as provided in this Indenture. SECTION 604. DISCONTINUANCE OF DEFAULT PROCEEDINGS. Prior to drawing upon the Credit Enhancement pursuant to Section 602 hereof, 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, the Credit Enhancement Provider and the Trustee shall be restored to their former positions and rights.hereunder, and all rights, remedies, powers, duties and obligations of the Issuer, the Trustee and the Credit Enhancement Provider shall continue as if no such proceedings had been taken, subject to the limits of any adverse determination. SECTION 605. WAIVER. To the extent not precluded by the Act, the Agreement or Section 601 hereof, the Trustee, upon notice to and with the prior written consent of the Credit Enhancement Provider, may waive any default or Event of Default hereunder, except for an Event of Default under Section 601(a) or (b) hereof, and its consequences, and rescind any declaration of acceleration of maturity of principal and shall do so upon the written request of the Credit Enhancement Provider; provided, however, that there shall be no such waiver or rescission unless the principal and interest on the Bonds in arrears, together with interest thereon (to the extent permitted by law) at the applicable rate or rates of interest borne by the Bonds and all fees and expenses of the Trustee, shall have been paid or provided for by the Borrower or the Credit Enhancement Provider. Unless (i) any Rating Agency then rating the Bonds is notified, (ii) Bondholders are advised by the Trustee that ratings on the Bonds may be reduced or withdrawn upon the occurrence of such waiver, and (iii) one hundred percent (100%) of the Bondholders otherwise approve, the Trustee may not waive any default or Event of Default hereunder unless the Credit Enhancement remains fully in effect in an amount equal to the aggregate principal amount of the Bonds then outstanding plus the Credit Enhancement Interest Requirement. SECTION 606. APPLICATION OF MONIES. Provided that amounts derived from drawings under the Credit Enhancement shall be applied solely to pay the principal of and interest on the Bonds and shall not be applied to pay any fees or expenses or advances of the Trustee or the Issuer, all moneys received by the Trustee pursuant to any action taken under this Article VI shall be deposited into the Receipts Account of the General Receipts Fund and applied to the payment of the unpaid fees and expenses of the Trustee, including expenses, liabilities and advances incurred in taking such action. The balance of such moneys, less such amounts as the Trustee shall determine may be needed for possible use in paying future fees and expenses and for the preservation and management of the Project, shall be deposited by the Trustee in the Receipts Accounts of the General Receipts Fund and applied as follows: -49- (a) Unless the principal on all Bonds shall have become or been declared due and payable, all such moneys shall be applied: First -- To the payment of all installments of interest then due on the Bonds and, if the amount available shall not be sufficient to pay in full any particular installment, then to the ratable payment of the amounts due on such installment, or to reimburse the Credit Enhancement Provider to the extent it has made such payments on the Bonds, and Second -- To the payment of the unpaid principal of any of the Bonds which shall have become due (other than Bonds called for redemption for payment of which moneys are held pursuant to the provisions of this Indenture), with interest on such Bonds from the respective dates upon which they became due (at the rate or rates borne by the Bonds, to the extent permitted by law) and, if the amount available shall not be sufficient to pay in full Bonds due on any particular date, together with such interest, then to the ratable payment of the amounts due on such date, or to reimburse the Credit Enhancement Provider to the extent it has made such payments on the Bonds. (b) If the principal of all the Bonds shall have become or been declared due and payable, all such moneys shall be applied to the payment of the principal and interest then due and unpaid upon the Bonds, without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Bond over any other Bond, ratably according to the amounts due respectively for principal and interest to the persons entitled thereto, or to reimburse the Credit Enhancement Provider to the extent it has made such payments on the Bonds. (c) If the principal on all the Bonds shall have been declared due and payable, and if such declaration shall thereafter have been rescinded under this Article, then, subject to paragraph (b) of this Section in the event that the principal of all the Bonds shall later become or be declared due and payable, the moneys shall be applied in accordance with paragraph (a) of this Section. Whenever moneys are to be applied pursuant to this Section 606, such moneys shall be applied at such times, and from time to time, as the Trustee shall determine, having due regard for the amount of such moneys available for application, the likelihood of additional moneys becoming available for such application in the future, and potential expenses relating to the exercise of any remedy or right conferred on the Trustee by the Indenture. Whenever the Trustee shall apply such moneys, it shall fix the date (which shall be an Interest Payment Date unless it shall deem another earlier date more suitable) upon which such application is to be made, and upon such date interest on the amounts of principal to be paid on such date shall cease to accrue. Notwithstanding anything to the contrary in this Section, in no event shall moneys derived from presentation of a draft on the Credit Enhancement be used to pay any fees or expenses of the Trustee or the Issuer, and such moneys shall only be applied by the Trustee to pay principal of and interest on the Bonds as provided in this Indenture. -50- SECTION 607. OBLIGATION OF TRUSTEE TO DRAW UNDER CREDIT ENHANCEMENT. (a) The Trustee shall draw on the Credit Enhancement for the benefit of the Bondholders, in accordance with its terms (or take such other steps as shall be necessary to realize funds thereunder) and to the extent permitted thereby, to receive moneys from the Credit Enhancement Provider on each Interest Payment Date, Redemption Date, Maturity Date and purchase date in the amounts and for the purposes specified in subparagraphs (i) through (iv) below. The Trustee shall cause such amounts to be applied to the purpose for which they were drawn when due on each of the events described: (i) On each Interest Payment Date, for the payment of the principal of and interest on the Bonds, in an amount calculated by the Trustee to be equal to the principal and interest due on the Bonds (other than Pledged Bonds) on such Interest Payment Date. (ii) On each Redemption Date of the Bonds (other than Pledged Bonds), whether by reason of optional redemption or mandatory redemption, for the payment of principal and interest on the redeemed Bonds (other than Pledged Bonds), in an amount calculated by the Trustee to be equal to the principal of and interest on the Bonds (other than the Pledged Bonds) to be redeemed; provided that in the event of a mandatory redemption of the Bonds the draw (and redemption) in any event shall occur prior to the fifth day next preceding the expiration of the Credit Enhancement. (iii) On the Maturity Date of the Bonds and on any date on which the Bonds have been accelerated pursuant to the provisions hereof (other than Pledged Bonds), for payment of principal of and accrued interest on the Bonds (other than Pledged Bonds), in an amount calculated by the Trustee to be equal to the principal of and accrued interest on the Bonds (other than Pledged Bonds) due on such date. (iv) On any date during the Weekly Variable Rate Period on which Bonds are subject to purchase on demand upon seven (7) days' notice by any Bondholder pursuant to Section 901 hereof, and on the Conversion Date, but, in each case, only to the extent remarketing proceeds are not available for the purchase of such Bonds, in an amount equal to the principal of and interest due on the Bonds so tendered. (b) All moneys received from draws on the Credit Enhancement shall be deposited in the Credit Enhancement Account of the General Receipts Fund pending their application by the Trustee. The Trustee shall transfer to the Tender Agent from the Credit Enhancement Account such moneys as are needed to pay the purchase price of Bonds to be purchased by the Tender Agent pursuant to Section 901 hereof. (c) The Trustee in its name shall enforce all rights of the Trustee and all obligations of the Credit Enhancement Provider (including, without limitation, the obligation of the Credit Enhancement Provider to honor drafts duly presented in accordance with the terms of the Credit Enhancement) under the Credit Enhancement for the benefit of the Bondholders. The Trustee shall not assign or transfer the Credit Enhancement except to any successor Trustee under this Indenture. -51 - SECTION 608. PAYMENTS BY BORROWER. If on any date on which the principal of and/or interest on any Bond becomes due, there shall not be moneys sufficient to pay such principal and/or interest due to a failure by the Credit Enhancement Provider to honor a draft drawn under the Credit Enhancement in accordance with the terms thereof, the Borrower shall deposit, upon receipt of notice of such deficiency, with the Trustee for deposit in the Receipts Account, but only as set forth in the Agreement, moneys in immediately available funds in an amount equal to the amount of the deficiency. SECTION 609. PRESERVATION OF SECURITY AND REMEDIES IF DRAW UNDER CREDIT ENHANCEMENT IS NOT PAID OR IS INSUFFICIENT, RIGHTS OF BONDHOLDERS. Subject always to the provisions of Section 606 hereof, upon the occurrence and during the continuance of an Event of Default, the Trustee may proceed to pursue any available remedy to enforce the payment of the principal of and interest on the Bonds then outstanding, including, without limitation, mandamus; further, upon the occurrence and during the continuance of any Event of Default then and in every case the Trustee may proceed, and upon the written request of the holders of not less than twenty-five percent (25%) of the aggregate principal amount of the Bonds then outstanding, to the extent indemnified to its satisfaction from any liability or expense, shall proceed, to protect and enforce its rights and the rights of the Bondholders under the Act and under this Indenture forthwith by such suits, actions or special proceedings in equity or at law, or by proceedings in the office of any board or officer having jurisdiction, whether for the specific performance of any covenant or agreement contained in this Indenture or the Agreement, or in aid of the execution of any power granted herein or in the Agreement or in the Act, or for the enforcement of any legal or equitable right or remedy, as the Trustee, being advised by counsel, shall deem most effectual to protect and enforce such rights or to perform any of its duties under this Indenture. Subject always to the provisions of Section 606 hereof, no remedy by the terms of this Indenture conferred upon or reserved to the Trustee (or 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 every other remedy given to the Trustee or to the Bondholders hereunder or now or hereafter existing by law. 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 Default hereunder, whether by the Trustee or by the Bondholders, shall extend to or shall affect any subsequent default or Event of Default or shall impair any rights or remedies consequent thereon. Upon the occurrence and during the continuation of an Event of Default, and upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee and of the Bondholders, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver or receivers of the purchase payments derived from the sale of the Project, together with such other powers as the court making such appointments shall confer. -52- SECTION 610. TRANSFER AND EXTENSION OF CREDIT ENHANCEMENT. If at any time during the term of the Credit Enhancement a successor Trustee shall be appointed and qualified under this Indenture and the Credit Enhancement is not transferable to the successor Trustee, the resigning Trustee shall request from the Credit Enhancement Provider a new Credit Enhancement identical to the prior Credit Enhancement but addressed to and running in favor of the successor Trustee for the benefit of the holders of the Bonds, and the resigning Trustee shall continue to serve as Trustee hereunder until such time as the new Credit Enhancement is delivered to the successor Trustee. If the resigning Trustee fails to make this request, the successor Trustee shall do so before accepting its appointment. Upon issuance of the new Credit Enhancement to the successor Trustee, the Credit Enhancement shall be returned and canceled, and the new Credit Enhancement shall thereafter be subject to all of the provisions hereunder relating to the prior Credit Enhancement, and shall be deemed for all purposes hereunder to be the Credit Enhancement. The Credit Enhancement shall be deposited with the Trustee, and the commitment relating to each succeeding extension of the Credit Enhancement shall be deposited with the Trustee not later than the Extension Date with respect to such Credit Enhancement. Upon request of any holder of the Bonds, the Trustee shall promptly furnish such holder with a copy of any commitment to extend or extension of the Credit Enhancement received by the Trustee. On or prior to each Extension Date the Trustee shall also receive an Opinion of Counsel for the Credit Enhancement Provider, in substantially the form of the Opinion of Counsel delivered to the Trustee upon the issuance of the initial Credit Enhancement. The Issuer hereby directs the Trustee to draw on the Credit Enhancement and redeem Bonds upon the failure of the Borrower to furnish the Trustee with a satisfactory commitment to extend the Credit Enhancement or an Alternate Credit Enhancement pursuant to Section 611 hereof and the Opinion of Counsel referred to in the preceding sentence on or prior to each Extension Date hereunder. A copy of any notice required hereunder shall also be given to the Rating Agency; provided, however, if the Borrower elects not to secure the Bonds with Credit Enhancement upon the Conversion Date pursuant to the provisions hereof, the Trustee shall not redeem the Bonds pursuant to the provisions of this Section 610. SECTION 611. ALTERNATE CREDIT ENHANCEMENT. The Borrower may at any time, but no later than an Extension Date, arrange for the deposit with the Trustee of an Alternate Credit Enhancement in substitution for the Credit Enhancement. The Alternate Credit Enhancement shall expire no earlier than the Credit Enhancement which it replaces, but may expire prior to the maturity of the Bonds. The rating on the Bonds to be in effect on and after the date of substitution of an Alternative Credit Enhancement shall be in the second highest rating category of the Rating Agency, or with the written consent of the Issuer, such lower rating category as is consented to by the Issuer. In connection with such substitution, the Trustee shall also receive (a) an Opinion of Counsel, in form and substance satisfactory to the Issuer and the Trustee, to the Alternate Credit Enhancement Provider issuing the Alternate Credit Enhancement relating to the due authorization and issuance of the Alternate Credit Enhancement, (b) an opinion of the Bond Counsel to the effect that the substitution of such Alternate Credit Enhancement will not adversely affect the exclusion from gross income of the interest on the Bonds for federal income tax purposes, (c) written evidence from the Rating Agency, if the Bonds are then rated by the Rating Agency, that such Rating Agency has reviewed such Alternate Credit Enhancement and that the substitution of such Alternate Credit Enhancement for the Credit Enhancement then in -53- effect will not result in a reduction or withdrawal of the rating on the Bonds then in effect, and (d) the written approval of the Alternate Credit Enhancement by the Issuer. A copy of any notice required hereunder shall also be given to the Rating Agency. Notice shall be provided to each Bondholder of the substitution or replacement of such Alternate Credit Enhancement for the Credit Enhancement then in effect. SECTION 612. RIGHTS OF THE CREDIT ENHANCEMENT PROVIDER. Notwithstanding anything contained herein to the contrary, all rights of the Credit Enhancement Provider under this Indenture to receive notices hereunder or to consent to extensions, remedies, waivers, actions and amendments hereunder shall cease, terminate and become null and void (a) if the Credit Enhancement Provider fails to meet its obligation under the Credit Enhancement when due, following the presentation of a conforming draft thereunder, (b) if the Credit Enhancement Provider otherwise defaults or refuses to perform its other obligations in conformity with the Credit Enhancement and such default shall continue beyond any applicable grace period after written notice from the Trustee to the Credit Enhancement Provider, or (c) if the Credit Enhancement is no longer in effect or an Alternate Credit Enhancement Provider is substituted therefor; provided, however, that the repayment of funds due to the Credit Enhancement Provider pursuant to the terms hereof and, if subparagraph (c) above is applicable, any approval rights of the Credit Enhancement Provider contained herein so long as any amounts are due and payable to the Credit Enhancement Provider shall continue in full force and effect. -54- ARTICLE VII THE TRUSTEE AND REMARKETING AGENT SECTION 701. APPOINTMENT OF TRUSTEE. The Trustee is hereby appointed, and does hereby agree to act in such capacity and to perform the duties of the Trustee under the Agreement and this Indenture, but only upon and subject to the following express terms and conditions (and no implied covenants or other obligations shall be read into this Indenture against the Trustee): (a) The Trustee may execute any of its trusts or powers hereunder and perform any of its duties by or through attorneys, agents or receivers, and shall be entitled to advice of counsel concerning all matters of trust hereunder and the duties hereunder, and may in all cases pay such reasonable compensation and shall be entitled to reimbursement for all such compensation paid to such attorneys, agents and receivers. The Trustee may act upon the opinion or advice of counsel, accountants, engineers, surveyors or such other professionals as the Trustee deems necessary and selected by it in the exercise of reasonable care or, if the same are selected by the Issuer, approved by the Trustee in the exercise of reasonable care. (b) Except as otherwise specifically provided elsewhere in this Indenture, the Trustee shall not be responsible for any recital herein, in the Financing Documents, the Regulatory Agreement or in the Bonds (other than in the certificates of authentication appearing thereon), or for the recording, rerecording, filing or refiling of this Indenture, or for insuring the Trust Estate or the Project or collecting any insurance moneys, or for the validity of this Indenture, the Financing Documents, the Regulatory Agreement or of any supplements thereto or instruments of further assurance, or-for the sufficiency or priority of the security for the Bonds issued hereunder or intended to be secured hereby, or for the value or title of the Project or otherwise as to the maintenance of the Trust Estate, but the Trustee may require of the Issuer or the Borrower full information and advice as to the performance of the covenants, conditions and agreements aforesaid as to the condition of the Project. Except as otherwise provided in Section 602 hereof, the Trustee shall have no obligation to perform any of the duties of the Issuer under the Agreement, and the Trustee shall not be liable for any loss suffered in connection with any investment of funds made by it in accordance with Section 407 hereof. No provision of this Indenture, the Financing Documents, or the Regulatory Agreement 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 or in the exercise of any of its rights or powers hereunder, or under the Financing Documents or Regulatory Agreement. Without limiting the generality of the foregoing, the Trustee shall not be responsible for the validity or sufficiency of the GNMA Security, including the sufficiency of payments on the GNMA Security to pay debt service on the Bonds. (c) The Trustee shall not be accountable for the use of any Bonds authenticated or delivered hereunder after such Bonds shall have been delivered in accordance with instructions of the Issuer, or for the use by the Borrower of the proceeds of the Loan, or for the use of any moneys received by the Trustee, except to the extent that the Trustee is -55- obligated to apply the amounts received pursuant to the provisions of Section 401 hereof and to invest moneys in the Project Fund, the Redemption Fund, General Receipts Fund, Debt Service Reserve Fund and Rebate Fund under and in the manner provided in Section 407 hereof. The Trustee may become the owner of Bonds secured hereby with the same rights as any other Bondholder. (d) The Trustee shall be protected in acting upon Opinions of Counsel and upon any notice, request, consent, certificate, order, affidavit, letter, telegram, or other paper or document believed to be genuine and correct and to have been signed or sent by the proper person or persons. Any action taken by the Trustee pursuant to this Indenture upon the request or authority or consent of any person who at the time of making such request or giving such authority or consent is the owner of any Bond (such ownership to be established as provided in the form of the Bond set forth in Exhibit A attached to this Indenture), shall be conclusive and binding upon all future owners or holders of the same Bonds and upon Bonds issued in exchange therefor or in place thereof. The Trustee shall not be bound to make any investigation into the facts or matters stated in any notice, request, consent, certificate, order, affidavit, letter, telegram, opinions, bond, note, other evidence of indebtedness 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, the Borrower or the Project, personally or by agent or attorney. (e) The permissive right of the Trustee to do things enumerated in this Indenture or the Agreement shall not be construed as duties until specifically undertaken by the Trustee. The Trustee shall only be responsible for the performance of the duties expressly set forth herein and shall not be answerable for other than its negligence or bad faith in the performance of those express duties. (f) The Trustee shall not be personally liable for any debts contracted or for damages to persons or to personal property injured or damaged, or for salaries or nonfulfillment of contracts, relating to the Project. (g) The Trustee shall not be required to post any bond or surety in respect of the execution of the said trust and powers or otherwise in respect of the premises. (h) Notwithstanding anything elsewhere in this Indenture or in the Financing Documents, before taking any action or omitting to take any action requested hereunder (except for acceleration of the Bonds as required by Section 602, a mandatory redemption following a default under the Reimbursement Agreement at the direction of the Credit Enhancement Provider or a draw pursuant to Section 607), the Trustee may require satisfactory security or an indemnity bond for the reimbursement of all expenses to which it may be put and to protect it against all liability, except liability which is adjudicated to have resulted from its own negligence or bad faith by reason of any action so taken or omitted. (i) Before taking any action or omitting to take any action requested by the Bondholder or Bondholders under or pursuant to Article VI or VII hereof, the Trustee may require satisfactory security or an indemnity bond from such Bondholder or Bondholders -56- for the reimbursement of all expenses to which it may be put and to protect it against all liability, except liability which is adjudicated to have resulted from its own negligence or bad faith by reason of any action so taken or omitted. (j) All moneys received by the Trustee, until used or applied or invested as herein provided, shall be held as special trust funds for the purposes specified in this Indenture and for the benefit and security of the holders of the Bonds and the Credit Enhancement Provider as herein provided. Such moneys need not be segregated from other funds except to the extent required by law or as herein provided. The Trustee shall not otherwise be under liability for interest on any moneys received hereunder except such as may be agreed upon. (k) The Trustee shall not be bound to ascertain or inquire as to the performance of the obligations of the Borrower under the Agreement or the Issuer under this Indenture, and shall not be deemed to have, or required to take, notice of default under this Indenture except in the event of written notification of such default by the Credit Enhancement Provider or holders of not less than twenty-five percent (25%) of the principal amount of outstanding Bonds, and in the absence of such notice the Trustee may conclusively presume there is no default except as aforesaid. The Trustee may nevertheless require the Issuer and the Borrower to furnish information regarding performance of their obligations under the Agreement and this Indenture, but is not obligated to do so. (1) The Trustee shall, prior to any Event of Default and after the curing of all Events of Default which may have occurred, perform such duties and only such duties of the Trustee as are specifically set forth in this Indenture and the Agreement. The Trustee shall, during the existence of any Event of Default (which has not been cured), exercise such of the rights and powers vested in it by this Indenture and the Agreement, 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. The foregoing shall not limit the Trustee's obligations under Section 602 hereof. (m) The Trustee shall, if the Bonds are then rated by a Rating Agency, give notice by mail to that Rating Agency at its address promptly upon the occurrence of any of the following: (i) any change in the Trustee serving under this Indenture; (ii) any modifications, amendments, supplements or revisions to this Indenture, the Agreement or the Credit Enhancement; OR ) the expiration or termination of the Credit Enhancement; (iv ) an Event of Default hereunder; (v) any Conversion Date; (vi ) a redemption or defeasance of the Bonds in whole; or (vii ) any change of the Remarketing Agent. -57- (n) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the holders of a majority in principal amount of the Outstanding Bonds relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture. (o) 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 Article VII. The immunities and exceptions from liabilities of the Trustee shall extend to its officers, employees, counsel, and agents. SECTION 702. FEES, EXPENSES. The Trustee shall be entitled to payment and/or reimbursement for (a) reasonable fees for its ordinary services rendered hereunder and all advances, counsel fees (including in-house counsel), agent fees, and other ordinary expenses reasonably made or incurred by the Trustee in connection with such ordinary services, such compensation not to exceed .07% of the Outstanding principal amount of the Bonds, and (b) in the event that it should become necessary that the Trustee perform extraordinary services, it shall be entitled to reasonable extra compensation therefor, and to reimbursement for reasonable extraordinary expenses in connection therewith; provided that if such extraordinary services or extraordinary expenses are occasioned by the negligence or willful default of the Trustee it shall not be entitled to compensation or reimbursement therefor. The Trustee shall be entitled to interest on any amounts advanced by it in the performance of its duties hereunder at its prime rate then in effect. The Trustee shall also be indemnified by the Borrower as provided in the Agreement. The Trustee recognizes that all fees, charges and other compensation to which it may be entitled under the provisions of this Indenture are required to be paid by the Borrower under the terms of the Agreement, and, accordingly, the Trustee agrees that except for moneys that the Issuer may derive from the Borrower for purposes of the foregoing (excluding, however, the moneys for administrative costs, taxes and other public service charges and indemnity under the Agreement), the Issuer shall not be liable for any such fees, charges and other compensation to which the Trustee may be entitled. Payment of all such amounts shall, however, be secured by a first lien prior to the Bonds on the Trust Estate (except the Credit Enhancement and any proceeds of a draw thereon) as set forth in this Indenture. SECTION 703. INTERVENTION IN LITIGATION. In any judicial proceedings to which the Issuer is a party the Trustee may intervene on behalf of Bondholders, and, upon receipt of indemnity satisfactory to it, shall intervene if requested in writing by the holders of at least twenty-five percent (25%) of the aggregate principal amount of Bonds then outstanding. SECTION 704. RESIGNATION OF TRUSTEE. The Trustee and any successor Trustee may resign only upon giving thirty (30) days' prior written notice to the Issuer, the Credit Enhancement Provider, the Borrower and to each registered owner of Bonds then outstanding as shown on the records of the Trustee. Such resignation shall take effect only upon the appointment of a successor Trustee by the Issuer with written consent of the Credit Enhancement Provider, which consent shall not be unreasonably withheld. If no -58- successor is appointed within thirty (30) days after the notice of resignation, the resigning party shall appoint a successor with the written consent of the Issuer and the Credit Enhancement Provider. Upon appointment of a successor Trustee, the resigning Trustee shall assign all of its right, title and interest in the Trust Estate, including its right, title and interest in the Credit Enhancement and this Indenture, to the successor Trustee. The successor Trustee shall be a bank or trust company organized under the laws of the United States of America or any State of the United States, having a combined capital stock, surplus and undivided profits aggregating at least $30,000,000, and shall accept in writing its duties and responsibilities hereunder and such writing shall be filed with the Issuer, the Credit Enhancement Provider and the Borrower. SECTION 705. REMOVAL OF TRUSTEE. The Trustee may be removed at any time by an instrument or concurrent instruments in writing delivered to the Issuer, the Credit Enhancement Provider, and the Borrower, signed by the owners of a majority in aggregate principal amount of Bonds then Outstanding, and approved by the Credit Enhancement Provider, which written instrument shall designate a successor Trustee. Upon such removal, which shall not be effective until a successor Trustee is appointed, the Trustee shall assign to the successor Trustee all of its right, title and interest in the Trust Estate in the same manner as provided in Section 704 hereof. SECTION 706. APPOINTMENT OF REMARKETING AGENT. The Remarketing Agent is appointed pursuant to the Remarketing Agreement to act in connection with the remarketing of any Bonds tendered,pursuant to Article IX hereof in accordance with, and subject to, the terms of the Remarketing Agreement and this Indenture. The Remarketing Agent shall designate to the Trustee, the Issuer, the Borrower and the Credit Enhancement Provider its principal office and signify its acceptance of the duties and obligations imposed upon it hereunder by a written instrument of acceptance delivered to the Issuer, the Credit Enhancement Provider, the Trustee and the Borrower. SECTION 707. RESIGNATION OF REMARKETING AGENT. The Remarketing Agent may resign by giving not less than thirty (30) days' written notice to the Borrower, the Trustee, the Credit Enhancement Provider and the Issuer, and such resignation shall take effect upon the date specified in such notice unless previously a successor shall have been appointed, in which event such resignation shall take effect immediately on the appointment of such successor. A copy of any notice required hereunder shall also be given to the Rating Agency. Any successor Remarketing Agent shall be a trust company or bank or investment bank in good standing, within or outside the State, those long-term debt is rated at least "AB-3" by Moody's Investors Service, and whose short-term debt is rated at least "P- 3" by Moody's Investors Service, or otherwise acceptable to the Rating Agency. SECTION 708. REMOVAL OF REMARKETING AGENT. The Remarketing Agent may be removed at any time by an instrument or concurrent instruments in writing, filed with the Trustee, the Credit Enhancement Provider and the Issuer, and signed by the Borrower. Notwithstanding anything contained herein to the contrary, no resignation or removal of the Remarketing Agent shall become effective unless the Borrower shall have previously designated a successor Remarketing Agent satisfactory to the Issuer and the Credit Enhancement Provider. A copy of any notice required hereunder shall also be given to the Rating Agency. -59- SECTION 709. INSTRUMENTS OF BONDHOLDERS. Any instrument required by this Indenture to be executed by Bondholders may be in any number of writings of similar tenor and may be executed by Bondholders in person or by agents appointed in writing. Proof of the execution of any such instrument or of the writing appointing any such agent and of the ownership of Bonds given in any of the following forms shall be sufficient for any of the purposes of this Indenture: (a) A certificate of any officer in any jurisdiction who by law has power to take acknowledgments within such jurisdiction that the person signing such writing acknowledged before him the execution thereof. (b) A certificate executed by any trust company or bank stating that at the date thereof the party named therein did exhibit to an officer of such trust company or bank, as the property of such party, the Bonds therein mentioned. The Trustee may rely on such an instrument of Bondholders unless and until the Trustee receives notice in the form specified in (a) or (b) above that the original of such instrument is no longer trustworthy. In the event that the Trustee shall receive conflicting directions from two groups of Bondholders, each with combined holdings of not less than twenty-five percent (25%) of the aggregate principal amount of outstanding Bonds, the directions given by the group of Bondholders which hold the largest percentage of Bonds shall be controlling and the Trustee shall follow such directions as elsewhere required herein. SECTION 710. POWER TO APPOINT CO-TRUSTEES. At any time or times, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Project may at the time be located, the Issuer (pursuant to a resolution duly adopted by the Issuer) and the Trustee shall have the power, subject to the approval of the Credit Enhancement Provider and the Borrower, which approvals shall not be unreasonably withheld, to appoint one or more persons approved by the Trustee either to act as co-trustee or co-trustees jointly with the Trustee of all or any part of the Project, or to act as separate trustee or separate co-trustees of all or any part of the Project, and to vest in such person or persons, in such capacity, such title to the Project or any part 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. Upon the request of the Trustee or of the holders of not less than a majority of the aggregate principal amount of the Bonds then outstanding, the Issuer shall join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to effect such appointment. If the Issuer shall not have joined in such appointment within thirty (30) days after the receipt by it of a request so to do, or the Credit Enhancement Provider shall have failed to disapprove such appointment, 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 Issuer shall execute, acknowledge and deliver all such instruments as may be required by any such co-trustee or separate trustee for more fully confirming such title, rights, powers, trusts, duties and obligations to such co-trustee or separate trustee. -60- Every co-trustee or separate trustee shall, to the extent permitted by law or any applicable contract, be appointed subject to the following terms, namely: (a) This Indenture shall become effective once the Bonds shall be authenticated and delivered, and thereupon the Trustee shall have all rights, powers, trusts, duties and obligations by this Indenture conferred upon the Trustee in respect of the custody, control or management of moneys, papers, securities and other personal property. (b) All rights, powers, trusts, duties and obligations conferred or imposed upon the trustees shall be conferred or imposed upon and exercised or performed by the Trustee, or by the Trustee and such co-trustee or co-trustees, or separate trustee or separate trustees, jointly, as shall be provided in the instrument appointing such co-trustee or co-trustees or separate trustee or separate trustees, except to the extent that, under the law of any jurisdiction in which any particular act or acts are to be performance, the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such act or acts shall be performed by such co-trustee or co-trustees or separate trustee or separate trustees. (c) Any request in writing by the Trustee to any co-trustee or separate trustee to take or to refrain from taking any action hereunder shall be sufficient warrant for the taking, or the refraining from taking, of such action by such co-trustee or separate trustee. (d) Any co-trustee or separate trustee 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, with the concurrence of the Issuer evidenced by a resolution, may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section 709, and, in case an Event of Default shall have occurred and be continuing, the Trustee shall have power to accept the resignation of, or remove, any such co-trustee or separate trustee without the concurrence of the Issuer. Upon the request of the Trustee, the Issuer shall join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to effectuate such resignation or removal. A successor to any co-trustee or separate trustee so resigned or removed may be appointed in the manner provided in this Section 709. (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 any Bondholder and delivered to the Trustee shall be deemed to have been delivered to each such co-trustee or separate trustee. (h) Any moneys, 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 appointment by any such co-trustee or separate trustee, it, she or he shall be vested with the pledge and assignment of the Trust Estate and with such rights, powers, duties, trusts or obligations as shall be specified in the instrument -61 - 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. In case any co-trustee or separate trustee shall become incapable of acting,resign or be removed, the pledge and assignment of 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 same manner as provided for with respect to the appointment of a successor Trustee pursuant to Section 704 hereof. Notwithstanding anything else to the contrary in this Article VII, no successor trustee or any co-trustee or separate trustee shall assume its duties hereunder without the prior written approval of the Issuer. SECTION 711. FILING OF FINANCING STATEMENTS. From time to time, the Trustee on behalf of the Issuer, shall file or record or cause to be filed or recorded all continuation statements for the purpose of continuing without lapse the effectiveness of (a) those financing statements which shall have been filed at or prior to the issuance of the Bonds in connection with the security for the Bonds pursuant to the authority of the U.C.C., and (b) any previously filed continuation statements which shall have been filed as herein required. SECTION 712. TENDER AGENT. The Trustee is hereby authorized, with the approval of the Borrower, the Remarketing Agent and the Credit Enhancement Provider, to appoint the Tender Agent for the Bonds. The Issuer has initially designated, and the Borrower, Remarketing Agent and Credit Enhancement Provider have approved, BankAmerica National Trust Company, as Tender Agent. The Tender Agent shall designate to the Trustee, the Issuer, the Remarketing Agent and the Credit Enhancement Provider its principal office and signify its acceptance of the duties and obligations imposed upon it hereunder by a written instrument of acceptance delivered to the Trustee under which such Tender Agent will agree particularly: (a) to authenticate and deliver Bonds (the "Authentication Agent") in accordance with the provisions of Section 210, Section 901 or other provisions hereof relating to authentication and delivery of Bonds; (b) to forward to the Trustee immediately after completion of such authentication the names, addresses, taxpayer identification numbers or social security numbers of all persons in whose names the Bonds are to be registered; (c) to deliver authenticated and registered Bonds to or to the order of the persons in whose names such Bonds are registered; (d) to hold all moneys delivered to it for the purchase of Bonds in trust for the account of the person who shall have so delivered such moneys until the Bonds purchased with suchmoneys shall have been registered, authenticated and delivered to or to the order of such person; and -62- (e) to hold all Bonds delivered to it for purchase in trust for the owner thereof until such owner shall have received the purchase price therefor. The Issuer shall cooperate with the Trustee, the Borrower and the Credit Enhancement Provider to cause the necessary arrangements to be made and to be thereafter continued whereby funds from the sources specified herein and in the Agreement will be made available for the purchase of Bonds presented at the principal office of the Tender Agent, and whereby Bonds, executed by the Issuer and to be authenticated by the Tender Agent, shall be made available to the Tender Agent to the extent necessary for delivery pursuant to Section 901 hereof. Any moneys held by the Tender Agent hereunder shall be held uninvested and in cash. In the event that the Tender Agent resigns or is removed, the Trustee shall act as the Tender Agent until such time as a successor Tender Agent is designated. -63- ARTICLE VIII AMENDMENTS; SUPPLEMENTAL INDENTURES SECTION 801. SUPPLEMENTAL INDENTURES. The Issuer and the Trustee, without the consent of or notice to any Bondholders, but subject to Section 808 hereof, may enter into an indenture or indentures supplemental to this Indenture for one or more of the following purposes: (a) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture, or to make such other provisions in regard to matters or questions arising under this Indenture which shall not materially adversely affect the interests of the Bondholders; (b) 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; (c) to grant or pledge to the Trustee for the benefit of the Bondholders any additional security other than that granted or pledged under this Indenture; (d) to modify, amend or supplement this Indenture or any indenture supplemental hereto in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute then in effect, or to permit the qualification of the Bonds for sale under the securities laws of any of the States of the United States; (e) to appoint a successor trustee, separate trustee or co-trustee in the manner provided in Article VII hereof; (f) to comply with requirements of any Alternate Credit Enhancement Provider which are determined by the Issuer not to be adverse to the interests of the Bondholders; (g) to comply with requirements of the Rating Agency which are determined by the Issuer not to be adverse to the interests of the Bondholders; (h) to comply with regulations or rulings issued with respect to the Code or otherwise to preserve the exclusion of interest on the Bonds from gross income for federal income tax purposes, to the extent determined as necessary or desirable in Bond Counsel's opinion; (i) to change any of the time periods for provision of notice relating to the remarketing of Bonds, and the tender of Bonds pursuant to Section 901 hereof; -64- (j) to change or modify any provision of this Indenture, harmonize, to the maximum extent possible, the provisions hereof with the applicable rules, regulations and procedures of HUD, FHA and GNMA; provided that such change or modification does not affect the obligation of the Trustee to draw on the Credit Enhancement at the times and in the amounts required by Section 607 hereof; or W prior to the Conversion Date, to modify, alter, amend or supplement this Indenture in any other respect, including amendments which would otherwise be described in Section 802 hereof, if notice to the proposed supplemental Indenture is given to Bondholders (in the same manner as notices of redemption are given hereunder) at least 30 days before the effective date thereof, and, on or before such effective date, the Bondholders have the right to demand purchase of their Bonds pursuant hereto. When requested by the Issuer, and if all conditions precedent under this Indenture have been met, the Trustee shall join the Issuer in the execution of any such supplemental indenture. A copy of all such supplemental indentures shall be promptly furnished to the Credit Enhancement Provider and the Borrower by the Trustee. SECTION 802. AMENDMENTS TO INDENTURE, CONSENT OF BONDHOLDERS, THE CREDIT ENHANCEMENT PROVIDER AND THE BORROWER. Exclusive of supplemental indentures covered by Section 801 hereof and subject to the terms and provisions contained in this Section 802, and not otherwise, the holders of not less than a majority of the aggregate principal amount of the Bonds then outstanding and affected by such indenture or indentures supplemental hereto shall have the right, from time to time, anything contained elsewhere in this Indenture to the contrary notwithstanding, but subject to Section 808 hereof, to consent to and direct the execution by the Trustee of such other indenture or indentures supplemental hereto as shall be consented to by the Issuer in its sole discretion 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 contained in this Section shall permit, or be construed as permitting, (a) an extension of the maturity of the principal of, or the mandatory redemption date of, or any date for payment of interest on, any Bond, or (b) a reduction in the principal amount of, or the rate of interest on, any Bond, (c) a preference or priority of any Bond or Bonds over any other Bond or Bonds, (d) the creation of a lien prior to the hen of this Indenture, (e) a reduction in the aggregate principal amount of the Bonds required for consent to any supplemental indenture, (f) a modification or change in the duties of the Trustee hereunder, or (g) a change in the percentage of Bondholders necessary to waive an Event of Default, or otherwise approve matters requiring Bondholder approval hereunder, without the consent of one hundred percent (100%) of the holders of the Bonds then Outstanding. The giving of notice to and consent of the Bondholders to any such supplemental indenture shall be obtained pursuant to Section 806 hereof. Copies of any such supplemental indenture shall be filed with the Credit Enhancement Provider and the Borrower. SECTION 803. AMENDMENTS TO AGREEMENT NOT REQUIRING CONSENT OF BONDHOLDERS. The Issuer and the Trustee may, without the consent of or notice to any of the Bondholders, but subject to Section 808 hereof, enter into or permit any amendment of -65- the Agreement acceptable to the Borrower as may be required (a) for the purpose of curing, any ambiguity or formal defect or omission which shall not adversely affect the interest of the Bondholders; (b) to grant or pledge to the Issuer or the Trustee, for the benefit of the Bondholders, any additional security; (c) to harmonize the provisions thereof, to the maximum extent possible, with the applicable rules, regulations and procedures of HUD, FHA or GNMA; or (d) in connection with any other change therein which, the Trustee acting in reliance upon an Opinion of Counsel, is not to the prejudice of the Trustee and the holders of the Bonds. Copies of any such amendments to the Agreement shall be filed with the Trustee. SECTION 804. AMENDMENTS TO AGREEMENT REQUIRING CONSENT OF BONDHOLDERS. Except as provided in Section 803 hereof, the Issuer and the Trustee shall not enter into any other modification or amendment of the Agreement, nor shall any such modification or amendment become effective, without the written consent of the holders of not less than a majority of the aggregate principal amount of the Bonds at the time outstanding, such consent to be obtained in accordance with Section 806 hereof. SECTION 805. AMENDMENTS, CHANGES AND MODIFICATIONS TO THE CREDIT ENHANCEMENT. Except as otherwise provided in the Agreement or in this Indenture, subsequent to the initial issuance of Bonds and prior to payment of the Bonds in full (or provision for the payment thereof having been made in accordance with the provisions of this Indenture), the Credit Enhancement may not be effectively amended, changed or modified by the Credit Enhancement Provider (except for amendments extending the term of the Credit Enhancement) without the prior written consent of the Trustee, the Issuer and the Borrower. The Trustee may, without the consent of the owners of the Bonds, consent to any amendment of the Credit Enhancement as may be required for purposes of curing any ambiguity, formal defect or omission which does not prejudice in any material respect the interests of the Bondholders. Except for such amendments, the Credit Enhancement may be amended by the Credit Enhancement Provider only with the consent of the Issuer, the Trustee, the Borrower and the owners of a majority in aggregate principal amount of Outstanding Bonds, except that no such amendment may be made which would reduce the amounts required to be paid thereunder, change the time for payment of such amounts or accelerate the expiration date of the Credit Enhancement without the written consent of the owners of all outstanding Bonds. SECTION 806. NOTICE TO AND CONSENT OF BONDHOLDERS. If consent of the Bondholders is required under the terms of this Indenture for the amendment of this Indenture, the Agreement or the Credit Enhancement or for any other similar purpose, the Trustee shall cause notice of the proposed execution of the amendment or supplemental indenture to be given by first class mail to the last known holders of the Outstanding Bonds then shown on the Register. Such notice shall briefly set forth the nature of the proposed amendment, supplemental indenture or other action, and shall state that copies of any such amendment, supplemental indenture or other document are on file at the principal corporate trust office of the Trustee for inspection by all Bondholders. If, within thirty (30) days or such longer period as shall be prescribed by the Trustee following the mailing of such notice, the holders of a majority of the aggregate principal amount of the Bonds Outstanding by instruments filed with the Trustee shall have consented to the amendment, supplemental indenture or other proposed action, then the Trustee may execute such -66- amendment, supplemental indenture or other document or take such proposed action, and the consent of the Bondholders shall thereby be conclusively presumed. SECTION 807. WAIVERS. The Trustee shall not waive, on its own behalf or on behalf of the Issuer, any obligation of the Borrower under the Agreement without the consent of the Credit Enhancement Provider (subject to the provisions of Section 612 hereof). SECTION 808. CREDIT ENHANCEMENT PROVIDER,BORROWER AND REMARKETING AGENT. Subject to the provisions of Section 612 hereof, and notwithstanding anything herein to the contrary, no amendment, supplement, change or modification may be made to the Indenture, the Agreement or the Credit Enhancement without the prior written consent of the Credit Enhancement Provider. Anything herein to the contrary notwithstanding, a supplemental indenture, amendment or other document described under this Article VIII which affects any rights or obligations of the Borrower or the Remarketing Agent shall not become effective unless and until the affected party shall have consented in writing to the execution of such supplemental indenture, amendment or other document. -67- ARTICLE IX PURCHASE AND REMARKETING OF BONDS SECTION 901. PURCHASE OF BONDS ON ANY BUSINESS DAY. So long as the Bonds bear interest at a Weekly Variable Rate, any Bond shall be caused to be purchased by the Tender Agent on behalf of and as agent for the Borrower, on the demand of the holder thereof, on any Business Day at a purchase price equal to 100% of the principal amount thereof plus accrued interest, if any, to the date of purchase, upon delivery to the Tender Agent at its principal office of a Bondholder Tender Notice which: (i) states the number and principal amount of such Bond; or portion thereof in integral multiples of Authorized Denominations, provided that the portion of the Bond retained is also an integral multiple of an Authorized Denomination; (ii) states the name, address and tax identification number of the owner of the Bond demanding such payment; and (iii) states the date on which such Bond or portion thereof shall be purchased pursuant to this Section 901, which date shall be a Business Day not prior to the seventh day next succeeding the date of the delivery of such notice to the Tender Agent. By delivering the Bondholder Tender Notice, the holder irrevocably agrees to deliver such Bond (with an appropriate transfer of registration form executed in blank to the Tender Agent and accompanied by a guaranty of signature satisfactory to the Tender Agent) to the principal corporate trust office of the Tender Agent or any other address designated by the Tender Agent at or prior to 10:00 a.m., New York City time, on the Business Day specified in the Bondholder Tender Notice; provided, however, that such Bond shall be so purchased pursuant to this Section 901 only if the Bond so delivered to the Tender Agent shall conform in all respects to the description thereof in the Bondholder Tender Notice. The determination by the Tender Agent of a holder's compliance with the Bondholder Tender Notice requirements of this Section and the delivery of the Bonds is in its sole discretion and is binding on the Borrower, the Issuer, the Remarketing Agent, the Credit Enhancement Provider, the Trustee, the Tender Agent and the holder of the Bonds. No such Bondholder Tender Notice shall be effective unless it complies with the above- described requirements of this Section 901 and unless it is accompanied by a guaranty of signature acceptable to the Tender Agent and is received by the Tender Agent at its principal office prior to 3:00 p.m., New York City time, on a Business Day not later than the seventh day preceding the Business Day designated in such Bondholder Tender Notice as the date of purchase. Immediately upon receipt of a Bondholder Tender Notice delivered pursuant to the provisions of the preceding paragraph demanding the purchase of a Bond, the Tender Agent, shall notify the Borrower, the Remarketing Agent, the Trustee and the Credit Enhancement Provider by telephone, promptly confirmed in writing, of such receipt, specifying the contents of such Bondholder Tender Notice. -68- Any election by a holder to tender a Bond or Bonds (or portion thereof) for purchase on a Business Day in accordance with this Section shall be irrevocable and shall be binding on the holder making such election and on any transferee of such holder. If after delivery to the Tender Agent of a Bondholder Tender Notice in accordance with this Section, the holder making such election shall fail to deliver such Bond or Bonds described in the Bondholder Tender Notice to the Tender Agent on the applicable tender date as required by this Section 901, the untendered Bond or Bonds or portion thereof (the "Untendered Section 901 Bond" or "Untendered Section 901 Bonds") described in such Bondholder Tender Notice shall be deemed to have been properly tendered for purchase to the Tender Agent, and, to the extent that there shall be sufficient (i) remarketing proceeds, or (ii) amounts on deposit in the Credit Enhancement Account of the General Receipts Fund on or before the applicable purchase date to pay the purchase price thereof, such Untendered Section 901 Bond or Bonds (or portion thereof) shall on such purchase date cease to bear interest and no longer shall be considered to be Outstanding hereunder. The Trustee shall promptly give notice by first class mail to each registered owner of Bonds whose Bonds have been deemed to have been purchased pursuant to this Section 901, which notice shall state that interest on such Bonds ceased to accrue on the date of purchase and that moneys representing the purchase price of such Bonds are available against delivery thereof at the principal corporate trust office of the Tender Agent at its principal office. If for any reason a holder fails to deliver such Bond to the Tender Agent on said purchase date, the Issuer shall execute and the Tender Agent shall authenticate and deliver for redelivery in accordance with Section 210 hereof a new Bond or Bonds in replacement of the Bond not so delivered. The replacement of any such previously Outstanding Bond shall not be deemed to create new indebtedness, but such Bond as is issued in replacement shall be deemed to evidence the indebtedness previously evidenced by the bond not so delivered. Upon surrender of any Bond for purchase in part only, the Issuer shall execute and the Tender Agent shall authenticate and deliver to the holder thereof a new Bond or Bonds of the same maturity, series and interest rate of Authorized Denominations, in an aggregate principal amount equal to the unpurchased portion of the Bond surrendered. Payment for Bonds purchased by the Tender Agent shall be made at or before 3:00 p.m., New York City time, on the date specified in the Bondholder Tender Notice with remarketing proceeds and/or the proceeds from a draw on the Credit Enhancement. The Remarketing Agent, provided that the Credit Enhancement Provider has honored the draw on the Credit Enhancement pursuant to Section 607(a) hereof, shall, on the date Bonds are purchased or deemed purchased pursuant to a Bondholder Tender Notice, wire transfer directly to the Credit Enhancement Provider those amounts collected from the purchasers of the Bonds pursuant to the remarketing which have not been applied to, or set aside for, the payment of the purchase price of the tendered Bonds. SECTION 902. MANDATORY PURCHASE ON A CONVERSION DATE. Holders of Bonds shall be required to tender their Bonds to the Tender Agent who shall purchase the Bonds on behalf of and as agent for the Borrower for a purchase price equal to the principal amount thereof plus interest accrued to the Conversion Date, which will be the date of purchase. Any Bond which is not so tendered on the Conversion Date ('Untendered Section 902 Bond") shall be deemed to have been tendered to the Tender Agent as of the -69- Conversion Date, and, from and after such Conversion Date, shall cease to bear interest and no longer shall be considered to be outstanding hereunder. In the event of a failure by holders to tender Bonds on the Conversion Date, said holders shall not be entitled to any payment (including any interest to accrue subsequent to the Conversion Date) other than the purchase price for such Untendered Section 902 Bonds, and any Untendered Section 902 Bonds shall no longer be entitled to the benefits of this Indenture, except for the purpose of payment of the purchase price therefor. If for any reason a holder fails to deliver such Bond to the Tender Agent on the Conversion Date, the Issuer shall execute, and the Tender Agent shall authenticate and deliver to the Remarketing Agent for redelivery to the purchaser, a new Bond or Bonds in replacement of the Bond not so delivered. The replacement of any such previously outstanding Bond shall not be deemed to create new indebtedness, but such Bond as is issued in replacement shall be deemed to evidence the indebtedness previously evidenced by the Bond not so delivered. Any such Bonds that have been remarketed shall be deemed to continue to be Outstanding for all purposes and shall continue to be fully secured by this Indenture until paid at maturity or redemption prior to maturity. Payment for Bonds purchased by the Tender Agent shall be made with remarketing proceeds and/or the proceeds from a draw on the Credit Enhancement. Following the Conversion Date moneys deposited with the Tender Agent for purchase of Bonds pursuant to this Section 902 shall be held in trust in the General Receipts Fund, and shall be paid to the former owners of such Bonds upon presentation thereof at the principal corporate trust office of the Tender Agent. The Tender Agent shall promptly give notice by first class mail to each registered owner of Bonds whose Bonds are deemed to have been purchased pursuant to this Section 902, which notice shall state that interest on such Bonds ceased to accrue on the date of purchase and that moneys representing the purchase price of such Bonds are available against delivery thereof at the principal corporate trust office of the Tender Agent. The Remarketing Agent, provided that the Credit Enhancement Provider has honored the draw on the Credit Enhancement pursuant to Section 608(a)(iv) hereof, shall on the Conversion Date wire transfer directly to the Credit Enhancement Provider those amounts collected from the purchasers of the Bonds pursuant to the remarketing which have not been applied to, or set aside for, the payment of the purchase price of the tendered Bonds. SECTION 903. REMARKETING OF BONDS. Upon delivery of the Bondholder Tender Notice to the Tender Agent, and upon receipt of written notice from the Borrower of a Conversion Date pursuant to Section 204 hereof the Remarketing Agent shall offer for sale and use its best efforts to sell the Bonds identified in the Bondholder Tender Notice or for which a Conversion Date has been established, any such sale to be made on or before the date on which such Bonds are to.be purchased, and in so doing may sell such Bonds at a price equal to 100% of the principal thereof plus accrued interest thereon. Except as otherwise provided herein, the Remarketing Agent may not resell or remarket directly to the Issuer, the Borrower, any general partner of the Borrower or any guarantor of the Borrower any Bonds so delivered to it. In its capacity as a registered broker-dealer, the Remarketing Agent may, but is not obligated to, acquire for its own account any Bonds so -70- delivered to it, but not otherwise resold, in which case the Remarketing Agent shall resell such Bonds to itself. The Remarketing Agent may purchase and sell Bonds for its own account at any time. Not later than 4:00 p.m., New York City time, on the Business Day next preceding the purchase date, the Remarketing Agent shall, to the extent such information is then available, give notice by telephone, telex or telecopy to the Tender Agent, specifying the total principal amount of Bonds, if any, sold for settlement on such purchase date, and the name, address and taxpayer identification number of each purchaser as well as the denominations of the Bonds to be issued to such purchaser. At the time of delivery of Bonds to or upon the order of the Remarketing Agent as hereinafter provided, the Remarketing Agent shall deliver to the Tender Agent, at its principal corporate trust office in immediately available funds, an amount equal to the purchase price of the total principal amount of Bonds so specified in the notice given by the Remarketing Agent pursuant to the immediately preceding sentence plus accrued interest, if any. In any event, the Remarketing Agent shall, in no event later than 9:00 a.m., New York City time, on the purchase date designated in a Bondholder Tender Notice pursuant to Section 901, or on the Conversion Date, give telephonic or telecopy notice to the Tender Agent, specifying the principal amount of Bonds remarketed and the amount of Bonds to be tendered that have not been remarketed at the time of such notice, which notice shall be immediately confirmed in writing if all Bonds to be purchased have not been remarketed. With respect to any Bonds that have been remarketed, such notice shall contain instructions to the Tender Agent as to the manner in which such Bonds are to be registered. Bonds tendered pursuant to a Bondholder Tender Notice or on a Conversion Date pursuant to Sections 901 and 902, respectively, hereof shall be purchased first from remarketing proceeds, and second, if such proceeds are not available, from amounts drawn on the Credit Enhancement. If the Tender Agent receives from the Remarketing Agent, on or before 9:30 a.m., New York City time, on the purchase date designated pursuant to Sections 901 and 902 written notice that any of the Bonds identified in the Bondholder Tender Notice or Outstanding on the Conversion Date have not been remarketed, the Tender Agent shall promptly thereafter give the Credit Enhancement Provider and the Trustee telephonic notice of the receipt of such notice from the Remarketing Agent; provided, however, that such notice from the Tender Agent to the Trustee and the Credit Enhancement Provider shall have been given no later than 10:00 a.m., New York City time, on the date on which a drawing under the Credit Enhancement is to be made with respect to such Bonds. In the event that any Bond in respect of which a Bondholder Tender Notice has been given or is Outstanding on the Conversion Date shall not be remarketed or for which proceeds have not been received on or prior to 11:30 a.m. New York City time on the purchase date designated pursuant to Sections 901 and 902, the Trustee shall draw on the Credit Enhancement by 12:00 noon New York City time on this designated purchase date in an amount sufficient to enable the Tender Agent to pay the purchase price of such Bonds. In the event that the Trustee does not receive notice from the Tender Agent of the amount of funds held by the Tender Agent constituting the purchase price of the Bonds remarketed by the Remarketing Agent by 11:45 a.m. New York City time, the Trustee shall draw by 12:00 noon New York City time on the Credit Enhancement in an amount sufficient to pay the purchase price of all Bonds to be purchased on the purchase date identified pursuant to Sections 901 and 902. On each purchase date designated pursuant to Sections 901 and 902 -71 - the Trustee shall pay to the Tender Agent, but only from amounts drawn under the Letter of Credit, the purchase price of any Bonds for which it has received a Bondholder Tender Notice or which are subject to tender on the Conversion Date and which have not been remarketed pursuant to this Section 903 or arrange to have such amounts drawn under the Credit Enhancement to be paid directly to the Tender Agent. The Tender Agent shall pay by 4:00 p.m. New York City time such purchase price to the registered owners thereof. Any amounts drawn under the Credit Enhancement to purchase Bonds shall be used solely for such purpose. Amounts drawn under the Credit Enhancement which are not used, or held, to purchase Bonds pursuant to this Section 903 shall be remitted by the Trustee or the Tender Agent to the Credit Enhancement Provider on the Business Day after each purchase date designated pursuant to Sections 901 and 902. The Tender Agent shall deliver, or cause to be delivered, at its principal corporate trust office, Bonds remarketed by the Remarketing Agent, before 1:00 p.m., New York City time, on the purchase date designated pursuant to Sections 901 and 902; provided, however, except in the event that no Credit Enhancement is then intended to secure the Bonds, that prior to delivery of the Bonds to such purchasers the Credit Enhancement shall have been reinstated to the principal amount of the Bonds Outstanding (other than Pledged Bonds) plus the Credit Enhancement Interest Requirement thereon. Bonds purchased by the Tender Agent and not remarketed shall, if purchased with proceeds of a draw on the Credit Enhancement, be delivered and registered as Pledged Bonds pursuant to the Pledge Agreement. It is the intention of the Issuer that the arrangements for the purchase and remarketing of the Bonds, including any purchase from funds advanced by the Credit Enhancement Provider as provided in this Indenture, shall not result in the extinguishment or the reissuance of the Bonds, but that these arrangements shall be solely for the benefit of the Borrower and the holders of the Bonds. SECTION 904. CREATION AND REMARKETING OF PLEDGED BONDS. Bonds purchased by draws under the Credit Enhancement pursuant to Sections 607(a)(iv) and which are not remarketed in accordance with the Remarketing Agreement shall become Pledged Bonds and will be governed by the terms of the Pledge Agreement. When the Tender Agent purchases Bonds which become Pledged Bonds, the Tender Agent shall promptly give written notification to the Borrower, the Remarketing Agent, the Trustee and the Credit Enhancement Provider stating that such Bonds are being held as Pledged Bonds. The Credit Enhancement shall not constitute security for Pledged Bonds. Pledged Bonds shall be registered in the name of the Borrower and delivered to the custodian under the Pledge Agreement, or, at the written request of the Credit Enhancement Provider, shall be made available to the Credit Enhancement Provider and registered in such name as the Credit Enhancement Provider may designate. Failure to pay interest on Pledged Bonds when due, or failure to pay principal and interest upon any Redemption Date or Maturity Date on Pledged Bonds, shall not constitute an Event of Default under Section 601 hereof. Upon the Maturity Date, or upon any Redemption Date on which all Outstanding Bonds are redeemed (whether by reason of optional redemption or mandatory redemption or acceleration), all Pledged Bonds shall be deemed cancelled. Pledged Bonds shall not be remarketed until the Trustee, the Tender Agent and the Remarketing Agent have received written notice from the Credit -72- Enhancement Provider that the Credit Enhancement has been reinstated to an amount equal to the principal amount of all Bonds Outstanding, including Pledged Bonds to be remarketed (but excluding any other Pledged Bonds) plus interest for thirty-nine days computed at the Maximum Rate, unless such reinstatement is automatic pursuant to the terms of the Credit Enhancement. At such time as a Pledged Bond is .remarketed, the Tender Agent shall (i) remit the proceeds from the remarketing to the Credit Enhancement Provider, and (ii) give written notice to the Remarketing Agent, the Borrower, the Trustee and the Credit Enhancement Provider that such Bond is no longer a Pledged Bond. SECTION 905. NO SALES AFTER DEFAULT, NO PURCHASE AFTER ACCELERATION. Anything in this Indenture to the contrary notwithstanding, there shall be no ,sales of Bonds pursuant to this Article IX if the Trustee shall have given notice to the Remarketing Agent that there shall have occurred and be continuing an Event of Default. -73- ARTICLE X MISCELLANEOUS SECTION 1001. LIMITATION OF RIGHTS. With the exception of rights herein expressly conferred, nothing expressed or mentioned in or to be implied from this Indenture or the Bonds is intended or shall be construed to give to any Person other than the parties hereto, the Bondholders, the Credit Enhancement Provider and the Borrower any legal or equitable right, remedy or claim under or in respect to this Indenture or any covenants, conditions and provisions herein contained; this Indenture and all of the covenants, conditions and provisions herein being intended to be and being for the sole and exclusive benefit of the parties hereto, the Bondholders, the Credit Enhancement Provider and the Borrower as herein provided. SECTION 1002. SEVERABILITY. If any provision of this Indenture is held to be in conflict with any applicable statute or rule of law, or is otherwise held to be unenforceable for any reason whatsoever, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other part or circumstance, or of rendering any other provision or provisions herein contained invalid, inoperative, or unenforceable to any extent whatsoever. The invalidity of any one or more phrases, sentences, clauses or Sections of this Indenture contained, shall not affect the remaining portions of this Indenture, or any part hereof. SECTION 1003. NOTICES AND APPROVALS. It shall be sufficient service or giving of any notice, request, complaint, demand or other paper if the same shall be duly mailed by registered or certified mail, postage prepaid, addressed as follows: To the Issuer: County of Contra Costa 651 Pine Street, North Wing, 4th Floor Administration Building Martinez, California 94553 Attention: Deputy Director of Redevelopment To the Trustee: Bank of America National Trust and Savings Association 333 South Beaudry Avenue, 25th Floor Los Angeles, California 90017 Attention: Corporate Trust Division Reference: Contra Costa 1994A —Del Norte To the Borrower: Del Norte Place A California Limited Partnership c/o The John Stewart Company The IBEX Group 2310 Mason Street San Francisco, California 94117 Attention: President -74- To the Remarketing Agent: Newman and Associates, Inc. 1801 California Street, Suite 3700 Denver,Colorado 80202 Attention: Mr. Bradley James If to the Credit Enhancement Provider: The Sumitomo Bank, Ltd. 233 South Wacker Drive Sears Tower, Suite 4800 Chicago, Illinois 60606-6448 Attention: If to the Tender Agent: BankAmerica National Trust Company 2 Rector Street, 9th Floor New York, New York 10006 The Issuer, the Borrower, the Credit Enhancement Provider, the Tender Agent and the Trustee, by notice given hereunder, may designate any different addresses to which subsequent notices, certificates or other communications shall be sent, but no notice directed to any one such entity shall thereby be required to be sent to more than two addresses. All approvals required hereunder shall be given in writing. SECTION 1004. RATING AGENCY NOTICES. The Trustee shall provide to the Rating Agency prior written notice of the following: (i) the providing of an Alternate Credit Enhancement pursuant to Section 611 hereof; (ii) expiration of the Credit Enhancement or any Alternate Credit Enhancement ; (iii) exercise by the Borrower of its Conversion Option pursuant to Section 603 hereof and the mandatory tender of Bonds as a result thereof; (iv) any optional or mandatory tender of Bonds; or (v) any amendment or supplement to this Indenture, the Agreement, the Reimbursement Agreement, the Credit Enhancement or any Alternate Credit Enhancement. SECTION 1005. PAYMENTS DUE ON NON-BUSINESS DAYS. In any case where the date of maturity of interest on the Bonds, or principal of the Bonds, or the date fixed for redemption of any Bonds shall not be a Business Day, then payment of such interest or principal need not be made on such date but shall 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, in the case of such payment, no interest shall accrue for the period from and after such date. SECTION 1006. BINDING EFFECT. This instrument shall inure to the benefit of and shall be binding upon the Issuer, the Trustee and their respective successors and assigns, subject, however, to the limitations contained in this Indenture. SECTION 1007. CAPTIONS. The captions or headings in this Indenture are for convenience only and in no way define, limit or describe the scope or intent of any provisions or sections of this Indenture. -75- SECTION 1008. GOVERNING LAW. This Indenture shall be governed by and interpreted in accordance with the laws of the State. SECTION 1009. NO RECOURSE. No recourse shall be had for the payment of the principal of or the interest on the Bonds, or for any claim based thereon, or otherwise in respect thereof, or based on or in respect of the Indenture or any indenture supplemental hereto, against any Member, officer, employee or agent, as such, of the Issuer or any successor, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue of the Bonds, expressly waived and released. -76- IN WITNESS WHEREOF, the Issuer has caused this Indenture to be executed in its name and on its behalf by its duly authorized officer, and the Trustee has caused this Indenture to be executed in its name by its duly authorized officer, all as of the day 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: 13052-17:J7223 -77- EXHIBIT A FORM OF BOND No. R-1 $ COUNTY OF CONTRA COSTA VARIABLE RATE DEMAND MULTIFAMILY HOUSING REVENUE REFUNDING BOND,1994 SERIES A (GNMA COLLATERALIZED DEL NORTE PLACE APARTMENTS) INTEREST RATE MATURITY DATE DATED DATE: CUSIP April 28, 1994 REGISTERED OWNER: PRINCIPAL AMOUNT: FOR VALUE RECEIVED, the County of Contra Costa (the "Issuer") hereby promises to pay, but only from the sources provided herein, to the Registered Owner specified above, or registered assigns, the Principal Amount specified above, upon surrender hereof at the principal corporate trust office of Bank of America National Trust and Savings Association, as trustee (the "Trustee"), on the Maturity Date specified above, unless redeemed prior thereto as hereinafter provided, and to pay by check mailed by first class mail to the Registered Owner at its registered address as shown on the registration books of the Issuer as maintained by the Trustee, on the Record Date (except with respect to defaulted interest for which a special record date may be established under the Indenture), interest on such Principal Amount from the Dated Date specified above to the Maturity Date specified above or earlier redemption of this Bond at the interest rate per annum provided for in the Indenture, initially payable on May 2, 1994, and thereafter (a) during the Weekly Variable Rate Period, on the first Business Day of each calendar month, and on the Conversion Date and (b) during the Fixed Rate Period, on each April 20 and October 20, (collectively, the "Interest Payment Dates"), until the Bonds have been either fully paid or retired. The Bonds are limited obligations of the Issuer payable solely from the revenues and funds pledged therefor under the Indenture. No holder of this Bond shall ever have the right to compel the exercise of the taxing power of the Issuer, State of California (the "State"), or any political subdivision thereof to pay the principal of this Bond or the interest hereon'or any other cost incident hereto, or to enforce payment hereof against any property of said State or any political subdivision thereof. THE BONDS SHALL NOT CONSTITUTE A DEBT OF THE ISSUER, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF; AND NEITHER THE ISSUER, THE STATE NOR ANY POLITICAL SUBDIVISION THEREOF SHALL BE LIABLE THEREFOR. NEITHER THE FAITH, REVENUES, CREDIT NOR TAXING POWER OF THE ISSUER, THE CITY, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF SHALL BE PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE BONDS. THE BONDS ARE NOT A DEBT OF THE UNITED Exhibit A Page 1 STATES OF AMERICA OR OF ANY AGENCY THEREOF, AND ARE NOT GUARANTEED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA. THE BONDS ARE A SPECIAL LIMITED OBLIGATION OF THE ISSUER, PAYABLE, AS TO PRINCIPAL AND INTEREST, SOLELY OUT OF THE TRUST ESTATE, WHICH IS THE SOLE ASSET PLEDGED THEREFOR. This Bond is one of a duly authorized issue of bonds of the Issuer designated as "County of Contra Costa Variable Rate Demand Multifamily Housing Revenue Refunding Bonds, 1994 Series A (GNMA Collateralized — Del Norte Place Apartments), limited in aggregate principal amount to $11,110,000 (the 'Bonds"), all issued pursuant to and in full compliance with the laws of the State of California, including particularly Chapter 7 of Part 5 of Division 31 of the Health and Safety Code of the State of California, as amended (the "Act"), a resolution of the Issuer adopted on April 19, 1994 (the 'Bond Resolution"), and the Indenture (as hereinafter defined). The Bonds are issued under and are equally and ratably secured as to principal and interest by a Trust Indenture, dated as of April 1, 1994, between the Issuer and the Trustee (the "Indenture"), to which Indenture and all indentures supplemental thereto (copies of which are on file at the corporate trust office of the Trustee in Los Angeles, California) reference is hereby made for a description of the trust estate under the Indenture, the nature and extent of the security and the terms and conditions upon which the Bonds are issued and secured, and the rights of the registered owners thereof. Defined terms used herein and not defined herein shall have the meanings assigned to them in the Indenture. The Bonds are being issued by the Issuer for the purpose of providing funds to acquire a fully-modified, mortgage-backed security guaranteed as to timely payment of principal and interest by the Government National Mortgage Association, to assist in the refinancing of the acquisition, construction and equipping of a 135-unit apartment building in the City of El Cerrito, California owned by Del Norte Place A California Limited Partnership (the 'Borrower"). The Bonds are issuable as fully registered Bonds in the denomination of $100,000 or integral multiples of $5,000 in excess thereof during the Weekly Variable Rate Period, and $5,000 or integral multiples thereof during the Fixed Rate Period ('Authorized Denominations"). This Bond, upon surrender hereof at the principal corporate trust office of the Trustee with a written instrument of transfer satisfactory to the Trustee executed by the registered owner hereof or an attorney duly authorized in writing, may, at the option of the registered owner hereof, be exchanged for an equal aggregate principal amount of Bonds of any other Authorized Denomination. This Bond is transferable as provided in the Indenture, subject to certain limitations therein contained, only upon the bond register of the Issuer, as kept by the Trustee, and only upon surrender of this Bond for transfer to the Trustee duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Trustee duly executed by, the registered owner hereof or an attorney duly authorized in writing. Thereupon, one or more new Bonds of Authorized Denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. Any service charge made by the Trustee for any such registration, transfer or exchange hereinbefore referred to shall be paid by the Borrower. The Trustee or the Issuer may require payment by the registered owner of a sum sufficient to cover any tax or other Exhibit A Page 2 governmental charge payable in connection therewith. Neither the Issuer nor the Trustee shall make any such exchange or registration of transfer of any Bond after notice of redemption or partial redemption of such Bond has been given. The Trustee is not required to register the transfer or exchange of any Bond (or portion thereof) during the five-day period next preceding the selection of Bonds for redemption, and from and after notice calling such Bonds (or portion thereof) for redemption or partial redemption has been given and prior to such redemption. The Issuer, the Trustee and the Tender Agent, and any agent of the Issuer, the Trustee or the Tender Agent, may treat the person in whose name this Bond is registered as the absolute owner hereof for any purpose, whether or not this Bond would be overdue, and neither the Issuer, the Trustee, the Tender Agent nor any such agent shall be affected by notice to the contrary. Weekly Variable Rate Period The Bonds shall bear interest at the Weekly Variable Rate determined by Newman and Associates, Inc., or its successor (the 'Remarketing Agent"), as provided below, for each seven-day period from Wednesday of a calendar week for which the Weekly Variable Rate is to be determined to and including Tuesday of the next succeeding calendar week. The Weekly Variable Rate shall be the rate, not exceeding twelve percent (12%) per annum (the "Maximum Rate"), determined by the Remarketing Agent to be the minimum rate of interest necessary, in the best professional judgment of the Remarketing Agent, taking into account prevailing market conditions, to enable the Remarketing Agent to sell all the Bonds on the rate determination date at a price of 100% of the principal amount thereof plus accrued interest thereon. Interest on the Bonds during the Weekly Variable Rate Period shall be computed on the basis of a 365 or 366-day year, as applicable, for the actual number of days elapsed. During the weekly Variable Rate Period the Bonds are required to be secured by a Credit Enhancement. Fixed Rate Period From the Conversion Date to the Maturity Date specified above, the Bonds shall bear interest at a Fixed Interest Rate. On any Interest Payment Date, upon the compliance with certain conditions set forth in the Indenture, the Bonds may be converted to a Fixed Interest Rate. The Fixed Interest Rate on the Bonds shall be that rate, not exceeding the Maximum Rate, determined by the Remarketing Agent to be the minimum rate of interest necessary, in the best professional judgment of the Remarketing Agent, taking into account prevailing market conditions, to enable the Remarketing Agent to sell on the rate determination date all the Bonds at 100% of the principal amount thereof plus accrued interest thereon. During the Fixed Rate Period, the Bonds shall bear interest at the Fixed Interest Rate, payable on each Interest Payment Date. Such interest shall be computed on the basis of a year of three hundred and sixty (360) days of twelve (12) thirty (30) day months. During the Fixed Rate Period the Bonds may be secured by a Credit Enhancement at the option of the Borrower, such option to be exercised on or before the Conversion Date. Exhibit A Page 3 Repurchase of Bonds at Option of Registered Owner During the Weekly Variable Rate Period, any Bond shall be caused to be purchased by BankAmerica National Trust Company, as the Tender Agent (the "Tender Agent"), on behalf of and as agent for the Borrower, on the demand of the registered owner thereof, on any Business Day (as defined in the Indenture) at a purchase price equal to one hundred percent (100%) of the principal amount thereof plus accrued interest, if any, to the date of purchase upon delivery, the Tender Agent at its principal office, of a Bondholder Tender Notice. The date stated in the Bondholder Tender Notice on which such Bonds shall be purchased shall be a Business Day not prior to the seventh day next succeeding the date of delivery of such notice to the Tender Agent. Mandatory Purchase on Conversion Date The registered owners of the Bonds shall be required to tender their Bonds to the Tender Agent who shall purchase the Bonds on behalf of and as agent for the Borrower for the purchase price equal to the principal amount thereof plus interest accrued to the Conversion Date, which will be the date of purchase. Optional Redemption During the Weekly Variable Rate Period, the Bonds shall be subject to redemption by the Issuer, in whole or in part (but only in Authorized Denominations), at the option of the Borrower, but with the consent of the Credit Enhancement Provider, on any Interest Payment Date, at a redemption price equal to one hundred percent (100%) of the principal amount redeemed plus accrued interest to the redemption date, without premium. During the Fixed Rate Period, the Bonds shall be subject to redemption by the Issuer, on any Interest Payment Date, in whole or in part, as set forth in the Indenture. Mandatory Redemption The Bonds are subject to mandatory redemption in Authorized Denominations at any time at a redemption price equal to one hundred percent (100%) of the principal amount of the Bonds to be redeemed plus accrued interest thereon to the redemption date, in accordance with the following: (a) The Bonds shall be subject to mandatory redemption, in whole, in the event that the aggregate amount on deposit in the Debt Service Reserve Fund, the Redemption Account and the Receipts Account is sufficient to pay the principal of and interest on all Bonds Outstanding on such date. (b) The Bonds shall be subject to mandatory redemption, in whole, due to an occurrence of an Event of Default (as defined in the Agreement); provided that the Credit Enhancement Provider, if required, shall have consented to the same constituting an Event of Default. (c) The Bonds shall be subject to mandatory redemption, in whole, within ten (10) days of the receipt by the Trustee of a written notice from the Credit Exhibit A Page 4 Enhancement Provider that a default under the Reimbursement Agreement has occurred and directing the Trustee to redeem all Outstanding Bonds. (d) The Bonds shall be subject to mandatory redemption, in whole, on the Business Day prior to the expiration date of the Credit Enhancement, in the event of a failure to obtain a commitment to extend the Credit Enhancement or obtain an Alternate Credit Enhancement by a date ten (10) Business Days prior to the expiration of the Credit Enhancement, unless the Bonds have been converted to a Fixed Interest Rate pursuant to the Indenture without the security of the Credit Enhancement. (e) The Bonds shall be subject to mandatory redemption, in whole or in part, if (i) payments (other than optional prepayments) on the Loan are made in excess of regularly scheduled payments, including payments representing casualty insurance proceeds or condemnation awards applied to the prepayment of the Loan following a partial or total destruction or condemnation of the Project; (ii) FHA Debentures issued in satisfaction of a mortgage insurance claim with respect to the Loan mature or are called for redemption by HUD; (iii)mortgage insurance proceeds are otherwise payable with respect to the Loan following the occurrence of an event of default thereunder; or (iv) a prepayment of the Loan is required pursuant to applicable rules, requirements or policies of HUD, including a prepayment of the Note in whole or in part without the consent of the Trustee and without penalty if HUD determines that a prepayment would avoid a mortgage insurance claim and is in the best interest of the federal government. (f) The Bonds shall be subject to mandatory redemption in part on the first date for which notice of redemption can timely be given under the Indenture, when ever amounts in the Redemption Fund established under the Indenture total the amounts specified in the Indenture, as a result of transfers thereto from the Receipts Account of the General Receipts Fund established under the Indenture. If less than all of the Bonds are to be called for redemption, the Trustee shall select by lot, in such manner as it shall in its discretion determine, the Bonds, or portions thereof in Authorized Denomination to be redeemed. If there shall be called for redemption less than the entire principal amount of a Bond, the Issuer shall execute and the Trustee shall authenticate and deliver, upon surrender of such Bond, without charge to the registered owner thereof, in exchange for the unredeemed principal amount of such Bond, at the option of such registered owner, a Bond or Bonds in Authorized Denominations equal to that portion of the Bond not so redeemed. Notice of Redemption In the event of a redemption of the Bonds for any reason, notice thereof shall be given to the holders of the Bonds to be so redeemed in the manner specified in this paragraph. Except as provided below, notice of redemption shall be given not less than thirty (30) nor more than forty-five (45) days prior to the date fixed for redemption by first class mail postage prepaid to the registered owner of each Bond to be redeemed, at the address of such registered owner shown on the Bond Register; provided, however, that in Exhibit A Page 5 the event of a mandatory redemption pursuant to paragraphs (c) through (e) above, the Trustee may redeem such Bonds with five (5) days prior notice to the Owners of the Bonds to be redeemed. The notice shall require that such Bonds be surrendered at the principal corporate trust office of the Trustee for redemption at the redemption price, and shall, state that further interest on such Bonds will not accrue from and after the redemption date. CUSIP number identification with appropriate dollar amounts for each CUSIP number also shall accompany all redemption payments. Notice of such redemption also shall be sent by registered mail, overnight delivery service or other secure means, postage prepaid, to certain municipal registered securities depositories (as set forth in the Indenture) which are known to the Trustee to be holding Bonds, and to at least two of the national information services (as set forth in the Indenture) that disseminate securities redemption notices, when possible, at least five (5) days prior to the mailing of notices required by the first paragraph above, but in any event at least 30 days, but not more than 45 days, prior to the redemption date. Neither failure to receive notice, as described in either of the two preceding paragraphs, nor any defect in any notice so mailed shall affect the sufficiency of the proceedings for the redemption of such Bonds. If provision is made for the payment of principal of and interest on this Bond in accordance with the Indenture, this Bond shall no longer be deemed Outstanding under the Indenture, shall cease to be entitled to the benefits of the Indenture, and shall thereafter be payable solely from the funds provided for payment. Under certain circumstances as described in the Indenture, the principal of all of the Bonds may be declared due and payable in the manner and with the effect provided in the Indenture. Immediately following any such declaration of acceleration, the Trustee shall mail notice of such declaration by first class mail to each registered owner of Bonds at such registered owner's last address appearing on the bond register kept by the Trustee. Any defect in or failure to give such notice of such declaration shall not affect the validity of such declaration. The Indenture permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer, the Borrower, the Credit Enhancement Provider and the registered owners of the Bonds at any time with the consent of the registered owners of a majority in aggregate principal amount of the Bonds at the time outstanding which are affected by such amendment or modification. The Indenture also permits amendments and supplements to the Indenture and the Agreement without requiring the consent of any Bondholders in certain specifically described instances. The Indenture also contains provisions permitting, subject to the consent of the Credit Enhancement Provider, registered owners of a majority in aggregate principal amount of the Bonds at the time Outstanding, on behalf of all the registered owners of all Bonds, to waive compliance by the Issuer and the Borrower with certain provisions of the Indenture and their consequences. Any such consent or waiver by the registered owner of this Bond shall be conclusive and binding upon such registered owner and on all future registered owners of this Bond and of any Bond issued in lieu hereof, whether or not notation of such consent or waiver is made upon this Bond. Supplements and amendments to the Exhibit A Page 6 0 Indenture or the Agreement may be made only to the extent and in circumstances permitted by the Indenture. The registered owner of this Bond shall have no right to enforce the provisions of the Indenture or the Agreement, or to institute action to enforce the covenants therein, or to take any action with respect to a default under the Indenture or the Agreement, or to institute, appear in or defend any suit or other proceedings with respect thereto, except as provided under certain limited circumstances described in the Indenture; provided, however, that nothing contained in the Indenture shall affect or impair any right of enforcement conferred on the registered owner hereof to enforce (i) the payment of the principal of, and interest on, this Bond at and after the maturity hereof, or (ii) the obligation of the Issuer to pay the principal of, and interest on, this Bond to the registered owner hereof at the time, place, from the sources and in the manner provided in the Indenture. The registered owner of this Bond, by acceptance hereof, consents to all of the terms and provisions of the Indenture and the Agreement. The principal corporate trust office of the Trustee, and the principal office of the Tender Agent, are as provided in the Indenture. No recourse shall be had for the payment of the principal of or the interest on this Bond, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture or any indenture supplemental thereto, against the general credit of the Issuer or against any Member, officer, employee or agent, as such, past, present or future, of the Issuer or any successor, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released. IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required to exist, happen and be performed precedent to the execution and delivery of the Indenture and the issuance of this Bond and the issue of which it is a part, do exist, have happened and have been timely performed in regular form and manner as required by law, and the issuance of this Bond, together with all other obligations of the Issuer, does not exceed or violate any State of California constitutional or statutory limitation or any other limitation of the Issuer. This Bond shall not be entitled to any benefit under the Indenture or become valid or obligatory for any purpose until authenticated by the certificate of the Trustee or the Tender Agent endorsed hereon. Exhibit A Page 7 IN WITNESS WHEREOF the Issuer has caused this Bond to be duly executed in its name by the manual or facsimile signature of the Chair of the Board of Supervisors under its official seal, or a facsimile thereof, and attested by the manual or facsimile signature of the Clerk of the Board of Supervisors. COUNTY OF CONTRA COSTA By: Chair of the Board of Supervisors (SEAL) Attest: By: Clerk of the Board of Supervisors CERTIFICATE OF AUTHENTICATION This Bond is one of the Bonds described in the within mentioned Indenture. BANK OF AMERICA NATIONAL BANKAMERICA NATIONAL TRUST TRUST AND SAVINGS ASSOCIATION, COMPANY, as Tender Agent as Trustee By: By: Authorized Signatory Authorized Signatory Date of Authentication: Exhibit A Page 8 • ASSIGNMENT For value received, the undersigned do(es) hereby sell, assign and transfer unto (Name,Address and Tax Identification or Social Security Number of Assignee) the within Certificate and do(es) hereby irrevocably constitute and appoint , attorney attorney, to transfer the same on the registration books of the Fiscal Agent, with full power of substitution in the premises. Dated: Signature Guaranteed: NOTICE: Signature(s) must be guaranteed by an NOTICE: The signature(s) on this Assignment must eligible guarantor. correspond with the name(s)as written on the face of the within Certificate in every particular, without alteration or enlargement or any change whatsoever. Exhibit A Page 9 13052-17 JHHW:PJT:cra 04/05/94 J1261 04/17/94 FINANCING AGREEMENT Dated as of April 1,1994 By and Among COUNTY OF CONTRA COSTA, DEL NORTE PLACE A CALIFORNIA LIMITED PARTNERSHIP, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Trustee, and TRI CAPITAL CORPORATION Relating to: $11,110,000 County Of Contra Costa Variable Rate Demand Multifamily Housing Revenue Refunding Bonds, 1994 Series A (GNMA Collateralized — Del Norte Place Apartments) Paze TABLE OF CONTENTS ARTICLE I DEFINITIONS AND INTERPRETATION Section1.1. Definitions.............................................................................................................3 Section 1.2. Rules of Construction...............................................................................................3 ARTICLE II REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS Section 2.1. General Representations and Findings of the Issuer...................................................4 Section 2.2. Representations,Warranties and Undertakings by the Borrower..............................4 Section 2.3. Representations, Warranties and Undertakings of the Lender...................................8 Section 2.4. Hazardous Waste Covenant..................................................................................10 Section 2.5. Warranty of Truth................................................................................................12 ARTICLE III THE FINANCING TRANSACTION Section 3.1. General Terms of the Financing..............................................................................13 Section 3.2. Delivery of the GNMA Security............................................................................13 Section 3.3. Sufficiency of Funds...............................................................................................13 Section 3.4. Lender Loan to Borrower........................................................................................13 Section 3.5. Investment of Moneys............................................................................................14 Section 3.6. Failure to Deliver the GNMA Security..................................................................14 Section 3.7. Extension of GNMA Security Delivery Date...........................................................14 Section 3.8. Acquisition of the GNMA Security.........................................................................15 Section 3.9. Bond Purchase or Redemption................................................................................15 ARTICLE IV PAYMENTS; SPECIAL COVENANTS OF THE BORROWER Section 4.1. Additional Payments............................................................................................16 Section 4.2. Operation of the Project.........................................................................................16 Section 4.3. Compliance with Applicable Laws........................................................................16 Section 4.4. Other Payments by Borrower.................................................................................16 Section 4.5. Obligation of Borrower to Replenish Debt Service Reserve Fund ............................17 Section4.6. Credit Enhancement..............................................................................................17 ARTICLE V ADDITIONAL COVENANTS AND AGREEMENTS Section 5.1. Absolute and Unconditional Obligation; Limited Recourse......................................18 Section5.2. No Defense...........................................................................................................20 Section 5.3. Waiver of Notice..................................................................................................20 Section5.4. Inspections............................................................................................................20 Section 5.5. Reports and Information........................................................................................20 Section5.6. Assignment...........................................................................................................20 Section5.7. Fees and Expenses..................................................................................................20 Section5.8. Indemnification....................................................................................................21 -i- Paye Section 5.9. Mortgage Loan Documents......................................................................................23 Section 5.10. Right to Perform Borrower's Obligations................................................................23 ARTICLE VI SPECIAL TERMS AND PROVISIONS Section 6.1. No Pecuniary Liability.........................................................................................24 Section 6.2. Further Assurances and Corrective Instruments.......................................................24 Section 6.3. Tax Covenants.......................................................................................................24 ARTICLE VII EVENTS OF DEFAULT; REMEDIES Section 7.1. Events of Default; Remedies..................................................................................27 Section 7.2. No Remedy Exclusive,. xclusive.. 27 Section 7.3. No Additional Waiver Implied by One Waiver.....................................................27 Section 7.4. Rights of the Credit Enhancement Provider...........................................................28 Section 7.5. Assignment to Credit Enhancement Provider..........................................................28 ARTICLE VIII TERMINATION AND PREPAYMENT Section8.1. Option to Terminate..............................................................................................29 Section8.2. Option to Prepay Loan...........................................................................................29 Section 8.3. Notice of Prepayment; Timing of Prepayment.........................................................29 ARTICLE IX MISCELLANEOUS Section 9.1. Term of Agreement................................................................................................30 Section 9.2. Assignment by the Issuer........................................................................................30 Section9.3. Notices.................................................................................................................30 Section9.4. Binding Effect.......................................................................................................30 Section 9.5. Successors and Assigns...........................................................................................30 Section9.6. Severability.........................................................................................................30 Section 9.7. Amendments,Changes and Modifications..............................................................31 Section 9.8. Execution of Counterparts......................................................................................31 Section 9.9. Law Governing Construction of Agreement..............................................................31 Section 9.10. Amounts Remaining in General Receipts Fund or Other Funds..................................31 Section 9.11. FHA Loan Documents and Regulations Control.......................................................31 Section 9.12. Limited Liability.................................................................................................31 -ii- FINANCING AGREEMENT THIS FINANCING AGREEMENT (the "Agreement") is entered into as of the 1st day of April, 1994, by and among the COUNTY OF CONTRA COSTA, a public body, corporate and politic, existing under the laws of the State of California (together with its successors and assigns, the "Issuer"), DEL NORTE PLACE A CALIFORNIA LIMITED PARTNERSHIP (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 (the "Indenture"), and TRI CAPITAL CORPORATION, a California corporation (together with its successors and assigns, the "Lender"). RECITALS: Upon the request of the Borrower, the Issuer has determined to issue under the Indenture its Variable Rate Demand Multifamily Housing Revenue Refunding Bonds, 1994 Series A (GNMA Collateralized — Del Norte Place Apartments) in the aggregate principal amount of $11,110,000 (the "Bonds"), in order to assist in the financing and refinancing of a facility maintained and operated for rental housing known as Del Norte Place Apartments (the "Project") located within the geographical boundaries of the Issuer. The Lender has made a secured loan in the original principal amount of $10,586,300 (the "Mortgage Loan") to the Borrower to provide permanent financing for the Project and has delivered to the trustee (the "Prior Trustee") under an indenture (the "Prior Indenture") securing the Issuer's Multifamily Housing Revenue Bonds (GNMA Collateralized — Del Norte Place Apartments) 1990 Series B (the "Prior Bonds") a mortgage- backed security (the "Prior GNMA Security") guaranteed as to payment of principal and interest by the Government National Mortgage Association ("GNMA") to secure payment of the Prior Bonds. The Mortgage Loan is coinsured by the Lender and the Federal Housing Administration ("FHA"), an organizational unit within the United States Department of Housing and Urban Development ("HUD") pursuant to Sections 221(d)(4) and 244 of the National Housing Act of 1934, as amended (the "National Housing Act"). The Mortgage Loan is evidenced by a deed of trust note (the "Mortgage Note") in favor of the Lender and secured by a mortgage (the "Mortgage") on the Project. The Borrower is in default of its obligation to make payments under the Mortgage Note, and the Lender has, therefore, the right to prepay the Prior GNMA Security. Under the terms of the Prior Indenture, the Prior Bonds are subject to mandatory redemption at a redemption price equal to the principal amount plus accrued interest to the redemption date, as a whole or in part to the extent that Prior Trustee receives payments on the Prior GNMA Security in excess of regularly scheduled payments (except optional prepayments) including (but not limited to) payment representing mortgage insurance proceeds or other amounts received in respect to the Mortgage Loan following the acceleration thereof upon the occurrence of an event of default thereunder. -1- The Lender and FHA have agreed to amend, reinstate and reinsure the maximum insurable the amount of the Mortgage Loan to the Borrower in connection with the proposed refunding and obtained the funds therefor by issuing and delivering to the Trustee on behalf of the Issuer, a new fully modified mortgage-backed security (the "GNMA Security") guaranteed as to timely payment of principal and interest by GNMA with respect to the amended and reinstated Mortgage Loan; The Trustee shall use a portion of the proceeds of the Bonds to purchase from the Lender the GNMA Security which will be guaranteed as to timely payment of principal and interest by GNMA, to reimburse the Borrower for costs incurred in connection with the construction of the Project and to pay certain costs in connection with the issuance of the Bonds. The GNMA Security will be secured by the Mortgage. In connection with, and in consideration for, such use of the proceeds of the Bonds, the Borrower will cause the Lender to prepay the Prior GNMA Security in order to cause the redemption of the Prior Bonds. The Issuer, the Borrower, the Trustee and the Lender each represent as to themselves that they have full 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: -2- ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1. Definitions. Terms used in this Agreement and defined in the Indenture shall have the meanings given to them by the Indenture, 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. 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 their respective counsel have participated in the drafting and revision of this Agreement and the Indenture. Accordingly, the parties agree that any rule of construction which would disfavor the drafting party shall not apply in the interpretation of this Agreement or the Indenture or any Supplement or exhibit hereto or thereto. -3- ARTICLE II REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS SECTION 2.1. General Representations and Findings of the Issuer. The Issuer makes the following representations and warranties: (a) The Issuer is a public 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 and the Indenture 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 and the Indenture. (b) The Issuer is issuing the Bonds, at the request of the Borrower, in order to acquire the GNMA Security and reimburse the Borrower for costs of the Borrower incurred in connection with the Project, and thereby refinance a portion of the costs of the acquisition and construction by the Borrower of the Project. (c) To its knowledge, neither the execution nor the delivery of the Bonds, this Agreement, the Bond Purchase 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 constitute a default under any of the foregoing. (d) The Issuer hereby confirms its findings relating to the issuance of the Bonds contained in its 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 limited partnership duly organized and existing, and in good standing, under the laws of the State, (ii) has the power to own its property and to carry on its business as now being conducted and as contemplated by this Agreement and the FHA Loan Documents, and (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. (b) Authority. The Borrower has full power and authority to execute and deliver this Agreement, each of the FHA Loan Documents executed and delivered by it 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 partnership 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 or any of the FHA Loan Documents executed and delivered by the Borrower have been obtained. -4- Q Binding Agreements. This 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, however, 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 or any of the FHA Loan Documents executed and delivered by the Borrower. (e) Conflicts; Defaults. (i) There is (A) no provision of the Borrower's partnership agreement 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 (B) 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 or any of the other 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. (ii) 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, except with respect to the default under the FHA Loan Documents. (f) Title to Property. The Borrower has good and marketable title to the Land free and clear of any liens or encumbrances (other than encumbrances on the Project approved by the Lender and 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 and agrees to be bound by the terms and conditions of, 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 Bonds being included in gross income for federal income tax purposes, the Borrower shall promptly give written notice thereof to the Issuer, the Trustee and the Underwriters. -5- W Compliance with Laws. The Project is of the type authorized and permitted to be financed and/or refinanced under the Act and has at all times been operated by the Borrower in compliance with any applicable provisions of the Act or the Code. The Borrower will use due diligence to cause the Project to be operated in accordance with the Code and 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 all requisite approvals of the State and of other federal, state, regional and local governmental bodies for the operation of the Project. (j) No Reliance on Issuer or Trustee. 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 or the Trustee 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 or the Trustee 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. (k) Changes to Project. The Borrower shall make no changes to the Project or to the operation thereof which would affect the qualification of the Project under the Act or impair the exclusion from gross income under federal tax law of interest on the Bonds. The Borrower intends to utilize the portion of the Project being financed or refinanced with the proceeds of the Bonds as a residential rental facility so long as the Bonds are outstanding. (1) Cost of Issuance Limit. The aggregate amount of the proceeds of the Bonds used to pay costs of issuance of the Bonds does not exceed two percent (2%) of the proceeds of the Bonds. (m) Operation of the Project. The operation of the Project in the manner presently contemplated and as described herein will not conflict with any zoning, water or air pollution or other ordinance, order, law or regulation applicable thereto. The Borrower will cause the Project to be operated in accordance with all applicable federal, state and local laws or ordinances (including rules and regulations) relating to zoning, building, safety and environmental quality. (n) Taxes. The Borrower has filed or caused to be filed all federal, state and local tax returns which are required to be filed, and has paid or caused to be paid all taxes as shown on said returns or on any assessment received by it, to the extent that such taxes have become due. (o) Conflict with Issuer. No officer or other official of the Issuer has any financial interest whatsoever in the Project or the Borrower or in the transactions contemplated by this Agreement. (p) Disclosure Statement. The information contained in the official statement of the Issuer with respect to the Bonds, insofar as such information relates to the Borrower and the Project, is accurate in all material respects and does not contain any untrue statement of -6- a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. (q) Sale of Project. The Borrower intends to continue to hold the Project for its own account, has no current plans to sell and has not entered into any agreement to sell the Project. (r) Acquisition of Bonds. The Borrower has contacted all "related persons" thereof (within the meaning of section 147(a) of the Code); and neither it nor any of them shall, at any time, pursuant to any arrangement, formal or informal, acquire any Bond. (s) Useful Life. Within the meaning of Section 147(b) of the Code, the average maturity of the Bonds does not exceed 120 percent of the average reasonably expected remaining economic life of the facilities being financed with the proceeds of the Bonds. (t) Project Location. The Project is located wholly within the City of El Cerrito, California. (u) Commencement of Construction. The acquisition, construction and equipping of the Project commenced subsequent to August 22, 1989; and neither the Owner nor any "related person" (as defined in of the Code) entered into any binding agreement in connection with the acquisition, construction or equipping of the Project or incurred any costs to be reimbursed from Prior Bond proceeds prior to such date. (v) Financial Information. Any financial statement which has been furnished to the Issuer and the Credit Enhancement Provider is complete and accurate in all material respects and presents fairly the financial condition of the Borrower as of its date in accordance with generally accepted accounting principles, and since the date of the financial statement there has not been any material adverse change, financial or otherwise, in the condition of the Borrower, and there has not been any material transaction entered into by the Borrower other than transactions in the ordinary course of business, and the Borrower does not have any material contingent obligations which are not otherwise disclosed in its financial statement, other than as required and contemplated by this Agreement in connection with the issuance of the Bonds. (w) Defaults. No event has occurred and no condition exists with respect to the Borrower that would constitute an "Event of Default" under this Agreement or which, with the lapse of time, if not cured, or with the giving of notice or both, would become an "Event of Default" under this Agreement. (x) Prior Bond Proceeds. Substantially all (at least 95%) of the sum of the aggregate amount disbursed from the Prior Bond proceeds to pay directly to third parties or to reimburse the Borrower for paying Project costs, including an allocable portion of any costs which are neutral Project costs pursuant to the Code, have been or will be used to finance the acquisition, construction and equipping of facilities qualifying for financing under the Code. -7- (y) Breaches. The Borrower agrees, upon receiving knowledge thereof, to notify the Trustee, the Credit Enhancement Provider and the Issuer immediately in writing of any default by the Borrower in the performance or observance of any covenant, agreement, representation, warranty or obligation of the Borrower set forth in this Agreement or the Loan Documents. (z) Discrimination. The Borrower will not discriminate on the basis of color, creed, age (except as otherwise required in connection with the Disposition and Development Agreement, as defined in the Regulatory Agreement), race, religion, handicap, sex, marital status 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. (aa) Project Improvements. The Project consists of a building or structure or several proximate buildings or structures that have similarly constructed units, are owned or subject to control at all times, for federal tax purposes, by one person, and are financed pursuant to a common plan of financing. The Project may include facilities functionally related and subordinate thereto. (bb) Project Units. All of the residential units in the Project contain complete living, sleeping, eating, cooking and sanitation facilities for a single person or a family. None of the units in the Project will at any time be used on a transient basis, or used as a hotel, motel, dormitory, fraternity house, sorority house, rooming house, hospital, nursing home, sanitarium, rest home or trailer park and court. (cc) Prior Bond Proceeds. The Borrower did not use any proceeds of the Prior Bonds (i) for the construction of any commercial, retail or office space, (ii) to provide an airplane, a skybox or other private luxury box, any health club facility, any facility primarily used for gambling, or any store the principal business of which is the sale of alcoholic beverages for consumption off premises, (iii) to acquire land or any interest therein in an amount equal to or greater than twenty-five percent (25%) of the proceeds of the Prior Bonds, or (iv) to provide funding for parking spaces not required for the use of the residents of the Project. 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, 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, and delivery of the GNMA Security. -8- V Binding Agreements. This Agreement constitutes, and the GNMA Security, upon the issuance, execution and delivery thereof, will 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; provided that, the GNMA Security does not constitute a liability of, nor evidence any recourse against the Lender, since it is based on and backed by the Mortgage, and recovery may be made from GNMA in the event of any failure of timely payment as provided for in the GNMA Security and the GNMA Guaranty Agreement. (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 service mortgage loans co-insured by FHA under Section 221(d)(4) and 244 of the National Housing Act and applicable regulations thereunder, and (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(g) of the National Housing Act and applicable regulations thereunder. (f) Eliig bility of Mortgage for GNMA Guarantee. The Lender believes that the Project, including the Mortgage, will meet the eligibility requirements set forth in the GNMA Mortgage-Backed Securities Guide as of the Original Issue 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 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 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 -9- from the Bonds or from any other obligation, the interest on which is exempt from federal income taxes. (j) 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 (i) in connection with the disbursement of the moneys in the Project Fund and the delivery of the GNMA Security, and (ii) as necessary to compute the Rebate Amount under Section 311(e) and Section 404 of the Indenture. (k) Lender's Certificate. The Lender covenants that the certifications in the Lender Certificate, a form of which is attached as Exhibit — to the Bond Purchase Agreement, are true and correct, and agrees that they shall be incorporated herein by reference. (1) The Lender shall prepare and cause to be filed such financing statements or other filings as shall be necessary to perfect a first priority security interest in favor of the Trustee with respect to the Trust Estate, including, without limitation, the GNMA Security. (m) If, at any time, an event occurs which would result in a redemption of less than all of the Bonds pursuant to Section 213 of the Indenture and in a corresponding decrease in future payments on the GNMA Security, the Lender shall, not less than 45 days prior to the applicable redemption date, file with the Trustee a Certificate setting forth: (i) the revised payment schedule for the GNMA Security and (ii) the principal amount (in Authorized Denominations) of Bonds to be redeemed on such redemption date so that the resulting decrease in debt service on the Bonds 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. SECTION 2.4. Hazardous Waste Covenant. In addition to and without limitation of all other representations, warranties and covenants made by the Borrower under this Agreement, the Borrower further represents, warrants and covenants that the Borrower will not use Hazardous Materials (as defined hereinafter) on, from, or affecting the Project in any manner which violates Federal, state or local laws, ordinances, rules, or regulations governing the use, storage, treatment, transportation, manufacture, refinement, handling, production or disposal of Hazardous Materials in a manner that would create a material adverse effect on the Project, and that, to the best of the Borrower's knowledge, no tenant, subtenant, prior tenant or prior subtenant have used Hazardous Materials on, from, or affecting the Project in any manner which violates Federal, state or local laws, ordinances, rules, or regulations governing the use, storage, treatment, transportation, manufacture, refinement, handling, production or disposal of Hazardous Materials except for violations that would not create a material adverse effect on the Project. Without limiting the foregoing, the Borrower shall not cause or permit the Project or any part thereof to be used to generate, manufacture, refine, transport, treat, store, handle, dispose, transfer, produce or process Hazardous Materials, except in substantial compliance with all applicable Federal, state and local laws or regulations, nor shall the Borrower cause or knowingly permit, as a result of any intentional or unintentional act or omission on the part of the Borrower or any tenant or subtenant, a release of Hazardous Materials on to the Project or on to any other property that would create a material adverse effect on the Project. The Borrower shall substantially comply with and require compliance by all tenants and subtenants with -10- all applicable Federal, state and local laws, ordinances, rules and regulations, and shall obtain and comply with, and require that all tenants and subtenants obtain and comply with, any and all approvals, registrations or permits required thereunder. The Borrower shall conduct and complete all investigations, studies, sampling, and testing, and all remedial, removal, and other action required by a governmental authority under an applicable statute or regulation to clean up and remove all Hazardous Materials, on, from, or affecting the Project in accordance with all applicable Federal, state, and local laws, ordinances, rules, and regulations. The Borrower shall defend, indemnify, and hold harmless the Issuer and the Trustee from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs, or expenses of whatever kind or nature, known or unknown, contingent or otherwise, arising out of, or in any way related to, (a) the presence, disposal, release, or threatened release of any Hazardous Materials which are on or from the Project which affect, the soil, water, vegetation, buildings, personal property, persons, animals, or otherwise; (b) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to such Hazardous Materials on or from the Project, and/or (c) any violation of laws, orders, regulations, requirements or demands of government authorities, or written requirements of the Issuer and the Trustee, which are based upon or in any way related to such Hazardous Materials including, without limitation, attorney and consultant fees, investigation and laboratory fees, court costs, and litigation expenses. In the event the Project is foreclosed upon, or a deed in lieu of foreclosure is tendered, or this Agreement is terminated, the Borrower shall deliver the Project in a manner and condition that shall conform with all applicable Federal, state and local laws, ordinances, rules or regulations affecting the Project. For the purposes of this paragraph, "Hazardous Materials" includes, without limit, any flammable explosives, radioactive materials, hazardous materials, hazardous wastes, hazardous or toxic substances, or related materials defined in the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Sections 9601, et seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C. Sections 1801 et seq.), the Resource Conservation and Recovery Act, as amended (42 U.S.C. Sections 9601 et seq.), and in the regulations promulgated pursuant thereto, or any other Federal, state or local environmental laws, ordinance, rule, or regulation. The provisions of this paragraph shall be in addition to any and all other obligations and liabilities the Borrower may have to the Issuer and the Trustee at common law, and shall survive the termination of this Agreement; provided, however that nothing contained in this Section 2.4 shall be construed to change, modify, amend or alter the provisions contained in the Mortgage Loan Documents that provide that the Mortgage Loan shall be a nonrecourse obligation of the Borrower and that the Borrower and its partners shall not be personally liable for the payment thereof. The indemnifications and protections set forth in this Section 2.4 shall be extended, with respect to the Issuer, to its councilmembers, directors, officers, employees, agents and servants and persons under the Issuer's control or supervision, and with respect to the Trustee, to any of its directors, officers, employees, agents and servants and persons under the Trustee's control or supervision. Anything to the contrary in this Agreement notwithstanding, the covenants of the Borrower contained in this Section 2.4 shall remain in full force and effect after the termination of this Agreement until the later of (i) the expiration of the period stated in the applicable statute of limitations during which a claim or cause of action may be brought and -11- (ii) payment in full or the satisfaction of such claim or cause of action and of all expense and charges incurred by the Issuer or the Trustee relating to the enforcement of the provisions herein specified. For the purposes of this Section 2.4, the Borrower shall not be deemed an employee, agent or servant of the Issuer or person under the Issuer's control or supervision. SECTION 2.5. Warranty of Truth. The Borrower covenants that no information, certificate, statement in writing or report required by this 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. -12- 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 refund the Prior Bonds, (i) the Issuer will issue, sell and deliver the Bonds upon the terms and subject to the conditions contained in this Agreement and the Indenture, and will deliver the proceeds thereof to the Trustee; and (ii) and the Borrower shall deliver the sum of $ to the Trustee, to be deposited by the Trustee into the Costs of Issuance Account of the Project Fund. (b) The Lender anticipates that it will deliver the GNMA Security to the Trustee by June 1, 1994. (c) The Borrower promises (i) to repay the principal of the Mortgage Loan with interest thereon as provided in the Mortgage Note subject to the conditions contained therein, and (ii) to comply with the provisions of this Agreement and the FHA Loan Documents 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. Delivery of the GNMA Security. The Borrower (to the extent of its obligations, if any) and the Lender agree to use their best efforts to deliver to the Trustee the GNMA Security on or before June 1, 1994 (as such date may be extended pursuant to the Indenture) (which is 15 days prior to the date on which Bonds are to be redeemed pursuant to the Indenture from moneys in the Prior Bonds Account of the Project Fund in the event the conditions for disbursing the amounts held under the Indenture for the purpose of acquiring the GNMA Security are not satisfied by that date). Neither the Borrower nor the Lender has any reason to believe that GNMA Security will not be delivered to the Trustee on or before such date. SECTION 3.3. Sufficiency of Funds. The Issuer does not make any warranty, either express or implied, that the moneys deposited in the Prior Bonds Account of the Project 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 shall not be entitled to any reimbursement therefor from the Lender, the Issuer, the Trustee or the Bondholders; provided, however that if the Borrower shall incur such costs as a result of the negligent or willful misconduct of the Lender, the Borrower may be entitled to reimbursement therefor. SECTION 3.4. Lender Loan to Borrower. The Lender and the Borrower represent, and the Issuer and the Trustee acknowledge, that the Mortgage Loan (a) is co-insured by the Lender and FHA pursuant to and in accordance with the provisions of Section 221(d)(4) and 244 of the National Housing Act and applicable regulations thereunder, as evidenced by the -13- endorsement by FHA of the Mortgage Note, as modified, evidencing the Mortgage Loan; (b) is in the principal amount of $10,586,300; (c) bears interest at the rate of 8.25% per annum; (d) has a final maturity of October 1, 2032; (e) is payable in equal monthly installments of principal and interest, commencing on June 1, 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 May 20, 1999, 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 May 20, 2003, 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 3.5. Investment of Monexs. 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 Permitted Investments as provided in Section 407 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 3.6. Failure to Deliver the GNMA Security. Any provisions in any other documents to the contrary notwithstanding, in the event the GNMA Security is not delivered to the Trustee by June 15, 1994 (as such date may be extended pursuant to the Indenture), the remaining funds held under the Indenture shall be used to redeem the Bonds in accordance with the provisions of the Indenture, and neither the Borrower nor the Lender shall be entitled to any use of such funds. SECTION 3.7. Extension of GNMA Security Delivery Date. The Borrower agrees to deposit with the Lender for deposit by the Lender with the Trustee an amount equal to the amount required to be deposited with the Trustee for the credit of the Receipts Account of the General Receipts Fund pursuant to Section 402(c)(iii) of the Indenture in the event it is necessary to extend the date of acquisition of the GNMA Security. -14- SECTION 3.8. 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 Prior Bonds Account of the Project 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 Mortgage Note, as modified; (b) 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 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 and the FHA Loan Documents, as of the date of such certificate. (c) notice from the Prior Trustee to the effect that the liability of the Issuer with respect to the Prior Bonds has been discharged as provided in Section 901 of the Prior Indenture. Upon delivery of the foregoing to the Trustee, the Lender shall 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 Prior Bonds Account of the Project Fund. Remaining balances in the Prior Bonds Account of the Project Fund after acquisition of the GNMA Security shall be transferred to the Receipt Account of the General Receipts Fund as provided in the Indenture. SECTION 3.9. Bond Purchase or Redemption. The Trustee shall (i) in the case of an optional redemption (as such term is used in the Indenture) upon notice from the Issuer at the Borrower's request, and (ii) in the case of a mandatory redemption (as such term is used in the Indenture), or (iii) in the case of purchase pursuant to the Indenture, take all steps or cause all steps to be taken as may be necessary, under the Indenture, to effect the earliest possible redemption or purchase, as determined in the discretion of the Trustee, as provided under the Indenture, of any or all of the Bonds or portions thereof as may be specified by the Borrower or the Trustee, as the case may be. In the event of any redemption, the Borrower will pay, or cause to be paid, an amount equal to the principal amount of such Bonds or portions thereof called for redemption, together with interest accrued to the redemption date. -15- ARTICLE IV PAYMENTS;SPECIAL COVENANTS OF THE BORROWER SECTION 4.1. Additional Payments. (a) The Borrower covenants to pay the Rebate Amount, if any, payable to the United States Government as provided herein and in the Indenture. (b) Subject to the restrictions imposed by FHA and the Credit Enhancement Provider with respect to the use thereof, the Borrower agrees to pay amounts from Surplus Cash Flow, all fees and expenses as may be required to be paid by the Borrower pursuant to the terms and provisions of this Agreement and the Reimbursement Agreement. (c) 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. (d) The Borrower agrees to pay to the Trustee on the Original Issue Date the amounts set forth in Section 405 of the Indenture, other than the amounts attributable to the proceeds of the Bonds. (e) In the event the Borrower is in default under any provision of this Agreement or the FHA Loan Documents 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 gross negligence willful misconduct of the Issuer. 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 221(d)(4) and 244 of the National Housing Act and in accordance with the requirements of the Code and the Act. 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. Other 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 -16- the Mortgage Loan, and the fees and expenses of the Trustee required pursuant to the Indenture. The Borrower shall also pay the costs of preparing and filing any financing statements pursuant to Section 2.3(j) hereof and any continuation statements pursuant to Section 309 of the Indenture, and all costs and other amounts mentioned in Sections 5.7, 5.8 and 6.1 hereof. SECTION 4.5. Obligation of Borrower to Replenish Debt Service Reserve Fund . In the event that moneys are withdrawn from the Debt Service Reserve Fund for the purpose of paying interest or principal on the Bonds, or for paying the obligations of the Borrower under the Reimbursement Agreement, the Borrower shall pay the equivalent of such amount into the Debt Service Reserve Fund to replenish such Fund to the level at which such Fund was funded prior to the withdrawal of moneys pursuant to the Indenture. The payment required by this Section shall be made, however, only to the extent that Surplus Cash Flow is available for such purpose. SECTION 4.6. Credit Enhancement. The Borrower shall cause the Credit Enhancement to be delivered to the Trustee on or before the Original Issue Date of the Bonds. The Credit Enhancement shall (a) be in an amount equal to the aggregate principal amount of the Bonds outstanding from time to time plus the Credit Enhancement Interest Requirement; (b) provide for payment to the extent of the amount specified in the preceding clause (a) in immediately available funds to the Trustee (upon receipt of the Trustee's request for payment of the principal of and/or interest on the Bonds then outstanding on any Interest Payment Date, purchase date (to the extent remarketing proceeds are not available with respect to the purchase price of the Bonds) or redemption date pursuant to the Indenture); and (c) provide an expiration date no earlier than the earliest of (i) April 28, 1999 (the "Stated Expiration Date"), unless the Stated Expiration Date has been extended as provided in the Credit Enhancement; (ii) ten (10) days after the Trustee receives notice from the Credit Enhancement Provider of a default under and as defined in the Reimbursement Agreement and a direction to redeem all outstanding Bonds; (iii) the date on which all Bonds are paid in full and the Indenture is discharged in accordance with its terms; (iv) the date on which the Bonds become secured by an Alternate Credit Enhancement in accordance with the terms of the Indenture; or (v) the date on which the interest rate on the Bonds is converted to a Fixed Interest Rate. At the Borrower's option, the Bonds may be converted to bear a Fixed Interest Rate without the security of a Credit Enhancement being in place during the Fixed Rate Period only if upon such conversion the rating on the Bonds shall be in the second highest rating category of the Rating Agency, or with the written consent of the Issuer, such rating as shall be consented to by the Issuer. -17- 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 and all amounts payable by the Borrower to the Issuer or the Trustee under the Financing Documents shall have been paid or provided for, or, if later, (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 and the Mortgage as modified; (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, and the Mortgage as modified, 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, and the Mortgage as modified, the FHA Regulatory Agreement, the Credit Enhancement 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 or the FHA Regulatory Agreement; (f) the taking or the omission of any of the actions referred to in the Indenture, the Mortgage Note and the Mortgage as modified or the FHA 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, -18- 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 (j) the default or failure of the Borrower fully to perform any of its obligations set forth in this Agreement. 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, (other than under Sections 2.4 and 5.8 hereof) (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 of any rights of the Borrower under any guarantees relating 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 importance (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 right of the Borrower under any guarantees relating to the Project), its partners 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. -19- 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 Borrowers 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 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, 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. SECTION 5.6. Assignment* No assignment or transfer of title to the Project shall be made unless (i) the Lender and HUD consent to such assignment or transfer, as long as the Mortgage Loan is held by the Lender and co-insured by the Lender and/or FHA, and (ii) the transferee or assignee, as the case may be, assumes all of the duties of the Borrower under this Agreement, the 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, including without limitation in house counsel) in connection with the issuance of -20- 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 Account of the Project Fund or the Receipts Account of the General Receipts Fund in accordance with Section 401 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 Prior Bonds or the Bonds. Specifically, and without limiting the foregoing, the Borrower agrees to pay (i)to the Issuer and the Trustee, respectively, or to any payee designated by either of them, within thirty (30) days after receipt of request for payment thereof, all reasonable expenses of the Issuer and the Trustee, respectively, 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; and (ii) to the Issuer, on the Original Issue Date, the sum of $ SECTION 5.8. Indemnification. (a) To the fullest extent permitted by applicable law, the Borrower (the "Indemnifying Party") agrees to indemnify, hold harmless and defend the Issuer, the Trustee, and the Prior Trustee and each of their respective officers, governing members, officials, employees, attorneys and agents, and each person, if any, who controls the Issuer, the Trustee and the Prior Trustee within the meaning of Section 15 of the Securities Act of 1933, as amended (the "1933 Act"), or Section 20 of the Securities Exchange Act of 1934, as amended (the "1934 Act") (collectively, the "Indemnified Parties"), against any and all ordinary or extraordinary trustees fees and expenses under the Indenture or the Prior Indenture and any other amounts owing to the Trustee, the Prior Trustee or the Issuer in connection therewith and any and all losses, damages, claims, actions, liabilities, cost and expenses of whatever nature, kind or character (including, without limitation, attorneys' fees, litigation and court costs, amounts paid in settlement and amounts paid to discharge judgments) to which the Indemnified Parties, or any of them, may become subject under the federal or state securities laws or any other statutory law or at common law or otherwise, arising out of or based upon or in any way relating to: (i) the acquisition, construction, equipping, operation, financing or refinancing of the Project; (ii) the redemption of the Prior Bonds, which indemnification shall apply whether any such claim, suit, investigation, proceeding or action is based upon (a) the interference with or breach of or alleged interference with or alleged breach of any existing contract in connection with the Prior Bonds, (b) any untrue statement or alleged untrue statement of a material fact or omission or alleged omission of a material fact required to be stated in any offering document with respect to the Prior Bonds or the Bonds necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or (c) any other wrongful act or alleged wrongful act of the Indemnified Parties related to the redemption of the Prior Bonds and regardless of whether the Indemnified Parties made any investigation with respect to the facts relating to the Project, the Indemnifying Party, the Mortgage Loan or the Prior Bonds for the purpose of determining whether the redemption of the Prior Bonds and the issuance of the Bonds were appropriate. -21- (iii) any untrue statement or misleading statement or alleged untrue statement or alleged misleading statement of a material fact contained in the Preliminary Official Statement or the Official Statement for the Prior Bonds or any untrue statement or misleading statement or alleged untrue statement or alleged misleading statement of a material fact contained in the Preliminary Official Statement or the Official Statement for the Bonds relating to the redemption of the Prior Bonds, the Borrower, the Project, the Mortgage Loan Documents or any of the documents relating to the Prior Bonds or caused by any omission or alleged omission from the Preliminary Official Statement or the Official Statement for the Prior Bonds or any omission or alleged omission from the Preliminary Official Statement or Official Statement for the Bonds of any material fact relating in any way to the redemption of the Prior Bonds, the Borrower, the Project, the Mortgage Loan Documents or any of the documents relating to the Prior Bonds, necessary to be stated therein in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. (iv) the Trustee's acceptance or administration of the trust of the Indenture, or the exercise or performance of any of its powers or duties thereunder. It is the intention of the parties that such indemnification (to the extent of the matters covered by it as provided in clauses (i) and (ii) above) shall not cover liabilities, losses, damages, costs, expenses and fees (including legal and other fees and expenses) and claims (or actions in respect thereof) arising out of the negligence or willful misconduct of any Indemnified Party. The Indemnifying Party hereby waives its rights to assert that a failure of the Issuer, the Prior Trustee or the Trustee to make investigation in connection with the issuance of the Bonds with respect to the facts relating to the Project, the Indemnifying Party, the Mortgage Loan or the Prior Bonds for the purpose of determining whether the facts justify the redemption of the Prior Bonds. The indemnity provided by this Section 5.8 shall be in addition to any other liability that the Indemnifying Party may otherwise have, at common law, by agreement or otherwise, and is provided solely for the benefit of the Indemnified Parties, and no other person shall acquire or have any right under or by virtue of such provisions of this Agreement. (b) In the event that any action or proceeding is brought against an Indemnified Party with respect to which indemnity may be sought hereunder, the Indemnifying Party, upon written notice from the Indemnified Party, shall assume, and have the right to direct, the investigation and defense thereof, including, without limitation, the employment of counsel acceptable to the Indemnified Parties and the payment of all expenses; provided that the Indemnified Parties shall have the right to review and approve or disapprove any compromise or settlement in connection with any such claim, suit, investigation, proceeding or action brought against it or to which it is a party if such compromise or settlement requires an admission of wrongdoing on behalf of the Indemnified Parties. In the event that one or more of the Indemnified Parties is advised by counsel in good faith that the retention of one counsel to represent all Indemnified Parties would create a conflict of interest as between the Indemnified Parties, the Indemnifying Party, at the cost and expense of the Indemnifying Party, may retain the minimum number of additional counsel as necessary to eliminate such conflict of interest. The Indemnified -22- Parties shall have the right to employ separate counsel in any suit, investigation, proceeding or action and to participate in the defense thereof, but, except where such separate counsel is employed to avoid a conflict of interest as described in the preceding sentence, the Indemnifying Party shall not be required to pay the fees and expenses of such separate counsel. The obligation of the Indemnifying Party hereunder to indemnify against all costs and expenses incurred by the Indemnified Parties includes the obligation to reimburse the Indemnified Parties for any expense incurred as a result of producing documents, presenting testimony or evidence, or preparing to present testimony or evidence in connection with any claim, suit, investigation, proceeding or action (including any investigation which may be preliminary thereto) arising out of or relating to the occurrence of events for which indemnity is provided hereunder. The Indemnifying Party expressly reserves the right, in its sole discretion, and at its sole cost and expense (including the cost of providing any appeal bond), to appeal from any adverse judgment or order. The rights of any persons to indemnity hereunder and rights to payment of fees and reimbursement of expenses pursuant to Sections 4.4 and 5.7 hereof shall survive the final payment or defeasance of the Bonds and in the case of the Trustee any resignation or removal. 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 221(d)(4) and 244 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. 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. SECTION 5.10. Right to Perform Borrower's Obligations. In the event the Borrower fails to perform any of its obligations under this Agreement, the Issuer, the Credit Enhancement Provider and/or the Trustee, after giving the requisite notice, if any, may, but shall be under no obligation to, perform such obligation and pay all costs related thereto, and all such costs so advanced by the Issuer, the Credit Enhancement Provider or the Trustee shall become an additional obligation of the Borrower to the Issuer or the Trustee hereunder or to the Credit Enhancement Provider under the Reimbursement Agreement, as the case may be, payable on demand with interest thereon at the Maximum Rate. In the event of an advance made by the Credit Enhancement Provider due to the Borrower's default, the interest thereon shall be at the default rate of interest payable under the Reimbursement Agreement. Any obligation of the Borrower to the Issuer or the Trustee created hereunder shall survive termination of this Agreement. -23- 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 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 and of the Bonds, or for any reason in connection with the issuance of the Bonds. 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, 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 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. 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. (a) The Issuer, the Trustee, the Lender and the Borrower have entered into this Agreement with the intention that the interest on the 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 (i) take any action, (ii) fail to take any action, or (iii) make any use of the Project or the proceeds of the Bonds, which would cause the interest on any of the Bonds to be or become includable in the gross income of the Bondholders for federal income tax purposes. -24- W 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 take or omit to take any other action that would cause any Bond to be an "arbitrage bond" within the meaning of Section 148 of the Code and applicable regulations promulgated from time to time thereunder. In the event that at any time the Borrower is of the opinion or becomes otherwise aware that for purposes of this Section 6.3 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 determine the limitations and so instruct the Trustee in writing (with a copy to the Issuer) and cause the Trustee to comply with those limitations under the Indenture. The Borrower will take such action or actions as may be reasonably necessary in the opinion of Bond Counsel, or of which it otherwise becomes aware, to fully comply with Section 148 of the Code. (c) The Borrower shall take no action nor permit nor suffer any action to be taken if the result of the same would be to cause the Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the Code. (d) The Borrower represents and warrants that no portion of the proceeds of the Bonds shall be used to provide any airplane, skybox, or other private luxury box, health club facility, facility primarily used for gambling, or store the principal business of which is the sale of alcoholic beverages for consumption off premises, and no portion of the proceeds of the Bonds shall be used for an office unless the office is located on the premises of the facilities constituting the Project and unless not more than a de minimus amount of the functions to be performed at such office is not related to the day-to-day operations of the Project. (e) The Borrower recognizes that certain of the facts, estimates and circumstances required to be set forth in the 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 are necessary to enable the Issuer to execute and deliver such instruments. The Borrower further covenants that (i) 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 officer or representative of the Borrower furnishing such facts, estimates and circumstances, true, correct and complete as of that date, and (ii) the Borrower will make reasonable inquiries to insure such truth, correctness and completeness. (f) The Borrower and the Lender recognize that (i) the Trustee will hold and invest the proceeds of the Bonds within its control in accordance with the Indenture; and (ii) 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 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 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 -25- certificate or instructions delivered by the Issuer to the Trustee as contemplated in this Agreement. (g) 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. -26- ARTICLE VII EVENTS OF DEFAULT;REMEDIES SECTION 7.1. Events of Default; Remedies. Upon notice or discovery of a violation by the Borrower of, or default by the Borrower under, any of the provisions of this Agreement or the FHA Loan Documents, the Lender shall give written notice thereof to the Borrower and the Trustee by certified mail, postage prepaid, return-receipt requested. If 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 30 days after the date such notice is mailed or, if the violation or 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, any of the FHA Loan Documents or the Indenture as a result of such extension, 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, in itself, constitute an Event of Default under the Indenture or under the FHA Loan Documents (unless a default under the FHA Loan Documents is the reason for the default hereunder). 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. Except as provided in Section 4.4 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. -27- SECTION 7.4. Rights of the Credit Enhancement Provider. All rights of the Credit Enhancement Provider under this Agreement to consent to certain extensions, remedies, waivers, actions and amendments hereunder shall cease, determine and become null and void in accordance with the terms of Section 6.12 of the Indenture. SECTION 7.5. -Assignment to Credit Enhancement Provider. If the Credit Enhancement Provider shall have honored a final drawing under the Credit Enhancement and thereby provided the Trustee with moneys.sufficient to pay in full the principal of and interest on all Bonds, the Trustee, at the Credit Enhancement Provider's request, shall assign to the Credit Enhancement Provider, without recourse, all of the Trustee's and the Bondowners' rights under this Agreement (other than with respect to payment of fees, costs and expenses and indemnification) and the GNMA Security, and any other fees, expenses or disbursements of the Trustee or the Issuer shall remain an obligation of the Borrower to the Trustee or the Issuer, as appropriate, and such unsecured obligation of the Borrower to the Trustee or the Issuer shall continue and survive the assignment of this Agreement to the Credit Enhancement Provider, and the Reserve Rights of the Issuer shall continue to be vested in the Issuer and shall survive the assignment of this Agreement to the Credit Enhancement Provider. -28- ARTICLE VIII TERMINATION AND PREPAYMENT SECTION 8.1. Option 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 V 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 Prepay 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 the Mortgage Note as modified 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 as modified which are attributable to the GNMA Security, which prepayment penalties shall comply with the requirements of Section 213(a) 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. -29- ARTICLE DC 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 1003 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 9.4. Binding Effect. 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. -30- 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 Acts of the State and, where applicable, the United States of America, shall govern its construction. SECTION 9.10. Amounts Remaining in General Receipts 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 General Receipts 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 Act, the FHA Loan Documents, the National Housing Act and the regulations under such Act, 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 Act, as applicable. SECTION 9.12. Limited Liability. All obligations of the Issuer incurred hereunder, under the bond purchase agreement with respect to the Bonds, the Regulatory Agreement and the Indenture shall be limited obligations of the Issuer, payable solely and only from Bond proceeds, revenues and other amounts derived by the Issuer from the Trust Estate, as defined in the Indenture. The Bonds shall not constitute an indebtedness of the State or any political subdivision thereof, nor shall any act of the Issuer in any manner constitute or result in the creation of indebtedness of the State or any such political subdivision. The Bonds shall be payable solely from the revenues and other funds and property pledged under the Indenture for the payment of the Bonds, and no owner or owners of any of the Bonds shall ever have the right to compel any exercise of the taxing power of the State or any political subdivision thereof, nor to enforce the payment thereof against any property of the State or any such political subdivision. In entering into and performing this Agreement, the Trustee is acting solely in its capacity as Trustee under the Indenture, and not in its individual capacity, and all persons, including, without limitation, the Borrower, the Lender and the Issuer, having any claim against the Trustee arising from the Indenture, the Financing Documents or the Project shall look only to the funds and accounts held by the Trustee under the Indenture for payment, except with respect to the negligence of the Trustee or the breach by the Trustee of -31- its express duties and obligations under the Indenture and the Financing Documents. The Trustee's duties, obligations and powers hereunder are qualified, in all cases, by the provisions of the Indenture, including Article VII thereof. -32- y. 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: Authorized Officer DEL NORTE PLACE A CALIFORNIA LIMITED PARTNERSHIP By: The IBEX Group, a California general partnership, General Partner By: The John Stewart Company, a California Corporation, General Partner By: John K. Stewart, President By: James Babcock, General Partner By: Richard Moran, General Partner By: Roger Nelson, General Partner By: Peter Wilson, General Partner TRI CAPITAL CORPORATION, a California corporation, as Lender By: Title: 13052-17:J1261 -33- i 13052-17 JHHW:PJTicra 04/05/94 J1241 I 04/17/94 i RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,AS TRUSTEE 333 South Beaudry Avenue (W24-30) Los Angeles,California 90017 Attention: Corporate Trust Department AMENDED AND RESTATED REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS By and Among COUNTY OF CONTRA COSTA and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Trustee and DEL NORTE PLACE A CALIFORNIA LIMITED PARTNERSHIP Dated as of April 1, 1994 Relating to: $11,110,000 County of Contra Costa Variable Rate Demand Multifamily Housing Revenue Refunding Bonds, 1994 Series A (GNMA Collateralized—Del Norte Place Apartments) • TABLE OF CONTENTS Section 1. Definitions and Interpretation.................................................................................2 Section 2. Acquisition,Construction,Equipping and Completion of the Project...........................7 Section 3. Residential Rental Property....................................................................................8 Section 4. Very Low Income Tenants.........................................................................................9 Section 5. Tax Exempt Status of the Bonds.............................................................................11 Section 6. Additional Requirements of the Act.......................................................................12 Section 7. Additional Requirements of the Issuer...................................................................14 Section 8. Modification of Special Tax Covenants.................................................................15 Section9. Indemnification....................................................................................................15 Section 10. Consideration.......................................................................................................16 Section11. Reliance...............................................................................................................17 Section 12. Location of the Project...........................................................................................17 Section 13. Sale or Transfer of the Project................................................................................17 Section14. Term.....................................................................................................................18 Section 15. Covenants to Run With the Land...........................................................................18 Section 16. Burden and Benefit................................................................................................19 Section17. Uniformity...........................................................................................................19 Section18. Enforcement..........................................................................................................19 Section19. The Trustee...........................................................................................................21 Section 20. Recording and Filing.............................................................................................21 Section 21. Payment of Fees....................................................................................................21 Section 22. Governing Law..................................................................:...................................21 Section23. Amendments.........................................................................................................21 Section24. Notice..................................................................................................................22 Section25. Severability.........................................................................................................22 Section 26. Multiple Counterparts...........................................................................................23 Section 27. Subordination of Agreement...................................................................................23 Section 28. Regulatory Agreement as Replacement..................................................................23 EXHIBIT A— PROJECT SITE EXHIBIT B — STATISTICAL REPORT OF COUNTY EXHIBIT C —CERTIFICATE OF TENANT ELIGIBILITY EXHIBIT D—CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE EXHIBIT E—COMPLETION CERTIFICATE -i - REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS THIS AMENDED AND RESTATED REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS (the "Regulatory Agreement") is made and entered into as of April 1, 1994,by and among COUNTY OF CONTRA COSTA, a public body,corporate and politic organized and existing under the laws of the State of California (the "Issuer") BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association in its capacity as trustee under the Indenture (as hereinafter defined), with its principal corporate trust office in Los Angeles, California (the "Trustee") and DEL NORTE PLACE A CALIFORNIA LIMITED PARTNERSHIP (the "Borrower"). WITNESSETH: WHEREAS, the Legislature of the State of California enacted Chapter 7 of Part 5 of Division 31 (commencing with Section 52075) of the Health and Safety Code (the "Act") to authorize cities and counties to issue bonds to finance the construction or Project of multifamily rental housing; WHEREAS, on August 22, 1989, the Board of Supervisors of the Issuer adopted a resolution (the "Resolution") providing for the issuance of revenue bonds in connection with the 135 residential unit multifamily rental housing and commercial project of the Borrower constructed on the site described in Exhibit A hereto (the "Project"); WHEREAS, in furtherance of the purposes of the Act and the Resolution and as a part of the Issuer's plan of financing housing, the Issuer issued $11,000,000 aggregate principal amount of its Multifamily Housing Revenue Bonds (GNMA Collateralized - Del Norte Place Apartments), 1990 Series B (the "Prior Bonds"), the proceeds of which were used to acquire a GNMA Security (the "Prior GNMA Security"), as defined in and in accordance with the terms of that certain indenture dated as of October 15, 1990, by and between Bank of America National Trust and Savings Association, as successor to Security Pacific National Bank, as trustee (the "Prior Trustee") and the Issuer pursuant to which the Prior Bonds were issued (the "Prior Indenture"), which GNMA Security was backed by a loan made to the Borrower (the "Mortgage Loan") by TRI Capital Corporation (the "Lender") to finance the costs of the Project for the public purpose of providing decent, safe and sanitary housing; WHEREAS, as a consequence of a default by the Borrower on the Mortgage Loan, the Lender has prepaid the Prior GNMA Security, and the Prior Trustee has received such prepayment and will redeem the Prior Bonds with such funds pursuant to the mandatory redemption provisions of the Prior Indenture; and WHEREAS, the Issuer is now issuing its $11,110,000 aggregate principal amount of the Variable Rate Demand Multifamily Mortgage Revenue Refunding Bonds, 1994 Series A (GNMA Collateralized — Del Norte Place Apartments) (the "Bonds") for the purpose of providing funds to acquire a new GNMA Security from the Lender, and thereby refinance the Project; and -1- WHEREAS, the Internal Revenue Code of 1986 (the "Code") and the regulations and rulings with respect to the Code prescribe that the use and operation of the Project be restricted in certain respects; and WHEREAS, the Issuer has determined that, in order to ensure the preservation of dwelling units occupied by Very Low Income Tenants (as defined herein) in the Project, it is necessary to enter into this Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants which amends and restates in its entirety that certain Regulatory Agreement and Declaration of Restrictive Covenants, dated as of October 15, 1990, among the Prior Trustee, the Issuer and the Borrower (the "Prior Regulatory Agreement"). 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, the Trustee and the Borrower hereby agree as follows: SECTION 1. Definitions and Interpretation. Unless otherwise defined herein, capitalized terms used herein shall have the respective meanings given to such terms in the Indenture. In addition, the following terms shall have the respective meanings assigned to them in this Section 1 unless the context in which they are used clearly requires otherwise: "Act" means Chapter 7, Part 5 of Division 31 of the Health and Safety Code of the State of California. "Adjusted Income" means the adjusted income of a person (together with the adjusted income of all persons who intend to reside with such person in one residential unit) as calculated in the manner prescribed in Regulation Section 1.167(k)-3(b)(3) in effect as of the Bond Issuance Date. "Affiliated Party" means a general or limited partnership in which the Borrower is a partner, a person whose relationship with the Borrower would result in a disallowance of losses under section 267 or 707(b) of the Code or who together with the Borrower are members of the same controlled group of corporations (as defined in section 1563(a) of the Code, except that "more than 50 percent" shall be substituted for "at least 80 percent" each place it appears therein). "Area" means the Oakland Primary Metropolitan Statistical Area. "Bond Counsel" means an attorney at law or firm of attorneys, of nationally recognized standing in matters pertaining to the Tax-exempt nature of interest on bonds issued by states and their political subdivisions, who is selected by the Issuer and duly admitted to the practice of law before the highest court of any state of the United States of America or the District of Columbia. "Bond Issuance Date" means the date of the issuance of the Bonds, being April 28, 1994. -2- "Bondholder" or "holder" or "owner" means, when used with respect to the Bonds, the owner of a Bond then outstanding under the Indenture as shown on the registration books maintained by the Trustee pursuant to the Indenture. "Bonds" means the bonds authorized and delivered under the Indenture. "Borrower" means Del Norte Place A California Limited Partnership and its successors and assigns, as owner of the Project. "Borrower Cost Certificate" means the Borrower Cost Certificate of the Borrower, dated as of the date of issuance of the Prior Bonds, and recertified as of the Bond Issuance Date, with respect to certain Project Costs, delivered to the Issuer by the Borrower. "Certificate of Continuing Program Compliance" means the Certificate to be filed by the Borrower with the Issuer, the Lender and the Trustee under Section 4(e) hereof, which shall be substantially in the form attached hereto as Exhibit D. "Code" means the Internal Revenue Code of 1986. "Completion Certificate" means the certificate of completion of the Project required to be delivered to the Issuer, the Lender and the Trustee by the Borrower pursuant to Section 2 of the Prior Regulatory Agreement. "Completion Date" means the date of the completion of the acquisition, construction and equipping of the Project, as that date was required to be certified under Section 2 of the Prior Regulatory Agreement. "Costs of Issuance" means all costs incurred in connection with the issuance of the Bonds or the Prior Bonds, including, but not limited to, attorneys' fees and expenses (including Bond Counsel, the counsel to the Issuer, Borrower's counsel, Trustee's counsel, as well as other specialized counsel fees incurred in connection with the borrowing), initial fees and expenses of the Issuer, financial advisor fees and expenses, rating agency fees, Trustee's initial fees and expenses (including its first annual administrative fee), accountant fees related to the issuance of the Bonds or the Prior Bonds, printing costs for the Bonds or the Prior Bonds and any preliminary and final offering materials, costs incurred in connection with satisfying the public approval requirement of Section 147(f) of the Code and costs of engineering and feasibility studies necessary to the issuance of the Bonds or the Prior Bonds, if any. "County" means the County of Contra Costa, California. "Determination of Taxability" means (1) the failure of the Borrower to consent within forty-five (45) days to any amendment to the Financing Agreement or the Regulatory Agreement which in the written opinion of Bond Counsel is necessary to preserve the Tax-exempt status of interest on the Bonds, or (2) a final judgment or order of a court of competent jurisdiction or a final ruling or decision of the United States Department of the Treasury or the Internal Revenue Service which, (3) legislation enacted by the United States Congress which, or (3) an event or condition arising or existing after the Closing Date which in the opinion of Bond Counsel, will adversely affect the tax-exempt status of the -3- • interest on the Bonds (other than interest on any Bond for any period during which such Bond is held by a "substantial user" of any facility financed with the proceeds of the Bonds or a "related person," as such terms are used in Section 147(a) of the Code). With respect to clause (2) above, a judgment or order of a court shall be considered final only if no appeal or action for judicial review has been filed and the time for filing such appeal or action has expired. "Disposition and Development Agreement" means the Disposition and Development Agreement made as of the 16th day of July, 1990, by and between the Redevelopment Agency of the City of El Cerrito and The IBEX Group, a California general partnership. "Financing Agreement" means the Financing Agreement entered into by the Borrower, the Trustee, the Lender and the Issuer, describing among other things, the delivery by the Lender to the Trustee of the GNMA Security. "Housing Act" means the United States Housing Act of 1937, as amended, or its successor. "Income Certification" means a Certification of Tenant Eligibility in the form attached as Exhibit C hereto or in such other form as may be provided by the Issuer to the Borrower. "Indenture" means the Trust Indenture, dated as of the date hereof, between the Issuer and the Trustee, relating to the issuance of the Bonds, and any indenture supplemental thereto. "Inducement Date" means August 22, 1989. "Lender" means TRI Capital Corporation, a California corporation, and its successors. "Modification Agreement" means the Modification of Deed of Trust Note and Deed of Trust, dated April , 1994, between the Borrower and the Lender. "Mortgage Loan" means the mortgage loan made by the Lender to the Borrower to provide financing for the Project, in a principal amount equal to $10,586,300, as modified by the Modification Agreement. "Mortgage Note" means the deed of trust note executed by the Borrower in favor of the Lender and in the maximum insurable amount of $10,586,300, as modified pursuant to the Modification Agreement. "Prior Bonds" means the $11,000,000 Multifamily Housing Revenue Bonds (GNMA Collateralized — Del Norte Place Apartments) 1990 Series B, issued and outstanding under the Prior Indenture. "Prior Indenture" means the Indenture, dated as of October 15, 1990, by and between the Issuer and the Prior Trustee. -4- "Prior Regulatory Agreement" means the Regulatory Agreement and Declaration of Restrictive Covenants, dated as of October 15, 1990, among the Issuer, the Borrower and the Prior Trustee. "Prior Trustee" means Bank of America National Trust and Savings Association, successor by merger to Security Pacific National Bank, as trustee with respect to the Prior Bonds. "Project"_means the Project Facilities and the Project Site. "Project Costs" means to the extent authorized by the Code, the Regulations and the Act, any and all costs incurred by the Issuer or the Borrower with respect to the acquisition, construction, and equipping, as the case may be, of the Project, whether paid or incurred prior to or after the date of this Regulatory Agreement, including, without limitation, costs for site preparation, the planning of housing and improvements, the acquisition of property, the removal or demolition of existing structures, the construction of housing and related facilities and improvements, and all other work in connection therewith, and all costs of financing, including, without limitation, the cost of consultant, accounting and legal services, other expenses necessary or incident to determining the feasibility of the Project contractors' and Borrowers' overhead and supervisors' fees and costs directly allocable to the Project, administrative and other expenses necessary or incident to the Project and the financing thereof (including reimbursement to any municipality, county or other entity for expenditures made, with the approval of the Issuer, for the Project), interest accrued during construction and prior to the Completion Date, provided, however, that Project Costs do not include Costs of Issuance (as defined in the Prior Indenture and the Indenture). "Project Facilities" means the buildings, structures and other improvements to be constructed on the Project Site, and all fixtures and other property owned by the Borrower and located on, or used in connection with, such buildings, structures and other improvements constituting the Project. "Project Site" means the parcel or parcels of real property described in Exhibit "A", which is attached hereto and by this reference incorporated herein, and all rights and appurtenances thereunto appertaining. "Qualified Project Costs" means the Project Costs incurred after the Inducement Date which are chargeable to a capital account with respect to the Project for federal income tax and financial accounting purposes, or would be so chargeable either with a proper election by the Borrower or but for the proper election by the Borrower to deduct those amounts, within the meaning of Treasury Regulations Section 1.103-8(a)(1); provided, however, that only such portion of the interest Accrued during construction of the Project shall constitute a Qualified Project Cost as bears the same ratio to all such interest as the Qualified Project Costs bear to all Project Costs, and provided further that such interest shall cease to be a Qualified Project Cost on the Completion Date, and provided still further that if any portion of the Project is being constructed by an Affiliated Party (whether as a general contractor or a subcontractor), "Qualified Project Costs" shall include only (a) the actual out-of-pocket costs incurred by such Affiliated Party in constructing the Project (or any portion thereof), (b) any -5- • reasonable fees for supervisory services actually rendered by the Affiliated Party, and (c) any overhead expenses incurred by the Affiliated Party which are directly attributable to the work performed on the Project, and shall not include, for example, intercompany profits resulting from members of an affiliated group (within the meaning of Section 1504 of the Code) participating in the construction of the Project or payments received by such Affiliated Party due to early completion of the Project (or any portion thereof). Qualified Project Costs do not include Costs of Issuance (as defined in the Indenture and in the Prior Indenture). "Qualified Project Period" means the period beginning on the first day on which at least ten percent (10%) of the dwelling units in the Project were first occupied and ending on the latest of (a) the date which is 30 years after the date on which at least fifty percent (50%) of the dwelling units in the Project were first occupied, (b) the first date on which no tax exempt private activity bond (as that term is used in Section 142(d)(2) of the Code) issued with respect to the Project is outstanding, or (c) the date on which any assistance provided with respect to the Project under Section 8 of the Housing Act terminates. "Regulations" means the Income Tax Regulations promulgated or proposed by the Department of the Treasury pursuant to the Code from time to time. "Regulatory Agreement" means this Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants. "Tax-exempt" means with respect to interest on any obligations of a state or local government, including the Bonds, that such interest is excluded from gross income for provided, however. that such interest may be includable as an item of tax preference or otherwise includable directly or indirectly for purposes of calculating other tax liabilities, including any alternative minimum tax or environmental tax, under the Code. "Trustee" means Bank of America National Trust and Savings Association, or any successor Trustee, serving as Trustee under the Indenture. "Very Low Income Tenant" means any tenant whose Adjusted Income does not exceed limits determined in a manner consistent with determinations of lower income families under Section 8 of the Housing Act, except that the percentage of median gross income that qualifies as lower income shall be fifty percent (50%) of median gross income for the Area with adjustments for family size. If all the occupants of a unit are students (as defined under Section 151(c) of the Code), no one of whom is entitled to file a joint return under Section 6013 of the Code, such occupants shall not qualify as Very Low Income Tenants. The determination of a tenant's status as a Very Low Income Tenant shall be made by the Borrower upon initial occupancy of a unit in the Project by such tenant and annually thereafter, on the basis of an Income Certification executed by the tenant. "Very Low Income Units" means the units in the Project required to be rented to, or held available for occupancy by, Very Low Income Tenants pursuant to Section 4(a) hereof. Unless the context clearly requires otherwise, as used in this Regulatory Agreement, words of the masculine, feminine or neuter gender shall be construed to include each other gender when appropriate and words of the singular number shall be construed to include -6- the plural number, and vice versa, when appropriate. This Regulatory Agreement and all the terms and provisions hereof shall be construed to effectuate the purposes set forth herein and to sustain the validity hereof. The defined terms used in the preamble and recitals of this Regulatory Agreement have been included for convenience of reference only, and the meaning, construction and interpretation of all defined terms shall be determined by reference to this Section 1 notwithstanding any contrary definition in the preamble or recitals hereof. The titles and headings of the sections of this Regulatory Agreement have been inserted for convenience of reference only, and are not to be considered a part hereof and shall not in any way modify or restrict any of the terms or provisions hereof or be considered or given any effect in construing this Regulatory Agreement or any provisions hereof or in ascertaining intent, if any question of intent shall arise. SECTION 2. Acquisition, Construction, Equil2ping and Completion of the Project. The Borrower hereby represents as of the date hereof, covenants and agrees as follows: (a) The Borrower has completed the acquisition and construction of the Project, and is not in default under any provision of the Prior Regulatory Agreement. (b) The total cost of the acquisition, construction and equipping of the Project are accurately set forth in the Borrower Cost Certificate. (c) The Borrower expects that the full amount of the proceeds of the Bonds deposited in the Project Fund will be disbursed under the Indenture to acquire the GNMA Security by June 15, 1994. (d) At least ninety-five percent (95%) of the sum of the proceeds of the Mortgage Loan and the proceeds of the Bonds not otherwise used to acquire the GNMA Security were applied to pay or reimburse the Borrower for Qualified Project Costs, none of such total proceeds were applied to pay or reimburse costs or expenses other than Project Costs, and not more than 2% of the proceeds of the Bonds shall be applied to pay Costs of Issuance. (e) The statements made in the various certificates delivered by the Borrower to the Issuer or the Trustee are true and correct. (f) On the Completion Date of the Project, the Borrower submitted to the Issuer, the Lender and the Prior Trustee, a duly executed and completed Completion Certificate. (g) The Borrower (and any person related to it within the meaning of Section 144(a)(3) of the Code) will not 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 Indenture, the Financing Agreement, this Regulatory Agreement, the Act or the Code. -7- W The Borrower will not enter into any agreements which would result in the payment of principal or interest on the Bonds being federally guaranteed, within the meaning of Section 149(b) of the Code. (i) The Borrower hereby reaffirms the certifications made by it with respect to investment of moneys and arbitrage in Section 3.5 of the Financing Agreement and such certifications are hereby incorporated herein as covenants of the Borrower by this reference. SECTION 3. Residential Rental Propea. The Borrower hereby acknowledges and agrees that the Project is owned, managed and operated as a "qualified residential rental project" (within the meaning of Section 142(d) of the Code) for a term equal to the Qualified Project Period. To that end, and for the term of this Regulatory Agreement, the Borrower hereby represents, covenants, warrants and agrees as follows: (a) The Project was acquired and constructed for the purpose of providing multifamily residential rental property, and the Borrower leases the Project Site from the City of El Cerrito and owns the Project Facilities, and manages and operates the Project as a project to provide multifamily residential rental property comprised of a building or structure or several interrelated buildings or structures, together with any functionally related and subordinate facilities, and no other facilities, in accordance with Section 142(d) of the Code and Section 1.103-8(b) of the Regulations, and the Act, and in accordance with such requirements as may be imposed thereby on the Project from time to time. (b) All of the dwelling units in the Project are similarly constructed units, and each dwelling unit in the Project contains complete separate and distinct facilities for living, sleeping, eating, cooking and sanitation for a single person or a family, including a sleeping area, bathing and sanitation facilities and cooking facilities equipped with a cooking range, refrigerator and sink. (c) None of the dwelling units in the Project will at any time be utilized on a transient basis, or will ever be used as a hotel, motel, dormitory, fraternity house, sorority house, rooming house, nursing home, hospital, sanitarium, rest home or trailer court or park; provided, however, that the Project may comprise a portion of a congregate care facility. (d) No part of the Project will at any time be owned by a cooperative housing corporation, nor shall the Borrower take any steps in connection with a conversion to such ownership or use and the Borrower will not take any steps in connection with a conversion of the Project to a condominium ownership. (e) All of the completed dwelling units have been and will be available for rental on a continuous basis to members of the general public and the Borrower will not give preference to any particular class or group in renting the dwelling units in the Project, except to the extent that dwelling units are required to be leased or rented to Very Low Income Tenants, provided that a portion of the Project not exceeding 30 units may be reserved exclusively for use by senior citizens as set forth in the Disposition and Development Agreement, and provided further that the Very Low -8- Income Units may be dispersed in accordance with Section 6.04 of the Disposition and Development Agreement as in effect as of the date hereof, but only if the Borrower at all times makes a good faith effort to ensure that units occupied by Very Low Income Tenants are of comparable quality and offer a range of sizes and number of bedrooms throughout all the buildings comparable to those units which are available to other tenants, and are available to both senior citizens and non-senior citizens. (f) The Project Site consists of a parcel or parcels that are contiguous except for the interposition of a road, street or stream, and all of the Project Facilities comprise a single geographically and functionally integrated project for residential rental property, as evidenced by the ownership, management, accounting and operation of the Project. (g) No dwelling unit in the Project shall be occupied by the Borrower; provided, however, that if the Project contains five or more dwelling units, this subsection shall not be construed to prohibit occupancy of such dwelling units by one or more resident managers or maintenance personnel any of whom may be the Borrower. (h) Within 30 days after the date on which 10 percent of the dwelling units in the Project were occupied, the Borrower delivered a written notice to the Issuer and the Prior Trustee specifying such date. Within 30 days after the dates on which 50 percent of the dwelling units in the Project were occupied, the Borrower executed and delivered to the Issuer and the Prior Trustee a copy of a certificate identifying said dates and the beginning and ending dates of the Qualified Project Period. The Borrower recorded a copy of such certificate in the Office of the County Recorder of the County. SECTION 4. Very Low Income Tenants. Pursuant to the requirements of the Code, the Act and this Regulatory Agreement, the Borrower hereby represents, warrants and covenants as follows: (a) Commencing on the date on which ten percent (10%) of the units in the Project were first occupied, Very Low Income Tenants occupied and shall occupy at least twenty percent (20%) of all completed and occupied units in the Project before any additional units are occupied by persons who are not Very Low Income Tenants; and for the Qualified Project Period no less than 20% of the total number of completed units of the Project shall at all times be rented to and occupied by Very Low Income Tenants. For the purposes of this paragraph (a), a vacant unit which was most recently occupied by a Very Low Income Tenant is treated as rented and occupied by a Very Low Income Tenant until reoccupied, other than for a temporary period of not more than 31 days, at which time the character of such unit shall be redetermined. Except as otherwise provided herein, (including without limitation, Section 3(e) hereof) the Very Low Income Units shall be intermingled with all other dwelling units in the Project and shall be of a quality, and offer a range of sizes and number of bedrooms, comparable to those units which are available to other tenants. Tenants in the Very Low Income Units will have equal access and enjoyment to all common facilities of the Project. -9- (b) No tenant qualifying as a Very Low Income Tenant shall be denied continued occupancy of a unit in the Project because, after admission, such tenant's Adjusted Income increases to exceed the qualifying limit for Very Low Income Tenants; provided, however, that should a Very Low Income Tenant's Adjusted Income, as of the most recent determination thereof, exceed one hundred forty percent (140%) of the applicable income limit for a Very Low Income Tenant of the same family size, the next available unit of comparable or smaller size must be rented to (or held vacant and available for immediate occupancy by) a Very Low Income Tenant; and provided further that, until such next available unit is rented to a Very Low Income Tenant, the former Very Low Income Tenant who has ceased to qualify as such shall be deemed to continue to be a Very Low Income Tenant for purposes of the twenty percent (20%) requirement of Section 4(a) hereof until the next available unit of comparable or smaller size is rented to a qualifying Very Low Income Tenant. (c) The Borrower will obtain, complete, and maintain on file Income Certifications from each Very Low Income Tenant, dated immediately prior to the initial occupancy of such Very Low Income Tenant in the Project, and will provide such additional information as may be required in the future by the State of California, the Issuer and by Section 142(d) of the Code, as the same may be amended from time to time, or in such other form and manner as may be required by applicable rules, rulings, policies, procedures, Regulations or other official statements now or hereafter promulgated, proposed or made by the Department of the Treasury or the Internal Revenue Service with respect to obligations issued under Section 142(d) of the Code. The Borrower will also obtain, complete, and maintain on file an annual Income Certification from each Very Low Income Tenant, dated the anniversary of the date of initial occupancy in the Project by such Very Low Income Tenant. A copy of the most recent Income Certification for Very Low Income Tenants commencing or continuing occupation of a Very Low Income Unit shall be attached to each report to be filed with the Issuer and the Trustee. The Borrower shall make a good faith effort to verify that the income provided by an applicant in an Income Certification is accurate by taking one or more of the following steps as a part of the verification process: (1) obtain a pay stub for the most recent pay period, (2) obtain an income tax return for the most recent tax year, (3) conduct a TRW or other similar search, (4) obtain an income verification from the applicant's current employer, (5) obtain an income verification from the Social Security Administration and/or the California Department of Social Services if the applicant receives assistance from either of such agencies, or (6) if the applicant is unemployed and does not have an income tax return, obtain another form of independent verification. (d) The Borrower has and will continue to will maintain complete and accurate records pertaining to the Very Low Income Units, and will permit any duly authorized representative of the Issuer, the Trustee, the Department of the Treasury or the Internal Revenue Service to inspect the books and records of the Borrower pertaining to the Project, including those records pertaining to the occupancy of the Very Low Income Units. - 10- (e) The Borrower prepared and submitted to the Issuer, the Trustee and the Lender within thirty days after the end of each month until ninety-five percent (95%) of the units in the Project were occupied and will prepare and submit at the end of each calendar quarter hereafter, a Certificate of Continuing Program Compliance executed by the Borrower stating (i) the percentage of the dwelling units of the Project which were occupied or deemed occupied, pursuant to subsection (a) hereof, by Very Low Income Tenants during such period, (ii) that either (A) no unremedied default has occurred under this Regulatory Agreement or (B) a default has occurred, in which event the certificate shall describe the nature of the default in detail and set forth the measures being taken by the Borrower to remedy such default and (iii) that, to the knowledge of the Borrower, no Determination of Taxability has occurred, or if a Determination of Taxability has occurred, setting forth all material facts relating thereto. (f) On or before each February 15th during the Qualified Project Period the Borrower will submit to the Issuer a draft of the completed Internal Revenue Code Form 8703 or such other annual certification required by the Code to be submitted to the Secretary of the Treasury as to whether the Project continues to meet the requirements of Section 142(d) of the Code. On or before each March 31st during the Qualified Project Period the Borrower will submit such completed form to the Secretary of the Treasury. (g) The Borrower has and will continue to accept as tenants on the same basis as all other prospective tenants, persons who are recipients of federal certificates for rent subsidies pursuant to the existing program under Section 8 of the Housing Act, or its successor. The Borrower shall not apply selection criteria to Section 8 certificate or voucher holders that is more burdensome than criteria applied to all other prospective tenants. (h) Each lease or rental agreement pertaining to a Very Low Income Unit shall contain a provision to the effect that the Borrower has relied on the income certification and supporting information supplied by the Very Low Income Tenant in determining qualification for occupancy of the Very Low Income Unit, and that any material misstatement in such certification (whether or not intentional) will be cause for immediate termination of such lease or rental agreement. Each such lease or rental agreement shall also provide that the tenant's income is subject to annual certification in accordance with Section 4(c) hereof and that if upon any such certification such tenant's Adjusted Income exceeds one hundred forty percent (140%) of the applicable income limit for a Very Low Income Tenant of the same family size, such tenant shall cease to qualify as a Very Low Income Tenant, and such tenant's rent is subject to increase. (i) The requirements of this Regulatory Agreement shall be administered and compliance therewith monitored by the Issuer, as program administrator, but the Issuer shall incur no liability hereunder as a consequence thereof. SECTION 5. Tax Exempt Status of the Bonds. The Borrower and the Issuer each hereby represent, warrant and agree that: -11 - (a) They will not knowingly take or permit, or omit to take or cause to be taken, as is appropriate, any action that would adversely affect the Tax-exempt nature of the interest on the Bonds or the exemption from California personal income taxation of the interest on the Bonds and, if it should take or permit, or omit to take or cause to be taken, any such Action, it will take all lawful actions correct such actions or omissions promptly upon obtaining knowledge thereof; (b) They will take such action or actions as may be necessary, in the written reasonable opinion of Bond Counsel filed with the Issuer and the Trustee, (i) to comply fully with all applicable rules, rulings, policies, procedures, Regulations or other official statements promulgated, proposed or made by the Department of the Treasury or the Internal Revenue Service pertaining to obligations issued under Section 142(d) of the Code, and (ii) to comply with the Act; and (c) They will file of record such documents and take such other steps as are necessary, in the written reasonable opinion of Bond Counsel filed with the Issuer and the Trustee, in order to insure that the requirements and restrictions of this Regulatory Agreement will be binding upon all owners of the Project, including, but not limited to, the execution and recordation of this Regulatory Agreement in the real property records of the County of Contra Costa. The Borrower hereby covenants to include or reference the requirements and restrictions contained in this Regulatory Agreement in any documents transferring any interest in the Project to another person to the end that such transferee has notice of, and is bound by, such restrictions, and to obtain the agreement from any transferee to abide by all requirements and restrictions of this Regulatory Agreement. SECTION 6. Additional Requirements of the Act. In addition to the requirements set forth above, the Borrower hereby agrees to comply with each of the requirements of the Act, set forth in this Section 6, as follows: (a) As provided in Section 52097.5(e) of the Act, not less than twenty percent (20%) of the total number of units in the Project shall be occupied by tenants whose adjusted gross income does not exceed fifty percent (50%) of the median adjusted gross income for the Area, adjusted for family size, as determined pursuant to Section 8 of the Housing Act. (b) The rents for the units reserved pursuant to paragraph (a) of this Section shall not exceed the amount derived by multiplying thirty percent (30%) to fifty percent (50%) of the median adjusted gross income for the Area, adjusted for assumed family size, as determined pursuant to Section 8 of the Housing Act, for a family of one person in the case of a studio unit, 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. (c) As provided in Section 52080(a) of the Act, not less than twenty percent (20%) of the total number of units in the Project shall be for occupancy on a priority basis by tenants whose incomes do not exceed the qualifying limits for lower income families as established and amended from time to time pursuant to Section 8 of the -12- Housing Act, or who otherwise qualify as lower income households, as defined by Section 50079.5 of the California Health and Safety Code. (d) The units required for occupancy as provided in paragraph (c) of this Section shall be for occupancy on a priority basis for tenants whose incomes do 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 California Health and Safety Code. (e) The rental payments on the units required for occupancy as provided in paragraph (c) of this Section (excluding any supplemental rental assistance from the state, the federal government, or any other public agency to those persons or on behalf of those units) shall not exceed thirty percent (30%) of fifty percent (50%) of area median income. If the Borrower elects to establish a base rent for all or part of the units required for occupancy as provided in paragraphs (c) and (d) of this Section, the base rents shall be adjusted for household size, assuming 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. (f) The selection criteria applied to certificate holders under Section 8 of the Housing Act shall not be more burdensome than the criteria applied to all other prospective tenants. (g) As provided in Section 52080(b) of the Act, the requirement of paragraph (c) of this Section shall remain in effect until the Bonds are retired. (h) As provided in Section 52080(c) of the Act, the Borrower shall ensure that units occupied as required by paragraph (c) of this Section are of comparable quality and offer a range of sizes and number of bedrooms comparable to those units which are available to other tenants. (i) As provided in Section 52080(e) of the Act, the Project may be syndicated after prior written approval of the Issuer. The Issuer shall grant that approval after it makes a reasonable determination that the terms and conditions of the syndication (1) shall not reduce or limit any of the requirements of the Act or regulations adopted or documents executed pursuant to the Act, (2) shall not cause any of the requirements of the Issuer set forth in Section 7 hereof to be subordinated to the syndication agreement, or (3) shall not result in the provision of fewer assisted units, or the reduction of any benefits or services, than were in existence prior to the syndication agreement. (j) Other than as provided in Section 6(g), the requirements of this Section 6 shall be in effect for the Qualified Project Period. (k) As provided in Section 52087 of the Act, at least six months prior to the expiration of the Qualified Project Period the Borrower shall provide by first-class mail, postage prepaid, a notice to each Very Low Income Tenant containing (1) the -13- anticipated date of the termination of the Qualified Project Period, (2) the anticipated rent increase upon the expiration of the Qualified Project Period, (3) a statement that a copy of such notice will be sent to the Issuer, and (4) a statement that a public hearing may be held by the Issuer on the issue and that the tenant will receive notice of the hearing at least 15 days in advance of any such hearing. The Borrower shall also file a copy of the above-described notice with the Board of Supervisors of the Issuer, and the Borrower shall additionally notify the Issuer as to the number of Very Low Income Tenants in the project, the number of units that are and are not Very Low Income Units, the number of bedrooms in each Very Low Income Unit and the ages and income categories of the Very Low Income Tenants. This report shall be based solely on information contained in existing tenant records. The Borrower shall not be held liable for any inaccuracies contained in the tenant records. (1) As provided in Section 52080(8) of the Act, following the expiration or termination of the Qualified Project Period, except in the event of foreclosure and redemption of the Bonds, deed in lieu of foreclosure, eminent domain, or action of a federal agency preventing enforcement, units required to be reserved for occupancy pursuant to clause (c) above and financed with proceeds of the Bonds shall remain available to any eligible household occupying a Very Low Income Unit at the date of expiration or termination, and at a rent not greater than the amount set forth by clause (d) above, until the earliest of any of the following occurs: (1) the household's income exceeds 140 percent of the maximum eligible income specified in clause (c) above; (2) the household voluntarily moves or is evicted for "good cause" ("good cause" for the purposes of this subsection, means the nonpayment of rent or allegation of facts necessary to provide major, or repeated minor, violations of material provisions of the occupancy agreement which detrimentally affect the health and safety of other persons or the structure, the fiscal integrity of the Project, or the purposes or special programs of the Project); (3) thirty years after the date of the commencement of the Qualified Project Period; or (4) the Borrower pays the relocation assistance and benefits to tenants as provided in subdivision (b) of Section 7264 of the Government Code. During the three years prior to expiration of the Qualified Project Period, the Borrower shall continue to make available to eligible households reserved units that have been vacated to the same extent that nonreserved units are made available to noneligible households. SECTION 7. Additional Requirements of the Issuer. In addition to the requirements set forth above and to the extent not prohibited thereby, the Borrower hereby agrees to comply with each of the requirements of the Issuer set forth in this Section 7, as follows: (a) All tenant lists, applications and waiting lists relating to the Project shall at all times be kept separate and identifiable from any other business of the Borrower and shall be maintained as required by the Issuer, in a reasonable condition for proper audit and subject to examination during business hours by representatives of the Issuer. (b) The Borrower shall not discriminate on the basis of race, creed, color, religion, sex; sexual orientation, marital status, national origin, source of income (e.g. SSI), ancestry or handicap in the lease, use or occupancy of the Project or in connection with the employment or application for employment of persons for the -14- construction, operation, or management of the Project, and will not discriminate on the basis of household size as long as the tenants meet the household size standards of Section 8 of the Housing Act. (c) The Borrower shall not permit occupancy in any unit in the Project by more persons than is permissible under the Section 8 of the Housing Act household size standards. (d) The requirements of Section 7 shall be in effect for the Qualified Project Period. Any of the foregoing requirements of the Issuer may be expressly waived by the Issuer in writing, but (i) no waiver by the Issuer of any requirement of this Section 7 shall, or shall be deemed to, extend to or affect any other provision of this Regulatory Agreement; and (ii) any requirement of this Section 7 shall be void and of no force and effect if the Issuer and the Borrower receive a written opinion of Bond Counsel to the effect that compliance with any such requirement would cause interest on the Bonds to cease to be Tax-exempt or to the effect that compliance with such requirement would be in conflict with the Act or any other state or federal law. SECTION 8. Modification of Special Tax Covenants. The Borrower, the Trustee and the Issuer hereby agree as follows: (a) To the extent any amendments to the Act, the Regulations or the Code shall, in the written opinion of Bond Counsel filed with the Issuer and with the Trustee, who shall deliver a copy thereof to the Lender and the Borrower, impose requirements upon the ownership or operation of the Project more restrictive than those imposed by this Regulatory Agreement, this Regulatory Agreement shall be deemed to be automatically amended to impose such additional or more restrictive requirements. (b) The Borrower, the Issuer and, if applicable, the Trustee, shall execute, deliver and, if applicable, file of record any and all documents and instruments, necessary to effectuate the intent of this Section 8, and each of the Borrower and the Issuer hereby appoints the Trustee as its true and lawful attorney-in-fact to execute, deliver and, if applicable, file of record on behalf of the Borrower or the Issuer, as is applicable, any such document or instrument (in such form as may be approved in writing by Bond Counsel) if either the Borrower or the Issuer defaults in the performance of its obligations under this subsection (b); provided, however, that unless directed in writing by the Issuer or the Borrower, the Trustee. shall take no action under this subsection (b) without first notifying the Borrower or the Issuer, or both of them, as is applicable, and without first providing the Borrower or the Issuer, or both, as is applicable, an opportunity to comply with the requirements of this Section 8 Nothing in this subsection (b) shall be construed to mean this Regulatory Agreement may be amended without the signature of the Issuer or the Borrower. SECTION 9. Indemnification. The Borrower hereby covenants and agrees that it shall indemnify and hold harmless the Issuer and the Trustee and each of their respective officers, directors, officials, employees and agents from and against any and all claims by or -15- on behalf of any person arising from any cause, whatsoever in connection with this Regulatory Agreement, the Indenture, the Financing Agreement, the Mortgage Loan, the Project (or the operation thereof) or the sale of Bonds to refinance the Project, any and all claims arising from any act of omission of the Borrower or any of its agents, contractors, servants, employees or licensees in connection with the Project (or the operation thereof) or the sale of Bonds to refinance the Project, and all costs, counsel fees, expenses or liabilities incurred in connection with any such claim or proceeding brought thereon. The Borrower further hereby indemnifies, and agrees to defend and hold harmless, the Issuer and the Trustee and each of them against all loss, costs, damages, expenses, suits, judgments, actions and liabilities of whatever nature (including, without limitation, reasonable fees of legal counsel reasonably acceptable to the respective indemnified parties, litigation and court costs, amounts paid in settlement, and amounts paid to discharge judgments) directly or indirectly resulting from or arising out of or related to (a) the design, construction, installation, operation, use, occupancy, maintenance, or ownership of the Project (including compliance with laws, ordinances and rules and regulations of public authorities relating thereto); or (b) any written statements or representations with respect to the Borrower, the Project or the Bonds made or given to the Issuer or the Trustee, or any underwriters of any of the Bonds, by the Borrower, or any of its agents or employees limited to, statements or representations of information or partnership affairs. In the event that any action or proceeding is brought against the Issuer or the Trustee or any of their respective officers, directors, officials, employees or agents, with respect to which indemnity may be sought hereunder, the Borrower, upon written notice from the indemnified party, shall assume the investigation and defense thereof, including the employment of counsel and the payment of all expenses. The indemnified party shall have the right to employ separate counsel in any such action or proceedings and to participate in the defense thereof, and the Borrower shall pay the reasonable fees and expenses of such separate counsel; provided that the indemnified party shall have the right to review and approve or disapprove any compromise or settlement. The rights of the Issuer and the Trustee to indemnification under this Section shall survive termination of this Regulatory Agreement and discharge of the Bonds under the Indenture. The Borrower also shall pay and discharge and shall indemnify and hold harmless the Issuer and the Trustee from (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. 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 or the Trustee upon actual knowledge thereof 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. SECTION 10. Consideration. The Issuer has issued the Bonds to provide funds to acquire the GNMA Security and otherwise reimburse the Borrower for Project Costs to refinance the Project, all for the purpose, among others, of inducing the Borrower to lease -16- the Project Site and, construct, equip and operate the Project. In consideration of the issuance of the Bonds by the Issuer, the Borrower has entered into this Regulatory Agreement and has agreed to restrict the uses to which this Project can be put on the terms and conditions set forth herein. SECTION 11. Reliance. The Issuer, the Trustee and the Borrower hereby recognize and agree that the representations and covenants of the Borrower set forth herein may be relied upon by all persons interested in the legality and validity of the Bonds, in the exemption from California personal income taxation and the Tax-exempt status of the interest on the Bonds. In performing their duties and obligations hereunder, the Issuer and the Trustee may rely upon statements and certificates of the Very Low Income Tenants, and upon audits of the books and records of the Borrower pertaining to the Project. In addition, the Issuer and the Trustee may consult with counsel, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by the Issuer or the Trustee hereunder in good faith and in conformity with such opinion. In determining whether any default or lack of compliance by the Borrower exists under this Regulatory Agreement, neither the Issuer nor the.Trustee shall be required to conduct any investigation into or review of the operations or records of the Borrower and may rely solely on any written notice or certificate delivered to the Trustee or the Issuer by the Borrower with respect to the occurrence or absence of a default unless it knows that the notice or certificate is erroneous or misleading. SECTION 12. Location of the Project. The Borrower hereby represents and warrants that the Project is located entirely within the City of El Cerrito, County of Contra Costa. SECTION 13. Sale or Transfer of the Project. The Borrower hereby covenants and agrees not to voluntarily sell, transfer or otherwise dispose of the Project, or any portion thereof (other than for individual tenant use as contemplated hereunder), without obtaining the prior written consent of the Issuer and the Trustee, which consent shall be deemed given upon receipt by the Issuer of (i) evidence reasonably satisfactory to the Issuer and the Trustee that the Borrower's purchaser or transferee has assumed in writing and in full, the Borrower's duties and obligations under this Regulatory Agreement, (ii) evidence reasonably satisfactory to the Issuer that either (a) the purchaser or assignee has at least three years' experience in the ownership, operation and management of large mixed-income rental housing projects, without any record of material violations of discrimination restrictions or other state or federal laws or regulations applicable to such projects, or (b) the purchaser or assignee agrees to retain a property management firm with the experience and record described in subclause (a) above, or (c) the Issuer shall not have any reason to believe that the purchaser or assignee is incapable, financially or otherwise, of complying with, or may be unwilling to comply with, the terms of all agreements binding on such purchaser or assignee relating to the Project, (iii) an opinion of counsel of the transferee that the transferee has duly assumed the obligations of the Borrower under this Regulatory Agreement and that such obligations and this Regulatory Agreement are binding on the transferee, and (iv) an opinion of Bond Counsel to the effect that such sale will not cause interest on the Bonds to become includable in the gross income of the recipients thereof for federal income tax purposes. It is hereby expressly stipulated and agreed that any voluntary sale, transfer or other disposition of the Project in violation of this Section shall be null, void and without effect, shall cause a reversion of title to the Borrower, and shall be ineffective to relieve the Borrower of its obligations under this Regulatory Agreement. -17- Nothing contained in this Section shall affect any provision of any other document or instrument between the Borrower and the Lender which requires the Borrower to obtain the consent of the Lender as a precondition to sale, transfer or other disposition of the Project. SECTION 14. Term. This Regulatory Agreement and all and several of the terms hereof shall become effective upon its execution and delivery. This Regulatory Agreement shall remain in full force and effect for the periods provided herein and shall terminate as to any provision not otherwise provided with a specific termination date at the end of the Qualified Project Period, it being expressly agreed and understood that the provisions hereof are intended to survive the retirement of the Bonds and expiration of the Indenture, the Financing Agreement, the Mortgage Loan and the Mortgage Note; provided, however, that this Regulatory Agreement may terminate earlier at the sole option of the Issuer but only if, in addition, in the written opinion of Bond Counsel filed with the Issuer, the Trustee and the Borrower, termination of this Regulatory Agreement at some earlier time will not adversely affect the exemption from California personal income taxation and the Tax- exempt status of interest on the Bonds, and will not otherwise violate any provision of the Act or any requirement of the Issuer incident to the issuance of the Bonds. The terms of this Regulatory Agreement to the contrary notwithstanding, all and several of the terms hereof shall terminate and be of no further force and effect in the event of (i) either (A) a foreclosure or delivery of a deed in lieu of foreclosure whereby a third party (which may be the Lender) becomes the owner of the Project or (B) involuntary non- compliance with the provisions of this Regulatory Agreement caused by fire, seizure, requisition, change in a federal law or an action of a federal agency after the date hereof which prevents the Issuer and the Trustee from enforcing the provisions hereof or condemnation or a similar event and (ii) the payment in full and retirement of the Bonds within a reasonable period thereafter; provided, however, that the preceding provisions of this sentence shall cease to apply and the restrictions contained herein shall be reinstated if, at any time subsequent to the termination of such provisions as the result of the foreclosure or the delivery of a deed in lieu of foreclosure or a similar event, the Borrower or any related person to them (within the meaning of Section 1.103-10(e) of the Regulations) obtains an ownership interest in the Project for federal income tax purposes. Upon the termination of the terms of this Regulatory Agreement, the parties hereto agree to execute, deliver and record appropriate instruments of release and discharge of the terms hereof; provided, however, that the execution and delivery of such instruments shall not be necessary or a prerequisite to the termination of this Regulatory Agreement in accordance with its terms. SECTION 15. Covenants to Run With the Land. The Borrower hereby subjects the Project (including the Project Site) to the covenants, reservations And restrictions set forth in this Regulatory Agreement. The Issuer, the Trustee and the Borrower hereby declare their express intent that the covenants, reservations and restrictions set forth herein shall be deemed covenants running with the land and shall pass to and be binding upon the Borrower's successors in title to the Project; provided, however, that on the termination of this Regulatory Agreement said covenants, reservations and restrictions shall expire. Each and every contract, deed or other instrument hereafter executed covering or conveying the Project or any portion thereof shall conclusively be held to have been executed, delivered and accepted subject to such covenants, reservations and restrictions, regardless of whether -18- such covenants, reservations and restrictions are set forth in such contract, deed or other instruments. SECTION 16. Burden and Benefit. The Issuer, the Trustee and the Borrower hereby declare their understanding and intent that the burden of the covenants set forth herein touch and concern the land in that the Borrower' legal interest in the Project is rendered less valuable thereby. The Issuer, the Trustee and the Borrower hereby further declare their understanding and intent that the benefit of such covenants touch and concern the land by enhancing and increasing the enjoyment and use of the Project by Very Low Income Tenants, the intended beneficiaries of such covenants, reservations and restrictions, and by furthering the public purposes for which the Bonds were issued. SECTION 17. Uniformity; Common Plan. The covenants, reservations and restrictions hereof shall apply uniformly to the entire Project in order to establish and carry out a common plan for the use, Project and improvement of the Project Site. SECTION 18. Enforcement. If the Borrower defaults in the performance or observance of any covenant, agreement or obligation of the Borrower set forth in this Regulatory Agreement, and if such default remains uncured for a period of 60 days after notice thereof shall have been given by the Issuer or the Trustee to the Borrower, then the Trustee, acting on its own behalf or on behalf of the Issuer, shall declare am "Event of Default" to have occurred hereunder, provided, however, that if the default stated in the notice is of such a nature that it cannot be corrected within 60 days, such default shall not constitute an Event of Default hereunder so long as (i) the Borrower institutes corrective action within said 60 days and diligently pursues such action until the default is corrected, and (ii) in the opinion of Bond Counsel, the failure to cure said default within 60 days will not adversely affect the Tax-exempt status of interest on the Bonds. Following the declaration of an Event of Default hereunder the Trustee may, at its option, take any one or more of the following steps: (i) by mandamus or other suit, action or proceeding law or in equity, require the Borrower to perform its obligations and covenants hereunder or enjoin any acts or things which may be unlawful or in violation of the rights of the Issuer or the Trustee hereunder; (ii) have access to and inspect, examine and make copies of all of the books and records of the Borrower pertaining to the Project; and (iii) take such other action at law or in equity as may appear necessary or desirable to enforce the obligations, covenants and agreements of the Borrower hereunder. In addition to the foregoing, in the event the Issuer and the Trustee shall declare an Event of Default under this Regulatory Agreement effective on the date of such declaration of default, and upon such default, the Borrower hereby agrees to pay to the Issuer, but only to the extent of any available "surplus cash" as defined in the FHA Regulatory Agreement and not otherwise restricted by FHA or the Credit-Enhancement Provider, an amount.equal to any rents or other amounts. received by the Borrower for any units in the Project which were in violation of this Regulatory Agreement during the period such violation -19- continued, and the Issuer shall apply to any court, state or federal, for specific performance of this Regulatory 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 Regulatory Agreement. The Borrower hereby grants to the Issuer the option, upon the expiration of 30 days after the giving of the notice to the Borrower referred to in the first paragraph of this Section 18 of the Borrower's default under this Regulatory Agreement, for the Qualified Project Period to lease-up to twenty percent (20%) of the units in the Project for a rental of $1.00 per unit per year for the purpose of subleasing such units to Very Low Income Tenants, but only to the extent necessary to comply with the provisions of Section 4, Section 6 and Section 7. The option granted in the preceding sentence shall be effective only if the Borrower has not instituted corrective action within such 30-day period. The option and any leases to the Issuer under this provision shall terminate with respect to each default upon the achievement, by the Borrower, the Lender or the Issuer, of compliance with the requirements of Section 4, Section 6 and Section 7 and any subleases entered into pursuant to the Issuer's option shall be deemed to be leases from the Borrower. The Issuer shall make diligent effort to rent Very Low Income Units to Very Low Income Tenants for monthly rental amounts equivalent to those collected from tenants of similar units in the Project, but shall not be required to obtain such rental amounts. Any rental paid under any such sublease shall be paid to the Borrower after the Issuer has been reimbursed for any expenses incurred in connection with such sublease. The Borrower, the Issuer and the Trustee each acknowledge that a purpose for requiring compliance by the Borrower with the restrictions provided in this Regulatory Agreement is to preserve the federal and state income tax exclusion from gross income of interest on the Bonds to the Bondholders, and that the Trustee on behalf of the Bondholders, who are declared to be third party beneficiaries of this Regulatory 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; and Notwithstanding the foregoing, enforcement of this Regulatory Agreement shall not serve as a basis for a declaration of default under the Mortgage Loan or acceleration of the Mortgage Loan or result in any claim under such Mortgage Loan, or claim against the Project, the Mortgage Loan proceeds, any reserve or deposit made with the mortgagee or another person or entity required by the Lender in connection with the Mortgage Loan transaction or against the rents or other income from the Project (other than available "surplus cash" as defined in the FHA Regulatory Agreement) for payment hereunder. The Trustee shall have the right, in accordance with this Section 18 and the provisions of the Indenture, without the consent or approval of the Issuer, to exercise any or all of the rights or remedies of the Issuer hereunder; provided that prior to taking any such act the Trustee shall give the Issuer written notice of its intended action. All fees, costs and expenses of the Trustee incurred in taking any action pursuant to this Section 18 shall be the sole responsibility of the Borrower. After the Indenture has been discharged, the Issuer may act on its own behalf to declare an "Event of Default" to have occurred and to take any one or more of the steps specified hereinabove to the same extent and with the same effect as if taken by the Trustee. -20- The Borrower hereby agrees that specific enforcement of the Borrower's agreements contained herein is the only means by which the Issuer may obtain the benefits of such agreements made by the Borrower herein and the Borrower therefore agrees to the imposition of the remedy of specific performance against it in the case of any default by the Borrower hereunder. SECTION 19. The Trustee. The Trustee shall act as specifically provided herein and in the Indenture and may exercise such additional powers as are reasonably incidental hereto and thereto. The Trustee shall act as the agent of and on behalf of the Issuer, and any act required to be performed by the Issuer as herein provided shall be deemed taken if such act is performed by the Trustee. Neither the Trustee nor any of its officers, directors or employees shall be liable for any action taken or omitted to be taken by it hereunder or in connection herewith except for its or their own negligence or willful misconduct. The Trustee may consult with legal counsel selected by it (the reasonable fees of which counsel shall be paid by the Borrower) and any action taken or suffered by it reasonably and in good faith in accordance with the opinion of such counsel shall be full justification and protection to it. Except as otherwise expressly set forth herein, nothing contained herein shall be construed to impose any duties upon Trustee beyond those contained in the Indenture. All immunities, indemnities and other provisions of the Indenture insofar as related to the duties and liabilities of the Trustee shall apply to this Regulatory Agreement. SECTION 20. Recording and Filing. The Borrower shall cause this Regulatory Agreement and all amendments and supplements hereto and thereto, to be recorded and filed in the real property records of the County of Contra Costa and in such other places as the Issuer or the Trustee may reasonably request. The Borrower shall pay all fees and charges incurred in connection with any such recording. SECTION 21. Payment of Fees. Notwithstanding any prepayment of the Mortgage Loan and notwithstanding a discharge of the Indenture, the Borrower shall continue to pay to the Trustee reasonable compensation for any services rendered by it hereunder and reimbursement for all expenses reasonably incurred by it in connection therewith and shall continue to pay the Issuer's annual administrative fee in an amount equal to .125% of $11,110,000, payable in advance in annual installments on each May 1, commencing May 1, 1995. SECTION 22. Governing Law. This Regulatory Agreement shall be governed by the laws of the State of California. The Trustee's rights, duties and obligations hereunder are governed in their entirety by the terms and provisions of the Indenture. SECTION 23. Amendments. (a) This Regulatory Agreement shall be amended only by a written instrument executed by the parties hereto or their successors in title, and duly recorded in the real property records of the County of Contra Costa, California. The parties hereto acknowledge that, for so long as the Bonds are outstanding, the Lender is a third party beneficiary to this Regulatory Agreement, and that no amendment to this Regulatory Agreement affecting the -21 - rights of the Lender may occur without the prior written consent of the Lender except for those amendments described in Section 8(a) and Section 23(b). (b) Anything to the contrary contained herein notwithstanding, the Issuer, the Trustee and the Borrower hereby agree to amend this Regulatory Agreement to the extent required, in the opinion of Bond Counsel, in order that interest on the Bonds remain Tax- exempt. The parties requesting such amendment shall notify the other parties to this Regulatory Agreement of the proposed amendment, with a copy of such requested amendment to Bond Counsel and a request that such Bond Counsel render to the Trustee an opinion as to the effect of such proposed amendment upon the Tax-exempt status of interest on the Bonds. SECTION 24. Notice. Any notice required to be given hereunder shall be made in writing and shall be given by personal delivery, certified or registered mail, postage prepaid, return receipt requested, at the addresses specified below, or at such other addresses as may be specified in writing by the parties hereto: County: County of Contra Costa Community Project Department 651 Pine Street Fourth Floor, North Wing Martinez, California 94553 Attention: Deputy Director of Redevelopment Lender: TRI Capital Corporation 100 Pine Street, 23rd Floor San Francisco, California 94111 Attention: Kathy Ratliff, Vice President, Loan Servicing Trustee: Bank of America National Trust and Savings Association 333 South Beaudry (W24-30) Los Angeles, California 90017 Attention: Corporate Trust Department Reference: 11-7-30520-0 Borrower: Del Norte Place A California Limited Partnership C/o The John Stewart Company 2310 Mason Street San Francisco, California 94117 Attention: President Notice shall be deemed given three business days after the date of mailing. SECTION 25. Severability. If any provision of this Regulatory Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining portions hereof shall not in any way be affected or impaired thereby. -22- SECTION 26. Multiple Counterparts. This Regulatory Agreement may be simultaneously executed in multiple counterparts, all of which shall constitute one and the same instrument, and each of which shall be deemed to be an original. SECTION 27. Subordination of Agreement. This Regulatory Agreement and the restrictions hereunder are subordinate to the Mortgage Loan. Notwithstanding anything in this document to the contrary, the provisions hereof are subordinate to all applicable HUD mortgage coinsurance, Section 8 regulations and GNMA regulations and related administrative requirements. In the event of any conflict between the provisions of this document and the provisions of any applicable HUD regulations, related HUD or GNMA administrative requirements, or Mortgage Loan Documents or GNMA documents, the HUD or GNMA regulations, related administrative requirements, the Mortgage Loan Documents or the GNMA Documents shall control. In consideration of the Lender's and HUD's agreeing to coinsure the Mortgage Loan, and in reliance by the Lender and HUD upon the promises of the Borrower and the Issuer in connection with the Mortgage Loan, HUD, acting through the Lender, has reserved the right to require the Issuer to remove or void the restrictions on Very Low Income Units contained herein upon a determination by HUD that the restrictions are threatening the financing viability of the Project (i.e., impairing the Borrower's ability to sustain a level of income sufficient to meet all financial obligations of the Project, including debt service costs, required escrows and Project operating expenses), provided the Issuer concurrently receives an opinion of Bond Counsel reasonably satisfactory to it to the effect that the removal or voiding of such restrictions shall not affect the validity of the Bonds or the exclusion from gross income for federal income tax purposes of interest on the Bonds. In the absence of the Issuer's compliance with a HUD request coupled with the opinion of Bond Counsel described above that it remove or void the restriction(s), the Issuer expressly recognizes the power of HUD to take appropriate action to unilaterally remove or void the restriction(s) and that HUD shall not have to look any further than this Regulatory Agreement for the power to remove or void it. SECTION 28, Regulatory Agreement as Replacement. The Trustee, the Issuer and the Borrower acknowledge and agree that the provisions of this Regulatory Agreement are a complete restatement of and replace in full the provisions of the Prior Regulatory Agreement. The Trustee (in its capacity as the Prior Trustee), the Issuer and the Borrower, being all of the parties to the Prior Regulatory Agreement, hereby agree that the recordation of this Regulatory Agreement and redemption in full of the Prior Bonds shall operate to terminate the Prior Regulatory Agreement and that, upon such recordation and redemption, the Prior Regulatory Agreement shall no longer have any force or effect or be binding upon or affect the Project (including the Project Site). This provision is intended to be self-executing and no further action, document or instrument, other than the recordation of this Regulatory Agreement, is necessary to release the lien and charge of the Prior Regulatory Agreement. -23- IN WITNESS WHEREOF, the Issuer, the Trustee and Borrower have executed this Regulatory Agreement by duly authorized representatives, all as of the date first above written: COUNTY OF CONTRA COSTA By: Deputy Director — Redevelopment BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Trustee By: Authorized Officer DEL NORTE PLACE A CALIFORNIA LIMITED PARTNERSHIP By: The IBEX Group, a California general partnership, General Partner By: The John Stewart Company, a California Corporation, General Partner By: John K. Stewart, President By: James Babcock, General Partner By: Richard Moran, General Partner By: Roger Nelson, General Partner By: Peter Wilson, General Partner 13052-17:J]241 -24- ACKNOWLEDGMENT STATE OF CALIFORNIA ) ) SS. CITY AND COUNTY OF SAN FRANCISCO ) On this day of April, 1994, before me , Notary Public, State of California, personally appeared James Kennedy known to me to be the Deputy Director - Redevelopment of the County of Contra Costa and known to me to be the person who executed the within instrument on behalf of said public Agency and acknowledged to me that such public agency executed the same. WITNESS my hand and official seal. [SEAL] Notary Public Print Name My Commission Expires: ACKNOWLEDGMENT STATE OF CALIFORNIA ) ) SS. CITY AND COUNTY OF SAN FRANCISCO ) On this day of April, 1994, before me , Notary Public, State of California, personally appeared Linda Watson, of Bank of America National Trust and Savings Association, a national banking association duly organized and existing under the laws of the United States, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that she executed the same for the purposes and consideration therein expressed, in the capacity therein stated, and as the act and deed of said WITNESS my hand and official seal. [SEAL] Notary Public Print Name My Commission Expires: ACKNOWLEDGMENT STATE OF CALIFORNIA ) SS. CITY AND COUNTY OF SAN FRANCISCO ) On this day of April, 1994, before me , Notary Public, State of California, personally appeared John R. Stewart, personally known to me (or proved to me on the basis of satisfactory evidence) to be President of The John Stewart Company which is a general partner of The IBEX Group, a California general partnership, which is the general partner of Del Norte Place A California Limited Partnership, who executed the within instrument, and acknowledged to me that such general partnership executed the same. WITNESS my hand and official seal. [SEAL] Notary Public Print Name My Commission Expires: ACKNOWLEDGMENT STATE OF CALIFORNIA ) ) SS. CITY AND COUNTY OF SAN FRANCISCO ) On this day of April, 1994, before me , Notary Public, State of California, personally appeared , personally James Babcock known to me (or proved to me on the basis of satisfactory evidence) to be a general partner of The IBEX Group, a California general partnership, which is the general partner of Del Norte Place A California Limited Partnership, who executed the within instrument, and acknowledged to me that such general partnership executed the same. WITNESS my hand and official seal. [SEAL] Notary Public Print Name My Commission Expires: ACKNOWLEDGMENT STATE OF CALIFORNIA ) ) SS. CITY AND COUNTY OF SAN FRANCISCO ) On this day of April, 1994, before me , Notary Public, State of California, personally appeared Richard Moran, personally known to me (or proved to me on the basis of satisfactory evidence) to be a . general partner of The IBEX Group, a California general partnership, which is the general partner of Del Norte Place A California. Limited Partnership, who executed the within instrument, and acknowledged to me that such general partnership executed the same. WITNESS my hand and official seal. [SEAL] Notary Public Print Name My Commission Expires: ACKNOWLEDGMENT STATE OF CALIFORNIA ) SS. CITY AND COUNTY OF SAN FRANCISCO ) On this day of April, 1994, 1990, before me , Notary Public, State of California, personally appeared Roger Nelson, personally known to me or proved to me on the basis of satisfactory evidence) to be a general partner of The IBEX Group, a California general partnership, which is the general partner of Del Norte Place A California Limited Partnership, who executed the within instrument, and acknowledged to me that such general partnership executed the same. WITNESS my hand and official seal. (SEAL) Notary Public Print Name My Commission Expires: ACKNOWLEDGMENT STATE OF CALIFORNIA ) SS. CITY AND COUNTY OF SAN FRANCISCO ) On this day of April, 1994, before me Notary Public, State of California, personally appeared Peter Wilson, personally known to me (or proved to me on the basis of satisfactory evidence) to be a general partner of The IBEX Group, a California partnership, which is the general partner of Del Norte Place A California Limited Partnership, who executed the within instrument, and acknowledged to me that such general partnership executed the same. WITNESS my hand and official seal. [SEAL] Notary Public Print Name My Commission Expires: EXHIBIT A DESCRIPTION OF PROJECT SITE Exhibit A Page 1 EXHIBIT B STATISTICAL REPORT TO COUNTY Reporting Period: , 1990. Date: As of the date hereof: 1. Of the Very Low Income Units occupied by Very Low Income Tenants: units are occupied by households with children; and units are currently occupied by elderly households with a member of age 62 or over. 2. 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. 3. The number of Very Low Income Tenants who terminated their rental agreements during the previous twelve (12) month period is 4. The number of units rented to new Very Low Income Tenants during the last twelve (12) month period is 5. The family names of each household currently occupying a Very Low Income Unit are listed on the schedule attached hereto. 6. The number of two-bedroom Lower-Income Units is 7. The number of one-bedroom Very Low Income Units is 8. The number of former Very Low Income Tenants whose Adjusted Income has exceeded 140% of the applicable income limit for a Very Low Income Tenant of the same family size and have therefore ceased to qualify as Very Low Income Tenants is DEL NORTE PLACE A CALIFORNIA LIMITED PARTNERSHIP By: The IBEX GROUP, a California general partnership, General Partner By: Authorized Signatory Exhibit B Page 1 EXHIBIT C CERTIFICATION OF TENANT ELIGIBILITY RE: [name and address of Project] Apartment Number: Floor Number: Square footage: Number of Bedrooms: Initial monthly rent: $ 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 Project 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 on the later of the date on which the above persons first occupy the apartment or sign a lease with respect to the apartment, 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 and other compensation for personal services, before payroll deductions; (ii) net annual 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). (An allowance for depreciation of assets used in a business or profession may be deducted, based on straight-line depreciation, as provided in Internal Revenue Service regulations. Include any withdrawal of cash or assets from the operation of a business or profession, except to the extent the withdrawal is reimbursement of cash or assets invested in the operation by the above persons): Exhibit C Page 1 (iii) interest and dividends (include all income from assets as set forth in item 7(b) below and include any withdrawal of cash or assets from an investment, except to the extent the withdrawal is reimbursement of cash or assets invested by the above persons); (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 including a lump-sum payment for the delayed start of a periodic payment; (v) payments in lieu of earnings, such as unemployment and disability compensation, workers' compensation and severance pay; (vi) any welfare assistance: if the welfare assistance payment includes an amount specifically designated for shelter and utilities that is subject to adjustment by the welfare assistance agency in accordance with the actual cost of shelter and utilities, include as income (a) the amount of the allowance or grant exclusive of the amount specifically designated for shelter or utilities, plus (b) the maximum amount that the welfare assistance agency could in fact allow the above persons for shelter and utilities. (If the welfare assistance is ratably reduced from the standard of need by applying a percentage, the amount calculated under clause (b) shall be the amount resulting from one application of the percentage); (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, spouse or other household member whose dependents are residing in the unit; 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) Income from employment of children (including foster children),under the age of 18 years; (ii) Payment received for the care of foster children; (iii) Lump-sum additions to household 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; Exhibit C Page 2 (iv) Amounts received by the household that are specifically for, or in reimbursement of, the cost of medical expenses for any household member: (v) Income of a live-in aide; (vi) Amounts of education scholarships paid directly to the student or to the education institution, and amounts paid by the Government to a veteran, for use in meeting the costs of tuition, fees, books, equipment, materials, supplies, transportation, and miscellaneous personal expenses of the student. Any amount of such scholarship or payment to a veteran not used for the above purposes that is available for subsistence is to be included in income; (vii) The special pay to a household member serving in the Armed Forces who is exposed to hostile fire; (viii) (a) Amounts received under training programs funded by HUD; (b) Amounts received by a Disabled person that are disregarded for a limited time for purposes of Supplemental Security income eligibility and benefits because they are set aside for use under a Plan to Attain Self-Sufficiency (PASS); or (c) Amounts received by a participant in other publicly assisted programs which are specifically for or in reimbursement of out-of-pocket expenses incurred (special equipment, clothing, transportation, child care, etc.) and which are made solely to allow participation in a specific program; (ix) Temporary, nonrecurring or sporadic income (including gifts); or (x) Amounts specifically excluded by any other federal statute from consideration as income for purposes of determining eligibility or benefits under a category of assistance programs that includes assistance under the United States Housing Act of 1937. 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, but including the value of any assets disposed of for less than fair market value (including a disposition in trust, but not in a foreclosure or bankruptcy sale) during the previous two years in excess of the consideration received therefor), provide: (a) the total value of all such assets owned by all such persons: $�and Exhibit C Page 3 (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 OWNER: A vacant unit previously occupied by individuals or a family of very low income, may be treated as occupied by individuals or a family of very low income until reoccupied, other than for a period of 31 consecutive days or less, at which time the character of the unit shall be redetermined. Exhibit C Page 4 FOR COMPLETION BY PROJECT OWNER 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 S5,000, 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) than $0, enter $0): $ (C) TOTAL ELIGIBLE INCOME (Line I(A) plus line I(B)(iii)): $ II. Qualification as individuals or a family of lower income: (A) Is the amount entered in line 1(c) less than 50% of Median Income for the Area with adjustments for smaller and larger families.* Yes No (B) (i) If line II(A) is "No", then the household does not qualify as individuals or a family of very low 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 very low income; skip to item III. (iii) If line II(A) above is "Yes" and 8(b) above is "Yes", then the household qualifies as individuals or a family of very low income; skip to item III. (iv) If neither (ii) nor (iii) is applicable, then the household does not qualify as individuals or a family of very low income. III. (Check one) The household does not qualify as individuals or a family of very low income. The household qualifies as individuals or a family of very low income. Exhibit C Page 5 IV. Number of apartment unit assigned: (enter here and on page one) Owner * "Median Income for the Area" means the area median gross income as determined by the Secretary of the Treasury in a manner consistent with determinations of lower income families and area median gross income under Section 8 of the United States Housing Act of 1937, including adjustments for family size, or if programs under Section 8 are terminated, area median gross income determined under the method in effect immediately before such termination. Exhibit C Page 6 ' EXHIBIT D CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE The undersigned, being the authorized representative of Del Norte Place A California Limited Partnership (the "Borrower") has read and is thoroughly familiar with the provisions of the various Mortgage Loan Documents associated with the Borrower's participation in the County of Contra Costa (the "County") Multifamily Housing Program, such documents including: 1. the Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants, dated as of April 1, 1994 (the "Regulatory Agreement"), among the Borrower, the Issuer and Bank of America National Trust and Savings Association, as trustee; 2. the Financing Agreement (as defined in the Regulatory Agreement); and 3. the Mortgage Note (as defined in the Regulatory Agreement). As of the date of this certificate, the following percentages of completed residential units in the Project (i) are occupied by Very Low Income Tenants (as such term is defined in the Regulatory Agreement) or (ii) are currently vacant and being held available for such occupancy and have been so held continuously since the date a Very Low Income Tenant vacated such unit; as indicated: Occupied by Very Low Income Tenants: percent Unit Nos. Held vacant for occupancy continuously since last occupied by Very Low Income Tenant: percent Unit Nos. Vacant Units: percent Unit Nos. Exhibit D Pagel a 4` The undersigned hereby certifies that the Borrower is not in default under any of the terms and provisions of the above documents and no Determination of Taxability (as defined in the Regulatory Agreement) has occurred. DEL NORTE PLACE A CALIFORNIA LIMITED PARTNERSHIP By: The IBEX Group, a California general partnership, General Partner By: The John Stewart Company, a California Corporation, General Partner By: John K. Stewart, President By: James Babcock, General Partner By: Richard Moran, General Partner By: Roger Nelson, General Partner By: Peter Wilson, General Partner Exhibit D Page 2 o �' WCONTRMLMOFFSfATE 4/12/94 DRAFT C � � y H PREL] IINARY OFFICIAL STATEMENT DATED APRIL , 1994 0 d > `o E T NEW ISSUE: REFUNDING Standard&Poor's: w r BOOK-ENTRY ONLY (See "RATING" herein.) ° In the,opinion of Jones Hall Hill& White, A Professional Law Corporation, San Francisco, California, and Vaca& Vaca, Walnut X H w Creek,California, Co-Bond Counsel,subject,however,to certain qualifications described herein,under existing law,the interest on the Bonds Wis excluded from gross income for federal income tax purposes until the Conversion Date (as such term is defined in the Indenture)and such c g o interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations,although, E t o o for the purposes of computing the alternative minimum tax imposed on certain corporations,such interest is taken into account in determining y E certain income and earnings. In the further opinion o Co-Bond Counsel,such interest is exe t om California ersonal income taxes. See 8 .� P f mP.h' P C .o "TAX MATTERS"herein. C, $11,110,000* tom ; o ; COUNTY OF CONTRA COSTA a H Variable Rate Demand „ E o c Multifamily Housing Revenue Refunding Bonds, 1994 Series A w 3 (GNMA Collateralized-Del Norte Place Apartments) U rn 02 W _% Term Bonds due October 20 2032• Price: % N y Dated: Date of Issuance Due: October 20, 2032 rn w g The Bonds are issued under the Trust Indenture(the"Indenture")dated as of April 1, 1994,between the County of Contra Costa(the"Issuer")and c c d Bank of America National Trust and Savings Association,as Trustee(the"Trustee"). The Bonds will bear interest from the date of delivery at a weekly interest ki 'E E r- rate, to be determined as described herein, payable,until the Conversion Date, on the first business day of each month. The Bonds, when issued,will be M E c registered in the name of Cede&Co.,as Bondholder and nominee for the Depository Trust Company("DTC"),New York,New York. Purchases of beneficial E interests in the Bonds will be made in book-en only form. Principal is payable at maturity or upon earlier redemption at the n7 Y P P Y tY P p principal corporate trust office E' 2 of the Trustee,regularly scheduled interest is payable b check or draft of the Trustee mailed directly to DTC,as the registered owner thereof. Disbursement N E •Uw Su Y PY Y w M of such payments to the DTC Participants is the responsibility of DTC and disbursements of such payments to the beneficial owners is the responsibility of DTC ° 0 Cr Participants and Indirect Participants,as more fully described herein. Any purchaser as a beneficial owner of a Bond must maintain an account with a broker m c ` c E or dealer who is,or acts through,a DTC Participant to receive payment of the principal of and interest on such Bond. See"THE BONDS—Book-EntryOnly c n.E System"herein. cd H While the Bonds bear interest at the weekly interest rate,the registered owners of the Bonds will have the right to tender their Bonds for purchase ° y 'rn to the Tnrstee at its principal corporate trust office in Los Angeles,California,or to BankAmerica National Trust Company the"Tender Agent" at its COL c._ P Y( g ) principal g .2 Y ° office in New York City,New York,upon seven days'written notice. The Bonds are subject to mandatory purchase upon conversion of the interest rate on > a, the Bonds to a fixed interest rate. See "THE BONDS-Optional Tender"and "THE BONDS-Mandatory Purchase"herein. o r o ° H a The Bonds are subject to mandatory and optional redemption prior to maturity,at a redemption price equal to the aggregate principal amount of the c . ,°, 5 Bonds to be redeemed,plus accrued interest thereon to the redemption date. See "THE BONDS-Redemption Provisions"herein. C 3 Pursuant to and in accordance with the Constitution and laws of the State of California,the Issuer has determined to issue its$11,110,000*Variable a) .0 ym E H E E Rate Demand Multifamily Housing Revenue Refunding Bonds,1994 Series A(GNMA Collateralized-Del Norte Place Apartments)(the"Bonds")to(i)refund T ` a certain outstanding bonds of the Issuer(the"Prior Bonds")which were issued to provide moneys to fund an FHA insured mortgage loan(the"Mortgage Loan") E made by TRI Capital Corporation(the"Lender")to Del Norte Place Limited Partnership,a California limited partnership(the "Owner")to finance a 135-unit w t oc 'o mixed use multifamily housing rental facility maintained and operated for low and moderate income persons(the "Project");(ii)to reimburse certain costs of 10 c iu 3 the Project incurred by the Owner which were not reimbursed from the proceeds of the Prior Bonds;and(iii)to pay certain costs of issuing the Bonds. As co v d .- 't y further described herein,the Owner has defaulted on the Mortgage Loan,and the Mortgage Loan will be refinanced and the FHA co-insurance thereon reinstated C E o in connection with the issuance of the Bonds. The Bonds are special limited obligations of the Issuer payable solely from revenues,receipts payments under a new GNMA Security to be issued b the Lender with respect to the modified and reinstated Mo .o tY Y P Mortgage Loan and other sources provided in the Indenture. See -C r "SOURCES OF PAYMENT FOR THE BONDS"herein. In addition,the Bonds initially will be payable from funds drawn under an irrevocable direct pay C ..9 .LJ letter of credit issued in favor of the Trustee by C N C _ U =c iu THE SUMITOMO BANK,LP&MD `o N > (Chicago Branch) Eo v , Such letter of credit will permit the Trustee to draw up to(i)an amount equal to the aggregate principal amount of the Bonds(other than Pledged 0 1° y 0 Bonds as defined herein)then outstanding to pay the unpaid principal amount,or the portion of the purchase price representing the principal amount,of the c d t outstanding Bonds,whether at maturity,upon purchase,redemption,acceleration or otherwise,and(ii)an amount equal to 39 days'interest(at a maximum rate 75 E c of 12%*per annum)to pay the interest accrued,or a portion of the purchase price equal to the interest accrued,on the Bonds(other than Pledged Bonds). M •- Such letter of credit will expire as described herein,but in no event later than April 28, 1999,unless extended. See "SOURCES OF PAYMENT FOR THE c c '2 BONDS-Credit Enhancement"herein. :°- . v 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 iiw information with respect to the Bonds. Investors should read this entire Official Statement to obtain information necessary to make an informed investment ' 0 ? -CO E a, decision. c a ,c, The Bonds are offered when,as and if issued and received by the Underwriter,subject to prior sale,to withdrawal or modification of the offer without ESE c notice and to the approval of legality by Jones Hall Hill&White,A Professional Law Corporation,San Francisco,California,and Vaca&Vaca,Walnut Creek, d v d2 California,Co-Bond Counsel. Certain legal matters will be passed on for The Sumitomo Bank,Limited(Chicago Branch)by its counsel,Hopkins&Sutter, rn 'r, Chicago,Illinois,and Nishi,Tanaka&Takahashi,Tokyo,Japan;for the Owner by its counsel,Michaud&Hoshiyama,San Francisco,California;for the Lender o E E d by Paul Renno,Esq.,Corporate Counsel to the Lender;,and for the Underwriter by its counsel,Ritter Eichner&Norris,Washington,D.C. It is expected that 0 o a a) Bonds in definitive form will be available for delivery in New York, New York, on or about April 28, 1994. >•m d E o NEWMAN AND ASSOCIATES, INC. E ° 0 —°, April 1994 C M N Preliminary; subject to change. No dealer, broker, salesman or other person has been authorized by the Issuer, the Owner, the Bank or the Underwriter to give any information or to make any representations other than those contained in this Official Statement and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there by 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 Issuer, the Owner, the Bank and other sources which are believed to be reliable but is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by, the Underwriter. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale hereunder shall, under any circumstances, create any implication that there has been no change in the information contained herein since the date hereof. IN CONNECTION WITH THIS OFFERING,THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. TABLE OF CONTENTS Page INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 THEISSUER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 SOURCES OF PAYMENT FOR THE BONDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 THE BONDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ESTIMATED SOURCES AND USES OF FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 THE GNMA MORTGAGE-BACKED SECURITIES PROGRAM . . . . . . . . . . . . . . . . . . . . . . . . . . 16 THE OWNER AND THE PROJECT . . . . . . . . . . . . . . . . . . . . . 19 CERTAIN RISKS TO BONDHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 THE LENDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 SUMMARY OF CERTAIN PROVISIONS OF THE NOTE AND MORTGAGE . . . . . . . . . . . . 27 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 RATING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 UNDERWRITING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . . . . . . . . . . . 30 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 EXHIBIT A - SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE, THE AGREEMENT AND THE REGULATORY AGREEMENT EXHIBIT B - SUMMARY OF CERTAIN PROVISIONS OF THE REIMBURSEMENT AGREEMENT EXHIBIT C - THE SUMITOMO BANK, LIMITED OFFICIAL STATEMENT of the COUNTY OF CONTRA COSTA Relating to $11,110,000* Variable Rate Demand Multifamily Housing Revenue Refunding Bonds, 1994 Series A (GNMA Collateralized -Del Norte Place Apartments) INTRODUCTION The purpose of this Official Statement, which includes the cover page and Exhibits hereto, is to set forth certain information in connection with the issuance and sale by the County of Contra Costa (the "Issuer") of its $11,110,000* Variable Rate Demand Multifamily Housing Revenue Refunding Bonds, 1994 Series A (Del Norte Place Apartments) (the "Bonds"). The Bonds are being issued under and pursuant to Chapter 7 of Part 5 of Division 31 of the Health and Safety Code of the State of California(the "Act"), a trust indenture(the "Indenture"), dated as of April 1, 1994, between the Issuer and Bank of America National Trust and Savings Association, as Trustee (the "Trustee"), and a resolution of the Issuer adopted on April 19, 1994. Certain capitalized terms used herein are defined in Exhibit A hereto. The Indenture authorizes the Issuer to issue the Bonds to provide a portion of the funds in connection with the early redemption and refunding of the outstanding Multifamily Housing Revenue Bonds(GNMA Collateralized- Del Norte Place Apartments) 1990 Series B (the "Prior Bonds") previously issued for the purpose of financing a mortgage loan (the "Loan") made to Del Norte Place Limited Partnership, a California limited partnership (the "Owner"), to finance the acquisition, construction and equipping of the housing portion of a 135-unit mixed use multifamily housing rental project located in the city of El Cerrito,California known as Del Norte Place Apartments (the "Project"). The Loan is evidenced by a deed of trust note(the "Note")secured by a first lien deed of trust(the "Mortgage") on the Project. The Note was finally endorsed for insurance by the Federal Housing Administration ("FHA"), an organizational unit within the United States Department of Housing and Urban Development("HUD"), pursuant to the provisions of Section 221(d)(4) and 244 of Title II of the National Housing Act of 1934, as amended (the "National Housing Act"). The Prior Bonds were secured primarily by a fully-modified mortgage backed security (the "GNMA Security") guaranteed as to timely payment of principal and interest by the Government National Mortgage Association("GNMA") issued by TRI Capital Corporation(the "Lender"). Due to the financial condition of the Project, the Owner defaulted in making the full payments due on the Loan on September 1, 1993, and thereafter. See "THE OWNER AND THE PROJECT--Prior Operating History of the Project" herein. It is expected that this default will result in a prepayment of the GNMA Security relating to the Prior Bonds by the Lender, and that the Prior Bonds will therefore be called for redemption. Concurrently with the issuance of the Bonds, the Loan will be refinanced pursuant to a Financing Agreement dated as of April 1, 1994 (the "Agreement" or the "Financing Agreement"), among the Issuer, the Trustee, the Owner and the Lender, and the FHA co-insurance on the Loan will be reinstated. As provided in the Financing Agreement, the terms of the Mortgage Loan will be amended and reinstated to increase the amount of the Mortgage Loan to the Owner in connection with refunding its original principal amount ($10,586,300) and to reduce the interest rate on the Mortgage Loan to a rate of 8.250% per annum. Under the terms of the Financing Agreement, it is expected that a new GNMA Security will be issued by the Lender with respect to the modified Mortgage Loan bearing interest at 8.0%. The proceeds of the Bonds will be used to purchase the GNMA Security from the Lender. Prior to the acquisition of the GNMA Security by the Trustee, the Bonds will be secured by Bond proceeds and other moneys deposited in the Acquisition Fund and the * Preliminary; subject to change. Bond Fund, each established under the Indenture and invested by the Trustee pursuant to an investment agreement with with respect to the Acquisition Fund (the "Investment Agreement"). During the Weekly Variable Rate Period, the Bonds are payable from funds drawn under an irrevocable direct pay letter of credit issued in favor of the Trustee by The Sumitomo Bank, Limited (the "Bank"), acting through its Chicago Branch. Such letter of credit (together with any authorized substitutions and extensions, the "Credit Enhancement")will permit the Trustee to draw up to(i)an amount equal to the aggregate principal amount of the Bonds(other than Pledged Bonds)then Outstanding to pay the unpaid principal amount, or the portion of the purchase price representing the principal amount, of the Outstanding Bonds, whether at maturity, upon purchase, redemption or acceleration, and (ii) the Credit Enhancement Interest Requirement to pay the interest accrued, or a portion of the purchase price equal to the interest accrued, on the Bonds. The initial Credit Enhancement will expire prior to the final maturity of the Bonds as described herein; and prior to the Conversion Date the Bonds are subject to mandatory redemption in such event if an Alternate Credit Enhancement complying with the Indenture is not provided. See "SOURCES OF PAYMENT FOR THE BONDS -- Credit Enhancement" herein. The Owner, the Trustee and the Issuer will also enter into an Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants dated as of April 1, 1994(the"Regulatory Agreement")in connection with the issuance of the Bonds. See "SUMMARY OF CERTAIN PROVISIONS OF THE NOTE AND MORTGAGE" herein and Exhibit A-- "SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE, THE AGREEMENT AND THE REGULATORY AGREEMENT." The Bonds are initially issuable as fully registered bonds without coupons, in the denomination of$100,000 or any integral multiple of$5,000 in excess thereof during the Weekly Variable Rate Period (as defined herein) and $5,000 or any integral multiple thereof during the Fixed Rate Period (as defined herein). The Bonds, when issued, will be registered in the name of Cede & Co., as Bondholder and nominee for The Depository Trust Company ("DTC"), New York, New York. Purchases of beneficial interests in the Bonds will be made in book- entry only form. Principal of and interest on the Bonds will be paid by the Trustee directly to DTC, as the registered owner thereof. Disbursement of such payments to the DTC Participants is the responsibility of DTC and disbursements of such payments to the beneficial owners is the responsibility of DTC Participants and the Indirect Participants, as more fully described herein. Any purchaser as a beneficial owner of a Bond must maintain an account with a broker or dealer who is, or acts through, a DTC Participant in order to receive payment of the principal of and interest on such Bond. Transfers of ownership will be made in the records of DTC for the beneficial owners of the Bonds. (See "THE BONDS -- Book-Entry-Only System".) The Bonds are subject to mandatory and optional redemption prior to maturity,at a redemption price equal to the aggregate principal amount of the Bonds to be redeemed, plus accrued interest thereon to the redemption date as set forth herein. THE PAYMENT OF PRINCIPAL AND PREMIUM, IF ANY, AND INTEREST ON THE BONDS IS NOT GUARANTEED BY, NOR SECURED BY A PLEDGE OF THE FAITH AND CREDIT OF, NOR ANY TAXING POWER OF, THE UNITED STATES OF AMERICA, GNMA, FHA, THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, OR THE ISSUER. THE SOLE OBLIGATION OF GNMA IS TO GUARANTEE THE PAYMENTS REQUIRED TO BE MADE ON THE MORTGAGE LOAN. EXCEPT AS EXPRESSLY PROVIDED HEREIN, THE BONDS ARE NOT SECURED BY THE PROJECT, OR THE MORTGAGE LOAN, ALTHOUGH THE PROJECT DOES SECURE THE MORTGAGE LOAN. IF THE PROJECT FAILS TO GENERATE ANTICIPATED REVENUES AND THE OWNER FAILS TO MAKE PAYMENTS WITH RESPECT TO THE MORTGAGE LOAN A DEFAULT WITH RESPECT THERETO WILL ALLOW THE LENDER TO PREPAY THE GNMA SECURITY AND CAUSE A MANDATORY REDEMPTION OF THE BONDS WITHOUT PREMIUM. SEE"THE BONDS"AND"CERTAIN RISKS TO BONDHOLDERS-- EARLY REDEMPTION" HEREIN. Brief descriptions of the Issuer, the sources of payment for the Bonds, the Bonds, the Project, the Owner and the Bank and summaries of the GNMA Security, the Note, the Mortgage, the Indenture, the Agreement, the Regulatory Agreement and the Reimbursement Agreement hereinafter referred to are included in this Official Statement. All references herein to the Indenture, the Agreement, the Reimbursement Agreement, the Regulatory 2 Agreement and all, other documents and agreements are qualified in their entirety by reference to such documents and agreements, and all references to the Bonds are qualified by reference to the form thereof included in the Indenture, copies of which are available for inspection at the principal corporate trust office of the Trustee. THE ISSUER The Issuer is a legal subdivision and body corporate and politic organized and existing under the Constitution and 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 position are as follows: Board Term Expires Position Tom Powers January, 1995 Chairman Gayle Bishop January, 1997 Vice-Chair Tom Torlakson January, 1997 Supervisor Mark DeSaulnier January, 1995 Supervisor Jeff Smith January, 1997 Supervisor 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 staff for the housing programs financed by bonds such as the Bonds consists of four people. The staff members function under the management of the Deputy Director-Redevelopment who is appointed by the County Administrator. At present the 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) 6464076. SOURCES OF PAYMENT FOR THE BONDS General It is anticipated that a portion of the Bonds will be secured primarily by a fully-modified mortgage backed security (the "GNMA Security") issued by TRI Capital Corporation (the "Lender") and guaranteed as to timely payment of principal and interest by the Government National Mortgage Association ("GNMA"), which is based on a mortgage loan co-insured by the FHA, and made by the Lender to the Owner (the "Mortgage Loan"). THE PAYMENT OF PRINCIPAL AND PREMIUM, IF ANY, AND INTEREST ON THE BONDS IS NOT GUARANTEED BY, NOR SECURED BY A PLEDGE OF THE FAITH AND CREDIT OF, NOR ANY 3 TAXING POWER OF, THE UNITED STATES OF AMERICA, GNMA, FHA, THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, OR THE ISSUER. THE SOLE OBLIGATION OF GNMA IS TO GUARANTEE THE PAYMENTS REQUIRED TO BE MADE ON THE MORTGAGE LOAN. EXCEPT AS EXPRESSLY PROVIDED HEREIN, THE BONDS ARE NOT SECURED BY THE PROJECT, OR THE MORTGAGE LOAN, ALTHOUGH THE PROJECT DOES SECURE THE MORTGAGE LOAN. IF THE PROJECT FAILS TO GENERATE ANTICIPATED REVENUES AND THE OWNER FAILS TO MAKE PAYMENTS WITH RESPECT TO THE MORTGAGE LOAN A DEFAULT WITH RESPECT THERETO WILL ALLOW THE LENDER TO PREPAY THE GNMA SECURITY AND CAUSE A MANDATORY REDEMPTION OF THE BONDS WITHOUT PREMIUM. SEE"THE BONDS"AND "CERTAIN RISKS TO BONDHOLDERS-- EARLY REDEMPTION" HEREIN. Debt Service Reserve Fund Amounts on deposit in the Debt Service Reserve Fund shall be withdrawn by the Trustee and applied, to the extent that moneys in the General Receipts Fund are not available therefor in accordance with the Indenture, to pay principal of and interest on Outstanding Bonds on any Interest Payment Date, Maturity Date or Redemption Date, or to pay the obligations of the Owner under the Reimbursement Agreement, to the extent necessary to satisfy any such deficiency. Credit Enhancement General. The initial Credit Enhancement will be issued by the Bank to the Trustee in the amount of $11,110,000, which amount is equal to the original principal amount of the Bonds plus interest thereon for a period of 39 days (at the Maximum Rate). The initial Credit Enhancement is issued pursuant to the Reimbursement, Letter of Credit and Loan Agreement dated as of April 1, 1994, between the Owner and the Bank (the "Reimbursement Agreement"). The initial Credit Enhancement will expire on the earliest of (i) April 28, 1999 (the "Stated Expiration Date"), unless the expiration date has been extended, (ii)ten(10) days after the Trustee receives written notice from the Bank of a default under the Reimbursement Agreement and a direction by the Bank to immediately redeem all Outstanding Bonds, (iii) the date on which all of the Bonds are paid in full and the Indenture is discharged in accordance with its terms, (iv)the date on which the Bonds become secured by an Alternate Credit Enhancement in accordance with the terms of the Indenture, and(v)the date on which the interest rate on the Bonds is converted to a Fixed Interest Rate in accordance with the terms of the Indenture. Draws are required to be made under the Credit Enhancement by submission to the Bank of sight drafts accompanied by appropriate certificates. The Trustee is required by the Indenture to cause such amounts to be applied to the purpose for which they were drawn when due on each of the dates described below: (i) On each Interest Payment Date, for the payment of interest on the Bonds, in an amount calculated by the Trustee to be equal to the interest due on the Bonds (other than Pledged Bonds) on such Interest Payment Date; (ii) On each Redemption Date of the Bonds (other than Pledged Bonds), whether by reason of optional redemption or mandatory redemption, for the payment of principal of and interest on the redeemed Bonds (other than Pledged Bonds), in an amount calculated by the Trustee to be equal to the principal of and interest on the Bonds (other than Pledged Bonds) to be redeemed; provided that in the event of a mandatory redemption of the Bonds the draw (and redemption) in any event shall occur prior to the fifth day next preceding the expiration of the Credit Enhancement; (iii) On the Maturity Date of the Bonds and on any date on which the Bonds have been accelerated pursuant to the provisions of the Indenture (other than Pledged Bonds), for the payment of principal of and accrued interest on the Bonds (other than Pledged Bonds), in an amount calculated by the 2 Preliminary; subject to change. 4 Trustee to be equal to the principal of and accrued interest on Bonds (other than Pledged Bonds) due on such date; and (iv) On any date during the Weekly Variable Rate Period on which Bonds are subject to purchase on demand upon seven(7) days' notice by any Bondholder, and on the Conversion Date, but, in each case, only to the extent remarketing proceeds are not available for the purchase of such Bonds, in an amount equal to the principal of and interest on the Bonds to be purchased. Amounts drawn under the Initial Credit Enhancement pursuant to(i), (ii)or (iii)above are required to be immediately reimbursed by the Owner under the Reimbursement Agreement. Interest on any unreimbursed amount will accrue at the Default Rate (as defined in the Reimbursement Agreement) pursuant to the Reimbursement Agreement. In the event amounts are drawn under the Credit Enhancement pursuant to (iv) above and not immediately reimbursed by the Owner under the Reimbursement Agreement, the Bank may (subject to the satisfaction of certain conditions)make a short-term loan to the Owner of such amounts and the Bonds purchased with such draws shall be "Pledged Bonds" and all proceeds of remarketing of such Bonds shall be for the account of the Bank unless all amounts due to the Bank by the Owner under the Reimbursement Agreement in connection therewith have been paid in full. In the event of a failure by the Owner to reimburse the Bank for amounts drawn under the initial Credit Enhancement as required pursuant to the Reimbursement Agreement or any other default under the Reimbursement Agreement, the Bank may direct the Trustee to cause the Bonds to be redeemed. See "THE BONDS -- Redemption Provisions-- Mandatory Redemption," Exhibit A, "Summary of Certain Provisions of the Indenture, the Agreement and the Regulatory Agreement--The Indenture-- Pledged Bonds" and "Summary of Certain Provisions of the Indenture, the Agreement and the Regulatory Agreement -- The Indenture -- Events of Default," and Exhibit B, "Summary of Certain Provisions of the Reimbursement Agreement." Reinstatement of Initial Credit Enhancement. Each time a draw is made by the Trustee under the initial Credit Enhancement, the amount available to be drawn under the initial Credit Enhancement will be reduced by the amount so drawn and will or will not be reinstated as follows: (A) to the extent the drawing is being made with respect to any payment of the principal amount of the Bonds, whether at maturity, upon redemption, upon a conversion of the Bonds to a Fixed Interest Rate, or as a result of the acceleration thereof, and interest payable in connection with an optional redemption or mandatory redemption of the Bonds in whole or in part, or an acceleration, or upon a conversion of the Bonds to a Fixed Interest Rate, or at the maturity of the Bonds, the obligation to pay the principal amount of the Bonds and such accrued interest thereon so paid will not be reinstated; (B) to the extent the drawing is being made with respect to any regularly scheduled payment of interest on the Bonds, other than interest payable in connection with an optional redemption or mandatory redemption of the Bonds in whole or in part, or an acceleration, or upon a conversion of the Bonds to a Fixed Interest Rate, or at the maturity of the Bonds, the obligation to pay such accrued interest with respect to the Bonds will be automatically and immediately reinstated, such reinstatement to be in an amount equal to the Credit Enhancement Interest Requirement; (C) to the extent the drawing is being made with respect to any payment of the purchase price of the Bonds tendered for purchase on demand on 7 days' notice, the obligation to pay principal portion of such purchase price will be automatically and immediately reinstated, upon and to the extent that the Trustee or the Tender Agent has received payment in immediately available funds of the principal of and accrued interest on the Pledged Bonds purchased with such drawing in connection with the remarketing thereof and is holding such payment for the Bank's sole benefit and account; in such case, (i)the principal portion of the initial Credit Enhancement shall be reinstated in an amount equal to the principal amount of the remarketed Bonds and (ii) the interest portion shall be reinstated to an amount equal to the Credit Enhancement Interest Requirement; and (D) the initial Credit Enhancement may also be otherwise reinstated as the Bank may notify the Trustee from time to time in writing. 5 At any time prior to the expiration of the initial Credit Enhancement, the Trustee may deliver a notice of reduction to the Bank setting forth the principal amount of Bonds paid, and the initial Credit Enhancement will be reduced by such amount and a corresponding amount of interest,which amounts shall not be reinstated. Extension of Initial Credit Enhancement. The term of the initial Credit Enhancement will expire on April 28, 1999. The term of the initial Credit Enhancement will be extended by two years at the written request of the Owner delivered to the Bank on or before April 1, 1997, if the Bank in its sole discretion notifies the Issuer, the Owner and the Trustee in writing within three months after receipt of such request that the initial Credit Enhancement will be so extended. Thereafter, the initial Credit Enhancement will be extended by two years at the written request of the Owner delivered on or before April 1 in every second succeeding year if the Bank in its sole discretion gives notice to such effect within three(3) months after such request. Alternate Credit Enhancement. The Reimbursement Agreement provides that an Alternate Credit Enhancement may be delivered to the Trustee, provided that(i) the Owner has given written notice forty-five(45) days in advance of the delivery of such Alternate Credit Enhancement to the Bank, and (ii) such Alternate Credit Enhancement and any substitute reimbursement agreement pursuant to which such Alternate Credit Enhancement is to be issued provides for the payment in full of all reimbursement obligations of the Owner under the Reimbursement Agreement. The Indenture provides that the Owner may at any time,but no later than an Extension Date, arrange for the deposit with the Trustee of an Alternate Credit Enhancement in substitution for the Credit Enhancement. The Alternate Credit Enhancement shall mature no earlier than the Credit Enhancement which it replaces, but may mature prior to the maturity of the Bonds. In connection with such substitution,the Trustee shall also receive(i)an opinion of counsel to the Alternate Credit Enhancement Provider relating to the due authorization and issuance of the Alternate Credit Enhancement in form and substance satisfactory to the Issuer and the Trustee, (ii) an opinion of Co-Bond Counsel to the effect that such Alternate Credit Enhancement will not adversely affect the exclusion from gross income of the interest on the Bonds for Federal income tax purposes, (iii)written evidence from the Rating Agency, if the Bonds are then rated by the Rating Agency, that such Rating Agency has reviewed such Alternate Credit Enhancement and the substitution of such Alternate Credit Enhancement for the Credit Enhancement then in effect will not result in a reduction or withdrawal of the rating on the Bonds then in effect, and (iv) the written approval of the Alternate Credit Enhancement by the Issuer. The Bank has provided the financial information contained herein as Exhibit C. THE BONDS General The Bonds will be dated the date of original issuance thereof(the "Original Issue Date"), will mature on the date set forth on the cover hereof, and will bear interest from the Original Issue Date at a variable rate (the "Weekly Variable Rate") determined by Newman and Associates, Inc., or its successor as remarketing agent (the "Remarketing Agent"), to be the minimum rate, not exceeding 12% per annum, necessary, in the best professional judgment of the Remarketing Agent, taking into account prevailing market conditions, to enable the Remarketing Agent to sell all of the Bonds on the rate determination date at a price of 100% of the principal amount thereof plus accrued interest,such determination to be made on Monday of each calendar week or on the next preceding Business Day if such Monday is not a Business Day, and the rate so determined shall be effective for the Weekly Variable Rate Period commencing on Tuesday of that calendar week(or the next succeeding Business Day; provided that the Weekly Variable Rate in effect on the Record Date for any Interest Payment Date shall remain in effect from such Record Date until and including such Interest Payment Date). The Remarketing Agent is required to give the Trustee and the Credit Enhancement Provider telephonic or telecopy notice of each such determination on the date thereof, and to confirm the same promptly in writing. Interest on the Bonds during each Weekly Variable Rate Period shall be computed on the basis of a 365- or 366-day year, as applicable, for the actual number of days elapsed, and shall be payable on the first Business Day of each month. While DTC is the registered owner of Bonds, all payments of principal of, premium, if any, and interest on the Bonds shall be paid to DTC by wire transfer. 6 Except while the Bonds are registered as "Book-Entry-Only"securities as provided in the Indenture,Bonds may be exchanged, and the transfer of Bonds may be registered, at the principal corporate trust office of the Trustee. In the event that prior to the Conversion Date the Remarketing Agent shall fail or refuse to determine the Weekly Variable Rate applicable for any Weekly Variable Rate Period or shall fail to give notice thereof on the date specified in the immediately preceding paragraph, the interest rate to be borne by the Bonds during such Weekly Variable Rate Period shall be the same rate as for the preceding Weekly Variable Rate Period. Conversion of the Interest Rate on the Bonds to the Faxed Interest Rate The interest rate on all Outstanding Bonds shall be converted, for the remaining term of the Bonds, to a fixed rate of interest determined by the Remarketing Agent in accordance with the procedures set forth in the Indenture(the "Fixed Interest Rate")on any Interest Payment Date designated by the Owner with the prior written consent of the Bank and the Issuer(the "Conversion Date"). At the Owner's election,the Bonds may be converted to bear a Fixed Interest Rate with or without Credit Enhancement. The Indenture requires that the notice from the Owner designating the Conversion Date be accompanied by an opinion of Co-Bond Counsel (such opinion to be confirmed on the Conversion Date)stating that such conversion of the Bonds to the Fixed Interest Rate is authorized and permitted by the Indenture and the laws of the State (including the Act), and will not adversely affect the exclusion of the interest on the Bonds from gross income for federal income tax purposes. The Bonds are subject to mandatory purchase on the Conversion Date in accordance with the Indenture. See "Mandatory Purchase"below. Optional Tender So long as the Bonds bear interest at a Weekly Variable Rate, any Bond shall be caused to be purchased by BankAmerica National Trust Company, New York, New York, as Tender Agent (the "Tender Agent"), on the demand of the holder thereof, on any Business Day at a purchase price equal to 100% of the principal amount thereof plus accrued interest, if any, to the date of purchase, upon delivery to the Tender Agent at its principal office of a notice(the "Bondholder Tender Notice")which: (i)states the number and principal amount of such Bond (or portion thereof to be tendered in Authorized Denominations, provided that the portion of the Bond retained is also an Authorized Denomination); (ii) states the name, address and tax identification number of the owner of the Bond demanding such payment; and (iii)states the date on which such Bond or portion thereof shall be purchased, which date shall be a Business Day not prior to the seventh day next succeeding the date of the delivery of such notice to the Tender Agent. By delivering a Bondholder Tender Notice, the holder irrevocably agrees to deliver such Bond (with an appropriate transfer of registration form executed in blank to the Tender Agent, and accompanied by a guaranty of signature satisfactory to the Tender Agent) to the principal office of to the principal office of the Tender Agent, or any other address designated by the Tender Agent, at or prior to 10:00 a.m. New York City time,on the Business Day specified in the Bondholder Tender Notice;provided,however, that such Bond shall be so purchased only if the Bond so delivered to the Tender Agent shall conform in all respects to the description thereof in the Bondholder Tender Notice. The determination by the Tender Agent of a holder's compliance with the Bondholder Tender Notice requirements and the delivery of the Bonds is in its sole discretion and is binding on the Owner, the Issuer, the Remarketing Agent, the Credit Enhancement Provider, the Trustee, the Tender Agent and the holder of the Bonds. No such Bondholder Tender Notice shall be effective unless it complies with the above-described requirements,and unless it is accompanied by a guaranty of signature acceptable to the Tender Agent and unless it is received by the Tender Agent at the principal office of the Tender Agent prior to 3:00 p.m., New York City time, on a Business Day not later than the seventh day preceding the Business Day designated in such Bondholder Tender Notice as the date of purchase. Any election by a holder to tender a Bond or Bonds (or portion thereof) for purchase shall be irrevocable and shall be binding on the holder making such election and on any transferee of such holder. If after delivery to the Tender Agent of a Bondholder Tender Notice, the holder making such election shall fail to deliver such Bond or Bonds described in the Bondholder Tender Notice to the Tender Agent on the applicable tender date, the untendered Bond or Bonds or portion thereof(the "Untendered Bond" or "Untendered Bonds") described in such Bondholder Tender Notice shall be deemed to have been properly tendered for purchase and,to the extent that there shall be sufficient (i) remarketing proceeds or (ii) amounts on deposit in the Credit Enhancement Account of the 7 General Receipts Fund on or before the applicable purchase date to pay the purchase price thereof, such Untendered Bond or Bonds (or portion thereof) shall on such purchase date cease to bear interest and no longer shall be considered to be Outstanding under the Indenture. If for any reason a holder fails to deliver such Bond to the Tender Agent on said purchase date, the Issuer shall execute and the Tender Agent shall authenticate and deliver to the Remarketing Agent for redelivery a new Bond or Bonds in replacement of the Bond not so delivered. The replacement of any such previously Outstanding Bond shall not be deemed to create new indebtedness, but such Bond as is issued in replacement shall be deemed to evidence the indebtedness previously evidenced by the Bond not so delivered. Upon surrender of any Bond for purchase in part only,the Issuer shall execute and the Tender Agent shall authenticate and deliver to the holder thereof a new Bond or Bonds of the same maturity, series and interest rate of Authorized Denominations, in an aggregate principal amount equal to the unpurchased portion of the Bond surrendered. Payment for Bonds purchased by the Tender Agent shall be made at or before 3:00 p.m., New York City time, on the date specified in the Bondholder Tender Notice with remarketing proceeds and/or the proceeds of a draw on the Credit Enhancement. Mandatory Purchase The Bonds are subject to mandatory purchase by the Tender Agent on behalf of and as agent for the Owner on the Conversion Date. At least twenty-one (21) Business Days prior to the Conversion Date, the Trustee shall give notice thereof to the Bondholders. Such notice shall advise the Bondholders of the Conversion Date and the procedures regarding the mandatory tender and purchase of the Bonds. Any such notice shall be conclusively presumed to have been duly given, whether or not the registered owner actually receives the notice. Once the Owner has given notice to the Tender Agent of the Conversion Date, the Owner may elect to revoke or cancel the Conversion Date by giving notice of such revocation to the Issuer, the Trustee, the Tender Agent, the Remarketing Agent and the Credit Enhancement Provider on or prior to the date set for determination of the Fixed Interest Rate by the Remarketing Agent. In such event the Bondholders, the Issuer, the Credit Enhancement Provider, the Owner, the Trustee, the Tender Agent and the Remarketing Agent shall be restored to their original positions, to the same effect as if such notice of the proposed Conversion Date had not been given. In such event any Bonds held by the Trustee pursuant to the notice given to the Bondholders shall be returned to the registered owners thereof In no event shall the cancellation of a Conversion Date for any reason be deemed to be a default or Event of Default under the Indenture. Holders of Bonds shall be required to tender their Bonds to the Tender Agent who shall purchase the Bonds on behalf of and as agent for the Owner for a purchase price equal to the principal amount thereof plus interest accrued to the Conversion Date, which will be the date of purchase. Any Bond which is not so tendered on the Conversion Date (an "Untendered Bond") shall be deemed to have been tendered to the Tender Agent as of the Conversion Date and, from and after such Conversion Date, shall cease to bear interest and no longer shall be considered to be Outstanding under the Indenture. In the event of a failure by holders to tender Bonds on the Conversion Date, said holders shall not be entitled to any payment (including any interest to accrue subsequent to the Conversion Date) other than the purchase price for such Untendered Bonds, and any Untendered Bonds shall no longer be entitled to the benefits of the Indenture, except for the purpose of payment of the purchase price therefor. If for any reason a holder fails to deliver such Bond to the Tender Agent on the Conversion Date, the Issuer shall execute, and the Tender Agent shall authenticate and deliver to the Remarketing Agent for redelivery to the purchaser, a new Bond or Bonds in replacement of the Bond not so delivered. The replacement of any such previously Outstanding Bond shall not be deemed to create new indebtedness, but such Bond as is issued in replacement shall be deemed to evidence the indebtedness previously evidenced by the Bond not so delivered. Payment for Bonds purchased by the Tender Agent shall be made with remarketing proceeds and/or the proceeds of a draw on the Credit Enhancement. 8 There shall be no sales of Bonds in connection with any optional tender or mandatory purchase if the Trustee shall have given notice to the Remarketing Agent that there shall have occurred and be continuing any Event of Default under the Indenture. Redemption Provisions The Bonds are not subject to redemption, absent the direction of the Bank, upon a Determination of Taxability (as defined in Exhibit B). In such event, interest on the Bonds would be included in gross income for federal income tax purposes. Such an event, in and of itself, is not an Event of Default under the Indenture. See "Tax Matters"herein. Optional Redemption. During the Weekly Variable Rate Period, the Bonds are subject to redemption by the Issuer, at the option of the Owner, with the prior written consent of the Credit Enhancement Provider, on any Interest Payment Date, in whole or in part(but only in Authorized Denominations), at a redemption price equal to 100% of the principal amount thereof plus accrued interest to the redemption date. During the Fixed Rate Period, the Bonds shall be subject to redemption by the Issuer, on any date on and after the tenth anniversary of the Conversion Date, in whole, 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 by the Issuer, at a redemption price equal to one hundred percent (100%) of the principal amount thereof plus accrued interest to the redemption date. Special Mandatory Redemption. The Bonds are subject to mandatory redemption in Authorized Denominations at any time at a redemption price equal to one hundred percent (100%) of the principal amount of the Bonds to be redeemed plus accrued interest thereon to the redemption date, in accordance with the following: [Redemption from accumulations of loan principal to come.] (a) The Bonds shall be subject to mandatory redemption, in whole, in the event that the aggregate amount on deposit in the Debt Service Reserve Fund, the Redemption Account and the Receipts Account is sufficient to pay the principal of and interest on all Bonds Outstanding on such date. (b) The Bonds shall be subject to mandatory redemption, in whole, due to an occurrence of an Event of Default (as defined in the Agreement); provided that the Credit Enhancement Provider, if required, shall have consented to the same constituting an Event of Default. (c) The Bonds shall be subject to mandatory redemption, in whole, with ten (10) days of receipt by the Trustee of a written notice from the Credit Enhancement Provider that a default under the Reimbursement Agreement has occurred and directing the Trustee to redeem all Outstanding Bonds. (d) The Bonds shall be subject to mandatory redemption, in whole, (1) upon a wrongful dishonor of any conforming draft under the Credit Enhancement by the Credit Enhancement Provider, (2) if the Credit Enhancement Provider shall (A) fail to be open for the transaction of its general business on any Business Day absent extenuating circumstances of a nonfinancial nature;or(B)commence a proceeding under any federal or state insolvency,reorganization or similar law,or have such a proceeding commenced against it,and either have an order of insolvency or reorganization entered against it or have the proceeding remain undismissed and unstayed for ninety (90) days; or (C) have a receiver, liquidator or trustee appointed for it or for the whole or substantially all of its property, and (3) on the Business Day prior to the expiration date of the Credit Enhancement, in the event of a failure to obtain a commitment to extend the Credit Enhancement or obtain an Alternative Credit Enhancement by a date ten (10) Business Days prior to the expiration of the Credit Enhancement,unless the Bonds have been converted to a Fixed Interest Rate pursuant to the Indenture without the security of the Credit Enhancement. (e) The Bonds shall be subject to mandatory redemption: 9 (A) in whole or in part, at any time on the earliest practical date 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 coinsurance claim and is therefore in the best interest of the Federal Government; or (B) in whole or in part, at any time on the earliest practical date, to the extent that the Trustee receives payments on the GNMA Security representing prepayments on the Mortgage Loan made by the Owner without notice or prepayment penalty while under the supervision of a trustee in bankruptcy; or (C) in whole on or before June 15, 1994, in the event that the conditions governing disbursement of the Project Fund to acquire the GNMA Security have not been met on or before June 1, 1994, or such later dates to which such dates have been extended as provided in the Indenture; or (D) in part on or before June 15, 1994 (as such date may be extended pursuant to the Indenture)to the extent that the GNMA Security delivered to Trustee is in a principal amount less than $10,586,300. Notice of Redemption. Except as described below, notice of redemption shall be given by the Trustee by first-class mail, postage prepaid, not less than 30 not more than 45 days before the date fixed for redemption, to each registered owner of the Bonds to be redeemed, at the registered owner's address appearing on the bond register, except that(a) any notice of redemption following receipt of casualty insurance proceeds or condemnation awards, (b) any notice of redemption in the event that conditions governing disbursement of the Acquisition Fund to acquire the GNMA Security have not been met as specified in the Indenture, in each case shall be given not less than 15 days prior to the date fixed for such redemption. Notice of such redemption also shall be sent by registered mail, overnight delivery service or other secure means, postage prepaid, to certain municipal registered securities depositories (described in the Indenture) which are known to the Trustee to be holding Bonds and to at least two of the national information services(described in the Indenture)that disseminate securities redemption notices,when possible, at least two (2) days prior to the mailing of notices required by the immediately preceding sentence, but in any event at least 30 days, but not more than 45 days, prior to the redemption date (except in the case of redemption following receipt of casualty insurance proceeds or condemnation awards or as a result of failure to meet the conditions governing disbursement of the Acquisition Fund to acquire the GNMA Security). Neither failure to receive notice as described in the immediately preceding sentence nor any defect in any notice so mailed shall affect the sufficiency of the proceedings for the redemption of such Bonds, and failure to give notice by mailing to the holder of any Bond designated for redemption shall not affect the validity of the proceedings for the redemption of any other Bond. In the event of a mandatory redemption of the Bonds as described above in clause (c) under the caption "Special Mandatory Redemption,"the Trustee may redeem such Bonds without notice to the Bondholders. All Bonds so called for redemption will cease to bear interest on the specified date set for redemption, provided funds for their redemption have been duly deposited with the Trustee pursuant to the Indenture and, thereafter, the owners of such Bonds called for redemption shall have no rights in respect thereof, except to receive payment of the redemption price of such Bonds. 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 Owner 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 Indenture. 10 Partial Redemption. If less than all of the Outstanding Bonds shall be called for redemption, the Trustee will select by lot, in such manner as it shall in its discretion determine, the Bonds or portion thereof in Authorized Denominations to be redeemed. If there shall be called for redemption less than the entire principal amount of a Bond, the Issuer shall execute and the Trustee shall authenticate and deliver,upon surrender of such Bond, without charge to the holder thereof, in exchange for the unredeemed portion of such Bond, a new Bond or Bonds of Authorized Denomination of the same maturity,interest rate, principal amount equal to the portion of the Bond not so redeemed. Book-Entry-Only System DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants("Participants")deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book- entry changes in Participants'accounts,thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations,and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. On the Original Issue Date, the Issuer and the Trustee will deliver a Letter of Representations (the "Representation Letter") to DTC and the Issuer will certify to the Trustee that the Bonds shall be registered by a Book-Entry System as described below. The Bonds will be issued in the form of a separate single certificated fully registered Bond for each maturity set forth on the cover page hereof. Upon initial issuance, the ownership of each Bond will be registered in the books of registry kept by the Trustee in the name of Cede & Co., as nominee of DTC. Except as provided in the Indenture, all of the Outstanding Bonds shall be registered in the books of registry kept by the Trustee in the name of Cede & Co., as nominee of DTC. With respect to Bonds registered in the books of registry kept by the Trustee in the name of Cede &Co., as nominee of DTC, the Issuer and the Trustee shall have no responsibility or obligation with respect to (1) the accuracy of the records of DTC, Cede&Co. or any Participant with respect to any ownership interest in the Bonds, (2) the delivery to any Participant or any other person, other than a Bondholder, as shown in the books of registry kept by the Trustee,of any notice with respect to the Bonds, including any notice of redemption,or(3)the payment to any Participant or any other person, other than a Bondholder, as shown in the books of registry kept by the Trustee, of any amount with respect to principal of, premium, if any, or interest on the Bonds. The Issuer and the Trustee may treat and consider the person in whose name each Bond is registered in the books of registry kept by the Trustee as the holder and absolute owner of such Bond for the purpose of payment of principal, premium, if any, on and interest with respect to such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bonds 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 books of registry kept by the Trustee, as provided in the Indenture, 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 books or registry kept by the Trustee, 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 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 record dates, the term "Cede & Co." in the Indenture shall refer to such new nominee of DTC. 11 The delivery of the Representation Letter by the Issuer and the Trustee shall not in any way limit the provisions described in the preceding paragraph or in any other way impose upon the Issuer or the Trustee any obligation whatsoever with respect to persons having interest in the Bonds other than the Bondholders, as shown on the books of registry kept by the Trustee. The Trustee shall take all action necessary for all representations in the Representation Letter with respect to the Trustee to all times be complied with. DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving written notice to the Issuer and the Trustee and discharging its responsibilities with respect thereto under applicable law. The Issuer, 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 termination of the services of DTC with respect to the Bonds,the Issuer may designate a different depository for the Bonds or may discontinue use of the book-entry system. Upon such determination to discontinue use of DTC, or if no substitute securities depository willing to undertake the functions of DTC under the Indenture can be found which, in the opinion of the Issuer, is willing and able to undertake such functions upon reasonable and customary terms, 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 books of registry kept by the Trustee 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. Notwithstanding any other provisions 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 of, 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. ESTIMATED SOURCES AND USES OF FUNDS The sources of funds and the uses thereof in connection with the issuance of the Bonds are expected to be approximately as set forth below: SOURCES Bond Proceeds Funds Under Prior Indenture Owner Contribution Total USES Deposit to Acquisition Fund Deposit to Bond Fund Deposit to Project Fund .Total Certain costs of issuance incurred in connection with the issuance of the Bonds will be paid from amounts on deposit($11,110,000*) in the Costs of Issuance Account of the Project Fund. 3 Preliminary; subject to change. 12 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. GNMA is a non-stock corporate instrumentality of the United States within the Department of Housing and Urban Development("HUD") with its principal offices in Washington, D.C. Subsequent to the closing of the Bond issue, GNMA will issue one or more "fully modified" mortgage- backed securities in the aggregate principal amount of$10,586,300 (together, the "GNMA Security")with respect to the Mortgage Loan. The total face amount of the GNMA Security to be acquired by the Trustee pursuant to the terms of the Indenture will be in the same face amount (or such lesser amount to reflect any payment to principal pursuant to the Mortgage Loan's monthly payments prior to the issuance of the GNMA Security) as the Bonds. The Lender will be required to pass through to the Trustee, as the holder of the GNMA Security, by the 15th day of each month the monthly scheduled installments of principal and interest on the Mortgage Note evidencing the Mortgage Loan (the "Mortgage Note"), less the GNMA guarantee fee and the Lender's servicing fees, whether or not the Lender receives such payment from the Owner, plus any unscheduled prepayments of principal of said Mortgage Note received by the Lender. GNMA guarantees the timely payment of the principal of and interest on the GNMA Security. GNMA Guaranty GNMA is authorized by Section 306(g)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 co-insured by the Federal Housing Administration ("FHA") under Sections 221(d)(4) and 244 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(g) 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 the 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 Security in the related GNMA Guaranty Agreement, 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 Security, 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 Security. Servicing of Mortgage Loan 13 The Lender is responsible for servicing and otherwise administering the Mortgage Loan 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 Security outstanding. GNMA regulations and policies have fixed the total of the servicing and guaranty fees not less than 0.25% nor more than .50% per annum, payable monthly, calculated on the principal balance of the GNMA Security outstanding on the last day of the month preceding such date of calculation. Of the total fee, .13% per annum is paid to GNMA as a guaranty fee, and the remainder is retained by the Lender as a servicing fee. The GNMA Security carries an interest rate that is 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 of the Mortgage Note will be the source of moneys for payments on the GNMA Security. If such payments are less than what is due, the Lender may, but is not obligated to, advance its own funds to ensure timely payment of scheduled installments of principal and interest due on the GNMA Security. 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 Security 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 GNMA Guaranty Agreement to be entered into by GNMA and the Lender upon issuance of the GNMA Security (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 Security when the Owner 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 shall 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 shall thereupon become the absolute property of GNMA, subject only to the unsatisfied rights of the holder of the GNMA Security. 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 shall 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 shall 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 Agreements, 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 to assume any part or all such responsibilities,duties or liabilities theretofore placed on the Lender, and provided that,no such agreement shall detract from or diminish the responsibilities,duties or liabilities of GNMA in its capacity as guarantor of the GNMA Security,or otherwise adversely affect the rights of the holders thereof. Payment of Principal and Interest on the GNMA Security Payment of principal and interest on the GNMA Security is required to be made in equal monthly installments on or before the 15th day of each month commencing the month next following the date of issue of the GNMA, 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 partial prepayments of principal on the Mortgage Note. The Lender is required to pay to the Trustee, as holder of the GNMA Security, monthly installments of not less than the interest due on the GNMA Security at the rate specified in the GNMA Security, together with any scheduled installments of principal, whether or not collected from the Owner, and any 14 prepayments or early recoveries of principal. Final payment of the GNMA Security shall be made upon surrender of the outstanding certificate. Liability of Lender The GNMA Security will not constitute a liability of nor evidence any recourse against the Lender. The GNMA Security is based on and backed by the insured Mortgage on the real property securing the Mortgage Note. Recourse may be had to GNMA by the Trustee in the event of any failure of timely payment as provided for in the GNMA Guaranty Agreement appended to the GNMA Security. Participants Trust Co. Prior to the acquisition of the GNMA Security,the Trustee will have entered into a custody agreement with respect to the GNMA Security with a participant(the "Participant")of Participants Trust Co. ("PTC") and it will have received assurances from the Participant and/or PTC prior to the acquisition of the GNMA Security that: (a) acting on behalf of the Trustee,the Participant has established a limited purpose account with PTC for the Indenture called the "Limited Purpose Account"; (b) the Participant has delivered 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 Participant;(c)that PTC has delivered a certificate to the Participant acknowledging that PTC will not charge the specified Limited Purpose Account while the instruction remains in effect(with exceptions only for mistake or to secure and repay any advance of principal and interest made by PTC); (d) the Participant has received written evidence that PTC has made an appropriate entry in its records of the transfer of such book-entry securities to the Participant's account; and (e)the GNMA Security will be transferred and received into the Limited Purpose Account free of any payment obligation. THE OWNER AND THE PROJECT The following description of the Owner and the Project has been provided by the Owner. The Issuer has not verified such information and assumes no responsibility for the accuracy thereof. The Owner The Owner is Del Norte Place Limited Partnership, a California limited partnership formed for the principal purpose of owning the Project. The General Partner of the Owner is The IBEX Group, a California general partnership consisting of five general partners (the "General Partner"), has general responsibility and sole authority for supervising the operations of the Owner and management of the Project. The general partners of the General Partner are described below. The John Stewart Company (the "Company"), located in San Francisco, California, is a firm that has served a number of functions over the past 15 years, primarily in the field of low- and moderate-income housing. Its scope of involvement includes project acquisition,rehabilitation,syndication,marketing and management. The Company's management portfolio consists of approximately 100 properties, representing 9,000 residential units as well as a smaller proportion of commercial spaces throughout Northern California. The Company serves as general partner and owner in a substantial number of these developments. Mr. Stewart is a Presidential appointee to the Board of Directors of the National Cooperative Bank in Washington, D.C. and has recently become a member of an advisory task force reporting to the Deputy Assistant Secretary for the U.S. Department of Housing and Urban Development. Mr. Stewart is a graduate of Stanford University. James Babcock - President of Sandy and Babcock, Inc., Architects and Planners with offices located in San Francisco, California and Miami, Florida. Since 1967 Mr. Babcock's firm, which has a staff of 38 architects, has planned and designed over 45,000 multifamily units in the United States and Canada. More than 120 of Sandy 15 & Babcock's projects have received awards from architectural excellence. Mr. Babcock is Chairman of the Board of Transpacific National Bank in San Francisco and is a graduate of the University of Illinois. Roger Nelson - President of Midstate Construction Corporation, located in Petaluma, California. Mr. Nelson's Company was founded in the early 1930's and serves such clients as Safeway Stores, AT&T, Bank of America, The State of California, The City of San Francisco and the U.S. Army and Navy. Mr. Nelson, who is on undergraduate and graduate engineering degrees from Stanford University. Richard Moran - President of Harbor Development Company, located in Sausalito, California. Mr. Moran, who has 20 years of experience in high quality multifamily projects and suburban office complexes in Northern California. Mr. Moran, a licensed attorney, is a graduate of the University of California at Berkeley. Peter Wilson - Principal of Kentfield Enterprises, Inc., located in Larkspur, California. Mr. Wilson has been primarily involved in single family subdivisions and multifamily apartments in Northern California for over 15 years, first as a real estate broker for Grubb & Ellis and then as a developer with Kentfield Enterprises. Mr. Wilson, is a graduate of Lake Forest College in Illinois. The General Partner, formed in 1989, entered into its first project in a joint venture with Mercy Family Housing California,a 501(c)(3), a California non-profit public benefit corporation. The General Partner developed on a turn-key basis 36 units of housing entailed the adaptive reuse of the vacant Southern Pacific Hospital, located in the Panhandle of Golden Gate Park in San Francisco, California. Seven different sources of financing were used without the benefit of rental assistance from the U.S. Department of Housing and Urban Development. The complex has been successfully developed and operated for the past four years, is a local landmark, and is listed on the National Register of Historic Buildings. The General Partner's second project, known as Woodhaven, was started in 1989 and completed in 1990, as a substantial rehabilitation of a partially constructed and vacant 104-unit senior complex, located in Sacramento, California. The Project is fully occupied. The Owner has not and does not intend to acquire any substantial assets or engage in any substantial business activities other than those related to the ownership of the Project. However, the General Partners are engaged in and will continue to engage in the acquisition,development,ownership and management of similar types of housing projects. The Owner, as a California limited partnership, is composed of the above General Partners and other persons who are or may become limited partners. The limited partners may assign a part of their economic interest in the partnership to others. Each limited partner and assignee are entitled to a share of the profits, losses, cash distributions and return of capital relative to the interest acquired. The proceeds received from any limited partner or assignee of an economic interest may be used for partnership purposes, including the payment of substantial fees to or repayment of substantial loans from the General Partner. Neither the Owner nor its partners are personally liable for payments on the Loan. Furthermore, except to the extent expressly set forth herein, no representation is made that the Owner has substantial funds available for the Project. Accordingly, neither the Owner's financial statements nor those of its partners are included in this Official Statement. Location and Description of the Project The Project is a transportation-based 135-unit mixed use, mixed income project, located on San Pablo Boulevard within a 1/2 block of the Del Norte BART station in the City of El Cerrito in western Contra Costa County. The Project consists of four four-story buildings with surface parking. Based on agreements with the El Cerrito Redevelopment Agency and Contra Costa County, 28 of the units have rent levels restricted to be affordable to very-low-income households (50% of median income level),while 29 units are designated for seniors. The property is subject to a long-term ground lease from the El Cerrito Redevelopment Agency. The project opened in the summer of 1992, and has been at or near full occupancy on the residential units since mid-1993. The retail 16 space is currently about 40% vacant and is not expected by the Owner to reach stabilized occupancy until late 1994. Over 50% of the residents use BART regularly and 40% do not own a car. Del Norte Place is a frame and stucco structure with Monterey tile roofs and interior courtyards for the residential units. Each of the four buildings are elevator-serviced. There are 19,945 leasable square feet of ground floor retail,oriented toward San Pablo Boulevard and 1,636 square feet leased to the County's Older Adults Clinic. Unit mix by market segment is as follows: Market Se ment One-Bedroom Two-Bedroom Total Low-Income 12 16 28 Market Rate/Family 29 62 91 Market Rate/ Seniors 16 -- 16 TOTAL 57 78 135 Unit mix by sizes is as follows: Bedrooms #i of Units Square Feet 1 12 533 1 12 570 1 23 640 1 10 685 2 5 780 2 21 856 2 21 863 2 11 900 2 20 924 Unit amenities include patio/balcony,oven, dishwasher and refrigerators. The common area amenities are a whirlpool spa facility,work-out room and a playground for children. There are 234 total parking spaces in the development, a portion of which are on a ground lease from BART. The retail parking (64 spaces) is located on the San Pablo frontage, with residential parking confined to the rear of the Project, including under the BART tracks. Parking for the residents is covered, and there are security gates which limits access to the residential units. Mortgage Loan on the Project The Loan on the Project provided construction and permanent financing for the Project. The Loan was finally endorsed for insurance by FHA on April 11, 1991, in the amount of$10,586,300. Prior to the issuance of the Bonds the interest rate on the Loan had been 8.275%. Under the terms of the financing provided through the issuance of the Bonds, the effective interest rate on the Loan will be the variable rate on the Bonds plus approximately_%, being the additional amount necessary to pay the fees and expenses of the Trustee, the Credit Enhancement Provider and others. The Note provides for the level payment of principal and interest until maturity. Prior Operating History of the Project Construction of the Project commenced in 1990 and was completed in 1992. The Project was initially financed with proceeds of the Loan made from the proceeds of the Prior Bonds. Based upon market conditions at the time the Prior Bonds were issued, the Owner believed that it would be able to increase rental income at a rate which would be more than sufficient to cover the debt service payments required under the Prior Bonds. However, due to general market conditions in the area, the Project did not achieve the rental rates and occupancy originally 17 projected. Due to these factors, the Project has had a negative cash flow during most of the years of its operation. As a result of the continuing cash shortfalls, the Owner defaulted on the Loan on and as of September 1, 1993. The Owner has represented that the default resulted primarily from the unexpected competitive market conditions which the Project has faced and depressed Project revenues combined with the debt service requirements under the terms of the Loan. The Owner believes that with a lower effective interest rate expected through the refunding and refinancing of the Loan and the issuance of the Bonds, the Project should be able to cover debt service and operating expenses, taking into account its design amenities and the competitive position of the local marketplace. However, there can be no assurance that this will be the case. Neither the Issuer, HUD, GNMA or the Underwriter has verified independently the conclusion of the Owner with respect to the feasibility of the Project subsequent to the refunding, nor can there be any assurance that future Project defaults will not occur. A default under the Loan could result in a mandatory redemption of Bonds at par plus accrued interest through the date of redemption. See "THE BONDS--Redemption Provisions--Special Mandatory Redemption" and "CERTAIN RISKS TO BONDHOLDERS -- Early Redemption" herein. At the request of the Issuer, Kotin, Regan&Mouchly, Inc. prepared a feasibility study with respect to the Project, dated December 10, 1993, a copy of which may be obtained upon request to the Issuer. 18 The table below sets forth a brief summary of the operating history of the Project since July 1, 1992 for which financial statements are available, as well as calculations of historical debt service coverage and estimates of pro forma debt service coverage after the issuance of the Bonds: June 25- Jan. 1- Dec. 31 Mar. 31 1992' 1993 19942 TOTAL INCOME $232,758 $1,260,096 $347,662 EXPENSES Operating Expenses 439,390 604,532 139,537 Management 18,000 47,250 9,000 Property Taxes 35,991 114,584 37,236 Total Expenses $493,381 $766,366 $185,773 NET OPERATING INCOME (LOSS) (260,623) 493,730 161,889 DEBT SERVICE Interest 217,680 873,985 203,092 Principal 5,618 35,383 9,311 Other 19.216 57,544 15.000 Total Debt Service $242,514 $966,912 $227,403 DEBT SERVICE COVERAGE (1.07) .71 .51 OPERATING DEFICIT ($503,137) ($473,182) ($65,514) CUMULATIVE OPERATING DEFICIT (503,137) (976,319) (1,041,833) PRO FORMA DEBT SERVICE COVERAGE4 ' Partial year initial occupancy (six months' operations). The Project received its First Certificate of Occupancy on June 25, 1992. 2 First quarter results. 3 Net Operating Income (Loss) _ Total Debt Service. 4 Net Operating Income(Loss)divided by projected annual principal and interest on amended and reinstated Loan at the rate of % which is based on the initial rate of interest on the Bonds (_% through April 1994) plus certain fees, expenses and required reserves. [Additional paragraph discussing pro forma operations subsequent to come.] CERTAIN RISKS TO BONDHOLDERS Prospective purchasers of the Bonds should consider carefully all possible factors that may affect their investment in the Bonds, including the possibility of redemption of the Bonds prior to maturity. The following is a summary, which does not purport to be comprehensive or definitive,of some of the possible factors that should be considered prior to purchasing the Bonds. 19 Limited Revenue Obligations The Bonds are limited obligations of the Issuer which impose'no general liability upon the Issuer or its officers, and the obligations and liabilities of the Owner under the Note are of a nonrecourse nature, limited to the Project and moneys derived from the operation of the Project, with no other funds or properties of the Owner pledged to secure the Note. No general or limited partner of the Owner nor any partners of the General Partner will have any personal liability to repay the Loan or to perform any other obligations of the Owner, other than management of the Project. The Bonds are payable solely from payments of principal and interest made or to be made on the GNMA Security issued with respect to the Note and received by the Trustee, together with certain moneys received by the Trustee representing proceeds of mortgage insurance, casualty insurance proceeds and condemnation awards, amounts drawn under the Credit Enhancement and all moneys held in any trust fund established under the Indenture, including certain investment income earned thereon, but excluding any insurance premiums, taxes or other amounts required to be escrowed pursuant to the FHA documents. Economic Feasibility The economic feasibility of the Project depends in large part upon the Project being substantially occupied at projected rent levels. The Owner is required to maintain the Project as a "project for residential rental property" as defined in the Internal Revenue Code of 1954, as amended prior to the enactment of the Tax Reform Act of 1986 (the "1954 Code"), which includes holding 20% of the units in the Project available for occupancy by low or moderate income persons as required by the 1954 Code, and is required to satisfy certain other restrictions on the Project imposed by the Issuer, as described in Exhibit A under "The Regulatory Agreement." There can be no assurance that in the future the Owner will be able to rent units at rent levels which will enable it to make timely payments on the Note. As discussed above, the Project has not generated sufficient rents to cover operating expenses and debt service on the Note at the rate of 8.275% per annum. It is projected by the Owner that, subsequent to the issuance of the Bonds, the Project will generate sufficient rental income to cover operating expenses and debt service on the Note at the effective rate of_% per annum, but if the Project is unable to do so, it could result in a default by the Owner on the Note and a prepayment of the GNMA Security, and the use of the proceeds of such prepayment to redeem Bonds at par plus accrued interest prior to maturity. See "THE BONDS -- Redemption Provisions -- Special Mandatory Redemption" herein. Prior Unsuccessful Operating History of the Project The Project has encountered substantial difficulties in operations in its prior operating history (See "THE OWNER AND THE PROJECT-- Prior Operating History of the Project"above). No assurance can be given that during the period following the issuance of the Bonds, the cash flow from the Project (after operating expenses, taxes, insurance,mortgage insurance premium,and other expenses)will be sufficient to cover the stated debt service on the Bonds and other fees and expenses. In such an event, the Owner could default once again on the Note, which default could result in a prepayment of the GNMA Security, and the use of the proceeds of such prepayment to redeem Bonds at par plus accrued interest prior to maturity, as described herein. See "THE BONDS -- Redemption Provision-- Mandatory Redemption." Early Redemption Prospective purchasers of the 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 prior to maturity under various circumstances at a redemption price equal to their principal amount plus accrued interest without premium, 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), in the event that the Note is prepaid from the proceeds of a condemnation award or an insurance recovery, or in the event that there is a default on the Note or the Mortgage. See "THE BOND - Redemption Provisions" herein. Prospective purchasers should consider carefully all possible factors that may cause the Bonds to be redeemed earlier than projected. 20 Taxability of Bonds; Limited Remedies for Enforcement of Regulatory Agreement In the event that the interest on the Bonds should be declared taxable by the Internal Revenue Service, or in the event of the enactment of legislation or the adoption of regulations by the United States Congress or any agency of the United States, or if there is a final determination by a judicial or administrative authority requiring interest on the Bonds to be included in the recipient's gross income for federal income tax purposes, the method for determining the interest rate on the Bonds will remain unchanged. The exclusion of interest on the Bonds from gross income for federal income tax purposes is dependent upon, among other things,continuing compliance by the. Owner with its covenants in,and other provisions of,the Regulatory Agreement;however, the Bonds are not subject to redemption by reason of interest on the Bonds having become subject to federal income taxation,even if the event of taxability is caused by the Owner's breach of a covenant. Under such circumstances,Bondholders would receive principal and interest as and when due, but would be required to include payments of interest in gross income for federal income tax purposes. Neither the Issuer nor the Owner is liable for payment of additional interest if interest on the Bonds is declared taxable. Bankruptcy If the Owner were to file a petition for relief under Chapter 11 of the Federal Bankruptcy Code, the filing would operate as an automatic stay of the commencement or continuation of any judicial or other proceeding against the Owner and its property and as an automatic stay of any act or proceeding to enforce a lien on its property. If the bankruptcy court so ordered, the Owner's property could be used for the benefit of the Owner despite the security interest of the Trustee therein, provided that "adequate protection" is given to the lienholder. In a bankruptcy proceeding, the Owner could file a plan for the adjustment of its debts that modifies the rights of creditors generally,or any class of creditors,sowed or unsecured. The plan,when confirmed by the court, binds all creditors who had notice or knowledge of the plan and discharges all claims against the debtor provided for in the plan. No plan may be confirmed unless, among other conditions, the plan is in the best interests of creditors, is feasible and has been accepted by each class of claims impaired thereunder. Each class of claims has accepted the plan if at least two-thirds in dollar amount and more than one-half in number of the allowed claims of the class that are voted with respect to the plan are cast in its favor. Even if the plan is not so accepted, it may be confirmed if the court finds that the plan is fair and equitable with respect to each class of nonaccepting creditors impaired thereunder and does not discriminate unfairly in favor of junior creditors. Under the circumstances, the bankruptcy court could accelerate the payment of the Note, notwithstanding any provisions therein prohibiting prepayment before certain dates or requiring payment of a prepayment premium, which could cause the Bonds to become subject to redemption at a price of par plus accrued interest at any time. See "THE BONDS--Redemption Provisions" herein. Information Not Verified Information with regard to the Project has been obtained from the Owner. Aside from the original analyses made by FHA in determining to insure the Note, and a feasibility study prepared by Kotin,Regan&Mouchly, Inc., at the request of the Issuer in connection with the issuance of the Bonds, no other feasibility study or other independent verification of Project revenues has been undertaken. Competing Facilities The Issuer and the Owner 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. Investment Agreement Moneys held in the Acquisition Fund will be invested by the Trustee in an Investment Agreement with (the "Investment Agreement Provider"). The Investment Agreement represents the unsecured 21 general obligation of Investment Agreement Provider 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. The Issuer makes no representations as to the ability of the Investment Agreement Provider to make payments under the Investment Agreement in amounts necessary to make scheduled payments under the Investment Agreement in amounts necessary to make scheduled payments of debt service on the Bonds. In addition, the lowering by the Rating Agency of the long-term credit rating of the Investment Agreement Provider could cause the rating on the Bonds to be lowered. See "RATING" herein. Secondary Markets and Prices The Underwriter will not be obligated to repurchase any of the Bonds and no representation is made concerning the existence of any secondary market therefor, nor can any assurance be given that any secondary market will develop following the completion of the offering of the Bonds, and no assurance can be given that initial offering prices for the Bonds will continue for any period of time. In addition,there is no assurance that the rating on the Bonds will remain in effect or that the rating may not be lowered or withdrawn entirely (see "RATING" herein). Any prospective purchaser of the Bonds should therefore undertake an independent investigation through its own advisors regarding the desirability and practicability of an investment in the Bonds. Any prospective purchaser should be fully award of the long-term nature of an investment in the Bonds and should assume that the economic risk of the investment must be bome indefinitely. THE LENDER AND THE TRUSTEE The following description of the Lender and the Trustee has been provided by the Lender and the Trustee, respectively. The Issuer has not verified the information and assumes no responsibility for the accuracy thereof. The Lender TRI Capital Corporation is the Lender. The Lender is a HUD-approved lender under Sections 221(d)(4) of the National Housing Act,and a GNMA-approved issuer of GNMA securities. The Lender was formed in 1987, and currently has approximately 31 employees located at its principal corporate office in San Francisco, California. As of June 30, 1993 the Lender had made approximately 137 mortgage loans with a total commitment amount of approximately$640,000,000. To be approved by GNMA to issue modified pass-through securities with respect to long-term mortgages on multifamily 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. As of December 31, 1992, the Lender's net worth was $3,370,202 and the securities outstanding totalled$390,847,711.76. The Trustee Bank of America National Trust and Savings Association, Los Angeles, California 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. The Trustee currently serves as trustee or escrowee for over_ other tax-exempt financings backed by FHA-insured multifamily mortgage loans totaling over $ million in aggregate principal amount. The Trustee currently serves as trustee for approximately_ other tax- exempt multifamily financings in excess of$_billion in aggregate principal amount. SUMMARY OF CERTAIN PROVISIONS OF THE NOTE AND MORTGAGE The following is a brief summary of the Note and Mortgage. The summary does not purport to be complete or definitive and is qualified in its entirety by reference to the Note and Mortgage, copies of which are on file with the Trustee. 22 The Mortgage from the Owner to the Lender secures the Mortgage Note and is co-insured by FHA under Sections 221(d)(4)and 244 of the National Housing Act, and the regulations thereunder. 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. The Mortgage Loan, as evidenced by the Mortgage Note and Mortgage which will be modified by certain modification agreements in connection with the refunding, (i)is co-insured by FHA pursuant to and in accordance with the provisions of Sections 221(d)(4)and 244 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)as modified in connection with the refunding will be in the aggregate principal amount of$10,586,300; (iii)will bear interest at the rate of 8.25% per annum; (iv)has a final maturity of October 1, 2032; (iv) is secured on a nonrecourse basis pursuant to the FHA Loan Documents; and (vii) is not subject to prepayment prior to maturity except that(A) the Mortgage Loan is subject to mandatory prepayment as a whole or in part at any time upon fifteen(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, (B) the Mortgage Note is subject to prepayment to the extent, if any, required by applicable rules, regulations,policies and procedures of HUD and GNMA, and (C) the Mortgage Loan 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. If the Owner 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 herein under the caption "THE BONDS -- Redemption Provisions." The Mortgage provides that insurance proceeds and condemnation awards may be applied in reduction of the principal amount of the Mortgage Note. In such event, such insurance proceeds or condemnation awards would be passed through to the Trustee and thereafter applied to the redemption of Bonds, as described under "THE GNMA MORTGAGE-BACKED SECURITIES PROGRAM" and "The Bonds -- Redemption Provisions." TAX MATTERS In the opinion of Jones Hall Hill & White, A Professional Law Corporation, San Francisco, California, and Vaca & Vaca, Walnut Creek, California, Co-Bond Counsel, under existing law, the interest on the Bonds is excluded from gross income for federal income tax purposes until the Conversion date and that such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, provided, however, that for the purpose of computing the alternative minimum tax imposed on corporations(as defined for federal income tax purposes), such interest is taken into account in determining certain income and earnings. Co-Bond Counsel has expressed no opinion with respect to the continuation of the exclusion of interest on the Bonds from gross income following the first Reset Date or Conversion Date. The opinion set forth in the first sentence of the preceding paragraph is subject to the condition that the Issuer and the Owner comply with all requirements of the Internal Revenue Code of 1986, as amended(the "Code") that must be satisfied subsequent to the issuance of the Bonds in order that such interest be, or continue to be, excluded from gross income for federal income tax purposes. The Issuer and the Owner have covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date of'issuance of the Bonds. Co-Bond Counsel expresses no opinion regarding other federal tax consequences arising with respect to the Bonds. Prospective purchasers of the Bonds should be aware that,under existing law,for the purpose of computing the 20 percent federal alternative minimum tax imposed on corporations, an amount equal to 75 percent of the 23 amount by which adjusted current earnings exceed alternative minimum taxable income is added to alternative minimum taxable income. Interest otherwise excluded from gross income, such as interest on the Bonds, is included in adjusted net book income and in adjusted current earnings. Prospective purchasers of the Bonds should be aware that(i) Section 265 of the Code denies a deductions for interest on indebtedness incurred or continued to purchase or carry the Bonds or, in the case of a financial institution,that portion of the Bondowner's interest expense allocated to interest payable with respect to the Bonds, (ii) with respect to insurance companies subject to the tax imposed by Section 831 of the Code, Section 832(b)(5)(B)(i) reduces the deduction for loss reserves by 15% of the sum of certain items, including interest on the Bonds, (iii) for taxable years beginning before January 1, 1996, interest on the Bonds earned by some corporations could be subject to the environmental tax imposed by Section 59A of the Code, (iv) interest on the Bonds earned by certain foreign corporation doing business in the United States could be subject to a branch profits tax imposed by Section 884 of the Code, (v) passive investment income, including interest on the Bonds, may be subject to federal income taxation under Section 1375 of the Code for Subchapter S corporations that have Subchapter C earnings and profits at the close of the taxable year if greater than 25% of the gross receipts of such Subchapter S corporation is passive investment income and(vi)Section 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take into account in determining the taxability of such benefits, receipts of accruals of interest on the Bonds. In the further opinion of Co-Bond Counsel, interest on the Bonds is exempt from California personal income taxes. A proposed form of the opinion of Co-Bond Counsel with respect to the Bonds is attached hereto as Exhibit E. LEGAL MATTERS All legal matters incident to the authorization, issuance, sale and delivery of the Bonds are subject to the approval of Jones Hall Hill & White, A Professional Law Corporation, San Francisco, California, and Vaca & Vaca, Walnut Creek, California, Co-Bond Counsel. The approving opinion of Co-Bond Counsel will accompany the Bonds. Certain legal matters will be passed on for the Bank by its counsel, Hopkins&Sutter,Chicago, Illinois, and Nishi, Tanaka & Takahashi, Tokyo, Japan; for the Owner by its counsel, Michaud & Hoshiyama, San Francisco, California; for the Lender by Paul Renno, Esq., Corporate Counsel to the Lender; and for the Underwriter by its counsel, Ritter Eichner& Norris, Washington, D.C. LITIGATION The Issuer is not engaged in and has not been threatened with any litigation of any nature which seeks to restrain or enjoin the issuance, sale, execution or delivery of the Bonds or which in any way contests the validity of the Bonds or any proceedings of the Issuer taken with respect to their issuance or sale or the pledge or application of any moneys or the security provided for the payment of the Bonds, or which contests the existence of the Issuer. The Issuer is not engaged in and has not been threatened with any litigation with respect to is statutory powers or otherwise which in the judgment of the Issuer is material to the performance of its programs or its obligations with respect to notes and bonds, including the Bonds, of the Issuer. RATING Standard& Poor's Corporation(the "Rating Agency") has assigned to the Bonds the rating shown on the front cover hereof based on the initial Credit Enhancement. Certain information was supplied by the Issuer to the Rating Agency to be considered in evaluating the Bonds. Such rating expresses only the views of the Rating Agency. An explanation of the significance of the rating may be obtained from the Rating Agency. There is no assurance that such rating will continue for any given period of time or will not be revised or withdrawn entirely 24 by the Rating Agency if, in its judgment,circumstances so warrant.. Any such downward revision in or withdrawal of such rating may have an adverse effect on the market price of the Bonds. The rating is expected to expire on the Conversion Date. UNDERWRITING The Bonds are to be purchased by Newman and Associates, Inc. (the "Underwriter")at a purchase price equal to the aggregate principal amount thereof. The Underwriter will be paid an underwriting fee in an amount equal to 1.25% of the original principal amount of the Bonds, from which it will pay certain expenses. The Purchase Contract provides that the obligation to make such purchase is subject to certain terms and conditions set forth in the Purchase Contract, the approval of certain legal matters by counsel and certain other conditions. The initial public offering price may be changed, from time to time, by the Underwriter. The Underwriter may offer and sell the Bonds offered to the public to certain dealers (including dealers depositing Bonds into unit investment trusts,certain of which may be sponsored or managed by the Underwriter)and others at prices lower than the public offering price stated on the cover page hereof. 25 MISCELLANEOUS Any statements in this Official Statement 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 be construed as a contract or agreement between the Issuer and the purchasers or owners of any of the Bonds. The execution and distribution of this Official Statement have been duly authorized by the Issuer and the Owner. Information contained in this Official Statement under the headings"THE OWNER AND THE PROJECT" and "THE LENDER AND THE TRUSTEE" and in Exhibit C and Exhibit D attached hereto was provided to the Issuer by the Owner, the Lender, the Trustee, the Bank and WestAmerica Bank, respectively. The Issuer has not independently verified the accuracy of such information, although it has no reason to believe such information to be inaccurate; accordingly the Issuer disclaims any responsibility for such information. COUNTY OF CONTRA COSTA By: DEL NORTE PLACE LIMITED PARTNERSHIP, A CALIFORNIA LIMITED PARTNERSHIP By: The IBEX Group, a California general partnership (General Partner) By: The JOHN STEWART COMPANY, General Partner By John K. Stewart, President By James Babcock, General Partner By Richard Moran, General Partner By Roger Nelson, General Partner By Peter Wilson, General Partner 26 EXHIBIT A SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE, THE AGREEMENT AND THE REGULATORY AGREEMENT THE INDENTURE The following is a brief summary of the Indenture. The summary does not purport to be complete or definitive and is qualified in its entirety by reference to the Indenture, a copy of which is on file with the Trustee. Certain Definitions In addition to terms defined elsewhere in this Official Statement, the following terms are defined in the Indenture. "Act"means of Chapter 7 of Part 5 of Division 31 of the Health and Safety Code of the State of California, as amended to the date of the Indenture. "Agreement" means the Financing Agreement, dated as of April 1, 1994, among the Issuer, the Trustee and the Owner, relating to the Project, as amended from time to time. "Alternate Credit Enhancement" means any letter of credit or other credit facility as permitted by the Act and approved by the Issuer, including any extensions thereof then in effect and issued by an Alternate Credit Enhancement Provider to the Trustee pursuant to the requirements of the Indenture. "Alternate Credit Enhancement Provider"means the issuer of an Alternate Credit Enhancement which meets the standards set forth in the Indenture, and its successors and assigns. "Authorized Denomination" means, during the Weekly Variable Rate Period, $100,000 or any integral multiple of$5,000 in excess thereof and, during the Fixed Rate Period, $5,000 or any integral multiple thereof "Available Moneys" means with respect to any date of determination(i) moneys held by the Trustee in funds and accounts established under the Indenture and with respect to which the Trustee has received an opinion of counsel with expertise in bankruptcy matters to the effect that such moneys would not be deemed preferential transfers or voidable in the event of a bankruptcy proceeding with respect to the Issuer, the Owner or any general partner or guarantor of the Owner, (ii)proceeds from a draw on the Credit Enhancement, (iii)proceeds from the remarketing of the Bonds pursuant to the Indenture, and (iv) proceeds from the investment or reinvestment of moneys described in clauses (i) through (iii)above. "Bank" means The Sumitomo Bank, Limited, acting through its Chicago Branch, and its successors and assigns. "Beneficial Owner" means the person in whose name a Bond is recorded as the beneficial owner of such Bond by the respective systems of DTC and each of the DTC Participants. "Co-Bond Counsel" means any attorney at law or firm of attorneys, of nationally recognized standing in matters pertaining to the exclusion from gross income of interest on bonds for federal income tax purposes issued by states and political subdivisions,selected by the Issuer, and duly admitted to practice law before the highest court of any state of the United States of America or the District of Columbia. "Bondholder," "holder" or "owner" means the registered owner of any Bonds. "Borrower" means Del Norte Place Limited Partnership,a California limited partnership,and its successors and assigns. "Business Day" means a day other than(a) a Saturday, a Sunday or any day on which banking institutions located in the city of New York, New York, or the city in which the principal corporate trust office of-the Trustee or the office designated for payments under the Credit Enhancement is located (if different from the above), are required or authorized by law to close, or (b) a day upon which the New York Stock Exchange is closed. "Code" means the Internal Revenue Code of 1986, as amended, and the Regulations thereunder, or any successor statute,together with corresponding and applicable final, temporary or proposed regulations and revenue rulings issued or amended with respect thereto by the Treasury Department or the Internal Revenue Service of the United States. "Collateral Documents" means the Agreement, the Regulatory Agreement and the Indenture. "Conversion Date" means the date on which the interest rate on the Bonds is converted to a Fixed Interest Rate. "Conversion Option"means the option granted to the Owner in the Indenture pursuant to which the interest rate on the Bonds is converted to a Fixed Interest Rate on the Conversion Date. "Credit Enhancement" means the irrevocable direct pay letter of credit issued by the Credit Enhancement Provider to the Trustee in accordance with the Agreement and any extensions of such Credit Enhancement. To the extent an Alternate Credit Enhancement is substituted for the Credit Enhancement under the Indenture, all references to "Credit Enhancement" mean and include such Alternate Credit Enhancement. "Credit Enhancement Interest Requirement"means(a)during the Weekly Variable Rate Period, thirty-nine (39) days' interest on the Outstanding Bonds (other than Pledged Bonds) at the Maximum Rate; and (b) during the Fixed Rate Period, if the Bonds are secured by Credit Enhancement, two hundred and ten(210) days' interest on the Bonds at the Fixed Interest Rate, or such greater or lesser period as shall be required by the Rating Agency. "Credit Enhancement Provider"means the Bank, and its successors and assigns. To the extent an Alternate Credit Enhancement is substituted for the Credit Enhancement under the Indenture, all references to "Credit Enhancement Provider" mean and include the issuer of such Alternate Credit Enhancement. "Debt Service Reserve Fund" means the fund by that name created by the Indenture. "Debt Service Reserve Fund Requirement" means [to come]. "DTC" means The Depository Trust Company and its successors and assigns. "Event of Default" or "Default" means any of the events specified as such in the Indenture, as described herein under "Events of Default." "FHA" means the Federal Housing Administration,an organizational unit within HUD, or any successor entity and any authorized representatives or agents thereof, including the Secretary of HUD, the Federal Housing Commissioner and their representatives or agents. "FHA Insurance" means the federal mortgage insurance for mortgage loans with respect to multifamily rental housing developments and other facilities authorized pursuant to the National Housing Act. "Fixed Interest Rate" means a fixed, non-floating annual interest rate on the Bonds established in accordance with the Indenture. "Fixed Rate Period" means the period of time from the Conversion Date to the Maturity Date. During the Fixed Rate Period, interest will accrue on the Bonds from, and including,the Conversion Date to, but excluding, the Maturity Date. "General Receipts Fund" means the fund by that name created by the Indenture. A-2 "GNMA" means Government National Mortgage Association, its successors and assigns. "GNMA Guaranty Agreement" means the GNMA Guaranty Agreement,dated as of May 1, 1994 between GNMA and the Lender, together with all Supplements thereto. "GNMA Security" means the fully-modified, mortgage-backed security in the principal amount of $10,586,300 to be issued by the Lender and registered in the name of the Trustee and dated May 1, 1994 and maturing on October 15, 2031 which security is backed by the 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. "Government Obligations"means bonds,notes,certificates of indebtedness,treasury bills or other securities now or hereafter issued, which are guaranteed as to their timely payment by the full faith and credit of the United States of America as to principal and interest. "HUD" means the Department of Housing and Urban Development or the Secretary of Housing and Urban Development of the United States or the authorized representative of such Secretary. "Improvements means the 135-unit mixed use apartment building(and related facilities)constructed and equipped on the Land. "Interest Payment Date" means (a) during any Weekly Variable Rate Period and prior to the Conversion Date, the first Business Day of each calendar month, (b) during the Fixed Rate Period, each April 20 and October 20 following the Conversion Date, and (c) the Conversion Date. "Investment Agreement" means the investment agreement between and the Trustee, dated as of April_, 1994. "Investment Income" means the earnings, profits and accreted value derived from the investment of moneys in the Project Fund, Debt Service Reserve Fund and the General Receipts Fund pursuant to the Indenture. "Issuer" means the County of Contra Costa, a public body, corporate and politic organized and existing under the laws of the State of California, and its successors and assigns. "Issuer's Fee" means an annual fee equal to .125% of the Principal Amount payable in advance on each May 1 commencing May 1, 1995. "Land" means the parcels of real property described in Exhibit A to the Regulatory Agreement upon which the Improvements are located. "Letter of Credit Fee" means an amount payable to the Credit Enhancer Provider for providing the Credit Enhancement which amount shall be payable at the times and in the amounts set forth in the Reimbursement Agreement, as specified in writing by the Credit Enhancement Provider to the Trustee. "Loan" means the Prior Loan assigned by the Prior Trustee to the Trustee. "Maximum Rate" means twelve percent (12%) per annum. "Modification Agreement" means [to come]. "Mortgage" means the Prior Mortgage assigned by the Prior Trustee to the Trustee. "Note" or "Mortgage Note" means the Prior Note assigned by the Prior Trustee to the Trustee. A-3 "Opinion of Counsel" means a written opinion of competent legal counsel, acceptable to the recipient(s) of such opinion. "Original Issue Date" means the date of issuance of the Bonds. "Outstanding" when used with reference to the Bonds at any date as of which the amount of Outstanding Bonds is to be determined, means all Bonds which have been authenticated and delivered hereunder except: (a) Bonds canceled or delivered for cancellation at or prior to such date; (b) Bonds deemed to be paid in accordance with the defeasance provisions of the Indenture; (c) Bonds in lieu of which, others have been authenticated under the Indenture; and (d) For voting purposes only,Bonds held by the Owner or the Credit Enhancement Provider. "Permitted Investments" means any of the following which at the time of investment are legal investments under the laws of the State of California for trust funds held by the Trustee: (i) Government Obligations; (ii) obligations with a maturity of one year or less of any of the following federal agencies which obligations represent full faith credit of the United States of America,including:ExportImport Bank, Farmers Home Administration, General Services Administration, U.S. Maritime Administration, Small Business Administration, Government National Mortgage Association, U.S. Department of Housing & Urban Development, and Federal Housing Administration; (iii) bonds, notes or other evidences of indebtedness with a maturity of one year or less rated AAA by S&P issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation; (iv) U.S. dollar denominated deposit accounts, federal funds and banker's acceptable with domestic commercial banks which have a rating on their short term certificate of deposit of A-1+ or AA by S&P and maturing no more than 270 days after the date of purchase; (v) commercial paper which is rated A-1 or better by S&P; (vi) any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and (i) which are rated, based on the escrow, in the highest rating category of S&P and (ii)(A) which are fully secured as to principal and interest and redemption premium, if any, by a fund consisting only of cash or Government Obligations, which fund may be applied only to the payment of such principal of and interest and redemption premium,if any, in such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instruments,as appropriate, and (B)which fund is sufficient, as verified by a certified public accountant acceptable to S&P, to pay principal of and interest and redemption premium, if any on the bonds or other obligations described in this paragraph on the maturity date or dates thereof or on the redemption date or dates specified in the irrevocable instructions referred to above, as appropriate; (vii) obligations issued by any corporation organized and operating within the United States of America having assets in excess of$500,000,000 which obligations are rated AA or better by S&P; (viii) any investment agreement,guarantee or other investment vehicle or security,in form and substance satisfactory to the Issuer and the Trustee, which has been submitted to and approved by S&P and the Credit A-4 Enhancement Provider, and is issued or secured by or otherwise representing a general obligation of a financial institution,whose long-term unsecured general obligations are rated A or better by S&P; (ix) the Investment Agreement; and (x) any other investment approved by the Credit Enhancement Provider which is issued or secured by or otherwise representing a general obligation of a financial institution whose long- term unsecured general obligations are rated AA or better by S&P. "Pledge Agreement"means the Custody,Pledge and Security Agreement,dated as of April 1, 1994, among the Owner, the Credit Enhancement Provider and the custodian named therein, as amended or supplemented from time to time, and any similar agreement relating to Pledged Bonds between the Owner and any Alternate Credit Enhancement Provider and, if applicable, any other person. "Pledged Bond" means any Bond during the period from and including the date of its purchase with amounts realized under the Credit Enhancement to but excluding the date on which such Bond is purchased by any person other than the Credit Enhancement Provider or the Owner. "Principal Amount" means $11,110,000, the initial principal amount of the Bonds. "Prior Bonds" means the$11,000,000 Multifamily Housing Revenue Bonds(GNMA Collateralized--Del Norte Place Apartments) 1990 Series B, issued and outstanding under the Prior Indenture. "Project" means the Land and Improvements. "Project Fund" means the fund by that name created by the Indenture. "Rating Agency"means Moody's Investors Service,Inc. and/or Standard&Poor's Corporation,according to which of such rating agencies then rates the Bonds; provided that if neither of such rating agencies then rates the Bonds, the term "Rating Agency" shall refer to any national rating agency (if any) which provides such rating. "Record Date" means, (a) during the Weekly Variable Rate Period, the close of business on the third Business Day next preceding an Interest Payment Date, and(b) during the Fixed Rate Period, the close of business on the fifteenth day of the calendar month next preceding an Interest Payment Date, or, if such day is not a Business Day, the Business Day next preceding such day. "Redemption Date" means the date or dates upon which Bonds are to be called for redemption pursuant to the Indenture. "Reimbursement Agreement" means that certain Reimbursement, Letter of Credit and Loan Agreement, dated as of April 1, 1994, between the Owner and the Credit Enhancement Provider, as amended, modified or supplemented from time to time. To the extent an Alternate Credit Enhancement is substituted for the Credit Enhancement under the Indenture, all references therein to "Reimbursement Agreement" means and includes the agreement relating to the reimbursement of funds paid under such Alternate Credit Enhancement. "Remarketing Agent" means Newman and Associates, Inc., or any qualified successor thereto. "Remarketing Agreement" means that certain Remarketing Agreement, dated as of April 1, 1994, between the Remarketing Agent and the Owner, or any agreement entered into in substitution therefor, as the same may be amended from time to time. 4 Preliminary; subject to change. A-5 "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 Owner 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 Owner 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 Owner; (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. "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 Owner 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 paid to or collected by the Issuer in connection with any Reserved Rights of the Issuer, and (c) any Rebate Amount. "S&P" means Standard & Poor's Corporation, or any successor thereto. "Servicer" and "Lender" means TRI Capital Corporation and any successors or assigns thereto. "Tender Agent" means BankAmerica National Trust Company, or any qualified successor thereto. "Trust Estate" means the property rights, money, securities and other amounts pledged and assigned pursuant to the Indenture, as described herein under "Security for the Bonds." "Trustee" means Bank of America National Trust and Savings Association, or any permitted successor trustee under the Indenture. "Weekly Variable Rate" means the variable interest rate per annum for the Bonds determined, for each Weekly Variable Rate Period, in accordance with the Indenture. "Weekly Variable Rate Period" means initially the period of time commencing on the Original Issue Date and ending on May 2, 1994; and thereafter the Weekly Variable Rate Period shall consist of seven-day periods from of a calendar week for which the Weekly Variable Rate is to be determined to and including of the next succeeding calendar week. During the Weekly Variable Rate Period, interest will accrue on the Bonds from, and including, the Original Issue Date to, but excluding, the earlier of the Conversion Date or the Maturity Date. Security for the Bonds The Bonds and the interest thereon shall be special, limited obligations of the Issuer as provided in the Indenture, and shall be secured by and payable only from the following: (a) To the extent received by the Issuer, 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, the 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; (b) All right, title and interest of the Issuer in and to the Credit Enhancement and any moneys held . under the Indenture by the Trustee (excluding amounts in the General Receipts Account which represent Issuer fees), including the proceeds of the Bonds and the interest, profits and other income derived from A-6 the investment thereof (including the Investment Agreement), all certificates or other instruments representing the same, and all renewals thereof, additions thereto and replacements or substitutions therefor; (c) 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; (d) All right, title and interest of the Issuer in and to, and remedies under, the Agreement and the Regulatory Agreement, except the Reserved Rights of the Issuer; and (e) All right, title and interest of the Issuer in 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 authorized by the Indenture 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 foregoing are collectively the "Trust Estate" and are pledged to the Trustee for the benefit of the Bondholders for the payment of the principal of and interest on the Bonds in accordance with the terms and provisions of the Indenture, and for the benefit of the Credit Enhancement Provider for the payment of all amounts owing to it by the Owner under the Reimbursement Agreement, provided, however, that the Credit Enhancement and the proceeds thereof shall not secure Bonds during any period they are Pledged Bonds. This pledge shall be valid and binding from and after the date of execution of the Indenture and the Trust Estate thereby pledged shall immediately be subject to the lien of such pledge without any physical delivery thereof or further act, and the lien of such pledge shall be valid and binding as against all parties having claims of any kind in tort, contract or otherwise against the Issuer, irrespective of whether such parties have notice thereof. The Trustee shall not, without written consent of the holders of 100% of the Bonds then outstanding, 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 applicable provisions of the Indenture. Funds The following funds and accounts shall be established and maintained by the Trustee under the Indenture: (a) General Receipts Fund and therein the Credit Enhancement Account and the Receipts Account; (b) Project Fund; (c) Debt Service Reserve Fund; and (d) Rebate Fund. Initial Deposits Upon the issuance and delivery of the Bonds,the Owner shall cause the Credit Enhancement to be delivered to the Trustee. (a)the proceeds of the Bonds($11,110,000*)will be deposited in the Project Fund; (b) $ * received from the Trustee for the Prior Bonds will be deposited in the Debt Service Reserve Fund; and (c) $ * received from the Owner will be deposited in the Bond Revenue Fund. * Preliminary; subject to change. A-7 General Receipts Fund The Trustee will deposit in the Credit Enhancement Account of the General Receipts Fund all draws under the Credit Enhancement, and no other moneys. There shall be deposited in the Receipts Account in the General Receipts Fund(i)all income, revenue, proceeds and other amounts received from or in connection with the GNMA Security; (ii) all earnings and gains from the investment of moneys held in the Receipt Account accruing after the acquisition of the GNMA Security by the Trustee; and (iii)any other amounts received by the Trustee other than proceeds of draws on the Credit Enhancement which are subject to the lien and pledge of the Indenture. Moneys in the General Receipts Fund will be withdrawn by the Trustee and used in the following manner and order of priority: (a) On each Interest Payment Date,Redemption Date or purchase date the Trustee shall withdraw from the Credit Enhancement Account an amount equal to the amount of principal and/or interest or purchase price (to the extent provided in the Indenture) due on the Bonds on such date, and shall cause such amount to be applied to the payment of such interest and principal, or purchase price (to the extent not paid with the proceeds of the remarketing of the Bonds pursuant to the Indenture), so due. When such payment is made from the Credit Enhancement Account, on each Interest Payment Date the Trustee shall withdraw from the Receipts Account (or, to the extent of insufficient funds therein,the Debt Service Reserve Fund), the amount necessary to fully reimburse the Credit Enhancement Provider for such payments under the Reimbursement Agreement, and shall pay such amount to the Credit Enhancement Provider. Should the amount in the Credit Enhancement Account be inadequate to pay the amount due on the Bonds, the Trustee shall apply amounts in the Receipts Account for such purpose. (b) Prior to the Conversion Date,provided that the amounts specified in subparagraph(a) above have been paid in full, on each Interest Payment Date the Trustee shall withdraw from the Receipts Account and deposit in the Redemption Fund an amount equal to the principal components of the Loan paid by the Owner and delivered to the Trustee on the Loan repayment date immediately preceding such interest Payment Date. (c) Provided that the amounts specified in subparagraphs (a)and (b) above have been paid in full,on each Interest Payment Date the Trustee shall withdraw from the Receipts Account (excluding amounts on deposit therein representing principal payments on the GNMA Security) (i) such amount equal to the Letter of Credit Fee and pay such amount to the Credit Enhancement Provider, and(ii)deposit into the Debt Service Reserve Fund such amount(or the balance of the moneys so remaining in the Receipts Account if less than the required amount)as shall be required to increase the amount credited to the Debt Service Reserve Fund to the Debt Service Reserve Fund Requirement. , (d) Prior to the Conversion Date, provided that the amounts specified in subparagraphs (a), (b) and (c) above have been paid in full, on each Interest Payment Date (i) the Trustee shall first withdraw from the Receipts Account such amount, if any, as shall be necessary to pay any obligations under the Reimbursement Agreement not theretofore paid and shall pay such amount to the Credit Enhancement Provider, but only at the direction of the Credit Enhancement Provider; and (ii)the Trustee shall then withdraw from the Receipts Account such amount, if any, as shall be necessary to pay the Issuer's Fees, the Trustee's fees, fees of the Remarketing Agent, if any, fees of the Tender Agent, if any, and any other fees then due pursuant to the Indenture, and shall apply such amount to pay such fees; provided that, in either case, with the consent of the Credit Enhancement Provider, if any, moneys shall be paid to the Owner to reimburse the Owner for any such amounts paid by the Owner. (e) Prior to the Conversion Date, provided the amounts specified in subparagraphs (a) through (d) above have been paid in full,on each Interest Payment Date, the Trustee shall withdraw from the Receipts Account all amounts on deposit therein and transfer such amount to the Owner to be applied to the payment of the next succeeding payment due and payable on the Note. (f) Subsequent to the Conversion Date, on each Interest Payment Date, any amounts remaining in the Receipts Account after meeting the requirements of subparagraphs (a) through (e) above shall be deposited in the Redemption Account and thereupon used to redeem Bonds on the earliest practicable date in accordance with the Indenture. A-8 Amounts in the Receipts Account shall be withdrawn therefrom at any time that the amounts therein and amounts in the Debt Service Reserve Fund are sufficient to pay the principal of and interest on all Bonds that remain Outstanding on such date and any fees and expenses due under the Indenture, and such amounts in the Receipts Account and the Debt Service Reserve Fund, after the payment of such fees and expenses, shall be deposited in the Redemption Account and applied to the redemption of Bonds. Redemption Fund [to come] Project Fund (a) The Indenture creates and establishes with the Trustee the Project Fund and within such Project Fund a Prior Bonds Account and a Costs of Issuance Account. (b) Moneys on deposit in the Cost of Issuance Account of the Project Fund shall be applied to pay Costs of Issuance. Interest earnings on amounts on deposit in the Cost of Issuance Account of the Project Fund shall remain in such Account. Any moneys remaining in the Cost of Issuance Account of the Project Fund on the 180th day following the Original Issue Date shall be transferred to the Owner. (c) Amounts shall be deposited in the Prior Bonds Account of the Project Fund as provided in the Indenture and shall be applied as provided therein;provided that no amounts shall be transferred or disbursed from the Prior Bonds Account of the Project Fund until the Trustee shall have received notification from the Prior Trustee to the effect that the liability of the Issuer of the Prior Bonds with respect to the Prior Bonds has been discharged in accordance with the provisions of the Prior Indenture. (i) The Trustee shall deposit into the Prior Bonds Account of the Project Fund the proceeds of the Bonds in the amount of$ and paid to the Trustee for deposit into the Prior Bonds Account of the Project Fund by the Prior Trustee on the Original Issue Date from amounts held in the Fund under the Prior Indenture. (ii) On the date on which the Trustee acquires the GNMA Security, the Trustee shall (A) confirm that the aggregate principal amount of the GNMA Security is $10,586,300 or such lesser amount in the event that the GNMA Security is delivered subsequent to any pass through of principal on the Mortgage Norte and that the GNMA Security bears interest at the rate of 8.5% per annum and matures on October 15, 2032; (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 shall transfer to the Receipts Account of the General Receipts Fund an amount sufficient to provide for the extraordinary redemption of the Bonds in a principal amount equal to the difference, if any, between the principal amount of the GNMA Security, as delivered, and the original aggregate principal amount of the Bonds; (II) 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 therein, if any; and (III) the Trustee shall transfer to the Receipts Account of the General Receipts Fund any remaining balance in the Prior Bonds Account of the Project Fund. (iii) If, on the first Business Day following June 1,1994, the Trustee has not yet acquired the GNMA Security, the Trustee shall transfer to the Receipts Account of the General Receipts Fund all amounts on deposit in the Prior Bonds Account of the Project Fund for application to the extraordinary redemption of Bonds on June 15, 1994 pursuant to the Indenture and shall as soon as practicable give A-9 notice of such redemption to the holders of such Bonds; provided, however, that such transfer and such redemption shall be delayed one or more times but not to dates later than June 1, 1994 and June 15, 1994, respectively, if the Trustee shall have received a timely written request from the Owner or the Lender for such delay accompanied by (v) the consent of the Credit Enhancement Provider, if such dates are to be extended beyond August 1 and August 15, respectively,(w)a cash flow projection acceptable to the Rating Agency (evidence of such acceptance shall be in writing)demonstrating that(A) the sum of(I) the amount in the Prior Bonds Account of the Project Fund, (11)the investment earnings to accrue on the amounts held in the Prior Bonds Account of the Project Fund during the period ending 30 days after the end of any period of delay requested, and (III) any additional sums paid to the Trustee by or on behalf of the Owner or the Lender(including amounts necessary to cover any "lag" and any reinvestment risk)for deposit into the Prior Bonds Account of the Project Fund or Receipts Account of the General Receipts Fund (accompanied by an opinion of Co-Bond Counsel or bankruptcy counsel acceptable to the Trustee to the effect that such sums are not subject to the provisions of Sections 362(a)and 547 of the Federal Bankruptcy Code)will be at least equal to the debt service on the Bonds (including the redemption price of the Bonds) through the date which is 30 days after the end of any such extension period(assuming redemption of the Bonds in full on the 30th day after the end of such extension period) plus accrued and unpaid fees and expenses of the Trustee plus $5,000, and (B) assuming that the GNMA Security is delivered on the last day of such extension period, the sum of the amounts listed in (I), (II) and (III) of (A) above, plus the regularly scheduled payments on the GNMA Security payable on or before the maturity date of the Bonds will be sufficient to pay the principal(including regularly scheduled mandatory sinking fund redemptions) and interest on the Bonds at the times and in the amounts set forth in this Indenture; (x) evidence satisfactory to the Trustee that the GNMA Commitment will not expire prior to the last day of such extension period; (y) arrangements satisfactory to the Trustee for the making of the investments contemplated by the cash flow projection,and (z)receipt of written confirmation of the rating then in effect for the Bonds from the Rating Agency. (iv) If, on an Interest Payment Date,the Trustee has not yet acquired the GNMA Security and the transfer of all moneys in the Prior Bonds Account of the Project Fund to the Receipts Account of the General Receipts Fund is not then required to be made in accordance with Section(iii)above, the Trustee shall transfer from the Prior Bonds Account of the Project Fund to the Receipts Account of the General Receipts Fund an amount equal to debt service on the Bonds to become due and payable on such Interest Payment Date and an amount equal to the accrued unpaid fees and expenses of the Trustee. Debt Service Reserve Fund The Indenture creates and establishes with the Trustee the Debt Service Reserve Fund. Amounts on deposit in the Debt Service Reserve Fund shall be withdrawn by the Trustee and applied, to the extent that moneys in the General Receipts Fund are not available therefor pursuant to the Indenture, to pay principal of and interest on Outstanding Bonds on any Interest Payment Date, Maturity Date or Redemption Date, or to pay the obligations of the Owner under the Reimbursement Agreement, to the extent necessary to satisfy any such deficiency. The Owner is also required to deposit in the Debt Service Reserve Fund, moneys in the amount necessary to replenish it to the Debt Service Reserve Fund Requirement pursuant to the Agreement. Whenever the amount in the Debt Service Reserve Fund (prior to the Conversion Date, such amount shall exclude any interest earnings on amounts therein)exceeds the Debt Service Reserve Fund Requirement,the Trustee shall withdraw from the Debt Service Reserve Fund the amount of any excess therein'over the Debt Service Reserve Requirement as of the date of such withdrawal and deposit the moneys withdrawn into the Receipts Account. Amounts in the Debt Service Reserve Fund shall be withdrawn therefrom at any time as the amounts therein, the amounts in the Receipts Account and the amounts in the Redemption Fund are sufficient to pay the principal of and interest on all Bonds that remain Outstanding on such date and any fees and expenses due hereunder, and such amounts in the Receipts Account and the Debt Service Reserve Fund, after the payment of such fees and expenses, shall be deposited in the Redemption Fund and applied to the redemption of the Bonds. A-10 In the event that the Bonds are converted to a Fixed Rate and there is no Credit Enhancement, moneys on deposit in the Debt Service Reserve Fund in excess of amounts required by the Rating Agency to be on deposit therein shall, at the directions of the Credit Enhancement Provider, be used on the Conversion Date to pay the obligations of the Owner to the Credit Enhancement Provider. Rebate Fund The Indenture creates the Rebate Fund, the purpose of which is to facilitate compliance with Section 148(f) of the Code (the "Rebate Provision"). The requirements of the Indenture 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 the Trustee is furnished with an opinion of Co-Bond Counsel or other satisfactory evidence that the Regulations contain an applicable exception. The Trustee shall promptly transfer to the Rebate Fund each amount required to be deposited therein pursuant to the Code, from revenues which have been deposited into the Receipt Account of the General Receipts 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 Owner and an amount equal to such deficiency shall be paid promptly by the Owner to the Trustee for deposit into the Rebate Fund. Investments Moneys held as part of the Project Fund, the General Receipts Fund and the Debt Service Reserve Fund shall be invested and reinvested in Permitted Investments (subject to the limitations set forth in the Agreement); provided, however, (i) that draws on the Credit Enhancement if expected to be applied as set forth herein within five (5) days must be held uninvested or if expected to be held for five (5) days or more must be invested in Government Obligations,and (ii)moneys held in the Debt Service Reserve Fund may not be invested at a yield in excess of the yield on the Bonds as computed pursuant to Section 148 of the Code and the regulations thereunder, or if invested at a yield in excess of the yield on the Bonds as set forth in the Indenture, the Owner shall make yield reduction payments to the federal government with respect to such investments in the manner provided in the regulations under Section 148 of the Code. Any Permitted Investments shall be held by or under the control of the Trustee. All interest accruing thereon and any income realized from Permitted Investments shall be deposited into the Receipts Account of the General Receipts Fund. The Trustee is authorized to cause to be sold and reduced to cash a sufficient amount of Permitted Investments whenever the cash balance is or will be insufficient to make a requested or required disbursement. All Permitted Investments shall be made by the Trustee, at the direction of the Owner by written direction subject to the limitations contained in the Indenture. In computing the amount in any Fund or Account held by the Trustee under the Indenture, Permitted Investments if purchased at par shall be valued at principal cost plus accrued interest,or, if purchased at other than par, at principal cost plus amortized discount or less amortized premiums plus accrued interest. Permitted Investments maturing, redeemable or reducible to cash at the option of the Trustee, within 185 days from the date of valuation, shall be valued at principal cost plus accrued interest. Pledged Bonds Bonds purchased by draws under the Credit Enhancement pursuant to the Indenture and which are not remarketed in accordance with the Remarketing Agreement shall become Pledged Bonds and will be governed by the terms of the Pledge Agreement. When the Trustee or the Tender Agent purchases Bonds which become Pledged Bonds, the Trustee shall promptly give written notification to the Owner, the Remarketing Agent, the Tender Agent and the Credit Enhancement Provider stating that such Bonds are being held as Pledged Bonds. The Credit Enhancement shall not constitute security for Pledged Bonds. Pledged Bonds shall be registered in the name of the Owner and delivered to the custodian under the Pledge Agreement, or, at the written request of the Credit Enhancement Provider, shall be made available to the Credit Enhancement Provider and registered in such name as the Credit Enhancement Provider may designate. A-11 Failure to pay interest on Pledged Bonds when due, or failure to pay principal and interest upon any Redemption Date or Maturity Date on Pledged Bonds, shall not constitute an Event of Default under the Indenture. Upon the Maturity Date, or upon any Redemption Date (whether by reason of optional redemption or mandatory redemption or acceleration)on which all Bonds are redeemed, all Pledged Bonds shall be deemed cancelled. At such time as a Pledged Bond is remarketed, the Trustee or the Tender Agent, as appropriate, shall (i) remit the proceeds from the remarketing to the Credit Enhancement Provider, and(ii)give written notice to the Remarketing Agent, the Owner and the Credit Enhancement Provider that such Bond is no longer a Pledged Bond. Events of Default Each of the following is an "Event of Default"under the Indenture: (a) Default in the payment of any interest on any Bond(other than Pledged Bonds)when and as the same shall have become due. (b) Default in the payment of the principal of any Bond or purchase price in the event of tender of any Bond (other than Pledged Bonds) when and as the same shall become due, whether at the stated maturity thereof or upon any Interest Payment Date. (c) Default in the observance or performance of any other of the covenants, agreements or conditions on the part of the Issuer included in the Indenture or the Agreement or in the Bonds (other than a default set forth in (a) or (b) above), and the continuance thereof for a period of thirty (30) days after receipt of written notice to the Issuer, the Credit Enhancement Provider and the Owner given by the Trustee. Acceleration; Other Remedies By notice in writing sent to the Issuer, the Trustee shall, upon the occurrence of any Event of Default described above, declare the principal of all Bonds then Outstanding(if not then due and payable) and the interest accrued to be due and payable immediately, and, upon said declaration, such principal and interest shall become and be.immediately due and payable, and the trustee shall draw on the Credit Enhancement, if any, pursuant to the Indenture. Upon the happening and continuance of an Event of Default under the Indenture, Trustee may, and upon the direction of the Credit Enhancement Provider, and to the extent indemnified to its satisfaction from any liability or expense, shall, exercise such of the rights and powers conferred by the Indenture as the Trustee shall deem most effective to enforce and protect the interests of the Bondholders and the Credit Enhancement Provider. 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 shall be cumulative and shall be in addition to any other remedy given to the Trustee or to the Bondholders thereunder. No delay or omission to exercise any right or power accruing upon any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or acquiescence therein;and every such right and power may be exercised from time to time and as often as may be deemed expedient. No waiver of any Event of Default under the Indenture, whether by the Trustee or by the Bondholders, shall extend to or shall affect any subsequent Event of Default or shall impair any rights or remedies consequent thereon. The Trustee, as the assignee of all right, title and interest of the Issuer in and to the Agreement, shall be empowered to enforce each and every right(except for the Reserved Rights) granted to the Issuer under the Agreement. Supplemental Indentures Subject to the provisions of the Indenture,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 for any one or more of the following purposes: (a) to cure any ambiguity or to correct or supplement any provision contained therein which may be defective or inconsistent with any other provision contained therein,or to make such other provisions in regard to matters or questions arising under the Indenture which shall not materially adversely affect the interests A-12 of the Bondholders; (b) 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; (c) to grant or pledge to the Trustee for the benefit of the Bondholders any additional security other than that granted or pledged under the Indenture; (d) to modify, amend or supplement the Indenture or any indenture supplemental thereto in such manner as to permit the qualification thereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute then in effect, or to permit the qualification of the Bonds for sale under the securities laws of any of the States of the United States; (e) to appoint a successor trustee, separate trustee or co-trustee in the manner provided in the Indenture; (f) to comply with requirements of any Alternate Credit Enhancement Provider which are determined by the Issuer not be adverse to the interests of the Bondholders; (g) to comply with requirements of the Rating Agency which are determined by the Issuer not to be adverse to the interests of the Bondholders; (h)to comply with regulations or rulings issued with respect to the Code, to the extent determined as necessary or desirable in Co-Bond Counsel's opinion; (i) to change any of the time periods for provision of notice relating to the remarketing of Bonds, the tender of Bonds and determination of the interest rate; 0) to change or modify any provision of the Indenture so as to harmonize, to the maximum extent possible, the provisions thereof with the applicable rules, regulations and procedures of HUD, provided such change or modification does not affect the obligation of the Trustee to draw on the Credit Enhancement at the times and in the amounts required by the Indenture; or (k) prior to the Conversion Date, to modify, alter or supplement the Indenture in any other respect, including amendments which would otherwise be described in the next paragraph; if notice to the proposed supplemental indenture is given to Bondholders (in the same manner as notices of redemption are given) at least 30 days before the effective date thereof, and, on or before such effective date, the Bondholders have the right to demand purchase of their Bonds. Exclusive of supplemental indentures permitted as described in the preceding paragraph, and subject to the terms and provisions described below, the owners of not less than a majority of the aggregate principal amount of the Bonds then Outstanding and affected by such indenture or indentures supplemental to the Indenture will have the right, from time to time, notwithstanding any other provisions of the Indenture, to consent to and direct the execution by the Trustee of such other indenture or indentures supplemental thereto as may be consented to 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 the Indenture or in any supplemental indenture;provided,however,that nothing contained in the Indenture shall permit, or be construed as permitting,(a) an extension of the maturity of the principal of, or the mandatory redemption date of, or any date for payment of interest on, any Bond, (b) a reduction in the principal amount of, or the rate of interest on, any Bond, (c) a preference or priority of any Bond or Bonds over any other Bond or Bonds, (d)the creation of a lien prior to the lien of the Indenture, (e)a reduction in the aggregate principal amount of the Bonds required for consent to any supplemental indenture, (f) a modification or change in the duties of the Trustee thereunder, or(g) a change in the percentage of Bondholders necessary to waive an Event of Default or otherwise approve matters requiring Bondholder approval thereunder,without the consent of one hundred percent (100%) of the holders of the Bonds then Outstanding. No amendment,supplement,change or modification may be made to the Indenture without the prior written consent of the Credit Enhancement Provider. Any supplemental indenture affirming the rights or obligations of the Owner or the Remarketing Agent will not be effective unless consented to by such party. Discharge of Lien Prior to the Conversion Date,the Bonds shall be deemed to be paid under the Indenture if the Trustee holds Available Moneys or Government Obligations(meeting the defeasance requirements of the Indenture)the principal of and the interest on which at maturity will,together,be sufficient for the payment of the Bonds on their respective maturity dates or redemption dates; provided, however, that the Trustee shall obtain an opinion from bankruptcy counsel that such Available Moneys or Government Obligations are not subject to avoidance under Section 547 or 544, and, as such, are not recoverable under Section 550(a), of the federal bankruptcy laws should there be a petition by or against the Owner, any general partner of the Owner or the Issuer under any bankruptcy act; and to pay to the Trustee its reasonable fees and expenses. If the Bonds are to be redeemed, then the Trustee must also have received instructions to redeem such Bonds on such date, A-13 THE AGREEMENT The following is a brief summary of the Agreement. The summary does not purport to be complete or definitive and is qualified in its entirety by reference to the Agreement, copies of which are on file with the Trustee. Agreement to Refinance the Loan Pursuant to the Agreement, the Issuer agrees to cause the Trustee to disburse the proceeds of the Bonds to the trustee for the Prior Bonds to be applied to the redemption of the Prior Bonds. The Owner's obligation to repay the Loan will be evidenced by the Note endorsed for FHA mortgage insurance and secured by the Mortgage. Covenants The Owner agrees under the Agreement to pay certain fees, expenses and other amounts, including rebate amounts payable to the federal goverment, taxes, assessments and utility charges; to maintain the Project in good repair and to maintain insurance thereon; to operate the Project in accordance with the Agreement and the Regulatory Agreement; and to take actions necessary to maintain the exclusion of interest on the Bonds from gross income for federal income tax purposes. Events of Default and Remedies The following are "Events of Default" under the Agreement: (a) Failure by the Credit Enhancement Provider to properly honor a draft under the Credit Enhancement. (b) Failure by the Owner to observe and perform any covenants, agreements or obligations in the Agreement on its part to be observed or performed for a period of (30) days after receipt of written notice specifying such failure and requesting that it be remedied, given to the Owner by the party to the Agreement affected by such failure;provided,however, that if said failure shall be such that it cannot be corrected within such period, it shall not constitute an Event of Default if correctable without material adverse effect on the Bonds and if corrective action is instituted by the Owner within such period and diligently pursued until corrected,and provided further that (subject to the Reserved Rights of the Issuer), so long as the Credit Enhancement Provider is not in default under the Credit Enhancement, the Credit Enhancement Provider shall have consented to the same constituting an Event of Default. (c) Any representation or warranty made by the Owner in any document delivered by the Owner to the Trustee, the Credit Enhancement Provider or the Issuer in connection with the issuance, sale and delivery of the Bonds is untrue in any material adverse respect; provided that, subject to the Reserved Rights of the Issuer, the Credit Enhancement Provider shall have consented to the same constituting an Event of Default. (d) The occurrence of an Event of Default under the Indenture. (e) The occurrence of an Event of Default under any of the Collateral Documents (other than the Indenture),provided that, subject to the Reserved Rights on the Issuer, so long as the Credit Enhancement Provider is not in default under the Credit Enhancement, the Credit Enhancement Provider shall have consented to the same constituting an Event of Default. (f) The Owner shall generally not pay its debts as they become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors or shall institute any proceeding or voluntary case seeking to adjudicate it a bankrupt or insolvent or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief or protection of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property; or the Owner shall take any action A-14 to authorize any of the actions described above in this subsection(f), or any proceeding shall be instituted against the Owner seeking to adjudicate it a bankrupt or insolvent or seeking liquidation, winding up, reorganization, arrangement, adjustment,protection,relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief or protection of debtors or seeking the entry of an order for the relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property, and, if such proceeding is being contested by the Owner in good faith, such proceeding shall remain undismissed or unstayed for a period of sixty (60) days. (g) Default by the Owner under the Reimbursement Agreement,together with a written notice from the Credit Enhancement Provider to the Trustee, the Issuer and the Owner declaring such event to be an Event of Default under the Agreement. (b) Any representation or warranty made by the Owner to the Issuer or the Trustee in the Agreement which proves to have been untrue or misleading in any material respect as of.the date made or deemed made. Whenever any Event of Default shall have occurred and be continuing, the Issuer or the Trustee may, subject to certain provisions of the Regulatory Agreement, take any one or more of the following remedial steps: (i) If the principal and interest accrued on the Bonds shall have been declared immediately due and payable pursuant to the Indenture, or if the Bonds shall have been called for redemption, the Trustee shall thereupon draw upon the Credit Enhancement in accordance with its terms and the terms of the Indenture; provided, however, that the Credit Enhancement shall be available only for the payment of an amount equal to the aggregate principal amount of the Bonds plus the Credit Enhancement Interest Requirement, and further provided, however, that if the Trustee shall annul a declaration of acceleration of the Bonds pursuant to the Indenture, the Issuer, the Trustee and the Credit Enhancement Provider shall be restored to their former rights and positions, and all rights, duties and obligations of the parties shall continue as if no adverse proceeding had been taken, subject to the limits of any adverse determination. (ii) The Issuer or the Trustee shall have access to and may inspect,examine, audit and make copies of the books and records and any and all accounts, data and income tax and other tax returns of the Owner or the general partners of the Owner, only insofar as they relate to the Project or the Event of Default and the remedying thereof. (iii) To.the extent of any insufficiency in the payment of the Bonds after the Trustee receives money pursuant to the Credit Enhancement, the Trustee may pursue all.remedies existing at law or in equity to collect all amounts then due and thereafter to become due under the Agreement, or to enforce the performance of any other obligation or agreement of the Owner(subject to the non-recourse provisions of the Agreement and the Regulatory Agreement)under the Agreement. (iv) To the extent of any insufficiency in the payment of the Bonds after the Trustee receives money pursuant to the Credit Enhancement, the Trustee may exercise and enforce all or any of its rights under the Note and Mortgage. In the event the Owner fails at any time and for any reason to comply with the requirements of the Regulatory Agreement, within sixty(60) days after the earlier of the date the violation is discovered by the Issuer or the date the Issuer receives notice thereof, an action at law or in equity may be instituted by the Issuer to correct the violation. Subject to the limitations in the Regulatory Agreement, the Issuer, without the consent of the Trustee or FHA, but only after notice to the Trustee, the Owner and the Credit Enhancement Provider, may take whatever action at law or in equity may appear necessary or desirable to enforce performance and observance of any Reserved Right of the Issuer; provided that, the Issuer may not, without the consent of the Trustee and the Credit Enhancement Provider, terminate the Agreement or cause the Loan to become due and payable thereunder or cause the Trustee to declare the principal of all Bonds then Outstanding and the interest accrued thereon to be immediately A-15 due and payable, or cause the Trustee to foreclose or take any other action under the Collateral Documents or any other documents contemplated by the Agreement to obtain such payment. Any amounts collected pursuant to action taken under the Agreement shall, after the payment of the costs and expenses of the proceedings resulting in the collection of such moneys and of the expenses, liabilities and advances incurred or made by the Trustee or the Credit Enhancement Provider, and their respective counsel,be paid into the Receipts Account of the General Receipts Fund and applied in accordance with the provisions of the Indenture; provided,however, that there shall be no deduction for costs and expenses associated with the Trustee's collection of funds payable under the Credit Enhancement to the extent a draw has been honored in a timely manner by the Credit Enhancement Provider. No remedy conferred upon or reserved to the Issuer or the Trustee in the 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 existing pursuant to any other agreement at law or in equity or by statute. Limitation of Issuer's Liability All obligations of the Issuer incurred under the Agreement, the bond purchase agreement relating to the Bonds, the Regulatory Agreement and the Indenture shall be limited obligations of the Issuer, payable solely and only from Bond proceeds, revenues and other amounts derived by the Issuer from the Trust Estate. The Bonds shall not constitute an indebtedness of the State of California or any political subdivision thereof, nor shall any act of the Issuer in any manner constitute or result in the creation of indebtedness of the State or any such political subdivision. The Bonds shall be payable solely from the revenues and other funds and property pledged under the Indenture for the payment of the Bonds, and no owner or owners of any of the Bonds shall ever have the right to compel any exercise of the taxing power of the State or any political subdivision thereof, nor to enforce the payment thereof against any property of the State or any such political subdivision. Non-Recourse Obligation Notwithstanding anything to the contrary in the Agreement, in any action or proceeding brought on any instrument evidencing any indebtedness to the Issuer or the Trustee (other than as set forth in the Agreement) no deficiency or other money judgment shall be enforced against the Owner or any partner of the Owner personally, any successor or assign of the Owner, or any partner of a partner, and any judgment obtained shall, subject in all respects to the limitations of the Regulatory Agreement, be enforced only against the property of the Owner, and the rents, issues and profits thereof, and any other security for the indebtedness evidenced by the Agreement, and not against the Owner, any partner of the Owner, any successor or assign of the Owner, or any partner of a partner. Nothing,in the Agreement shall be construed in any way to limit or restrict any of the Reserved Rights of the Issuer or any of the rights and remedies of the Issuer in any proceeding or other enforcement of the payment of any indebtedness, subject only to the aforesaid limitation upon enforcement of any judgment against the Owner, any partner of the Owner, and any successor or assign of the Owner, or any partner of a partner, subject in all respects to the limitations of the Regulatory Agreement; provided, however, that nothing in this paragraph shall be deemed to affect the Issuer's right (i) to recover any condemnation or insurance proceeds, deposit with governmental agencies or owners' associations,refunds or rebates which are attributable to work and material incorporated in the Project and actually received by the Owner or any of its partners, or (ii) to recover any tax or security deposits, advance or prepaid rents or other similar sums paid or to or held by the Owner or any other person or entity in connection with the operation of the Project, if the amounts referred to in (i) and (ii)have not been applied to or used for Project-related obligations, including the Mortgage, or otherwise required to be used by the Trustee in connection with the restrictions or rehabilitation of the Project. THE REGULATORY AGREEMENT In order to assure compliance with the requirements of 1954 Code and the Treasury, Regulations promulgated thereunder (the "Regulations"), the Owner, the Issuer and the.Trustee will execute the Regulatory Agreement for the benefit of the Issuer and the Trustee, and cause it to be recorded in the public records of Alameda County, California. The covenants and restrictions contained in the Regulatory Agreement will run with A-16 the land and therefore be binding upon the Owner's successors in title to the Project. The following description is intended only to be a summary of certain provisions of the Regulatory Agreement. In the Regulatory Agreement, the Owner covenants, subject to certain limitations described below, to comply with certain requirements of Section 103(b)(4)(A) of the 1954 Code and local bond policy. The requirements under the 1954 Code must be continuously met subsequent to the date of issue of the Bonds in order that interest on the Bonds commencing from the dated date of the Bonds be excluded from gross income for federal income tax purposes. In the Regulatory Agreement, the Issuer and the Owner each covenants that it will not knowingly take or permit any action to be taken that would adversely affect the exemption of interest on the Bonds from federal income taxation. However, the Owner could be required to take any action required under Section 221(d)(4) of the National Housing Act of 1934, as amended, or the regulations thereunder, or the FHA loan documents, even if the tax-exemption were adversely affected. The Owner, the Issuer and the Trustee also agree to take any lawful actions, subject to prior HUD approval, including amendment of the Regulatory Agreement, as is necessary in the opinion of a nationally recognized bond counsel,to comply fully with all applicable requirements affirming the federal tax-exemption of interest on the Bonds. The Owner has agreed at all times during a period commencing the later of the date following the date on which 10% of the units in the Project were occupied or the date of issue of the Prior Bonds, and ending on the latest of(i)the date which is 10 years after the date on which 50% of the units in the Project are occupied, (ii)the date which is 50% of the total number of days which comprise the period from the date of the issuance of the Prior Bonds to the final maturity date of the Bonds or any refunding bonds after the date on which any of the units in the Project was first occupied, (iii) the termination date of any Housing Assistance Payments contract relating to the Project under Section 8 of the United States Housing Act of 1937, as amended, including the initial term and any renewal thereof, (iv) the date the Bonds are no longer outstanding, or (v) October 1, 2013 (the "Qualified Project Period"), that at least 20% of the units in the Project shall be occupied or held for occupancy by individuals of low or moderate income within the meaning of Section 103(b)(4)(A) of the 1954 Code and Treasury regulations thereunder, who are also "lower income households" within the meaning of Section 50079.5 of the Health and Safety Code of the State of California as in effect on the date of issuance of the Prior Bonds("Qualifying Tenants"). The Regulatory Agreement also requires that all units in the Project be rented or made available for rental to the general public on a continuous basis for the Qualified Project Period. The Owner has agreed to additional restrictions regarding operations of the Project in compliance with Section 103(b)(4)(A) and the Housing Law, which include: (a) the Project has been constructed for the purpose of providing multifamily residential rental property and constitutes multifamily residential rental property; (b) the Project consists of a building or structure or several proximate buildings or structures which are located on a single tract of land or contiguous tracts of land which may include facilities functionally related and subordinated thereto; (c)in the event a unit within a building or structure is occupied by the Owner, the building or structure must include no fewer than four units not occupied by the Owner; (d) all the units in the Project contain complete living, sleeping,eating,cooking, and sanitation facilities for a single person or a family;(e)none of the units in the Project Will at any time be utilized on a transient basis, or used as a hotel, motel, dormitory, fraternity house, sorority house, rooming house, hospital,sanitarium,or rest home; and (f)all the units in the Project are and 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 of maintenance personnel or units for individuals or families of low or moderate income); (g) Qualifying Tenants shall not be restricted from the enjoyment of unrestricted access to all common facilities and common areas of the Project; and (h) in the lease, use or occupancy of the Project or in connection with the employment or application for employment or the operation and management of the Project, the Owner will not discriminate on the basis of race, creed, color, sex, age or national origin. ' The Owner has also agreed as follows:(a)for the term of the Regulatory Agreement(i)at least twenty-five percent (25%) of the units in the Project (the "Qualifying Units") shall be occupied (or treated as occupied as provided in the Regulatory Agreement)by Qualified Tenants and(ii)the rent charged for each Qualifying Unit shall be no more than the Affordable Rent (as defined in the Regulatory Agreement)for such unit; (b) Qualifying Units shall be offered on a priority basis to Section 8 Certificate Holders who have applied to the Owner for the rental units in the Project and who meet the Owner's tenant selection criteria,before such units are offered to prospective A-17 tenants who are not Section 8 Certificate Holders; and (c) no resident of a unit of the.Project shall be denied continued occupancy because, after admission, the resident's family income increases to exceed the eligibility level (however, the Owner shall ensure that the Affordable Rent percentage requirements set forth in the Regulatory Agreement shall continue to be met by providing the next available unit or units to Qualifying Tenants or by taking other actions to satisfy such percentage requirements and shall certify to the Issuer, the Trustee and the Administrator that such requirements have been satisfied in accordance with the Regulatory Agreement). No rent of any tenant whose increase in household income causes such tenant to cease to qualify as a Qualifying Tenant shall be increased prior to the date on which another unit has been rented to a Qualifying Tenant. The Regulatory Agreement provides that upon foreclosure or transfer of deed-in-lieu of foreclosure, the Regulatory Agreement and its restrictions will terminate. In addition it provides that such restrictions will terminate upon involuntary Ioss, substantial destruction or other unforeseen events such as fire, seizure, requisition or condemnation of the Project,if the Bonds are retired at the first available call date or the proceeds of any insurance or condemnation award will be used either to restore the Project or to provide a substitute project which meets the requirements of the 1954 Code,but that such termination will cease to be effective if after such foreclosure, transfer by deed in lieu of foreclosure or similar event and during the Qualified Project Period, the Owner obtains an ownership interest in the Project. The Regulatory Agreement permits the Issuer or the Trustee periodically to inspect or require receipt of records and certifications of the Owner to determine whether the Owner is in continued compliance with the Regulatory Agreement, and requires that the Owner submit all Income Certifications to the Issuer and Trustee upon receipt and, each month after the Project is available for occupancy, certify the percentage of units occupied or treated as occupied by Qualifying Tenants. The Owner has agreed in the Regulatory Agreement to require as a condition precedent to any disposition of the Project prior to expiration of the Qualified Project Period, that the transferee assume all obligations of the Owner under the Regulatory Agreement and such assumption be delivered to the Issuer and the Trustee prior to any transfer in a form acceptable to the Issuer and the Trustee. The Owner is required upon discovering any violation of the Regulatory Agreement to provide written notice of such violation to the Issuer and the Trustee within five days thereafter. In addition,the Issuer is required to give written notice to the Owner within five days after first discovering any violation of the Regulatory Agreement and direct the Owner to remedy the violation within a specified period of time. The Issuer and the Trustee may declare a default under the Regulatory Agreement if the violation is not corrected to their satisfaction and thereafter may seek equitable relief,pursue any remedies available at law or take any other action available to correct the violation. In the event of a breach by the Owner of the covenants contained in the Regulatory Agreement, the Issuer or Trustee, acting on behalf of the Bondholders as third-parry beneficiaries of the Regulatory Agreement, may sue for specific performance of the Regulatory Agreement, or for an injunction against any violation of the provisions of the Regulatory Agreement or pursue any other remedies available at law or in equity. Not only is the scope of the covenants limited as described above,but also the availability of equitable remedies such as specific performance or an injunction to enforce those covenants is generally subject to the discretion of the court and no assurances can be given that the Issuer or the Trustee would be able to obtain such relief after proving a breach by the Owner of any of the covenants contained in the Regulatory Agreement. Furthermore, as a condition of FHA's insuring the Loan, the Regulatory Agreement is made expressly subordinate to obligations under the Loan, and enforcement of the Regulatory Agreement is expressly limited so that enforcement will not result in any claim under the Loan, or claim against the Project, the Loan proceeds, any reserve or deposit made with the mortgagee or another person or entity required by HUD in connection with the Loan transaction, -or against the rents or other income from the Project for payment under the Regulatory Agreement, except that the Owner has agreed to pay to the Issuer, but only to the extent of any available "surplus cash" as defined in the FHA Regulatory Agreement and subject to the rights of the Credit Enhancement Provider to any such surplus cash, an amount equal to any rents or other amounts received by the Owner for any units in the Project which were in violation of the Regulatory Agreement during the period such violation continued. Consequently,the rights of the Issuer or the Trustee to enforce or claim for money damages would be severely restricted and, among other things, it would not be possible to accelerate the debt evidenced by the Note or to seek FHA mortgage insurance benefits. There is no provision in the Bonds or the Indenture for an acceleration of the Bond indebtedness or payment of additional interest in the event interest on the A-18 r Bonds were declared taxable, and neither the Issuer under the Indenture nor Credit Enhancement Provider under the Credit Enhancement shall be liable for any such payment on the Bonds whatsoever. IF THE PROJECT FAILS TO COMPLY WITH THE PROVISIONS OF SECTION 103(b)(4)(A)OF THE 1954 CODE, AND NON-COMPLIANCE IS NOT CORRECTED WITHIN A REASONABLE PERIOD OF TIME (NOT LESS THAN 60 DAYS FROM THE DATE SUCH NONCOMPLIANCE WAS DISCOVERED OR WOULD HAVE BEEN DISCOVERED WITH THE USE OF REASONABLE DILIGENCE),INTEREST ON THE BONDS MAY BECOME RETROACTIVELY TAXABLE AS OF THE DATE OF ISSUE. IN SUCH EVENT THE BANK IS PERMITTED, BUT NOT REQUIRED, TO DIRECT THE TRUSTEE TO REDEEM THE BONDS. A-19 EXHIBIT B SUMMARY OF CERTAIN PROVISIONS OF THE REIMBURSEMENT AGREEMENT The Credit Enhancement is issued pursuant to the Reimbursement Agreement. The following is a summary of certain provisions of the Reimbursement Agreement and is qualified in its entirety by reference to the Reimbursement Agreement. Reimbursement Obligations A draw under the Credit Enhancement creates an immediate reimbursement obligation on the part of the Owner in favor of the Bank, provided, however, that a draw under the Credit Enhancement to pay the purchase price of Bonds delivered or deemed delivered to the Tender Agent or the Trustee pursuant to the Indenture which have not been remarketed shall constitute a 90-day loan from the Bank to the Owner. Such loan together with the reimbursement obligations and certain additional amounts which the Owner must also pay to the Bank in connection with the Credit Enhancement are evidenced by a promissory note delivered by the Owner to the Bank. Defaults Each of the following events constitutes an "Event of Default" under the Reimbursement Agreement: (a) The occurrence of any 'Event of Default" under any Bond Document, HUD Document or Credit Document (each as defined in the Reimbursement Agreement), other than a default under the Reimbursement Agreement. (b) Nonpayment when due of principal of the reimbursement obligations, fees or other amounts payable pursuant to the terms of the Reimbursement Agreement or the other Credit Documents. (c) Any representation or warranty made by the Owner under or in connection with the Reimbursement Agreement, the Credit Documents, the Bonds Documents or the HUD Documents shall be materially false as of the date on which made. (d) The breach by the Owner(other than a breach that constitutes a Default under clauses(a) through (c) above) of any of (i) the terms and provisions of certain covenants relating to Surplus Cash and replenishment of the Debt Service Reserve Fund or (ii) any other covenants, terms and provisions the Reimbursement Agreement which is not remedied within thirty(30) days after written notice to the Owner by the Bank; provided, however, that if such breach under clause (ii) is such that it cannot be corrected within such period, it shall not constitute a Default if the breach is correctable without material adverse effect on the Bonds and if corrective action is instituted by the Owner within such period and diligently pursued until the breach is corrected, but, in any event, such breach must be corrected within sixty (60) days after written notice to the Owner by the Bank. (e) Failure of the Owner to pay any indebtedness owed or incurred by the Owner when due(excluding (i) indebtedness and trade debt being contested in good faith and (ii) trade debt incurred in the normal course of business which remains unpaid for not more than sixty (60) days), whether by maturity, acceleration or otherwise, or the default by the Owner in the performance of any other term, provision or condition contained in any agreement under which any such indebtedness was created or is governed, the effect of which is to cause, or to, permit the holder or holders of such indebtedness to cause, such indebtedness to become due prior to its stated maturity. (f) The Owner shall (i) be adjudicated as bankrupt, or an order for relief shall be entered against it under the Federal bankruptcy law which remains unstayed or is not dismissed within sixty (60) days after the entry of such adjudication or order; (ii) not pay, or admit in writing its inability to pay, its debts generally as they become due; (iii)make an assignment for the benefit of creditors; (iv) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any substantial part of its property; (v) institute any proceeding seeking an order for relief under the federal bankruptcy law or seeking to adjudicate it as bankrupt or insolvent,or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any federal or state law relating to bankruptcy,insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it;(vi)take any action to authorize or effect any of the foregoing actions set forth in this clause(f); or (vii)fail to contest in good faith any appointment or proceeding described in clause (g) below. (g) Without the application, approval or consent of the Owner, a receiver, custodian, trustee, examiner, liquidator or similar official shall be appointed for the Owner or any substantial part of its property, or a proceeding described in clause (f) above shall be instituted against the Owner and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of sixty (60) consecutive days. (h) Any court, government or governmental agency shall condemn, seize or otherwise appropriate, or take custody or control of all or any substantial portion of the property of the Owner which is material to the operation of the Owner unless the proceeds are used to replace such property. (i) The occurrence of a Determination of Taxability(as defined below): 0) Any judgement for the payment of money in excess of an aggregate of$10,000 shall be rendered against the Company and the same shall remain unpaid, unstayed on appeal, or undischarged for a period of sixty (60) consecutive days. (k) The Cap Agreement dated as of the Original Issue Date between the Owner and Sumitomo Bank Capital Markets, Inc. shall cease for any reason to be in full force and effect or shall be held invalid or unenforceable for any reason by a court of competent jurisdiction. (1) HUD shall have required an amendment to any of the Bond Documents, HUD Documents or the Credit Documents which in the sole determination of the Bank impairs the security for the obligations of the Owner to the Bank. (m) Any governmental body, authority or agency shall require any amendment to the Reimbursement Agreement or any of the Bond Documents or the GNMA Security or the HUD Documents, or any modification to any of the parties to the Reimbursement Agreement or the other documents, which amendment or modification, in the opinion of the Bank, may materially adversely affect any right or remedy of the Bank under the Reimbursement Agreement or the other documents, or any statute or any rule or regulation of any governmental body, authority or agency shall render ineffective or shall materially adversely affect any right or remedy of the Bank under the Reimbursement Agreement or the other documents, or any such requirement, statute,rule or regulation shall cause the termination of or otherwise materially affect any duty, liability or obligation, of the Owner to the Bank hereunder or under the Bond Documents or the HUD Documents. (n) The occurrence of an Act of Insolvency with respect to the Collateral Letter of Credit Provider (as defined in the Reimbursement Agreement). (o) The Collateral Letter of Credit Provider shall fail to honor any properly presented drawing under the Collateral Letter of Credit or shall contest any of its obligations thereunder. (p) The Collateral Letter of Credit shall cease for any reason to be in full force and effect or shall be held invalid or unenforceable for any reason by a court of competent jurisdiction. (q) A default shall occur and be continuing beyond any applicable cure period under any agreement (other than the Related Documents)between the Owner and the Bank or under any obligation owed by the Owner to the Bank. B-2 W Any court, government or governmental agency shall condemn, seize or otherwise appropriate, or take custody or control of all or any substantial portion of the Property of the Owner which is material to the operating of the Project unless the proceeds are used to replace such Property. (s) The GNMA Security or any material provision of the Reimbursement Agreement or any of the Related Documents shall cease to be valid and binding as respects any party other than the Bank; or any party shall contest or deny the validity of, or ownership rights to, the GNMA Security or any provision thereof, or any party, or any agent or trustee on behalf of such party, shall deny that it has any further liability under the Reimbursement Agreement,the GNMA Security or any material provision of any of the Related Documents to which it is a party. (t) GNMA shall, be written notification or other action, indicate that it will not fully honor its guarantee of the GNMA Security. (u) The GNMA Security shall not be held by, or otherwise not be subject to a first priority security interest in favor of, the Trustee solely for the benefit of the Bank and the owners of the Bonds. (v) Any payment default by the Owner under any of the HUD Documents beyond any applicable cure period. - (w) The principal of or interest on the GNMA Security has been prepaid as a result of an event of default under the HUD Documents. (x) The Trust Estate shall not be held by, or otherwise not be subject to a first priority security interest in favor of, the Trustee solely for the benefit of the Bank and the owners of the Bonds. For purposes of the Reimbursement Agreement, the phrase "Determination of Taxability"means either(a) the entry by a court of a final judgment or order or the promulgation by the Internal Revenue Service of a final ruling or decision,in either such case to the effect that the interest on the Bonds(other than(i)interest on any Bond for any period during which such Bond is held by a "substantial user" of a facility financed with the proceeds of the Bonds or a "related person," as such terms are used in Section 147 of the Code or(ii)interest which is included as a preference item for purposes of calculating an alternative minimum tax) is includable for federal income tax purposes in the gross income of all recipients thereof subject to federal income taxes by reason of the failure of the Owner to comply with the provisions of the Regulatory Agreement, or (b) receipt by the Trustee, the Issuer, the Owner and the Bank of a certificate of an authorized officer of the Issuer stating that a violation of the use and occupancy restriction set forth in the Regulatory Agreement has occurred, (specifying the same) and is continuing, that not less than sixty (60) days has elapsed since written notice has been given to the Owner and the Bank specifying such violation and demanding that it be cured, within the time period specified in such notice, and that such violation has not been cured, accompanied by an opinion of nationally recognized bond counsel to the effect that,under the circumstances described in such certificate,interest on the Bonds(other than(i)interest on any Bond for any period during which such Bond is held by a "substantial user" of any facility financed with the proceeds of the Bonds or a "related person," as such terms are used in Section 147 of the Code or (ii) interest which is included as a preference item for purposes of calculating an alternative minimum tax) would be subject to Federal income taxation. For purposes of this definition, a judgment or order of a court or a ruling or decision of the Internal Revenue Service shall not be considered final during the pendency of any appeal or other action for judicial or administrative review which may be filed within the time allowed therefor, provided that the Bank shall have received an opinion of nationally recognized bond counsel to the effect that such an appeal or action for judicial or administrative review is not without merit. Remedies If any Event of Default occurs the Bank may, at its election,pursue one or more of the following remedies: (i) declare any and all amounts owed to the Bank under the Reimbursement Agreement and the other Credit Documents immediately due and payable, without demand, presentment, protest or notice of any kind, (ii) give notice to the Trustee of an Event of Default,which notice shall provide that the Credit Enhancement shall terminate B-3 t ten (10) days after receipt by the Trustee of such notice and a direction to the Trustee to redeem all outstanding Bonds as provided in the Indenture, (iii) by written notice to the Owner and the Trustee, require the Owner to immediately prepay to the Bank in immediately available funds an amount equal to the Stated Amount of the Letter of Credit (as defined therein), such amount to be held as collateral security for the Owner's Obligations (due or contingent) to the Bank, (iv) direct the Trustee to exercise its rights under the Indenture and the Agreement; (v) exercise the Bank's rights under the Related Documents, including, to the extent permitted under the Indenture, taking sole possession and ownership or control of the GNMA Security; (vi)draw on the Collateral Letter of Credit and hold the proceeds of any such drawing as collateral security for any and all indebtedness, obligations and liabilities of the Owner to the Bank and under the other Related Documents,or(vii)pursue any rights and remedies available to it under the Reimbursement Agreement, or other specified documents or otherwise available to it pursuant to law or equity. B-4 w EXHIBIT C THE SUMITOMO BANK, LIMITED The following description of the Bank has been provided by the Bank. The Issuer has not verified such information and assumes no responsibility for the accuracy thereof. General The Sumitomo Bank, Limited ("Sumitomo") provides a comprehensive range of wholesale and retail banking services both in Japan and abroad. Through its head office and branch network in Japan and-overseas, Sumitomo accepts deposits, makes loans and extends guarantees to corporations, individuals, governments and government entities. Sumitomo also underwrites and deals in bonds issued by or under the guarantee of the Japanese government and local government authorities. Among the eleven city banks in Japan, Sumitomo ranked fourth in terms of deposits and tenth in terms of net income based on its published audited non-consolidated accounts with respect to the year ended March 31, 1993. In Japan, Sumitomo operates through a domestic network of 328 branches. Overseas, Sumitomo has 17 branches, 2 agencies, 3 subbranches, 22 representative offices, and 28 subsidiaries and principal affiliates. The registered head office of Sumitomo is 6-5, Kitahama 4-chome, Chou-ka, Osaka, Japan, and its Tokyo head office is located at 3-2 Marunouchi 1-chome, Chiyoda-ku, Tokyo, Japan. The common stock of Sumitomo is listed on the Tokyo, Osaka and other major Japanese stock exchanges, as well as the London and Paris stock exchanges. The Chicago Branch Sumitomo's Chicago Branch has been authorized by the Commissioner of Banks and Trust Companies of the State of Illinois to conduct a full commercial banking business since May, 1974. The Chicago Branch conducts an extensive banking business concentrating primarily on international banking transactions and servicing the financial needs of its Japanese and American customers in the United States. As of March 31, 1993, the total assets of the Chicago Branch were approximately$2.9 billion. The Chicago Branch is a branch of Sumitomo and is not a separate subsidiary of Sumitomo. Therefore, the initial Credit Enhancement is an obligation of Sumitomo (and not solely the Chicago Branch). Financial Performance for the Fiscal Year Ended March 31, 1993 In the fiscal year ended March 31, 1993, non-consolidated net income of Sumitomo amounted to $14.0 billion($121 million),representing an 87.2 percent decrease from the previous year's $109.8billion($945 million). As of March 31, 1993, deposits totaled$37,607.9 billion($323.4 billion),a decrease of 7.5 percent from the previous fiscal year's figure of$40,673.5 billion($349.7 billion), and total assets stood at $55,071.0 billion ($473.5 billion),representing a decrease of 8.5 percent from$60,206.7 billion($517.7 billion)recorded at the end of the prior fiscal year. United States and Japanese Generally Accepted Accounting Principles The financial information presented herein is derived from financial statements of Sumitomo which conform with accounting principles generally accepted in Japan. Japanese accounting principles differ in certain respects from accounting principles generally accepted in the United States. Sumitomo maintains its records and prepares its financial statements in Japanese Yen. U.S. Dollar amounts are presented solely for convenience. The rate used for U.S. Dollar amounts herein is $116.30 = $1.00, the rate of exchange on March 31, 1993. It should not be assumed that Japanese Yen could be converted as of the date of this Official Statement to U.S. Dollars at the same rate. Miscellaneous Sumitomo will provide without charge to any interested investor a copy of Sumitomo's most recent Annual Report or Interim Financial Report. Written requests should be directed to The Sumitomo Bank, Limited,Chicago Branch, Sears Tower, Suite 4800, 233 South Wacker Drive, Chicago, Illinois 60606-6448, Attention: Manager - Public Finance Section; Telephone (312) 876-0525. The above information relating to Sumitomo relates to and has been supplied by Sumitomo. The delivery of this Official Statement shall not create any implication that there has been no change in the affairs of Sumitomo since the date hereof, or that the information contained or referred to in this Official Statement is correct as of any. time subsequent to its date. C-2