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MINUTES - 04061999 - C138
Con a ' Costa TO BOARD OF SUPERVISORS ��� FROM: Dennis Barry V Director of Community Development DATE: April 6, 1999 SUBJECT. Band Sale Resolution --Willow Pass Apartments, Bay Point SPECIFIC REQUEST(S) OR RECOMMENDATIONS (S) & BACKGROUND AND JUSTIFICATION REQOMME ' `1ON,9 ADOPT resolution authorizing the sale of Multi-Family Mortgage Revenue Bonds for the acquisition/renovation of the Willow Pass Apartments, Bay Paint, and actions related thereto. [99/161] FISCAL IMPACT None. County is compensated for costs incurred in issuance process and for costs of monitoring compliance with Regulatory Agreement. B C ROOUNDjREASONS FOR RECOMMENDATIONS On December 8 , 1998 the Board of Supervisors approved an Inducement Resolution conditionally stating its intent to issue multi-family mortgage revenue bonds for the acquisition/renovation of the Willow .Pass Apartments in Bay Point by Willow Partners, L.P. , a California Limited Partnership. The Willow Pass Apartments are an existing, privately owned housing project at 1056 Weldon Lane, Bay Point. -she principals associated with Willow Partners, L.P. , are affiliated with Partners Realty Capital, a Newport Beach real estate firm with extensive experience in owning and managing affords le housing projects. CONTINUED ON ATTACHMENT: XX SIGNATURE. RECOMMENDATION OF COUNTY ADMINISTRATOR MMENDAT s N OF BOARD MI+IZTTEE APPROVE OTHER } SIGNATURE(S) : 1 ACTION OF BOAAD ON 400,;j 6 q APPROVED AS RECOMMENDED ,X OTHER VOTE OF SUPERVISORS I HEREBY CER'T'IFY THAT THIS IS A UNANIMOUS (ABSENT } TRUE AND CORRECT COPY OF AN AYES: NOES: AC'T'ION TAKEN AND ENTERED ON THE ABSENT: ABSTAIN: MINUTES OF THE BOARD OF SUPERVISORS ON THE DATE SHOWN. Source: Jim Kennedy 646-4208 cc: Community Development ATTESTED County Administrator PH �� H / , CLERK OF County Counsel THE BOARD OF SUPERVISORS via Community Development AND COUNTY ADMINISTRATOR Willow Partners, L.P. Hutchison, Shockey, Erley & Co. Orrick Herrington & Sutcliffe Arter Hadden Haynes & Miller BY magma , DEPUTY JK/sib D:\data\wp6\9903\crespark.bos The Regulatory Agreement of the County will require that at least 48 units (40% of the total) be reserved as affordable units for at least thirty years. The owner intends to provide approximately 80% of the units as affordable units. No existing qualified tenant will be displaced as a result of this acquisition. The proposed financing and the credentials of Willow Partners financing and the credentials of Willow Partners, L.P. , were thoroughly evaluated and approved by the Bay Point ICAC and The Bay Point Redevelopment Project Area Committee in December, 1993 -- February, 1999 . The committees concurred with the staff recommendation to proceed with the financing. The bonds to be issued will, finance the acquisition and rehabilitation of the Willow Pass Apartments. The bonds will be secured by a pledge of rents, reserve accounts and by a guaranty issued by Federal National Mortgage Association(FNMA) . The bonds are expected to be rated AAA. The bonds are to be issued in two series (a taxable Series C-T; a Series C tax exempt bonds in an amount not to exceed $8 million. The underwriters for this transaction is Hutchison, Shockey, Frley & Co. Bond Counsel is Orrick Herrington & Sutcliffe. The bond sale resolution authorizes a number of actions, a summary of which is provided as Attachment A. ATTACHMENT A The attached resolution authorizes a number of actions, a summary of which follows: 1. Authorizes the issuance of revenue bonds in an amount not to exceed $8 million; 2 . Approves the form of Trust Indentures between the County and the Trustee, U. S.Bank Trust National Association; 3 . Approves the form of Bond Purchase Agreements between the County, Willow Partners, L.C. , Hutchison, Shockey, Erley &Co. as Underwriter; 4 . Approves form of Financing Agreements between County, Trustee, Developer and ARCS Commercial Mortgage, the FNMA Lender; 5 . Approves form of Regulatory Agreement between County, Trustee and Willow Partners, L.C. ; 6. Approves form of Preliminary Official Statements; 7 . Designates Hutchison, Shockey, Erley &Co. as Underwriters; 8. Designates Orrick, Herrington, & Sutcliffe as Bond Counsel; 9 . 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. JK/sr,b D:\data\w-p6\9903\crespark.bos RESOLUTION NO. '9 q leel OF THE BOARD OF SUPERVISORS OF THE COUNTY OF CONTRA COSTA, CALIFORNIA RESOLUTION AUTHORIZING THE ISSUANCE AND DELIVERY OF ONE. OR MORE SERIES OF MULTIFAMILY HOUSING REVENUE BONDS IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $8,000,000 FOR. THE FINANCING OF THE ACQUISITION, CONSTRUCTION AND REHABILITATION OF A MULTIFAMILY RENTAL HOUSING PROJECT GENERALLY KNOWN AS WILLOW PASS APARTMENTS: DETERMINING AND PRESCRIBING CERTAIN MATTERS AND APPROVING AND AUTHORIZING THE EXECUTION AND DELIVERY OF VARIOUS DOCUMENTS RELATED THERETO, RATIFYING ANY ACTION HERETOFORE TAKEN AND APPROWING RELATED MATTERS IN CONNECTION WITH SAID BONDS. WHEREAS,the County of Contra Costa(the"County") is authorized pursuant to Section 52075 and follownlirrg of the California Health and Safety Code (the ``Act") to issue revenue bonds for the purpose of financing the acquisition, construction and development of multifamily rental housing projects; WHEREAS, the proceeds of such bonds may be loaned to a nongovernmental owner of multifamily Dousing, who shall be responsible for the payment of such bonds, to allow- such nongovernmental owner to reduce the cost of operating such housing and to assist in providing housing for low and very love income persons, WHEREAS,the County desires to participate in the financing of the acquisition, construction and rehabilitation of a 120-unit multifamily rental housing development generally known as Willow Pass Apartments (the "Project"), which will be owned and operated by Willow Partners LP., a California limited partnership, and/or entities related thereto (collectively, the `.Borrower"'). and in order to do so intends to sell an issue in one or more series not to exceed $8,000,000 in aggregate principal amount of its multifamily housing;revenue bonds(as more,`ully described herein, the"Bonds") and loan; the proceeds thereof to the Borrower,thereby reducing the cost of the Project and assisting in providing housing for love income persons, WHEREAS,pursuant to Section 147(f) of the Internal Revenue Code of 1986 (the "Code"), the financing of the Project and the issuance of the Bonds by the County must be approved by the applicable representative of a governmental unit having jurisdiction over the territory in which the Project is located, WHEREAS,the Board of Supervisors of the County of Contra Costa(the "Board°") is the elected legislative body of the County and is one of the applicable elected representatives required to approve the financing of the Project and the Bonds under Section 147(f) of the Code, WHEREAS,the Borrower has requested that the Board approve the financing of the Project and the issuance of the Bonds in order to satisfy the public approval requirement of Section 147(f) of the Code. WHEREAS, pursuant to Section 147(f) of the Code, the Deputy Director-Redevelopment has, following notice duly given, held a public hearing regarding the financing of the Project and the issuance of the Bonds, and the Board desires to approve the financing and the issuance of the Bonds. WHEREAS, there have been prepared and presented at this meeting the following docurnents required for the issuance of the Bonds, and such documents are now in substantially final form and appropriate instruments to be executed and delivered for the purposes intended: (1) Trust Indenture ('the "Indenture") to be entered into between the County and U.S. Bank Trust National Association(the"Trustee"), providing for the authorization and issuance of the Bonds', (2) Financing Agreement(the"Financing Agreement") to be entered into among the County, the Borrower, the Trustee and ARCS Commercial Mortgage Co.. L.P. as servicer of the mortgage loan-, (3) Regulatory Agreement and Declaration of' Restrictive Covenants (the "Regulatory Agreement"'), to be entered into among the Borrower, the County and the Trustee-, (4) Bond Purchase Agreement (the "Purchase Agreement") to be entered into among the County, the Borrower and Hutchinson, Shockey, Erley & Co., as underwriter for the Bonds (the "Underwriter"),and (5) Preliminary Official Statement (the "Preliminary Official Statement") to be used by the Underwriter in connection with the sale of the Bonds. NOW,THEREFORE,BE IT RESOLVED by the Board of Supervisors of the County of Contra Costa-, as follows: Section 1. This Board hereby specifically finds and declares that the statements, findings and determinations of the County set forth above are true and correct. Section 2. Pursuant to the Act and the Indenture, the County is hereby authorized to issue the Bonds. The Bonds shall be designated as "County of Contra Costa, California, Multifamily Housing Revenue Bonds(Willow Pass Apartments),"with appropriate series designations, in an aggregate principal amount not to exceed$8,000,000. The Bonds shall be in the form set forth in and otherwise in accordance with the Indenture, and shall be executed by the manual or facsimile signature of the Chairman of the Board of Supervisors, and attested by the manual or facsimile signature of the County Administrator and Clerk of the Board of Supervisors (the "Clerk"), The Bonds shall be issued and secured in accordance with the I -rip" niurn. if any, to:ns of the Indenture presented at this meeting. Payment of the principal of, redei 11on prer and interest on, the Bonds shall be made solely form the Trust Estate(,-is defined in the Indenture), and the Bonds shall not be deemed to constitute a debt or liability of the County, The Bonds may be issued as either taxable or tax-exempt obligations under the Internal Revenue Code of 1986, as amended, based upon the requirements of the financing and the availability of private activity bond limit. Section 3. The form of Indenture, on file with the Clerk, is hereby approved, and the Chain-nan,Vice-Chair, the County Administrator,the Director of Community Development and the Deputy Director-Redevelopment(each an"Authorized Officer)are hereby authorized and directed to -execute and deliver the Indenture in substantially said form, with such changes therein as such officers may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. The date. maturity' N y-date or dates(which shall not extend beyond April 1, 2035), interest rate or rates (which shall not exceed 7.(?%per annum), interest payrnent dates, denominations, form, registration privileges, manner of execution, place of payment,teres of redemption and other terms of the Bonds shall be as provided in the Indenture as finally executed. Section 4. The form of Financing Agreement, on file with the Clerk, is hereby approved and an Authorized Officer is hereby authorized and directed to execute and deliver the Financing Agreement in substantially said form, with such changes therein as such officers may require or approve, such approval to be conclusively evidenced by the -execution and delivery thereof Section 5. The fon-n of the Regulatory Agreement, on file with the Clerk. is hereby approved and an Authorized Officer is hereby authorized and directed to execute and deliver the Regulatory Agreement in substantially said form., with such changes therein as such officers may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. Section 6. The County is hereby authorized to sell the Bonds to the Underwriter and such other purchasers as approved by an Authorized Officer pursuant to the terms and conditions of the Purchase Agreement. The form of the Purchase Agreement, on file with the Clerk, is hereby approved and an Authorized Offic-er is hereby authorized and directed to execute and deliver the Purchase Agreement in substantially said form, with such changes therein as such officers may require or approve (provided that in no case shall the fee paid to the Underwriter exceed 2% of the principal amount of the Bonds), such approval to be conclusively evidenced by the execution and delivery thereof. Section 7. The form of Preliminary Official Statement describing the Bonds, on file with the Clerk, is hereby approved. An Authorized Officer is hereby authorized and directed to execute and deliver a final Official Statement in substantially said form., with such additions thereto or changes therein as such officer may require or approve, such approval to be conclusively evidenced by the -execution and delivery thereof The Underwriter is hereby authorized to distribute copies of the Preliminary Official Statement to interested purchasers and to subsequently distribute copies of the Preliminary Official Statement to persons purchasing the Bonds. An Authorized Officer is hereby authorized and directed to execute a certificate confirming that the Preliminary Official Statement has been -deemed final" by the County for purposes of Securities and Exchange Commission Rule 15c2-12. Section S. It is the purpose and intent of this Board that this Resolution constitute approval of the financing of the Project and the issuance of the Bonds by the County for the purposes of Section I I 47(f) of the Code by the applicable elected representative ofthe goverru-nental unit having jurisdiction over the area in which the Prcject is or will be located, in accordance with said Section 147(f) of the Code. Section 9. 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 appearing thereon, and to deliver the Bonds, when duly executed and authenticated, in accordance with written instructions executed and delivered on behalf of the County by ,,in Authorized Officer, which such Authorized Officer is hereby authorized and directed to execute and deliver to the Trustee. Such instructions shall provide for the delivery of the Bonds in accordance with the Purchase Agreement, upon payment of the purchase price thereof. Section 10. The Board hereby appoints Orrick, Herrington, & Sutcliffe LLP, Los Angeles, California, as bond counsel and Hutchinson, Shockey, Erley &Co., Phoenix, Arizona, as underwriter. Section 11. All actions heretofore taken by the officers and agents of the County with respect to the financing of the Project and the sale and issuance of the Bonds are hereby approved, ratified and confirmed, and any Authorized Officer is hereby authorized and directed,for and in the name and on behalf of the County, to do any and all things and take any and all actions and execute and deliver any and all certificates,agreements, and other documents, including but not limited to those described in the Indenture, the Purchase Agreement and the other documents herein approved, which such officer, or any of them, may deem necessary or advisable in order to consurnmate the lawful issuance and delivery of the Bonds and to effectuate the purposes thereof and of the documents herein approved in accordance with this resolution and resolutions heretofore adopted by the County and otherwise in order to carry out the financing of the Project. Section 12. All further consents, approvals, notices, orders, requests and other actions permitted or required by any of the documents authorized by this resolution, whether before of after the issuance of the Bonds, including without limitation any of the foregoing which may be necessary or desirable in connection with any default under or amendment of such documents, any transfer or other disposition of the Project, any addition or substitution of security for the Bonds or any redemption of the Bonds, may be given or taken by -in Authorized Officer without further authorization by this Board of Supervisors, and such Authorized Officer is hereby authorized and directed to give any such consent, approval, notice, order or request and to tale any such action which such officer may deem necessary or desirable to further the purposes of this resolution and the financing of the Project. Section 13. This Resolution shall talo;effect upon its adoption. PASSED AND ADOPTED THIS 6th day of April, 1999. AYES: SupervisorGioia, T.�ilkema, G--rbe�, DeSaulnier,Canciamilla NOES:'NO ABSENT:- yyBS�E�i~'3pT:�GNE '� ABSTAIN: [Seal, AlrTEST Phil Batchelor, County Administrator and Clerk of the Beard of Supervisors By: Deputy Clerk CLERK'S CERTIFICATE I, M. -Maurer Deputy Clerk of the Board of Supervisors of the County of Contra Costa,hereby certify that the foregoing is a Cull, trace and correct copy of a resolution duly adopted at a regular meeting of the Board of Supervisors of said County duly and regularly held at the regular meeting place thereof on the 6th day of April, 1999, of which meeting all of the members of` said Board of Supervisors had due notice and at which a Majority thereof were present; and that at said meeting said resolution was adopted by the following vote: AWES: Supervisor Gioia, Uilkema, Gerber, DeSaulnier, G,ancaamill.a NOES: NONE ABSENT: NONE ABSTAIN: NONE An agenda of said meeting was posted at least 72 hours before said meeting at 651 Pine Street, Martinez. Califomia a location freely accessible to members of the public, and a brief general description of said resolution appeared on said agenda. I farther certify that I have caref"uily compared the saane with the original minutes of'said meeting on file and of record in my office-that the fibregoing resolution is a tu11, true and correct copy of the originai resolution adopted at said meeting and entered in said minutes, and that said resolution has not been amended,modified or rescinded since the date of its adoption, and the same is now in full force and effect. WITNESS my hand and the seal of the County of Contra Costa this 6th day of April. 1999, SEAL] ATTEST Phil Batchelor, County Administrator and Clerk of the Board of Supervisors By: Deputy Clerk J KIsm» t7:\aa#a\vwtx6199C�3�tvi i;3as.w'ni KUTAK ROCK DRAFT 3124/99 PRELIMINARY OFFICIAL STATEMENT DATED APRIL 7, 1999 NEW ISSUE--BOOK-ENTRY ONLY RATING: Standard&Poor's: "__ " .� (see"RATING"herein) M In the opinion of Orrick,Herrington&Sutcliffe LLP, Bond Counsel, based upon an analysis of existing laws,regulations,rulings and court decisions and assuming, among other things, compliance with certain covenants, interest on the Series D Bonds is excluded from gross income for federal tax purposes under Section 103 of'the Internal Revenue Code of 1986(the "Code')and is exempt from State of California personal income taxes, except that J R no opinion is expressed as to the status of interest on any Series D Bond for any period during which such Series D Bond is held by a "substantial user"of 4.s facilities financed or refinanced by the Series D Bonds or 6v a "related person"within the meaning of Section 14"t'a}of the Code. Bond Counsel observes, „ however; that interest on the Series D Bonds is a specific preference item for purposes of the federal individual and corporate alternative minimum taxes. Bond Counsel is also of the opinion that interest on the Series D Bonds is exempt from State cif California personal income taxes. Bond Counsel also i observes that interest on the Servs D-T Bonds is not e-xcludable from gross income far federal income tax purposes. Bond Counsel expresses no opinion regarding any other tar consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Series D Bonds. See "TA-V ex� VA7TERS"herein. r $J5,400,000* $2,500,OW y County of Contra Costa.,California County of Contra Costa, California Multifamily Housing Revenue Bonds Multifamily Housing Revenue Bonds (Willow Pass Apartments) (Willow Pass Apartments) Series 1999D Series 1999D-T y Dated: April 1, 1999 Due: as shown on the inside cover The above-captioned Series 1999D Bonds (the "Series D Bonds") and the above-captioned Series 1999D.T Bonds (the "Series D-T Bonds" and,. ," o toge her with the Series D Bonds,the"Bonds")are being issued pursuant to a Trust Indenture(the"Indenture")dated as of April 1, 1999,by and between the County of Contra Costa, California (the "Issuer") and U.S. Bank Trt st Naticsnal Association, as t.ustee (he "Trustee'"}. Pursuant to a Financing o ; Agreement(the "Financing Agreement"), dated as of April 1, 1999, the proceeds of the Bands will be applied to fund a mortgage loan. (the "Mortgage Loan")to Willow Partners, L.P., a California limited partnership (the"Borrower*), to finance the acquisition and rehabilitation of a multifamily rental a, housing project known, as the Willow Pass Apartments, located in the County of Contra Costa, California. See 4'APPENDIX C—THE €OR€OWER AND THE PROJECT."` The Mortgage Loan will be evidenced by a Multifamily Note dated as of April 1, 1999 executed by the Borrower(the"Mortgage Note"). �� c Fannie Mae has issued a commitment (the "Fannie Mae Commitment")with respect to the Mortgage Loan. Under the Fannie Mae Commitment, . �a Fannie Mae has agreed,subject to satisfaction of the terms and conditions of the Fannie Mae Commitment,to provide.effective as of the date of issuance of ' the Fonds,credit enhancement for the Mortgage Loan pursuant to.and subject to the limitations of,a Collateral Agreement(described herein). Following .' rehabilitation of the Project and satisfaction of the applicable conditions set forth in the Fannie Mae Commitment, Fannie Mae will. on the Farmie Mae a Pass-Through Certificate Delivery Date(as defined herein),acquire all of the right,title and interest in and to the Mortgage Loan in exchange fora Fannie Mae Guaranteed Mortgage Pass-Through Cer±ificate(a"Fannie Mae Pass-Through Certificate'')evidencing an interest in the Mortgage Loan. The Fannie o ma Mae Pass-Through Certificate,when issued,will be substituted for the Mortgage Loan and Collateral Agreement as security for the Bonds. The Trustee c will hold the Fannie Mae Pass-Through Certificate,or the beneficial interest in the Fannie Mae Pass-Through Certificate as security forth-,holders of the Bonds. SeeSECURITY FOR THE BONDS, Prior to the issuance of the Fannie Mae Pass-Through Certificate, payment of the principal of and interest on the Bonds will be secured by: (I)the 0:i�i Mortgage Loan,; (2)the Revenues (as defined herein) and other moneys received by the Trustee for the prepayment of principal of and interest on the Bonds; (3)moneys and investments held by the Trustee In certain finds and accounts established under the Indenture: and(4}Fannie Mae's obligations under the Collateral Agreement to make certain: required payments due under the Mortgage Note. From and after the issuance of the Fannie Mae Pass-Through Certificate,payment of the principal of and interest on the Bonds will be secured primarily by distributions to be made under the Fannie Mae Pass-Through Certificate.and tate Bonds will no longer be secured by the Mortgage Loan.or by the Collateral Agreement. Distributions under the Fannie =' Mae Pass-Through Certificate will correspond to scheduled principal and interest payments to be made by the Borrower on the Mortgage Loan(less certain E fees payable to the Servicer and Fannic Mae,the`'Spread Amount."as defined herein).Fannie Mae's obligation to make scheduled distributions under the o Fannie Mae Pass-Through Certiticate will be independent of its receipt of corresponding payments from the Borrower under the Mortgage Loan. 57, : PAYMENT OF PRINCIPAL OF, PREMIUM. IF ANY, AND INTEREST ON, THE BONDS IS NOT GUARANTEED BY FANNIE MAE, FANNIE MAE'S SOLE OBLIGATION WITH RESPECT TO THE MORTGAGE LOAN WILL BE CONTAINED IN THE COLLATERAL AGREEMENT, SO LONG AS IT IS IN EFFECT, AND, UPON ISSUANCE OF THE FANNIE MAE ?ASS-THROUGH CERTIFICATE. IN THE p ° FANNIE MAE PASS-7.HROUGH CERTIFICATE. ANIS WILL BE LIMITED. AS TO THE COLLATERAL AGREEMENT. SOLELY TO ITS c .° OSL C-ATIONS THEREUNDER AND, AS TO THE FANNIE MAE PASS-THROUGH CERTIFICATE. TO MAKING DISTRIBUTIONS OF L PRINCIPAL AND INTEREST UNDER THE FANNIE MAE PASS-THROUGH CERTIFICATE. 1N ACCORDANCE WITH ITS TERMS,TO OR FOR . -is THE BENEFIT OF THE TRUSTEE AS RECORD OR BENEFICIAL OWNER OF THE FANNIE MAF, PASS-THROUGH CERTIFICATE. THE M OBLIGATIONS OF FANNIE MAE ARE NOT BACKED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA. BUT BY THE CREDIT OF FANNIE MAE,A FEDERALLY CHARTERED,STOCKHOLDER-OWNED CORPORA T ION. SEE"FANNIE MAE"HEREIN. ° The Bonds are subject to optional. mandatory. and special mandatory redemption prior to maturity. in certain events. including special mandatory redemption in part iE at the time of Fannie Mae's acquisition of the Mortgage Loan.'he principal amount of the Mortgage Loan is reduced in accordance with the terms of the Fannie Mae Commitment to conform to Fannie Mae's underwriting requirements for the Mortgage Loan. See"THE BONDS— u_g Redemption."' The Bonds are not subject to redemption and the interest rate will not be adjusted if interest on the Series D Boards becomes includable in gross income for federal income tax purposes. THE BONDS AND THE;SERIES OF WHICH THEY ARE A PART ARE SPECIAL OBLIGATIONS OF THE ISSUER. THE BONDS ARE . a NOT A DEBT OF AND DO NOT PLEDGE THE FAITH,CREDITOR TAKING POWER OF THE STATE OF CALIFORNIA,THE, ISSUER ' OR ANY POLITICAL SUBDIVISION,BUT ARE PAYABLE SOLELY FROM THE REVENUES AND THE ASSETS PROVIDED FOR IN THE e� INDENTURE AND THE ACT(AS DEFINED HEREIN). This cover page contains certain information for quick reference only and is not a summary of the issue. Investors must read the entire Official Statement to obtain'nfbrmation essential to the:Waking o:an informed investment decision. : The Bonds are offered when,as and if received by the Underwriter subject to the approval as to their legality by Orrick, Herrington&Sutcliffe LLP, o Los Angeles, California, Bond Counsel. Certain legal matters will he passed upon for the Underwriter by its counsel, Kutak Kock,for the Borrower by its counsel, Bret H. Reed,Jr.,.4 Law Corporation,Balboa Island,California,and for Fannie Mae b.),,its Legal Department and by Arent Fox Kintner Plotkin& a Kahn. PLLC, Washington,D.C.,counsel for Fannie.Viae. It is anticipated that the Bonds will be available for delivery in book-enin form to DTC in New EYork,New York on or about April 22, 1999. a. y a. � Netimi=.nary:subject to change. 01-177463.02 HUTCHINSON,SHOCKEY,ERLEY& CO. Dated: April , 1999 01-177463.02 MATURITY SCHEDULE Series D Bonds $ %Term Band due $ %Term Bond due Series D-T Bonds $ %Term Bonds due $ %Terra Bonds due (Price of All Bonds: % Flus accrued interest from April 1, 1999) 01-177463.02 No dealer, broker, salesperson or other person has been authorized by the Issuer or the Underwriter to give any information or to make any representations other than those contained herein in connection with the offering of the Bonds described herein and, if given or made, such other information or representation must not be retied upon as having been authorized by the Issuer or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an Gaffer to bay nor shall there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such an offer,solicitation,or sale. This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly described as such herein, are intended solely as such and are not to be construed as representations of fact. The information set forth herein has been obtained from sources which are believed to be reliable but it is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the Issuer or the Underwriter. The Issuer has not made an independent verification of the information contained herein. Fannie Mae has not provided or approved any information in this Official Statement except with respect to the description under the caption "FANNIE MAE,"takes no responsibility for any other information contained in this Official Statement and makes no representation as to the contents of this Official Statement (other than with respect to the description under the caption "FANNIE MAE"). Without limiting the foregoing, Fannie Mae makes no representation as to the suitability of the Bonds for any investor,the feasibility or performance of the Projects,or compliance with any securities,tax or other laws or regulations. Fannie Mae's role with respect to the Mortgage Loan is limited to issuing the Fannie Mae Commitment, entering into the Collateral Agreement, acquiring all of the right, title and interest in and to the Mortgage Loan on the Fannie Mae Pass-Through Certificate Delivery Date by issuing a Fannie Mae Pass-Through Certificate in exchange for such right, title and interest in and to the Mortgage Loan and making distributions under the Fannie Mae Pass-Through Certificate, all as described herein. The information herein is subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder may, under any circumstances,create any implication that there has been no change in the affairs of the Issuer, the Borrower, or of Fannie Mae since the date hereof. The Trustee has not participated in the preparation of this Official Statement. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. 01-177463.02 _ TABLE OF CONTENTS Page INTRODUCTION... ...... ......................................................... .................................................................. l THEBONDS..........................,............................................................. ....................... ......................... ..4 B(](}K-ETNT7RYONLY 8YSTBM. ...................................................~._.....-................................ .. ...... l3 SECURITY FOR THE BONDS.................................................................. ............................................. l6 THEMORTGAGE NOTE.............. ............................ .......... ........ ........................................................27 SERVICING{]FTHE MORTGAGE LOAN....................................... —............................. .............. _27 FEES OF THE SERVICER ANDPANNJE MAE . ..........— ......................... ............................. ..........%0 Ff\NNDE M&AE ........... ........ — ...... ..........................—....-...............................................'.........--.....Z9 THESERVICER.................. ..................... .......................... ........ ...................... ......... ...... ....... ........3O SOURCES AND USES OF FUNDS.... ............. ...... ........ ........................ ..................— .........---.....3O THEISSUER.............. ....................................... ...................... .............. ......... ......---.............. ......3l ENFORCEABILITY OFREMEDIES.................................................................—.............. .... .............3I TAXMATTERS........—. ............... .......................... ............................................... .............. _...........]1 CONTINUING DISCLOSURE ....... .......... ...................... ...................................................... ........... -]2 YEAR 2000 PREPAREDNESS................................ —.— .................. ............................. ................ '.I3 CASH FLOW PREPARATION....... ....... .................. ........................... ............. .............. ............... ....33 CERTAIN LEGAL MATTERS.......................................... ............. .......... ..................... ................. ...33 NOLITIGATION ...................— ................—....................... ....... ............... ...................... ................. �34 RATING................ . ...... ..........--. ... --.............................................—. ... .... ............................34 8N ..... .—.............................—.......... ....... ............................... ...................................34 MISCELLANEOUS ... ...... ........... .................. ...................— .............. ................................. ............35 APPENDIX SUMMARY OF PRINCIPAL LEGAL DOCUMENTS APPENDIX PROPOSED FORM CFOPINION OF BOND COUNSEL APPENDIX THE BORROWER AND—1 HE PROJECT APPENDIX SUMMARY 0FCERTAIN PROVISIONS {)FTHE CONTINUING DISCLOSURE AGREEMENT m'n74Q.02 _ __ _ $5,400,000* $$.2,500,000* County of Contra Costa,California County of Contra Costa,California Multifamily Housing Revenue Bonds Multifamily Housing Revenue Bonds (Willow Pass Apartments) (Willow Pass Apartments) Series 1999171 Series 1999 D-T INTRODUCTION This Official Statement provides certain information concerning the County of Contra Costa, California (the "Issuer"), a political subdivision of the State of California (the "State"), and its above- captioned Series 1999D Bonds (the "Series D Bands") and its above-captioned Series 1999D-T Bunds (the "Series D-T Bonds" and, together with the Series D Bands, the "Bonds"). The Bonds are being issued pursuant to a Trust Indenture (the "Indenture"), dated as of April 1, 1999, by and between the Issuer and U.S. Bank Trust National Association,as trustee(the "Trustee"),and pursuant to Chapter 7 of Dart 5 of Division 31 of the Health and Safety Cade of the State of California, as amended (the "Act"). Certain definitions used in this Official Statement are summarized under the caption "CERTAIN DEFINITIONS." The Bonds are to be issued to finance costs of acquisition, rehabilitation and equipping of a multifamily rental housing project known as the Willow Pass Apartments, located in the County of Contra Costa, California(the"Project"). The proceeds of the Bonds will be used to fund a mortgage loan (the"Mortgage Loan")to be made by the Issuer to Willow Partners, L.P.,a California limited partnership (the "Borrower"). See "APPENDIX C—THE BORROWER AND THE PROJECT." In connection with the issuance of the Bonds and the making of the Mortgage Loan, the Issuer will enter into a Financing Agreement (the "Financing Agreement") dated as of April 1, 1999 among the Trustee, the Borrower and ARCS Commercial Mortgage Co., L.P., a mortgage banking concern Headquartered in Calabasas, California (the "Servicer"). In connection with the issuance of the Bonds, the Issuer, the Trustee and the Borrower will enter into a Regulatory Agreement and Declaration of Restrictive Covenants dated as of April 1, 1999 (the "Regulatory Agreement") which will restrict the operation and occupancy of the Project. Among other things, the Regulatory Agreement will require that at least 40% of the units in the Project be occupied by Low Income Tenants. See "APPENDIX A---SUMMARY OF PRINCIPAL LEGAL DOCUMENTS---The Regulatory Agreement." The Mortgage Loan will be evidenced by a Multifamily Note(the "Mortgage Mote"), dated as of April 1, 1999, executed by the Borrower. The Mortgage Note will be payable to the Issuer and will be secured by, among other things, a Multifamily Deed of Trust, Assignment of Rents and Security Agreement(the "Mortgage"), dated as of April 1, 1999 made by the Borrower, encumbering the Project. All the Issuer's right,title and interest in and to the Mortgage Loan (including the Mortgage Note and the Mortgage) will be assigned (except for certain Reserved Rights) by the Issuer to the Trustee and the Fannie Mae, as their interests may appear, pursuant to an Assignment of Mortgage Loan. Pursuant to the Issuer's assignment and prior to Fannie Mae's acquisition of the Mortgage Loan (as described below),the Mortgage Loan will be part of the Trust Estate securing the Bonds. It is expected that all of the principal amount of the Bonds will be disbursed to the Borrower at closing to fund all or a portion of the costs of acquiring the Project. Any amount not disbursed to the Borrower will be applied to the mandatory prepayment in part of the Mortgage Loan and the corresponding special mandatory redemption in part of the Bonds The Borrower will provide a letter of `1.eliminary,subject to change. 01-177463.02 credit in the amount of $ to the Leader to secure its obligations under the (Completion/Repair and Security Agreement with respect to completing certain repairs to the project by April 1, 20011. If any of the foregoing obligations are not met, the Lender will have the right to draw under the respective letter of credit and cause the proceeds to be applied to a mandatory prepayment of the Mortgage Loan and a corresponding redemption of the Bonds in part. See "THE BONDS,---- Redemption----Special Mandatory Redemption From Unexpended JVet Bond Proceeds; Special Mandatory Redemption .prior to the Fannie Moe Pass-Through Certylicate Delivery Date; Special Mandatory Redemption Upon Mandatory Mortgage Loan Prepayment in Part." The Mortgage Loan will be made subject to the terms and conditions of a commitment (the "Fannie Mae Commitment") issued by Fannie Mae. Under the Fannie Mae Commitment, Fannie Mae has agreed, subject to satisfaction of the terms and conditions of the Fannie Mae Commitment,to provide, effective on the elate of the issuance of the Bonds, credit enhancement for the Mortgage Loan prior to the issuance of the Fannie Mae Pass-Through Certificate pursuant to, and subject to the terms and conditions of, a Collateral Agreement(the "Collateral Agreement"),dated as of April 1, 1999, between Fannie Mae and the Trustee. Under the Collateral Agreement, certain required mortgage payments under the Mortgage:Mote will be sectored by a pledge and security interest granted by Fannie Mae to the Trustee of interests in certain residential mortgages and other collateral owned by Fannie Mae (tile "Pledged Collateral"). The Trustee's security interest in the fledged Collateral will be unperfected. See "SECURITY FOR THE BONDS—Collateral Agreement" and "APPENDIX A--SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—The Collateral Agreement." The obligation of the Borrower to reimburse Fannie Mae for any funds provided by Fannie Mae pursuant to the Collateral Agreement will be established by the terms and conditions of a reimbursement Agreement (the "Reimbursement Agreement"),dated as of April 1, 1999, by and between the Borrower and Fannie Mae. On the Fannie Mae Pass-Through Certificate Delivery Date (as defined herein), Fannie Mae will acquire all of the right, title and interest in and to the Mortgage Load in exchange for a Fannie Mae Guaranteed Mortgage Pass-Through Certificate(the"Fannie Mae Pass-Through Certificate")as described under the caption "SECURITY FOR THE BONDS." The Fannie Mae Pass-Through Certificate will (a)be issued and delivered to or for the benefit of the Trustee, (b)evidence an interest in a mortgage pool comprised solely of the Mortgage Loan and (c)be held by or on behalf of the Trustee to secure payment of the Bonds. Distributions under the Fannie Mae Pass-Through Certificate corresponding to scheduled payments of principal and interest on the Mortgage Loan (less the Spread Amount with respect thereto, comprising the servicing and guaranty fees payable to the Servicer and Fannie Mae, respectively)will be made to the Trustee,as bolder of the beneficial interest in the Fannie Mae lass-Through Certificate. Such distributions of principal and interest will be made by Fannie Mae regardless of whether corresponding payments on the Mortgage Loan are paid by the Borrower when due. See "SECURITY FOR THE BONDS"and "APPENDIX A--SUMMARY OF PRINCIPAL LEGAL DOCUMENTS." The Fannie Mae lass-Through Certificate Delivery Date will be the date on which the Fannie Mae Pass-Through Certificate is actually delivered, electronically, in book-entry form to, or to a custodian for the benefit of,the Trustee,and will occur following the Termination'Date. The interest rate on the Mortgage dote will be established at a rate, and the monthly payments under the Mortgage Note will be scheduled, such that the monthly payments of principal and interest on the Mortgage Note and, upon issuance of the Fannie Mae Pass-Through Certificate the corresponding distributions under the Fannie Mae Pass-Through Certificate, plus other moneys on deposit with the Trustee pursuant to the Indenture and Investment Income, will be sufficient to pay, when due, the semi-annual principal of and interest on the Bonds, as well as the Trustee's Annual Fee and the Rebate Analyst's Annual Fee, if any(collectively,the "Fees," as defined in the Indenture). Fannie Viae has not prepared, reviewed or verified, mattes no representation or warranty with respect to, does not 0 I-17746102 2 certify to, and assumes no responsibility or liability for.any calculations used to establish such schedule of payments or distributions, the assumptions used in making such calculations, their mathematical accuracy or for the sufficiency of payments on which they are based to pay the principal of and interest on the Bonds when due,the Fees included in the Pass-Through Rate under the Mortgage Note when due or any ether amounts at any time. THE BONDS ARE NOT A DEBT OF THE UNITED STATES OF AMERICA, OR ANY AGENCY THEREOF, OR OF FANNIE MAE. PAYMENT OF PRINCIPAL OF, PREMIUM, IF ANY, ANIS INTEREST ON THE BONDS IS NOT GUARANTEED BY FANNIE MAE. SO LONG AS THE COLLATERAL AGREEMENT IS IN EFFECT WITH RESPECT TO THE MORTGAGE LOAN, FANNIE MAE'S OBLIGATIONS WILL BE SOLELY AS PROVIDED IN THE COLLATERAL AGREEMENT. UPON ISSUANCE OF THE FAN'NIE MAE PASS-THROUGH CERTIFICATE, FANNIE MAE'S SOLE OBLIGATION WILL BE CONTAINED IN THE FANNIE MAE PASS-THROUGH CERTIFICATE, AND WILL BE LIMITER TO MAKING DISTRIBUTIONS OF PRINCIPAL AND INTEREST UNDER. THE FANNIE MAE PASS-THROUGH CERTIFICATE, IN ACCORDANCE WITH ITS TERMS, TO THE RECORD OWNER OF THE FANNIE MAE PASS-THROUGH CERTIFICATE. THE OBLIGATIONS OF FANNIE MAE UNDER THE COLLATERAL AGREEMENT AND UNDER THE FANNIE MAE, PASS-THROUGH CERTIFICATE, WILL BE OBLIGATIONS SOLELY OF FANNIE MAE, A FEDERALLY CHARTERED STOCKHOLDER-OWNED CORPORATION. THE OBLIGATIONS OF FANNIE MAE ARE NOT BACKED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA. FANNIE MAE HAS NO OBLIGATION' TO PURCHASE, DIRECTLY OR INDIRECTLY, ANY OF THE BONDS. The Bonds are subject to optional, mandatory, and special mandatary redemption (including special mandatory redemption in part, as described above) prior to maturity as described under the heading"THE BONDS" herein. Fannie Mae has designated the Servicer to service the Mortgage Loan; however, Fannie Mae may subsequently designate another eligible servicing institution to service the Mortgage Loan for Fannie Mae or may elect to service the Mortgage Loan itself(the Servicer or any such other mortgage servicer so acting from time to time is herein referred to as the"Mortgage Servicer"). THE BONDS AND THE SERIES OF WHICH THEY ARE A PARI' ARE SPECIAL OBLIGATIONS OF THE ISSUER. THE BONDS ARE NOT A DEBT OF AND DO NOT PLEDGE THE FAITH, CREDIT OR TAXING POWER OF THE STATE OF CALIFORNIA, THE ISSUER OR ANY POLITICAL SUBDIVISION, BUT ARE PAYABLE SOLELY FROM THE REVENUES AND THE ASSETS PROVIDED FOR IN THE INDENTURE AND THE ACT, Brief descriptions of the Issuer, Fannie Mae, the Servicer and the Borrower, as well as of the Bonds, the security for the Bonds, the Collateral Agreement, the Fannie Mae Pass-Through Certificate and the Project, are included in this Official Statement together(a) with summaries of the Indenture, the Financing Agreement, the Regulatory Agreement and the Collateral Agreement, and (b) information concerning ether relevant parties, documents, agreements, and laws. Such descriptions do not purport to be comprehensive or definitive. All references herein to the Indenture, the Financing Agreement, the Regulatory Agreement, the Collateral Agreement and the Fannie Mae Pass-Through Certificate are qualified in their entirety by reference to such documents,and references herein to the Bonds are qualified in their entirety by reference to the forms thereof included in the Indenture and the information with respect thereto in the aforementioned documents, copies of all of which are available for inspection in the principal corporate trust office of the Trustee. 01-177453.02 3 THE BONDS General The Bonds are issuable in book-entry only form,without coupons, in denominations of$5,000 or any integral multiple thereof; see "BOOK-ENTRY SYSTEM" herein. The Bonds are dated as of the date set forth on the cover hereof and will bear interest at the rates per annum,and mature in the principal amounts, as set forth on the inside cover hereof. The Bonds will be subject to redemption prior to maturity as described herein under the caption "THE BONDS---Redemption." Interest on the Bonds will be calculated on the basis of a 360-day year consisting of twelve 30-day months and be payable on May I and November 1 of each year commencing November 1, 1999 and on each other Bond Payment Date on which interest is payable, including any Redemption Bate, each Maturity bate and any date of acceleration of the Bonds. Each Bond will bear interest from the Interest Payment bate next preceding the date of its authentication unless such date of authentication is an Interest Payment Date for which interest has been paid or is after the Record Date, but prior to the next Interest Payment Date, in which event the Bond will bear interest from such Interest Payment Date, or unless such date of authentication is on or prior to the Record Date for the first Interest Payment Date, in which event the Bond will bear interest from the Dated Date of the Bonds. However, if at the time of authentication of any Bond, interest is in default on such Bond, such Bond will bear interest from the Interest Payment Date to which interest has been paid or made available for payment or, if no interest has theretofore been paid on such Bond, from the Dated Date of the Bonds. While the Bonds are subject to the Book-Entry System, payments of principal of, premiurn (if any) and interest on the Bonds will be :Wade by the Trustee to DTC, which in turn is obligated to remit such principal and interest to its Participants for subsequent disbursement to the Beneficial Owners of the Bonds. While the Bonds are subject to the Book-Entry System, their exchange and transfer will be effected through DTC and its Participants and will be subject to the procedures, rules and requirements established by DTC. Redemption Optional Redemption. The Bonds are not subject to optional redemption prior to . On and after _ _, the Bonds shall, to the extent optional prepayment of the Mortgage Loan in whole is made pursuant to and as permitted by the terms of the Mortgage Loan Documents, be subject to corresponding optional redemption in whole, and not in part, on the first day of any mond: for which timely notice of redemption can be given during the periods set forth in the below table and at the respective redemption prices set forth below (expressed as percentages of the principal amounts of the Bonds called for redemption),plus accrued -interest, if any.- Redemption ny:Redemption Period Redemption prices Optional redemption shall not be permitted unless such redemption is effected solely with Available Moneys. Notwithstanding any other provision of the Indenture to the contrary, the optional redemption of the Bonds arising from the optional prepayment of the Mortgage Loan shall not be made, and notice of any redemption arising from the optional prepayment of the Mortgage Loan shall not be 01-177463.02 4 given to Bondholders, unless and until the Trustee has on hand Available Moneys or has reasonable evidence that such amounts will be paid on the Redemption Date in an amount sufficient to pay the End Period Payment. Neither the Issuer, Fannie Mae, the Trustee nor the Servicer shall have any responsibility or liability to provide funds to be included in the End Period Payment. Conditions to Optional Redemption Based on Prepayment of a Mortgage Loan. Under the Financing Agreement, the Borrower is required to provide to the Trustee, the Servicer and Fannie Mae written notice of the optional prepayment of the Mortgage Loan not less than 60 days prior to the date of the prepayment. As soon as practicable after receipt of such notice, the Trustee shall send notice, in accordance with the Indenture, of redemption of the Bonds to the Bondholders, Fannie Mae and the Rating Agency. Under the Mortgage Note, prepayment of the Mortgage Loan must be made on the last Business Day of a month, and therefore on a day immediately preceding a scheduled payment date under the Mortgage Note. Following the Fannie Mae Pass-Through Certificate Delivery Date, an optional prepayment of the Mortgage Loan will be distributed by Fannie Mae on the Distribution Date in the month following the month in which the prepayment is made by the Borrower. Because of the timing of the distribution of the prepayment of the Mortgage Loan under the Fannie Mae Pass-Through Certificate,the Redemption Date of any such optional redemption shall be the first day of the month following the month in which falls the Distribution Date on which Fannie Mae will distribute the prepayment of the Mortgage Loan. Special Mandatory Redemption From Unexpended Net Bond Proceeds;Special Mandatory Redemption Prior to the Fannie Mae Pass-Through Certificate Delivery Date; Special Mandatory Redemption Upon Mandatory Mortgage Loan Prepayment in Part. Prior to the Fannie Mae Pass-Through Certificate Delivery Date, the Bonds are subject to special mandatory redemption plus accrued interest to the redemption date. (i) in part, from Net Bond Proceeds remaining in the Mortgage Loan Fund or the Z' Rehabilitation Fund which are transferred to the Redemption Account pursuant to the Indenture for application to the redemption of Bonds, or (ii) in whole or in part, as applicable, from proceeds of insurance frorn any casualty to, or proceeds of any award from any condemnation or any award as part of a settlement in lieu of condemnation, of the Project which are not applied in accordance with the Mortgage Loan Documents to the rebuilding,restoration or replacement of, or other improvements to,the Proiect, or, with the prior written consent of Fannie Mae, otherwise used for improvements to the Project, or applied to the reimbursement of amounts owed to Fannie Mae pursuant to the Reimbursement Agreement as follows: (a) in whole, upon the involuntary destruction or loss of the Project in its entirety or nearly in its entirety as a result of casualty or condemnation, such special mandatory redemption to be a redemption of all of the Bonds Outstanding and, therefore, in a principal amount at least equal to the unpaid principal balance of the Mortgage Loan, provided that the Trustee shall be entitled to payment under the Collateral Agreement, in accordance with its terms, to the extent the insurance or condemnation proceeds,as applicable, applied to the payment of the Mortgage Note,and moneys, if any, on deposit in the Funds and Accounts(other than the Rebate Fund) are less than the unpaid principal balance of the Mortgage Note and are, therefore, insufficient to redeem all of the Bonds Outstanding and(b) in part, upon the partial destruction or condemnation of the Project, such special mandatory redemption of Bonds to be a redemption of Bonds Outstanding in a principal amount equal to the insurance or condemnation proceeds received with respect to the Project; 01-177463.02 5 (iii) in whole or in part, at the written direction or with the prior written consent of Fannie Mae to the Trustee and in the amount specified by Fannie Mae, fallowing any event of default ander the Mortgage Loan, including any default under the Mortgage Note, the Mortgage or any other Mortgage Loan Document or any "Event of Default" under and as defined in the Reimbursement Agreement or the Financing Agreement (including any Event of Default under, and as defined in,the Reimbursement Agreement or the Financing Agreement caused by a default under the Mortgage Note,the Mortgage or any other Mortgage Loan Document);and. (iv) in part, upon the Trustee's receipt of written notice from the Servicer (with a copy to Fannie Mae) that the Mortgage Loan is subject to mandatory prepayment in part in an amount equal to the difference between the outstanding principal balance of the Mortgage Loan and the Maximum Mortgage Loan Amount (as such term is defined in, and determined in accordance with., the terms and conditions of, the Fannie Mae Commitment) permitted by the Fannie Mae Commitment and directing the Trustee to effect a special mandatory redemption of a corresponding principal amount of the Bonds. A special mandatory redemption pursuant to paragraph (i), (ii),(iii)or(iv)above shall be effected on the earliest practicable Redemption Date for which timely notice of redemption can be given pursuant to the Indenture following the occurrence of any of the events described in such paragraphs, provided that a special mandatory redemption as described in paragraph (i)(A) above shall be effected only after the Trustee has made the final transfer, if any, pursuant to the Indenture to the Redemption Account from the Mortgage Loan Fund (and, therefore following the final disbursement from the Mortgage Loan Fund) or from the Rehabilitation Fund (and therefore, following the final disbursement from the Rehabilitation Fund),as the case may be. A special mandatory redemption as described in paragrapl (i), (ii), (iii)or(iv) above will be at a redemption price equal to 100% of the principal amount of the Bands to be redeemed plus accrued interest on such Bands to the Redemption Date. Notwithstanding the provisions of the Indenture described above, the Trustee shall not give notice of a special mandatory redemption as described in paragraph (iv) above unless it has received (a)a then current Cash Flow Projection, accompanied by a Verification Report,showing that the scheduled payments to be made under the Mortgage Dote following the proposed prepayment and reamortization of amounts due under the Mortgage Note,together with other Revenues and other moneys held under the Indenture available for such purpose,will be sufficient to pay timely the principal of and interest on the Bonds and the Fees (to the extent included in the Mortgage Note Rate) when the same shall become due and payable and (b)a written Rating Confirmation. Special I# andatmy Redemption From Certain Fannie Mae Pass-Through Certificate Distributions. The Bonds are subject to special mandatory redemption in whole or in part after the Fannie Mae Pass-Through Certificate Delivery Date and prior to their stated maturity at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest to the Redemption Date, but without premium, in each case from and to the extent that the Trustee receives a d=istribution under the Fannie Mae Pass-Through Certificate resulting from: (i) Fannie Mae's determination that the Mortgage Loan is or is to be deemed a Fully Prepaid Mortgage Loan (other than by reason of optional prepayment of the entire unpaid principal balance of the Mortgage Loan prior to final maturity, causing an optional redemption of the Bonds pursuant to the Indenture);or (ii) other moneys received by Fannie Mae on account of the Mortgage Loan (other than by reason of optional prepayment of the entire principal balance of the Mortgage Loan prior to final maturity, causing an optional redemption of the bonds pursuant to the Indenture), 01-177463.02 6 including, without limitation, prepayment as a result of a casualty or condemnation affecting the Project,or a default under the Mortgage Loan; provided, however,that at the direction of Fannie Mae, all or part of the proceeds of any such prepayment of the Mortgage Loan shall be used, in lieu of redeeming Bonds, to acquire a Substitute Fannie Mae Pass-Through Certificate pursuant to the Indenture. Because of the timing of the distribution under the Fannie Mae Pass-Through Certificate, the Redemption Date of any such special mandatory redemption shall be the first day of the month following the month in which falls the Distribution Date on which Fannie Mae will make such distribution. Special Mandatory.Redemption Upon Purchase of Fannie Mae Pass-Through Certificate. In the event that Fannie Mae is in default in its payment obligations under the Fannie Mae Pass-Through Certificate, the Trustee is authorized to accept from Fannie Mae an offer to purchase the Fannie Mae Pass-Through Certificate from the Trustee at a purchase price not less than the Stated Principal Balance (as defined in the Fannie Mae Trust Indenture and specified in writing to the Trustee by Fannie Mae or the Servicer) of the Mortgage Loan plus accrued interest. If such a purchase occurs, the Trustee shall thereafter immediately call all of the Outstanding Bonds for redemption on the first day for which the requisite notice of redemption can be given but in no event more than 10 days after the Trustee receives the purchase price from Fannie Mae, and small apply the proceeds received from Fannie Mae in respect of purchase of the Fannie Mae Pass-Through Certificate, together with Available Moneys held by the Trustee, to the payment of the redemption price of the Bonds. No such offer from Fannie Mae shall be accepted by the Trustee unless the Available Moneys held by the Trustee under the Indenture, together with the amounts to be paid by Fannie Mae in respect of the purchase of the Fannie Mae Pass-Through Certificate, are sufficient to pay in full the principal amount of the Bonds Outstanding and interest accrued and to accrue on the Outstanding Bonds to the Redemption Date. Any redemption of Bonds pursuant to the Indenture shall be at a redemption price equal to 1170% of the principal amount of the Bonds to be redeemed plus accrued and unpaid interest on the Bonds to the Redemption Date, but without premium. Mandatory Sinking Fund Redemptions. The Series D Bonds maturing on ___ __ (the 6f Term Bonds") are subject to mandatory redemption in part, by lot, prior to maturity; from sinking fund installments on each May l and November I of the years and in the aggregate principal amounts set forth in the table below, any such redemption to be at a redemption price equal to 100%of the principal amount of the Term Bonds to be redeemed, plus accrued interest, to the Redemption Date, but without premium. 01-:77463.0.2 7 Redemption Hate Principal Amount Redemption Date Principal Amount *Mawrity If less than all of the _T"errn Bonds shall have been redeemed, other than from sinking fund installments, as provided in the preceding paragraph, the principal amount of Term Bonds to be redeemed in each year from sinking fund installments as provided above shall be decreased by an amount (and the Trustee will redeem as nearly as practicable a corresponding principal amount of_Term Bonds), in proportion, as nearly as practicable,to the decrease in the distributions under the Fannie Mae Pass-Through Certificate in such year, or, if there is no decrease in the distributions under the Fannie Mae Vass-Through Certificate,pro rata among the principal amounts of _ Term Bonds required to be redeemed in each subsequent year pursuant to the Indenture. Mandatory Sinking Fund Redemptions. The Series D Bonds maturing on .. (the Terra Bonds") are subiect to mandatory redemption in part, by lot, prior to maturity, from sinking fund installments on each.May i and November I of the years and in the aggregate principal amounts set forth in the table below, any such redemption to be at a redemption price equal to 102% of the principal amount of the ,Term Bonds to be redeemed, plus accrued interest, to the Redemption Date, but without premium: OI-177463.©2 8 Redemption Date Principal Amount Redemption Date Principal Amount *Maturity If less than all of the Tenn Bonds shall have been redeemed, ether than from sinking fund installments, as provided in the preceding paragraph, the principal amount of Term Bonds to be redeemed in each year from sinking fund installments as provided above shall be decreased by an amount (and the Trustee will redeem as nearly as practicable a corresponding principal amount of Term Bonds), in proportion, as nearly as practicable, to the decrease in the distributions under the Fannie Mae Dass-Through Certificate in such year, or, if there is no decrease in the distributions under the Fannie Mae Pass-Through Certificate, pro rata among the principal amounts of _ 'Perm Bonds required to be redeemed in each subsequent year pursuant to the Indenture. The Series D Bonds maturing on (the " Term Bonds") are subject to mandatory redemption in part, by lot, prior to maturity, on each May I and November I of the years and in the aggregate principal amounts set forte in the table below, any such redemption to be at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed, plus accrued interest, to the Redemption Date, but without premium: 01-177463.02 9 Redemption Date Principal Amount Redemption Date Principal Amount *Maturity If less than all of the _ Term Bonds shall have been redeemed, other than from sinking fund installments, as provided in the preceding paragraph, the principal amount of — Term Bonds to be redeemed in each year from sinking fund installments as provided above shall be decreased by an amount (and the Trustee will redeem as nearly as practicable a corresponding principal amount of= Ten-n Bonds), in proportion, as nearly as practicable, to the decrease in the distributions under the Fannie Mae Pass-Through Certificate in such year, or, if there is no decrease in the distributions ander the Fannie Mae Pass-Through Certificate, pro rata among the principal amounts of _ Term Bonds required to be redeemed in each subsequent year pursuant to the Indenture. The Series D-T Bonds maturing on (the " Term Bonds") are subject to mandatory redemption in part, by lot, prior to maturity, on each. May I and November I of the years and in the aggregate principal amounts set forth in the table below, any such redemption to be at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed, plus accrued interest, to the Redemption Date, but without premium: 01-177463.02 10 Redemption Date Principal Amount Redemption Date Principal Amount *Maturity If less than all of the _ Tenn Bands shall have been redeemed, other than from sinking fund installments, as provided in the preceding paragraph, the principal amount of Term Bands to be redeemed in each year from sinking fund installments as provided above shall be decreased by an amount (and the Trustee will redeem as nearly as practicable a corresponding principal amount of_ Term Bands), in proportion, as nearly as practicable,to the decrease in the distributions under the Fannie Mae Pass-Through Certificate in such year, or, if there is no decrease in the distributions under the Fannie Mae Pass-Through Certificate, pro rata among the principal amounts of _ Term Bonds required to be redeemed in each subsequent year pursuant to the Indenture. .Notice of Redemption. Notice of the call for redemption of any Bonds shall be given by the Trustee in the name and on behalf of the Issuer not less than 30 nor more than 45 days prior to the anticipated Redemption Date to the Registered towner of each Bond to be redeemed at the address of such Registered Owner as shown on the Bond Register, provided that notice of any optional redemption or any special mandatory redemption may be given not less than 15 nor more than 20 days prior to the date fixed for such redemption. Notwithstanding the foregoing, so long as the Book-Entry System is maintained in effect, notice of redemption shall be given to the entity designated in any agreement between the Issuer and DTC relating to the Book-Entry System and otherwise in accordance with the rules and regulations instituted with respect to the Book-Entry System, provided that notice shall not be required to be given more than 01-177463.02 11 20 days prig to the date fixed for such redemption,and the Trustee shall not be required to give any other notice of redemption. Neither failure to give notice to any :Registered Owner of any Bonds or to any depository or information service, nor failure to receive such notice, nor any defect in any notice so mailed or in its content or in the manner in which notice is given, nor the failure to give any such notice of redemption in a timely manner shall affect the validity or sufficiency of any proceedings for the redemption of the Bonds to be redeemed. Selection of Bonds To Be Redeemed. Except in the case of a mandatory sinking fund redemption, if less than all of the Outstanding Bands are to be called for redemption, Bonds to be redeemed shall be selected by the Trustee on a reasonably proportionate basis, in minimum amounts of $5,000, from among all the them existing maturities of the Bonds Outstanding, such reasonably proportionate basis to be determined and effectuated as nearly as practicable by multiplying the total amount of money available to redeem Bonds by the ratio which the principal amount of Bonds Outstanding in each maturity bears to the principal amount of all of the Bonds Outstanding,and within a maturity by lot. In the event that any Bonds of the same maturity are to be redeemed in part, the Trustee shall assign to each Bond then Outstanding a distinctive number for each $5,000 of the principal amount of such Bond and from the numbers so assigned to such Bond, the Trustee shall randomly select as many numbers as, at $5,000 for each number, shall equal the principal amount of such Bonds to be redeemed. The Bonds within a maturity that are to be redeemed shall be the Bonds to which are assigned the numbers selected by the Trustee, but only so much of the principal amount of each such Bond of a denomination of more than $5,000 shall be redeemed as shall equal $5,000 for each number assigned to it and so selected. Bonds may be redeemed only in Authorized Denominations. Notwithstanding the foregoing, so long as the Bands remain in the Book-Entry System, the DTC Participants interests in the Bonds to be redeemed shall be selected by ITC, or any successor Securities Depository, and the LTC Participant through such selection process as is applicable at such time. Bonds which have theretofore been selected for redemption shall not be deemed Outstanding. Effect of Redemption. If notice of redemption has been given as provided above and if Available Moneys in an amount sufficient for the redemption of the Bonds to be redeemed on such Redemption Date, together with interest thereon accrued and unpaid to the Redemption Date, shall be held by the Trustee. the Bonds called for redemption s:all become due and payable on such Redemption Date, and, from and after such Redemption Date, interest on such Bonds shall cease to accrue, and such Bonds shall no longer be considered as Outstanding. Purchase of Bonds In Lieu of Redemption The Issuer may purchase or cause to be purchased any Bonds in lieu of redemption of such Bonds (in which event any Bonds so purchased shall be cancelled as provided in the Indenture)or for any other purpose pursuant to written instructions given by the Issuer to the Trustee. The Issuer or the Trustee shall pay the purchase price of such Bonds together with accrued interest thereon from such funds as may be available therefor pursuant to this Indenture,or as otherwise may be made available by the Issuer. If at any time moneys are held in any Fund or Account to be used to redeem Bonds, in lieu of such redemption the Borrower or the Issuer at the request of the Borrower may in writing direct the Trustee,at the expense of the Borrower,to use part or all of such moneys to purchase Bonds which would otherwise be subject to redemption from such moneys. The purchase price of such Bonds (excluding accrued interest, but including any brokerage and other charges) shall not exceed the applicable 0 1-177463.02 12 redemption price of the Bands which would be redeemed but for the operation of the purchase in lieu of redemption provision of the Indenture (accrued interest to be paid from the sante Fund or Account from which accrued interest would be paid upon the redemption of such Bonds). Any such purchase must be completed prior to the time notice would otherwise be required to be given to redeem the Bonds and may not occur, without the consent of the Trustee, after a Record Date. All Bonds so purchased shall be cancelled by the Trustee and the face amount of the Bonds so purchased shall be applied as a credit against the Issuer's obligation to redeem such Bonds from such moneys. Savings resulting from the purchase of Bonds at less than their respective redemption prices shall be used to purchase or redeem additional Bonds to the extent permitted by the provisions of the Indenture. The Issuer may from time to time in its discretion direct the Trustee to invite the submission of tenders for sale of Bonds to the Issuer or a person designated by the Issuer, either by public offer or private invitation, at such prices or bidding procedures as may be determined by the Issuer. Such tender invitations may be in lieu of redemption of Bonds or for any other purpose. BOOK-EN'T'RY ONLY SYSTEM The Bonds will be available in book-entry form only in the principal amount of$5,400 and any integral multiples thereof. Purchasers of beneficial ownership interests in the Bonds will not receive bonds representing their interests in the Bonds purchased. The Underwriter will confirm original issuance purchases with statements containing certain terms of the Bands purchased. The following information concerning DTC and FTC's book.-entry system has been obtained from sources the Issuer and the Underwriter believe to be reliable; however, the Issuer and the Underwriter take no responsibility for the accuracy or completeness thereof. There can be no assurance that DTC will abide by its procedures or that such procedures will not be changed from time to time. The ownership of one fully registered Bond in the principal amount of each maturity of Bonds will be registered in the name of Cede& Co., as nominee for DTC, and will be deposited with DTC. DTC is a !united-purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a"clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC was created to hold securities of its participants (the "DTC Participants") and to facilitate the clearance and settlement of securities transactions among DTC Participants in such securities through electronic book-entry changes in accounts of DTC Participants, thereby eliminating the reed of physical movement of securities certificates. DTC Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations, some of whom (and/or their representatives)own DTC. Access to the DTC system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a DTC Participant, either directly or indirectly (the "Indirect Participants"). Purchases of the Bands under the DTC system must be trade through DTC Participants, which will receive a credit for the Bonds on DTC's records. The DTC Participants will receive a credit balance in the records of DTC. The ownership interest of each actual purchaser of each Bond (the Beneficial owner") will be recorded through the records of DTC, Beneficial Owners are expected to receive a written confirmation of their purchase providing details of the Bonds acquired from the DTC Participant or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds will be accomplished by book entries made by DTC and, in turn, by the DTC participants who act on behalf of the Beneficial Owners. Such DTC Participants and the persons for 01-1 77463.02 '13 whom they acquire interests in the Bonds as nominees will not receive certificated Bonds, but each such DTC Participant will receive a credit balance in the records of DTC in the amount of such DTC Participant's interest in the Bonds, which will be confirmed in accordance with DTC's standard procedures. Each person for whore a DTC Participant acquires an interest in the Bonds, as nominee, may desire to make arrangements with such DTC Participant to receive a credit balance in the records of such DTC Participant, and may desire to make arrangements with such DTC Participant to have notices of redemption or of other communications of the Issuer to DTC which may affect such persons forwarded in writing by such ITC Participant and to have notifications made of all payments of interest and principal with respect to such person's beneficial interest. NEITHER THE ISSUER NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO DTC PARTICIPANTS, OR THE PERSON'S FOR WHOM THEY ACT AS NOMINEES WITH RESPECT TO THE BONDS IN RESPECT OF: THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT; THE PAYMENT BY DTC OR ANY DTC PARTICIPANT OF ANY AMOUNT IN RESPECT OF THE PRINCIPAL, INTEREST OR REDEMPTION PRICE OF THE BONDS, ANY NOTICE WHICH IS PERMITTED OR REQUIRED TO BE GIVEN TO BONDHOLDERS UNDER THE INDENTURE; THE SELECTION BY FITC OR ANY DTC PARTICIPANT OF ANY PERSON TO RECEIVE PAYMENT IN THE EVENT OF A PARTIAL REDEMPTION OF THE BONDS; OR ANY OTHER ACTION TAKEN BY DTC AS BONDHOLDER. SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE BONDS, AS NOMINEE OF LTC, REFERENCES HEREIN TO THE OWNERS OR HOLDERS OF THE BONDS (OTHER THAN UNDER THE CAPTION "TAX EXEMPTION") SHALL MI EAN CELE & CO, ANIS SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE BONDS. LTC may determine to discontinue providing its service with respect to the Bonds at any time by giving notice to the Issuer and discharging its responsibilities with respect thereto under applicable law. Under such circumstances, if no successor to DTC is appointed to act as securities depository, Band certificates are required to be delivered as described in the Indenture. The Beneficial Owner, upon registration of Bonds in the Beneficial Owner's name, will become the registered owner of the Bonds. The Issuer may determine that continuation of the system of book-entry transfers through DTC (or a successor securities depository) is not in the best interest of the Beneficial Owners. In such event, the Issuer will cause the Trustee to deliver Bond certificates as described in the Indenture. The Issuer and the Trustee will recognize DTC or its nominee as the sole and exclusive owner of the Bonds registered in its name for all purposes, including notices and voting, under the Indenture, registering the transfer of the Bands or other action to be taken by registered owners and for all other purposes whatsoever and shall not be affected by any notice to the contrary. Conveyances of notices and other communications by LTC to DTC Participants, by DTC Participants to Indirect Participants and by DTC Participants and Indirect Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is now the case with municipal securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such DTC Participant or Indirect Participant, and not of LTC, the Trustee or the Issuer, subject to any statutory and regulatory requirement as may be in effect from time to time. Payments of principal of, premium, if any, and interest on the Bonds will be made to LTC or its nominee, Cede & Co., as registered owner of the Bonds. DTC's current practice is to immediately credit the accounts of the DTC Participants in accordance with their respective holdings shown on the records of DTC. Payments by LTC Participants and Indirect Participants to Beneficial Owners will be governed by 0 1-17746102 14 standing instructions and customary practices, as is now the case with municipal securities held for the accounts of customers in bearer form or registered in"street name,"and will be the responsibility of such DTC Participant or Indirect Participant,and not of DTC,the Trustee or the Issuer,subject to any statutory and regulatory requirements as may be in effect from time to time. Payment of principal, premium, if any, and interest to DTC is the responsibility of the Trustee. Disbursement of such payments to the DTC Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of the DTC Participants and.the Indirect Participants. DTC Year 2000 Efforts DTC management is aware that some computer applications, systems, and the life for processing data("Systems")that are dependent upon calendar dates, including dates before, on, and after January 1, 2000, may encounter"Year 2000 problems." DTC has informed its participants and other members of the financial community (the "Industry") that it has developed and is implementing a program so that its Systems, as the same relate to the timely payment of distributions (including principal and income payments)to securityholders,book-entry deliveries and settlement of trades with DTC ("DTC Services"), continue to function appropriately. This program includes a technical assessment and a remediation plan, each of which is complete. Additionally, DTC's plan includes a testing phase, which is expected to be completed within appropriate time frames. However, DTC's ability to perform properly its services is also dependent -upon other parties, including but not `=limited to issuers and their agents, as well as third-party vendors from whom ITC licenses software and hardware, and third-party vendors on whom DTC relies for information or the provision of services, including telecommunication and electrical utility service providers, among others. DTC has informed the Industry that it is contacting (and will continue to contact) third-party vendors from whom DTC acquires services to: (i) impress upon them the importance of such services being Year 2000 compliant and (ii)determine the extent of their efforts for Year 2000 remediation (and, as appropriate, testing)of their services. In addition, DTC is in the process of developing such contingency plans as it deems appropriate. According to DTC, the foregoing information with respect to DTC has been provided to the Industry for informational purposes only and is not intended to serve as a representation, warranty or contract modification of any kind. SECURITY FOR THE BONDS Pledge of Trust Estate To secure the payment of all amounts owing under and with respect to the Bonds and the payment and performance by the Issuer of its obligations under the Indenture and the payment and performance by the Borrower of its obligations with respect to the Bonds, the Financing Agreement, the Regulatory Agreement and the Mortgage Loan Documents, and to secure all obligations owed to Fannie Mae under the Reimbursement .Agreement, subject to the provisions of the Assignment, the Issuer will, pursuant to the Indenture, without warranty or recourse, pledge,grant, assign and convey unto the Trustee (in trust for the benefit of the Owners of the Bonds and Fannie Mae, as their interests may appear) all of its right,title and interest to and in the Trust Estate,consisting of the following: (i) all right, title and interest of the Issuer in and to the Financing Agreement, the Regulatory Agreement, the Mortgage Loan, the Mortgage Note, the Mortgage and the other Mortgage Loan Documents, and all amendments, modifications, supplements, renewals and restatements of the foregoing, including, but not limited to, all rights to receive payments on the 01-177453.02 15 Mortgage dote and under the other Mortgage Loan Documents, and all proceeds of insurance or condemnation awards; provided that the foregoing pledge and assignment shall be subject to the provisions of the Assignment and the Collateral Agreement, including the right of Fannie Mae, as provided in the Collateral Agreement,to direct the Trustee to assign the Mortgage Loan to Fannie Mae, including within such assignment the Mortgage Note and the Mortgage; and provided further that there shall be excluded from the foregoing pledge and assignment the Reserved Rights which shall be retained by the Issuer for its sole and exclusive benefit; (ii) all right, title and interest of the Issuer in and to the Net Bond Proceeds and the accrued-interest derived From the sale of the Bonds and all Funds and Accounts established under the Indenture (including, without limitation, moneys, documents, securities, investments, instruments and general intangibles on deposit, or otherwise held by the Trustee under the Indenture), including Investment Income; provided that there shall be excluded from the foregoing pledge and assignment all moneys(including Investment Income)on deposit from time to time in the Fees Account, the Rebate Fund and the Costs of Issuance Fuad (including within such exclusion Investment Income retained in the Costs of issuance Fund); (iii) all Revenues; (iv) all funds, moneys and securities and any and all other rights and interests in property, whether tangible or intangible, from time to time hereafter by delivery or by writing of any kind conveyed, mortgaged, pledged, assigned or transferred as and for additional security under this Indenture for the Bonds by the Issuer, or by anyone on its behalf, or with its written consent, to the Trustee, which is authorized to receive any and all such property at any and all times,and to hold and apply the same subject to the terms of the Indenture;and (v) all of the proceeds of the foregoing, including, without limitation, Permitted Investments and Investment Income. The foregoing is collectively referred to as the"Trust Estate,"and in addition: (A) until the delivery to the Trustee of the Fannie Mae Pass-Through Certificate as provided in the Indenture, the Trust Estate shall, for all purposes of the Indenture, be deemed to ir:clude the Collateral Agreement and the rights of the Trustee thereunder, including without limitation all payments made under the Collateral Agreement in accordance with its terms: and (B) upon delivery of the Fannie Mae Pass-Through Certificate to the Trustee as provided in the Indenture, the Trust Estate shall, for all purposes of the Indenture, be deemed to include the Fannie Mae Pass-Through Certificate and the rights of the Trustee thereunder, including without limitation all distributions made under the Fannie Mae .Pass-Through Certificate in accordance with its terms. The Trustee acknowledges and agrees in the Indenture that: (i)as set forth in the Assignment,the Issuer has further assigned certain rights and interests under and with respect to the Mortgage Loan and the Mortgage Loan Documents exclusively to Fannie Mae (it being understood that under the Collateral Agreement such rights are subject to reassignment to the Trustee in certain events); and (II) prior to the Fannie Mae Pass-Through Certificate Delivery Date Fannie Mae may, under the Collateral Agreement, direct the Trustee to: 01-177463.02 16 (a) assign its interest in the Mortgage Loan, including the Mortgage '*cote, the Mortgage and, subject to the provisions of the Assignment and the Collateral Agreement, the other Mortgage Loan Documents, to Fannie Mae at any time, subject to reassignment to the Trustee,as provided in the Collateral Agreement;and (b) assign its interest in the Mortgage Loan, including the 'Mortgage Dote, the Mortgage and the other Mortgage Loan Documents and the Financing Agreement(other than the Reserved Rights) and all amendments, modifications, supplements and restatements of the Financing Agreement, to Fannie Mae as provided in the Collateral Agreement upon payment in full of all amounts due under the Financing Agreement and the Mortgage Loan, including, but not limited to,the fees and expenses of the Issuer and the Trustee, provided that, upon assignment of the Financing Agreement as described in this clause (b), the Issuer and the Trustee shall have no further liability or obligations under the Financing Agreement. The Trust Estate will be held by the Trustee in accordance with the terms of the Indenture for the benefit of'. (I)the Bondholders in order to secure payment of the principal of, premium, if any, and interest on the Bands in accordance with the terms and provisions of the Indenture and the Bonds, and (2) Fannie Mae to secure amounts payable under the Financing Agreement,the Credit Facility Agreement and the Mortgage Loan, provided that the Fannie Mae Pass-Through Certificate and all distributions made to the Trustee under the Fannie Mae Pass-Through Certificate and all payments made under the Collateral Agreement will be held by the "Trustee for the sole and exclusive benefit of the Bondholders, and not for the benefit of Fannie Mae,except as otherwise provided in the Indenture. Limited Liability of the Issuer THE BONDS AND THE SERIES OF WHICH THEY ARE A PART ARE SPECIAL OBLIGATIONS OF THE ISSUER. THE BONDS ARE NOT A DEBT OF AND DO NOT PLEDGE THE FAITH, CREDIT OR TAXING POWER OF THE STATE OF CALIFORNIA, THE ISSUER OR ANY POLITICAL SUBDIVISION, BUT ARE PAYABLE SOLELY FROM THE REVENUES AND THE ASSE'T'S PROVIDED) FOR.IN THE INDENTURE AND THE ACT. Security for and Payment of Bands Prior to the Fannie Mae Pass-Through Certificate Delivery Date, the principal of and interest on the Bonds will be secured by the Mortgage Loan and by Fannie Mae's credit enhancement of the Mortgage loan pursuant to the Collateral Agreement,and will be further secured by and payable from the undisbursed proceeds of the Bonds and the Revenues, including payments under the Mortgage Note, and payments under the Collateral Agreement, as well as by other moneys received by the Trustee for payment of the principal of and interest on the Bonds, certain funds held by the Trustee from time to time under the Indenture and certain Investment Income. Can and after the delivery of the Fannie Mae Pass-Through Certificate,the principal and interest on the Bonds will be secured by, among other things, the Fannie Viae Pass-Through Certificate, and will be further secured by and payable from the Revenues, including distributions received by the Trustee from Fannie Mae under the Fannie Mae Pass-Through Certificate and other moneys received by the Trustee for payment of the principal of and interest on the Bonds, as well as by certain funds held by the Trustee from time to time under the Indenture and from certain Investment Income. Collateral Agreement Can the Closing Date, the Trustee will enter into a Collateral Agreement with Fannie Mae, and thereafter the Trustee is required to abide by and take all actions required of the Trustee under the 01-1177463.02 17 Collateral Agreement. In addition to the other security provided under the Indenture,the obligation of the Borrower to make Rewired Mortgage Payments under the Mortgage Dote will, so long as the Collateral Agreement is in effect, be secured by a pledge by Fannie Mae to the Trustee of interests in certain Pledged Collateral pursuant to the terms of the Collateral Agreement,which may consist of(1)an interest in residential mortgages insured by the Federal Housing Administration of the United States Department of Housing and urban Development under the National mousing Act of 1934, as amended, or otherwise insured or guaranteed by an agency of the United States of America, (2)mortgage-backed securities guaranteed as to payment when due by Fannie Mae,the Federal Home Loan Mortgage Corporation or the Government National Mortgage Association, (3)any general obligation of Fannie Mae and/or (4)participation interests in any such securities or obligations described in clauses(2) and (3). The pledge made by Fannie Mae in the Collateral Agreement is in the nature of a hypothecation in which pledged collateral is not delivered to the pledgee. On the basis of the pledge and security interest with respect to the Pledged Collateral, Fannie Mae is obligated, upon the Borrower's default in making any Required Mortgage .Payment under the Mortgage Note when due, and upon receipt of notice from the Trustee of such default, to pay to the Trustee, from proceeds of the Pledged Collateral,or other funds of Fannie Mae, an amount equal to the Required Mortgage Payment that was to have been made by the Borrower. In addition, under certain terms and conditions set forth in the Collateral Agreement, proceeds derived from redeeming all or a portion of the Pledged Collateral from the Trustee, or other funds of Fannie Mae, will be available to the Trustee under the Collateral Agreement in amounts which, when aggregated with other funds held by the Trustee for such purpose, will be sufficient to provide for the timely payment of the principal of and interest on a corresponding portion of the Bonds. Under the Indenture,the Trustee has covenanted that it will not, without the prior written consent of the Registered Owners of all of the Bonds then Outstanding, transfer, assign or release the Collateral Agreement until the principal of and interest on the Bonds shall have been paid or duly provided for in accordance with the terms of the Indenture, except(a) to a successor Trustee or (b) to Fannie Mae upon expiration or other termination of the Collateral Agreement in accordance with its terms, including termination on its stated expiration date and upon payment under the Collateral Agreement of the full amount payable under the Collateral Agreement. If at any time during the tern: of the Collateral Agreement, a successor Trustee is appointed and qualified under the Indenture and the Collateral Agreement is not assignable or transferable to the successor Trustee, the resigning Trustee is to request that Fannie Mae enter into a new Collateral Agreement, substantially identical to the then existing Collateral Agreement,with the successor Trustee for the benefit of the holders of the Bonds. annie Mae's obligation under the Collateral Agreement with respect to the Mortgage Loan is limited to (i) snaking payments to the Trustee to the extent that the Borrower fails to make a Required Mortgage Payment under the Mortgage Note, as described in the Collateral Agreement, including payment of the unpaid principal balance of the Mortgage Note and all accrued and unpaid interest due on the Mortgage Note on the maturity date of the Mortgage Note, (ii) making payments to the Trustee to redeem Pledged Collateral upon acceleration of the Bonds or upon certain special mandatory redemptions of Bonds and (iii) making payments following certain proceedings under the Bankruptcy Code resulting in recoveries of Mortgage Note payments previously made. Fannie Mae has no obligation under the Collateral Agreement to rake any payment with respect to any other payments which may be due or payable under the Bonds,the Mortgage Note,the Mortgage or any other Mortgage Doan Documents. The T rustee is required to give notices to Fannie Mae as required by, and pursuant to and in accordance with,the terms and conditions of the Collateral Agreement, in order to receive payments from Fannie Mae under, and as and to the extent provided in and permitted by, such Collateral Agreement,and is to cause moneys received from Fannie Mae to be applied for the purposes specified in such Collateral Agreement and the Indenture. All moneys derived from the Collateral Agreement are to be deposited into the Credit Facility Account of the Revenue Fund pending their application by the Trustee. In the event 01-177463.02 18 that the Trustee receives any payment from Fannie Mae under or pursuant to the Collateral Agreement, and thereafter amounts are received by the Trustee from the Borrower or other source, which later received amounts are in payment of amounts satisfied by the payment under or pursuant to the Collateral Agreement, then such later received amounts are to be promptly reimbursed to Fannie Mae to the extent of the amount so paid by Fannie Mae. Fannie Mae's obligation to make payments under the Collateral Agreement is absolute, unconditional and irrevocable and is not dependent upon the principal amount or the fair market value of the Pledged Collateral or whether the cash flow on the Pledged Collateral (whether or not Pledged Collateral is identified to the Trustee pursuant to the Collateral Agreement) is sufficient to make the payments required by the Collateral Agreement, Under the Collateral Agreement, Fannie Mae has the right to direct the Trustee to assign the Mortgage Loan to Fannie Mae. If Fannie Mae does not redeem the Pledged Collateral in connection with such assignment, it must file with the Trustee a certification reaffirming Fannie Mae's obligations tinder the Collateral Agreement. Fannie Mae is obligated to assign the Mortgage Rights with respect to the Mortgage Loan to the Trustee upon any payment default by Fannie Mae under the Collateral Agreement. Upon receipt of the Fannie Mae Pass-Through Certificate, the Trustee is to relinquish all of its rights and interests in the Collateral Agreement effective as of the expiration or earlier termination of the Collateral Agreement and upon such expiration or termination, shall return the Collateral Agreement to Fannie Mae. Each purchaser of the Bands should be aware that the Collateral Agreement does not guarantee payment of principal of, premium, if any, or Interest on the Bonds. Neither does the Collateral Agreement create a perfected security interest in specific Pledged Collateral. The Collateral Agreement only provides that payments corresponding to the Required Mortgage Payments due under the Mortgage Note will be made by Fannie Mae if not made by the Borrower or that Fannie Mae will redeem the Trustee's interest in the Pledged Collateral in certain events. A summary of certain provisions of the Collateral Agreement is contained in "APPENDIX A--- SUMMARY OF PRINCIPAL LEGAL DOCUMENTS---The Collateral Agreement." Information regarding.Fannie Mae is contained herein under the caption"FANNIE VIAE." Fannie:Mae Pass-Through Certificate Delivery Upon satisfaction of the conditions set forth in the Fannie Mae Commitment for Fannie Mae's acquisition of the Mortgage Loan in exchange for the Fannie Mae Pass-Through Certificate,the Servicer is required, following consultation with Fannie Mae to coordinate the timing of the issuance of the Fannie Mae Pass Through Certificate and to establish the anticipated Fannie Mae Pass-Through Certificate Delivery Date and, correspondingly, the anticipated Issue Date of the Fannie Mae Pass-Through Certificate,to notify the Trustee in writing(the "Fannie Mae Pass-Through Certificate Delivery Notice") of the anticipated Fannie Mae Pass-Through Certificate Delivery Date and the anticipated Issue Date of the Fannie Mae Pass-Through Certificate. The Trustee is also required, not later than three (3) Business Days following issuance of the Fannie Mae Pass-Through Certificate Delivery Notice, to give written notice by first class mail to the Bondholders of the pending issuance of the Fannie Mae Pass-Through Certificate, but issuance of the Fannie Mae Pass-Through Certificate will not require, and will be effective without,the consent of the bondholders. The Trustee's notice to the Bondholders is to state the anticipated Fannie Mae Pass-Through Certificate Delivery date and the anticipated Issue Bate. The Trustee and the Issuer acknowledge and agree that in consideration of the execution and delivery to the Servicer of the Trustee Assignment and the concurrent execution and delivery to Fannie Mae of the 011-17746.3.02 19 Servicer Assignment in exchange for the Fannie Mae Pass-Through Certificate, the will acquire the Fannie Mae Pass-Through Certificate or the beneficial interest in the Fannie Mae Pass Through Certificate as provided in and subject to the terms and conditions set forth in the Indenture. On the Fannie ``✓tae Pass-Through Certificate Delivery Date: (i) the Trustee is to (a) assign all of its right, title and interest in and to the Mortgage Loan, including the Mortgage Note and the Mortgage, to the Servicer, effective as of the issue Date, without recourse, pursuant to the Trustee Assignment in the form attached to the Indenture as Exhibit B or in such other form as is acceptable to the Servicer and Fannie Mae, in either case, in appropriate fora for recordation,and-(b)endorse the Mortgage Note to the Servicer,without recourse; (ii) the Servicer is to (a) assign all of its right, title and interest in and to the Mortgage Loan acquired pursuant to the Trustee Assignment, including the Mortgage Note and the Mortgage, to Fannie Mae, effective as of the Issue Date, without recourse, pursuant to the Servicer Assignment in the form attached to the indenture as Exhibit C or in such other form as is acceptable to the Servicer and Fannie Mae, in either case, in appropriate form for recordation, and (b) endorse the Mortgage dote to Fannie Mae; (iii) Fannie Mae is to issue the Fannie Mae Pass-Through Certificate as provided in the Indenture and an Issue Supplement to the Fannie Mae Trust indenture which has attached to it a Mortgage Loan Schedule specifying the Mortgage Loan (and no other mortgage loan) as the Mortgage Loan constituting the Pool (as defined in the Fannie Mae Trust indenture), provided that the obligation of the Trustee to accept the Fannie Mae Pass-Through Certificate is subject to satisfaction of the conditions set forth in the Indenture; (iv) at the request of the Servicer, the Legal Department of Fannie Mae is to issue and deliver to the Trustee an Opinion of Counsel to the effect that the Fannie Mae Pass-Through Certificate constitutes a valid and binding obligation of Fannie Mae, entitled to the benefits of the Fannie Mae Trust Indenture, subject to any applicable bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights from time to time in effect and to general equity principles; (v) the Trustee is to relinquish all of its rights and interests in the Collateral Agreement effective as of the expiration or earlier termination of the Collateral Agreement in accordance with its teras;and (vi) all other agreements, documents, instruments, certificates and opinions as the Issuer, the Trustee, the Servicer or Fannie Mae shall require, in their respective discretion, to effect Fannie 'viae Pass-Through Certificate Delivery shall be delivered. The requirements for the Trustee to provide notice of the pending issuance of the Fannie Mae Pass-Through Certificate to the Bondholders are the following: (i) the Servicer shall have issued the Fannie Mae Pass-Through Certificate Notice to the Trustee prior to the Termination Date, (ii) the Servicer shall have confirmed to the Trustee that the Servicer has ordered the Fannie Mae Pass-Through Certificate (a) in a principal amount equal to the Issue Date Principal Balance and (b)with an interest rate equal to the Fannie Mae Pass-Through Certificate Rate; 01-177463.02 20 (iii) the Trustee shall have received written confirmation from the Servicer that the Servicer has received confirmation from Fannie Mae that Fannie Mae intends to issue the Fannie Mae Pass-Through Certificate, (iv) the Trustee shall have received confirmation from Fannie Mae that Fannie Mae will, on the Fannie Mae Pass-Through Certificate Delivery Date,deliver to the Trustee an Issue Supplement to the Fannie Mae Trust Indenture which has attached to it a Mortgage Loan Schedule specifying the Mortgage Loan (and no other mortgage loan)as the Mortgage Loan constituting the Pool (as defined in the Fannie Mae Trust Indenture), (v) the Servicer shall have confirmed to the Trustee that the Servicer has received confirmation from Fannie Mae that the Fannie Mae Legal Department will issue to the Trustee on the Fannie Mae Pass-Through Certificate Delivery Date, an Opinion of Counsel to the effect that the Fannie Mae Pass-Through Certificate constitutes a valid and binding obligation of Fannie Mae, entitled to the benefits of the Fannie Mae Trust Indenture, subject to any applicable bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors'rights from time to time in effect and to general equity principles; (vi) the Trustee, the Servicer, the Issuer, the Borrower, Fannie Mae and the Rating Agency shall have received either (a) a written confirmation of the original Cash Flow Projection from a Verification Agent or (b) a then current Cash Flow Projection, in the latter instance accompanied by a Verification Report, showing that the scheduled payments to be made under the Mortgage Loan and the corresponding distributions to be made under the Fannie Mae Pass-Through Certificate together with other Revenues, will be sufficient to timely pay the principal of and interest on the Bonds and the Fees when the same shall become due and payable; (vii) the Trustee shall have received from Bond Counsel the form of, and confirmation from Bond Counsel that, subject to satisfaction of the Fannie Mae Pass-Through Certificate Delivery Requirements, Bond Counsel will issue to the Trustee, Fannie and Mae and the Issuer on the Fannie Mae Pass-Through Certificate Delivery Date, a then current Opinion of Bond Counsel to the effect that,absent a change in law or material fact bearing on the matters covered in the form of Opinion of Bond Counsel, the substitution of the Fannie Mae Pass-Through Certificate for the Collateral Agreement is permitted by the Indenture and will not affect the excludability from gross income, for federal income tax purposes, of the interest payable on the Series D Bonds, (viii) the Trustee shall have determined or received confirmation that all other agreements, documents, instruments, certificates and opinions as the Issuer, the Trustee or Fannie shall require, in their respective discretion, to effect Fannie Mae Pass-Through Certificate Delivery have been prepared, agreed upon and accepted as to form and content by the intended recipients of such agreements, documents, instruments,certificate and opinions; (ix) the Trustee shall have received written confirmation from the Rating Agency that the Bonds will be assigned a rating, or will maintain a rating, not less than the rating in effect prior to the Fannie Mae Pass-Through Certificate Delivery Date; (x) the Borrower shall have deposited with the Trustee moneys sufficient to pay all fees, costs and expenses (including attorneys' fees and expenses) necessary to effectuate the terms and conditions of this provision, which moneys shall be held by the Trustee, pending disbursement, in a ,separate escrow account;and 01-177463.02 2 1 (xi) any special mandatory redemption from unexpended net proceeds and/or any special mandatory redemption,in part,upon the Trustee's receipt of written notice from the Servicer(with a copy to Fannie Mae) that the Mortgage Loan is subject to mandatory prepayment shallhave been made or Available Moneys shall be on deposit with the Trustee and separately identified in the Redemption Account in an amount sufficient to effect any such redemption. Fannie Mace Pass-Through Certificate Assignment of Mortgage Loan and Issuance of Fannie Mae Pass-Through Certificate. The Trustee acknowledges and agrees,in the Indenture,that the Trustee,acting for and on behalf of the Issuer, will, on the Fannie Mae Pass-Through Certificate Delivery Date (to be established fallowing the first to occur of final disbursement of the proceeds of the Bonds from the Mortgage Loan Fund or the Termination Date), assign all of its right, title and interest in and to the Mortgage Loan to the Servicer who, in turn, will concurrently assign all such right, title and interest in and to the Mortgage Loan to Fannie Mae in exchange for the Fannie Mae Pass-Through Certificate as provided in and subject to the terms and conditions set forth in the Indenture. The Fannie Mae Pass-Through Certificate will be issued on the Fannie Mae Pass-Through Certificate Delivery Date in accordance with the Fannie Mae Trust Indenture, electronically, in "book-entry" farm. The obligation of the Trustee to adept delivery of the Fannie Mae Pass-Through Certificate will be subject to the fallowing (all of which must be provided at the sole cost and expense of the Borrower). (i) the Trustee's receipt of either (a) a written confirmation of the original Cash Flow Projection or(b)a then current Cash Flow Projection, in the latter instance accompanied by a Verification Report, showing that the scheduled payments to be made under the Mortgage Loan and the corresponding distributions to be made under the Fannie Mae bass-Through Certificate together with other Revenues and other moneys held under the Indenture and available to be used for such purpose will be sufficient to timely pay the principal of and interest on the Bonds and the Fees (to the extent included in the Mortgage Note Rate) when the same shall become due and payable; (ii) the Trustee's confirmation, based on information furnished to it by Fannie Mae or the Servicer (a) that the Fannie Mae Pass-Through Certificate has an Issue Date Principal Balance equal to the then unpaid principal balance of the Mortgage Loan, which written confirmation may be an Issue Supplement and (b) of the Fannie Mae Pass-Through Certificate Rate; (iii) the Trustee's confirmation, based on information furnished to it by Fannie Mae or the Servicer, that the last scheduled distribution under the Fannie Mae Pass-Through Certificate will be made not later than in the month preceding the final Maturity Date of the Bonds; (iv) the Trustee's receipt of an Issue Supplement to the Fannie Mae Trust Indenture which has attached to it a Mortgage Loan Schedule specifying the Mortgage Loan (and no other mortgage loans)as the Mortgage Loan constituting the Pool (as defined in the Fannie Mae Trust Indenture);and (v) the Trustee's receipt of confirmation from the Servicer that the Fannie Mae Legal Department will issue to the Trustee on the Fannie Mae Pass-Through Certificate Delivery Date, an Opinion of Counsel to the effect that the Fannie Mae Pass-Through Certificate constitutes a valid and binding obligation of Fannie Mae, entitled to the benefits of the Fannie Mae Trust Indenture, subject to any applicable bankruptcy, insolvency, reorganization and other laws of o ��{ general applicability relating to or affecting creditors' rights from time to time in effect and to general equity principles. The Fannie Mae Pass-Through Certificate will be issued (i) pursuant to the Trust Indenture for Guaranteed Mortgage Pass-Through Certificates evidencing undivided beneficial interests in Pools of Fixed Rate Residential Mortgage Loan (the "Fannie Mae Trust Indenture"), dated November 1, 1981, as supplemented and amended, between Fannie Mae in its corporate capacity and in its capacity as trustee, and an Issue Supplement(as defined below) identifying the Mortgage Loan, establishing the composition of the mortgage pool and assigning the Mortgage Loan to the pool, to be held in trust, and (ii) in accordance with the applicable provisions of certain Fannie Mae Documents. Upon the issuance of the Fannie Mae Pass-Through Certificate, Fannie Mae in its corporate capacity will assign ail of its rights in and to the corresponding Mortgage \Note and Mortgage to Fannie Mae as trustee. The Trustee, as registered or beneficial owner of the Fannie Mae Pass-Through Certificate,will hold the entire undivided beneficial interest in the Mortgage Loan. From and after the Fannie Mae Pass-Through Certificate Delivery Date,the Trustee will hold the Fannie Mae Pass-Through Certificate (or evidence of the Trustee's interest in the Fannie Mae bass-Through Certificate) for the benefit of the Bondholders. Upon issuance of the .Fannie Mae Pass-Through Certificate, the Trustee will receive distributions from Fannie Mae under the Fannie Mae Pass-Through Certificate in accordance with the terms of the Fannie Mae Pass-Through Certificate and will deposit,hold and invest such amounts in accordance with the Indenture. Following its acquisition of the Fannie Mae Pass-Through Certificate, the Trustee will not, without the prior written consent of Fannie Mae and of the owners of all of the Bonds then Outstanding, sell, exchange, transfer, assign or otherwise dispose of the Fannie Mae Pass-Through Certificate other than to Fannie :'viae in exchange for(a) a Substitute Fannie Mae Pass-Through Certificate pursuant to the Indenture or(b) payment to the Trustee of Available Moneys in an amount sufficient to pay or defease, in accordance with the Indenture,the principal of and interest due and owing on the Bonds, provided that the Fannie Mae Pass-Through Certificate may be assigned to a successor Trustee under the Indenture. Upon receipt of written notice from Fannie Mae, the Trustee will exchange the Fannie Mae Pass-Through Certificate with Fannie Mae for a substitute Fannie Mae Pass-Through Certificate (in any such event,the "Substitute Fannie Mae Pass-Through Certificate")backed by the Mortgage Loan or by a different mortgage loan on the Project which different mortgage loan may be executed by a person other than the Borrower (the "New Borrower"). The terms of the Substitute Fannie Mae Pass-Through Certificate, including,without limitation,the Fannie Mae Pass-Through Certificate Rate,terra to maturity, payment schedule,principal amount and prepayment terms may be the same or different from those of the Fannie Mae Pass-Through Certificate in effect immediately prior to the exchange. The obligation of the Trustee to accept delivery of a Substitute Fannie Mae Pass-Through Certificate will be subject to the following (all of which must be provided, at the sole cost and expense of the Borrower or the New Borrower, as the case may be): (i) the Trustee's receipt of either: (a) a written confirmation of the existing Cash Flow Projection or (b) a then current Cash Flaw Projection, in each instance accompanied by a Verification Report, showing that the scheduled payments to be made under the Mortgage Loan and the corresponding distributions to be made ander the Substitute Fannie Mae Pass-Through Certificate, together with other Revenues and other moneys held under the Indenture that are available for such purpose, will be sufficient to timely pay the fees and the principal of, and interest on the Bonds when the same shall become due and payable, 01-177463,02 23 (ii) the Trustee's confirmation based on information provided to it by Fannie Mae (a)that the Substitute Fannie Mae Pass-Through Certificate has an Issue Date Principal Balance equal to the then unpaid principal balance of the Mortgage Loan, which written confirmation may be an issue Supplement and (b) of the Fannie Mae Pass-Through Certificate Rate applicable to such Substitute Fannie Mae Pass-Through Certificate; (iii) the Trustee's confirmation based on information provided to it by Fannie Mae that the last scheduled distribution under the Substitute.Fannie Mae Pass-Through Certificate will be made not later than in the month preceding the final maturity date of the Bonds; (iv) the Trustee's receipt of an Issue Supplement to the Fannie Mae Trust Indenture which has attached to it a Mortgage Loan Schedule specifying the Mortgage Loan (and no other mortgage loan) as the Mortgage Loan constituting the Pool (as defined in the Fannie Mae Trust Indenture); (v) the Trustee's receipt of written evidence that the New Borrower either shall have executed and recorded a documents substantially in the form of the Regulatory Agreement and that such document has been approved by Fannie ':Viae or shall have assumed the Borrower's obligations under the Regulatory Agreement by recorded instrument, (vi) the Trustee shall have provided written notice to the Rating ,Agency not less than 30 days prior to the date of acceptance of the Substitute Fannie Mae Pass-Through Certificate of the proposed substitution; (vii) the Trustee's receipt from the Rating Agency of a written Rating Confirmation; (viii) the Trustee's receipt of an Opinion of Bond Counsel, upon which the Underwriter, Fannie Mae, the Servicer,the Trustee and the Issuer may rely,to the effect that such substitution, in and of itself, is permitted under the Indenture and will not adversely affect the excludability of the interest on the Series D Bonds, for federal income tax purposes, from the gross incomes of the owners thereof;and (ix) the Trustee's receipt of confirmation from Fannie Mae that the Fannie Mae Legal Department will issue to the Trustee on the Fannie Mae Pass-Through Certificate Delivery Late applicable to the Substitute Fannie Mae Pass-Through Certificate, an Opinion of Counsel to the effect that the Substitute Fannie Mae Pass-Through Certificate constitutes a valid and binding obligation of Fannie Mae, entitled to the benefits of the Fannie Mae Trust Indenture, subject to any applicable bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights from time to time in effect and to general principles of equity. In addition, the principal amount of the Substitute Fannie Mae Pass-Through Certificate is less than the principal amount of the Fannie Mae Pass-Through Certificate being replaced, sufficient Available Moneys must be available to the Trustee to redeem Bonds such that the principal amount of Bands to remain Outstanding after such redemption will be equal to the principal amount of the Substitute Fannie Mae Pass-Through Certificate. Upon the discharge of the lien of the Indenture, the Trustee is to return the Fannie Mae Pass-Through Certificate to Fannie Mae and distribute any payments received by it in respect of the Fannie Mae Pass-Through Certificate after such discharge to Fannie Mae to the extent, as set forth in a statement from Fannie Mae, of any moneys then owed to Fannie Mae on account of the Mortgage Doan, 01-177463.02 24 or if a default shall have occurred and remain uncured under the Mortgage Loan of which the Trustee shall have received written notice from Fannie Mae or the Servicer,provided that upon payment in full of all obligations awed by the Borrower under the Bond Documents and under the Mortgage Loran Documents and termination of all obligations awed to Fannie Mae, the Trustee is except to the extent provided by the Indenture,to pay such amounts to the Borrower, as their interests may appear. Pending such distributions, the Trustee is to hold such amounts in trust for the benefit of,Fannie Mae and the Borrower. This provision may not be modified or amended without the prior written consent of Fannie Mae and the holders of all of the Bonds then Outstanding. Requirement of Credit Facility. So long as the Bonds are Outstanding,a Credit Facility must be in effect with respect to the Bonds. Distributions. The Fannie Mae Dass-Through Certificate will represent Fannie Mae's obligation to make timely distributions of amounts corresponding in part, as to principal and interest, to the scheduled payments of principal of and interest due on the Mortgage Loan (less the Spread Amount, as defined below, and not including any additional interest or other amounts payable by the Borrower in respect of redemption premiums), without regard to whether the payments on the Mortgage Loan are received by Fannie Mae. Upon issuance of the Fannie Mae Pass-Through Certificate, the principal and interest on the Bonds will be payable from distributions received by the Trustee from Fannie Mae under the Fannie Mae Pass-Through Certificate and from certain funds held by the Trustee from time to time under the indenture. Accordingly, timely payment of debt service on the Bonds depends upon timely distributions of principal and interest under the Fannie Mae Pass-Through Certificate as Fannie Mae does not guarantee the payment of tate principal of, premium, if any; or interest on the Bonds. Distributions under the Fannie Mae Pass-Through Certificate,together with anticipated investment earnings thereon, at a certain assumed rate of interest, have been calculated to be sufficient to pay when due the principal of and interest on the Bonds when due. Fannie Mae has not prepared, reviewed or verified, makes no representation or warranty with respect to, does not certify to, and assumes no responsibility or liability for, such calculations, the assumptions used in making such calculations or the mathematical accuracy of such calculations or for the sufficiency of the distributions to pay the principal of and interest on the Bonds when due,the Fees included in the Pass-Through Rate under the Mortgage Note when clue or any wither amounts at any time. A default on the Mortgage Loan may result in the Mortgage Loan being deemed, by Fannie Mae, a Fully Prepaid Mortgage loan (as defined 'below), which could result in mandatory redemption of Bonds. See "THE BONDS---Redemption--Special t landatory Redemption From Fannie .Mae Pass-Through Certificate Distributions" herein. Summary Description of Fannie Mae Pass-Through Certificate. The following description of tite Fannie .Mae Pass-Through Certificate assumes that at the time the Fannie Mae Pass-Through Certificate is issued, the Fannie Mae Trust Indenture and the forret of Fannie Mac Pass-Through Certificate issued by Fannie Mae under the Fannie Mae Trust Indenture will be in substantially the forth they are in on the date of this Official Statement. Under the terms of a Fannie-Mae Pass-Through Certificate, Fannie Mae will distribute to the registered holder(the Trustee or a custodian for the Trustee)on the 25th day of each month or, if any such 25th day is not a business day, the succeeding business day (the "Distribution bate"), commencing with the Distribution Date in the month following the month in which such Fannie Mae Pass-Through Certificate is issued, an amount equal to the total of(1) Aggregate Scheduled Principal(as defined below), (ii) one month's interest at the Pass-Through Rate (as defined in the Fannie Mae Trust indenture) on the Stated Principal Balance of the Mortgage Loan as of the preceding Distribution Bate, (iii) the Stated 0 1-177463.02 25 Principal Balance of the Mortgage Loan if the Mortgage Loan became or was deemed by Fannie Mae to be a Fully Prepaid Mortgage Loan(as defined below) in the month prior to the month of distribution, and (iv) any unscheduled partial payments or other recoveries of principal on the Mortgage Loan which are not accompanied by an amount representing scheduled interest due after the month of payment, which payments or recoveries are received or deemed to have been received in the month prior to the month of distribution. "Aggregate Scheduled Principal" means, with respect to any Distribution 'Date, the aggregate principal due on the Mortgage Loan during the period beginning on the second day of the month preceding the month of such Distribution Date and ending on the first day of the month of such Distribution Date. "Issue Supplement" means an instrument published by Fannie Mae pursuant to the Fannie Mae Trust Indenture which supplements the Fannie Mae Trust Indenture and identifies and establishes the pool comprising the Mortgage Loan and the Fannie Mae Pass-Through Certificate related to the Mortgage Loan. "Spread Amount" means the portion of interest on the Mortgage Loan allocable to the Servicer's servicing fees and Fannie Mae's guaranty fees. "Stated Principal Balance"means, with respect to the Mortgage Loan and any Distribution Date, the aggregate principal balance of the Mortgage Lean on the date of issuance of the Fannie Mae Pass-Through Certificate reduced by all amounts distributed to the Registered Owner of the Fannie Mae Pass-Through Certificate in respect of principal of the Mortgage Loan. The Mortgage Loan will constitute a "Fully Prepaid Mortgage Loan" if(i) payment of the entire principal balance of the Mortgage Loan is made prior to final maturity, (ii)cash is received in connection with the liquidation of the Mortgage Loan (whether through insurance proceeds, condemnation awards, proceeds of any sale of the Project or otherwise and whether or not such cash is equal to the unpaid principal amount of the Mortgage Loan and all accrued interest on the Mortgage Loan) in an amount determined by Fannie Mae in its reasonable judgment to be the full amount finally recoverable on account of the Mortgage Loan, or(iii)a default has occurred under the Mortgage Loan which, in accordance with the Fannie Mae Trust Indenture,causes the Mortgage Loan to become or to be deemed by Fannie Mae to be a Fully Prepaid Mortgage Loan. Under the Fannie Mae Frust Indenture, the Mortgage Loan will be deemed a Fully Prepaid Mortgage Loan if Fannie Mae exercises certain rights with respect to the Mortgage Loan, such as withdrawing the Mortgage Loan from the pool. Fannie Mae has the right and option, without obligation and in its discretion, to withdraw the Mortgage Loan from: the pool, for example (a) at any time after the Mortgage Note becomes delinquent, in whole or in part, as to four consecutive monthly installments of interest or principal and interest or the Borrower shall fail to pay, when due, certain fees or expenses, (b) if the Borrower shall be in violation of or default under any covenant or agreement under the Mortgage Mote or the Mortgage or under the Regulatory .Agreement or any similar document intended to insure compliance by the Project with certain laws and regulations relating to the tax-exempt status of the Series D bonds and such violation or default shall have continued for 60 days or (c) if the principal balance of the Mortgage Loan is declared to be immediately due and payable by Fannie Mae and such principal balance shall not have been paid within ten days after such declaration. In addition, Fannie Mae shall have the right to withdraw the Mortgage Loan from the pool if the Project is transferred, or proposed to be transferred, under circumstances in which Fannie Mae is legally permitted or reasonably believes that it is legally permitted, to accelerate the maturity of the Mortgage Loan pursuant to the terms of the "due-on-sale"or like clause contained in the Mortgage, or if Fannie Mae acquires the Project through foreclosure, deed-in-lieu of foreclosure or comparable conversion of the Mortgage Loan, Upon the exercise of any such rights by Fannie Mae, the Mortgage 01-177463.02 26 Loan will be deemed to be a Fully Prepaid Mortgage .Loan resulting in a prepayment under the Fannie Mae Pass-Through Certificate and a corresponding redemption of Bonds. See "THE BONDS— Redemption." The obligation of Fannie Mae to make distributions under the Fannie Mae Vass-Through Certificate is a general, unsecured obligation of Fannie Mae. If Fannie Mae fails to perform such obligations, distributions to the Trustee will consist of payments and other recoveries on the Mortgage Loan and a delinquency or default on the Mortgage Loan at that time would seriously and adversely affect monthly distributions to the Trustee. The monthly distributions under the Fannie Mae Pass-Through Certificate will be subject to adjustment by reason of any prepayments or other early or unscheduled recoveries of principal on the Mortgage Loan. In any event, Fannie Mae is obligated to pay to the Trustee, or to a custodian for the Trustee,as registered owner of the Fannie Mae Pass-Through Certificate,monthly installments of not less than the interest due on the Fannie Mae Pass-Through Certificate, together with any scheduled installments of principal, whether or not collected from the Borrower, and any prepayments or early recoveries of principal. The Fannie Mae Pass-Through Certificate will mature no later than the Distribution Date subsequent to the final maturity date of the Mortgage Loan. Prior to the issuance of the Fannie Mae Pass-Through Certificate, or if the Fannie Mae Pass-"Through Certificate is not issued, Fannie Mae will not have any obligation to make any distributions under the Fannie Mae Pass-Through Certificate with respect to the Mortgage Loan. Following acquisition of the Fannie Mae Pass-Through Certificate,the Trustee may not, without the prior written consent of Fannie Mae and of the owners of all of the Bonds then Outstanding, sell, exchange, transfer,assign or otherwise dispose of the Fannie Mae Pass-Through Certificate other than to Fannie Mae in exchange for(a) substitute or replacement Fannie Mae Pass-Through Certificate pursuant to the Indenture or (b) payment to the Trustee of Available Moneys in an amount sufficient to pay or defease, in accordance with the Indenture, the principal of and interest due and owing on the Bonds, provided that the Fannie Mae Pass-Through Certificate may be assigned to a successor Trustee under the Indenture. THE BONDS ARE NOT A DEBT OF THE UNITED STATES OF AMERICA, DR ANY AGENCY THEREOF, OR OF FANNIE MAE. PAYMENT OF PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON, TIME BONDS IS NOT GUARANTEED BY FANNIE MAE. SO LONG AS THE COLLATERAL AGREEMENT IS IN EFFECT WITH RESPECT TO THE MORTGAGE LOAN, FANNIE MAE'S OBLIGATIONS WILL BE SOLELY AS PROVIDED IN THE COLLATERAL AGREEMENT. UPON ISSUANCE OF THE FANNIE MAE PASS-THROUGH CERTIFICATE, FANNIE MAE'S SOLE OBLIGATION WILL BE CONTAINED IN THE FANNIE MAE PASS-THROUGH CERTIFICATE, AND WILL BE LIMITED TO MAKING DISTRIBUTIONS OF PRINCIPAL AND INTEREST UNDER THE FANNIE MAE PASS-THROUGH CERTIFICATE, IN ACCORDANCE WITH ITS TERMS, TO THE RECORD OWNER OF THE FANNIE MAE PASS-THROUGH CERTIFICATE. THE OBLIGATIONS OF FANNIE MAE UNDER THE COLLATERAL AGREEMENT AND UNDER THE FANNIE MAE PASS-THROUGH CERTIFICATE WILL BE OBLIGATIONS SOLELY OF FANNIE MAE, A FEDERALLY CHARTERED STOCKHOLDER-OWNED CORPORATION. THE OBLIGATIONS OF FANNIEMAE ARE NOT BACKED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA. FANNIE MAE HAS NO OBLIGATION TO PURCHASE, DIRECTLY OR INDIRECTLY, ANY OF THE BONDS. 0 1-1 77460.02 27 Additional Bonds The Indenture does not authorize the issuance of additional bonds secured equally or on a parity with the Bonds. No Borrower Personal Liability The Borrower has not been nor will it be personally liable for any payments with respect to the Mortgage Loan(subject to certain exceptions to non-recourse liability set forth in the Mortgage Note and the Mortgage) or for the Bonds (except for certain recourse liability for fees and indemnification under the Financing Agreement). Furthermore,except to the extent expressly set forth herein, no representation is made that the Borrower will have substantial funds available for the Project. Accordingly, neither the Borrower's financial statements nor those of its partners are included in this Official Statement. THE MORTGAGE NOTE The Mortgage Loan will be evidenced by a Mortgage Note. The Mortgage Note evidences a non-recourse obligation of the Borrower to repay the Mortgage Loan evidenced by the Mortgage Note, and is secured by the Mortgage. The Mortgage Note will be in the principal amount ("Principal Amount")of$7.900,000*. The Mortgage Note will bear interest at the "Mortgage Note Rate." The Mortgage Nate Rate comprises (i)a pass-through rate of interest (the "Pass-Through Rate") and (ii)a fixed rate of interest which (a) prior to the Fannie Mae Pass-Through Certificate Delivery Date will be equivalent to the sum of the Fannie Mae Facility Fee payable to Nannie Mae and the Servicing Fee payable to the Servicer,and (b)on and after the Fannie Mae Pass-Through Certificate Delivery Date, until the Mortgage Note is paid in full, will be equivalent to the sum of the Guaranty Fee payable to Fannie Mae and the Servicing Fee payable to the Servicer. See "FEES OF THE SERVICER AND FANNIE MAE" herein. The Mortgage Note will bear interest at the rate of� %per annum beginning on the Accrual Date(as defined and specified below) to, but not including, the issue Date of the Fannie Mae Pass-Through Certificate and,thereafter will bear interest at the rate of_%per annum to, but not including,the date on which the Mortgage Note is paid in full. The Accrual bate is the date of closing. The Pass-Through. Rate is_% per annum, which Pass-Through Rate has been calculated to be sufficient to pay the interest on the Bonds and the annual fees of the Trustee. Fannie Mae has not prepared, reviewed or verified, makes no representation or warranty with respect to, dues not certify to, and assumes no responsibility or liability for,any calculations,the assumptions used in making such calculations,their mathematical accuracy or for the sufficiency of payments on which they are based to pay the principal of and interest on the Bonds when due,any fees when due or any other amounts at any time. The Principal Amount of the Mortgage Note will be due and payable in 360 consecutive monthly installments of principal and interest. The Maturity Date of the Mortgage Note is The Mortgage Note is subject to optional and mandatory prepayment at the times, in the manner and on the terms provided in the Mortgage Note. The Mortgage Note provides that, if any installment under the Mortgage Note is not paid when due, or any other default exists under the Mortgage Note, the Mortgage or any other Mortgage Loan Document, Fannie Mae, at its option, may declare the entire principal amount outstanding under the Mortgage Note,plus accrued interest thereon,at once due and payable. *�relimir?ary,subject to change. 01-177463.02 28 SERVICING OF THE MORTGAGE LOAN Fannie Mae will contract with the Servicer, or another eligible servicing institution, to perform mortgage servicing functions with respect to the Mortgage Loan, in accordance with Fannie Mae guidelines. Any servicing contracts or arrangements by Fannie Mae with the Servicer for the servicing of the Mortgage Loan are solely between Fannie Mae and the Servicer and neither the Issuer nor the Trustee is deemed to be party thereto or has any claim, right, obligation, duty or liability with respect to the servicing of the Mortgage Loan. The servicing arrangements between the Servicer and Fannie Mae are subject to amendment or termination from time to time without the consent of the Issuer,the Trustee or the Burrower and none of the Trustee,the Issuer or the Borrower has any rights under, nor is a third party beneficiary of, any such servicing arrangements,including the servicing agreement. The Servicer will be obligated,pursuant to its selling and servicing contract with Fannie Mae and Fannie Mae's servicing requirements, to perform all services and duties specifically prescribed by such contract, the Fannie Mae Commitments and the DDS Guide. Fannie Mae will monitor the Servicer's performance and has the right to remove the Servicer. The duties performed by the Servicer include general loan servicing responsibilities, collection and remittance of principal and interest payments, administration of mortgage escrow accounts and collection of insurance claims. FEES OF THE SERVICER AND FANNIE VIAE The Servicer will receive a Servicing Fee (the "Servicing Fee") for its servicing function and Fannie Mae will receive a Credit Fee which is a Facility Fee for providing the Collateral Agreement and, upon issuance of the Fannie Mae Pass-Through Certificate is, in lieu of the Facility Fee, a Guaranty Fee for discharging its obligations under the Fannie Mae Pass-Through Certificate. Fannie Mae's Facility Fee is equal to the sum of _% per annum applied to the outstanding unpaid principal balance of the Mortgage Loan at the time of calculation. Fannie Mae's Guaranty Fee, beginning on the Issue bate of the Fannie Mae Pass-Through Certificate, is _% per annum applied to the outstanding unpaid principal balance of the Mortgage Loan at the time of calculation. The Servicer's Servicing Fee is equal to the sutra of_% per annum applied to the outstanding unpaid principal balance of the Mortgage Loan at the time of calculation. On and after the Issue bate of the Fannie Mae Pass-Through Certificate, the Servicer's Servicing Fee is equal to_% per annum of the outstanding principal balance of the Mortgage Loan at the time of calculation. The sunt of the Guaranty Fee and the Servicing Fee payable on and after the Issue Date, _% per annum and _% per annum, respectively,totaling_% per annum (such total being the "Spread")may, by agreement of Fannie Mae and the Servicer, be reallocated among Fannie Mae and the Servicer, so as to be payable to them in different proportions, provided that (a)there will be no change in the Spread and (b) any such reallocation will not affect a Borrower's obligations under the Mortgage Note. As a matter of administration, prior to the issuance of the Fannie Mae Pass-Through Certificate,the Facility Fee and the Servicing Fee will be deducted by the Servicer from the interest portion of the monthly payments on the Mortgage Note prior to the Servicer's remittance of the monthly payments to the Trustee; the Servicing Fee will be retained by the Servicer and the Facility Fee will be remitted to Fannie Mae; accordingly, all remittances to the Trustee will be net of such fees. Upon issuance of the Fannie Mae Pass-Through Certificate, the Servicing Fee and the Guaranty Fee will be deducted by the Servicer and Fannie Mae, respectively, from the interest portion of the monthly payments on the Mortgage Loan, accordingly, distributions of interest received by the Trustee with respect to the Fannie Mae Pass-Through Certificate will be net of such fees. Fannie Mae is also entitled to retain late charges or, in certain cases, to share with the Servicer late charges, assumption fees, and similar charges to the extent they are collected from the Borrower. 01-17746102 29 Timing of Receipt of Revenues The payment of the principal of and interest on the Bands depends upon timely distributions of principal and interest on the Mortgage Loan (until the Fannie Mae Pass-Through Certificate Delivery Date)and the Fannie Mae Pass-Through Certificate,as well as receipt of Investment Income(assuming a rate of 2.50% per annum on an investment agreement)on amounts on deposit in the Revenue Fund. The scheduled debt service payments on the Bonds have been calculated based on the assumed receipt of these payments and income. Sufficiency of Cash Flows The payment of the principal of and interest on the Bonds depends upon timely distributions of principal and interest on the Mortgage Loan. Fannie Mae does not guarantee the payment of the principal of, premium, if any, or interest on the Bonds. The interest rate on the Mortgage Doan has been established at a rate expected to be sufficient to pay the Servicing Fee of the Servicer, the Fannie Mae Facility Fee or the Guaranty Fee, as the case may be, and certain other fees, as well as the debt service on the Bonds, taking into consideration the project investment earnings on the moneys on deposit in the various funds and accounts. Such investment earnings are not guaranteed by Fannie Mae. In the event that the investment of such money at an anticipated rate of return should fail, or there is an error in the cash flow projections, the interest rate on the Mortgage Loan may not be sufficient to pay all such fees and expenses,together with the debt service on the Bonds. This could result in a payment default on the Bonds even though there is no default under the Collateral Agreement or the Fannie Mae Pass-Through Certificate, as the case may be. The remedies of the Trustee are limited in this event. See "APPENDIX A---THE INDENTURE—Default Provisions and Remedies" attached. hereto. An independent verification of the cash flow sufficiency for the Bonds has been provided by FA'raNIE MAF HAS NO RESPONSIBILITY FOR THE CASH FLOW PROJECTIONS OF THE VERIFICATION THEREOF AND MAKES NO REPRESENTATION WITH RESPECT TO THE SUFFICIENCY OR THE ACCURACY OF SUCH CASH FLOWS OR THE ASSUMPTIONS THEREIN. See"CASH FLOW PREPARATION" herein. FANNIE MAE Fannie Mae is a federally chartered and stockholder-owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12. U.S.C. 1716 et sect. It is the largest investor in home mortgage leans in the United States with a net portfolio of$376 billion of mortgage loans as of September 30, 1998. Fannie Mae was originally established in 1938 as a United States government agency to provide supplemental liquidity to the mortgage market and was transformed into a stockholder-owned and privately managed corporation by legislation enacted in 1968. Fannie Mae purchases,sells and otherwise deals in mortgages in the secondary market rather than as a primary lender. It does not make direct mortgage loans but acquires mortgage loans originated by others. In addition, Fannie Mae issues mortgage-backed securities ("MBS"), primarily in exchange for pools of mortgage loans from lenders. Fannie Mae receives guaranty fees for its guarantee of timely payment of principal of and interest on MBS. Fannie Mae is subject to regulation by the Secretary of Housing and Urban Development ("HUD") and the Director of the Independent Office of Federal Housing Enterprise ',Oversight within HUD. Approval of the Secretary of Treasury is required for Fannie Mae's issuance of its debt obligations and MBS. Five of the eighteen members of Fannie Mae's Board of Directors are appointed by the President of the United States, and the other thirteen are elected by the holders of Fannie Mae's common stock. 01-177463.02 30 The securities of Fannie Mae are not guaranteed by the United States and do not constitute a debt or obligation of the United States or any agency or instrumentality thereof other than Fannie Mae. As of September 30, 1998, Fannie Mae's stockholders' equity was $14.9 billion. Information on Fannie Mae and its financial condition is contained in Fannie Mae's Information Statement dated March 31, 1998 and Supplements thereto dated May IS, 1998, August 13, 1998 and November 13, 1998 (and any later update of such Information Statement). Copies of the most recent Information Statement, as well as any Supplements to the Information Statement and Fannie Mae's most recent annual and quarterly reports to stockholders and proxy statement, are available without charge from the Office of Investor Relations, Fannie Mae, 3900 Wisconsin Avenue, NW, Washington, DC 20015(telephone; (2012)752-7115). Fannie Mae makes no representation as to the contents of this Official Statement, the suitability of any Bonds for any investor, the feasibility of performance of any project, the sufficiency of amounts payable under any Mortgage Loan or under any Collateral Agreement to pay the principal of and interest on the Bonds in accordance with the Indenture, or compliance with any securities, fax or other laws or regulations. Fannie Mae's role is limited, with respect to the Mortgage Loan, to issuing the Fannie Mae Commitment, entering into the Collateral Agreement and discharging its obligations thereunder and, if Fannie Mae acquires the Mortgage Loan, issuing the Fannie Mae Pass-Through Certificate in exchange therefor and making distributions under the Fannie Mae Pass-Through Certificate to the record owner of the Fannie Mae Pass-Through Certificate,as described in this Official Statement. THE SERVICER ARCS Commercial Mortgage Co., L.P., (the "Servicer") will be the Servicer with respect to the Mortgage Loan on behalf of Fannie Mae and will be paid fees for its services. See "SERVICING OF THE lYI+0)RTCAGE LOAN" and "FEES OF THE SERVICER AND FANNIE VIAE." The Servicer may be removed and a replacement servicer designated by Fannie Mae, in its sole and absolute discretion. The Servicer makes no representation as to the contents of this Official Statement, the suitability of the Bonds for any investor, the feasibility of performance of the Project, or compliance with any securities,tax or other laws or regulations. The ervicer's role is limited to the assignment to Fannie Mae of all of the Servicers right, title and interest in and to the Mortgage Loan, as acquired by the Servicer from the Trustee concurrently with the Trustee's assignment of all of the Trustee's right,title and interest in and to the Mortgage Loan to the Servicer,and the servicing of the Mortgage Loan, as described herein. SOURCES AND USES OF ]FUNDS The sources of funds and the uses thereof in connection with the Bonds, exclusive of accrued interest thereon,are expected to be approximately as set forth below, 01-177463.02 31 Sources: Proceeds from Sale of the Bonds $ Borrower's Contribution Total Sources $ Uses: Initial Deposit to Mortgage Loan Fund $ Initial Deposit to General Receipts and Disbursements Account of the Revenue Fund Costs of Issuance and Credit Enhancement Total Uses $ THE ISSUER The Issuer is a political subdivision of the State. The Issuer is authorized to issue bonds and finance multifamily housing projects located within the boundaries of the Issuer pursuant to the Act. The Issuer has sold and delivered obligations other than the Bonds,which other obligations are and will be secured by instruments separate and apart from the Indenture and the Bonds. The folders of such obligations of the Issuer have no claim on the security of the Bonds,and the owners of the Bonds will have no claim on the security of such other obligations issued by the Issuer. THE BONDS AND THE SERIES OF WHICH THEY ARE A PART ARE SPECIAL OBLIGATIONS OF THE ISSUER. THE BONDS ARE NOT A DEBT OF AND DO NOT PLEDGE THE FAITH, CREDIT OR TAXING POWER OF THE STATE OF CALIFORNIA, THE ISSUER. OR ANY POLITICAL SUBDIVISION, BUT ARE PAYABLE SOLELY FROM THE REVENUES AND THE ASSETS PROVIDED FOR IN THE INDENTURE AND THE ACT. ENFORCEABILITY OF REMEDIES The remedies available to the Trustee and the owners of the Bonds upon an event of default under the Indenture are in many respects dependent upon regulatory and judicial actions which are often subject to discretion and delay. cruder existing law and judicial decisions, the remedies provided for under the Indenture may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Bonds, the Indenture, the ether Bond Documents and the Mortgage Loan Documents will be qualified as to enforceability by limitations imposed by bankruptcy, reorganization, insolvency or ether similar laws affecting the rights of creditors generally and by equitable remedies and proceedings generally. Additionally, the enforcement of provisions of the Regulatory Agreement and Financing Agreement and the covenants contained therein is subject and subordinate to provisions of the Mortgage. TAX MAT'T'ERS In the opinion of Orrick, Herrington & Sutcliffe.LL.P ("Fond Counsel"), based upon an analysis of existing laws, regulations,rulings and court decisions,and assuming, among other:natters, compliance with certain covenants, interest on the Series D Bands is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the "Code") and is exempt from (i I-177463.02 32 State of California personal income taxes, except that no opinion is expressed as to the status of interest on any Series D Bond for any period that such Series D Bond is held by a "substantial user" of the facilities financed or refinanced by the Series D Bonds or by a "related person" within the meaning of Section 47(a) of the Code. Bond Counsel observes, however, that interest on the Series D Bonds is a specific preference item for purposes of the federal individual and corporate alternative minimum taxes. Bond Counsel is further of the opinion that interest on the Series D Bonds is exempt from State of California personal income taxes. Bond Counsel observes that interest on the Series D-T Bonds is not excludable from gross income for federal income tax purposes. A complete copy of the proposed form of the opinion of Bond Counsel is set forth in Appendix B. To the extent the issue price of any maturity of the Series D Bonds is less than the amount to be paid at maturity of such Series D Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Series D Bands), the difference constitutes "original issue discount,"the accrual of which,to the extent properly allocable to each owner thereof, is treated as interest on the Series D Bonds which is excluded from gross income for federal income tax purposes and State of California personal income taxes. For this purpose, the issue price of a particular maturity of the Series D Bonds is the first price at which a substantial amount of such maturity of the Series D Bonds is sold to the public (excluding bond houses,brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Series D Bonds accrues daily over the term to maturity of such Series D Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Series D Bonds to determine taxable gain or `=.cess upon disposition (including sale, redemption or payment on maturity)of such Series D Bonds. Owners of the Series D Bonds should consult their own tax advisors with respect to the tax consequences of ownership of the Series D Bonds with original issue discount, including the treatment of purchasers who do not purchase such Series D Bands in the original offering to the public at the first price at which a substantial amount of such Series D Bonds is sold to the public. The Code imposes various restrictions,conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Series D Bonds. The Issuer and the Developer have covenanted to comply with certain restrictions designed to ensure that interest on the Series D Bonds will not be included in federal gross income. Failure to comply with these covenants may result in interest on the Series D Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Bonds. The opinion of Bond Counsel assumes compliance with these covenants. Bond Counsel has not undertaken to determine(or to inform any person) whether any actions taken (or not taken) or events occurring(or not occurring)after the date of issuance of the Series D Bonds may adversely affect the value of, or the tax status of interest on the Series D Bonds. Further, no assurance can be given that pending, or future legislation or amendments to the Code, if enacted into law, or any proposed legislation or amendments to the Code, will not adversely affect the value of,or the tax status of interest on, the Series D Bonds. Prospective Bondowners are urged to consult their own tax advisors with respect to proposals to restructure the federal income tax. Series D Bonds purchased, whether at original issuance or otherwise, for an amount greater than their principal amount payable at maturity (or, in come cases, at their earlier call date) ("Premium Bonds") will be treated as !raving amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax exempt interest received, and a purchaser's basis in a Premium Band, will be reduced by the amount of amortizable bond premium properly allocable to such purchaser. Owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances. 01-177463.02 3 3 Certain requirements and procedures contained or referred to in the Indenture, the Financing Agreement,the Regulatory Agreement,the Tax Certificate and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the Series D Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. Orrick, Herrington& Sutcliffe LLP expresses no opinion as to any Series D Band or the interest thereon if any such change occurs or action is taken or omitted upon the advice or approval of band counsel other than Orrick,Herrington & Sutcliffe LLP. Although Bond Counsel is of the opinion that interest on the Series D Bonds is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes, the ownership or disposition of, or the accrual or receipt of interest on, the Series D Bonds may otherwise affect a Bondowner's federal or state tax liability. The nature and extent of these other tax consequences will depend upon the Bondowner's particular tax status and the Bondowner's other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. CONTINUING DISCLOSURE The Borrower has entered into a Continuing Disclosure Agreement dated April 1, 1999 (the "Continuing Disclosure Agreement") with the Trustee obligating the Borrower to send, or cause to be sent, certain financial information with respect to the Project to certain information repositories annually and to provide notice,or cause notice to be provided,to the Municipal Securities Rulemaking Board and a state information repository, if any, of certain enumerated events for the benefit of the Beneficial Owners and Holders of any of the Bonds, pursuant to the requirements of Section (b)(5)(i)of Securities Exchange Commission Rule 15c2-12 (the "Rule"). See "APPENDIX D---SUNIMARY OF CERTAIN PROVISIONS OF THE CONTINUING DISCLOSURE AGREEMENT" hereto. The Borrower has not entered into any other such undertaking with respect to the.Rule. A failure by the Borrower to comply with the provisions of the Continuing Disclosure Agreement will not constitute a default under the Indenture or the Financing Agreement(although Bondholders will have any available remedy at law or in equity). Nevertheless, such a failure to comply roust be reported in accordance with: the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Bonds. "YEAR.2000 PREPAREDNESS Many existing computer programs are not programmed to address date related problems arising on and after January 1, 2000. The Servicers have advised that they have undertaken an effort to evaluate their computer programs in order to avoid computer problems on and after January 1, 2000. Information regarding the Trustee's Year 2000 efforts can be obtained by accessing the Web site of U.S. Bancorp at http://www.usbank.com. Information regarding DTC's year 2000 preparedness is set forth herein under the caption "TILE BONDS—Soak-entry-only System." Information regarding Fannie Mae's efforts toward compliance with the year 2000 matter is contained in the Information Statement:described herein under the heading"FANNIE MAE." Other parties related to the Bonds, including the Borrower,are also subject to potential problems related to the year 2000 matter. No assurance can be given, however, as to whether the Servicer, the Trustee, DTC, Fannie Mae or any Bond-related third party will be successful in its respective efforts. Further, if they are not successful, such problems may adversely effect the payment of the Bonds. 01-177463.02 34 CASH SLOW PREPARATION Computations relating to the projected payments of principal and interest on the Mortgage Loan and the sufficiency of such payments together with certain amounts held under the Indenture for the payment of principal of and interest can the Bonds and certain fees will be prepared by[Causey Detngen& Moore Inc., certified public accountants]. The Cash Flaw Preparer has not trade a study or evaluation of the assumptions and information on which the computations are based and, accordingly, has not expressed an opinion on the data used, the reasonableness of the assumptions or the achievability of the projected outcome. None of the Issuer, the Borrower, Bond Counsel, the Underwriter or Fannie Mae have participated in the preparation of such computations. CERTAIN LEGAL MATTERS Certain legal matters relating to the authorization and validity of the Bonds will be subject to the approving opinion of Carrick, Herrington & Sutcliffe LLP, Los Angeles, California,,Bond Counsel. A complete copy of the proposed form of opinion of Bond counsel is attached hereto as Appendix B. Brand Counsel undertakes no responsibility for the accuracy,completeness or fairness of this Official Statement. Certain legal matters will be passed upon for the Underwriter by its counsel, Kutak Rock, for the Borrower by its counsel, Bret H. Reed,Jr., A Law Corporation, Balboa Island, California, and for Fannie Mae by its Legal Department and by Arent Fox Kintner Plotkin & Kahn, PLLC, Washington, D.C., its counsel. Fees and expenses of certain of the above-mentioned counsel are contingent upon issuance of the Bonds. The various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified as to the enforceability of the various legal instruments by limitations unposed by the valid exercise of the constitutional powers of the State of California and the United States of America and bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally, and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). The various legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the attorneys rendering the opinions on the legal issues explicitly addressed therein. By rendering a legal opinion, tate opinion giver does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon or of the future performance of parties to such transaction, nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. The remedies available to the bondholders upon a default under the Indenture or the financing Agreement are in many respects dependent upon judicial actions which are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including specifically Title I I of the United States Code (the federal bankruptcy code), the remedies provided in the Indenture and the Loan Agreement may not be readily available or may be limited. NO LITIGATION To the best knowledge of the Issuer there is no action, suit or proceeding known to be pending or threatened restraining or enjoining the execution or delivery of the Bonds or in any way contesting or affecting the validity of the foregoing. To the best knowledge of the Borrower, there is no pending or threatened action, suit or proceeding restraining or enjoining the execution or delivery of the Bonds, or in any way contesting or 0 1-177463.132 35 affecting the validity of the foregoing or which in any way contests the existence or powers of the Borrower, and that there is no pending or threatened action, snit or proceeding pending against or relating to the Borrower or the Project, or which could have a material adverse effect on the financial condition or operation of the Borrower or the Project. :RATING Standard & moor's Ratings Services, a division of The McGraw-Dill Companies, Inc. ("S&P"), has assigned the Bonds the rating shown on the cover page hereof. Such rating reflects only the view of such organization and an explanation of the significance of such rating may be obtained only from S&P at 25 Broadway, New 'fork, New 'York 10004, telephone number (212) 208-11002. There is no assurance that such rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by the rating agency, if in the judgment of such rating agency, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the marketing price of the Bonds. UNDERWRITING The Bonds are being purchases! by Hutchinson, Shockey, l rley& Co. (the "Underwriter"). The Underwriter has agreed, subject to certain conditions, to purchase the Bonds at a price of$ plus accrued interest. The Borrower has agreed to pay an underwriting fee in an amount equal to �% ofthe initial principal amount of the Bonds. The purchase contract relating to the Bonds provides that the Underwriter will purchase all of the Bonds if any are purchased, the obligation to make such purchase being 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 Underwriter may offer and sell the Bonds to certain dealers and others at prices lower than the offering prices stated on the cover page hereof. The offering prices may be changed from time to time by the Underwriter. Payment of the underwriting fee to the Underwriter is contingent on the issuance and sale of the Bonds. MISCELLANEOUS EOUS included herein are brief summaries of certain documents and reports, which summaries do not purport to be complete or definitive, and reference is made to such documents and reports for full and complete statements of the contents thereof. 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 to be construed as a contract or agreement between the Issuer and the purchasers or owners of the Bonds. Use of the words "shall" or "will" in this Official Statement to describe future events or continuing obligations is not intended as a representation that such event or obligation will occur but only that the document contemplates or requires such event to occur or obligation to be fulfilled. 01-177463.02 36 The Issuer has caused this Official Statement to be executed by its authorized officer. COUNTY OF CONTRA COSTA,CALIFORNIA By Its 01-177463.02 37 APPENDIX A SUMMARY OF PRINCIPAL LEGAL DOCUMENTS The following summaries of the principal legal documents are summaries only and do not purport to be a complete statement of the contents thereof. Reference is made to each such summarized document for the complete terms thereof. Copies of the complete documents are available from the Issuer upon request for the cost of copying and delivery thereof. CERTAIN DEFINITIONS Additional definitions are set forth under the subheading "'THE COLLATERAL AGREEMENT"and "THE REGULATORY AGREEMENT" below. "Accounts"means all Accounts established within the Funds created by the Indenture. "Act"means Chapter 5 of Title I of Division 7 of the California Government Code,together with Chapter 7 of Part 5 of Division 31 of the California Health and Safety Code, as the same may be amended from time to time(but only to the extent any such amendments, by their terms or by appropriate election of the Issuer,apply to the Bonds outstanding as of the effective date of such amendments). "Act of .bankruptcy" means any proceeding instituted under the Bankruptcy Code or other applicable insolvency law by or against the Issuer. "Adjusted Income" means the adjusted income of a person (together with the adjusted income of all persons who intend to reside with such person in one residential unit) as calculated in the manner prescribed in regulations Section 1.167(k)-3(b)(3)in effect as of the Closing Date. "Administrator" means any administrator or program monitor appointed by the Issuer to administer the Regulatory Agreement,and any successor so appointed. The initial Administrator shall be the Issuer. "Area" means the Oakland Primary Metropolitan Statistical Area. "Assignment" means the Assignment of Mortgage Loan, dated as of April 1 1999, pursuant to which the Issuer assigns to the Trustee and Fannie Mae, as their interests may appear, all of the Issuer's right, title and interest in and to the Mortgage Lean, as such Assignment may be amended, modified, supplemented or restated from time to time. "Authorized Borrower Representative" means any person who, at any time and from time to time, is designated as the Borrower's authorized representative by written certificate furnished to the Issuer,the Servicer, Fannie Mae and the Trustee containing the specimen signature of such person and signed on behalf of the Borrower by or on behalf of any authorized general partner of the Borrower(including any successor or assign) if the Borrower is a general partnership or a limited partnership, any authorized managing member of the Borrower (including any successor or assign) if the Borrower is a limited liability company, or by any authorized officer of the Borrower(including any successor or assign) if the Borrower is a corporation, which certificate may designate an alternate or alternates,or, in the event that such term shall refer to successors or assigns of the Borrower, any authorized general partner if the successor or assignee is a general partnership or a limited partnership, any authorized managing member 01-177463.02 if the successor or assignee is a limited liability company,or any authorized officer if the successor or the assignee is a corporation. "Authorized Denomination"means$5,000 or any integral multiple of$5,000. "Authorized Issuer Representative" means any Authorized Officer of the Issuer or any other person from time to time duly authorized to perform a specified act, to sign a specified document, or to act generally, on behalf of the Issuer with respect to the Bonds by a written certificate furnished to the Trustee,which certificate is signed by an Authorized Officer and contains the specimen signature of such authorized person; such authorization and approval may designate an alternate or alternates who shall have the same authority,duties and powers as such authorized person. "Authorized Officer" means the Chairman, Vice-Chair, County Administrator, Director of Community Development and Deputy Director-Redevelopment or any other person duly authorized by the Issuer to perform a specified act, to sign a specified document or to act generally, on behalf of the Issuer. "Authorized Servicer Representative" means any person from time to time :designated to act on behalf of the Servicer by written certificate furnished to the Trustee and the Issuer containing the specimen signature of such person and authorized to act by resolution or other appropriate action of the Board of Directors of the Servicer or by its bylaws. Such resolution or other appropriate action may designate an alternate or alternates, acceptable to Fannie Mae, in its sole and absolute discretion, who shall have the same authority,duties and powers as the Authorized Servicer Representative. "Available sWoneys" means (a) the proceeds of the Bonds, (b) proceeds received pursuant to the Credit Facility, including payments under the Collateral Agreement and distributions under the Fannie Mae Pass-Through Certificate, (c) amounts with respect to which the Trustee has received, at or prior to the time such amounts are deposited with the Trustee, an Opinion of Counsel provided by counsel experienced in bankruptcy matters, acceptable to the Rating Agency, to the effect that(l)the use of such amounts to make payments on the Bonds would not violate section 362(a)of the Bankruptcy Code or that relief from the automatic stay provisions of such Section 362(a) would be available from a bankruptcy court or (2) payments of such amounts to the Bondholders would not be avoidable as preferential payments under Section 547 of the Bankruptcy Code should the Issuer, the Borrower or any general partner or guarantor of the Borrower, if applicable, become a debtor in proceedings commenced under the Bankruptcy Code, (d) moneys which have been received by the Trustee directly from the Borrower and which have been continuously on deposit in the General Receipts and Disbursements Account for a period of '231 days during and prior to which no (A) petition in bankruptcy(or the other commencement of a bankruptcy or similar proceeding) by or against the Borrower or any partner of the Borrower or the Issuer under the Bankruptcy Code or any other applicable bankruptcy, insolvency, reorganization or similar law in effect now or in the future shall have been filed or initiated or(B) Act of Bankruptcy shall have occurred and(e) Investment Income derived from the investment of moneys described in clauses(a), (b), (c) or (d). Amounts received by the Trustee for deposit into the Revenue Fund if not otherwise Available Moneys, may become Available Moneys upon and as of the date of deliver; to the Trustee of the legal opinion set forth in clause(c)above. "Bankruptcy Code" means Title I I of the Ignited States Code, entitled "Bankruptcy,"as in effect now and in the future, or any successor statute. "Beneficial Owner" means (a) when used with respect to a Bond at such time as a Book-Entry System is in effect,the person or entity whose name is shown on the records of a participant in the Book- Entry System, pursuant to the arrangements for book-entry determination of ownership applicable to the 0?-177-63 M A-2 engaged Securities Depository, as the beneficial owner of the Bond, and (b) when used with respect to a Bond held in certificated form,the registered owner of the Bond. "Bond Counsel" means (a)on the Closing Date, the law firm or law firms delivering the approving opinion with respect to the valid issuance of the Bonds and the excludability from gross income,for federal income tax purposes,of the interest payable on the Tax-Exempt.Bunds,or(b)after the Closing Date, any law firm selected by the Issuer, acceptable to Fannie Mae, of nationally recognized standing in matters pertaining to the excludability from gross income, for federal income tax purposes,of the interest payable on bonds issued by states and political subdivisions. "Bond Documents" means the Indenture, the Financing Agreement, the Regulatory Agreement, the Contract of Purchase,the Tax Certificate,the Bonds,the Credit Facility Agreement and the Disclosure Agreement. "Bondholder," "holder, " "Owner," `:owner, " "Registered Owner" or "registered owner" means,with respect to any Bond,the registered owner of the Bond. "Bond Payment Date" means any (a)Interest Payment Date, (b)other date on which interest is payable, including any Redemption Date, each !Maturity Date and the date of acceleration of the Bonds, and(c)any date on which principal of the Bonds is payable. "Bond Register"means the bond register maintained by the Trustee pursuant to the Indenture. "Bond Registrar"means the Trustee as keeper of the Bond Register. "Bond Fear" means each one year period commencing on: (a)the date of issuance and delivery of the Bonds, or(b)such other date as the Borrower may elect in accordance with the applicable provisions of Section 148(f)of the Code and the regulations thereunder. "Book-Entry Bonds" means any Bonds which are issued in book-entry form, as evidenced by a single certificate for each stated principal maturity of the Bonds, and registered in the name of and delivered to a Securities Depository. "Book-Entry,`ystem" shall mean that system in which the clearance and settlement of securities transactions is made through electronic book-entry changes, in that way eliminating the need of physical movement of securities. "Borrower" means Willow Partners, L.P., a California limited partnership, and its permitted successors and assigns. "Business Day" means: (a) on or before the Fannie Mae Pass-Through Certificate Delivery date, any day other than: (i) a Saturday,a Sunday or a legal holiday; (ii) any day on which banking institutions located in the city or cities in which the Principal Office of the Trustee or the Principal Office of the Servicer with, respect to the servicing of the Mortgage Loan is located are required or authorized by law or executive order to close, 01-177403.02 A-3 (iii) a day on which Fannie Mae is closed, or (iv) solely with respect to issuance of the Fannie Mae Pass-Through Certificate,a day on which the Federal Reserve Bank of New York is dosed,and (b) after the Fannie Mae Pass-Through Certificate Delivery Date,any day other than: (i) a day excluded under subparagraphs (i), (ii)or (iii)of paragraph(a) above; and (ii) solely with respect to distributions to be made under the Fannie Mae Pass-Through Certificate, a day on which the Federal Reserve Bank of New York is closed. "Cash Flow Projection" means a cash flow projection prepared by an independent firm of certified public accountants, a financial advisory firm or other independent third party qualified and experienced in the preparation of cash flow projections for mortgage loans, designated by the Borrower and acceptable to Fannie Mae and the Rating Agency, establishing the sufficiency of(a)the (i)scheduled payments due under the Mortgage Note (together with and after taking into account the Initial Debt Service Deposit)up to and including the Issue Irate and(ii)scheduled distributions under the Fannie Mae Pass-Through Certificate after the Issue Date and (b)Investment Income with respect to the General Receipts and Disbursements Account(assumed at 2.5%), to pay the principal of and interest on the Bonds and the Fees, in each instance, when due and payable, including, without limitation, any cash flow projection prepared in connection with (A)the initial issuance and delivery of the Bonds, as provided in the Indenture,(B) issuance of the Fannie Mae Pass-Through Certificate on the Fannie Mat Pass-Through Certificate Delivery Date, as provided in the Indenture, (C)a partial prepayment of the Mortgage Doan and a corresponding partial redemption of Bonds pursuant to the Indenture, or (D)substitution of the Fannie Mae Pass-Through Certificate as provided in the Indenture. "Closing irate" means the date on which the Bonds are issued and delivered to the Underwriter. "Code" means the Internal revenue Code of 1986, as amended, and the applicable rules and regulations thereunder. "Collateral Agreement" means the Collateral Agreement elated as of April 1, 1999, between Fannie Mae and the Trustee, as amended, modified, supplemented or restated from time to time to the extent permitted by the Indenture,or any agreement entered into in substitution therefor. "Completion Late" means the date on which rehabilitation of the Project is completed, as evidenced by a certification of the Servicer delivered to the Issuer, Trustee, Fannie Mae, and the Borrower, which certification shall state the extent to which the Borrower has satisfied the requirements of the Fannie Mae Commitment. "CornpletfonlRepair and Security Agreement" means the Completion/Repair and Security Agreement dated as of April I, 1999 by and between the Borrower and the Servicer as amended, modified, supplemented or restated from time to time, or any agreement entered into in substitution therefore ',Computation .trate" means the last day of every fifth Bond Year, commencing on the fifth anniversary of the Closing Date(i.e., April 22, 2004)and the date on which the final payment in full of all Outstanding Bonds is made. 01-17746102 A-4 "Contract of Purchase" means the Contract of Purchase, dated ,by and among the Underwriter,the Issuer and the Borrower. "Cost," "Costs," "Costs of the Project" or "Project Costs" means the costs chargeable to the Project in accordance with generally accepted accounting principles, including, without limitation, the cost of acquisition,construction,reconstruction,restoration,rehabilitation,repair,alteration,improvement and extension of any building, structure, facility or ether improvement; stored materials for construction work in progress; the cost of machinery and equipment;the cost of the band, rights-in-lands, easements, privileges, agreements, franchises, utility extensions, disposal facilities, access roads and site development necessary or useful and convenient for the Project or in connection therewith; financing costs, including, but not limited to, the Costs of Issuance, engineering and inspection costs; fees paid to the developer of the project; organization, administrative, insurance, legal, operating, letter of credit and other expenses of the Borrower actually incurred prior to and during acquisition or construction; and all such other expenses as may be necessary or incidental to the financing, acquisition, construction or completion of the Project or any part of it, including, but not limited to, the amount of interest expense incurred with respect to the Mortgage Loan prior to the Completion Date; insurance premiums payable by the Borrower and taxes and other governmental charges levied on the Project. "Casts of Issuance" means (a)the fees, costs and expenses of(i) the Issuer, the Issuer's counsel and the Issuer's financial advisor, if any, (ii) the Underwriter(including discounts to the Underwriter or other purchasers of the Bonds (other than original issue discount) incurred in the issuance and sale of the Bonds) and the Underwriter's counsel, (iii) Bond Counsel, (iv)the Trustee and the Trustee's counsel, (v) the Servicer and the Servicer's counsel, (vi) Fannie Mae and Fannie Mae's counsel, (vii)the Borrower's counsel and the Borrower's financial advisor, if any, and (viii) the Rating Agency, (b)the costs of preparing the initial Cash Flow Projection and the initial Verification Report, (c)costs of printing the offering documents relating to the sale of the Bonds and (d)all other fees, costs and expenses directly associated with the authorization, issuance, sale and delivery of the Bonds, including, without limitation, printing costs,costs of reproducing documents,ding and recording fees, and any fees,costs and expenses required to be paid to the Servicer in connection with the Mortgage roan. "Costs of Issuance Deposit" means the deposit to be made by the Borrower with the Trustee on the Closing Date in the Costs of Issuance Fund. "Costs of Issuance Fund"means the Costs of Issuance Fund created by the Indenture. "Credit Facility" means (a)the Collateral Agreement, (b)on and after the Fannie Mae Pass-Through Certificate Delivery Date, the Fannie Mae Pass-Through Certificate, to be effective as of the Issue Date, or(c)any other credit enhancement facility provided at any time by Fannie Mae. "Credit FacilityAccount" means the Credit Facility Account established within the Revenue Fund created by the Indenture. "Credit Facility Agreement" means, individually or collectively, the Reimbursement Agreement, and all other agreements and other documents securing Nannie Mae or otherwise relating to the provision of the Collateral Agreement or the Reimbursement Agreement, as any such agreement may be amended, modified.,supplemented or restated from time to time. "'Dated Date"means the dated date of the Bonds set forth on the cover hereof. "Disclosure agreement" means the Continuing Disclosure Agreement, dated as of April 1, 1999, executed and delivered by the Borrower and the Trustee. 01-177463.02 A-5 "Distribution Date" means, with respect to distributions to be made under the Fannie Mae Vass-Through Certificate,the twenty-fifth (25th)day of each month beginning with the twenty-fifth day of the month following the month of the Issue Date, or, if such twenty-fifth (25th) clay is not a Business Day,the Business Day immediately following. "DTC"means The Depository Trust Company and any successor to it or any nominee of it. ".DUS Guide" means the Fannie Mae Delegated Underwriting and ServicingGuide in its present form and as amended, modified, supplemented or reissued from time to time (all references to Parts, Chapters, Sections and other subdivisions of the DUS Guide shall be deemed references to (i) the Parts, Chapters, Sections and ether subdivisions in effect on the Closing Date and (ii) any successor provisions to such Parts,Chapters, Sections and other subdivisions). "Electronic Means" means telecopy, facsimile transmission or other similar electronic means of communication approved in writing by Fannie Mae, including a telephonic communication confirmed by writing or written transmission. "End Period,Payment" means, with respect to any optional redemption of Brands pursuant to the Indenture, the premium due on the .Bonds, if any, and the interest due on the Bonds from the date of prepayment of the Mortgage Loan to the Redemption Date, including that portion of the interest payable to the Bondholders on the Redemption Date which is not (i) included in any distribution by Fannie Mae (of an optional prepayment of the Mortgage Loan) under the Fannie Mae Pass-Through Certificate or(ii) held by the Trustee under the Indenture as Available Moneys. "Event of Default" (a)when used in or with respect to the Indenture, means any of the events specified in the Indenture, and (b)when used in or with respect to the Financing Agreement, means any event of default specified and defined in the Financing Agreement. "Excess Earnings" means the amount of. (a)(i) investment earnings derived from moneys on deposit from time to time in the Funds and Accounts established under the Indenture or in any fund or account whether or not established under the Indenture or the Financing Agreement, to the extent that such investment earnings are required to be taken into account for purposes of determining the Rebate Amount for the Series D Bonds; and (ii) investment earnings derived from moneys on deposit in any other fund or account(whether or not held by the Trustee)containing funds the investment earnings on which are required to be taken into account for purposes of determining the Rebate Amount for the Series D Bonds: less (b) the amount that would have been earned on such moneys had such moneys been invested at a yield equal to the yield on the Bonds(with the yield on the Bonds being determined in accordance with the provisions of Section 148(f) of the Code), provided that the investment earnings on amounts on deposit from time'to time in any"bona fide debt service fund"(within the meaning of Section 148(f) of the Code) established in connection with the Bonds shall not be taken into account to the extent that the gross investment earnings on such account for the Bond Year are less than $100,000, all within the meaning of and as contemplated by Code Section 148(f)(4)(A)(ii), it being the intent of this definition that "Excess Earnings" shall be calculated so that the Rebate Amount is determined in accordance with the requirements of Section 148(f)of the Code(or any successor thereto). 0I-177463.02 A-67 "Extraordinary Items" means, with respect to the Trustee, reasonable compensation for extraordinary services and/or reimbursement for reasonable extraordinary costs and expenses, including attorneys fees,in each case incurred with the approval of Fannie Mae pursuant to the Indenture. "Facility Fee" means the Facility Fee provided for in the Reimbursement Agreement,to be paid by the Borrower on and before the Issue Date in consideration of Fannie Mae providing the Collateral Agreement. ".Fannie Mae Commitment" means Fannie Mae's Commitment, pursuant to which Nannie Mae has agreed., upon satisfaction of the terms and conditions set forth in the Fannie Mae Commitment, to provide credit enhancement for the Mortgage Loan and, on the Fannie Mae Passe-Through Certificate Delivery Date, to acquire the Mortgage Loan from the Servicer by issuance of and in exchange for the Fannie Mae Pass-Through Certificate, as the Fannie Mae Commitment may be amended, modified, supplemented or restated from time to time. "Fannie Jae Documents" means, collectively (a)the Fannie Mae Commitment, (b)the Fannie Mae Mortgage Selling and Servicing Contract (the "Selling and Servicing Contract") and the applicable provisions of any addenda to the Selling and Servicing Contract(collectively the "Addenda"; the Selling and Servicing Contract and the Addenda are, collectively, the "Contract"), executed by the Servicer and Fannie Mae, including, without limitation, the warranties contained in the Contract and in each Fannie Mae Guide incorporated into the Contract by reference, further including,without limitation, and as a "Guide" within the meaning of Section IC of the Contract, the IMUS Guide: and any additional and modified warranties contained in any Addenda, (c)any agreement between Fannie Mae and the Servicer relating to the servicing of the Mortgage Loan, and (d)any administrative or procedural requirements (including execution and delivery of any documentation required in connection with mortgages to be purchased by issuance of mortgage-backed securities) imposed now or in the future by Fannie, Mae (i) upon Servicers originating multifamily mortgages pursuant to the Contract or any Fannie Mae Guide, including the DUS Guide, or (ii) in connection with Fannie Mae's issuance of guaranteed mortgage pass-through certificates. "Fannie JVJae Pass-Through Certificate" means Fannie Mae's Guaranteed Mortgage Pass-Through Certificate to (a)be issued by Fannie Mae pursuant to the Fannie Mae Trust Indenture, in connection with Fannie Mae's acquisition of, and in exchange for the Mortgage Loan, (b)be dated as of the Issue Date, (c)evidence the beneficial interest in the Mortgage Loan held in trust for Fannie Mae and (d) bear interest at the Fannie Mae Pass-Through Certificate Rate,or in the event a Substitute Fannie Mae Pass-Through Certificate shall be delivered to the Trustee pursuant to the Indenture, the Substitute Fannie Mae Pass-Through Certificate. "Fannie Mae Pass-Through Certificate Delivery Date" means the date on which the Fannie Mae Pass-Through Certificate is actually delivered,electronically, in book-entry form, to, or to a custodian for the benefit of, the Trustee. "Fannie Mae Pass-Through Certificate 17elfvery Notice" means the notice, to the Trustee in writing, required to be provided by the Servicer of the expected .Fannie Mae Pass-Through Certificate Delivery Date and the corresponding expected Issue Date of the Fannie Mae Pass-Through Certificate pursuant to the Indentures "Fannie Mae Pass-Through Certificate Rate" means the interest rate per annum to be borne by the Fannie Mae Pass-Through Certificate(i.e., 011-177463.02 A->' "Fannie alae .Trust Indenture" means, individually or collectively, the (a)Trust Indenture for Guaranteed Mortgage Pass-Through Certificates, evidencing undivided beneficial interests in Pools of Fixed Rate Residential Mortgage Loans dated November 1, 1981, as amendedand supplemented, between Fannie Mae in its corporate capacity and in its capacity as trustee and (b)Issue Supplement identifying and establishing the mortgage loan pool for the Mortgage Loan and the Fannie Mae Pass-Through Certificate related to such pool. "Fees" means, individually or collectively, (a) the Trustee's Annual Fee, (b) the Issuer's Annual Fee, and(c)the Rebate Analyst's Annual Fee, if any. "Fees Account"means the Fees Account of the Revenue Fund created by the Indenture. "Final Computation Date" means "final computation date" as such phrase is used in the regulations promulgated pursuant to Section 148(f)of the Code(or any successor thereto). "Financing Agreement" means the Financing Agreement, dated as of April 1, 1999, among the Issuer, the Trustee, the Borrower and the Servicer, as amended, modified,supplemented or restated from time to time to the extent permitted by the Indenture. ":Fully .Prepaid ,Wortgage Loan" has the meaning given that terra in the Fannie Mae Trust Indenture. By way of illustration, and not limitation, in respect of a mortgage loan, such term generally means (a)payment of the entire principal balance of the mortgage loan prior to the final maturity of the mortgage loan,(b)receipt by Fannie Mae of cash in connection with the liquidation of the mortgage loan, whether through insurance or guaranty proceeds, condemnation awards, proceeds of any sale of the project encumbered by the mortgage loan or otherwise (and whether or not such cash is equal to the unpaid principal amount of the mortgage loan and all interest accrued on the mortgage loan) in an amount determined by Fannie Mae in its reasonable Judgment to be the full amount finally recoverable on account of the mortgage loan or (c)the mortgage loan is deemed by Fannie Mae, at its option, to be a Fully Prepaid Mortgage Loan because, for example, (i)the mortgage loan has become delinquent, in whole or in part, as to four consecutive monthly installments of interest or principal and interest, (ii)Fannie Mae or any other party entitled to do so shall have declared the principal balance of the mortgage loan to be immediately due and payable in accordance with the terms of the mortgage note or the mortgage and such principal balance shall not have been paid within ten days after such declaration, (iii)the project or any interest in the borrower has been transferred, or is proposed to be transferred, under circ=umstances in which Fannie Mae is legally permitted or reasonably believes that it is legally permitted, to accelerate the maturity of the mortgage loan pursuant to the terms of any "due-on-sale" or like clause contained in the documentation of the mortgage loan, (iv)Fannie Mae has acquired the project through foreclosure, deed-in-lieu of foreclosure or comparable conversion of the mortgage loan or(v)there has been a material breach of warranty by the Servicer or a material defect in the mortgage loan documentation. ".wands"means all Funds created by the Indenture. "General.Receipts and Disbursements Account" means the General Receipts and Disbursements Account of the Revenue F=und created by the Indenture. "Government Obligations" means direct obligations of, and obligations on which the full and timely payment of principal and interest is unconditionally guaranteed by, the full faith and credit of the United States of America. "Guaranty Fee" means the Guaranty Fee payable to Fannie Mae for issuing a Fannie Mae Pass-Through Certificate. 0 1-177463.02 A-8 "Highest Rating Category" means an S&P Mating Category of"A-I-" for instruments Laving a term of one year or fess and "AAA" for instruments Having a terra greater than one year, and a Moody's Rating Category of "P-1" for instruments having a term of one year or less and at least "Aad" for instruments having a terra greater than one year. "Housing Act"means the United States Housing Act of 1937,as amended,or its successor. "Immediate Notice" means written notice given by telecopy or other telecommunication device, promptly followed by a duplicate or "hard copy" of such written notice sent by certified mail, return- receipt requested,or delivery of a written notice in person or by messenger service. "Improvements" means the improvements made or to be made upon the Land described in the Mortgage. "Income Certification"means a Verification of Income and an Occupancy Certificate in the form attached as Exhibit B hereto or in such other comparable form as may be provided by the Issuer to the Owner. "Indenture" means the Trust Indenture, pursuant to which the Bonds are issued, dated as of April 1, 1999, between the issuer and the Trustee, as amended, modified, supplemented or restated from time to time as permitted by the terms of the Indenture. "Ineligible iWoneys Account" means the Ineligible honeys Account of the Revenue Fund created by the Indenture. "Initial Debt Service Deposit" means the amount which is required to be paid on the Closing Date by the Borrower to the Trustee and deposited by the Trustee into the General Receipts and Disbursements Account pursuant to the Indenture,and which account is being fully funded with Net Bond Proceeds. "Interest Payment .date" means May I and November I of each year beginning November 1, 1999, each Redemption Date,each Maturity Date, and the date of acceleration of the Bands. "Investment Agreement" means any investment agreement with respect to amounts on deposit in any Fund or Account, or any substitute investment agreement with respect to amounts on deposit in any Fund or Account,as described in paragraph(vii)of the definition of Permitted Investments. "Investment Income" means the earnings and profits derived from the investment of moneys pursuant to the Indenture. "Issue Date"means, with respect to the Fannie Mae Pass-Through Certificate,the first day of the month in which the Fannie Mae Pass-Through Certificate Delivery Date occurs. ":Issue Date Principal Balance" means, with respect to the Mortgage Loan, the principal balance of the Mortgage Loan as of the Issue Date. "Issuer's Annual Fee" means the annual fee of the Issuer in an amount equal to .125% of the initial unpaid principal balance of the Mortgage Loan, which shall be payable monthly commencing October 1, 1999. "Landf' means the real property (as described in the Mortgage), that will serve as the site of the Improvements that comprise a part of the Project as described in the Mortgage. 01-177463.02 A-9 "Low Income Tenant" means any tenant (i)whose Adjusted Income does not exceed limits determined in a manner consistent with determinations of Low Income families under Section 8 of the Housing Act, except that the percentage of median gross income that qualifies as Low Income shall be 60% of gross income for the Area with adjustments for family size; and (ii)whose income does not exceed the qualifying limits for Low Income families as established and amended from time to time pursuant to Section 8 of the Housing Act, or who otherwise qualify as lower income households as defined by Section 50105 of the California Health and Safety Code (as in effect on the dosing Date). If all the occupants of a unit are students(as defined under Section 151(e)(4)of the Code), no one of whom is entitled to file a joint return under Section 6013 of the Code, such occupants shall not qualify as Low Income Tenants-. The determination of a tenant's status as a Low income Tenant shall be made by the Owner upon initial occupancy of a unit in the Project by such Tenant, on the 'basis of an Income Certification executed by the Tenant, "Low Income units" means the units in the Project required to be rented, or held available for occupancy by,Low Income Tenants pursuant to the Regulatory Agreement. "Maturity Date"means any maturity date shown in the Indenture. "Moody's" means Moody's Investors Service, Inc., a Delaware corporation, and its successors and assigns, or if it shall be dissolved or shall no longer assign credit ratings to long term debt, then any other nationally recognized statistical rating agency, designated by Fannie Mae, as shall assign credit ratings to long term debt. 'Vvfortgage" means the Multifamily Deed of Trust, Assignment of Rents and Security Agreement, together with all riders, securing the Mortgage Note, to be executed by the Borrower with respect to the Project, as it may be amended, modified, supplemented or restated from time to time to the extent permitted by the Indenture. "Mortgage Loan" means the mortgage loan to be made by the Issuer to the Borrower out of the Net Bond Proceeds, which loan will be made pursuant to the Financing Agreement for the purpose of providing funds to the Borrower to finance the acquisition, rehabilitation and equipping of the Project, and which mortgage loan is to be acquired by Fannie Mae on the Fannie Mae Pass-Through Certificate Delivery Date pursuant to and in accordance with the terms and conditions of the Fannie Mae Commitment in exchange for the Fannie Mae Pass-Through Certificate. ' "Mortgage Loan Documents" means the Mortgage, the Mortgage Note, and each of the other instruments documenting,evidencing, securing or otherwise relating to the Mortgage Loan, including all amendments, modifications,supplements and restatements of such instruments,but specifically excluding the Financing Agreement and the Regulatory Agreement. "Mortgage Loan Fund"means the Mortgage Loan Fund created by the Indenture. "Mortgage Loan Fund Requisition Certificate" means a certificate in the form provided in the Indenture. "1fortgage Note" means, with respect to the Mortgage Loan, the Multifamily Nate, bated as of April 1, 1999, including allonge to the Multifamily Note, to be (a) executed by the Borrower in favor of the Issuer, and (b) assigned, pursuant to the Assignment, and endorsed without recourse, by the Issuer to the Trustee and Fannie Mae, as their interests may appear, and evidencing the Borrower's financial obligations under the Mortgage Loan, as the same may be amended, modified, supplemented or restated 01-177463.02 A-10 from time to time to the extent permitted in the Indenture or any mortgage note executed in substitution therefor as such substitute note may be amended,modified,supplemented or restated from time to time. "Mortgage Nate Rate"has the meaning given to that term in the Mortgage Note. "Net Bond Proceeds" means the total proceeds derived from the issuance, sale and delivery of the Bonds, representing the total purchase price of the Bonds, including any premium paid as part of the purchase price of the Bonds, but excluding the accrued interest on the Bonds paid by the initial purchaser(s)of Bonds. "Opinion of Bond Counsel"means a written opinion of Bond Counsel addressed to the Issuer,the Trustee and, at its request, Fannie Mae, and in form and substance acceptable to the Issuer and, in all events,Fannie Mae. "Qvinion of CounseP' means a written opinion of legal counsel acceptable to Fannie Mae and/or, if the recipient(s)of the opinion is/are other than Fannie Mae, acceptable to such recipient(s)(and if the opinion is with respect to an interpretation of federal tax laws or regulations, or bankruptcy, such legal counsel shall also be an attorney or firm of attorneys experienced in such matters), including any opinion issued by the Fannie Mae Legal Department." "Outstanding"means, when used with reference to the Bonds at any date as of which the amount of Outstanding Bonds is to be determined., all Bonds which have been authenticated and delivered hereunder except: (a) Bonds cancelled or delivered for cancellation at or prior to such date; (b) Bonds deemed to be paid in accordance with the Indenture;and (c) Bonds in lieu of which others have been authenticated under the Indenture. In determining whether the owners of a requisite aggregate principal amount of Outstanding Bonds have concurred in any request, demand,authorization,direction,notice,consent or waiver under the provisions of the Indenture, Bonds which are owned or held by or for the account of the Borrower shall be disregarded and deemed not to be Outstanding under the Indenture for the purpose of any such determination unless all Bonds are owned or held by or for the account of the Borrower. In determining whether the Trustee shall be liable in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Bonds which are registered in the nage of or known by the Trustee to be held for the account of the Borrower shall be disregarded. "Participant" means a broker-dealer, bank or other financial institution for which ITC holds Bonds as Securities Depository. ".Pass-Through Rate"has the meaning given that term in the Mortgage dote. "Pass-Through Rate Subaccount"means the Pass-Through Rate Subaccount of the Credit Facility Account established within the Revenue Fund created by the Indenture. "PayingAgent"means the Trustee. "Permitted Investments" means, to the extent authorized by law for the investment of moneys of the Issuer: 01-177463.02 A-! I (i) Government Obligations; (ii) direct obligations of, and obligations on which the full and timely payment of principal and Interest is unconditionally ,guaranteed by, any agency or instrumentality of the United States of America (other than the Federal Home Loan Mortgage Corporation) or direct obligations of the World Bank,provided that such obligations are assigned a credit rating by S&P and Moody's in the Highest Rating Category of S&P and of Moody's; (iii) obligations of the State or any other state or territory of the United States of America,or obligations of any agency,instrumentality,authority or political subdivision of the State or of such state or territory, or obligations of any public benefit or municipal corporation the principal of and interest on which are guaranteed by the State or such other state or political subdivision and the interest on which is payable on a current basis,and which obligations are rated in the Highest Rating Category of S&P and of Moody's; (iv) any written repurchase agreement entered into with a Qualified Financial Institution whose unsecured short-term obligations are rated in the HighestRating Category of S&P and of Moody's, provided such agreement has a Terra not to exceed 30 days; (v) commercial paper rated in the Highest Rating Category of SSP and of Moody's; (vi) (a) interest-bearing negotiable certificates of deposit, interest-bearing time deposits, interest-bearing savings accounts or bankers' acceptances, issued by a Qualified Financial Institution whose unsecured short-term obligations are rated in the Highest Rating Category of S&P and of Moody's, or (b)interest-bearing negotiable certificates of deposit, interest-bearing time deposits or interest-bearing savings accounts, issued by a Qualified Financial Institution, if such deposits or accounts are fully insured by the Federal Deposit Insurance Corporation.- (vii) orporation;(vii) an agreement for the investment of moneys at a guaranteed rate (an "Investment Agreement") held by the Trustee with: (A) a Qualified Financial Institution whose unsecured long-terra obligations are rated in the Highest Rating Category of S&P and of Moody's, or whose obligations are unconditionally guaranteed or insured by a Qualified Financial Institution whose unsecured long-terra obligations are rated in the Highest Rating Category of S&P and of Moody's, provided that notice of the Investment Agreement shall be provided to the Rating Agency prior to the execution and delivery of the Investment Agreement, provided, further, that the Investment Agreement shall be in a form acceptable to Fannie Mae, and provided, further, that the Investment Agreement shall include, without limitation, the following restrictions; (I) the invested funds shall be available for withdrawal without penalty or premium at any time that (a) the Trustee is required to pay moneys from the Fund(s) established under the Indenture to which the Investment Agreement is applicable or (b) any hating Agency indicates that it will lower, suspend or withdraw or actually lowers, suspends or withdraws the rating on the Bonds on account of the rating of the Qualified Financial Institution providing, guaranteeing or insuring,as applicable, the Investment Agreement; 41-177463.02 A-12 (2) the Investment Agreement shall be the unconditional and general obligation of, and shall not be subordinated to any other obligation of, the provider and, if applicable, the guarantor or insurer, of the Investment Agreement; (3) the Trustee shall receive an Opinion of Counsel that the Investment Agreement is legal, valid, binding and enforceable upon the provider of the Investment Agreement, in accordance with its terms and, if applicable,that any guarantee or other facility backing the Investment Agreement is legal, valid, binding and enforceable upon the provider of such guarantee or other facility, in accordance with its terms; and (4) the Investment Agreement shall provide that if during its term the rating of the Qualified Financial Institution providing, guaranteeing or insuring, as applicable, the Investment Agreement, by either S&P or Moody's is withdrawn or suspended or falls below the Highest Rating Category,the provider must provide immediate notice to the Issuer and the Trustee and must, at the written direction of the Trustee (given after receipt of written notice of such rating withdrawal, suspension or downgrade),within 10 days following receipt of such direction, either: (a) collateralize the Investment Agreement (if the Investment Agreement is not already collateralized) with Permitted Investments described in paragraphs (i) or (ii) above by depositing such collateral with the Trustee or a third party custodian, such collateralization to be effected in a manner and in an amount sufficient to maintain(1)the integrity of the Cash Flow Projection most recently provided with respect to the Bonds and (2) the then current rating of the Bonds, or, if the Investment Agreement is already collateralized, increase the collateral with Permitted Investments described in paragraphs (i) or (ii) above by depositing such collateral with the Trustee or a third party custodian, such collateralization to be effected in a manner and in an amount sufficient to maintain (3) the integrity of the Cash Flow Projection most recently provided with respect to the Bonds and (4)the then current rating of the Bonds, but in neither circumstance under this clause (a) shall (A) the Investment Agreement be collateralized at less than 110% of the value of the Investment Agreement, or (B) the collateral be Narked to market less frequently than weekly, or (b) unless waived by the Trustee, repay the principal of and accrued but unpaid interest on the investment, in either case with no penalty or premium to the Trustee unless required by law (the choice of(a) or(b) shall be that of the Trustee); and (5) the Investment Agreement shall provide that the principal of and accrued but unpaid interest on the investment(with no penalty or premium),shall be paid to the Trustee upon a defeasance or acceleration, in whole or in part, of the Bonds;or (B) Fannie Mae, (viii) money market mutual funds (including any proprietary mutual fund of the Trustee for which the Trustee or an affiliate is investment advisor or provides other services to such mutual fund and receives reasonable compensation for such services) registered under the Investment Company Act of 1940 that have been rated "AAAm-G" or "AAAm" by S&P and "Aaa" by Moody's, provided that the portfolio of such money market mutual fund is limited to obligations 01-17746102 A-13 described in (x) paragraph (i) above and to agreements to repurchase such obligations or (y) paragraphs(ii)or(iii)above and approved in writing by Fannie Mae;and (ix) any other investment authorized by the laws of the State if such investments are approved by Fannie Mae and the Rating Agency, provided that Permitted Investments shall not include the following: (a)any investments with a final maturity or any agreements with a terra greater than 365 days from the date of the investment(except(i) obligations that provide for the optional or mandatory tender, at par, by the holder of such obligations at least once within 365 days of the date of purchase, (ii) Government Obligations irrevocably deposited with the Trustee for payment of Bonds pursuant to the Indenture, and (iii) agreements or investments listed in paragraphs(vii) and (ix) above); (b)any obligation (other than obligations listed in (i) and (ii) above) with a purchase price greater or less than the par value of such obligation (c)mortgage-backed securities, real estate mortgage investment conduits or collateralized mortgage obligations, (d) interest-only or principal-only stripped securities, (e)obligations bearing interest at inverse floating rates, (f)any investment which may be prepaid or called at a price less than its purchase price prior to stated maturity, (g) any investment described in paragraph(iv) or (vii) above with a Qualified Financial Institution (as defined in clause (d)of the definition of"Qualified Financial Institution") if the Qualified Financial Institution does not agree to submit to jurisdiction, venue and service of process in the United States of America in the Investment Agreement and (h) any investment the interest rate on which is variable, and is established other than by reference to a single interest rate index plus a single fixed spread, if any, and which interest rate moves proportionately with that index; provided farther that if any such investment described in paragraphs(i) through (ix) above is required to be rated, such rating requirement will not be satisfied if an "r°" highlighter or a "t" highlighter is affixed to its rating or is otherwise applicable. If an Investment Agreement is entered into which does not require the provider to either (a) post collateral as described in paragraph (vii) above upon a downgrade in the rating of the provider or (b)compensate the Trustee for any loss in yield upon reinvestment if the Investment Agreement is terminated following a downgrade in the rating of the provider,the yield on the Investment Agreement above the minimum yield permitted by the Rating Agency(presently [2.5%] per annum)shall not be taken into account in any Cash Flow Proiection provided to the Rating Agency in connection with its rating of the Bonds. "Person" means any natural person, firm, partnership, association, limited liability company, corporation,company or public body. "Pledged Collateral"shall have the meaning given to that term in the Collateral Agreement. "Principal Amount" means the sum of the Tax-Exempt Principal Amount and the 'Taxable Principal Amount. "Principal Office"of the Trustee means the corporate trust office of the Trustee at the address set forth in the Indenture or such other address as may be specified in writing by the Trustee, as provided in said Indenture; and "Principal Office" of the Servicer means the office of the Servicer at the address set forth in the Indenture or such other address as may be specified in writing by the Servicer, as provided in the Indenture. "Principal Subaccount" means the Principal Subaecount of the Credit Facility Account established within the Revenue Fund created by the Indenture. "Qualified Financial Institution" means any of the following having a senior unsecured debt rating in the Highest Rating Category of S&P and Moody's, and approved by Fannie Mae: a(a) bank or 01-1,77463.02 A-14 trust company organized under the laws of any state of the united States of America,(b)national banking association, (c) savings bank, a savings and loan association, or an insurance company or association chartered or organized under the laws of any state of the united States of America, (d)federal branch or agency pursuant to the International Banking Act of 1978 or any successor previsions of la.w or a domestic branch or agency of a foreign bank which branch or agency is duly licensed or authorized to do business under the laws of any state or territory of the United States of America, (e) government bond dealer reporting;to,trading with, and recognized as a primary dealer by the Federal Reserve Bank of New York., and (f) securities dealer approved in writing by Fannie Mae the liquidation of which is subject to the Securities Investors Protection Corporation or other similar corporation. "Qualified Project Costs"means any expenditure: (a)to provide facilities and improvements that constitute part of a qualified residential rental project within the meaning of Section 142(d) of the Code; (b)that is properly chargeable to the Project's capital account under general Federal income tax principles or that would be so chargeable with a proper election or but for a proper election by the Borrower to deduct such expenditure; and (c) that was incurred after the date 60 days before , 1999, as more fully set forth in the Tax Certificate, "Qualif ".Rebate Fund"means the Rebate Fund created by the Indenture. "Record Date" means, with respect to any Interest Payment Date, the fifteenth day of the month preceding the month in which such Interest Payment Date falls. "Redemption Account" means the Redemption Account of the Revenue Fund created by the Indenture. "Redemption Date" means any date designated as a date upon which Bondsare to be redeemed pursuant to the Indenture. "Regulatory Agreement" means the Regulatory Agreement and Declaration of Restrictive Covenants, dated as of April 1, 1999, by and among the Issuer, the Trustee and the Borrower, as amended,modified,supplemented or restated from time to time to the extent permitted by the Indenture. ".Rehabilitation,Fund"means the Rehabilitation Fund created under the Indenture. "Rehabilitation.Fund .deposit"means the deposit to be made by the Borrower with the Trustee on the Closing Date in the amount specified in the Financing Agreement, which amount is to be deposited into the Rehabilitation Fund. "Reimbursement Agreement" means the Reimbursement Agreement, dated as of April 1, 1999, between Fannie Viae and the Borrower, as amended, modified, supplemented or restated from time to time or any agreement entered into in substitution therefor. "Reserved Rights" means those certain rights of the Issuer under the Financing Agreement to indemnification and to payment or reimbursement of fees and expenses of the Issuer, including the Issuer's Annual Fee and fees and expenses of counsel, assumption fees and indemnity payments, its nonexclusive right to enforce the Regulatory Agreement in accordance with the terms thereof, its right to give and receive notices and to enforce notice and reporting requirements and restrictions on transfer of ownership, its right to inspect and audit the books, records and premises of the Borrower and of the Project, its right to collect attorneys' fees and related expenses, its right to enforce the Borrower's covenants to comply with applicable federal tax law and State law (including the Act) and the requirements of the Issuer, its right to receive notices under the Financing Agreement and its rights to give or withhold consent to amendments, changes, modifications and alterations to the Financing Agreement. "Responsible Officer" means any officer of the Trustee assigned to administer the duties of the Trustee under the Indenture, the Financing Agreement, the Regulatory Agreement and the Collateral Agreement. ".Revenue Fund'means the Revenue Fund created by the Indenture,comprising the Accounts and subaccounts created within the Revenue Fund. "Revenues" means all(a)Investment Income (other than Investment Income earned from moneys on deposit in the Rebate Fund and the Costs of Issuance Fund (except to the extent Investment Income earned from moneys on deposit in the Costs of Issuance Fund is transferred to the General Receipts and Disbursements Account)), (b) prior to the Fannie Mae Pass-Through Certificate Delivery Date, all payments made under the Mortgage ?Mote, (c)all payments made under the Collateral Agreement, and (d)on and after the Fannie Mae Pass-Through Certificate .Delivery Date, all distributions made by Fannie Mae under the Fannie Mae Pass-Through Certificate. 01-177463.02 A-i 6 "Securities Depository" means, initially,The Depository Trust Company,New York,New York, and its successors and assigns,and any replacement securities depository appointed tinder the Indenture. "Servicer" means ARCS Commercial Mortgage Co., L.P., a California limited partnership, as servicer of the Mortgage Loan and any successor Servicer appointed by Fannie Mae. "Servicer Assignment"means the Assignment of Mortgage Loan(Servicer Assignment),which is to be delivered by the Servicer to Fannie Mae in connection with the issuance of the Fannie Mae Pass-Through Certificate,which assignment shall be in substantially the form attached to the Indenture as Exhibit C. "Servicer Commitment" means the Servicer Commitment accepted by the Borrower, as the same may be amended,modified,supplemented or restated from time to time. "Sinking Fund Redemption Bate" means each mandatory bond sinking fund redemption date provided for in the Indenture. "S&P" means Standard& Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., and its successors and assigns, or if it shall be dissolved or shall no longer assign credit ratings to long term debt,then any other nationally recognized statistical rating agency,designated by the Issuer and acceptable to Fannie Mae and the Borrower,as shall assign credit ratings to long term debt. "State"means the State of California. "Stated Principal Balance" has the meaning given to that term in the Fannie Mae Trust Indenture. "Substitute .Fannie telae Pass-Through Certificate" has the meaning given to that term in the Indenture. "Substitution .mate" means, with respect to the effective date of substitution of a Credit Facility other than the Collateral Agreement or a Fannie Viae Pass-Through Certificate,the first day of any month. `°Si pplerrmental Indenture" means any indenture duly authorized and entered into between the Issuer and the Trustee amending or supplementing the Indenture in accordance with the provisions of the Indenture. "Tax Certificate" means the Tax Certificate and Agreement dated the Closing Date, executed and delivered by the Issuer and the Borrower containing various representations, warranties and covenants intended to demonstrate that the interest on the Series D Bonds is excludable under Section 103 of the Code from the gross incomes of the owners thereof for federal income tax purposes and to maintain such excludability from grass income. "Tar Covenants" means any and all covenants entered into by the Borrower to comply with all requirements of the Code that must be met or observed under Code Sections ?03 and 141 through 150, and the regulations promulgated thereunder, to maintain under Code Section 103 the exclusion of the interest on the Series D Bonds from the gross incomes of the owners thereof. "Taxable .Principal Amount" means $2,500,000, the original aggregate principal amount of the Series D-T Bonds. 01-177463.02 A-17 "Tax-Exempt" means, with respect to interest on any obligations of a state or local government, including the Series D Bonds, that such interest is excluded from gross income for federal income tax purposes; provided, however, that such interest may be includable as an item of tax preference or otherwise includable directly or indirectly for purposes of calculating other tax liabilities, including any alternative minimum tax or environmental tax, under the Code. "Tax-Exempt Principal Amount" means $5,400,000, the original aggregate principal amount of the Series D Bonds. "Term bonds"means(a)the Series D Bonds having a Maturity Date of and , and (b)the Series D-T Bonds having a Maturity bate of and "Termination Date"has the meaning given that term in the Fannie Mae Commitment. "Trustee" means U.S. Bank Trust National Association, a national banking association organized and existing under the laws of the United States of America, and any successors or assigns to U.S. Bank Trust National Association, or any other corporation or association resulting from or surviving any consolidation or merger to which it or its successors may be a party and any successor trustee at any time serving as successor trustee under the Indenture. "Trustee Assignment" means the Assignment of Mortgage Loan (Trustee Assignment), which is to be delivered by the Trustee to the Servicer in connection with the issuance of the Fannie Mae Pass-Through Certificate,which assignment shall be in substantially the form attached to the Indenture as Exhibit B. "Trustee's Annual Fee" means the annual ongoing trust administration fee of the Trustee as provided in the Financing Agreement, computed and paid semiannually in arrears on each Interest Payment Date, subject to pro rata reduction to the extent of a full or partial prepayment of the Mortgage Note. "Trust Estate" means the property, rights, money, securities and other amounts pledged and assigned pursuant to the Indenture. "U.C.C." means the Uniform Commercial Code of the State as now or hereafter amended, whether or not such Uniform Commercial Code is applicable to the parties or the transactions. "Underwriter"means Hutchinson, Shockey, Erley& Co. "Verfcation Agent" means an independent firth of certified public accountants, an independent financial advisory firm or other independent third party qualified and experienced in the verification of the mathematical accuracy of scheduled cash flows and other funds to pay the principal of and interest on bands and fees, designated by the Borrower and acceptable to Fannie Mae, preparing a Verification Report. L,Verification cf'Income"means a Verification of Income in the farm attached as Exhibit B to the Regulatory Agreement or in such other comparable form as may be provided by the Issuer to the Borrower. "Verification Report"means a report prepared by a Verification Agent verifying the mathematical accuracy of a Cash Flow Projection. 0 10177463.32 A-18 THE LNDENTURE The following is a description of the Indenture. Capitalized terms used herein are defined above under the heading "CERTAIN DEFINITIONS," or are defined in the Indenture. This summary does not purport to be complete or definitive and is quaked in its entirety by reference to the Indenture, a copy of which is on file with the Trustee. Trust Estate The Trust Estate includes the following„ (a) all right, title and interest of the Issuer in and to the Financing Agreement, the Regulatory Agreement, the Mortgage Loan, the Mortgage Note, the Mortgage and the other Mortgage Loan Documents, and all amendments, modifications, supplements, renewals and restatements of the foregoing, including, but not limited to, all rights to receive payments on the Mortgage Dote and under the other Mortgage Loan Documents, and all proceeds of insurance or condemnation awards; provided that the foregoing pledge and assignment shall be subject to the provisions of the Assignment and the Collateral Agreement, including the right of Fannie Mae, as provided in the Collateral Agreement, to direct the Trustee to assign the Mortgage Lean to Fannie Mae, including within such assignment the Mortgage Mote and the Mortgage; and provided further that there shall be excluded from the foregoing pledge and assignment the Reserved Rights which shall be retained by the Issuer for its sole and exclusive benefit; (b) all right, title and interest of the Issuer in and to the Net Bond Proceeds and the accrued interest derived from the sale of the Bonds and al l Funds and Accounts established=under the Indenture (including, without limitation, moneys, documents, securities, investments, instruments and general intangibles on deposit, or otherwise held by the Trustee under the Indenture), including Investment Income; provided that there shall be excluded from the foregoing pledge and assignment all moneys (including Investment Income) on deposit from time to time in the Fees Account, the Rebate Fund and the Costs of Issuance Fund (including within such exclusion Investment Income retained in the Costs of Issuance Fund); (c) all Revenues; (d) all funds, moneys and securities and any and all other rights and interests in property,whether tangible or intangible,from time to time hereafter by delivery or by writing of any kind conveyed, mortgaged, pledged, assigned or transferred as and for additional security under the Indenture for the Bonds by the Issuer, or by anyone on its behalf, or with its written consent,to the Trustee,which is authorized to receive any and all such property at any and all times, and to hold and apply the same subject to the terms of the Indenture;and (e) all of the proceeds of the foregoing, including, without limitation, Permitted Investments and Investment Income, In addition: (i) until the delivery to the Trustee of the Fannie Mae Pass-Through Certificate as provided in the Indenture, the Trust Estate shall, for all purposes of the Indenture, be deemed to include the Collateral Agreement and the rights of the Trustee thereunder, including without limitation all payments made under the Collateral Agreement in accordance with its terms,and 01-.177463.42 A-19 (ii) upon delivery of the Fannie Mae Pass-Through Certificate to the Trustee as provided in the Indenture, the Trust Estate shall, for all purposes of the Indenture, be deemed to include the Fannie Mae Pass-Through Certificate and the rights of the Trust thereunder, including without limitation all distributions made under the Fannie Mae Pass-Through Certificate in accordance with its terms. Creation of Funds and Accounts The following Funds and Accounts are to be held and administered by the Trustee pursuant to the Indenture: (a) the Mortgage Loan Fund; (b) the Revenue Fund and within the Revenue Fund, the General Receipts and Disbursements Account, the Credit Facility Account (and within the CreditFacility Account, a Pass-Through Rate Subaccount and a Principal Subaccount) the Redemption Account, the Ineligible Moneys Account,and the Fees Account; (c) the Costs of Issuance Fund; (d) the Rehabilitation Fund; and (e) the Rebate Fund. Mortgage Loan Fund Deposit; Disbursement. The Trustee shall receive the Net Bond Proceeds and deposit them into the Mortgage Loan Fund. Disbursements front Mortgage Loan Fund. The Net Bond Proceeds on deposit in the Mortgage Loan Fund shall be disbursed by the Trustee in a single disbursement, such disbursement to be made on the Closing gate(if the applicable conditions set forth in the Indenture and the Financing Agreement have been satisfied) or as soon after the Closing Date as the requirements of the Indenture and the Financing Agreement have been satisfied, in an amount approved by the Servicer}solely to pay the specified portion of the Costs of the Project approved by the Servicer. This single disbursement from the Mortgage Loan Fund shall be made by the Trustee only upon receipt by the T rustee of a Mortgage Loan Fund Requisition Certificate, signed by the Authorized Borrower Representative and approved by the signature of an Authorized Servicer Representative. The Trustee shall have no duty to determine whether the requested disbursement from.the Mortgage Loan Fund is a proper charge against the Mortgage Loan Fund, but shall make such disbursement upon receipt of a Mortgage Loan Fund Requisition Certificate signed by the Authorized Borrower Representative and approved by the signature of an Authorized Servicer Representative. The written approval of the Authorized Servicer Representative and in the amount so approved by the Authorized Servicer Representative on the Mortgage Loan Fund Requisition Certificate shall be deemed a certification and, insofar as the Trustee and the Issuer are concerned, constitute conclusive evidence, that all of the terms, conditions and requirements applicable to the disbursement have been fully satisfied. Disbursement. The disbursement from the Mortgage Loan Fund shall be made prior to any disbursement from the Rehabilitation Fund pursuant to the Indenture. Notwithstanding any provision of the Indenture to the contrary,the disbursement from the Mortgage Loan Fund is expressly conditioned on the Trustee's receipt of the Collateral Agreement. 01-177463.02 A-20 Procedures. The Mortgage Loan Fund Requisition Certificate with respect to the disbursement from the Mortgage Loan Fund, signed by the Authorized Borrower Representative and approved by the Authorized Servicer Representative shall be paid on the day received by the Trustee, if received by noon, Pacific time, on any Business Day, or on the next Business Day if received after noon, Pacific time. Investment Income on the Mortgage Loan Fund, if any, shall, upon receipt, be transferred to, and deposited into,the General Receipts and Disbursements Account. Disposition of Remaining Amounts. Any amount remaining on deposit in the Mortgage Loan Fund on the first to occur of the Business.Day immediately following payment of the single disbursement from tete Mortgage Loan Fund, or the Termination Date shall be transferred on such date, as applicable,to the Redemption Account of the Revenue Fund and applied to the redemption of Blonds pursuant to the Indenture;provided that any amount in excess of a multiple of$5,000 shall be transferred on such date to the General Receipts and Disbursements Account of the Revenue Fund. Immediately prior to any special mandatory redemption of Bonds pursuant to the Indenture, any amounts then remaining in the Mortgage Loan Fund shall, at the written direction of Fannie Mae, be transferred to the Redemption Account of the Revenue Fund to be applied to the redemption of Bonds pursuant to the Indenture. Revenue Fund General. Moneys in the Revenue Fund shall be used solely for the purposes set forth in the Indenture. Aging of Moneys. Notwithstanding anything contained in the Indenture to the contrary, all moneys deposited to the credit of the Revenge Fund which do not constitute Available Moneys at the time of such deposit, shall be held in the Ineligible Moneys Account of the Revenue Fuad until such time as the same constitute Available Moneys under the Indenture, provided that, in each case, after such moneys shall become Available Moneys (or if the same at the time of deposit are Available Moneys), such moneys shall tae transferred to the General Receipts and Disbursements Account or the Redemption Account of the Revenue Fund, as appropriate; provided, further, that this paragraph shall have no applicability to. (a)the Initial Debt Service Deposit, (b) any payment received by the Trustee which constitutes a Required Mortgage Payment(as defined in the Collateral Agreement)(c) Investment Income arising out of the investment of any such Required Mortgage Payment, or(d) any earnings from time to time on deposit in the Fees Account. The Trustee shall establish separate subaceounts for all such moneys so as to ensure the separate identity of moneys received on a given date from each discrete source for the credit of such account from moneys received on any other date from each discrete source for the credit of such account and to separately identify moneys intended by the Borrower for eventual transfer to the General Receipts and Disbursements Account or the Redemption Account of the Revenue Fund. Deposits into the General Receipts and Disbursements Account. The Trustee shall deposit each of the following amounts into the General Receipts and Disbursements Account of the Revenue Fund: (a) on the Closing Date,the accrued interest, if any,on the Bonds; (b) on the Closing Date,the Initial Debt Service Deposit; (c) prior to the Fannie Mae Pass-Through Certificate Delivery Date, all regularly scheduled payments of principal, if any,and interest on the Mortgage Loan;; 01-177463.02 A-21 (d) prior to the Fannie Mae Pass-Through Certificate Delivery Date, any transfer from the Credit Facility Account pursuant to the Indenture; (e) prior to the Fannie Mae Pass-Through Certificate Delivery Date, interest paid in connection with any prepayment of the Mortgage Loan; (f) after the Fannie Mae Pass-Through Certificate Delivery Date upon receipt, all distributions of principal and interest under the Fannie Mae Pass-Through Certificate; (g) after the Fannie Mae Pass-Through Certificate Delivery Date, the interest component of any prepayment of the Fannie Mae Pass-Through Certificate (but specifically excluding the principal component of any prepayment of the Fannie Mae Pass-Through Certificate, which principal component prepayment small be deposited into the Redemption Account); (h) all Investment Income on the Funds and Accounts (except that Investment Income earned on amounts on deposit in the Mortgage Loan Fund shall be transferred to and become a part of the amounts on deposit in the Rehabilitation Fund; Investment Income earned on amounts on deposit in the Rehabilitation Fund shall be credited to and be retained in the Rehabilitation Fund; Investment Income earned on accounts on deposit in the Rebate Fund shall be credited to and be retained in the Rebate Fund; Investment Income earned on amounts on deposit in the Costs of Issuance Fund which is not attributable to Net Bond Proceeds or the Investment Income on Net Bond Proceeds shall be credited to and be retained in the Costs of Issuance Fund, (i) from time to time, upon receipt, Available Moneys provided by or on behalf of the Borrower to fund the interest portion of any End-Period Payment,and 6) any other moneys made available for deposit into the General Receipts and Disbursements Account from any other source, and moneys held in the Ineligible Moneys Account of the Revenue Fund and transferred to the General Receipts and Disbursements Account, provided that such moneys shall be transferred to the General Receipts and Disbursements Account only after they shall have become Available Moneys. Deposits into the RerlemptionAccount. The Trustee shall deposit each of the following amounts into the Redemption Account of the Revenue Fund; (a) prior to the Fannie Mae Pass-Through Certificate Delivery Date, any prepayment of principal of the Mortgage Loan, and any premium on the Bonds to be paid in connection with such prepayment; (b) prior to the Fannie Mae Pass-Through Certificate Delivery Date, that portion of any other deposit or transfer of funds representing principal corresponding to the principal to be paid on any optional or special mandatory redemption of the Bonds; (c) prior to the Fannie Mae Pass-Through Certificate Delivery Date, any transfer from the Credit Facility Account pursuant to the Indenture; (d) prior to the Fannie Mae Pass-Through Certificate Delivery Date, any other moneys to be transferred to the Redemption Account pursuant to any provision of the Indenture; 01-177463.02 A-22 (e) any amounts required to be transferred from the Mortgage Loan Fund to the Redemption Account pursuant to the Indenture to effect certain special mandatory redemptions of the Bonds; (f) any amounts required to be transferred from: the Rehabilitation Fund to the Redemption Account pursuant to the Indenture to effect certain special mandatory redemptions of Bonds; (g) after the Fannie Mae Pass-Through Certificate Delivery Date, distributions under the Fannie Mae Pass-Through Certificate corresponding to a voluntary prepayment of principal of the Mortgage Loan; (h) after the Fannie Mae Pass-Through Certificate Delivery Date, distributions under the Fannie Mae Pass-Through Certificate resulting from (a).Fannie Mae's determination that the Mortgage Loan is or is to be deemed a Fully Prepaid Mortgage Loan (other than by reason of optional prepayment of the entire principal balance of the Mortgage Loan prior to final maturity, causing an optional redemption of the Bonds), or(b)other moneys from time to time received by Fannie Mae with respect to the principal of the Mortgage Loan and distributed to the Trustee (other than by reason of optional prepayment of the entire principal balance of the Mortgage Loan prior to final maturity,causing an optional redemption of the Bonds), (i) after the Fannie Mae bass-Through Certificate Delivery Date, from time to time, upon receipt, Available Moneys provided by or on behalf of the Borrower to fund the premium portion of any End-Period Payment; 0) any other Available Moneys which may be deposited into the Redemption Account for the optional redemption of Bonds;and (k) any other amount received by the Trustee and required by the terms of the Indenture or any Financing Agreement to be deposited into the Redemption Account, including amounts held in a separate account of the Revenue Fund for deposit into the Redemption Account, provided that such moneys shall be transferred to the Redemption Account only after they shall have become Available Moneys. Deposits into the Credit Facitio Account. The Trustee shall deposit each of the following amounts into the subaccounts of the Credit Facility Account of the Revenue Fund: (a) all amounts derived from the Collateral Agreement in respect of principal payments on the Mortgage Loan, which amounts shall be deposited in the Principal Subaccount; and (b) all amounts derived from the Collateral Agreement in respect of payments of the Pass-Through Rate,which amounts shall be deposited into the Pass-Through Rate subaccount. No other moneys shall be deposited in the Credit Facility Account. The Credit Facility Account shall be closed at such time as Fannie Mae has no continuing liability under the Collateral Agreement. Deposits into the.Fees Account. The Trustee shall deposit into the Fees Account of the Revenue Fund the amounts provided for in the Indenture and the amounts transferred by the Servicer to the Trustee pursuant to the Financing Agreement. 01-:77463.02 A-23 Disbursements from the Accounts of the Revenue Fund. Moneys on deposit in the various Accounts of the Revenue Fund shall be disbursed at the following times, applied in the following manner and in the following order of priority: (a) on each Interest Payment Date, the Trustee shall disburse from the general Receipts and Disbursements Account an amount equal to the amount of interest due on the Bonds on such Interest Payment Date and shall apply such amount to the payment of such interest so due; (b) on each Redemption bate on which a mandatory sinkingfund redemption is scheduled to take place, each Maturity Date and the date of acceleration of the Bonds,the Trustee shall disburse from the General Receipts and Disbursements Account an amount equal to the amount of principal due on the Bonds on such date and shalt apply such amount to the payment of such principal so due; (c) on each Redemption Date on which a redemption (other than a mandatory sinking fund redemption)is scheduled to take place,the Trustee shall apply amounts on deposit in the Redemption Account to the payment of principal of and premium, if any, on the Bonds to be redeemed on such date; (d) on each May i and November 1, the Trustee shall transfer an aggregate amount equal to that portion of the Trustee's Annual Fee (to the extent the Trustee's Annual Fee is included in the Pass-Through Rate, as described in the Financing Agreement) payable on such date (or on any date prior to the next Interest Payment Date), from the General Receipts and Disbursements Account to the Fees Account; (e) the Trustee shall disburse amounts on deposit in the Fees Account as follows: (1)on each May t and November 1 to the Trustee, an amount equal to one-half of the Trustee's Annual Fee, (2)on the first day of each month to the Issuer,an amount equal to one-twelfth of the Issuer's annual fee, as provided in the Financing Agreement, and (3) upon receipt of an invoice from the Rebate Analyst, if any, to the Trustee, an amount equal to the Rebate Analyst's Annual Fee; in the event the amount in the Fees Account is insufficient to pay such Fees, the Trustee shall make written demand on the Borrower for the amount of such insufficiency and, pursuant to the terms of the Financing Agreement,the Borrower shall be liable to promptly pay the amount of such insufficiency to the Trustee within five Business Days after the date of the Trustee's written demand: (f) on each May 1 following the disbursement, transfer and application of funds described in the preceding paragraphs (a) through (e), the Trustee shall transfer any amounts remaining in the General Receipts and Disbursements Account in excess of$15,000 to the Rebate Fund up to the amount required to be deposited into the Rebate Fund to satisfy any deficiency Band in the Rebate Fund; and (g) any moneys remaining following any transfer pursuant to paragraph (f) above shall be retained in or transferred(as the case may be) to the General Receipts and Disbursement Account. Transfers Within the Revenue Fund. The Trustee shall, on each Interest Payment Date and Redemption Date, transfer all amounts on deposit in the Pass-Through Rate Subaccount and the Principal ubaccount, as applicable, of the Credit Facility Account to the general Receipts and Disbursements Account or the Redemption Account,as applicable. 01-177463.02 A-24 Funds Transfers To Facilitate Purchases. The Trustee is authorized to treat the date of any purchase of Bonds pursuant to the Indenture as a Redemption Date, and for such purpose to transfer moneys to the Redemption Account from the General Receipts and Disbursements.Account as necessary in connection with any such applications of moneys. Costs of Issuance Fund Deposits into Costs of Issuance Fund, On or before the Closing bate the Borrower shall deliver the Casts of Issuance Deposit to the Trustee as provided in the Financing Agreement. If the Costs of Issuance Deposit is received by the Trustee prior to the Closing Date, it shall be held in a temporary account of the Trustee until the Closing Date and, if received on the Closing Date, shall be deposited in the Casts of Issuance Fund. On the Closing Date, the Trustee shall transfer the Costs of Issuance Deposit into the Costs of Issuance Fund. Any Net Bond Proceeds to be applied to pay Costs of Issuance, as provided in the Indenture,shall be deposited into the Casts of Issuance Fund. Disbursements from the Costs of Issuance Fund. Moneys on deposit in the Costs of Issuance Fund shall be disbursed by the Trustee, pursuant to Costs of Issuance Requisition Certificates signed by the Authorized Borrower Representative,to pay Costs of Issuance. The Trustee may conclusively rely on such requisitions for purposes of making such disbursements. Moneys on deposit in the Costs of Issuance Fund shall not be part of the Trust Estate and shall be used solely to pay Costs of Issuance. Rebate Fund All money at any time deposited in the Rebate Fund shall be held by the Trustee in trust for payment of the Rebate Amount to the United States Government,and neither the Borrower,the Issuer,the Servicer, Fannie Mae nor the Bondholders shall have any rights in or claim to such moneys. All amounts deposited into or on deposit in the Rebate Fund shall be governed by the Indenture. The Rehabilitation Fund Deposit; Purpose, On or before the Closing Date, the Borrower shall deliver to the Trustee the Rehabilitation Fund Deposit required to be delivered pursuant to the Financing Agreement. Upon receipt, the Rehabilitation Fund Deposit shall be deposited by the Trustee into the Rehabilitation Fund as provided in the Indenture. The moneys in the Rehabilitation Account shall be disbursed by the Trustee solely to pay Project Costs. No amounts shalt' be deposited into the Rehabilitation Fund other than the Rehabilitation Fund Deposit,provided that Investment Income derived from amounts on deposit in the Rehabilitation Fund shall be retained in the Rehabilitation Fund. The amounts on deposit in the Rehabilitation Fund at any time, including all Investment Income derived from amounts on deposit therein shall not be disbursed unless and until the applicable conditions set forth in the Indenture and the Financing Agreement have been satisfied. Upon final disbursement of all amounts on deposit in the Rehabilitation Fund, the Trustee shall close the Rehabilitation Fund. Disbursements from the Rehabilitation Fund In General. Amounts on deposit in the Rehabilitation Fund, including Investment Income derived from amounts on deposit therein, shall be disbursed by the Trustee to, and used and applied by, the Borrower solely to pay Project Costs. Notwithstanding anything expressed or implied in the Indenture or in the Financing Agreement to the contrary, all amounts on deposit in the Rehabilitation Fund and Investment Income thereon shall be deemed to constitute Bond Proceeds for purposes of the Borrower's covenant in the Financing Agreement to cause not less than 95% of the net proceeds of the Bonds allocable to the Mortgage Loan Amount(within the meaning of Section 142(a)of the Code)to be 01-177463.02 A-25 expended for Qualified Project Costs, it being the intent of the foregoing that, in addition to otherwise complying with the covenant with respect to other Bond proceeds allocable to the Mortgage, the Borrower shall cause not less than 95% of the moneys (including Investment Income thereon) in the Rehabilitation Fund to be expended for Qualified Proiect Costs. Procedures, The Trustee shall disburse the amounts on deposit in the Rehabilitation Fund (including Investment Income)to the Borrower only upon receipt by the Trustee of a Rehabilitation Fund Requisition Certificate signed by an Authorized Borrower Representative and approved by the signature of an Authorized Servicer Representative. The Trustee shall have no duty to determine whether any requested disbursement from the Rehabilitation Fund is a proper charge against the Rehabilitation Fund, but shall make each such disbursement upon receipt of a Rehabilitation Fund Requisition Certificate signed by the Authorized Borrower Representative and approved by the Authorized Servicer Representative and in the amount so approved by the Authorized Servicer Representative. The written approval of the Authorized. Servicer Representative on the Rehabilitation Fund Requisition Certificate shall be deemed a certification and, insofar as the Trustee and the Issuer are concerned, constitute conclusive evidence, that all of the terms, conditions and requirements applicable to the disbursement have been fully satisfied. If a Rehabilitation Fund Requisition Certificate signed by the Authorized Borrower Representative and approved by the signature of an Authorized Servicer Representative is received by the Trustee by noon, F.S.T., on any given .Business Day, the disbursement requested thereby shall be paid by the Trustee within three calendar days; provided that if a Rehabilitation Fund Requisition Certificate signed by the Authorized Borrower Representative and approved by the signature of an Authorized Servicer Representative is received by the Trustee after noon, P.S.T., on any given Business Day, the disbursement requested thereby shall be paid by the Trustee within four calendar days. Within one Business Day after each receipt of a completed Rehabilitation Fund Requisition Certificate signed by the Authorized -Borrower Representative and approved by the signature of an Authorized Servicer Representative, the Trustee shall initiate procedures with the provider of the Investment Agreement applicable to the Rehabilitation Fund, if any, to make withdrawals under that Investment Agreement as necessary to fund the disbursement requested, [Transfers to k fect Certain Special Mandatary Redemptions of Bonds. Any amounts remaining on deposit in the Rehabilitation fund on the Termination Date shall be transferred on such date to the Redemption Account of the Revenue fund and applied to the redemption of Bonds pursuant to the Indenture; provided that any amount in excess of a multiple of$5,000 shall be transferred on such date to the General Receipts and Disbursements Account of the Revenue Fund. Immediately prior to any special mandatory redemption of Bonds pursuant the Indenture,any amounts then remaining in the Rehabilitation Fund shall, at the written direction of Fannie Mae, be transferred to the Redemption Account of the Revenue Fund to be applied to the redemption of Bonds pursuant to the Indenture.] Investments ;Moneys held as part of any Fund or Account shall be invested and reinvested in Permitted Investments, provided that such investments shall have maturities corresponding to the dates upon which such moneys will be needed for the purpose for which such moneys are held; and provided further, that (a) :honeys on deposit in the Rehabilitation fund and the General Receipts and Disbursements Account and the Credit Facility Account of the Revenue Fund shall be invested only in investments described in paragraphs (i), (ii), (iii), (vii)and (viii)of the definition of Permitted Investments, (b)moneys on deposit in the Redemption Account shall be invested only in investments described in paragraph(i)or(viii)of the definition of Permitted Investments, and (c)moneys on deposit in the Costs of Issuance Fund shall, until disbursed or returned to the Borrower, be invested in Permitted Investments described in paragraph (viii) 01-177463.02 A-26 of the definition of Permitted Investments. Permitted Investments shall be held by or under the control of the Trustees All Investment Income from moneys held in all Funds and Accounts other than the Rehabilitation Fund, the Rebate Fund and the Costs of Issuance Fund (other than as provided below) shall, upon receipt, if applicable, be transferred to, and deposited into the General Receipts and Disbursements Account of the Revenue Fund. Investment income from moneys held in the Rehabilitation Fund shall be retained in the Rehabilitation Fund. Investment Income from moneys held in the Debate Fund shall be retained in the Debate Fund; investment Income from moneys held in the Costs of Issuance Fund (other than Investment Income on Net Bona Proceeds deposited into the Costs of Issuance Fund and Investment Income on such Investment Income, which shall be transferred to the Mortgage Loan Fund),shall be retained in the Costs of Issuance Fund. Discharge of Lien Discharge of Lien and Security Interest. Upon (a)payment in full of the Bonds, (b)payment of all amounts due to the Trustee under the Indenture, (c)receipt by the Trustee of a written statement from Fannie Mae stating that all obligations owed to Fannie Mae in respect of the Bonds and the Mortgage Loan, whether with respect to the Bond Documents, the Mortgage Loan Documents, the Credit Facility Agreement, the Financing Agreement or otherwise in connection with the Bonds or the Mortgage Loan have been fully paid, satisfied,and discharged, and (d)payment and performance of all obligations owed to the Issuer under the Indenture and the Financing Agreement in respect of the Reserved Rights, the Trustee shall (1)cancel and discharge the Indenture and the pledge and assignment of the Trust Estate, (2)execute and deliver to the Issuer such instruments in writing as shall be required to evidence the cancellation and discharge of the Indenture and the pledge and assignment under the Indenture and (3)reconvey, assign and deliver to the Issuer so much of the Trust Estate as may be in its possession or subject to its control,except for(a)the Credit Facility,which small be returned to Fannie Mae, (b)moneys and Government Obligations held for the purpose of paying Bonds, and (c)moneys and Permitted Investments held in the Rebate Fund for payment to the United States Government. Defeasance. Any Bond shall be deemed to have been paid if: (a) there shall have been irrevocably deposited with the Trustee either: (i) sufficient Available Moneys;or (ii) Government Obligations, which are not subject to early redemption and which are purchased with Available Moneys, of such maturities and interest payment dates and bearing such interest as will, without further investment or reinvestment of either the principal amount of such Government Obligations or the interest earnings on Government Obligations (the earnings to be held in trust also), be sufficient, together with any Available Moneys deposited pursuant to paragraph (a)above, as verified by a written report of an independent certified public accountant; in each case for the payment on their respective maturity dates, or redemption dates prior to maturity, of the principal of such Bonds and redemption premium, if any, and interest to accrue on such Bonds to such maturity or redemption dates, provided, however, that the Trustee shall have received, at the expense of the Borrower,(a)an Opinion of Counsel rendered by bankruptcy counsel that such Available Moneys or Government Obligations purchased with Available Moneys are not subject to avoidance under Section 547 or 544 and are not subject to an automatic stay pursuant to Section 362 of the Bankruptcy Code or any successor statute, and, as such, are not recoverable under Section 554(a)of the Bankruptcy Code or other applicable insolvency law, should there be a petition by or against the Borrower, any general partner of the Borrower or the 0:-1177463.02 A-27 Issuer under the Bankruptcy Code or any other bankruptcy act, and (b)an Opinion of Bond Counsel to the effect that such deposit with the Trustee and consequent defeasance of the Band does not adversely affect the exclusion of the interest payable on the Series D Bonds from grass income for federal income tax purposes, (b) there shall have been paid all Fees due or to become due or there shall be irrevocably deposited with the Trustee sufficient additional moneys to 'make the required payments;and (c) for any such Bonds to be redeemed on any date prior to their maturity, the Trustee shall have received in form satisfactory to it irrevocable instructions to redeem such Bonds on a date on which the Bonds are subiect to redemption,and either evidence satisfactory to the Trustee that all redemption notices required by the Indenture have been given or irrevocable power authorizing the Trustee to give such redemption notices. The Trustee shall redeem the Bonds specified by such irrevocable instructions on the date specified by such irrevocable instructions. Default Provisions and Remedies Events of Default. Each of the following shall constitute an Event of Default under the Indenture: (a) default in the payment of any interest due on any Bond on any Interest Payment Date or any other date when and as the same shall have become due; (b) default in the payment of the principal of any Bond when and as the same shall become due, whether at the stated maturity of the Bond or upon any redemption (including any mandatory sinking fund redemption)of the Bond; (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 in the Bonds(other than an Event of Default set forth in paragraph (a)or (b)above) and the continuance of such default for a period of 30 days after receipt of written notice of such default from the Trustee to the Issuer, Fannie Mae, the Servicer and the Borrower; provided that Fannie Mae shall have consented in writing to the same constituting an Event of Default,or (d) an Act of Bankruptcy, provided that Fannie Mae shall have consented in writing to the same constituting an Event of Default. A payment default on the part of Fannie Mae under the Collateral Agreement or in making any distribution under the Fannie Mae Pass-Through Certificate or in failing to observe or perform any covenant, agreement or condition contained in the Fannie Mae Pass-Through Certificate shall not in and of itself constitute an Event of Default under the Indenture, but shall entitle the Trustee to exercise its rights and remedies under the Collateral Agreement or the Fannie Mae Pass-Through Certificate, provided that the Trustee shall not accelerate payment of the Bonds except as permitted by the Indenture. The Trustee wit immediately notify the Issuer,the Servicer,the Borrower and Fannie Mae after a Responsible Officer obtains knowledge or receives notice of the occurrence of an Event of Default or an event which would become an Event of Default with the passage of time or the giving of notice, or both, identifying the paragraph of the Indenture under which the Event of Default has occurred,or may occur. 01-177463.02 A-28 Effect of Tax Event. The occurrence of any event (a "Tax Event") which results in the interest payable on the Series D Bonds being, for federal income tax purposes, includable under Section 1033 of the Code in the gross incomes of the owners thereof, including, without limitation, any violation of any provision of the Regulatory Agreement or any of the Bond Documents, (i) shall constitute an Event of Default under the Regulatory Agreement; but (ii) shall not constitute an Event of Default under, and as defined in, the Indenture,and the Financing Agreement and shall not constitute a default under the Bonds, the Mortgage Loan, or any other Bond Document unless Fannie Mae, in its sole and absolute discretion provides written notice to the Trustee that the Tax Event default constitutes a default under the Mortgage Loan, the Mortgage dote and the Mortgage by cross default. No such Event of Default under the Regulatory Agreement shall permit any party (other than Fannie Mae) to accelerate, or require acceleration of,the Mortgage Loan or the Bonds,or give rise to a mandatory redemption of the Bonds, or give rise to the payment to the owners thereof of any amount, denoted as "supplemental interest," "additional interest," `penalty interest," "liquidated damages" or otherwise, 1n addition to the amounts payable to the owners of the Bonds prior to the occurrence of the Tax Event, it being the intent of the foregoing that the sale remedy of the Issuer,the Trustee and the owners thereof upon the occurrence of an Event of Default under the Regulatory Agreement arising from a Tax Event will be to compel specific performance of the Borrower's obligations under the Regulatory Agreement to comply with the Tax Covenants and otherwise cure such Event of Default or default. Nothing contained in the Indenture shalt be deemed to amend or modify the terms of the Mortgage Loan Documents. Promptly upon determining that a Tax Event has occurred, the Issuer or the Trustee shall, by notice in writing to Fannie Mae and the Servicer, inform Fannie Mae and the Servicer that a Tax Event has occurred and has been cured, or has occurred and has not been cured within a reasonable period, or has occurred and is incurable. Notwithstanding the availability of the remedy of specific performance to cure a Tax Event that is curable within a reasonable period, neither the Issuer nor the Trustee shall have, and each of them acknowledges that they shall not have, upon the occurrence of a Tax Event, any right or obligation to cause or direct acceleration of the Bonds or the Mortgage Loan, to enforce the Mortgage Note or to foreclose the Mortgage, to accept a deed to the Project in lieu of foreclosure, or to effect any other comparable conversion of the Project. Remedies,Rights of Bondholders. Upon the occurrence of an Event of Default, the Trustee may pursue any available remedy at law or in equity to enforce the payment of the principal of and interest on the Bonds then Outstanding, including enforcement of any rights of the Trustee under the Collateral Agreement or the Fannie Mae Pass-Through Certificate, as applicable, or of the Issuer and the Trustee under the Financing Agreement and the Reg=ulatory Agreement. In the case of an Event of Default other than an Event of Default described in paragraph(iii) under Events of Default above, the Trustee shall be entitled, but not obligated,to declare the principal amount of the Outstanding Bonds and interest accrued, and to accrue,on the Outstanding Bonds to the date of payment,to be immediately due and payable. Acceleration Prior to.Fannie Mae Pass-Through Delivery Date Upon (a) upon the occurrence of an Event of Default described in paragraphs (i) or (ii) under Events of Default above prior to the Fannie :Mae Pass-Through Certificate Delivery Date, the Trustee upon receipt of indemnity satisfactory to the Trustee may, and upon the written request of Owners of not less than ;I% in aggregate principal amount of Bonds then Outstanding, shall by written notice to the Issuer, the Borrower, Fannie Mae and the Servicer, declare the principal of all Bonds then Outstanding(if not then due and payable)and the interest accrued,and to accrue,on the Outstanding Bands to the date of payment immediately due and payable, in which event such principal and interest shall become and be immediately due and payable,and upon the occurrence of the.Event of Default as described in paragraphs (iii) or (iv) under Events of Default above prior to the Fannie Mae Pass-Through Certificate Delivery Date, the Trustee may, upon receipt of indemnity satisfactory to it and upon receiving the prior written 01-177463.02 A-29 consent of Fannie Mae, and shall, upon written direction of Fannie Mae, declare by written notice to the Issuer, the Borrower, Fannie Mae and the Servicer, the principal of all Bonds then Outstanding (if not then due and payable) and the interest accrued, and to accrue, on the Outstanding Bonds to the date of payment to be immediately due and payable in which event such principal and interest shall become and be immediately due and payable. Upon any such declaration of acceleration, the Trustee shall (a)give immediate written notice to Fannie Mae, activating Fannie Mae's obligation to redeem the Trustee's interest in the Pledged Collateral pursuant to the Collateral Agreement and (b)exercise such rights as it may have under the Financing Agreement to declare all payments under the Indenture to be immediately due and payable. Acceleration Can or After the Fannie Mae Pass-Through Certificate Delivery Date Upon the occurrence of an Event of Default described in paragraphs (i) or (ii) under "Events of Default" above on or after the Fannie Mae Pass-Through Certificate Delivery Date, the Trustee may, upon receipt of indemnity satisfactory to the Trustee,and shall upon the written request of the Owners of not less than 51% in aggregate principal amount of Bonds then Outstanding, which written request shall acknowledge that the amounts due on the Fannie Mae Pass-Through Certificate cannot be accelerated by virtue of acceleration of the Bonds, by written notice to the Issuer, the Borrower, Fannie Mae and the Servicer,declare the principal of all Bonds then Outstanding(if not then due and payable)and the interest accrued, and to accrue, on the Outstanding Bonds to the date of payment to be immediately due and payable, in which event such principal and interest shall become and be immediately due and payable and upon the occurrence of an Event of Default described in paragraphs(iii)or(iv)on or after the Fannie Mae Pass-Through Certificate Delivery Date, the Trustee, upon receipt of indemnity satisfactory to the Trustee and upon receiving the prior written consent of the Fannie Mae and upon the written direction of Fannie Mae shall by notice in writing delivered to the Issuer, the Borrower, Fannie Mae and the Servicer declare the principal of all Bonds then Outstanding and the interest accrued and to accrue, on the Outstanding Bonds to the date of payment immediately due and payable in which event such, principal and interest shall become and be immediately due and payable. The acceleration of the Bonds shall not constitute a default under, or cause the acceleration of,the Fannie Mae Pass-Through Certificate. Notice Upon any decision to accelerate payment of the Bonds, the Trustee shall notify the Bondholders of the declaration of acceleration, that interest on the Fonds will cease to accrue upon such declaration, and that payment of such Bonds will be made upon presentment of the Bonds at the Principal Office of the Trustee not earlier than 15 clays following the date of acceleration. Such notice shall be sent by registered mail, overnight delivery service or other secure means, postage prepaid, or, at the Trustee's option, may be given by Electronic Means to each Registered Owner of Bonds at such Registered Owner's last address appearing in the Bond Register. Any default in or failure to give notice of such declaration shall not affect the validity of such declaration. Supplemental Indentures, Amendments Supplemental Indentures not Requiring Bondholder Consent. The Issuer and the Trustee, without the consent of or notice to any of the Bondholders, may enter into an indenture or indentures supplemental to the Indenture for one or more of the following purposes: (a) to cure any ambiguity or to correct or supplement any provision contained in the Indenture or in any supplemental indenture which may be defective or inconsistent with any other provision contained in the Indenture or in any supplemental indenture, 01-177463.02 A-3 U (b) to mare such other provisions in regard to matters or questions arising under the Indenture which are not materially adverse to the interests of the Bondholders; (c) to amend,modify or supplement the Indenture in any respect if such amendment, modification or supplement is not materially adverse to the interests of the Bondholders; (d) to grant to or confer upon the Trustee for the benefit of the Bondholders any additional rights,remedies, powers or authority that may lawfully be granted to or conferred upon the Bondholders or the Trustee, or 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; (e) to modify, amend or supplement the Indenture or any supplemental indenture in such manner as to permit the qualification of the Indenture or such supplemental indenture under the Trust Indenture Act of 1939, as amended, or any similar federal statute then in effect, or to permit the qualification of the Bonds for sale under the securities laws of any of the States of the United States, (f) to make any change requested by Fannie Mae which is not materially adverse to the interests of the Bondholders including, without limitation, provision of a Credit.Facility other than or in substitution for the Collateral Agreement or the Fannie Mae Pass-Through Certificate, provided that the provision of such Credit Facility does not adversely affect the rating then in effect for the Bonds; (g) to comply with requirements of any Rating Agency then rating the Bonds; (h) to comply with the Code and the regulations and rulings issued with respect to the Code,to the extent determined as necessary or desirable in the Opinion of Bond Counsel; (i) to permit the Borrower to enter into a modification of the Mortgage Loan provided that the terms of such modification are approved by Fannie Mae, and further provided that there has first been delivered to the Trustee (i)written evidence of such approvals and the approval by Fannie Mae of the proposed form of supplemental indenture and any other documents relating to the supplemental indenture; and(ii)a written Rating Confirmation; 0) to implement any secondary market disclosure, required under applicable law with respect to the Bonds,the Issuer,the Borrower or the Project; (k) to make any changes in the Indenture or in the terms of the Bonds necessary or desirable in order to(a)obtain the Fannie Mae Pass-Through Certificate or(b) maintain the rating of"AAA" awarded to the Bonds by the Rating Agency, provided that any change under this clause (b), if made at all, must be made prior to the Fannie Mae Pass-Through Certificate Delivery Date; (1) to subject to the Indenture additional revenues,properties or collateral; (m) to modify, amend or supplement the Indenture as may be necessary or desirable in order to enable the Trustee to accept the Fannie Mae Pass-Through Certificate in certificated form instead of in book-entry form, and to make conforming amendments or supplements to the Indenture in connection therewith;or 01-177453.02 A-31 (n) in connection with any other change in the Indenture which is not materially adverse to the interests of the Bondholders. provided that the Trustee shall have received, in each instance,a written Rating Confirmation. Supplemental Indentures Requiring Bondholder Consent. Exclusive of supplemental indentures covered by the foregoing paragraphs, the Issuer, in its sole discretion, and the Trustee may, with the consent of Bondholders owning not less than 51% in aggregate principal amount of Bonds then Outstanding, execute an indenture or indentures supplemental to the Indenture for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in the indenture or in any supplemental indenture,provided, however,that this shall not permit, or be construed as permitting,without the approval of Bondholders owning one hundred percent(100%) in aggregate principal amount of Bonds then Outstanding: (a) an extension of the maturity of the principal of or interest on; any Bond, without the consent of the owners of all of the Bands thea Outstanding; (b) a reduction in the principal amount of, or the rate of interest on, any Bond, without the consent of the owner of such Bond; (c) a preference or priority of any Bond or Bonds over any other Bond or Bonds, without the consent of the owners of all such Bonds, (d) the creation of a lien prior to or on parity with the lien of the Indenture, without the consent of the owners of all of the Bonds then Outstanding; (e) a change in the percentage of Bondholders necessary to waive an Event of Default or otherwise approve matters requiring Bondholder approval under the Indenture, including consent to any supplemental indenture, without the consent of the owners of all the Bonds then Outstanding, (f) so long as the Collateral Agreement is in effect,a transfer,assignment or release of any the Collateral Agreement (or modification of the provisions of the indenture governing such transfer, assignment or release), other than as permitted by the Indenture or the Collateral Agreement without the consent of all of the Bonds then Outstanding, (g) on and after the Fannie Mae Pass-Through Certificate Delivery bate, a transfer, assignment, or release of a Fannie Mae Pass-Through Certificate, other than as permitted by the Indenture, at an aggregate price less than the Stated Principal Balance (as defined in the Fannie?Viae Trust indenture)of the Mortgage Loan, plus accrued interest, without the consent of the holders of all of the Bonds then Outstanding; (h) a reduction in the aggregate principal amount of the Bonds required for consent to such supplemental indenture, without the consent of the holders of all of the Bonds then Outstanding; (i) the creation of any lien other than a lien ratably securing all of the Bonds at any time Outstanding without the consent of the holders of all of the Bonds then Outstanding;or the amendment the supplemental indenture provisions of the Indenture. 01-177463.02 A-32 The giving of notice to and consent of the Bondholders to any such supplemental indenture shalt be obtained as provided in the Indenture. Amendments to the Financing Agreement Not Requiring Bondholder Consent. In addition to any amendment otherwise permitted by the Indenture, the Issuer and the Trustee, without the consent of or notice to any of the Bondholders and without a Rating Confirmation,but subject to limitations set forth in the Indenture to enter into or permit any amendment of the Financing Agreement and shall at the direction of Fannie Mae, enter into any amendment of the Financing Agreement for one or more of the following purposes: (a) to cure any ambiguity or to correct or supplement any provision which may be defective or inconsistent with any other provision of the Financing Agreement; (b) to amend, modify or supplement the Financing Agreement in any respect if such amendment, modification or supplement is not materially adverse to the interests of the Bondholders; (c) to grant to or confer upon the Trustee or the Trustee for the benefit of Bondholders,any additional rights,remedies,powers or authority that may lawfully be so granted or conferred,or to grant or pledge to the Issuer or the Trustee any additional security; (d) to comply with the requirements of any Rating Agency; or (e) to comply with regulations or rulings issued with respect to the Code, to the extent determined as necessary or desirable in the opinion of Bond Counsel. (f) to permit the Borrower to enter into a modification of any Mortgage Loan Document on terms approved by Fannie Mae, provided that there has first been delivered to the Trustee (a)written evidence of such approval and the approval by Fannie Mae of the proposed form of amendment and any ether documents relating to the amendment and (b)a written Rating Confirmation;or (g) in connection with any other change which, is not materially adverse to the interests of the Bondholders; provided that the Trustee shall have received, in each instance, a written Rating Confirmation. When requested by the Issuer or the Borrower and if all conditions precedent in the Indenture have been satisfied, the Trustee shall join the Issuer, the Servicer and the related Borrower in the execution of any such amendment and shall furnish copies of any such amendments to Fannie Mae, the Servicer and the Borrower. Amendments to the Financing Agreement Requiring Bondholder Consent. Except as provided in the Indenture, the Issuer and the Trustee shall not enter into any other modification or amendment of the Financing Agreement, nor shall any such modification or amendment become effective, without the written consent of the owners of not less than a majority in aggregate principal amount of Bonds then Outstanding, such consent to be obtained in accordance with the Indenture. No such amendment may, without the consent of the owners of all the Outstanding Bonds, reduce or delay the amounts payable on the Mortgage Loan under the Financing Agreement; provided that any such amounts may be reduced without such consent solely to the extent that such reduction (a)results from a partial redemption from other than sinking fund installments or (b)represents a reduction in any fees payable from such amounts (including, but not limited to, a reduction in the Facility Fre, the Servicing Fee and/or the Guaranty Fee). 01-177463.02 A-3 3 A copy of any such modification or amendment shall be provided to the Servicer. Notwithstanding the foregoing, on and after the Fannie Mae Pass-Through Certificate Delivery Date, 'Fannie Mae and the Borrower may amend the Mortgage Note and the Mortgage without the consent of the Issuer,the Trustee or the Bondholders so long as any such amendment does not reduce or modify the',payments due under the Fannie Mae Pass-Through Certificate. THE F"LNANCLNG AGREEMENT The following description is intended only to be a summary of certain provisions of the Financing Agreement. This summary does not purport to be complete or definitive and is quaked in its entirety by reference to the Financing Agreement, a copy of which is on file with the Trustee. Application of Bond Proceeds; Bond Redemption Neither the Issuer, the Servicer,the Trustee nor Fannie Mae shall have any Lability for any fees, costs or expenses, including, without limitation, issuance costs relating to the Bonds,,except to the extent the Trustee or the Issuer is required to pay such costs from amounts received as provided in the Indenture, it being understood that all of such fees, costs and expenses shall be paid by the Borrower. The.Borrower is unconditionally obligated, anything else to the contrary notwithstanding,but subject to the nonrecourse provisions of the Mortgage Doan Documents,to timely pay amounts sufficient to pay, when due,pursuant to the Mortgage Note or otherwise,the principal of, premium, if any, and interest on,the Bonds allocable to the Mortgage Loan. The Mortgage Loan Terms. In consideration of and in repayment of the Mortgage Loan, the Burrower shall make payments on the Mortgage Note, as provided in the Financing Agreement, which payments are expected to be, in all events and at all times be sufficient in amount to repay the Mortgage Loan, including all payments of principal and interest when due, and to timely pay, when due, the principal of, premium, if any, and interest on the Bonds, plus (a)the Fees, and (b)the fees clue to (i) Fannie Mae in respect to the Mortgage Loan (i.e., the facility Fee for providing the Collateral Agreement or, after the Fannie Mae Pass-Through Certificate Delivery Date, and effective as of-the Issue Date, the Guaranty Fee for issuing the Fannie Mae Pass-Through Certificate, in each case as provided in the Fannie Mae Commitment and as set forth in the financing Agreement) and (ii)the Servicer (i.e., the Servicing Fee for servicing the Mortgage Loan, as provided in the Fannie Mae Commitment and as set forth in the Financing Agreement), notwithstanding any other provision of the Financing Agreement, the Mortgage Note, any ether Bond Document or any Mortgage Loan Document which may state or imply to the contrary, and notwithstanding the amount of Investment Income available to be applied to the payment of the foregoing obligations. The Mortgage Loan shall: (a)be evidenced by the Mortgage 'Note, (b)bear interest at the Mortgage Note Rate, (c)be payable on the terms provided in the Mortgage Note, (d)be secured by, among other instruments,the Mortgage,(e)be subject to optional and mandatory prepayment at the times, in the manner and on the terms,and have such other terms and provisions,as are set forth in the Mortgage Note, the Mortgage and the other Mortgage Loan documents, and (f) otherwise comply in all respects with the requirements of the Fannie Mae Commitment pertaining to the Mortgage Loan. Payment of..Fees and Expenses, In addition to all fees, costs, expenses and other amounts required to be paid by the Borrower under the Mortgage Note and the Reimbursement Agreement, the Borrower shall pay,without duplication,the following fees and expenses: 01-17748 .02 A-34 (a) fees included in the Mortgage Note Tate: (i) the Trustee's Annual Fee, (ii) on or before the Issue Date, the Facility Fee, in the amount specified in the Fannie Mae Commitment and the Financing Agreement, based on the principal balance of the Mortgage Loan outstanding from time to time,payable monthly, in arrears, on the same dates on which and for the same periods for which interest is payable under the Mortgage Note; the Facility Fee shall be collected by the Servicer as part of the payments of interest on the Mortgage Note received by the Servicer and remitted by the Servicer to Fannie Mae, (iii) after the Issue Plate, the Fannie Mae Guaranty Fee, in the amount specified in the Fannie Mae Commitment and in the Financing Agreement, based on the principal balance of the Mortgage Loan outstanding from time to time, payable monthly, in arrears, on the same dates on which and for the same period for which interest is payable under the Mortgage Note; such Fannie Mae Guaranty Fee shall be collected by the Servicer as part of the payments of interest on the Mortgage Note received by the Servicer and remitted to Fannie Mae as part of the Servicer's remittance of principal and interest to Fannie Mae and deducted by Fannie Mae prior to distribution under the Fannie Mae Pass-Through Certificate;and (iv) the Servicing Fee, in the amount specified in the Fannie:Viae Commitment and in the Financing Agreement, based on the principal balance of the Mortgage Loan outstanding from time to time, payable monthly, in arrears, on the same dates on which and for the same period for which interest is payable under the Mortgage Note; the Servicing Fee shall be deducted by the Servicer from payments of interest on the Mortgage Note received by the Servicer prior to remitting the balance of the payments on the Mortgage Note (other than the Facility Fee, whichis to be remitted to Fannie Mae) to: (A)the Trustee on and before the Issue Date, and (B) Fannie Mae after the Issue bate. (b) fees not included in the Mortgage Note Bate and expenses: (i) the fees (other than the Servicing Fee) and expenses due to the Servicer in connection with the Mortgage Loan; (ii) to the extent not previously paid by the Borrower, the fees and expenses required to be paid by the Servicer to Fannie Mae under the terms of the Fannie Mae Commitment, such fees and expenses to be paid at the times and in the manner set forth in the Fannie Mae Commitment, provided that the Servicer's imposition of such obligation on the Borrower shall not diminish the Servicer's obligation to pay such fees to Fannie Mae, (iii) all amounts required to pay to the Issuer: (1) in connection with the issuance of the Bonds, the financing fee in an amount equal to $9,875.00 (.125% of the original Principal Amount of Bonds), which financing fee shall be paid upon the issuance and delivery of the Bonds, plus 01-177463.02 A-35 (2) notwithstanding any prepayment of the Mortgage Loan and discharge of the Indenture, an annual Issuer fee equal to $9,875.00 payable in Melve equal installments of$822.92, in arrears, on the first day of each month, commencing May 1, 1999 for the terra of the Qualified Project Period; provided that such annual Issuer fee shall be paid by the Borrower to the "Servicer for remittance to the Trustee and deposit into the Pees Account of the Revenue Fund; plus (3) all expenses of the Issuer incurred at any time related to the Project or the Bonds, including, without limitation, out-of-pocket costs and expenses (including attorneys' fees and expenses)of the Issuer incidental to the performance of its obligations tinder the Financing Agreement, the Indenture and with respect to its authorization, sale and delivery of the Bonds, or incurred by the Issuer in defending any action brought against it by any person (including but not limited to the Borrower)relating to the Bonds,the Indenture,the Financing Agreement or the Regulatory Agreement or the transactions contemplated and to be effected by the Indenture, the Financing Agreement or the Regulatory Agreement, or in enforcing the provisions of the Indenture, this Financing Agreement or the Regulatory Agreement, including, without limitation,attorneys' fees and expenses and attorneys' fees and expenses on appeal; all such expenses shall be paid within 30 days of the date of an invoice therefor from the Issuer to the Borrower; (iv) the Trustee's acceptance fee, which shall be paid on the Closing Date, and all amounts required from time to time to: (A) pay the fees of the Trustee for its duties and services as Trustee in connection with the Bonds (as such duties and services are set out in the Indenture), provided that the Trustee's Annual Fee is included in the Mortgage Note Rate and, therefore,paid by the Borrower to the Servicer with each monthly payment on the Mortgage Note and prior to the Fannie Mae Pass-Through Certificate Deliver Date remitted by the Servicer to the Trustee,and (B) reimburse the Trustee for all advances, out-of-pocket expenses, fees, costs and other charges, including Extraordinary Items, and further including counsel fees and expenses, and taxes (excluding; income, value added and single business taxes), reasonably and necessarily incurred by the Trustee in performing its duties as Trustee under the Indenture, the Financing Agreement, the Disclosure Agreement, the Collateral Agreement and the Regulatory Agreement,and (C) all amounts required to pay and reimburse the Trustee for any fees and expenses incurred in connection with any default under the Indenture, the Financing Agreement or under the Regulatory Agreement, including Extraordinary Items, all payments for fees and expenses other than the Trustee's Annual Fee included in the Mortgage Note Rate shall be made by the Borrower to the Trustee not later than 30 days after receipt of invoices rendered to the Borrower by the'Trustee; C s-t 77463.{32 A-36 (vi) all amounts required from time to time to pay the fees and expenses of the Rebate Analyst as required by the Indenture and the FinancingAgreement, provided that the Borrower shall, so long as the Bonds are Outstanding, pay to the Servicer monthly installments of$42,commencing May 1, 1999, for remittance to the Trustee and deposit into the Fees Account of the Revenue Fund, which amounts shall be held for payment of the Rebate Analyst's Annual Fee; provided further, that such monthly installments need not be paid by the Borrower if and to the extent that the Trustee holds at least$5,000 in the Fees Account for such purpose; all payments for fees and expenses of the Rebate Analyst shall be made by the Borrower not later than thirty days after receipt of invoices rendered to the Borrower by the Rebate Analyst; (vii) all Costs of Issuance (neither the Issuer, the Servicer, the Trustee nor Fannie Mae shall have any liability for any Costs of Issuance relating to the Bonds); (viii) all costs of registering, printing, reprinting, preparing and delivering any replacement bonds required under the Indenture and in connection with the registration, printing, reprinting or transfer of Bonds; (ix) all fees and expenses of Fannie Mae and the Servicer and their respective counsel, title insurance, survey,recording and other costs related to underwriting, closing and disbursing the Mortgage Loan and of the Assignment of the Mortgage Loan to the Trustee and Fannie Mae, as their interests:nay appear; and (x) all fees, costs and expenses in connection with issuance of the Fannie Mae Pass-Through Certificate, including, but not limited to, those incurred by Fannie Mae, the Servicer and their respective counsel. Optional Prepayment. At any time that the Bonds are subject to optional redemption pursuant to the Indenture,the Borrower shall have the right to prepay the Mortgage Loan in whole, but not in part,on the terms provided in, and subject to the limitations of,the Mortgage Note and the Mortgage and, if and to the extent applicable,the other Mortgage Lean Documents, provided that the Borrower shall comply with the provisions of the Financing Agreement. The Borrower expressly agrees and acknowledges that the payment of all amounts set forth in the .Financing Agreement shall be a condition precedent to the effectiveness of any such prepayment of the Mortgage Loan. Limit of Fannie Mae Obligation; End Period Payment. The Borrower is required, and agrees, that in order to effect an optional prepayment of the Mortgage Loan whether before or after the Fannie Mae Pass-Through Certificate Delivery Date, the Borrower shall, to the extent the Trustee does not have on hand sufficient Available Moneys: (a) make an End Period Payment by paying or otherwise providing Available :Moneys in an amount calculated by the Trustee equal to the difference between the principal of, premium, if any, and interest on the Bonds due on the Redemption Date (the "Total Redemption Amount") as a result of the prepayment, and the sum of: (i)the amount of principal and interest received by the Trustee for deposit into the Revenue Fund prior to the Redemption Date, (ii) Investment Income on the Funds and Accounts held under the Indenture, which constitute Available Moneys and which are available to be applied on the Redemption Date to the payment of the Total Redemption Amount, and (iii)any other Available Moneys to be held under the Indenture and available to be applied to the payment of the Total Redemption Amount on the Redemption bate and (b)deliver to the Servicer a certificate from the Trustee stating that the Trustee has received, in Available Moneys, an amount equal to the End Period Payment. 01-177463.02 A-3 7 Subordination All obligations of the Borrower under the Financing Agreement or the Regulatory Agreement for the payment of money, if any,and all claims for damages or reimbursement or indemnification against the Borrower occasioned by breach or alleged breach by the Borrower of its obligationsunder the Financing Agreement or the Regulatory Agreement shall be subordinate in all respects to the obligations of the Borrower under the Mortgage Loan Documents, provided that the foregoing subordination shall not apply to the Borrower's obligations arising in connection with the Issuer's Reserved Rights.' THE REGULATORY AGREEMENT In order to assure compliance with the requirements of the Code and the Treasury Regulations promulgated thereunder (the "Regulations'), the .Borrower, will in connection with the issuance of the .Bonds, execute with the .Issuer and the Trustee a separate Regulatory Agreement for the benefit of the .Issuer, and cause it to be recorded in the public records of the county in which the related Project is situated The covenants and restrictions contained in the Regulatory Agreement will create an equitable covenant binding upon a Borrower's successor in title to its Project. The following description is intended only to be a summary of certain provisions of the Regulatory Agreement. This summary does not purport to be complete or definitive and is quaked in its entirety by reference to the Regulatory Agreement, a copy of which is on file with the Trustee. Qualified Residential Rental Project The Borrower has acknowledged and agreed in the Regulatory Agreement that the Project is to be owned, managed and operated in the same manner 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 the Regulatory Agreement, the Borrower has represented, covenanted, warranted and agreed in the Regulatory Agreement as follows: (a) The Project will be acquired and operated for the purpose of providing multifamily residential rental property. The Borrower will own, manage and operate the Project as a project to provide multifamily residential rental property comprised of a building or structure or several interrelated buildings or structures, together with any functionally related and subordinate facilities, and no other facilities, in accordance with Section 142(d) of the Code, Section l,103-8(b)of the Regulations and the provisions of the Housing Law, and in accordance with such requirements as may be imposed on the Project from time to time. (b) All of the dwelling units in the Project will be similarly constructed units, and each dwelling unit in the Project will contain complete separate and distinct facilities for living, sleeping,eating, cooping 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 rented for a period of less than 30 consecutive days, or will ever be used as a hotel, motel, dormitory, fraternity house, sorority house, rooming house, nursing home, hospital, sanitarium,rest home or trailer court or park. (d) No part of the Project will at any time during the Qualified Project Period be owned by a cooperative housing corporation, nor shall the Borrower take any steps in connection with a conversion to such ownership or use, and the Borrower will not take any steps in 01-177463.02 A-3 8 connection with a conversion of the Project to condominium ownership during the Qualified Project Period. (e) All of the dwelling units in the Project (except for not more than two units set aside for resident manager or other administrative use) will be available for rental during the Qualified Project Period on a continuous basis to members of the general public,on a first-come, first-served basis, and the 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 Low Income Tenants. (f) The Project consists of a parcel or parcels that are contiguous except for the interposition of a road, street or strewn, and all of the facilities of the Project comprise a single geographically and functionally integrated project for residential rental property,as evidenced by the ownership,management,accounting and operation of the Project. (g) No dwelling unit in the Project shall be occupied by the Borrower; provided, however, that, if the Project contains five or more dwelling units, this provision shall not be construed to prohibit occupancy of not more than two dwelling units by one or more resident managers or maintenance personnel any of whom may be the Borrower. Low Income Tenants Pursuant to the requirements of the Code, the Borrower has represented, warranted and covenanted in the Regulatory Agreement as follows: (a) During the Qualified Project Period, no less than 40% of the total number of completed units in the Project shall at all times be rented to and occupied by, or held available for rental to and occupancy by, Low Income Tenants. For the purposes of this paragraph, a vacant unit which was most recently occupied by a Low income Tenant is treated as anted and occupied by a Low Income Tenant until reoccupied, other than for a temporary period of not more than 1 days, at which time the character of such unit shall be redetermined. (b) No tenant qualifying as a Low Income Tenant upon initial occupancy will 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 Low Income Tenants. However, should a Low Income Tenant's Adjusted Income, as of the most recent determination thereof, exceed 140% (or such lesser percentage as set forth in the City Agreement) of the applicable income limit for a 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 Low Income Tenant. Until such next available unit is rented to a Low Income Tenant, the former Low Income Tenant who has ceased to qualify as such shall be deemed to continue to be a Low Income Tenant for purposes ofthe 40% requirement set forth above. (c) For the Qualified Project Period, the Borrower will obtain, complete and maintain on file Income Certifications for each Low Income Tenant, including (i) an Income Certification dated, with respect to existing Low Income Tenants,within 60 days after the date that the Borrower acquires the Project and, with respect to new Low Income Tenants, immediately prior to the initial occupancy of such Low Income Tenant in the Project, and (ii) thereafter, an annual Income Certification with respect to each Low Income Tenant; provided that such certification with respect to any tenant shall in no case cover a period greater than one year. The Borrower will provide such additional information as may be required in the future by the Code, the Mate or the Issuer, as the 01 177463.02 A-39 same may be amended from time to time, or in such other form and manner as may be required by applicable rules, rulings, policies, procedures, Regulations or other official statements now or hereafter promulgated,proposed or made by the Department of the Treasury or the Internal Revenue Service with respect to Tax-Exempt obligations. A copy of the most recent Income Certifications for Low Income Tenants commencing or continuing occupation of a Low Income Unit shall be attached to each report to be filed with the Issuer pursuant to the Regulatory Agreement. The Borrower will snake a good-faith effort to verity that the income information provided by an applicant in a Verification of Income is accurate by taking one or more of the following steps as a part of the verification process: (i)obtain a pay stub for the most recent pay period, (2)obtain an income tax return for the most recent tax year, (3) obtain a credit report or conduct similar type credit search, (4)obtain an income verification from the applicant's current employer, (5)obtain an income verification from the Social Security Administration and/or the California Department of Social Services if the applicant receives assistance from either of such agencies or (6) if the applicant is unemployed and does not have an income tax return, obtain another form of independent verification reasonably acceptable to the Issuer. (d) The Borrower will maintain complete and accurate records pertaining to the 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 Low Income Units. (e) The Borrower will prepare and submit to the Issuer,the Administrator(if other than the Issuer) and the Trustee, at the end of each month until , and thereafter at the end of each calendar quarter, until the end of the (qualified Prcject Period, a Certificate of Continuing Program Compliance executed by the Borrower. On or before each February 15 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 as required by the Code with respect to the Project, which fora/ shall be submitted to the Secretary of the Treasury on or before March 31 of each year(or such other date as may be required by the Code). (f) For the (qualified Project Period, all tenant leases or rental agreements shall be subordinate to the Regulatory Agreement and the Mortgage. All leases pertaining to the Low Income Units shall contain clauses, among others, wherein each tenant who occupies a Low income Unit: (i)certifies the accuracy of the statements made in the Verification of Income, (ii)agrees that the family income and other eligibility requirements shall be deemed substantial and material obligations of the tenancy of such tenant,that such tenant will comply promptly with all requests for information with respect thereto from the Borrower, the Trustee,the Issuer or the Administrator on behalf of the Issuer, and that the failure to provide accurate information in the Verification of Income or refusal to comply with a request for information with respect thereto shall be deemed a violation of a substantial obligation of the tenancy of such tenant; (iii)acknowledges that the Borrower has relied on the Verification of Income and supporting information supplied by the Low Income Tenant in determining qualification for occupancy of the Low Income Emit and that any material misstatement in such certification (whether or not intentional) will be cause for immediate termination of such lease or rental agreement, and (iv)agrees that the tenant's income is subject to annual certification in accordance with the Regulatory Agreement and that, if upon any such certification such tenant's adjusted Income exceeds 140% of the applicable income limit for a Low Income Tenant of the same family size, such tenant may cease to qualify as a Low Income Tenant and such tenant's rent may be subject to increase. 01-177463.02 A-40 Tax-Exempt Status of Series D Bands The Borrower and the Issuer, as applicable, each hereby represents, warrants and agrees as follows; (a) The Borrower and the Issuer will not knowingly take or permit,or omit to take or cause to be taken,as is appropriate,any action that would adversely affect the Tax-Exempt nature of the interest on the Series D Bonds and, if either of them should take or permit, or omit to take or cause to be taken, any such action, it will take all lawful actions necessary to rescind or correct such actions or omissions promptly upon obtaining knowledge thereof. (b) The Borrower and the Issuer will file of record such documents and take such other steps as are necessary, in the written opinion of Bond Counsel filed with the Issuer and the Trustee, in order to ensure that the requirements and restrictions of the Regulatory Agreement will be binding upon all owners of the Project, including, but not limited to, the execution and recordation of the Regulatory Agreement in the real property records of the County of Contra Costa. Requirements of the Housing Law In addition to the requirements described above the Borrower agrees in the Regulatory Agreement that it shall comply with each of the requirements of Section 52080 of the Housing Law, including(but not limited to)the following° (a) Not less than 40%of the total number of units in the Project shall be available for occupancy on a priority basis to Low Income Tenants. The units made available to meet this requirement shall be of comparable quality and offer a range of sixes and numbers of bedrooms comparable to the units that are available to other tenants in the Project. (b) The rental payments for the Low Income Units paid by the tenants thereof (excluding any supplemental rental assistance from the State,the federal government or any other public agency to those tenants or on behalf of those units) shall not exceed 30% of an amount equal to 50%of the median adjusted gross income for the Area. (c) The Borrower shall accept as tenants, on the same basis as all other prospective tenants, low-income persons who are recipients of federal certificates or vouchers for rent subsidies pursuant to the existing program under Section 8 of the Housing Act. The Borrower shall not permit any selection criteria to be applied to Section 8 certificate or voucher holders that is more burdensome than the criteria applied to all other prospective tenants. (d) The units reserved for occupancy as required by subsection (a) of this Section shall remain available on a priority basis for occupancy at all times during the Qualified Project Period. (e) During the three (3) years prior to the expiration of the {qualified Project Period, the 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. (f) hollowing 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 01-177463.02 A-4 I domain, or action of a federal agency preventing enforcement, units reserved for occupancy as required by subsection(a)of this Section shall remain available to any eligible tenant occupying a reserved unit at the date of such expiration or termination, at the rent determined by subsection (b)of this Section,until the earliest of(1)the household's income exceeds 140%of the maximum eligible income specified above,(2)the household voluntarily moves or is evicted for good cause (as defined in the Housing Law), (3) 30 years after the date of the commencement of the Qualified Project Period, or (4) the Owner pays the relocation assistance and benefits to households as provided in Section 7264(b)of the California Government Code. (g) The covenants and conditions of the Regulatory Agreement shall be binding upon successors in interest of the Borrower. (h) The Regulatory Agreement shall be recorded in the office of the county recorder of the County of Contra Costa and shall be recorded in the grantor-grantee index to the names of the Borrower as grantor and to the name of the Issuer as grantee. Requirements of the Issuer In addition to the requirements described above and to the extent not prohibited thereby, the Borrower agrees in the Regulatory Agreement to comply with each of the requirements of the Issuer described below: (a) The Borrower will pay to the Issuer all of the amounts required by the Financing Agreement and will indemnify the Issuer and the Trustee as provided in the Financing Agreement. (b) All tenant lists, applications and waiting lists relating to the project shall at all times be kept separate and identifiable from any other business of the 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. (c) The Borrower shall submit to the issuer(i) annually, not later than July 15th, a statistical report to the Issuer in the form to the Regulatory Agreement hereto as Exhibit D and, within fifteen days after receipt of a written request, any other information or completed forms requested by the Issuer in order to comply with reporting requirements of the Internal Revenue Service or the State, including without limitation information necessary for the Issuer to file the annual report required by Section 8855.5. (d) 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 constructions, operation or management of the Project, and will not discriminate on the basis of household sire as long as the tenants meet the household size standards of Section 8 of the Housing Act. Further,the Borrower shall not permit occupancy in any unit in the Project by more persons than is permissible under the Section 8 household size standards. (e) The Borrower acknowledges that the Issuer may appoint an Administrator other than the issuer to administer the Regulatory Agreement and to monitor performance by the Borrower of the terms, provisions and requirements of the Regulatory Agreement. In such event, the Borrower shall comply with any reasonable request by the Issuer to deliver to any such 0 1-177463.02 A-42 Administrator, in addition to or instead of the Issuer, any reports, notices or other documents required to be delivered pursuant to the Regulatory Agreement, and to make the Project and the books and records with respect thereto available for inspection by the Administrator as an agent of the Issuer. (f) For purposes of clause (b) under "requirements of the Act," the base rents shall be adjusted for household size,to the extent permitted by law, and in making such adjustments it shall be assumed that the base rents to be paid will be as if 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. The requirements of the issuer described above shall be in effect for the Qualified Project Period, provided that any of the foregoing requirements of the Issuer may be expressly waived by the issuer in writing, in its sole discretion, but (i)no waiver by the Issuer of any requirement of the regulatory Agreement shall, or shall be deemed to, extend to or affect any other provision of the regulatory Agreement except to the extent the issuer has received an opinion of Bond Counsel that any such provision is not required by the Housing Law and may be waived without adversely affecting the exclusion from gross income of interest on the Series D Bonds for federal income tax purposes; and (ii) any requirement of the Regulatory Agreement 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 Series D Bonds to cease to be Tax-Exempt or to the effect that compliance with such requirement would be in conflict with the Housing Law or any other state or federal law. Sale or"Transfer of the Project For the Qualified Project Period, the Borrower shalt' not, except as otherwise provided in the Regulatory Agreement, sell. transfer or otherwise voluntarily dispose of the Project, in whole or in part, without the prior written consent of the Issuer and the Trustee, which consent shall not be unreasonably withheld or delayed if the following conditions are satisfied•. (a)the Issuer and the Trustee have received evidence, reasonably acceptable to the Issuer and the Trustee that(i)the Borrower shall not be in default under the Regulatory Agreement or under the Financing Agreement (which may be evidenced by a Certificate of Continuing Program Compliance) or the purchaser or assignee undertakes to cure any defaults of the Borrower to the reasonable satisfaction of the Issuer, (ii)the continued operation of the Project shall comply with the provisions of the Regulatory Agreement, (iii)either (A)the purchaser or assignee or its property manager has at least three years' experience in the ownership, operation and management of similar size rental housing projects and at least one year's experience in the ownership, operation and management of rental housing projects containing below-market-rate units, without any record of material violations of discrimination restrictions or other state or federal laws or regulations or local governmental requirements applicable to such projects, or (B)the purchaser or assignee agrees to retain a property management firm with the experience and record described in subclause (A)above or (C)the transferring Borrower or its management company will continue to manage the Project for at least one year following such transfer and during such period will provide training to the transferee and its manager in the responsibilities relating to the Low Income units; and (iv)the person or entity which is to acquire the Project does not have pending against it and does not have a history of signif=icant and material building code violations or complaints concerning the maintenance, upkeep, operation and regulatory agreement compliance of any of its projects as identified by any local, state or federal regulatory agencies, (b)the execution by the purchaser or assignee of any document reasonably requested by the Issuer or the Trustee with respect to the assumption of the Borrower's obligations under the Regulatory Agreement and, if the Bonds are outstanding at the time of transfer, the Financing Agreement, including, without limitation, an instrument of assumption thereof, and delivery to the Issuer of an opinion of such 0 1-t 77463.02 A-43 purchaser or assignee's counsel to the effect that each such document and the Regulatory Agreement are valid, binding and enforceable obligations of such purchaser or assignee, subject to bankruptcy and other standard limitations affecting creditor's rights; (c)receipt by the Issuer of an opinion of Bond Counsel to the effect that any such sale, transfer or other disposition will not adversely affect the Tax-Exempt status of interest on the Series D Bonds; and (d)receipt by the Issuer and Trustee of all fees and/or expenses thea currently due and payable to the Issuer and Trustee. The written consent of the Issuer to any transfer of the Project shall constitute conclusive evidence that the transfer is not in violation of this provision. Notwithstanding anything in this provision, the Project may be transferred without the consent of the Issuer and without compliance with the foregoing conditions, (1)to Fannie Mae or any transferee of or successor in interest to Fannie Mae pursuant to or following a foreclosure, deed in lieu of foreclosure or comparable conversion of the Mortgage Loan and (2)to the first transferee following such foreclosure or transfer by deed in lieu of foreclosure, without the consent of the Issuer, if the requirements set forth in clauses (b) through (d) above are satisfied. It is expressly stipulated and agreed in the Regulatory Agreement that any sale, transfer or other disposition of the Project in violation of the Regulatory Agreement will be null,void and without effect,will cause a reversion of title to the Borrower and will be ineffective to relieve the Borrower of its obligations under the Regulatory Agreement. ?clothing in the Regulatory Agreement will affect any provision of any other document or instrument between the Borrower and any other party which requires the Borrower to obtain the prior written consent of such other party in order to sell, transfer or otherwise dispose of the Project or any interest(direct or indirect) therein or in the Borrower or any interest(direct or indirect)therein. Upon any sale or other transfer that complies with the Regulatory Agreement, the Borrower shall be fully released from its obligations under the Regulatory Agreement to the extent such obligations have been fully assumed in writing by the transferee of the Project. Except as otherwise provided in the Regulatory Agreement, any transfer of the Project to any entity,whether or not affiliated with the Borrower, shall be subject to the provisions of the Regulatory Agreement,except that no consent of the Issuer shall be required in the case of any transfer of the Project to a wholly owned subsidiary or related entity of the Borrower if the conditions set forth in the Financing Agreement are satisfied. For the Qualified Project Period, the Borrower shall not: (a)encumber any of the Project or grant commercial leases of any part thereof or permit the conveyance, transfer or encumbrance of any part of the Project, except pursuant or subordinate to the provisions of the Regulatory Agreement and the Mortgage (and upon receipt by the Borrower of an opinion of Bond Counsel. that such action will not adversely affect the Tax-Exempt status of interest on the Series D Bonds); provided that such opinion will not be required with respect to any encumbrance, lease or transfer relating to a commercial operation or ancillary facility that will be available for tenant use and is customary to the operation of multifamily housing developments similar to the Project), or except upon a sale, transfer or other disposition of the Project in accordance with the terms of the Regulatory Agreement or pursuant to and in accordance with the Mortgage Loan Documents; (b)demolish any part of the Project or substantially subtract from any real or personal property of the Project, except to the extent that what is removed is replaced with comparable property;or(c) permit the use of the dwelling accommodations of the Project for any purpose except rental residences. 'Perm The Regulatory Agreement and all and several of the terms thereof will become effective upon its execution and delivery and will remain in full force and effect for the period provided therein and will terminate as to any provision not otherwise provided with a specific termination date and will terminate in its entirety at the enol of the Qualified Project Period, it being expressly agreed and understood that the provisions thereof are intended to survive the retirement of the Bonds and discharge of the Indenture and the Financing Agreement. 01,177453.02 A-44 The terms of the Regulatory Agreement to the contrary notwithstanding,the requirements of the Regulatory Agreement will terminate and be of no further force and effect in the event of involuntary noncompliance with the provisions of the Regulatory Agreement caused by fire,', seizure, requisition, change in a federal law or an action of a federal agency after the Closing mate which prevents the issuer and the Trustee from enforcing such provisions, or condemnation or foreclosure,transfer of title by deed in lieu of foreclosure or a similar event, but only if, within a reasonable period, either the Bonds are retired or amounts received as a consequence of such event are used to provide a project that meets the requirements of the Regulatory Agreement; provided, however, that the preceding provisions of this sentence will cease to apply and the restrictions contained therein will 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 (within the meaning of Section 1.103-1 O(e)of the Regulations)obtains an ownership interest in the Project for federal income tax purposes. The Borrower agrees in the Regulatory Agreement that, following any foreclosure, transfer of title by deed in lieu of foreclosure or similar event, neither the Borrower nor any such related person as described above will obtain an ownership interest in the Project for federal tax purposes. Notwithstanding any other provision of the Regulatory Agreement, the Regulatory Agreement may be terminated upon agreement by the Issuer, the Trustee and the Borrower upon receipt by the issuer and the Trustee of an opinion of Bond Counsel to the effect that such termination will not adversely affect the exclusion from gross income of interest on the Series D Bonds for federal income tax purposes. Upon the termination of the terms of the Regulatory Agreement, the* parties thereto agree to execute, deliver and record appropriate instruments of release and discharge of the terms thereof; provided, however, that the execution and delivery of such instruments shall-not be necessary or a prerequisite to the termination of the Regulatory Agreement in accordance with its terms. Covenants To Run With the Land Notwithstanding Section 1461 of the California.Civil Code, the Borrower subjects the Project to the covenants, reservations and restrictions set forth in the Regulatory Agreement. The Issuer and the Borrower declare in the Regulatory Agreement their express intent that the covenants, reservations and restrictions set forth in the Regulatory Agreement will be deemed covenants running with the land and will pass to and be binding upon the Borrower's successors in title to the Project; provided,however,that on the termination of the Regulatory Agreement said covenants, reservations and restrictions will expire without the necessity of further action. Each and every contract, deed or other instrument thereafter executed covering or conveying the Project or any portion thereof will conclusively be held to have been executed, delivered and accepted subject to such covenants, reservations and restrictions, regardless of whether such covenants, reservations and restrictions are set forth in such contract, deed or other instrument. Burden and Benefit The Issuer and the Borrower declare in the Regulatory Agreement their understanding and intent that the burdens of the covenants set forth in the Regulatory Agreement touch and concern the land in that the Borrower's legal interest in the Project is rendered less valuable thereby. The issuer and the Borrower further declare in the Regulatory Agreement their understanding and intent that the benefits of such covenants touch and concern the land by enhancing and increasing the enjoyment and use of the Project by Low income Tenants, the intended beneficiaries of such covenants, reservations and restrictions, and by furthering the public purposes for which the Bonds were issued. 01-177463.02 A-45 Default; Enforcement If the Borrower defaults in the performance or observance of any covenant, agreement or obligation of the Borrower set forth in the Regulatory Agreement and such default remains uncured for a period of 60 days after notice thereof is given by the Issuer or the Trustee to the Borrower,or for a period of 60 days from the date the Borrower should, with due diligence, have discovered such default,then the Issuer or the Trustee, acting on its own behalf or on behalf of the Issuer(as directed by the Issuer,subject to the provisions of the Indenture), acting on its own behalf or on behalf of the Issuer shall declare an "Event of Default" to have occurred under the Regulatory Agreement; provided, :however, that if the default is of such a nature that it cannot be corrected within 60 days, such default shall not constitute an Event of Default hereunder so long as(i)the 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 Series D Bonds. The issuer and the Trustee shall have the right to enforce the obligations of the Borrower under the Regulatory Agreement within shorter periods of time than are otherwise provided herein if necessary in the opinion of Bond Counsel to ensure compliance with the Dousing Law or the Code. Following the declaration of an Event of Default under the Regulatory Agreement, the Issuer or the Trustee,at the direction of the Issuer, subject to the provisions of the Indenture, may take any one or more of the following steps,in addition to all other remedies provided by law or equity. (a) by mandamus or other suit, action or proceeding at law or in equity, including injunctive relief, require the Borrower to perform its obligations and covenants under the Regulatory Agreement, or enjoin any acts or things that may be unlawful or in violation of the rights of the Issuer or the Trustee under the Regulatory Agreement, (b) have access to, and inspect, examine and make copies of, all of the books and records of the Borrower pertaining to the Project; and (c) 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 under the Regulatory Agreement. The Borrower agrees in the Regulatory Agreement that specific enforcement of the Borrower's agreements described therein is the only means by which the Issuer may fully obtain the benefits of such agreements made by the Borrower therein and the Borrower therefore agrees to the imposition of the remedy of specific performance against it in the case of any Event of Default by the Borrower under the Regulatory Agreement. The Trustee shall have the right, in accordance with the Regulatory Agreement 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 ander the Regulatory Agreement, provided that prior to taking any such action the Trustee shall give the Issuer written notice of its intended action. After the Indenture has been discharged,the Issuer may act on its own behalf to declare an "Event of Default"to have occurred and to take any one or more of the steps described above to the same extent and with the same effect as if taken by the Trustee. No bread: or default under the Regulatory Agreement shall defeat or render invalid the lien of the Mortgage or any other mortgage or like encumbrance upon the Project or any portion thereof given in good faith and for value. 01-177463.02 A-46 The 'Trustee shall not be deemed to have knowledge of any default under the Regulation Agreement unless the Trustee shall have been specifically notified in writing of such default by the Issuer, the Administrator or by the Owners of at least 25%of the Bonds outstanding. Promptly upon determining that a violation of the Regulatory Agreement has occurred,the city or the Trustee shall, by written notice, inform Fannie Mae and the Servicer that such violation has occurred, the nature of the violation and that the violation has been cured or has not been cured, but is curable within a reasonable period of time,or is incurable. Notwithstanding anything herein to the contrary, (A)the occurrence of an Event of Default under the Regulatory Agreement shall not be deemed, under any circumstances whatsoever, to be a default under the Mortgage Loan Documents, except as may be otherwise specified therein; and (B) neither the Issuer nor the Trustee may, upon the occurrence of an Event of default under the Regulatory Agreement, seek, in any manner, to (a) cause or direct acceleration of the Mortgage Loan, (b) enforce the Mortgage Note, (c)foreclose on the Mortgage, (d)cause the Trustee to redeem the Bonds or to declare the principal of the Bonds and the interest accrued on the Bonds to be immediately due and payable or (e) cause the trustee to take any other action under any of the Mortgage Loan Documents,any of the Band Documents or any other documents, which action would or could have the effect of achieving any one or more of the actions, events or results described in the preceding clauses (a) through (d). No person other than .Fannie Mae shall have the right to (a) declare the principal balance of the Mortgage Note to be immediately due and payable or(b)commence foreclosure or other like action. The foregoing prohibitions and limitations are not intended to limit the rights of the Issuer or the Trustee to specifically enforce the Regulatory Agreement or to seek injunctive relief in order to provide for the operation of the Project in accordance with the requirements of the Code and State law. Accordingly, upon any default by the Borrower, the Issuer or the Trustee may seek specific performance of the Regulatory Agreement or enjoin acts that may be in violation of the Regulatory Agreement or unlawful, but neither the Issuer nor the Trustee may seek any form of monetary recovery from the Borrower, although the Issuer and the Trustee may seek to enforce a claim for indemnification;provided that no obligation of the Borrower under the Regulatory Agreement, including, without limitation, any indemnification obligation, any other obligation for the payment of money, any claim and any judgment for monetary damages against the Borrower, occasioned by breach or alleged breach by the Borrower of its obligations under the Regulatory Agreement or otherwise, shall be secured by or in any manner constitute a lien on, or security interest in, the Project, whether in favor of the Issuer, the Trustee or any other person, and all such obligations shall be, and are, subordinate in priority, in right to payment and in all other respects to the obligations, liens, rights (including without limitation the right to payment) and interests arising or created under the Mortgage Loan Documents. Accordingly, neither the Issuer nor the Trustee shall have the right to enforce any monetary obligation other than directly against the Borrower, without recourse to the Project. In addition, any such enforcement must not cause the Borrower to file a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Borrower under any applicable liquidation, insolvency, bankruptcy, rehabilitation, composition, reorganization, conservation or other similar law in effect now or in the future. The obligations of any Borrower under the Regulatory Agreement shall be personal to the person who was the Borrower at the time that an event, including,without limitation,any default or breach of the Regulatory Agreement, occurred or was alleged to have occurred,and such person shall remain liable for any and all such obligations, including damages occasioned by a default or breach, event after such person ceases to be the owner of the Project. Accordingly, no subsequent owner of the Project shall be liable or obligated for the obligation of any prior Borrower(including the initial Borrower),including, but not limited to, any obligation for payment, indemnification or damages, for default or breach of the Regulatory Agreement or otherwise. The owner of the Project at the time the obligation was incurred, 0I-177463.02 A-47 including any obligation arising out of a default or breach of the Regulatory Agreement, shall remain liable car any and all payments and damages occasioned by the Borrower even after such person ceases to be the owner of the Project,and no person seeking such payments or damages shall have recourse against the Project. Under no circumstances shall the Issuer or the Trustee: (i) initiate or take any action which may have the effect, directly or indirectly, of impairing the ability of the Borrower to timely pay the principal of, interest on or other amounts due and,payable under,the Mortgage Loan; (ii) interfere with or attempt to influence the exercise of Nannie Mae of any of its rights under the Mortgage Loan, including,without limitation,Fannie Mae's remedial rights under the Mortgage Loan Documents upon the occurrence of an event of default by the Borrower under the Mortgage Loan; or The Trustee The Trustee shall act as specifically provided in the Regulatory Agreement and in the Indenture and may exercise such additional powers as are reasonably incidental thereto. The Trustee shall have no duty to act with respect to enforcement of the Borrower's performance under and as described in the Regulatory Agreement unless it shall have actual knowledge of any such default as provided in the Regulatory Agreement. The Trustee may act as the agent of and on behalf of the issuer, and any act required to be performed by the Issuer as provided in the Regulatory Agreement shallbe deemed taken if such act is performed by the Trustee. In connection with any such performance, the Trustee is acting solely as Trustee under the Indenture and not in its individual capacity, and, except as expressly provided in the Regulatory Agreement, all provisions of the Indenture relating to the rights, privileges, powers and protections of the Trustee, including, without limitation, those set forth in Section 10 thereof, shall apply with equal force and effect to all actions taken (or omitted to be taken) by the Trustee in connection with the Regulatory Agreement. Neither the Trustee nor any of its officers, directors or employees shall be liable for any action taken or omitted to be taken by it under the Regulatory Agreement or in connection with the Regulatory Agreement except for its or their own negligence or willful misconduct. The Issuer shall be (or shall cause the Administrator to be) responsible for the monitoring of the Borrower's compliance with the terms of the'Regulatory Agreement. The Trustee shalt not be responsible for such monitoring and verifying. After the date on which no .Bonds remain Outstanding as provided in the Indenture, the Trustee shall no longer have any rights, duties or responsibilities under the Regulatory agreement and all references to the Trustee in the Regulatory Agreement shall be deemed references to the Issuer. THE COLLATERAL AGREEMENT The following description is intended only to be a summary of certain provisions a,f the Collateral Agreement. This summary does not purport to he complete or definitive and is qualified in its entirety by reference to the Collateral Agreement, a copy of which is on file with the Trustee. Definitions. Capitalized terms used in the Collateral Agreement shall have the meanings given to those terms in the Collateral Agreement unless the context clearly indicates a different meaning. Capitalized terms used in the Collateral Agreement and not defined in the Collateral Agreement, shall have the meanings given to those terms in the Indenture or the Financing Agreement, as applicable. All references to Exhibits or Schedules shall be Exhibits or Schedules to the Collateral Agreement. 01-177463.02 A-48 "activity Fee" means the Activity Fee provided for and defined in the Reimbursement Agreement, "Activity Rate" means the Activity Rate provided for and defined in the Reimbursement Agreement. "Act of Bankruptcy" means any proceeding instituted under the Bankruptcy Code by or against the Borrower or the Servicer. "Ancillary Collateral Agreement" shall, with respect to the Mortgage Loan, have the meaning given that term in the Mortgage dote. "Bankruptcy Curie" means Title I 1 of the United States Code, entitled "Bankruptcy", as now in effect and as amended from time to time in the future,or any successor provisions of federal law. "Collateral" means (a)Collateral Mortgages and (b)securities, obligations and participation interests that are described in the Collateral Agreement, including the cash flow on such securities, obligations and participation interests, but only upon the determination of Fannie Mae as set forth in the Collateral Agreement. "Collateral Agreement"means the Collateral Agreement between Fannie Mae and the Trustee, as the Collateral Agreement may be amended,modified,supplemented or restated from time to time. "Collateral Agreement Vermination.trate"means, subject to the Collateral Agreement,the first to occur of(a)the date on which the bonds shall have been paid in full, (b)the date on which the Trustee, after having received sufficient funds to redeem or purchase all of the Bonds Outstanding in accordance with the provisions of the indenture, shall have released the Fledged Collateral in accordance with the provisions of the Collateral Agreement and shall have delivered to Fannie Mae all documents and instruments necessary or requested by Fannie Mae to effect or evidence the release and the reassignment of the fledged Collateral to Fannie Mae and shall have paid to Fannie Mae all amounts, if any, payable by the Trustee to Fannie Mae under the Collateral Agreement, or (c)the Fannie Mae Pass-Through Certificate Delivery Date. "Collateral Mortgages" means those residential mortgages owned by Fannie Mae that are described in the Collateral Agreement, including the cash flow on those residential mortgages. "True Bate" means the eighteenth (18th)day of each month or, if such day is not a Business Tray, the next preceding Business Day. "Event of Default" means the occurrence of any event of default described in the Collateral Agreement. "Fannie Mae" means a corporation organized and existing under the Fannie Mae Charter Act, and its successors and assigns. "Fannie Alae Charter .Act" means the Federal National Mortgage Association Charter Act, 12 U.S.C. §1716 et sect., as amended from time to time. "Fannie Mae Commitment" means the Commitment Letter issued by Fannie Mae to the Servicer with respect to the Mortgage Loan, as it may be amended, modified, supplemented or restated from time to time. 01-1777463.02 A-49 "Fannie Mae Vass-Through Certificate" has the meaning given that term in the Indenture. ".Fannie Mae Payment Default" means the occurrence of a payment default,under the Collateral Agreement. "FHA" means the Federal Housing Administration of HUD, and its successors and assigns. "HUD" means the United States Department of Housing and Urban Development, and its successors and assigns. "Maturity Date"means the final maturity date of the Bonds. "Monthly Debt Service Period" means, with respect to the Mortgage Loan, each month, or portion of a calendar month,ending on the last day of a calendar month. "Mortgage Lean Payment Default Notice" means, with respect to a Required Mortgage Payment due to the Trustee on a Due Date, telephonic notice (immediately confirmed by written notice given by facsimile and by first class mail, postage filly prepaid)by the Trustee to Fannie Mae and the Servicer not later than 4:00 p.m., Washington, D.C. time, on the Business Day immediately following the Due bate (a)stating. (i) that the Trustee has not received the Required Mortgage Payment due to the Trustee on the Due Date or has received a payment on or before the Due Date but in an amount less than the amount of the Required Mortgage Payment due to the Trustee on the Due Date; (ii) the amount of the Required Mortgage Payment due to the Trustee on the Due Date and, if the Trustee received a payment on or before the Due bate in an amount less than the amount of the Required Mortgage Payment clue to the Trustee on the Due Date, the amount received by the Trustee on or before the Due Date and the amount of the deficiency in the Required Mortgage Payment, and (iii) that the Trustee requires a Required Fannie Mae Payment in the amount of the Required Mortgage Payment or, if the Trustee received a payment on or before the D=ue Date in an amount less than the amount of the Required Mortgage Payment due to the Trustee on the Due Date, the amount of the deficiency in the Required Mortgage Payment; and (b) requesting the Required Fannie Mae Payment in the amount of the deficiency in accordance with the Collateral Agreement. "Mortgage Note Payments Interest" means, with respect to the Mortgage Loan, the right of the Trustee to receive and retain all payments due and owing under the Mortgage Note other than (a)the Facility Fee, (b)the Servicing Fee, (c) late charges,(d)default interest, (e)escrow payments for reserves, taxes, insurance and other impositions, and all payments for deposit into the Replacement Reserve (as defined in the Mortgage Note), (f) payments pursuant to any Ancillary Collateral Agreement and (g) other amounts which do not constitute principal or interest at the Pass-Through Rate. "Mortgage Rights" means, with respect to the Mortgage Loan, without limitation, (a)all of the rights and interests under the Mortgage Note, the Mortgage, and the other Mortgage Loan Documents to direct actions, grant consents, grant extensions, grant waivers, grant requests, give approvals, give directions, exercise remedies, exercise forbearance, give releases, make appointments, make decisions, take actions, apply partial payments,apply late charges, apply default interest,apply escrow payments for 01-177463.02 A-50 reserves,taxes,insurance and other impositions,apply funds received pursuant to any Ancillary Collateral Agreement, and, subject to the exclusion set forth below, do all other things that may be clone under the Mortgage Mote, the Mortgage, and the other Mortgage Loan Documents and (b)the right, power and authority to, and the right, power and authority to assign or delegate the right, power and authority to, enter into and/or receive or accept delivery of and/or be a party to all Mortgage Loan Documents(other than the Mortgage Note and the Mortgage which are executed and delivered by the Borrower to the Issuer), to be executed and delivered in connection with the Mortgage Loan, and which are not entered into and/or received or accepted by the Issuer, or to which the Issuer is not a party, including, without limitation, any agreements,documents and instruments ancillary to or otherwise relating to the Mortgage Loan, including,agreements with respect to the servicing of the Mortgage Loan and the establishment of custodial and other accounts for the deposit of funds payable by the .Borrower under the Mortgage Loan Documents and collected by the Servicer, and to vest in any assignee or delegatee, including the Servicer, such rights, powers and authority as may be necessary to implement any of the foregoing; "Mortgage Rights"also means,and expressly includes,with respect to the Mortgage Loan,custody of each Mortgage Loan Document other than the Mortgage Dote and the Mortgage, "Mortgage Rights" does not mean, and expressly excludes, the Reserved Rights and, with respect to a Mortgage Loan, the Mortgage mote Payments Interest and custody of the Mortgage Note and the Mortgage (excluding rights to receive condemnation awards and insurance proceeds), all of which are assigned by the Issuer to the Trustee, subject to certain assignment provisions of the Collateral Agreement. "'ass-Through Rate" shall,with respect to the Mortgage Lean, have the meaning given that term in the Mortgage Note. "Pledged Collateral" means (a)the Collateral described in the Collateral Agreement that is pledged to the Trustee pursuant to the Collateral Agreement, and which is, as of the Closing Bate, described in Schedule I-A to the Collateral Agreement, having the aggregate value set firth in Schedule I-B to the Collateral Agreement, without regard to whether specific Collateral has been identified to the Trustee by Fannie Mae, and (b)all proceeds and collections derived from or in connection with the Collateral described in the foregoing clause(a)(net of any mortgage servicing fees on Collateral Mortgages), including all payments of principal and interest on the Collateral described in the foregoing clause (a)and any insurance proceeds, including FHA insurance proceeds, with respect to pledged Collateral Mortgages. "Pledged Collateral Requirement" means the requirement that the cash flow (i.e., payments of principal and interest) on the Fledged Collateral (net of servicing fees on Collateral :.Mortgages) payable during each Monthly Debt Service Period, determined without regard to earnings from the investment of the cash flow on the Pledged Collateral, be an amount at least equal to 100% of the interest or the principal and interest payable on the Mortgage Loan during;such Monthly Debt Service Period. "Reimbursement Agreement" means, with respect to the Mortgage Loan, the Reimbursement Agreement, between Fannie:Viae and the Borrower, as such agreement may be amended, modified, supplemented or restated from time to time. "Required Fannie Mae Payment" means a payment required to be made by Fannie Mae to the Trustee pursuant to the Collateral Agreement upon Fannie Mae"s receipt of a Mortgage Loan Payment Default Notice. ",Required Mortgage Payment" means, with respect to the Mortgage Loan, only (a)the regularly scheduled monthly payments of interest (at the Pass-Through Rate), or level payments of principal and interest (at the Pass-Through Rate), as the case may be, due under the Mortgage Note, which payments under the Mortgage `Itilote are due and payable on the first day of each month to the Servicer, to be G:-i7!:63.32 A-51 remitted by the Servicer to the Trustee on the Due Date, and (b)on the maturity date of the Mortgage Note, the unpaid principal balance of the Mortgage Note and all accrued and unpaid interest due on the Mortgage ?'dote as of the maturity date of the Mortgage :'+cote, a payment described in clauses (a)or (b)above shall constitute a Required Mortgage Payment whether made by the Borrower or by the Servicer as a Servicer Advance, "Required Mortgage Payment" does not mean, with respect to the Mortgage Loan, and expressly excludes, (a)all other payments due or payable under the Mortgage Note, the Mortgage and the other Mortgage Loan Documents, such exclusion to extend expressly, without limitation, to (i)any prepayment of principal and accrued and unpaid interest on the Mortgage :Note attributable to such principal, including any payments in respect of the principal of, premium, if any, and interest on, the,Bonds payable to the Bondholders upon a redemption of Bonds occasioned by a prepayment of the Mortgage Loan, (ii) late charges, (iii) default interest, (iv) escrow payments for reserves, taxes, insurance and other impositions, and (v) payments pursuant to any Ancillary Collateral Agreement, (b)all payments on the Mortgage Loan in respect of the principal of, and the interest on, any Bond which is not Outstanding under the Indenture, and (c)that portion of the Mortgage Note Rate that comprises the Facility Pee or the Servicing Fee, (d)all payments on the Mortgage Loan in respect of the principal of,premium, if any, and the interest on,any Bond registered in the name of or otherwise owned, directly or indirectly, by the Borrower and (e)any payments due under the Indenture in connection with any redemption of Bonds. "Schedule l" means, collectively, Schedule I-A and Schedule I-B to the Collateral Agreement as each such Schedule may be amended, modified, supplemented or restated at any time and from time to time. ,,Schedule IP' means Schedule II to the Collateral Agreement as such Schedule may be amended, modified,supplemented or restated at any time and from time to time. "Servicer" means, with respect to the Mortgage Loan, any entity approved by Fannie Mae, in its discretion,as the servicer of the Mortgage Loan, and any permitted successors or assigns. "Ser,vicer Advance" means any advance by the Servicer of any amount payable under the Mortgage Note upon the Borrower's failure to pay such amount when due, including, without limitation, a Required Mortgage Payment. "Trustee" means the Trustee serving under the Indenture. Collateral Pledge of Collateral. Pledge. Fannie Mae pledges to the Trustee, and grants to the Trustee a security interest in, the fledged Collateral, and agrees that the Pledged Collateral has not been, and shall not be, otherwise pledged by Fannie Mae. The pledge made by Fannie Mae is in the nature of an hypothecation in which pledged collateral is not delivered to the pledgee. Description. Except as otherwise provided in the Collateral Agreement, the Pledged Collateral shall be an interest in (a)Collateral Mortgages described in the Collateral Agreement or (b) securities, obligations or participation interests described in the Collateral Agreement, but only upon the determination of Fannie Mae,as set forth in the Collateral Agreement. 01-177463.02 A-52 Collateral Mortgages. Each Collateral Mortgage shalt be an interest in a residential mortgage insured by FHA under the '-National Housing Act of 1934, as amended, or otherwise insured or guaranteed by an agency of the United States of America. Securities and Obligations; Participation Interests. In the event that Fannie Mae determines that it does not intend to pledge Collateral Mortgages, as described in the Collateral Agreement, to satisfy its obligations under the Collateral Agreement, or that it does not possess sufficient Collateral Mortgages, as described in the Collateral Agreement, to satisfy its obligations under the Collateral Agreement,Fannie Mae shall, at any time, include as Collateral (a)mortgage-backed securities guaranteed as to payment when due by Fannie Mae, the Federal Horne Loan Mortgage Corporation or the Government National Mortgage Association, or any successor to any of the foregoing, (b)any general obligation of ',Fannie Mae and/or (c)participation interests in any such securities or obligations described in the foregoing clauses (a)and (b). Segregation. Fannie Mae shall not be obligated to set the Pledged Collateral apart or hold it in any manner distinct from any other mortgages or similar instruments owned by Fannie Mae, nor to provide to the Trustee any documentation as to the Pledged Collateral. Modification; Substitution. Fannie Mae reserves the right, at any 'Lime, to change the Pledged Collateral and to modify the Collateral listen in Schedule I in order to (a)add Collateral to Schedule 1, (b)withdraw Collateral from Schedule 1, (c)withdraw Collateral from Schedule I and substitute other Collateral or (d)withdraw Schedule I entirely and substitute a new Schedule 1, provided that, at any such time, Fannie Mae shall (a)hold legal title to the Pledged Collateral and (b)have a beneficial interest in the Pledged Collateral, net of any prior pledge or assignment of the Pledged Collateral,at least equal to the fledged Collateral Requirement. Lffectiveness. The pledge made by Fannie Mae in section 3.1(1) of the Collateral Agreement shall,for purposes of any payment required to be made by Fannie Mae pursuant to the Collateral Agreement as a Required Fannie Mae Payment, be effective, as between the parties to the Collateral Agreement, with respect to cash flow on the Pledged Collateral received on and after the first day of the calendar month in which the Closing Date occurs. Identification of Collateral .Identification of Collateral—Failure to Make Required Mortgage Payment. Fannie Mae shall have the right, in its discretion, at any time, in anticipation of the Trustee requiring payment from Fannie Mae pursuant to the Collateral Agreement as a Required Fannie Mae Payment,to either: (a) identify (to the extent it has not previously done so) to the Trustee, and list in Schedule 11, specific Collateral which is part of the Fledged Collateral or, if applicable. pledge additional Collateral, as the source for payments required to be made pursuant to the Collateral Agreement:or (b) arrange for payment to the Trustee, from its awn funds, of any amounts required to be paid by Fannie Mae pursuant to the Collateral Agreement. Notwithstanding any prior election to identify specific Collateral or pledge additional Collateral pursuant to paragraph(a) above, Fannie Mae reserves the right, at any time, to pay to the Trustee, from its own funds, any amounts required to be paid by Fannie Mae pursuant to the Collateral Agreement. Notwithstanding any prior election to make payments pursuant to paragraph(b) above, Fannie Mae 01-:77463.02 A-53 reserves the right, at any time, to identify specific Collateral as the source for payments required to be made pursuant to the Collateral Agreement. Modification;Substitution. Fannie Mae reserves the right, at any time, to Modify the Collateral listed in Schedule II in order to (a)add Collateral to Schedule II, (b)withdraw Collateral from Schedule II, (c)withdraw Collateral from Schedule II, and substitute new Collateral or (d)withdraw Schedule II, entirely and substitute a new Schedule II, provided in each case that, at any such time, Fannie Mae shall (i)hold legal title to the Pledged Collateral and (ii) have a beneficial interest in the Pledged Collateral, net of any prier pledge or assignment of the Pledged Collateral, at least equal to the Pledged Collateral Requirement. Fannie Mae's Obligations Absolute and Unconditional Notwithstanding any other provision of the Collateral Agreement to the contrary, Fannie Mae's obligations to (a)satisfy the Pledged Collateral Requirement on the terms and to the extent provided in the Collateral Agreement and (b) make payments to the Trustee pursuant to the Collateral Agreement, including, without limitation, its obligations to redeem all or a portion of the Pledged Collateral pursuant to the Collateral Agreement, are absolute, unconditional and irrevocable, shall be fulfilled strictly in accordance with the Collateral Agreement, shali not be affected by any rights of set-off, recoupment or counterclaim Fannie Mae might otherwise have against the Issuer, the Trustee,the Borrower,the Servicer or any other person, and shall not be dependent upon (i)the principal amount or the fair market value of the fledged Collateral, (ii)whether the cash flow on the Pledged Collateral (whether or not Collateral is specifically identified to the Trustee pursuant to the Collateral Agreement) is sufficient to make certain payments required to be made by Fannie Mae pursuant to the Collateral Agreement or (iii) whether the principal amount or the fair market value of the fledged Collateral to be redeemed (whether or not Collateral is specifically identified to the Trustee pursuant to the Collateral Agreement) is less than the amount of Fannie Mae's redemption obligations under the Collateral Agreement. Fannie Mae's obligations under the Collateral Agreement shall not be suspended, discontinued or reduced or(except as expressly provided in the Collateral Agreement)terminated for any cause, including, without limiting the generality of the foregoing, any (a) interruption in the operation of the Project, (b) failure to obtain any permit, order or action of any kind from any governmental agency relating to the Mortgage loan, the Project or the sale of the Pledged Collateral, (c)event constituting force majeure, (d)acts or circumstances that may constitute commercial frustration of purpose, (e)change in law or(f)any failure of the Trustee to perform or observe any covenant, whether expressed or implied, or to discharge any duty, liability or obligation contained in, arising out of or connected with the Collateral Agreement, it being the intention of Fannie Mae and the Trustee that, so long as the Bonds or any portion of the Bonds remain Outstanding, and with respect to any continuation of the Collateral Agreement beyond the Collateral Agreement Termination Date as provided in the Collateral Agreement,the rights of the Trustee under the Collateral Agreement shall continue in all events. Pledged Collateral Requirement Satisfaction of fledged Collateral Requirement. Subject to the provisions of the Collateral Agreement described in the next paragraph, Fannie Mae agrees that if Collateral shall be identified pursuant to the Collateral Agreement, or if Fannie Mae redeems Collateral pursuant' to the Collateral Agreement, and if the identified Collateral shall, on any date on which Fannie Mae is required to mare a payment under the Collateral Agreement, fail to meet the Pledged Collateral Requirement, Fannie Mae shall add Collateral sufficient to satisfy the Pledged Collateral Requirement or, in the case of a Collateral Mortgage in default, substitute Collateral sufficient to satisfy the Pledged Collateral Requirement (effective, in the case of substitution of Collateral for a Collateral Mortgage in default, as of the date to 01-177463.02 A-54 which principal and interest on the defaulted Collateral Mortgage has been paid), or, alternatively, shall pay the amount required by the Collateral Agreement with respect to a mandatory redemption of the Pledged Collateral pursuant to a specified provision of the Collateral Agreement or, at its option,shall pay the amounts required to be paid under the Collateral Agreement. Upon any addition or substitution of additional Collateral under the Collateral Agreement, Fannie Mae shall complete a supplement to Schedule 11 to the Collateral Agreement deleting the Collateral to be withdrawn, if any, and listing the Collateral to be added or substituted, as the case may be, and promptly submit the completed supplement to the Trustee together with a certificate to the effect that the fledged Collateralsatisfies the Pledged Collateral Requirement. Deemed Satisfaction of Pledged Collateral Requirement. Notwithstanding any other provision of the Collateral Agreement to the contrary, the Pledgets Collateral Requirement shall be deemed satisfied,as of any applicable date of determination, if, pursuant to the Collateral Agreement, Fannie Mae pays all amounts required to be paid by Fannie Mae pursuant to the Collateral Agreement as of such bate. Payments on Account of Pledged Collateral Unless a Fannie Mae Payment Default shall have occurred and be continuing, all payments made on account of the Collateral shall (a)be retained by and be the property of Fannie alae, (b)cease to be part of the Pledged Collateral and (c)be free of any claim by the Trustee under the Collateral Agreement or the Indenture. Servicing of Collateral Collateral comprising the fledged Collateral shall be held by, and serviced by or for, Fannie Mae. Failure of Borrower To ':Make Required Mortgage Payment .Mortgage Loan Payment Default Notice. if a Required Mortgage Payment is not received by the Trustee by 3:010 p.m., Washington, D.C. time, on the Business Day immediately following the Due Date, or if,as of 3:00 p.m., Washington, D.C. time, on the Business Day immediately following the Due Date, the Trustee shall have received payment of an amount less than the amount of the required Mortgage Payment due to the Trustee on the Blue Date, the Trustee shall give a Mortgage Loan Payment Default Notice to Fannie Mae and shall give a copy of the Mortgage loan Payment Default Notice to the Servicer. The Mortgage Loan Payment Default Notice shall be given not later than 4:00 p.m., Washington, D.C. time, on the Business Day immediately following the Due bate. If a Mortgage Loan Payment Default Notice is given later than 4:00 p.m., Washington, D.C. time, the Mortgage Loan Payment Default Notice shall be deemed effective on the succeeding Business flay. Required .Fannie alae Payment. Upon receipt of a Mortgage Loan Payment Default Notice, Fannie Mae shall, not later than the applicable Business Day specified below, pay or cause to be paid to the Trustee, from cash flaw received on the Pledged Collateral, or from other funds of Fannie ?Mae, as a Required Fannie Mae Payment, an amount equal to the deficiency referenced in the Mortgage Loan Payment Default Notice, such amount being equal to the difference between (a)the amount of the .Required Mortgage Payment that was to have been received by the Trustee and (b)the amount, if any, that was actually received by the Trustee on account of such Required Mortgage Payment. Timing of Required Fannie Mae Payment. Provided that Fannie Mae has timely received the Mortgage Loan Payment Default Notice required to be given by the Trustee pursuant to the Collateral Agreement, the Required Fannie Mae Payment shall be made not later than the last Business Day of the 01-177463.02 A-55 calendar month in which the Required Mortgage Payment was due; if the Mortgage Loan Payment Default Notice is not timely received by Fannie Mae, the Required Fannie Mae payment shall, at Fannie Mae's option, in its discretion, be made not later than the later of(a)the last Business Day of the calendar month in which the Required Mortgage Payment was due or (b)the third Business Day following the date on which Fannie Mae receives the Mortgage Loan Payment Default Notice. Continuation of Required Fannie Mae Payments, Fannie Mae shall, upon each receipt of a Mortgage Loan Payment Default Notice, as and to the extent provided for in the Collateral Agreement, forward a Required Fannie Mae Payment to the Trustee (without regard to whether the Mortgage Loan with respect to,which the Required Fannie Mae Payment is to be made is foreclosed or otherwise extinguished), until the first to occur of(a)Fannie Mae's election to redeem. Pledged Collateral, in whole or in part, pursuant to the optional redemption provisions of the Collateral Agreement,(b)the Borrower's cure of all defaults under the Mortgage Lean with respect to which the Required Fannie Mae Payment is made to the satisfaction of Fannie:Viae and the Trustee in a manner which satisfies the requirements of the Mortgage Loan Documents, the Financing Agreement and the Indenture, or (c)the substitution in accordance with the previsions of the Bond Documents of a new mortgage note and mortgage for the Mortgage Note and the Mortgage. Borrower Default. Neither a Required Fannie Mae Payment pursuant to the Collateral Agreement nor a Servicer Advance shall be deemed a payment by the Borrower under, or be deemed to cure the Borrower's default under, any Mortgage Loan Document or any Bond. Document. Disgorgement Recovery. If all or any portion of a Required Mortgage Payment under the Mortgage Loan is recovered from the "Trustee or from any Bondholder, in whole or in part, pursuant to sections 544, 547, 549 or 550 of the Bankruptcy Code (or pursuant to any successor provisions of law), pursuant to a final nonappealable order of a court of competent jurisdiction in any proceeding instituted under the Bankruptcy Code by or against the Borrower or the Servicer (in the case of a Servicer Advance), upon receipt of written notice from the Trustee of the recovery, setting forth the amount of the recovery, Fannie Mae shall pay to the Trustee, from the Pledged Collateral, or from funds of Fannie Mae derived from sources other than the Pledged Collateral or, with respect to the Required Mortgage Payment due on the maturity date of the Mortgage Note, from funds of Fannie Mae to be applied to the redemption of all or a portion of the Pledged Collateral,for the benefit of the Bondholder,an amount equal to the amount of such recoverv. Automatic Stay. If the Trustee is prevented from using any Required Mortgage Payment to pay any amount due to the Bondholders as a result of the automatic stay relating to the Required Mortgage Payment unposed by a bankruptcy court under Section 362 of the Bankruptcy Code (or pursuant to any successor provision of law) in a proceeding against the Borrower or the Servicer(in the case of a Servicer Advance), Fannie Mae shall pay to the Trustee,from the fledged Collateral,or from funds of Fannie Mae derived from sources other than the Pledged Collateral, for the benefit of the Bondholders, an amount equal to the amount of such Required Mortgage Payment; in no event shall any payment be required pursuant to the Collateral Agreement in respect of any payment which is not a Required Mortgage Payment. Rights. Nothing contained in the Collateral Agreement shall preclude Fannie Mae from contesting, directly or indirectly, e.g., through the Trustee, in any such preceeding, any such attempted recovery or stay or from seeking to lift or modify the automatic stay. N-177463.02 A-56 Deposit, The Trustee shall deposit all payments received by the Trustee pursuant to the previsions of the Collateral Agreement described above or otherwise in connection with the Pledged Collateral and any investment earnings derived from the Pledged Collateral into the Credit Facility Account in accordance with the Indenture. Payments on Collateral. Unless a payment default under the Collateral Agreement shall have occurred and be continuing,on the last Business Day of each calendar month (a)all cash flow received by Fannie Mae prior to the first day of the preceding calendar month in connection with the Pledged Collateral and all investment earnings realized on such cash flow during such period shall be retained by and be the property of Fannie Mae,(b)any cash flow received by the Trustee on or in connection with the Pledged Collateral prior to the first day of the preceding calendar month and all investment earnings realized on such cash flow during such period and not theretofore paid to Fannie Mae or deposited in the Credit Facility Account of the Revenue Fund created under the Indenture shall be paid by the Trustee to Fannie Mae on such Business Day and (c)except as otherwise provided in a disgorgement provision of the Collateral Agreement, all such amounts shall cease to be part of the Pledged Collateral, shall not be subject to the pledge and security interest created by the Collateral Agreement,shall be free of any claims by the Trustee under the Collateral Agreement or the Indenture and shall be the property of Fannie Mae. Payment from General Funds. At Fannie Mae's option, any payment required to be made pursuant to the provisions of the Collateral Agreement described above may be made from the general funds of Fannie Mae, rather than from the fledged Collateral or the proceeds of the Pledged Collateral. Any payment required to be made pursuant to the provisions of the Collateral Agreement described above shall be made from the general funds of Fannie Mae, rather than from the Pledged Collateral or the proceeds of the Fledged Collateral,to the extent necessary to satisfy Fannie Mae's obligations under the Collateral Agreement, as provided in and consistent with the Collateral Agreement. Application of Payments. No payment made by Fannie Mae pursuant to the provisions of the Collateral Agreement described above shall be applied to make payment in respect of the principal of, or accrued interest on, any Purchased Bonds or any Bonds which are not Outstanding ander the Indenture. No part of any required Mortgage Payment shall be applied for any purpose other than to pay interest, or principal and interest,as the case may be,to the Bondholders,and Fees. Redemption of pledged Collateral .Release. The Trustee shall release Pledged Collateral upon (a) Fannie Mae's election to redeem Pledged Collateral,as provided in the Collateral Agreement,or(b)the occurrence of any event giving rise to Fannie Mae's obligation to redeem fledged Collateral, as provided in the Collateral Agreement, in each instance concurrently with Fannie Mae's payment of the amount set forth in the Collateral Agreement. Optional and Mandatory Redemption of Fledged Collateral Optional.Redemption of the Pledged Collateral. Fannie Mae shall have the option, in its sole and absolute discretion,on not less than one days' written notice to the Trustee, following the occurrence of an event of default under the Mortgage Loan, including the Mortgage Note, and further including any default under the Mortgage Loan occasioned by the occurrence of an Event of Default under (and as defined in)the Financing Agreement or the Reimbursement Agreement,and notwithstanding the previous making of one or more Required Fannie Mae Payments pursuant to the Collateral Agreement, to redeem the fledged Collateral within 10 days following the giving of such notice to the Trustee, by making payment of the amount set forth in the Collateral Agreement and by directing the Trustee to effect a 01-177463.02 A-5 7 special mandatary redemption of the Bonds pursuant to the Indenture. The Trustee shall, at the direction of Fannie Mae, tale all required action under the Indenture to provide for payment to the Bondholders following the Trustee's notice of a specified special mandatory redemption of the Bonds in accordance with the Indenture. Upon Fannie Mae's redemption of the Pledged Collateral, the Trustee shall, as provided in the Collateral Agreement, release the Pledged Collateral from the pledge made in the Collateral Agreement. The Trustee agrees to provide the Servicer with a copy of each notice given by the Trustee to Fannie Mae under the optional redemption provisions of the Collateral Agreement concurrently with the giving of such notice to Fannie Mae. Mandatory Redemption of Pledged Collateral. Fannie Mae shall be obligated to redeem fledged Collateral from the Trustee, in whole or in part, as the case may be, and to pay to the Trustee the amount set forth in the Collateral Agreement, described below, upon which redemption the Trustee shall release the redeemed Pledged Collateral from the pledge and security interest created by the Collateral Agreement, upon the occurrence of any of the following events (a) Fannie Mae's receipt of written notice from the Trustee stating that the Trustee has, in accordance with and as permitted or required by the Indenture, accelerated payment of the Bonds, such redemption of Pledged Collateral to be made within Ib days fallowing the date of the Trustee's declaration of acceleration;or (b) Fannie Mae's receipt of written notice from the Trustee 'stating that (i)the Trustee has received a prepayment of the Mortgage Loan following the involuntary destruction or loss of the Project in its entirety as a result of casualty or condemnation and (ii)the amount of insurance or condemnation proceeds, as applicable, applied to the prepayment of the Mortgage Note are less than the unpaid principal balance of the Mortgage Loan, such redemption of Pledged Collateral to be made within 10 days following Fannie Mae's receipt of the Trustee's written notice; or (c) Fannie Mae's or the Servicer's written direction or written consent to the Trustee to effect a special mandatory redemption of Bonds pursuant to the Indenture, such redemption of Pledged Collateral to be made within 10 days following the date of Fannie Mae's written direction to the Trustee. Upon receipt of payment from Fannie Mae in redemption of the Pledged Collateral, the Trustee shall, at the direction of Fannie Mae, tape all required action under the Indenture to provide for(a)payment to the Bondholders following the Trustee's declaration of acceleration of the Bonds in accordance with the Indenture, as described in paragraph (a) above, or (b) payment to Bondholders by special mandatory redemption of the Bonds in accordance with the Indenture following notice, direction or consent, as described in paragraph(b) or paragraph (c), respectively, above. Upon Fannie Mae's redemption of Pledged Collateral, the Trustee shall, as provided in the Collateral Agreement, release the redeemed Pledged Collateral from the pledge made in the Collateral Agreement. Mandatory Redemption of Pledged Collateral Upon Reduction in Mortgage Loan Amount If PrincipalAmount of Mortgage Loran is Forgiven, Cancelled or Written Off. If any part of the principal amount of the Mortgage Loan is forgiven, cancelled or written off by or at the direction of Fannie Mae, Fannie viae shall redeem Pledged Collateral from the Trustee in part, in an amount specified by Fannie Mae, pay to the Trustee the amount set forth in the Collateral Agreement and direct the Trustee to effect a special mandatory redemption of Bands in accordance with the Indenture in a principal amount equal to the principal amount of the Mortgage Loan forgiven, cancelled or written ',off by or at the direction of Fannie Mae, upon which redemption of Pledged Collateral the Trustee shall release the 0 1-177463.02 A-58 Pledged Collateral so redeemed from the pledge and security interest created by the Collateral Agreement. Amounts Payable Redemption of Pledged Collateral in Whole or in Part. The amount payable by Fannie Mae: (a) in the event of an optional redemption of Pledged Collateral pursuant to the Collateral Agreement shall be the amount that is sufficient, and not to exceed the amount necessary, to provide for payment of the outstanding principal balance of the Mortgage Loan, plus accrued interest on the Mortgage Loan at the Pass-Through Rate to the date of the redemption of the Bonds; (b) in the event of the mandatory redemption of the Pledged Collateral pursuant to the Collateral Agreement in connection with the acceleration of the Bonds shall be the amount that is sufficient, and not to exceed the amount necessary, to provide for payment of the outstanding principal balance of the Mortgage Loan, plus accrued interest on the Mortgage Loan at the Pass-Through Rate to the date of the Trustee's declaration of acceleration of the Bonds; (c) in the event of the mandatory redemption of the Pledged Collateral pursuant to the Collateral Agreement in connection with a casualty or condemnation shall be the amount that is sufficient,and not to exceed the amount necessary, after taking into account, at the direction of Fannie Mae, any amounts received in connection with the destruction or loss of the Project in its entirety as a result of casualty or condemnation and paid to the Trustee as a prepayment of the Mortgage Loan, to provide for payment of the outstanding principal balance of the Mortgage Loan, plus accrued interest on the Mortgage Loan at the Pass-Through Rate to the date of the redemption of the Bonds; and (d) in the event of the mandatory redemption of the fledged Collateral pursuant to the Collateral Agreement in connection with certain specified mandatory redemptions prior to the Conversion gate or in connection with Conversion shall be the amount that is sufficient, and not to exceed the amount necessary, to provide, with respect to a special mandatory redemption of Bonds under the Indenture, for payment of the outstanding principal balance of the Mortgage Loan, plus accrued interest on the Mortgage Loan at the Pass-Through Rate to the date of the redemption of the Bonds. Redemption of Pledged Collateral Upon Reduction in Mortgage Loan Amount If Principal Amount of Mortgage Loan is Forgiven, Cancelled or Written Off, The amount payable by Fannie Mae in the event of a mandatory redemption of Pledged Collateral in part pursuant to the Collateral Agreement shall be the amount that is sufficient, and not to exceed the amount necessary, to provide, with respect to the Mortgage Loan, for payment of the amount by which the principal balance of the Mortgage Loan is forgiven,cancelled or written off, plus accrued interest on the Mortgage Loan at the Pass-Through Bate to the date of the redemption of the Pledged Collateral to be redeemed. Disgorgement Recovery. If the Trustee has received a payment under the Mortgage Note from a source other than Fannie Mae, or has made a payment to the Bondholders from moneys on deposit in any Fund or Account, Fannie Mae agrees that if any such payment is recovered from the Trustee or any Bondholder, in whole or in part, under sections 544, 547, 543 or 550 of the Bankruptcy Code(or under any successor provisions of law) pursuant to a final nonappealable order of a court of competent jurisdiction in any 0 1-177463.02 A-59 proceeding instituted under the Bankruptcy Code by or against the Borrower or the Servicer(in the case of a Servicer Advance), upon receipt of written notice from the Trustee of the recovery, setting forth the amount of the recovery, Fannie Mae shall pay to the Trustee, for the sole benefit of the Bondholders, an amount equal to the amount of such recovery,provident that Fannie Mae shall have no obligation pursuant to the Collateral Agreement with respect to(a)an optional prepayment of the Mortgage Loan resulting in an optional redemption of the Bonds unless Fannie Mae has specifically consented to such optional prepayment and optional redemption in writing or (b)the premium, if any, paid to Bondholders upon a redemption of Bonds prior to maturity. Automatic S'ti y. If the Trustee is prevented from paying over to the Bondholders any amount (including any amount on deposit in any Fund or Account) due to the Bondholders as a result of the automatic stay unposed by a bankruptcy court under section 362 of the Bankruptcy Code (or under any successor provision of law) in a proceeding by or against a Borrower or the Servicer (in the case of a Servicer Advance), from a source other than Fannie Mae or Available'Moneys held by the Trustee under the Indenture, Fannie Mae shall pay to the Trustee,for the benefit of the Bondholders, an amount equal to the amount due and unpaid to the Bondholders. .Rights. Nothing contained in the Collateral Agreement shall preclude Fannie Mae from contesting, directly or indirectly, e.g., through the Trustee, in any such proceeding, any such attempted recovery or stay or from seeming to lift or modify the automatic stay. Release and Delivery On the date of Fannie Mae's redemption of Pledged Collateral in whole pursuant to the Collateral Agreement by the payment by Fannie Mae to the Trustee of the applicable amount specified in the Collateral Agreement, the Trustee shall be deemed to have released the redeemed Pledged Collateral then held by the Trustee,and shall deliver to Fannie Mae any documents in the Trustee's possession relating to the released Pledged Collateral and shall pay to Fannie Mae all amounts then held by the Trustee which were der=ived from payments by Fannie Mae or received as cash flow in connection with the released Pledged Collateral, including investment earnings on all such amounts, and not theretofore applied to payment of principal of or interest on the Bonds or deposited by the Trustee in the Credit Facility Account held under the Indenture for such purpose. Conditions to Release of Fledged Collateral Fannie Mae agrees that it shall have neither the right nor the obligation to obtain the release of the Fledged Collateral except as provided in the Collateral Agreement. Manner of Payments All payments by Fannie Mae under the Collateral Agreement shall be made to the Trustee in lawful currency of the United States and in immediately available funds. Release of Fledged Collateral Upon Reduction in Bonds Outstanding or Discharge of Bonds The Trustee shall, at the direction of Fannie Mae, release a portion of the Pledged Collateral upon any reduction in (a)the principal amount of the Mortgage Loan outstanding and (b)the principal amount of Bonds Outstanding by reason of any prepayment of the :Mortgage Loan or redemption of a portion of the Bonds Outstanding, such release of Pledged Collateral to be in an amount specified by Fannie Mae, but such that the Pledged Collateral Requirement will continue to be met with respect to all Bonds 0.-177463,02 A-60 Outstanding after the redemption, subject to the Pledged Collateral Requirement Provisions of the Collateral Agreement,the determination of Collateral to be released shall be made by Fannie Mae, in its discretion. The Trustee shall release the Pledged Collateral upon a satisfaction and discharge of the Bonds pursuant to the Indenture. [Upon any release of Pledged Collateral, Fannie Mae may modify the Collateral listed on Schedule I and, if applicable, Schedule II. Except as otherwise provided in the Collateral Agreement, Pledged Collateral shall not be released until Fannie Mae's obligations under the Collateral Agreement have been extinguished and, in any event, no release of Pledged Collateral shall affect Fannie Mae's rights or obligations under the Collateral Agreement, as provided in the Collateral Agreement. Assignments Assignment of Mortgage Rights; Custody a,f Mortgage Note and Mortgage; Assignment o,f Mortgage Nate Payments Interest. In consideration of Fannie Mae's entering into the Collateral Agreement and providing credit enhancement for the Mortgage Loan on the terms and conditions provided in the Collateral Agreement, the Issuer has, pursuant to the Assignment, assigned the Mortgage Rights with respect to the Mortgage Loan to Fannie Mae, and has assigned the Mortgage Note Payments Interest and custody of the Mortgage Note and the Mortgage (excluding the right to receive insurance proceeds and condemnation awards as provided in the Mortgage),to the Trustee. The Issuer's assignment of the Mortgage Rights with respect to the Mortgage Loan to Fannie Mae and the assignment of the Mortgage Dote Payments interest and custody of the Mortgage Note and the Mortgage to the Trustee, are subject to the assignment provisions of the Collateral Agreement described in the next two paragraphs, but are and shall be effective,without any other or further action by the Issuer,the Trustee or Fannie Mae. The Trustee covenants that it will not, with respect to the Mortgage Loan, assign its'rights in and to the Mortgage Note, the Mortgage, or the Mortgage mote Payments Interest to any party other than Fannie Mae, or other than as provided in the Collateral Agreement provisions described in the next two paragraphs, in the "No Disposition of Pledged Collateral" paragraph described below, and other than as provided in the Indenture, and confirms and agrees that it will not in any event assign any of such rights to any other party without Fannie Mae's prior written consent. By virtue of the Issuer's assignment of the Mortgage Fights with respect to the Mortgage Loan to Fannie Mae pursuant to the Assignment, Fannie Mae shall have (a)the right, power and authority to make all decisions in connection with the Mortgage Loan and under the Mortgage Loan Documents, it being understood and agreed that Fannie Mae shall be entitled to act with respect to the Mortgage Loran in the same manner and with the same rights, powers and authority to act as Fannie Mae would have if Fannie Mae owned the Mortgage Loan, (b)the right to require that payments on the Mortgage Loan be made to the Servicer, (c)the right, power and authority to enter into and/or receive or accept delivery of and/or be a party to all Mortgage Loan Documents (other than the Mortgage Note and the Mortgage which are executed and delivered by the Borrower to the Issuer) to be executed and delivered in connection with the Mortgage Loan, and which are not entered into and/or received or accepted by the Issuer, or to which the Issuer is not a party, including, without limitation, any agreements, documents and instruments ancillary to or otherwise relating to the Mortgage Loan and(d) the right to further assign or delegate(including assignments to any Servicer) any of the Mortgage Rights assigned to it and to delegate to the Servicer the right to (l)enter into and/or receive or accept delivery of and/or be a party to any Mortgage Loan Document (other than the Mortgage Note and the Mortgage which are executed and delivered by the Borrower to the Issuer), including, without limitation, any agreements, documents and instruments ancillary to or otherwise relating to the Mortgage Loan and (2)establish and maintain custodial and other accounts for the deposit of funds payable by the Borrower under any of the Mortgage Loan Documents and collected by the Servicer and apply and disburse such funds in accordance with the Mortgage Loan Documents. ''he assignment of the Mortgage Rights to Fannie Mae shall not vest in Fannie Mae the right, so long as Bonds remain Outstanding, to take certain action specified in the Mortgage Note without written confirmation from the Rating Agency that the rating in effect with respect to the Bonds after the taking;of 01-177463.02 A-61 such action will not be lower than the rating in effect for the Bonds prier to the taking of such action. Neither Fannie?Viae nor its officers, directors, employees, or agents shall be liable to the Trustee or any Bondholder for any action taken or omitted to be taken in good faith by Fannie Mae in connection with the Mortgage Loan by reason of the assignment of the Mortgage Rights with respect to the Mortgage Loan to Fannie Mae. The actions of Fannie Mae with respect to the Mortgage Loan shall not be taken as an agent of the Issuer or the Trustee, and neither the Issuer nor the Trustee shall be liable for any actions taken or not taken by Fannie Mae,any assignee of Fannie Mae or the Servicer. Upon the occurrence of a Fannie Mae Payment Default, absent a cure of such payment default within a reasonable period of time, Fannie Mae agrees to conditionally assign the Mortgage Rights with respect to the Mortgage Loan to the Trustee and to .take such action and to execute and deliver and record such documents as may be reasonably necessary to evidence the assignment of the Mortgage Rights with respect to the Mortgage Loan to the Trustee, provided that such assignment of the Mortgage Bights to the Trustee shall terminate, and the Mortgage Rights shall revert to Fannie Mae, upon the cure of the Fannie May Payment Default, consistent with the Collateral Agreement. Assignment of Mortgage Loan Upon Redemption of Pledged Collateral. upon Fannie Mae's redemption of fledged Collateral in whole pursuant to the Collateral Agreement, the Trustee shall (a)unless otherwise instructed by Fannie Mae, assign (in recordable form, if applicable) the Mortgage Note, the Mortgage and the Mortgage Note Payments Interest and the Financing Agreement to Fannie Mae, and endorse and deliver the Mortgage Note to Fannie Mae, (b) if the Bonds have been redeemed in whole in accordance with the terms of the Bonds and the Indenture, assign the Mortgage Note, the Mortgage and the Mortgage Note Payments Interest and the Financing Agreement to Fannie Mae, endorse and deliver the Mortgage Note to Fannie Mae and, at Fannie Mae's written direction, assign and transfer to Fannie Mae all funds, but excluding the Rebate Fund and the Fees Account, held by the Trustee, and, until such time as such moneys are paid to Fannie Mae, hold all moneys in all Funds and Accounts (excluding the Debate Fund and the Fees Account) as bailee for Fannie Mae and take such action with respect to such moneys while in the possession or control of the Trustee as Fannie Mae may direct and (c)execute all such documents as are necessary to legally and validly effectuate the assignments and other actions provided for in the preceding clauses(a)and(b). The Trustee's assignments to Fannie Mae pursuant to the Collateral Agreement shall be without recourse, except that the Trustee shall (a)represent and warrant in connection with such assignments that (i)the Trustee has the power and authority to endorse and assign such documents and instruments to Fannie Mae, (ii)the endorsement and assignment of such documents and instruments have been duly authorized and (iii)the Trustee has not previously endorsed or assigned any such documents or instruments to any other Person and (b)certify the principal amount outstanding under the Mortgage Note. Assignment of Mortgage Loan Without Redemption of Pledged Collateral. Fannie Mae shall have the right, with respect to the Mortgage Loan, in its sole and absolute discretion, without redeeming Pledged Collateral or directing the Trustee to effect a special mandatory redemption of the Bonds pursuant to the Indenture prior to the Conversion Date or in connection with Conversion or an acceleration of payment of the Bonds in accordance with the Indenture, but only upon ding with the Trustee a certification reaffirming Fannie Mae's obligations under the Collateral Agreement,and only if Fannie Mae Payment Default has not occurred, or if it has occurred, is not continuing, to direct the Trustee in writing to assign(in recordable form, if applicable)the Trustee's interest in the Mortgage mote and the Mortgage to Fannie Mae, in which event the Trustee shall (a)assign the Mortgage Note and the Mortgage to Fannie Mae, and endorse and deliver the Mortgage Note to Fannie Mae and (b)execute all such documents as are necessary to legally and validly effectuate the assignments provided for in the preceding clause(a). In the event that Fannie Mae acquires the Project through foreclosure, by accepting a deed in lieu of foreclosure, or by comparable conversion of the Mortgage, Fannie Mae may, if it elects to retain the Project, whether permanently or otherwise, and not to redeem fledged Collateral affirm that 0I-177463.02 A-62 its obligations under the Collateral Agreement(and subject to the terms and provisions of the Collateral Agreement) with respect to the Mortgage Loan shall continue in full force and effect as if the Mortgage Note had not been extinguished by the foreclosure, such obligations to be measured by the payments in respect of interest and principal that, but for the foreclosure, deed in lieu of foreclosure or other comparable conversion of the Mortgage, would have been due on the Mortgage Note. No assignment described in this section of the Collateral Agreement shall affect Fannie Mae's obligations under the Collateral Agreement. Upon the occurrence of a Fannie Mae Payment Default, absent a cure of such default within a reasonable period of time, Fannie Mae agrees to assign the Mortgage Note and the Mortgage previously assigned to Fannie Mae to the Trustee, and to take such action and to execute and deliver and record such documents as may be reasonably necessary to evidence the assignment of the Mortgage Note and the Mortgage to the Trustee, and the Trustee agrees to accept Fannie Mae's assignment of the Mortgage Note and the Mortgage. Discharge of Mortgage Loan in .D'art. Notwithstanding any other provision of the Collateral Agreement to the contrary, no part of the principal amount of the Mortgage Loan shall be forgiven, cancelled or written off by or at the direction of Fannie Mae unless Fannie Mae redeems Pledged Collateral in part pursuant to the Collateral Agreement in order to effect a corresponding redemption of principal amount of the Bonds Outstanding equivalent to the principal amount of the Mortgage Loan forgiven,cancelled or written off. Trustee's Assignments. The Trustee's assignments to Fannie :viae pursuant to the Collateral Agreement shall be without recourse,except that the Trustee shall(a) represent and warrant in connection with such assignments that (i)the Trustee has the power and authority to endorse and assign such documents and instruments to Fannie Mae, (ii)the endorsement and assignment of such documents and instruments have been duly authorized and (iii)the Trustee has not previously endorsed or assigned any such documents or instruments to any other Person and(b)certify the principal amount outstanding under the Mortgage Note. No Disposition of Pledged Collateral Except as expressly provided in the Collateral Agreement with respect to the redemption or release of the fledged Collateral, in whole or in part, the Trustee shall not dispose or seek to dispose of the Pledged Collateral except upon the occurrence of a Nannie Mae Payment Default. Limitations Notwithstanding anything contained in the Collateral Agreement to the contrary, the Collateral Agreement has no applicability to any Bonds registered in the name of or otherwise owned, directly or indirectly, by the Borrower or any Bonds which are not Outstanding under the Indenture; accordingly (a)a Mortgage Loan Payment Default Notice shall have no applicability to, and in no event shall the Trustee deliverto Fannie Mae a Mortgage Loan Payment Default Notice with respect to any amounts due in respect of the principal of, or accrued interest on, any Bonds registered in the name of or otherwise owned, directly or indirectly, by the Borrower, or any Bonds which are not Outstanding under the Indenture, (b) Fannie Mae has no obligation to make a Required Fannie Mae Payment to the extent that the Required Fannie Mae Payment would be applied, in lieu of the Required Mortgage Payment, to fund any payment due in respect of the principal of, or accrued interest on, any Bonds registered in the name of or otherwise owned, directly or indirectly, by the Borrower, or any Bonds which are not Outstanding under the Indenture, and (c) Fannie Mae has no obligation to make any other payment under the Collateral Agreement to the extent that such payment would be applied to fund any payment due in respect of the principal of, or accrued interest on, any Bonds registered in the name of or otherwise 01 77463.02 A-63 owned, directly or indirectly by the Borrower, or any Bonds which are not Outstanding under the Indenture. Manner of Payments. All payments by Fannie Mae under the Collateral Agreement shall be made to the Trustee in lawful currency of the United States and in immediately available funds. Event of Default;Remedies Events of Default. Any one or more of the following acts or occurrences shall constitute an Event of Default.under the Collateral Agreement. (a) failure by Fannie Mae to pay certain specified amounts due under the Collateral Agreement when due, (b) failure by Fannie Mae to perform or observe any covenant, agreement or obligation under the Collateral Agreement, except a failure described in paragraph(a) above, if the same shall remain uncured for a period of 60 days after written notice of such failure shall have been given by the Trustee to Fannie Mae, provided, however, that if such default is curable but requires acts to be done or conditions to be remedied which, by their nature, cannot be done or remedied within such 60-day period, no Event of Default shall be deemed to have occurred if Fannie Mae shall commence such acts or remedies within such 60-day period and thereafter, in the opinion of the Trustee,shall diligently pursue the same to completion,or (c) any governmental authority shall take over the operations of Fannie Mae, or require Fannie Mae to suspend its operations for more than three Business Days 'unless such requirement is applicable to financial institutions generally in the District of Columbia or in the United States),or require the sale or transfer of all or substantially all of the assets of Fannie Mae. Remedies of Trustee Basic Remedies. upon the occurrence and continuance of any Event of Default under the Collateral Agreement, unless such Event of Default has been cured to the Trustee's satisfaction, the Trustee may,at its option,take any one or more of the following steps; (a) by mandamus or other suit, action or proceeding at law or in equity, require Fannie Mae to identify and pledge additional Collateral in an amount sufficient to satisfy the Pledged Collateral Requirement and to perform its covenants and obligations under the Collateral Agreement,or enjoin any acts or things which may be unlawful or in violation of the rights of the Trustee; (b) have access to and inspect, examine and make copies of all of the books and records and any and all accounts and similar data of Fannie Mae pertaining to the project, the Mortgage Loan or the Pledged Collateral;or (c) take whatever other action at law or in equity may appear necessary or desirable to enforce any monetary obligation of Fannie Mae under the Collateral Agreement, or to enforce any other obligation,covenant or agreement of Fannie Mae under the Collateral Agreement. The above provisions are subject to the condition that if, after an Event of Default shall have occurred, all amounts which would then be payable under the Collateral Agreement by Fannie Mae if such Event of Default had not occurred and was not continuing shall have been paid by or on behalf of Fannie Mae, and 01-177463.02 A-64 Fannie Mae shah have also performed all other obligations in respect of which it is then in default under the Collateral Agreement, and shall have paid the reasonable charges and expenses of the Trustee, including reasonable attorney fees (including at the appellate level) paid or incurred in connection with such Event of Default,then and in every such case, such.went of Default may be waived and annulled by the Trustee, but no such waiver or annulment shall extend to or affect any subsequent Event of Default or impair any right or remedy exercisable as a result of the occurrence of such Event of Default. The redemption of Pledged Collateral by Fannie Mae pursuant to the provisions of the Collateral Agreement does not necessarily cure any Event of Default by Fannie Mae which may otherwise exist under the Collateral Agreement. Perfection of Ownership Interest. upon the occurrence of a Fannie Mae Payment Default, the Trustee may take all necessary action to (a)identify, obtain and perfect an ownership interest in the Pledged Collateral, (b)collect all cash flow payable under the Pledged Collateral and (c) sell, pledge or otherwise dispose of the Pledged Collateral, all as shall be in the hest interests of the Bondholders, and Fannie Mae shall deliver to the Trustee all documents reasonably required by the Trustee to evidence such (i)ownership interest of the Trustee, (ii)right to collect payments and (iii)right to deal with the Pledged Collateral,as provided in clause(a), (b)and (c)above. Exercise of.Remedies Limited to the Trustee. The Trustee agrees that no Bondholder shall individually have the right to (a)seek to enforce any provision of the Collateral Agreement, (b)collect amounts which may be payable under the Collateral Agreement or (c) realize on the Pledged Collateral, the cash flow on the Fledged Collateral or the proceeds of the fledged Collateral. The rights of the Bondholders are governed solely by the Indenture. Payments by Fannie Mae Fannie Mae agrees that all payments made by Fannie Mae to the Trustee ander the Collateral Agreement shall (a) be derived from the fledged Collateral or the proceeds received upon a liquidation of Fledged Collateral or (b)at Fannie Mae's option, be made out of the funds of Fannie Mae derived from sources other than the Pledged Collateral. Term The Collateral Agreement shall become effective upon its execution and delivery by Fannie Mae and the Trustee on the Closing Date and shall cease to be in effect on the Collateral Agreement Termination Bate. Notwithstanding the foregoing, the Collateral Agreement shall continue beyond the Collateral Agreement Termination bate solely with respect to Fannie Mae's (a)disgorgement obligations gander the Collateral Agreement as applicable to any payment made by the Borrower or to any Servicer Advance made by the Servicer, within 91 days prior to an Act of Bankruptcy until the earlier of the date on which Fannie Mae shall have paid to the Trustee the amount recovered or the 'date on which all applicable statutes of limitations shall have expired without a claim having been filed (or if any claim shall have been fled prior to such expiration,the latter of the date on which such claim has been denied with prejudice by a final order which is no longer subject to appeal or the date on which such claim has been paid by Fannie Mae), and (b) rights under the Collateral Agreement until the latest of (i)the expiration of all of its obligations under the Collateral Agreement (including without limitation its obligations under clause(a)above),(ii)the release of the Pledged Collateral to Fannie Mae in accordance with the Collateral Agreement or (iii) at Fannie Mae's direction, the assignment of the Mortgage Note Payments Interest and the Trustee's interest in the Mortgage Note and the Mortgage to Fannie Mae; subject to the foregoing, the Trustee shall be deemed to have relinquished all of its rights and interests in the Collateral Agreement on the Collateral Agreement Termination.Date. 01-;774E+3.L'2 A-65 APPENDIX B FORM OF OPINION OF BOND COUNSEL 01-177463.02 APPENDIX C THE BORROWER AND THE PROJECT The Borrower The Borrower is Willow Partners,L.P., a California limited partnership,which consists of Willow Assets, LLC, a California limited liability company ("Willow Assets"), as its administrative general partner, and the Foundation For Social Resources, Inc., a Delaware not-for-profit corporation, as the managing general partner. Willow Assets is comprised of the principles from KDF Holdings and FSC Realty, Inc. The principles of KDF Holdings specialize in the acquisition and rehabilitation of tax-credit, bond-financed apartment projects and have participated in over$150,000,000 of bond-financed and/or tax-credit projects as a mortgage bank or principal during 1995-1993. The Principals of FSC Realty have been in the multifamily real estate business since 1970 and have owned and managed thousands of units. Also, the key principal at FSC, Stanley Fimberg, and one of his partners, Eric Madsen, are both founders of Lexford properties which was formed in 1988 and currently manages thousands of units nationwide. The Foundation For Social Resources, Inc. currently owns or has a partnership or beneficial interest in over 70 apartment complexes comprising 13,000 units and was formed in 1988. The Foundation is located in Costa Mesa,California. Mr. William Hirsch is the President of the Foundation. The Project The property is located at 1056 Weldon Lane, Bay Point, CA 94565 in the County of Contra Costa, California. The property consists of 11 two-story buildings with 120 units. The buildings are constructed of wood frame with wood exterior and with asphalt shingle roofs. Amenities include a swimming pool,spa, barbecue area, laundry facilities and landscaped open areas. The unit mix consists of 20 one-bedroom/one bath, 81 two-bedroom/two bath apartments and 19 three-bedroom/two bath apartments. As of March 15, 1999, the most recent date for which occupancy information is available, the Project was 96%occupied. Forty percent of the dwelling units have been reserved for occupancy by citizens of low or Moderate income. The Project is also subject to additional requirements of the Issuer. See "APPENDIX A---SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—THE REGULATORY AGREEMENT" herein. The Issuer has not reviewed any appraisal of the Project or any feasibility study or other financial analysis of the Project and has not undertaken to review or approve expenditures for the Project, to supervise the rehabilitation of the Project,or to obtain any financial statements of the Borrower. Management and rehabilitation will be handled by Lexford Properties. Lexford was formed in 1988 by principles of FSC Realty who have been in the real estate industry for over 20 years. Lexford currently manages over 10,000 units nationwide, over 4,000 of those units are owned by principles of FSC Realty. The Lexford personnel have been involved in successful turnarounds of distressed properties as well as lease-ups of newly constructed units in Texas, Florida, Colorado, Illinois, Maryland, Indiana, Nevada and California 01-177463.02 APPENDIX D SUMMARY OF CERTAIN PROVISIONS OF THE CONTINUING DISCLOSURE AGREEMENT The following summary of the Continuing Disclosure Agreement is a summary only and does not purport to be a completed statement of the contents thereof Reference is made to the Continuing Disclosure agreement for the complete terms thereof Certain Definitions "Annual Financial Information"means the financial information or operating data with respect to the relevant Project, provided at least annually, of the type included in Appendix A to the Continuing Disclosure Agreement(set forth at Appendix D hereto), which Annual Financial Information may, but is not required to, include Audited Financial Statements. "Audited Financial Statements" means in the case of the Borrower, the relevant Project's annual audited financial statements, if any. "Dissemination Agent" means the Trustee, acting in its capacity as Dissemination Agent under the Continuing Disclosure Agreement,or any successor Dissemination Agent designated in writing by the Borrower and which has filed with the Trustee and any Disclosure Required Obligor a written acceptance of such designation. "Material Event"means any of the following events, if material,with respect to the Bonds: (i) principal and interest payment delinquencies; (ii) non-payment related Events of Default under and as defined in the Indenture; (iii) unscheduled draws on debt service reserves reflecting financial difficulties; (iv) unscheduled draws on credit enhancements reflecting financial difficulties; (v) substitution of credit-or liquidity providers,or their failure to perform; (vi) adverse tax opinions or events affecting the tax-exempt status of the Series D Bonds; (vii) modifications to rights of Bondholders; (viii) bond calls(other than mandatory sinking fund redemptions); (ix) defeasances; (x) release,substitution or sale of property securing repayment of the Bonds;and (xi) rating changes. "Material Event Notice"means written or electronic notice of a Material Event. 011-17746IG2 "NRUSIR" means a nationally recognized municipal securities information repository, as recognized from time to time by the Securities and Exchange Commission for the purposes referred to in the Rule, the NRMSIRs as of the date of the Disclosure Agreement being as follows: Bloomberg Municipal Repositories, Post Office Box 840, Princeton, New Jersey 08542-0840, Phone: (609)279-3200, Facsimile: (609)279-5962; Thomson NRMSIR, 395 Hudson Street, 3rd Floor, New York, New York 10014, Phone: (212) 807-3767, Facsimile: (212)378,-0952, Internet: Disclosure@ muller.com; J.J. Kenny Information Systems, 65Broadway- 16th Floor, New York, New York 10006, Phone: (212)770-4568, Facsimile: (212)797-7994; and DPC Data Inc., One Executive Drive, Fort Lee, New Jersey 07024, Phone: (201)346-0701, Facsimile: (201)947-0107, Internet: nrmsir@dpcdata.com. "SID"means a state information depository as operated or designated by the State as such for the purposes referred to in the Rule. As of the date of the Continuing Disclosure Agreement,there is no SID. Reporting Obligation The Borrower, as an "obligated person" within the meaning of the Rule, has undertaken to provide the following information as provided in the Continuing Disclosure Agreement: (i) Annual Financial Information; (ii) Audited Financial Statements, if any;and (iii) Material Event Notices. While any Bonds are Outstanding, the Borrower shall, or upon written direction shall cause the Dissemination Agent to, provide the Annual Financial Information on or before June 11 of each year(the "Borrower Report Date"), beginning on or before June 1, 2000, to each then existing NRMSIR and the SID, if any. If the Dissemination Agent is to provide the Annual Financial Information, not later than 15 Business Days prior to said date, the Borrower shall provide the Annual Financial Information to the Dissemination Agent. The Borrower shall include with each such submission of Annual Financial Information to the Dissemination Agent a written representation addressed to the Dissemination Agent to the affect that the Annual Financial Information is the Annual Financial Information required to be provided by it pursuant to the Continuing Disclosure Agreement and that it complies with the applicable requirements of the Continuing Disclosure Agreement. If not provided as part of the Annual Financial Information,the Borrower shall, or shall cause the Dissemination Agent to, provide the Audited Financial Statements when and if available while any Bonds are Outstanding to the Dissemination Agent and to each then existing NRMSIR and the SID, if any, as the case may be. If by 15 Business Days prior to an Borrower Report Date the Dissemination Agent has not received a copy of the Annual Financial Information,the Dissemination Agent shall contact the Borrower . .0 give notice that the Dissemination Agent has not received the Annual Financial Information and that such information must be provided to the NRMSIRs and SID, if any, by the applicable Report Date. If the Dissemination Agent does not receive Annual Financial Information by the applicable Report Date, the Dissemination Agent shall, without further direction or instruction from the Borrower, provide in a timely manner to the Municipal Securities Rulemaking Board and to the SID, if any, notice of any such failure to provide to the Dissemination Agent Annual Financial Information on or before the applicable Report Date. For the purposes of determining whether information received from the 01-177463. 2 D-2 Borrower is Annual Financial Information,the Dissemination Agent shall be entitled conclusively to rely on the written representation made by such party pursuant to the Continuing Disclosure Agreement. If a Material Event occurs while any Bonds are Outstanding, the Borrower shall provide a :Material Event Notice in a timely manner to the Dissemination Agent and instruct the Dissemination Agent to provide such Material Event Notice in a timely manner to the Municipal Securities Rulemaking Board and the SIU, if any, Each Material Event Notice shall be so captioned and shall prominently state the date,title and CUSIP numbers of the Bonds. The Trustee shall promptly advise the Borrower of the occurrence of any event which, if material, would constitute a Material Event with respect to the Bonds of which the Trustee has actual knowledge. The Trustee shall not be responsible for any determination as to materiality. If the Borrower provides to the Dissemination Agent information relating to the Borrower or the Bonds, which information is not designated as a Material Event Notice, and directs the Dissemination Agent to provide such information to information repositories, the Dissemination Agent shall provide such information in a timely manner to the Municipal Securities Rulemaking Board and the SIU, if any. Termination of Reporting Obligation The Borrower's, the Dissemination Agent's and the Trustee's obligations under the Continuing Disclosure Agreement shall automatically terminate once the Bonds are no longer outstanding or, in the case of the Dissemination Agent or the Trustee, upon the resignation or removal of the Dissemination Agent or the Trustee. The Borrower's obligations under the Continuing Disclosure Agreement will terminate upon payment in full of the Borrower's Mortgage Loan. Dissemination Agent The Borrower may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under the Continuing Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent, upon notice to the Dissemination Agent. The initial Dissemination Agent shall be U.S. Bank Trust National Association. Amendment, Waiver Notwithstanding any other provision of the Continuing Disclosure Agreement, the Borrower, the Dissemination Agent and the Trustee may amend the Continuing Disclosure Agreement(and the Trustee shall agree to any amendment so requested by the Borrower), and any provision of the Continuing Disclosure Agreement may be waived by the parties hereto, if such amendment or waiver is supported by an opinion of counsel expert. in federal securities laws, acceptable to the Borrower and the Trustee,to the effect that such amendment or waiver would not, in and of itself,cause the undertakings herein to violate the Rule if such amendment or waiver had been effective on the date hereof but taking into account any subsequent change in or official interpretation of the Rule,provided that the Borrower shall have provided notice of such delivery and of the amendment to each then existing NRMSIR or the MSRB and the SID, if any. Any such amendment shall satisfy, unless otherwise permitted by the Rule, the following conditions: (i) The amendment may only be made in connection with a change in circumstances that arises from a change in legal reimbursements,change in law or change in the identity, nature or status of the obligated person or type of business conducted; 01-i 77463.02 D-3 (ii) The Continuing Disclosure Agreement, as amended, would have complied with the requirements of the Rule at the time of the primary offering, after taking into account any amendments or interpretations of the Rale,as well as any change in circumstances;and (iii) The amendment does not materially impair the interests of the Beneficial Owners and Holders of any of the Bonds, as determined either by parties unaffiliated with the Borrower (such as counsel expert in federal securities laws), or by approving vote of Bondholders pursuant to the terms of the Indenture at the time of the amendment. The initial Annual Financial information after the amendment shall explain, in narrative form, the reasons for the amendment and the effect of the change, if any, in the type of operating data or financial information being provided. Default In the event of a failure of the Borrower,the Dissemination Agent or the Trustee to comply with any provision of the Continuing Disclosure Agreement, the Trustee shall, at the written direction of any Participating Underwriter or the Holders of at least -5% aggregate principal amount of Outstanding Bonds, but only upon receipt of indemnification satisfactory to the Trustee, or any Beneficial Owner or Holder of any of any of the Bonds may, seek mandate or specific performance by court order,to cause the Borrower or the Trustee, as the case may be, to comply with its obligations under the Continuing Disclosure Agreement, provided that none of the Borrower,the Dissemination Agent or the Trustee shall be liable for monetary damages or any other monetary penalty or payment for breach of any of its obligations under the Continuing Disclosure Agreement, unless such breach shall have been willful or reckless. A default under the Continuing Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the rights and remedies provided by the Indenture upon the occurrence of an "Event of Default"shall not apply to any such failure. The sole remedy under the Continuing Disclosure Agreement in the event of any failure of the Borrower, the Dissemination Agent or the Trustee to comply with the Continuing Disclosure Agreement shall be an action to compel performance. 01-17746-1.,32 D-4 FORM OF ANNUAL FINANCIAL INFORMATION $5,400,000 $2,500,000 COUNTY OF CONTRA COSTA,CALIFORNIA COUNTY OF CONTRA COSTA,CALIFORNIA MULTIFAMILY HOUSING REVENUE BONDS MULTIFAMILY HOUSING REVENUE BONDS (WILLOW PASS APARTMEN'T'S) (WILLOW PASS APARTMENTS) SERIES 1999D SERIES 1999D-T Report For Period Ending THE PROJECT Name: Address: Occupancy Number of Units Number of Units Occupied as of Report Date Operating.History of the Project The following table sets forth a summary of the operating results of the Project for fiscal year ended as derived from the Borrower's fun audited financial statements. Revenues Operating Expenses' Net Operating Income Debt Service on the Mortgage Loan' Net Operating Income/(Loss) After Debt Services The average occupancy of the Project for the fiscal year ended was 3 Excfudes depreciation and other noncash expenses,includes management fee. `Interest and scheduled principal payments on the Mortgage Loan during the period indicated. 0 i-:77463.02 D-5 CONTRACT OF PURCHASE KUTAK ROCK DRAFT 3/30/99 April 2, 1999 County of Contra Costa,California County Administration Building 651 Fine Street,0 Floor,North Wing Martinez,CA 94553-0095 Willow Partners, L.P. 46$5 MacArthur Court, Suite 422 Newport Beach, CA 92660 $5,400,000 $2,500,000 County of Contra Costa, California County of Contra Costa, California Multifamily Housing Revenue Bonds Multifamily Housing Revenue Bonds (Willow Pass Apartments) (Willow Pass Apartments) Series 1999D Series 1999D-T Ladies and Gentlemen: The undersigned, Hutchinson, Shockey, Frley fir. Co., on behalf of itself and not as your fiduciary (the "Underwriter"), offers to enter into the following agreement with the County of Contra Costa, California (the "Issuer") and Willow Partners, L.P., a California limited partnership (the "Borrower"), which, upon acceptance of this offer, will be binding upon the Issuer, the Borrower and the Underwriter. This offer is made subject to the Issuer's and the Borrower's acceptance on or before 5:00 p.m., Pacific time, today, and, if not so accepted, will thereafter be subject to withdrawal by the Underwriter upon written notice delivered to the Issuer and the Borrower at any time prior to the acceptance hereof by the Issuer and the Borrower. Capitalized terms not otherwise defined herein small have the meanings set forth in the Trust Indenture dated as of April 1, 1999 (the "Indenture") by and between the Issuer and U.S. Bank Trust National Association, as trustee (the "Trustee"), or the Financing Agreement dated as of April 1, 1999 (the "Financing Agreement")by and among the Borrower,the Issuer, the Trustee and ARCS Commercial Mortgage Company, L.P. (the "Lender"',. The Indenture, the Financing Agreement, the Regulatory Agreement and Declaration of Restrictive Covenants dated as of April 1, 1999 by and among the Issuer, the Trustee and the Borrower(the "Regulatory Agreement"),the Assignment of Mortgage Loan and this Contract of Purchase are hereinafter collectively referred to as the "Issuer Documents." The Financing Agreement, the Regulatory Agreement, the Mortgage, the Mortgage Note, this Contract of Purchase and the Continuing Disclosure Agreement between the Borrower and the Trustee dated as of April 1, 1999 (the "Continuing Disclosure Agreement") are hereinafter collectively referred to as the "Borrower Documents." The Indenture, the Financing Agreement, the Regulatory Agreement, the Continuing Disclosure Agreement and the Collateral Agreement dated as of April 1, 1999 by and between the Trustee and Fannie Mae are hereinafter collectively referred to as the"Trustee Documents." Section 1. Purchase and Sale of the Bonds. Upon the terms and conditions and upon the basis of the representations and warranties herein set forth, the Underwriter hereby agrees to purchase from the Issuer, and the Issuer hereby agrees to sell to the Underwriter, above-captioned Series 1999D Bonds(the "Series D Bonds")and the above-captioned Series 1999D-T Bonds(the"Series D-T Bonds"and,together 01-178268.02 with the Series D Bonds, the "Bonds") at a price equal to plus accrued interest thereon to the Closing Date (as defined below). The Bonds shall mature on the dates and bear interest at the rates per annum as set forth on Appendix A hereto. The Borrower agrees to cause to be paid to the Underwriter,as compensation for its services in purchasing the Bonds, an underwriting fee (the "Underwriting Fee") equal to $ . The Underwriting Fee shall be due and payable in immediately available funds on the Closing Date, solely and exclusively from funds provided by the Borrower. The Bonds shall be issued in accordance with the Constitution and laws of the State of California pursuant to the authority of the Act. The proceeds of the Bonds will be used by the Issuer to snake the Mortgage Loan to the Borrower pursuant to the Financing Agreement,and such loan will be evidenced by the Mortgage Note and secured by the Mortgage on the Project. The Borrower will, in accordance with Section 2 hereof. cause to be delivered to the Underwriter an executed copy of the Official Statement within seven business days of the date of this Contract of Purchase and in sufficient time to accompany any customer confirmation. Such Official Statement, together with all the information incorporated by reference therein and the appendices thereto, and with only such changes as shall be approved by the Issuer, the Borrower and the Underwriter, and as amended and supplemented, is hereinafter called the "Official Statement." The Issuer hereby authorizes the Underwriter to use the Official Statement in connection with the sale of the Bonds. Section 2. Representations,Warranties and Agreements of the Issuer. The Issuer represents, warrants and agrees as follows: (a) The Issuer is, and will be at the Closing Date, a political subdivision of the State of California(the "State"), with full legal right, power and authority under the Act to issue, sell and deliver the Bonds to the Purchaser pursuant to the Resolution and this Contract of Purchase, to enter into the Issuer Documents, to adopt the Resolution and to carry out and perform its obligations under the Issuer Documents and the Resolution. (b) The Resolution has been duly adopted by the Issuer, has not been amended, modified or repealed and is in full force and effect on the date hereof. The Issuer has the full legal right, power and authority to execute and deliver the Bonds and the Issuer Documents and to carry out its obligations hereunder and thereunder. The execution,delivery and performance of the Issuer Documents (including the issuance of the Bonds) have been duly authorized by the Issuer and, as of the Closing Date "assuming the due authorization, execution and delivery of such documents by the other respective parties thereto where necessary), each of the foregoing will be the duly authorized legal, valid and binding obligation of the Issuer, enforceable against the Issuer in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights of creditors generally and general equitable principles. (c) The Bonds have been issued in order to provide financing for the acquisition and rehabilitation of the Project. (d) When duly authenticated by the Trustee and delivered to and paid for by the Purchaser at the Closing in accordance with the provisions of this Contract of Purchase, the Bonds will have been duly authorized, executed, issued and delivered and will constitute legal, valid and binding limited obligations of the Issuer in conformity with the laws of the State of California, including the Act, will be entitled to the benefit and security of the Financing Agreement and the Indenture, and will be enforceable against the Issuer in accordance with their 2 01-178268.02 terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights of creditors generally and general equitable principles. (e) To the knowledge of the Issuer, neither the Issuer's execution and delivery of the Issuer Documents, the consummation of the transactions contemplated hereby and thereby, nor the fulfillment of or compliance with the terms,conditions or provisions of the Issuer Documents conflicts in any material respect with or results in a material breach of any of the terms, conditions or provisions of any agreement, instrument,judgment, order or decree to which the Issuer is now a party or by which it is bound or constitutes a material default under any of the foregoing. (f) Except as otherwise provided in the Indenture,the Issuer has not created and will not create any debt, lien or charge upon the Revenues, and has not made and will not make any pledge or assignment of or create any encumbrance thereon,other than the pledge and assignment thereof under the Indenture. (g) To the knowledge of the Issuer,the Issuer has complied and will comply with all material provisions of the Act applicable to the Bonds and the transactions contemplated by this Contract of Purchase and the Issuer Documents. (h) To the knowledge of the Issuer, no litigation or administrative action of any nature has been served on the Issuer and is now pending (i)seeking to restrain or enjoin the execution and delivery of the Issuer Documents or in any manner questioning the proceedings or authority relating thereto or otherwise affecting the validity of the Bonds or(ii)as to the existence or authority of the Issuer or that of its present or former members or officers. (i) The distribution of the Preliminary Official Statement and the Official Statement has been duly authorized by the Issuer, and the information therein under the captions "THE ISSUER" and "NO LITIGATION" is true and correct in all material respects and such information does not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements under such captions, in the light of the circumstances under which they were made, not misleading. 0) The Issuer agrees that, if at any time within 90 days from the Closing Date any event of which it has actual knowledge occurs as a result of which the Official Statement as then in effect would include any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading,the Issuer shall reasonably cooperate with the Purchaser in the preparation of an amendment or supplement to the Official Statement which will correct such statement or omission, provided all expenses thereby incurred will be paid by the Borrower or the Purchaser. The Issuer shall promptly advise the Purchaser of the institution of any action., suit, proceeding, inquiry or investigation seeking to prohibit, restrain or otherwise affect the use of the Official Statement in connection with the offering, sale or distribution of the Bonds of which it has actual knowledge. (k) The Issuer shall furnish or cause to be furnished to the Purchaser, at the expense of the Borrower and in such quantities as shall be required by the Purchaser,copies of the Official Statement and all amendments and supplements thereto, in each case as soon as available. Copies of the Official Statement shall be delivered, in any event, to the Purchaser within seven days of the date of this Contract of Purchase. 3 01-17 8268.02 0) The Issuer will furnish such information, execute such instruments and take such other action in cooperation with the Purchaser as the Purchaser may reasonably request in order for the Purchaser(i)to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Purchaser may designate and (ii)to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions and will use its best efforts to continue such qualification in effect so long as required for distribution of the Bonds, provided, however,that in no event shall the Issuer be required to take any action which would subject it to general or unlimited service of process in any jurisdiction in which it is not now so subject. Section 3. Representations,Warranties and Agreements of the.Borrower. (a)The Borrower is duly organized and existing as a limited partnership under the laws of the State, has full legal right, power and authority to own its properties and conduct its business as described in the Official Statement and to enter into and to carry out and consummate the transactions contemplated by the Borrower Documents and the Official Statement,and is duly authorized to do such business and is in good standing wherever such standing is required, including the State. (b) By all necessary action, the Borrower has duly authorized and adopted the Borrower Documents and approved the execution and delivery of the Borrower Documents, and the performance by the Borrower of the obligations in connection with the issuance of the Bonds on its part contained in the Borrower Documents and the consummation by it of all other transactions contemplated by the Indenture and the Borrower Documents in connection with the issuance of the Bonds. (c) At the dosing Date, the Borrower Documents will constitute the valid, legal and binding obligations of the Borrower(assuming due authorization, execution and delivery by the respective other parties thereto, where necessary), enforceable in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws of general applicability affecting the enforcement of creditors' rights and to general principles of equity, regardless of whether such enforceability is considered in equity or in law. (d) As of the date hereof, the Borrower is not in any material respect in violation of, breach of or default under any applicable constitutional provision or law of any state or of the United States, or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Borrower or any of its activities, properties or assets,or any indenture, mortgage, deed of trust, resolution, note agreement(including,without limitation,the Borrower Documents)or other agreement or instrument to which the Borrower is a party or by which the Borrower or any of its property or assets is bound,which violation or breach of or default would have a material adverse affect upon the transactions contemplated by this Contract of Purchase, and no event has occurred and is continuing which with the passage of time or the giving of notice, or both, would constitute such a default or event of default under any such instruments= and the execution and delivery of the Borrower Documents, and compliance with the provisions on the Borrower's part contained therein, do not and will not conflict with or constitute on the part of the Borrower a violation or breach of or default under any constitutional provision or law of any state or of the United States, or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Borrower or any of its activities, properties or assets, or any indenture, mortgage, deed of trust, resolution, note agreement (including, without limitation, the Borrower Documents)or other agreement or instrument to which the Borrower is a party or by which the Borrower or any of its property or assets is bound, which breach or default would have a material adverse affect upon the transactions contemplated by this Contract of Purchase, nor will any such execution, delivery or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the Borrower or under the 4 0 -i 78268,02 terms of any such law, regulation or instrument, except as provided by the Bonds or the Borrower Documents. (e) All consents, approvals, authorizations and orders of or filings or registrations with any governmental authority, board, agency or commission of any state or of the United States having jurisdiction required in connection with, or the absence of which would materially adversely affect, the execution and delivery by the Borrower of the Borrower Documents or the performance by the Borrower of its obligations thereunder have been obtained or made and are in full force and effect. (f) As of the date hereof, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any judicial or administrative court or governmental agency or body, state, federal or other, pending or, to the best knowledge of the Borrower, threatened against the Borrower, affecting the existence of the Borrower or the titles of its officers executing this Contract of Purchase to their respective offices, or contesting or affecting as to the Borrower the validity or enforceability of the Act, the Bonds, any Borrower Document or the execution and delivery or adoption by the Borrower of any Borrower Document, or in any way contesting or challenging the completeness or accuracy of the Official Statement or the powers of the Borrower or its authority with respect to the Borrower Documents or the consummation of the transactions contemplated hereby or thereby; nor, to the best knowledge of the Borrower, is there any basis for any such action, suit, proceeding, inquiry or investigation,wherein an unfavorable decision, ruling or finding would materially adversely affect the Borrower's financial condition or operations or the validity of the authorization, execution, delivery or performance by the Borrower of any Borrower Document. (g) The Borrower will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order(i)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, and (ii)to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions, and will use its best efforts to continue such qualifications in effect so long as required Zr the distribution of the Bonds; provided, however, that the Borrower shall not be required to register as a dealer or broker of securities or execute a general or special consent to service of process or qualify to do business in any jurisdiction where it is not now so subject. (h) Any certificate signed by the Borrower and delivered to the Underwriter or the Issuer pursuant to the Indenture or the Borrower Documents shall be deemed a representation and warranty by the Borrower to the Underwriter and the Issuer as to the statements made therein. (i) The Borrower will not take or omit to take any action, which action or omission will adversely affect the exclusion from gross income for federal income tax purposes of the interest on the Series D Bonds under the Internal Revenue Code of 1986,as amended. (j) The Borrower will fully comply with and assume all expenses incurred in fully complying with all regulatory requirements imposed by any state or federal regulatory authority as may have jurisdiction herein, including, but not limited to, all expenses incurred and required in the preparation and filing of such interim and annual financial information and reports as may be required to maintain the registration of the Bonds, or exemptions from registration, as the case may be, copies of all of which the Borrower agrees to furnish promptly to the Underwriter at such time as the same may be filed in the office of any such state or federal regulatory authority. (k) The Borrower shall honor all covenants contained in the Borrower Documents, which agreements are incorporated herein and made a part of this Contract of Purchase. 5 0l-l 78268.02 (1) All costs and expenses to effect the authorization,preparation,issuance, sale and delivery of the Bonds (whether or not such transaction is consummated,except under the circumstances described below), including the preparation, printing, execution and delivery of the Preliminary Official Statement and the Official Statement (together with any amendments thereof and supplements thereto) and the Issuer Documents, the Trustee Documents and the Documents, any rating agency fees, the fees and expenses of Bond Counsel, Counsel to the Issuer and the expenses (including the fees and expenses of counsel to the Underwriter) incurred in qualifying the Bonds for sale under the securities laws of various jurisdictions and of preparing "blue sky" and legal investment memoranda, shall be paid solely and exclusively from funds provided by the Borrower. In no event shall any of such costs be paid by the Issuer. Section 4. Indemnification. (a)The Borrower agrees to pay, defend, protect, indemnify, save and hold harmless the Issuer, the Underwriter and each affiliate, member, officer, director, official, employee and agent of the Issuer and the Underwriter and each person, if any, who controls any of the foregoing within the meaning of Section 15 of the Securities Act of 1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as amended (collectively referred to herein as the "Indemnified Parties"), against any and all liabilities, losses, damages, costs, expenses (including attorneys' fees), causes of action (whether in contract, tort or otherwise), suits, claims, demands and judgments of any kind, character and nature (collectively referred to herein as the "Liabilities") caused by or directly or indirectly arising from or in any way relating to (i)the Bonds, the Project,the loan of the proceeds of the Bonds, the Financing Agreement,the Mortgage,the Indenture, this Contract of Purchase or any document related to the Bonds, the Project, the loan of the proceeds of the Bonds(the "Transaction Documents")or any transaction or agreement, written or oral, pertaining to the foregoing or (ii)any untrue or misleading statement or alleged untrue or alleged misleading statement of a material fact relating to the Borrower or the Project contained in the Official Statement, or caused by any omission or alleged omission from the Official Statement of any material fact relating to the Borrower and the Project 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; provided, however,that no indemnity shall be required for claims arising from the gross negligence or willful misconduct of the Issuer and the negligence or willful misconduct of any other party seeking indemnification. (b) The Borrower also agrees to pay, defend, protect, indemnify, save and hold harmless the Underwriter and each affiliate,member, officer, director, official, employee and agent of the Underwriter from and against the Liabilities directly or indirectly arising from or relating to(i) any errors or omissions of any nature whatsoever contained in any legal proceedings or other official representation or inducement made by the Issuer pertaining to the Bonds and (ii)any fraud or misrepresentations or omissions of the Borrower contained in the proceedings of the Issuer pertaining to the financial condition of the Borrower. (c) Any Indemnified Party shall notify the Borrower of the existence of any Liability to which this indemnification obligation would apply and shall give to the Borrower an opportunity to defend the same at the Borrower's expense and with counsel satisfactory to the Indemnified Party, provided that the Indemnified Party shall at all times also have the right to fully participate in the defense. if there may be legal defenses available to the Indemnified Party which are different from or in addition to those available to the Borrower or if the Borrower shall, after this notice and within a period of time necessary to preserve any and all defenses to any claim asserted, fail to assume the defense or to employ counsel for that purpose satisfactory to the Indemnified Party, the Indemnified Party shall have the right, but not the obligation,to undertake the defense of, and, with the approval of Borrower,to compromise or settle the claim or other matter on behalf of, for the account of, and at the risk of,the Borrower. 6 01-138268.02 (d) In order to provide for just and equitable contribution in circumstances in which the indemnity provided for in paragraph(a) or(b) of this Section 4 is for any reason held to be unavailable, the Borrower and the indemnified Parry shall contribute proportionately to the aggregate Liabilities to which the Borrower and the Indemnified Party may be subject, so that the Indemnified Party is responsible for that portion represented by the percentage that the fees paid to the indemnified Party in connection with the issuance and administration of the Bonds bear to the aggregate offering price of the Bonds, with the Borrower responsible for the balance; provided, however, that in no case shall the Indemnified Party be responsible for any amount in excess of the fees paid by the Borrower to the Indemnified Party in connection with the issuance and administration of the Bonds. (e) The Indemnified Parties, other than the Issuer and the Underwriters, shall be considered to be third-party beneficiaries of this Contract of Purchase for purposes of this Section 4. The provisions of this Section 4 will be in addition to all liability which the Borrower may otherwise have and shall survive any termination of this Contract of Purchase,the offering and sale of the Bonds and the payment or provisions for payment of the Bonds. Section 5. Disclosure Matters. (a) Preliminary Official Statement. (i) The Borrower approved a preliminary official statement prepared with respect to the Bonds (the "Preliminary Official Statement")and has executed a certificate deeming the information contained in such document to be "final" as of its date, for purposes of assisting the Underwriter in satisfying its obligations under Rule 15c2-12 (17 C.F.R. 240.15c2-12)adopted by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. (ii) The Borrower will cause to be delivered or will deliver to the Underwriter, without charge, in such quantities as the Underwriter has requested or may hereafter reasonably request, copies of the Preliminary Official Statement (including all documents incorporated by reference therein or attached as appendices thereto) and any amendment or supplement thereto (provided that, as set forth in Section 8 hereof, the Borrower shall be responsible for any costs associated with such documents). (b) Official Statement. (i) The Borrower hereby represents that the information in the Official Statement with respect to the Borrower and the Project is fair and accurate and does not contain any untrue statement of a material fact and does not omit to state a material fact necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, not misleading. (ii) The Borrower will cause to be supplied, at the Borrower's expense, within the earlier of(A) seven business days from the date hereof or(B)sufficient time to accompany any confirmation requesting payment which the Underwriter might send to its customers with respect to the Bonds, sufficient quantities of the Official Statement to enable the Underwriter(x)to send a single copy of the Official Statement to any potential customer upon request until the earlier of(1) 90 days from the End of the Underwriting Period (as defined below) or(2)the time when the Official Statement is available to any person from a nationally recognized municipal securities information repository, but in no case less than 25 days following the End of the Underwriting Period and (y)to comply 7 01-178268.02 with any applicable rules of the Municipal Securities Rulemaking Board. The "End of the Underwriting Period"means the later of the delivery of the Bonds by the Issuer to the Underwriter or when a Underwriter no longer retains (directly or as a syndicate member) an unsold balance of the Bonds for sale to the public. The deemed End of the Underwriting Period may be extended for two additional periods of 30 days each upon receipt of an additional written notification from the underwriter containing the same information as required in the initial written notice. (iii) During the period commencing on the date hereof and ending on the earlier of(A)90 days from the End of the Underwriting Period or(B)the time when the Official Statement is available to any person from a nationally recognized municipal securities information repository, but in no case less than 25 days following the End of the Underwriting Period, if any event shall occur as a result of which it may be necessary to supplement the Official Statement in order to make the statements therein, in the light of the circumstances existing at such time, not misleading, the Borrower shall forthwith notify the Underwriter of any such event of which it has knowledge, and the Borrower will amend or supplement the Official Statement so that the statements therein as so amended or supplemented will not be misleading in the light of the circumstances existing at such time. Section 6. Closing. At 8:00 a.m., Pacific time, on April 22, 1999, or at such time on such earlier or later date as shall be agreed upon in writing by the Issuer, the Borrower and the Underwriter,the Issuer shall direct the Trustee to cause the Bonds to be credited to the account of the Underwriter at the offices of The Depository Trust Company("DTC"),New`Fork,New York, in definitive form, duly executed and authenticated by the Trustee. Subject to the terms and conditions hereof, the Issuer shall deliver at the offices of Orrick, Herrington & Sutcliffe LLP, Los Angeles, California ("Bond Counsel"), the other documents and instruments to be delivered pursuant to this Contract of Purchase (the "Closing Documents"),and the Underwriter shall accept delivery of the Bonds and Closing Documents and pay the purchase price for the Bonds as set forth in Section I above by wire transfer, to the Trustee, in immediately available federal funds, for the account of the Issuer or as the Issuer shall direct. This delivery and payment is herein called the "Closing" and the date on which the Closing occurs is herein called the "Closing Date." If the Underwriter shall make such request, the Bonds shall be remade available to the Underwriter one business day before the Closing at the offices of DTC for purposes of inspection and packaging. The Bonds shall be prepared and delivered as fully registered Bonds without coupons in the denominations set forth in the Official Statement or multiples thereof. The ownership of one fully registered Bond in the aggregate principal amount of the Bonds, bearing a proper, duly assigned CUSIP number, will be issued initially in the name of Cede & Co., as nominee of DTC. Section 7. Closing Conditions. The Underwriter has entered into this Contract of Purchase in reliance upon representations,warranties and agreements of the Issuer and the Borrower contained herein, in reliance upon the representations, warranties and agreements to be contained in the documents and instruments to be delivered at the Closing and upon the performance by the Issuer and the Borrower of their obligations hereunder, both as of the date hereof and as of the Closing Date. Accordingly, the underwriter's obligations under this Contract of Purchase to purchase,to accept delivery of and to pay for the Bonds shall be subject to the performance by the Issuer and the Borrower of their obligations to be performed by them hereunder at or prior to the Closing, and to the accuracy in all material respects of the representations and warranties of the Issuer and of the Borrower contained herein as of the date hereof and as of the Closing as if made on the Closing Date, and shall also be subject to the fallowing additional conditions: 8 01-178258.02 (a) At the time of the Closing, the Issuer Documents shall have been duly authorized, executed and delivered, and shall not have been amended, modified or supplemented, except as may have been agreed to in writing by the Underwriter and there shall have been taken in connection therewith and in connection with the issuance of the Bonds all such actions as, in the opinion of Bond Counsel, and counsel for the underwriter, shall be necessary and appropriate in connection with the transactions contemplated hereby. (b) The Underwriter may terminate this Contract of Purchase by notification to the Issuer and the Borrower if at any time subsequent to the date hereof and at or prior to the Closing: (i)(A) legislation shall be enacted by the Congress of the United States or adopted by the Senate or House of Representatives of the United States, or recommended to such Congress for passage by the President of the United States, or favorably reported for passage to such Senate or House of Representatives by any committee of either such body to which such legislation has been referred for consideration or a conference committee of both such bodies, or (B)a decision shall be rendered by a court of the United States or the Tax Court of the United States, or(C)a ruling, regulation or official action shall be rendered by or on behalf ofthe United States,or(D)a ruling,regulation or official action shall be proposed or issued, in any manner, including by pronouncement, press release or any other form of notice, by or on behalf of the Treasury Department of the United States, the Internal Revenue Service or another governmental agency of the United States or by or on behalf of any member of the Senate or House of Representatives of the United States in any such instance with respect to federal taxation of interest received on obligations of the general character of the series D Bonds and which (I) in the opinion of counsel for the Underwriter, would have or proposes action the effect of which would be to make such interest includable in gross income for federal income tax purposes, or(2) in the opinion of the Underwriter,would materially adversely affect any intended utilization of Bond proceeds or other intended action described in the Official Statement; (ii) payment for and delivery of the Bonds is rendered =impracticable or inadvisable because (A)trading in securities generally shall have been suspended on the New Fork Stock Exchange or a general banking moratorium shall have been established by federal or New Fork authorities or (B)a war involving the United States shall have been declared or another national or international calamity shall have occurred,the effect of any of which, in the reasonable judgment of the Underwriter, materially adversely affects the marketability of the Bonds; (iii) any event shall occur or exist which, in the reasonable judgment of the Underwriter, either makes untrue or incorrect in any material respect any statement or information contained in the Official Statement dated the date hereof or is not reflected in the Official Statement dated the date hereof but should be reflected therein for the purpose for which the Official Statement is to be used in order to make the statements or information contained therein not misleading in any material respect; or (iv) legislation shall be enacted, or any action shall be taken by the Securities and Exchange Commission, which, in the opinion of counsel for the Underwriter, has or may have the effect of requiring the contemplated distribution of the Bonds to be registered under the Securities Act of 1933, as amended, or the Indenture to be qualified as an indenture under the Trust Indenture Act of 1939, as amended. 9 01-178268.02 (c) At or prior to the Closing, the Underwriter shalt receive the following documents: (i) an approving opinion of Bond Counsel addressed to the Issuer, dated the Closing Date, to the effect of the opinion set forth at Appendix B to the Oficial Statement, and a letter of such counsel dated the Closing Date and addressed to the Underwriter to the effect that such approving opinion may be relied on by the Underwriter to the same extent as if such opinion were addressed to the Underwriter; (ii) opinions, dated.the Closing Date, of (A) Bond Counsel, substantially in the form attached hereto as Appendix C and addressed to the Underwriter; (B) Counsel to the Issuer,substantially in the form attached hereto as Appendix D,together with a reliance letter to the Underwriter; (C) Counsel to the Borrower, substantially in the form attached hereto as Appendix E, which opinion the Borrower hereby directs and authorizes its Counsel to issue to and for the benefit of the Underwriter; (D) Fannie Mae's Legal Department, substantially in the form attached hereto as Appendix O; (E) Arent Fox Kintner Plotkin & Kahn, substantially in the form attached hereto as Appendix H; and (F) Kutak Rock, Underwriter's Counsel, substantially in the form attached hereto as Appendix 1; (iii) the Underwriter shall have received a certificate, dated the Closing Date and signed on behalf of the Issuer, substantially in the form attached hereto as Appendix J; (iv) a certificate of the Issuer as to arbitrage and other federal tax matters, in form and substance acceptable to Bond Counsel and the Underwriter, (v) a certificate of the Borrower,dated the Closing Bate,that(A)each of the representations and warranties set forth in the Borrower Documents (including this Contract of Purchase) is true and correct in all material respects on the Closing Date with the same effect as if made on the Closing Date, (B) no event has occurred since the date of the Official Statement which should be disclosed in the OfficialStatement for the purpose for which it is to be used or which is necessary to be disclosed therein in order to make the statements and information therein not misleading in any material respect, and (C)the Borrower has complied with all agreements and satisfied all the conditions on its part to be performed or satisfied under the Borrower Documents at or prior to the Closing Date; (vi) closing certificate of an authorized officer of Fannie Mae, dated the Closing Date, in the form set forth as Appendix K; 10 01-178268.02 (vii) closing certificate of an authorized officer of the Trustee, dated the Closing Date, in the form set forth as Appendix L; (viii) a certificate signed by an officer of the Servicer to the effect that, as of the date of the Official Statement and as of the Closing Date,the information contained in the Official Statement under the caption "TIME SERVICER" is true and correct, does not contain any untrue statement of a material fact and doses not omit to state any material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading, authorizing the use of information relating to the Servicer in the Preliminary Official Statement and in the Official Statement, including all amendments and supplements thereto, by the Underwriter in connection with the public offering and sale of the Bonds and containing representations regarding the Servicer's corporate existence, its ability to enter into the transactions contemplated by the Servicing Agreement,the Official Statement,and the Indenture and other matters; (ix) counterpart originals or certified copies of each of the Issuer Documents, Borrower Documents and the Trustee Documents; (x) written evidence satisfactory to the underwriter that Standard& Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. has issued a rating of "AAA"for the Bonds,and such rating shall be in effect on the Closing Date; (xi) such agreements, certificates and opinions as requested by the Underwriter to evidence the closing of the Mortgage Loan; (xii) final cash flows and related verification reports;and (xiii) such additional legal opinions, certificates (including any certificates necessary or desirable in order to establish the exclusion of the interest on the Serres D Bonds from gross income for federal income tax purposes), instruments and other documents as the Underwriter may reasonably request to evidence the truth and accuracy, as of the Closing Date,of the Issuer's representations herein and in the Official Statement and the due performance or satisfaction by the Issuer at or prior to such date of all agreements then to be performed,and all conditions then to be satisfied by the Issuer. If the obligations of the underwriter shall be terminated for any reason permitted by this Contract of Purchase, neither the Underwriter nor the Issuer shall be under further obligation hereunder except for the continuing obligation of the Underwriter to pay certain expenses as hereinafter provided. Section 8. Expenses. (a)The Borrower shall pay, solely and exclusively from funds of the Borrower, the costs of issuing the Bonds, including, but not limited to, the fees and expenses described in Section 3(1)of this Contract of Purchase; provided, however, that if the sale of the Bonds by the Issuer to the Underwriter is not consummated, the Borrower or the Underwriter shall be liable for the payment of such fees and expenses to the extent required by said Section 3(l). The Issuer is not responsible for the payment of any Bond issuance costs. (b) The Borrower shall pay its own fees and expenses, including the fees and expenses of its counsel. (c) The Underwriter shall pay its own expenses, including the fees and expenses of its counsel, but not including fees and expenses relating to "blue sky"and legal investment matters. _ l 01-178258.02 (d) The Borrower shall pay to the Underwriter on the Closing Date an amount equal to the expenses related to printing the Official Statement,the fees of the rating agency, CUSIP, MSR.B, BMA, Bond clearance and federal funds charges as estimated by the Underwriter. Section 9. Notices. Any notice or other communication to be givers to the Issuer under this Contract of Purchase may be given by :nailing the same to the address on the first page hereof, any such notice or other communication to be given to the Borrower may be given by mailing the same to the address on the first page hereof with a duplicate copy of any notice(which copy shall not constitute notice to the Developer), mailed to Bret H. Beed, Jr., a Law Corporation, at the address set forth in the Indenture, and any such notice or other communication to be given to the Underwriter may be given by mailing the same to Hutchinson, Shockey, Erley& Co., Suite 301, 1702 East Highland Avenue, Phoenix, Arizona 85016. Section 10. Amendments. This Contract of Purchase may not be amended without the written consent of the Issuer,the Borrower and the Underwriter. Section 11. Survival of Representations and Warranties. The representations and warranties of the issuer and the Borrower shall not be deemed to have been discharged, satisfied or otherwise rendered void by reason of the Closing and regardless of any investigations made by or on behalf of the Underwriter (or statements as to the results of such investigations) concerning such representations and statements of the Issuer and the Underwriter and regardless of delivery of and payment for the Fonds. Section 12. Execution in Counterparts. This Contract of Purchase may be executed by the parties hereto in separate counterparts,each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 13. No Prier Agreements. This Contract of Purchase supersedes and replaces all prior negotiations, agreements and understandings between the parties hereto in relation to the sale of Bonds for the Issuer. Section 14. Effective Date. This Contract of Purchase shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the Issuer and the Borrower and shall be valid and enforceable as of the time of such acceptance. Section 15. Governing Law. This Contract of Purchase shall be governed by the laws of the State of California without giving effect to the conflict of law principles of such State. [Remainder of page intentionally left blank] 12 Ci-i 78268.02 If the foregoing is in accordance with your understanding of the Contract of Purchase please sign and return to us the enclosed duplicate copies hereof, whereupon it will became a binding agreement among the Issuer,the Borrower and the Underwriter in accordance with its terms. Very truly yours, HUTCHINSON, SHOCK.EY,ERLEY& CO. By Its AGREED AND ACCEPTED: COUNTY OF CONTRA COSTA, CALIFORNIA By Its WILLOW PARTNERS,L.P.,a California limited partnership By:FOUNDATION FOR. SOCIAL RESOURCES, INC., a Delaware non-profit corporation Its: General Partner By: Jonathan B. Webb Its: Executive Director By:WILLOW ASSETS LLC, a California limited liability company Its: General Partner By: Mark E. Hyatt,Member Its: Member 13 01-178268,02 AP'P'ENDIX A Series D Bonds $ %Term Bond due $ %Term Bond due Series D-T Bonds $ % Terre Bonds due $ % Term Bonds due ('rice of All Bonds: %Plus accrued interest from April 1, 1999) 01-17826&02 APPENDIX B RULE 15°2-12 CERTIFICATE OF BORROWER [BOND CAPTION] The undersigned hereby certifies and represents to Hutchinson, Shockey, Erley & Co. (the "Underwriter") that he/she is authorized to execute and deliver this certificate on behalf of Willow Partners, L.P., a California limited partnership (the "Borrower"), and hereby further certifies to the Underwriter as follows: (a) This Certificate is delivered to enable the underwriter to comply with Securities and Exchange Commission Rule l5c2-12 under the Securities Exchange Act of 1934(the"Rule") in connection with the issuance and sale of the above-captioned bonds(the"Bonds"). (`o) In connection with the issuance and sale of the Bonds, there has been prepared a Preliminary Official Statement dated April 7, 1999, setting forth information concerning the Bonds and the Borrower(the"Preliminary Official Statement"). (c) As used herein, "Permitted Omissions" shall mean the offering price(s), interest rate(s), accreted values, yield to maturity, selling compensation, aggregate principal amount, principal amount per maturity,delivery dates, ratings and other terms of the Bonds depending on such matters and the identity of the underwriter(s),all with respect to the issuance and sale of the Bonds. (d) The Preliminary Official Statement is, as of the date thereof, deemed final within the meaning of the Rule,except for Per-pitted Omissions. (e) The section of the Preliminary Official Statement entitled "APPENDIX D— SUMMARY OF CERTAIN PROVISIONS OF THE CONTINUING DISCLOSURE AGREEMENT" describes the agreement the Borrower expects to make for the benefit of the Bondholders in the Continuing Disclosure Agreement dated as of April 1, :399 by and between the Borrower and U.S. Bank Trust National Association, by which the Borrower will undertake to provide continuing disclosure in accordance with the Rule. 0i- 78263.02 [Signature Page to Rule I5c2-12 Certificate; IN WITNESS WHEREOF, I have hereunto set my hand this day of April, 1999. WILLOW PARTNERS, L.P., a California limited partnership By:FOUNDATION FOR SOCIAL RESOURCES, INC., a Delaware non-profit corporation Its: General Partner By: Jonathan B. Webb Its: Executive Director By:WILLOW ASSETS LLC, a California limited liability company Its: General Partner By: Mark E. Hyatt,Member Its: Member B-2 e: 78268.02 APPENDIX C [Letterhead of Bond Counsel] [Closing Date] Hutchinson, Shockey,Erley& Co. Phoenix,Arizona [BOND CAPTION] [After appropriate introductory language,the opinion shall state substantially as follows:] Based on and subject to the foregoing,and in reliance thereon,as of the date hereof, we are of the following opinions or conclusions; I. The Contract of Purchase has been duly executed and delivered by the Issuer and is a valid and binding agreement of the Issuer. No opinion is expressed with respect to the Collateral Agreement or the Fannie Mae Pass-Through Certificate. 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," "SECURITY FOR THE BONDS--Pledge of Trust Estate,„ "SECURITY FOR THE BONDS—Security for and Payment of Bonds" and "TAX MATTERS" in Appendix A under the headings "CERTAIN DEFINNITIONS," "THE INDENTURE," "THE FINANCING AGREEMENT" and "THE REGULATORY AGREEMENT," and in Appendix B, insofar as such statements expressly summarize certain provisions of the Bonds, the Indenture, the Financing Agreement, the Regulatory Agreement and our Bond Opinion concerning certain federal tax matters relating to the Bonds, are accurate in ail material respects. Very truly yours, 01-178268.02 APPENDIX D [Letterhead of Counsel to the Issuer] [Closing Date] County of Contra Costa,California Martinez, California Hutchinson, Shockey,Brley& Co. Phoenix,Arizona [BOND CAPTION] [After appropriate introductory language,the opinion shall state substantially as follows:] Based on and subject to the foregoing,and in reliance thereon, as of the date hereof,we are of the following opinions: 1. The Issuer is a political subdivision of the State of California. 2. The Resolution was duly adopted at a meeting of the governing board of the Issuer, which was called and held pursuant to law and with all public notice required by law and at which a quorurn was present and acting throughout. The Resolution is in full force and effect and has not been amended, modified or superseded. This letter is furnished by us as special counsel to the Issuer. No attorney-client relationship has existed or exists between our firm and the addressees of this letter other than the Issuer in connection with the Bonds or by virtue of this letter. With delivery of this letter our engagement with respect to the Bonds has concluded, and we disclaim any obligation to update this letter. This letter is solely for the benefit of the addressees hereof, and is not to be used, circulated, quoted or otherwise referred to or relied upon for any other purpose or by any person other than the addressees hereof. Very truly yours, 01-1 78268.02 APPENDIX E [Letterhead of Counsel to the Borrower] [Closing Date] County of Contra Costa,California Hutchinson, Shockey,Erley&Co. Martinez,California Phoenix,Arizona U.S. Bank Trust National Association Fannie Mae San Francisco, California Pasadena, California [BOND CAPTION] [After appropriate introductory language,the opinion shall state substantially as follows:] We are of the opinion,as of the date hereof. as follows: 1. The Borrower is a validly organized and existing limited partnership under the laws of the State of California and qualified to do business and in good standing in the State of California. 2. The Borrower has full legal right, power and authority (i)to own its properties and conduct its business as described in the Official Statement; and (ii)to enter into and to carry out and consummate the transactions contemplated by the Financing Agreement, the Regulatory Agreement, the Mortgage, the Mortgage Note, the other Mortgage Loan Documents, the Contract of Purchase and the Continuing Disclosure Agreement(collectively,the"Borrower Documents"). 3. By all necessary action, the Borrower has duly authorized and adopted the Borrower Documents, and approved the,execution and delivery of, and the performance by the Borrower of the obligations in connection with the issuance of the Bonds on its part contained in the Bonds and the Borrower Documents and the consummation by it of all other transactions contemplated by the Indenture and the Borrower Documents in connection with the issuance of the Bonds. 4. The Borrower Documents have been duly executed and delivered by the Borrower and, assuming the due authorization,execution and delivery of such agreements by the respective other parties thereto where necessary, if any, constitute legal, valid and binding obligations of the Borrower enforceable in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws of general applicability affecting the enforcement of creditors' rights and to general principles of equity, regardless of whether such enforceability is considered in equity or in law. 5. As of the Closing Date, the Borrower is not in any material respect in violation of, or breach of or default under, any applicable constitutional provision or law of any state or of the United States, or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Borrower or any of its activities,properties or assets, or,to the best of my knowledge after due and diligent inquiry, any indenture, mortgage, deed of trust, resolution, note agreement (including, without limitation, the Borrower Documents) or other agreement or instrument to which the Borrower is a party or by which the Borrower or any of its property or assets is bound, and no event has 01-178268.02 occurred and is continuing which with the passage of time or the giving of notice, or both, would constitute such a default or event of default under any such instruments;and the execution and delivery of the Bonds and the Borrower Documents, and compliance with the provisions on the Borrower's part contained therein, do not and will not conflict with, or constitute on the part of the Borrower a violation of, breach of or default under, any applicable constitutional provision or law of any state or of the United States, or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Borrower or any of its activities,properties or assets, or,to the best of my knowledge after due and diligent inquiry, any indenture, mortgage, deed of trust, resolution, note or other agreement or instrument to which the Borrower is a party or by which the Borrower or any of its property or assets is bound, nor will any such execution, delivery or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the Borrower or under the terms of any such law, regulation or instrument,except as provided by the Bonds or the Borrower Documents. 6. As of the dosing Date, all consents, approvals, authorizations,and orders of or filings or registrations with any governmental authority, board, agency or commission of any state or of the United States having jurisdiction required in connection with, or the absence of which would materially adversely affect, the execution and delivery by the Borrower of the Borrower Documents or the performance by the Borrower of its obligations thereunder have been obtained or made and are in full force and effect. 7. As of the dosing Bate, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any judicial or administrative court or governmental agency or body, state, federal or other, pending or, to the best of my knowledge, threatened against the Borrower, affecting the existence of the Borrower or the titles of its officers to their respective offices, or contesting or affecting as to the Borrower the validity or enforceability of the Act, the Bonds, any Borrower Document or the execution and delivery or adoption by the Borrower of any Borrower Document, or in any way contesting or challenging the completeness or accuracy of the Official Statement or the powers of the Borrower or its authority with respect to the Borrower Documents or the consummation of the transactions contemplated thereby; nor, to the best of my knowledge, is there any basis for any such action, suit, proceeding, inquiry or investigation, wherein an unfavorable decision, ruling or finding would materially adversely affect the financial condition or operations of the Borrower or the validity of the authorization, execution, delivery or performance by the Borrower of any Borrower Document. 8. Based upon my participation in the preparation ofthe Official Statement as counsel to the Borrower, as of the Closing Date I have no reason to believe that the Official Statement as of the date of the Official Statement contained, or as of the Closing Date contains, any misstatement of a material fact or as of the date of the Official Statement omitted, or as of the Closing Bate omits, to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and the statements contained in the Official Statement under the caption "NO LITIGATION" insofar as such statements relate to the Borrower or the Project and at Appendix C of the Official Statement,are fair and accurate in all material rest)ects. E-2 01-179268.02 APPENDIX E [NOT USED] 0I-378258.02 APPENDIX G [Letterhead of General Counsel to Fannie Mae] [Closing Date] U.S. Bank Trust:National Association San Francisco,California [BOND CAPTION! lAfter appropriate introductory language,the opinion shall state substantially as follows;-, I am of the opinion,as of the date hereof,as follows: I e Fannie Mae has been duly organized under the Federal National Mortgage Association Charter Act, as amended, 12 U.S.C, 1716 et seq., and is a corporation organized and existing under the laws of the United States; 2, Fannie Mae has full right, power and authority necessary to execute, deliver and perform its obligations under the Collateral Agreement; 3 the Collateral Agreement has been duly authorized, executed and delivered by Fannie Mae and constitutes a valid and binding obligation of Fannie Mae, enforceable in accordance with its terms, subject to any applicable bankruptcy, insolvency, reorganization, moratori=um and other laws of general applicability relating to or affecting creditor's rights from time to time in effect as such laws would be applied in the event of a bankruptcy, insolvency, reorganization, moratorium or similar occurrence affecting Fannie Mae and to the exercise of Judicial discretion in accordance with general principles of equity, whether applied by a court of law or of equity; 4. neither the consummation of the transactions contemplated by the Collateral Agreement nor the fulfillment by Fannie Mae of or compliance by Fannie Mae with the terms and conditions thereof conflicts with or results in a breach of any of the terms, conditions or provisions of any agreement or instrument of which I am aware and to which Fannie Mae is now a party or by which it is bound, which breach or conflict would prohibit Fannie Mae from consummating the transactions contemplated by the Collateral Agreement or the fulfillment by Fannie Mae of or compliance by Fannie Mae with the terms and conditions thereof;and 5. there is no action or suit instit=uted against Fannie Mae before any court which is now pending, or any cease and desist order or other order of a similar nature, temporary or permanent, of any federal or state authority, which action, suite or order would have the effect of preventing or hindering in any material respect the performance by Fannie Mae of its duties under the Collateral Agreement or which in any material respect(a)affects or seeks to prohibit, restrain or enjoin the execution and delivery of the Collateral Agreement, (b) affects the validity or enforceability of the Collateral Agreement or(c)challenges the power or authority of Fannie Mae to carry out the transactions contemplated by the Collateral Agreement. I express no opinion on the perfection or priority of any lien or security interest described in the Collateral Agreement. 01-178268.02 My opinion is rendered only to, and may be relied upon only by, the addressees. My opinion herein is limited to the laws of the District of Columbia and of the United States of America, and to the extent they are applicable, and I express no opinion as to the applicability of the laws of any other jurisdiction. Sincerely, G-2 0 -i 78268.02 APPENDIX H [Letterhead of Outside Counsel to Fannie Mae] [Closing Date] Hutchinson, Shockey,Erley& Co. Phoenix, Arizona [BOND CAPTION] [After appropriate introductory language,the opinion shall state substantially as follows.] In our capacity as special counsel to Fannie Mae, we have reviewed (a)certain portions (the "Reviewed Portions") of the Official Statement(the"Official Statement"),dated April , 1999, prepared in connection with the offering and sale of the Bonds describing(1)the Collateral Agreement and(2)the Fannie Mae Pass-Through Certificate(collectively, the "Described Documents")and (b)the summary of the Collateral Agreement, dated as of April 1, 1999, between Fannie Mae and the Trustee, contained in the Official Statement as part of Appendix A(the"Document Summary"). We emphasize that we have not been engaged by any party to pass upon, or assume any responsibility for, nor have we undertaken to verify,the fairness,accuracy, completeness or sufficiency of the information or statements contained in the Official Statement. Accordingly, we express no opinion on the Official Statement. Based upon our review of the Reviewed Portions and of the Document Summary, however,and without having undertaken to determine independently the fairness, accuracy,completeness or sufficiency of any statement or information contained in the Official Statement, and without assuming any responsibility for the fairness, accuracy, completeness or sufficiency of the statements and information contained in the Official Statement, we can advise you that nothing has come to our attention that would lead us to believe that(a)the abbreviated descriptions(the "Abbreviated Descriptions")of the Described Documents,specifically,the descriptions of(1)the Collateral Agreement in the first(excluding the first sentence), third, fifth and sixth paragraphs under the heaving "SECURITY FOR THE BONDS—Collateral Agreement," and (2) the Fannie Mae Pass-Through Certificate in the second paragraph ander the heading "SECURITY FOR THE BONDS—Fannie IY;`ae Pass-Through Certificate--Assignment of Mortgage Loan and Issuance of Fannie 11?ae Pass-Through Certificate," and under the headings "SECURIT"Y FOR THE BONDS—Distributions" (excluding the last sentence) and "SECURITY FOR THE BONDS--Summary Description of Fannie Mae Pass-Through Certificate") (excluding the lead-in paragraph and the final two paragraphs under such heading) do not constitute fair descriptions of the portions of the Described Documents so described or (b)the summary of the Collateral Agreement contained in Appendix A does not constitute a fair summary of the portions of the Collateral Agreement so summarized, provided that we express no opinion as to the adequacy, sufficiency or completeness of the Abbreviated Descriptions of the Described Documents or of the Document Summary, We Dave not been engaged to pass upon or undertaken to verify any financial information set forth in the Official Statement. We have made no investigation into the business or financial affairs of Fannie Mae. Very truly yours, 01-178268.02 APPENDIX I [Letterhead of underwriter's Counsel] [Closing Date] Hutchinson, Shockey,Erley& Co. Phoenix,Arizona [BOND CAPTION] We have acted as underwriter's Counsel in connection with the issuance of the above-captioned bonds (the "Bands"), issued pursuant to a "Trust Indenture dated as of April 1, 1999 (the "Indenture") between the County of Contra Costa, California(the"Issuer")and U.S. Bank Trust National Association, as trustee (the "Trustee"). As such counsel, we have reviewed such records, certificates, opinions and documents as we have deemed necessary or appropriate for the purpose of this opinion. Upon the basis of such examination,we are of the opinion that under the existing laws, the Bonds may be offered and sold without registration under the Securities Act of 1333, as amended, and the Indenture is not required to be qualified under the Trust Indenture Act of 1939, as amended. In connection with the preparation of the Official Statement (the "Offering Document") used in connection with the initial issuance and sale of the Bonds on the date hereof, we have reviewed generally information furnished to us by, and have participated in conferences with, representatives of the Issuer; Orrick, Herrington & Sutcliffe LLP, Bond Counsel; Fannie Mae; Arent Fox Kintner Plotkin & Kahn, Fannie Mae's outside counsel, Willow Partners, L.P, a California limited partnership (the "Borrower"); Bret H. Reed, Jr., Esq., a Law Corporation, Borrower's Counsel; the Trustee; and Hutchinson, Shockey, Erley fir. Co. (the "underwriter"). We also have reviewed the documents relating to the Bonds described in the Offering Document and other documents and records relating to the issuance and sale of the Bonds. In addition, we have relied upon certificates of officials of the Issuer, the Trustee, the Borrower and Fannie Mae. However, we have not independently verified any factual matters in connection with or apart from the aforementioned review and conferences and, accordingly, we do not express any view or belief as to matters that might have been disclosed by independent verification. Although we have made no independent investigation or verification of the accuracy, correctness, fairness or completeness of, and do not assume any responsibility for, the information included in the Offering Document(subject to the qualifications set forth herein), no information carne to the attention of the attorneys in our firm rendering legal services in connection with the issuance of the Bonds which causes us to believe that the Offering Document (except for the financial statement, financial, statistical and numerical information, forecasts, estimates, assumptions and expressions of opinion, as to which we express no view), as of its date contained, or as of the date of this opinion contains, any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Respectfully submitted, 0I-378268.02 APPENDIX J CER'T'IFICATE OF THE ISSUER [BOND CAPTION] The undersigned hereby states and certifies: (a) that I am the duly appointed, qualified and acting of the County of Contra Costa,California(the"Issuer")and, as such, I aria familiar with the facts herein certified and I am authorized to certify the same on behalf of the Issuer; (b) that the representations and warranties of the Issuer contained in the Contract of Purchase dated April , 1999(the"Contract of Purchase")among Hutchinson,Shockey, Erley& Co., Willow Partners, L.P, a California limited partnership (the "Borrower"), and the Issuer are true and correct in all material respects on the date hereof with the same effect as if made on the date hereof; (c) to the best of my knowledge, the Official Statement does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein relating to the Issuer under the captions "THE ISSUER" and "!NO LITIGATION," in light of the circumstances under which they were made, not misleading,and (d) to the best of my knowledge,the Issuer has complied with all',the agreements and satisfied all the conditions on its part to be performed or satisfied under the Bonds and the Issuer Documents at or prior to the date hereof. All terms capitalized but not otherwise defined herein shall have the meanings assigned to them in the Contract of Purchase. Dated: April , 1999 COUNTY OF CONTRA COSTA,CALIFORNIA By Title C:-178268.02 APPENDIX K CLOSING CERTIFICATE OF FAN IE MI AE [BOND CAPTION] This Certificate of Fannie Mae is being executed and delivered on behalf of Fannie Mae by the undersigned, an authorized officer of Fannie Mae. The undersigned certifies, on behalf of Fannie Mae, that the attached information regarding Fannie Mae is accurate and may be included in the Official Statement for the bonds described above. FANNIE MAE Date: By Title Attachment 0i-178268.02 APPENDIX L CERTIFICATION OF TRUSTEE [BOND CAPTION) The undersigned, on behalf of U.S. Bank Trust National Association, as trustee (the "Trustee") under that certain Trust Indenture, dated as of April 1, 1999 (the "Indenture"), between the County of Contra Costa,California(the"Issuer")and the Trustee, hereby certifies as follows: (a) The officer executing this certificate is an officer of the undersigned duly authorized to make the representations contained herein, and the signature of such officer below is the genuine signature of such officer. (b) The Trustee has taken all action necessary for the acceptance of, and has duly accepted, the office of Trustee under the Indenture and the duties and obligations of the Trustee thereunder. (c) The Trustee is a national banking association with trust powers, duty organized, validly existing and in good standing under the laws of the United States of America, is duly qualified to act as Trustee under the Indenture, and has the corporate power to take all action required or permitted of it under the Indenture and under each of the following(collectively with the Indenture,the"Program Documents"): (i) the Financing Agreement, dated as of April 1, 1999, among the Issuer, Willow Partners, L.P, a California limited partnership (the "Borrower"), ARCS Commercial Mortgage Company, L.P. and the Trustee; (ii) the Regulatory Agreement and Declaration of Restrictive Covenants, dated April 1, 1999,among the Issuer,the Trustee and the Borrower; (iii) the Collateral Agreement dated as of April 1, 1999 between the Trustee and Fannie Viae, and (iv) the Continuing Disclosure Agreement dated as of April 1, 1999 between the Trustee and the Borrower. (d) The Program .Documents have been duly entered into, executed, attested and delivered by the Trustee. The officers of the Trustee who executed and delivered the Program Documents were, at the dates of such execution, attestation and delivery, duly qualified and acting officers authorized to perform such acts, and the signatures of such officers appearing on the Program Documents are their genuine signatures. (e) The execution, delivery and performance by the Trustee of the Program Documents have been duly authorized by all necessary corporate action on the part of the Trustee and presently do not contravene the Articles of Association or Bylaws of the Trustee or, to the best of the knowledge of the Trustee, conflict with or constitute a breach of or default under any law, administrative regulation, consent decree or any agreement or instrument to which the Trustee is subject. 01-179268.02 (f) All approval, consents and orders of any governmental authority or agency having jurisdiction in the matter which, to the best of our knowledge, 'would constitute a condition precedent to the performance by the Trustee of its duties and obligations under the Program Documents have been obtained and are in full force and effect. (g) The above-captioned bonds (the "Bonds"), all in fully registered form and dated as of April 1, 1999, have been duty authenticated and registered in the names of the owners thereof by the undersigned or duty authorized signatories of the Trustee, who at the time of affixing their signatures were authorized signatories of the Trustee and were duly authorized to authenticate the Bands on behalf of the Trustee. (h) To the knowledge of the Trustee, no litigation is pending or threatened in any way contesting or affecting the existence or powers(including trust powers) of the Trustee or the Trustee's ability to fulfill its duties and obligations under the Program Documents. (i) Attached hereto are true and correct copies of the Articles of Association and Bylaws of the Trustee, authorizing certain officers thereof to, among other things, accept trusts, execute the indenture and authenticate the Bonds, all of which are in full force and effect on the date hereof. 0) The Trustee's principal corporate trust office for purposes of trust operations and the maintenance of trust funds and accounts under the Indenture is in Salt Lake City,Utah. Dated: April , 1999 U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee By Authorized Officer L,-2 014 78268.02 TRUST INDENTURE Between COUNTY OF CONTRA COSTA,CALIFORN*NTIA, as Issuer and U.S. BAND.TRUST NATIONAL ASSOCIATION, as Trustee Dated as of April 1, 1999 Relating to COUNTY OF CL7NURA COSTA,CALIFORNIA COUNTY OF CONTRA COSTA,CALIFORNIA MULTIFAMILY HOUSING REVENUE BONDS MULTIFAMILY MOUSING REVENUE BONDS (WILLOW PASS APARTMENTS), ('WILLOW PASS APARTMENTS), SERIES 1999D SERIES 1999D-T I)ccsi-n I:296342. 40929-170 MM3 TABLE OF CONTENTS Ease SECTION 1. PLEDGE OF TRUST ESTATE; DEFINITIONS AND INTERPRETATION........................................................................................4 Section 1.1 Pledge of Trust Estate..........................................................................4 Section1.2 Definitions............................................................................................6 Section 1.3 Rules of Construction.................................................................._...28 Section 1.4 Content of Certificates and Opinions.................................................29 Section 1.5 Interpretation......................................................................................30 SECTION2. THE BONDS.................................................................................................30 Section 2.1 Issuance of Bonds.............................................................................. 30 Section 2.2 Authorized Amount of Bonds............................................................31 Section 2.3 Registered Bonds; Authorized Denomination; Numbering...............31 Section2.4 Terms of Bonds....................................................... .......................... 31 Section2.5 Form of Bonds...................................................................................34 Section2.6 Execution...........................................................................................34 Section 2.7 Authentication.................................................................................... 34 Section 2.8 Temporary Bonds............................................................................... 34 Section 2.9 Mutilated, Lost, Stolen or Destroyed Bonds......................................35 Section 2.10 Bond Registrar; Exchange and Transfer of Bonds; Persons Treated as the Bondholders................................................................ 35 Section2.11 Cancellation.......................................................................................36 Section 2.12 Ratably Secured.................................................................................37 Section 2.13 Book-Entry System............................................................................37 Section 2.14 Conditions for Delivery of Bonds...................................................... 38 Section 2.15 Fannie Mae Pass-Through Certificate Delivery................................. 39 SECTION 3. REDEMPTION OF BONDS..........................................................................42 Section 3.1 Redemption........................................................................................42 Section 3.2 Optional Redemption.........................................................................42 Section 3.3 Special Mandatory Redemption.........................................................43 Section 3.4 Notice of Redemption........................................................................47 Section 3.5 Redemption Payments ....................................................................... 51 Section 3.6 Cancellation of Bonds............................................. .......................... 52 Section 3.7 Selection of Bonds to be Redeemed Upon Partial Redemption ofBonds............................................................................................. 52 D7cs1.F 1:296342. 40929-170 MM3 i TABU OF CONTENTS (continued) Section 3.8 Purchase of Bonds In Lieu of Redemption........................................ 53 SECTION 4. FUNDS AND ACCOUNTS.......................................................................... 53 Section 4.1 Creation of Funds and Accounts........................................................ 53 Section4.2 Initial Deposits................................................................................... 54 Section 4.3 The Mortgage Loan Fund..................................................................54 Section 4.4 The Revenue Fund.............................................................................55 Section 4.5 The Costs of Issuance Fund...............................................................60 Section4.6 The Rebate Fund................................................................................61 Section 4.7 The Rehabilitation Fund....................................................................63 Section 4.8 Moneys to be Held in Trust; Records................................................ 64 Section 4.9 Reports From the Trustee...................................................................65 Section 4.10 Unclaimed.Moneys Due to Nonpresentent of Bonds .....................65 Section 4.11 Moneys Held for Particular Bonds ....................................................66 SECTIONT5. INVESTMENTS............................................................................................66 SECTION6. SECURITY....................................................................................................67 Section 6.1 Security; Pledge of Trust Estate; Compliance with Law...................67 Section}6.2 Preservation of Security.....................................................................68 Section 6.3 Payment of Bonds.............................................................................. 68 Section 6.4 Performance of Covenants.................................................................68 Section6.5 Enforcement....................................................................................... 68 Section 6.6 Limitations on Liability..................................................................... 69 Section 6.7 Further Assurances.............................................................................69 Section 6.8 Possession of the Mortgage Note and Mortgage............................... 70 Section 6.9 No Disposition of Mortgage Loan,Mortgage Note or Mortgage Prior to the Fannie Mae Pass-Through Certificate Delivery Date; Excepted Assignments; Substitution........................................ 70 Section 6.10 Books, Records and Accounts .................................,.......................... 71 Section 6.11 Compliance with Rating Agency Requests........................................72 Section 6.12 Enforcement of Obligations............................................................... 72 Section 6.13 Maintenance of Lien on Trust Estate................................................. 73 Section 6.14 No Modification of Security; No Additional Indebtedness............... 73 Section 6.15 Tax Covenants ................................................................................... 74 `OcsLAi:295342. 40929-1 70 MM3 i1 TABLE OF CONTENTS (continued) Page Section 6.16 Preservation of Revenues...................................................................75 Section 6.17 Request and Indemnification.............................................................76 SECTION 7. THE CREDIT FACILITIES.......................................................................... 76 Section 7.1 The Collateral Agreement....................................... ..........................76 Section 7.2 The Fannie Mae Pass-Through Certificate........................................ 78 Section 7.3 Requirement of Credit Facility.......................................................... 83 SECTION8. DISCHARGE OF LIEN................................................................................ 83 Section 8.1 Discharge of Lien and Security Interest............................................. 83 Section 8.2 Limitation on Transfer or Release of Mortgage Loan....................... 85 Section8.3 Defeaaance.........................................................................................85 SECTION 9. DEFAULT PROVISIONS AND REMEDIES.............................................. 87 Section 9.1 Events of Default; Preliminary Notice............................................... 87 Section 9.2 Remedies; Rights of Bondholders .....................................................89 Section 9.3 Other Remedies..................................................................................91 Section 9.4 Remedies Not Exclusive.................................................................... 92 Section9.5 Waiver................................................................................................92 Section 9.6 Limited Effect of Waiver................................................................... 93 Section 9.7 Delay or Omission............................................................................. 93 Section 9.8 Enforcement of Financing Agreement............................................... 93 Section 9.9 Rights of Fannie Mae and the Bondholders To Direct Proceedings; Rights and Limitations Applicable to Bondholders, Issuer and Trustee........................................................ 94 Section 9.10 Discontinuance of Proceedings..........................................................96 Section 9.11 Action byTrustee...............................................................................96 Section 9.12 Accounting and Examination of Records After Default.................... 96 Section 9.13 Application of Moneys ...................................................................... 96 Section 9.14 Mortgage Loan; Issuer's and Trustee's Acknowledgments with Respect to the Mortgage Loan...........................................................98 SECTION10. THE TRUSTEE............................................................................................. 98 Section 10.1 Appointment of Trustee; Duties.........................................................98 Section 10.2 Receipt of Fannie Mae Pass-Through Certificate...'......................... 102 Section 10.3 Representation.................................................................................. 103 DOCK A 1.296342. 40929-170 MM3 iii TABLE OF CONTENTS (continued) Page Section 101.4 Fees; Expenses................................................................................. 103 Section 10.5 Intervention in Litigation................................................................. 103 Section 10.6 Instruments of Bondholders............................................................. 103 Section 10.7 Filing of Financing Statements........................................................ 104 Section 10.8 Servicing the Mortgage Loan...................................',....................... 104 Section 10.9 Requests from Rating Agency......................................................... 104 Section 10.10 Resignation of Trustee..................................................................... 105 Section 10.11 Appointment of Successor Trustee.................................................. 105 Section 10.12 Removal of Trustee.......................................................................... 105 Section 10.13 Power to Appoint Co-Trustees......................................................... 106 Section 101.14 Merger, Consolidation..................................................................... 108 Section 10.15 Transfer of Rights and Property to Successor Trustee..................... 108 Section 10).16 Continuing Disclosure..................................................................... 108 SECTION 11. SUPPLEMENTAL INDENTURES; AMENDMEN'T'S.............................. 109 Section 11.1 Supplemental Indentures Not Requiring Bondholder Consent........ 109 Section 11,2 Supplemental Indentures Requiring Bondholder Consent............... 1101 Section 11.3 Amendments to the Financing Agreement Not Requiring Bondholder Consent......................................................................... 112 Section 11.4 Amendments to the Financing Agreement Requiring BondholderConsent......................................................................... 113 Section 11.5 Amendments, Changes and Modifications to the Collateral Agreement and the Regulatory Agreement...................................... 113 Section 11.6 Amendments to Mortgage Loan Documents Not Requiring Bondholder Consent......................................................................... 114 Section 11.7 Amendments to Mortgage Loan Documents Requiring Bondholder Consent......................................................................... 115 Section 11.8 Notice to and Consent of Bondholders............................................ 115 Section 11.9 Waivers............................................................................................ 116 Section 11.103 Required Approvals.................................................,........................ 116 Section 11.11 Opinions of Counsel ........................................................................ 116 Section 11.12 Certificate of Borrower.................................................................... 116 Section 11.13 Notation of Modification on Bonds; Preparation of New Bonds .... 116 SECTION 12. MISCELLANEOUS.................................................................................... 117 DOCS I-A 1:296342. 40929-170 MM3 iv TABLE OF CONTENTS (continued) Paye Section12.1 [Reserved]........................................................................................ 117 Section 12.2 Limitation of Rights......................................................................... 117 Section 12.3 Severability..............................................................:....................... 117 Section12.4 Notices............................................................................................. 117 Section 12.5 Limitations on Rights of Fannie Mae.............................................. 119 Section 12.0 Action Required to be taken on a Non-Business Day...................... 120 Section 12.7 Binding Effect.................................................................................. 120 Section 12.8 Governing Law................<............................................................... 120 Section 12.9 No Personal Liability;No Recourse................................................ 120 Section12.10 Captions........................................................................................... 121 Section12.11 Counterparts..................................................................................... 121 SCHEDULE I MANDATORY SINKING FUND REDEMPTION OF BONDS -- MATURING MATURINNG ON NOVEMBER 1, 20 .....................................................A-1 SCHEDULE II MANDATORY SINKING FUND REDEMPTION OF BONDS MATURING ON MAY 1, 20 ..................................................................B-1 EXHIBIT A FORM OF BOND................................................................................................C-1 EXHIBIT B FORM OF ASSIGNMENT OF MORTGAGE LOAN(TRUSTEE ASSIGNMENT) ..........................................................................................D-I EXHIBIT C FORM OF ASSIGNMENT OF MORTGAGE LOAN(SERVICER ASSIGNMENT) ...........................................................................................E-1 EXHIBIT D FORM OF MORTGAGE LOAN FUND REQUISITION CERTIFICATE.........F-1 EXHIBIT E FORM OF REHABILITATION FUND REQUISITION CERTIFICATE .........G-1 EXHIBIT F FORM OF COSTS OF ISSUANCE FUND REQUISITION CERTIFICATE....H-1 DOCSL Al:29u342. 40929-170 MM3 V TRUST INDENTURE THIS TRUST INDENTURE, dated as of April 1, 1999 (this "Indenture"), is between COUNTY OF CONTRA COSTA, CALIFORNIA, a political subdivision of the State of California (the "Issuer") and U.S. BANK TRUST NATIONLAL ASSOCIATION, a national banking association duly organized and existing under the laws of the United States of America (the"Trustee"). The meaning of all capitalized terms can be determined by reference to Section 1.2 of this Indenture. RECITALS A. The Borrower has (a)requested that the Issuer provide permanent financing for the acquisition and rehabilitation of the Project by issuing the Bonds and by making the Net Bond Proceeds available to the Borrower in the form of a loan, specifically, the Mortgage Loan, and(b) agreed to secure the Mortgage Loan by placing the Mortgage on the Project. Ba The Issuer is authorized and empowered under Chapter 7 of Part 5 of Division 31 of the California Health and Safety Code (the "Act") to issue bonds and to lend the proceeds thereof to qualified borrowers for the purpose of financing, among other things, the acquisition and rehabilitation of multifamily housing projects for persons and families of low income residing within the State of California.(the"State"). C. In order to provide permanent financing for the acquisition and rehabilitation of the Project, the Issuer has determined to issue and sell its County of Contra Costa, California Multifamily Housing Revenue Bonds, (Willow Pass Apartments), Series 199D and its County of Contra Costa, California Multifamily Housing Revenue Bonds, (Willow Pass Apartments), Series 1999D-T and to lend the aggregate proceeds thereof in the principal amount of$7,900,000 (the "Mortgage Loan") to the Borrower pursuant to the terms of the Financing Agreement. By executing this Indenture, the Issuer is directing the deposit of the Net Bond Proceeds with the Trustee, to be used by the Trustee to fund the Mortgage Loan to the Borrower. The proceeds of the Mortgage Loan will be applied, together with other funds,to the financing of the Project. D. Fannie Mae has issued the Fannie Mae Commitment to the Servicer, pursuant to which Fannie Mae has agreed, subject to satisfaction of the terms and conditions of the Fannie Mae Commitment, (a) to provide credit enhancement for the Mortgage Loanpursuant to, and subject to the limitations of, the Collateral Agreement, and (b)to acquire the Mortgage Loan, on the Fannie Mae Pass-Through Certificate Delivery bate in exchange for the Fannie Mae Pass- Through Certificate evidencing an interest in a mortgage pool comprised solely of the Mortgage Loan and under the terms of which monthly distributions of principal and interest on the Fannie Mae Pass-Through Certificate corresponding to the scheduled monthly payments of principal and interest due on the Mortgage Loan(less certain fees payable to the Servicer and Fannie Mae, i.e., the Servicing Fee and the Guaranty Fee)will be guaranteed by Fannie Mae regardless of whether the corresponding monthly payments on the Mortgage Loan are paid when due. DOCS r_A 1:296342. 40924-170 MI M1 3 E. The Mortgage Loan will be (a)made pursuant to and in accordance with the Financing Agreement and in accordance with the requirements of Fannie Mae and subject to the terms and conditions of the Fannie Mae Commitment, (b) evidenced by the Mortgage Note, (c) secured by the Mortgage and (d)otherwise documented, evidenced and secured by the other Mortgage Loan:Documents. F. The Issuer, the Trustee, Fannie Mae, the Servicer and the Borrower understand and intend that the financing of the Project through the issuance of the Bonds and the funding of the Mortgage Loan will be structured in the following manner. (i) the Issuer will issue the Bonds under the Act and pursuant to the proceedings of the Issuer and this Indenture; (ii) on the Closing Date, the Issuer will originate the Mortgage Loan to the Borrower pursuant to the terms and provisions of the Financing Agreement, the Mortgage Note, the Mortgage and the other Mortgage Loan Documents (provided that certain other Mortgage Loan Documents may, pursuant to authority contained in the Assignment and the Fannie Mae Commitment,be entered into by the Servicer); (iii) the Mortgage Note and the Mortgage will be executed by the Borrower in favor of the Issuer; (iv) the Mortgage Loan will be fully funded on the Closing Date with the Net Band Proceeds, provided that disbursements will be made to the Borrower periodically, in accordance with the provisions of this Indenture and the Financing Agreement; (v) pursuant to the Assignment, the Issuer will, concurrently with the origination of the Mortgage Loan, assign and deliver all of its right, title and interest in and to the Mortgage Loan, including the Mortgage Note and the Mortgage, to the Trustee and Fannie Mae, as their interests may appear (except that the Issuer will reserve and retain the Reserved Rights), to provide security for, respectively, the owners of the Bonds and Fannie Mae, subject to Fannie Mae's rights, as provided in the Collateral Agreement, to direct the Trustee to assign its interest in the Mortgage Loan, including the Mortgage Note and the Mortgage, to Fannie Mae; (vi) as provided in the Assignment, the Issuer will assign to (a) the Trustee certain rights to payments under the Mortgage Note and (b) Fannia Mae certain of its rights and interests under the Mortgage Note, the Mortgage and each of the other Mortgage Loan Documents, all such assignments to be made on and subject to the terms provided in the Assignment and the Collateral Agreement; (vii) at the request of the Servicer, Fannie Mae will enter into the Collateral Agreement to provide credit enhancement for the Mortgage Loan; (viii) at the direction of the Borrower, the proceeds of the Mortgage Loan will be applied to the financing of the Project; and DO"S LA t:296342. 40929-170 MM3 2 (ix) on the Fannie Mae Pass-Through Certificate Delivery Date, the Trustee's interest in the Mortgage Loan will be assigned by the Trustee to the Servicer pursuant to the Trustee Assignment (and the Mortgage Note will, concurrently, be endorsed to the Servicer) and, concurrently, assigned by the Servicer to Fannie Mae pursuant to the Servicer Assignment, and the Mortgage Note will, concurrently, be endorsed to Fannie Mae in exchange for the Fannie Mae Pass-Through Certificate. G. Upon Fannie Mae's acquisition of the Mortgage Loan, the Fannie Mae Pass- Through Certificate will, on the order of the Servicer, be delivered to the Trustee or a custodian for the Trustee and held by or on behalf of the Trustee as part of the Trust Estate securing the Bonds. Under the terms of the Fannie Mae Pass-Through Certificate, Fannie Mae will make monthly distributions of principal and interest to or for the benefit of the Trustee corresponding to the scheduled monthly payments of principal and interest due on the.Mortgage Loan (less the Servicing Fee and the Guaranty Fee); Fannie Mae's distributions of principal and interest on the Fannie Mae Pass-Through Certificate will be guaranteed by Fannie Mae regardless of whether the corresponding payments on the Mortgage Loan are paid when due. H. Prior to the Fannie Mae Pass-Through Certificate Delivery Date, the security for the Bonds will include, among other property comprising a part of the Trust Estate, the following. (1) the Mortgage Loan, (2)Fannie Mae's credit enhancement of the Mortgage Loan pursuant to the Collateral Agreement, (3)the Net Bond Proceeds (to the extent not disbursed to the Borrower), (4) the Revenues and any ether moneys received by the Trustee for the payment of the principal of and interest on the Bonds, (5) amounts otherwise on deposit in the Funds and Accounts (other than moneys on deposit from time to time in the Rebate Fund and the Costs of Issuance Fund and the Fees Account), all of which(in the foregoing clauses(1) through(5)) will be invested in Permitted Investments, and (6) Investment Income (excluding Investment Income earned on amounts on deposit in the Rebate Fund and certain Investment Income earned on amounts on deposit in the Costs of Issuance Fund). On and after the Fannie Mae Pass-Through Certificate Delivery Date, the security for the Bonds will include, among other property comprising a part of the Trust Estate, the following: (1)the Fannie Mae Pass-Through Certificate, (2)the Revenues, including distributions under the Fannie Mae Pass-Through Certificate delivered to the Trustee, and any other moneys received by the Trustee for the payment of the principal of and interest on the Bonds, (3) amounts otherwise on deposit in the Funds and Accounts (other than moneys on deposit from time to time in the Rebate Fund and the Fees Account), all of which (in the foregoing clauses (1) through (3)) will be invested in Permitted Investments, and (4) Investment Income (excluding Investment Income earned on amounts on deposit in the Rebate Fund). I. The development and operation of the Project will be regulated by, among other documents, the terms of the Financing Agreement and the Regulatory Agreement. J. The execution and delivery of this Indenture by the Issuer and the issuance and sale of the Bonds have been in all respects duly and validly authorized by the proceedings of the Issuer. K. The Issuer has determined that all things necessary to snake the Bonds, when executed by the Issuer and authenticated by the Trustee and issued in accordance with this DOCSLA 1:296342. 40929-170 MM3 3 Indenture, the valid, binding and legal obligations of the Issuer and to constitute this Indenture a valid assignment and pledge of the Revenues and all other amounts pledged to the payment of the principal of, premium, if any, on, and interest on, the Bonds and a valid and binding agreement for the uses and purposes set forth in this Indenture, have been duly taken, and the creation, execution and delivery of this Indenture and the creation, execution and delivery of the Bonds, subject to the terms of this Indenture have been duly authorized in all respects. L. The Trustee has trust powers and the power and authority to enter into this Indenture, to accept trusts generally and to accept and execute the trust created by this Indenture; the Trustee has accepted the trust so created, and to evidence such acceptance, has joined in the execution of this Indenture. M. THE BONDS AND THE SERIES OF WHICH THEY ARE A PART ARE SPECIAL OBLIGATIONS OF THE ISSUER. THE BONDS ARE NOT A DEBT OF AND DO NOT PLEDGE THE FAITH, CREDIT OR TAXING POWER OF THE STATE, THE ISSUER OR ANY POLITICAL SUBDIVISION, BLq ARE PAYABLE SOLELY FROM THE REVENUES AND THE ASSETS PROVIDED FOR.IN THE INDENTURE AND THE ACT. NOW, THEREFORE, for and in consideration of the promises and the mutual covenants and agreements set forth herein, the Issuer and the Trustee hereby agree as follows. Section 1. Pledge of Trust Estate.Definitions_and Interpretation. Section 1.1 Pledge of Trust Estate. For and in consideration of the purchase of the Bonds by the persons who at any shall be or become the Owners thereof and the acceptance and performance by the Trustee of the trusts created by this Indenture and to secure the payment of all amounts owing under and with respect to the Bonds and the payment and performance by the Issuer of its obligations under this Indenture and the payment and performance by the Borrower of its obligations with respect to the Bonds,',the Mortgage Loan Documents, the Regulatory Agreement and the Financing Agreement, and to secure all obligations owed to Fannie Mae under the Credit Facility Agreement and the Mortgage Loan Documents, subject to the provisions of the Assignment, the Issuer does hereby, without warranty or recourse,pledge, grant, assign and convey unto the Trustee(in trust for the benefit of the Owners of the Bonds and Fannie Mae, as their interests may appear) all of its right, title and interest to and in the following: (1) all right, title and interest of the Issuer in and to the Financing Agreement, the Regulatory Agreement, the Mortgage Loan, the Mortgage Note, the Mortgage and the other Mortgage Loan Documents, and all amendments, modifications, supplements, renewals and restatements of the foregoing, including, but not limited to, all rights to receive payments on the Mortgage Note and under the other Mortgage Loan Documents, and all proceeds of insurance or condemnation awards; providedthat the foregoing pledge and assignment shall be subject to the provisions of the Assignment and the Collateral Agreement, including the right of Fannie Mae, as provided in the Collateral Agreement, to direct the Trustee to assign the Mortgage Loan to Fannie Mae, including within such assignment the Mortgage Note and the Mortgage; and provided further that DOCS".A i:296342. 40929-170 MM3 4 there shall be excluded from the foregoing pledge and assignment the Reserved Rights which shall be retained by the Issuer for its sole and exclusive benefit; (2) all right, title and interest of the Issuer in and to the Net Bond Proceeds and the accrued interest derived from the sale of the Bonds and all Funds and Accounts established under this Indenture (including, without limitation, moneys, documents, securities, investments, instruments and general intangibles on deposit, or otherwise held by the Trustee under this Indenture), including Investment Income; provided that there shall be excluded from the foregoing pledge and assignment all moneys (including Investment Income) on deposit from time to time in the Fees Account, the Rebate Fund and the Costs of Issuance Fund (including within such exclusion Investment Income retained in the Costs of Issuance Fund); (3) all Revenues; (4) all funds, moneys and securities and any and all other rights and interests in property, whether tangible or intangible, from time to time hereafter by delivery or by writing of any kind conveyed, mortgaged, pledged, assigned or transferred as and for additional security under this Indenture for the Bonds by the Issuer, or by anyone on its behalf, or with its written consent, to the Trustee, which is authorized to receive any and all such property at any and all times, and to hold and apply the same subject to the terms of this Indenture; and (5) all of the proceeds of the foregoing, including, without limitation, Permitted Investments and Investment Income. The foregoing is herein collectively referred to as the"Trust Estate,"and in addition: (A) until the delivery to the Trustee of the Fannie Mae Pass-Through Certificate as provided herein., the Trust Estate shall, for all purposes of this Indenture, be deemed to include the Collateral Agreement and the rights of the Trustee thereunder, including without limitation all payments made under the Collateral Agreement in accordance with its terms; and (B) upon delivery of the Fannie Mae Pass-Through Certificate to the Trustee as provided herein, the Trust Estate shall, for all purposes of this Indenture, be deemed to include the Fannie Mae Pass-Through Certificate and the rights of the Trustee thereunder, including without limitation all distributions made under the Fannie Mae Pass-Through Certificate in accordance with its terms. The Trustee hereby acknowledges and agrees that: (I) as set forth in the Assignment, the Issuer has further assigned certain rights and interests under and with respect to the Mortgage Loan and the Mortgage Loan Documents exclusively to Fannie Mae (it being understood that under the Collateral Agreement such rights are subject to reassignment to the Trustee in certain events); and (II) prior to the Fannie Mae Pass-Through Certificate Delivery Date Fannie Mae may, under the Collateral Agreement, direct the Trustee to: DOCSLA I:246342. 40929-170 MM3 s (a) assign its interest in the Mortgage Loan, including the,Mortgage Note, the Mortgage and, subject to the provisions of the Assignment and the Collateral Agreement, the other Mortgage Loan Documents, to Fannie Mae at any time, subject to reassignment to the Trustee, as provided in the Collateral Agreement; and (b) assign its interest in the Mortgage Loan, including the Mortgage Note, the Mortgage and the other Mortgage Loan Documents and the Financing Agreement (other than the Reserved Rights) and all amendments, modifications, supplements and restatements of the Financing Agreement, to Fannie Mae as provided in the Collateral Agreement upon payment in full of all amounts due under the Financing Agreement and the Mortgage Loan, including, but not limited to, the fees and expenses of the Issuer and the Trustee, provided that, upon assignment of the Financing Agreement as described in this clause (b), the Issuer and the Trustee shall have no further liability or obligations under the Financing Agreement. All Outstanding Bonds issued pursuant to this Indenture shall be: (1) payable from the Trust Estate on an equal and ratable (pari passu) basis with all either Outstanding Bonds issued hereunder; and (2) equally and ratably secured by the lien on the Trust Estate created hereunder; all without any kind of preference or priority of one Outstanding Band over any other Outstanding Bond. All of the covenants and other provisions relating to the Outstanding Bonds set forth herein shall be for the equal benefit,protection and security of the Owners of all Bonds. The Trust Estate shall be held by the Trustee in accordance with the terms of this Indenture for the benefit of (1)the Bondholders in order to secure payment of the principal of, premium, if any, and interest on the Bonds in accordance with the terns and provisions of this Indenture and the Bonds, and (2)Fannie Mae to secure amounts payable tinder the Financing Agreement, the Credit Facility Agreement and the Mortgage Loan Documents;provided that the Fannie Mae Pass-Through Certificate and all distributions made to the Trustee under the Fannie Mae Pass-Through Certificate and all payments made under the Collateral',Agreement shall be held by the Trustee for the sole and exclusive benefit of the Bondholders, and not for the benefit of Fannie Mae, except as otherwise provided in this Indenture. Section 1.2 Definitions. Capitalized terms used in this 'Indenture or in the Financing Agreement shall have the following meanings: "Accounts" means all Accounts established within the Funds created by Section 4.1 of this Indenture. "Act" means Chapter 7 of Part 5 of Division 31 of the California Health and Safety Code, as the same may be amended from time to time (but only to the extent any such amendments, by their terms or by appropriate election of the Issuer, apply to the Bonds outstanding as of the effective date of such amendments). UCK'SLA 1:2%342. 40929-170 MM3 6 "Activity Fee" has the .meaning given to that term in the Reimbursement Agreement. "Activity Rate" has the meaning given to that term in the Reimbursement Agreement. "Act of Bankruptcy" means any proceeding instituted under the Bankruptcy Code or other applicable insolvency law by or against the Issuer. "Administrator" means any administrator or program monitor appointed by the Issuer in the administration of the Regulatory Agreement, and any successor so appointed. The initial Administrator shall be the Issuer. "Assignment" means the Assignment of Mortgage Loan, dated as of April 1, 1999, pursuant to which the Issuer assigns to the Trustee and Fannie Mae, as their interests may appear, all of the Issuer's right, title and interest in and to the Mortgage Loan, as such Assignment may be amended, modified, supplemented or restated from time to time. "Authorized Borrower Representative"means any person who, at any time and from time to time, is designated as the Borrower's authorized representative by written certificate furnished to the Issuer, the Servicer, Fannie Mae and the Trustee containing the specimen signature of such person and signed on behalf of the Borrower by or on behalf of any authorized general partner of the Borrower (including any successor or assign) if the Borrower is a general partnership or a limited partnership, any authorized managing member of the Borrower (including any successor or assign) if the Borrower is a limited liability company, or by any authorized officer of the Borrower (including any successor or assign) if the Borrower is a corporation, which certificate may designate an alternate or alternates, or, in the event that such term shall refer to successors or assigns of the Borrower, any authorized general partner if the successor or assignee is a general partnership or a limited partnership, any authorized managing member if the successor or assignee is a limited liability company, or any authorized officer if the successor or the assignee is a corporation. "Authorized Denomination"means $5,000 or any integral multiple of$5,000. "Authorized Issuer Representative" means any Authorized Officer of the Issuer or any ether person from time to time duly authorized to perform a specified act, to sign a specified document, or to act generally, on behalf of the Issuer with respect to the Bonds by a written certificate furnished to the Trustee, which certificate is signed by an Authorized Officer and contains the specimen signature of such authorized person; such authorization and approval may designate an alternate or alternates who shall have the same authority, duties and powers as such authorized person. "Authorized Officer" means the Chairman, Vice-Chair, County Administrator, .Director of Community Development and Deputy Director-Redevelopment for any ether person duly authorized by the Issuer to perform a specified act, to sign a specified. document or to act generally, on behalf of the Issuer. Dacss.,M.296342, 40929-170 MIM3 7 "Authorized Servicer Representative" means any person from time to time designated to act on behalf of the Servicer by written certificate furnished to the Trustee and the Issuer containing the specimen signature of such person and authorized to act by resolution or other appropriate action of the Board of Directors of the Servicer or by its bylaws. Such resolution or other appropriate action may designate an alternate or alternates, acceptable to Fannie Mae, in its sole and absolute discretion, who shall have the same authority, duties and powers as the Authorized Servicer Representative. "Available Moneys" means (a) the proceeds of the Bonds, (b) proceeds received pursuant to the Credit Facility, including payments under the Collateral Agreement and distributions under the Fannie Mae Pass-Through Certificate, (c) amounts with respect to which the Trustee has received, at or prior to the time such amounts are deposited with the Trustee, an Opinion of Counsel provided by counsel experienced in bankruptcy matters, acceptable to the Rating Agency, to the effect that (1) the use of such amounts to make payments on the Bonds would not violate Section 362(a) of the Bankruptcy Code or that relief from the automatic stay provisions of such Section 362(a)would be available from a bankruptcy court or(2)payments of such amounts to the Bondholders would not be avoidable as preferential payments under Section 547 of the Bankruptcy Code should the Issuer, the Borrower or any general partner or guarantor of the Borrower, if applicable,become a debtor in proceedings commenced under the Bankruptcy Code, (d) moneys which have been received by the Trustee directly from the Borrower and which have been continuously on deposit in the General Receipts and Disbursements Account for a period of 123 days during and prior to which no (A) petition in bankruptcy (or the other commencement of a bankruptcy or similar proceeding)by or against the Borrower or any partner of the Borrower or the Issuer under the Bankruptcy Code or any other applicable bankruptcy, insolvency, reorganization or similar law in effect now or in the future shall have been filed or initiated or (B) Act of Bankruptcy shall have occurred and (e) Investment Income derived from the investment of moneys described in clauses (a), (b), (c) or (d). Amounts received by the Trustee for deposit into the Revenue Fund if not otherwise Available Moneys, may become Available Moneys upon and as of the date of delivery to the Trustee of the legal opinion set forth in clause(c) above. "Bankruptcy Cade" means Title 11 of the United States Code, entitled "Bankruptcy," as in effect now and in the future, or any successor statute. "Beneficial Owner" means (a) when used with respect to a Bond at such time as a Book-Entry System is in effect, the person or entity whose name is shown on the records of a participant in the Book-Entry System,pursuant to the arrangements for book-entry determination of ownership applicable to the engaged Securities Depository, as the beneficial owner of the Bond, and(b)when used with respect to a Bond held in certificated form, the registered owner of the Bond. "Bond" or "Bonds" means the County of Contra Costa., California Multifamily Housing Revenue Bonds (Willow Pass Apartments), Series 1999D, in the original aggregate principal amount of$5,400,000 and the County of Contra Costa., California Multifamily Housing Revenue Bonds (Willow Pass Apartments), Series 1999D-T, in the original aggregate principal amount of$2,500,000. DOC"SLA 1:296342. 40929-;7C MM3 8 "Bond Counsel" means (a)on the Closing Date, the law', firm or law firms delivering the approving opinion with respect to the valid issuance of the Bands and the excludability from gross income, for federal income tax purposes, of the interest payable on the Tax-Exempt Bonds,or(b) after the Closing Date, any law firm selected by the Issuer, acceptable to Fannie Mae, of nationally recognized standing in matters pertaining to the excludability from gross income, for federal income tax purposes, of the interest payable on bonds issued by states and political subdivisions. "Bond Documents" means this Indenture, the Financing Agreement, the Regulatory Agreement, the Contract of Purchase, the Tax Certificate, the Bonds, the Credit Facility Agreement and the Disclosure Agreement. "Bondholder," "holder," "Owner," "owner," "Registered Owner" or "registered owner"means, with respect to any Bond,the registered owner of the Bond. "Bond Payment Date" means any (a) Interest Payment Date, (b) other date on which interest is payable, including any Redemption Date, each Maturity pate and the date of acceleration of the Bonds and(c) date on which principal of the Bonds is payable. "Bond Register" means the bond register maintained by the Trustee pursuant to Section 2.10.1 of this Indenture. "Bond Registrar"means the Trustee as keeper of the Bond Register. "Bond 'Year" means each one year period commencing on: (a) the date of issuance and delivery of the Bonds; or (b) such other date as the Borrower may elect in accordance with the applicable provisions of Section 148(f) of the Code and the regulations thereunder. "Book-Entry Bonds" means any Bonds which are issued in book-entry form, as evidenced by a single certificate for each stated principal maturity of the Bonds, and registered in the name of and delivered to a Securities Depository. "Book-Entry System" shall mean that system in which the clearance and settlement of securities transactions is made through electronic book-entry changes, in that way eliminating the need of physical movement of securities. "Borrower" means Willow Partners, L.P., a California limited partnership, and its permitted successors and assigns. "Business Day"means: (i) on or before the Fannie Mae Pass-Through Certificate Delivery Date, any day other than: (A) a Saturday, a Sunday or a legal holiday, DOCSLA I:296342. 40929-170 MM3 9 (B) any day on which banking institutions located in the city or cities in which the Principal Office of the Trustee or the Principal Office of the Servicer with respect to the servicing of the Mortgage Loan is located are required or authorized by law or executive order to close, (C) a day on which Fannie Mae is closed; or (D) solely with respect to issuance of the FannieMae Pass--Through Certificate, a day on which the Federal Reserve Bank of New York is closed; and (ii) after the Fannie 'viae Pass-Through Certificate Delivery Date, any day other than.: (A) a day excluded under subparagraphs (A), (B) or (C) of paragraph (i) above; (B) solely with respect to distributions to be made under the Fannie Mae Pass-Through Certificate, a day on which the Federal Reserve Bank of New York is closed. "Calculation Period" means the period elected by the Borrower in accordance with and pursuant to the regulations promulgated pursuant to Section 148(f) of the Code (or any successor thereto) for calculating the Rebate Amount with respect to the Tax-..Exempt Bonds. "Cash Flow Projection" means a cash flaw projection prepared by an independent firm of certified public accountants, a financial advisory firm or other independent third party qualified and experienced in the preparation of cash flow projections for mortgage loans, designated by the Borrower and acceptable to Fannie Mae and the Rating Agency, establishing the sufficiency of (a) the (1) scheduled payments due under the Mortgage Note (together with and after taking into account the Initial Debt Service Deposit)'up to and including the Issue Date and (2) scheduled distributions under the Fannie Mae Pass-Through Certificate after the Issue bate and (b) Investment Income with respect to the General Receipts and Disbursements Account (assumed at [2.5]%) to pay the principal of and interest on the Bonds and the Fees, in each instance, when due and payable, including, without limitation, any cash flow projection prepared in connection with(A) the initial issuance and delivery of the Bonds, as provided in paragraph (xi) of Section 2.14 of this Indenture, (B) issuance' of the Fannie Mae Pass-Through Certificate on the Fannie Mae Pass-Through Certificate Delivery bate, as provided in paragraph(i) of Section 7.2.1 of this Indenture, (C) a partial prepayment of the Mortgage Loan and a corresponding partial redemption of Bonds pursuant to Section 3.2, 3.3.1 or 3.3.2 of this Indenture, as provided in Section 3.7 of this Indenture, or (D) substitution of the Fannie Mae Pass-Through Certificate, as provided in paragraph(i)of Section 7.2.2(b) of this Indenture. "Closing Date" means the date on which the Bonds are issued and delivered to the Underwriter, being April_, 1999. "Code" means the Internal Revenue Code of 1986, as amended, and the applicable rules and regulations promulgated thereunder. L)005LA 1:296342. 40929-170 MM3 10 "Collateral Agreement" means the Collateral Agreement, dated as of April 1, 1999, between Fannie Mae and the Trustee, as amended, modified, supplemented or restated from time to time to the extent permitted by this Indenture, or any agreement entered into in substitution therefor. "Completion Date" means the date on which rehabilitation of the Project is completed, as evidenced by a certification of the Servicer delivered to the Issuer, Trustee, Fannie Mae and the Borrower, which certification shall state the extent to which the Borrower has satisfied the requirements of the Fannie Mae Commitment. "Completion/Repair and Security Agreement" means the Completion/Repair and Security Agreement, dated as of April 1, 1999, by and between the Borrower and the Servicer, as amended, modified, supplemented or restated from time to time, or any agreement entered into in substitution therefor. "Computation Date" means the last day of every Bond Year, commencing on the fifth anniversary of the Closing Date (i.e., April 22, 2004), and the date on which the final payment in full of all Outstanding Bonds is made. "Contract of Purchase" means the Contract of Purchase, dated April_, 1999, by and among the Underwriter, the Issuer and the Borrower. "Cost", "Costs", "Costs of the Project" or "Project Costs" means the costs chargeable to the Project in accordance with generally accepted accounting principles, including, without limitation, the cost of acquisition, construction, reconstruction, restoration, rehabilitation, repair, alteration, improvement and extension of any building, structure, facility or other improvement; stored materials for construction work in progress; the cast of machinery and equipment; the cost of the Land, rights-in-lands, easements, privileges, agreements, franchises, utility extensions, disposal facilities, access roads and site development necessary or useful and convenient for the Project or in connection therewith; financing costs, including, but not limited to, the Costs of Issuance, engineering and inspection costs; fees paid to the developer of the Project; organization, administrative, insurance, legal, operating, letter of credit and ether expenses of the Borrower actually incurred prior to and during acquisition or construction; and all such other expenses as may be necessary or incidental to the financing, acquisition., construction or completion of the Project or any part of it, including, but not limited to, the amount of interest expense incurred with respect to the Mortgage Loan prior to the Completion Date; 'insurance premiums payable by the Borrower and taxes and other governmental charges levied on the Project. "Costs of Issuance" means (a) the fees, costs and expenses of(1) the Issuer, the Issuer's counsel and the Issuer's financial advisor, if any (2) the Underwriter (including discounts to the Underwriter or other purchasers of the Bonds (other than original issue discount) incurred in the issuance and sale of the Bonds) and the Underwriter's counsel, (3) Bond Counsel, (4) the Trustee and the Trustee's counsel, (5) the Servicer and the Servicer's counsel, (6) Fannie Mae and Fannie Mae's counsel., (7)the Borrower's counsel and the Borrower's financial advisor, if any, and (8) the Rating Agency, (b) the costs of preparing the initial Cash Flow Projection and the initial Verification Report, (c) costs of printing the offering documents relating to the sale of DOCS LA 1:296342. 40929-170 MM3 11 the Bonds and (d) all other fees, costs and expenses directly associated with the authorization, issuance, sale and delivery of the Bonds, including, without limitation, printing costs, costs of reproducing documents, filing and recording fees, and any fees, casts and expenses required to be paid to the Servicer in connection with.the Mortgage Loan. "Costs of Issuance Deposit" means the deposit to be made by the Borrower with the Trustee on the Closing Date in the aggregate amount specified in paragraph (iv) of Section 4.2 hereof. "Costs of Issuance Fund" means the Costs of Issuance Fund created by Section. 4.1 of this Indenture. "Costs of Issuance Fund Requisition Certificate" means a certificate in the form.of Exhibit F to this Indenture. "Credit Facility" means: (a) the Collateral Agreement, (b) on and after the Fannie Mae Pass-Through Certificate Delivery Date, the Fannie Mae Pass-Through Certificate, to be effective as of the Issue Date, or (c) any other credit enhancement facility provided at any time by Fannie Mae. "Credit Facility Account" means the Credit Facility Account established within the Revenue Fund created by Section 4.1 of this Indenture. "Credit Facility Agreement" means, individually or collectively, the Reimbursement Agreement, and all other agreements and other documents securing Fannie Mae or otherwise relating to the provision of the Collateral Agreement or the Reimbursement Agreement, as any such agreement may be amended, modified, supplemented or restated from time to time. "Dated Date"means 11999. "Disclosure Agreement" means the Continuing Disclosure Agreement, dated as of April 1, 1999, executed and delivered by the Borrower and the Trustee. "Distribution Date" means, with respect to distributions to be made under the Fannie Mae Pass-Through Certificate, the twenty-fifth. (25th) day of each month beginning with the twenty-fifth (.25th) day of the month following the month of the Issue Date, or, if such twenty-fifth(25th) day is not a Business Day, the Business Day immediately following. "DTC" means The Depository Trust Company and any successor to it or any nominee of it. "DUS Guide" means the Fannie Mae Delegated Underwriting and Servicing Guide in its present form and as amended, modified, supplemented or reissue from time to time (all references to Parts, Chapters, Sections and other subdivisions of the DUS Guide shall be deemed references to (i) the Parts, Chapters, Sections and other subdivisions in effect on the Closing Date and (ii) any successor provisions to such Parts, Chapters, Sections and other subdivisions). DOCS'A 1:296342. 40929-170 MM3 12 "electronic Means" means telecopy, facsimile transmission or other similar electronic means of communication approved in writing by Fannie Mae, including a telephonic communication confirmed by writing or written}transmission. "End Period Payment"means,with respect to any optional redemption of Bonds pursuant to Section 3.2 of this Indenture, the premium due on the Bonds, if any, and the interest due on the Bonds from the date of prepayment of the Mortgage Loan to the Redemption Date, including that portion of the interest payable to the Bondholders on the Redemption Date which is not (a) included in any distribution by Fannie Mae (of an optional prepayment of the Mortgage Loan) under the Fannie Mae Dass-Through Certificate or (b) held by the Trustee under this Indenture as Available Moneys. "event of Default" (a) when used in or with respect to this Indenture, means any of the events specified in Section 9.1.1 of this Indenture, and (b) when used in or with respect to the Financing Agreement, means any event of default specified and defined in Section 11.1.1 of the Financing Agreement. "Excess Earnings" means the amount of. (a)(1) investment earnings derived from moneys on deposit from time to time in the Funds and Accounts established under this Indenture or in any fund or account whether or not established under this Indenture or any Financing Agreement, to the extent that such investment earnings are required to be taken into account for purposes of determining the Rebate Amount for the Tax-Exempt Bonds; and (2) investment earnings derived from moneys on deposit in any other fund or account (whether or not held by the Trustee) containing funds the investment earnings on which are required to be taken into account for purposes of determining the .Rebate Amount for the Tax-Exempt Bonds; less (b)the amount that would have been earned on such moneys had such moneys been invested at a yield equal to the yield on the Bonds (with the yield on the Bonds being determined in accordance with the provisions of Section 148(f) of the Code); provided l that the investment earnings on amounts on deposit from time to time in any "bona fide debt service fund" (within the meaning of Section 148(f) of the Code) established in connection with the Bonds shall not be taken into account to the extent that the gross investment earnings on such account for the Bond Year are less than $100,000, all within the meaning of and as contemplated by Code Section 148(f)(4)(A)(ii), it being the intent of this definition that"Excess Earnings" shall be calculated so that the Rebate Amount is determined in accordance with the requirements',of Section 148(f) of the Code(or any successor thereto). "Extraordinary Items" means, with respect to the Trustee, reasonable compensation for extraordinary services and/or reimbursement for reasonable extraordinary costs and expenses, including attorneys fees, in each case incurred with the approval of Fannie Mae pursuant to Section 10.4 of this Indenture. "Facility Fee" means the Facility Fee provided for in the Reimbursement Agreement, to be paid by the Borrower on and before the Issue Date in consideration of Fannie Mae providing the Collateral Agreement. DOCSLA 1:296342. 40929-170 MM3 13 "Fannie Mae" means Fannie Mae, a corporation duly organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C., § 1716 et seq., and its successors and assigns. "Fannie Mae Commitment" means Fannie Mae's Commitment to the Servicer dated , 1999, accepted by the Servicer on , 1999, as amended, pursuant to which Fannie Mae has agreed, upon satisfaction of the terms and conditions set forth in the Fannie Mae Commitment, to provide credit enhancement for the Mortgage Loan and, on the Fannie Mae Pass-Through Certificate Delivery Date, to acquire the Mortgage Loan from the Servicer by issuance of and in exchange for the Fannie Mae Pass-Through Certificate, as the Fannie Mae Commitment may be .amended, modified, supplemented or restated from time to time; "Fannie Mae Documents"means, collectively, the following documents: (a) the Fannie Mae Commitment, (b) the Fannie Mae Mortgage Selling and Servicing Contract (the "Selling and Servicing Contract") and the applicable provisions of any addenda to the Selling and Servicing Contract (collectively the "Addenda"; the Selling and Servicing Contract and the Addenda are, collectively, the. "Contract"), executed by the Servicer and Fannie Mae, including, without limitation, the warranties contained in the Contract and in each Fannie Mae Guide incorporated into the Contract by reference, further including, without limitation, and as a "Guide" within the meaning of Section IC of the Contract, the DUS Guide and any additional and modified warranties contained in any Addenda, (c) any agreement between Fannie Mae and the Servicer relating to the servicing of the Mortgage Loan, and (d) any administrative or procedural requirements (including execution and delivery of any documentation required in connection with mortgages to be purchased by issuance of mortgage-backed securities) imposed now or in the future by Fannie Mae (1) upon Servicers originating multifamily mortgages pursuant to the Contract or any Fannie Mae Guide, including the DUS Guide, or (2) in connection with Fannie Mae's issuance of guaranteed mortgage pass-through certificates. "Fannie Mae Pass-Through Certificate" means the Fannie Mae Guaranteed Mortgage Pass-Through Certificate to: (a) be issued by Fannie Mae, pursuant to the Fannie Mae Trust Indenture, in connection with Fannie Mae's acquisition of, and in exchange for the Mortgage Loan, (b) be dated as of the Issue Date, (c) evidence the beneficial interest in the Mortgage Loan held in trust for Fannie Mae, and (d) bear interest at the Fannie Mae Pass- Through Certificate Rate, or in the event a Substitute Fannie Mae Pass-Through Certificate shall be delivered to the Trustee pursuant to Section 7.2.2(b) of this Indenture, such Substitute Fannie Mae Pass-Through Certificate. "Fannie Mae Pass-Through Certificate Delivery Date" 'means the date on which the Fannie Mae Pass-Through Certificate is actually delivered, electronically, in book- entry form, to, or to a custodian for the benefit of, the Trustee. "Fannie Mae Pass-Through Certificate Delivery Notice" has the meaning assigned thereto in Section 2.15 of this Indenture. "Fannie Mae Pass-Through Certificate Efate" means the interest rate per annum to be borne by the Fannie Mae Pass-Through Certificate(i.e., DOCS LA I:296342. 409129-170 MM3 14 "Fannie Mae Trust Indenture" means, collectively, the (a) Trust Indenture for Guaranteed Mortgage Pass-Through Certificates, evidencing undivided beneficial interests in Pools of Fixed Rate Residential Mortgage Loan dated November 1, 1981, as amended and supplemented, between Fannie Mae in its corporate capacity and in its capacity as trustee and(b) Issue Supplement identifying and establishing the mortgage loan pool for the Mortgage Loan and the Fannie Mae Pass-Through Certificate related to such pool. "Fees" means, individually or collectively, (a) the Trustee's Annual Fee, (b) the Issuer's Annual Fee, and(c) the Rebate Analyst's Annual Fee, if any. "Fees Account"means the Fees Account of the Revenue Fund created by Section 4.1 of this Indenture. "Final Computation Date" shall mean"final computation date"as such phrase is used in the regulations promulgated pursuant to Section 148(f) of the Code (or any successor thereto). "Financing Agreement" means the Financing Agreement, dated as of April 1, 1999, among the Issuer, the Trustee, the Borrower and the Servicer, as amended, modified, supplemented or restated from time to time to the extent permitted by this Indenture. "Fully Prepaid Mortgage Loan" has the meaning given to that term in the Fannie Mae Trust Indenture. By way of illustration, and not limitation, in respect of a mortgage loan, such term generally means (a)payment of the entire principal balance of the mortgage loan prior to the final maturity of the mortgage loan, (b) receipt by Fannie Mae of cash in connection with the liquidation of the mortgage loan, whether through insurance or guaranty proceeds, condemnation awards, proceeds of any sale of the project encumbered by the mortgage loan or otherwise (and whether or not such cash is equal to the unpaid principal amount of the mortgage loan and all interest accrued on the mortgage loan) in an amount determined by Fannie Mae in its reasonable judgment to be the full amount finally recoverable on account of the mortgage loan or (c) the mortgage loan is deemed by Fannie Mae, at its option, to be a Fully Prepaid Mortgage Loan because, for example, (1) the mortgage loan has become delinquent, in whole or in part, as to four consecutive monthly installments of interest or principal and interest, (2) Fannie Mae or any other party entitled to do so shall have declared the principal balance of the mortgage loan to be immediately due and payable in accordance with the terms of the mortgage note or the mortgage and such principal balance shall not have been paid within ten days after such declaration, (3) the project or any interest in the borrower has been transferred, or is proposed to be transferred, under circumstances in which Fannie Mae is legally permitted or reasonably believes that it is legally permitted, to accelerate the maturity of the mortgage loan pursuant to the terms of any "due-on-sale" or like clause contained in the documentation of the mortgage loan., (4) Fannie Mae has acquired the project through foreclosure, deed-in-lieu of foreclosure or comparable conversion of the mortgage loan or (5) there has been a material breach of warranty by the Servicer or a material defect in the mortgage loan documentation.. "Funds"means all Funds created by Section 4.1 of this Indenture. DOCSLA 1:296342. 417929-17(71 M3 15 "General Receipts and Disbursements Account" means the General receipts and Disbursements Account of the revenue Fund created by Section 4.1 of this Indenture. "Government Obligations" means direct obligations of, and obligations on which the full and timely payment of principal and interest is unconditionally guaranteed by, the fall faith and credit of the United States of America. "Guaranty Fee" means the Guaranty Fee payable to Fannie Mae for issuing the Fannie Mae Pass-Through Certificate. "Highest Rating Category" means an S&P .rating Category of "A-1-P" for instruments having a term of one year or less and "AAA." for instruments having a term greater than one year, and a Moody's Rating Category of"P-1" for instruments having a term of one year or less and least`°Aaa" for instruments having a terra greater than one year. "Immediate Notice" means written notice given by ',telecopy or other telecommunication device, promptly followed by a duplicate or "hard copy" of such written notice sent by certified mail, return-receipt requested, or delivery of a written notice in person or by messenger service. "Improvements" means the improvements made or to be made upon the Land described in the Mortgage. "Indemnified Parties" or "indemnified parties" has the meaning given to that term in Section 7.2.19 of the Financing Agreement. "Indenture" means this Trust Indenture, as amended, modified, supplemented or restated from time to time as permitted by the terms hereof. "Ineligible Moneys Account" means the Ineligible Moneys Account of the .revenue Fund created by Section 4.1 of this Indenture. "Initial Debt Service Deposit" means the amount set forth in Section 4.2(iii) of this Indenture which is required to be paid on the Closing Date by the Borrower to the Trustee and deposited by the Trustee into the General Receipts and Disbursements account pursuant to said Section 4.2(iii), and which account is being fully funded with Net Bond Proceeds . "Interest Payment Date" means May 1 and November 1 of each year beginning November 1, 1999, each Redemption Date, each Maturity Date and the date of acceleration of the Bonds. "Installment Computation Daae" shall mean "installment computation date" as such phrase is used in the regulations promulgated pursuant to Section 148(f) of the Code (or any successor thereto). "Investment Agreement" means any investment agreement with respect to amounts on deposit in any Fund or Account, or any substitute investment agreement with respect DOCS i_A t:296342. 40929-170 MM3 116 to amounts on deposit in any Fund or Account, as described in paragraph(vii) of the definition of Permitted Investments. "Investment Income" means the earnings and profits derived from the investment of moneys pursuant to Section 5 of this Indenture. "Issue Bate" means, with respect to the Fannie Mae Pass-Through Certificate, the first day of the month in which the Fannie Mae Pass-Through Certificate Delivery Date occurs. "Issue Bate Principal Balance" means, with respect to the Mortgage Loan, the principal balance of the Mortgage Loan as of the Issue Date. "Issue Supplement" means any supplement amending or supplementing the Fannie Mae Trust Indenture. "Issuer"means the County of Contra Costa, California. "Issuer's Annual Fee" means the annual fee of the Issuer in an amount equal to 1f$ of 1% of the initial unpaid principal balance of the Mortgage Lean, which shall be payable monthly commencing October 1, 1999. "Land" means, the real property that will serve as the site of the Improvements that comprise apart of the Project, as described in the Mortgage. "Maturity Date" means any maturity date shown. in Section 2.4.1 of this Indenture. "Moody's" means Moody's Investors Service, Inc., a Delaware corporation, and its successors and assigns, or if it shall be dissolved or shall no longer assign credit ratings to long term debt, then any other nationally recognized statistical rating agency, designated by Fannie Mae, as shall assign credit ratings to long term debt. "Mortgage" means the Multifamily Deed of Trust, Assignment of Rents and Security Agreement, together with all riders, securing the Mortgage Note, to be executed by the Borrower with respect to the Project, as it may be amended, modified, supplemented or restated from time to time to the extent permitted by this Indenture. "Mortgage Loan" means the mortgage loan made by the Issuer to the .Borrower out of the Net Bond Proceeds, which loan will be made pursuant to the Financing Agreement for the purpose of providing funds to the Borrower to finance the acquisition, rehabilitation and equipping of the Project, and which mortgage loan is to be acquired by Fannie Mae on the Fannie Mae Pass-Through Certificate Delivery Date pursuant to and in accordance, with the terms and conditions of the Fannie Mae Commitment in exchange for the Fannie Mae Pass-Through Certificate. "Mortgage Loan Documents" means the Mortgage, the Mortgage Nate, and each of the other instruments documenting, evidencing, securing or otherwise relating to the DOCSt.A l:25'534 2. 40929-1170 MM3 17 Mortgage Loan, including all amendments, modifications, supplements and restatements of such instruments,but specifically excluding the Financing Agreement and the Regulatory Agreement. "Mortgage Loan Fund" means the Mortgage Loan Fund created by Section 4.1 of this Indenture. "Mortgage Loan Fund Requisition Certificate" means a certificate in the form of Exhibit D to this Indenture. "Mortgage Loan Term" means the period from the Closing Date to and including the maturity date of the Mortgage Loan. "Mortgage Vote" means, with respect to the Mortgage Loan, the Multifamily Note, dated as of April 1, 1999, including any allonge to the Multifamily Note, to be (a) executed by the Borrower in favor of the Issuer, and (b) assigned, pursuant to the Assignment, and endorsed, without recourse, by the Issuer to the Trustee and Fannie Mae, as their interests may appear, and evidencing the Borrower's financial obligations under the Mortgage Loan, as the same may be amended, modified, supplemented or restated from time to time to the extent permitted in this Indenture or any mortgage note executed in substitution therefor as such substitute note may be amended,modified, supplemented or restated from time to time. "Mortgage Note Rate" has the meaning given to that term in the Mortgage Note. "Net Bond Proceeds" means the total proceeds derived from the issuance, sale and delivery of the Bonds, representing the total purchase price of the Bonds, including any premium paid as part of the purchase price of the Bonds, but excluding the accrued interest on the Bonds paid by the initial purchaser(s)of Bonds. "Officer's Certificate"means a certificate signed by an Authorized Officer. "Opinion of Bond Counsel"means a written opinion of Bond. Counsel addressed to the Issuer,the Trustee and, at its request,Fannie Mae, and in form and substance acceptable to the Issuer, the Trustee and, in all events,Fannie Mae. "Opinion of Counsel" means a written opinion of legal counsel acceptable to Fannie Mae and/or, if the recipient(s) of the opinion is/are other than Fannie Mae, acceptable to such recipient(s) (and if the opinion is with respect to an interpretation of federal tax laws or regulations, or bankruptcy, such legal counsel shall also be an attorney or firm of attorneys experienced in such matters), including any opinion issued by the Fannie Mae Legal Department." "Outstanding" means, when used with reference to the Bonds at any date as of which the amount of Outstanding Bonds is to be determined,, all Bonds which have been authenticated and delivered hereunder except: (a) Bonds cancelled or delivered for cancellation, at or prior to such date, DOC'SLA 1:296342. 401929-170 MM3 18 (b) Bands deemed to be paid in accordance with. Section 8 of this Indenture; and (c) Bonds in lieu of which others have been authenticated under Sections 2.8, 2.9 or 2.10 of this Indenture. In determining whether the owners of a requisite aggregate principal amount of Outstanding Bonds have concurred in any request, demand, authorization, direction, notice, consent or waiver under the provisions of this Indenture, Bonds which are yawned or held by or for the account of the Borrower shall be disregarded and deemed not to be Outstanding under this Indenture for the purpose of any such determination unless all Bands are owned or held by or for the account of the Borrower. In determining whether the Trustee shall be liable in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Bonds which are registered in the name of or known by the Trustee to be held for the account of the Borrower shall be disregarded. "Participant"means a broker--dealer, bank or other financial institution for which ITC holds Bonds as Securities Depository. "Pass-Through Rate"has the meaning given to that term in the Mortgage Note. "Pass-Through Rate Subaccount" means the Pass-ThroughRate Subaccount of the Credit Facility Account established within the Revenue Fund created by Section 4.1 of this Indenture. "Paying Agent"means the Trustee. "Permitted Investments" means, to the extent authorized by law for the investment of moneys of the Issuer: (i) Government Obligations; (ii) direct obligations of, and obligations on which the full',and timely payment of principal and interest is unconditionally guaranteed by, any agency or instrumentality of the United States of America (other than the Federal Home Loan Mortgage Corporation) or direct obligations of the World Bank, provided that such obligations are assigned a credit rating by S&P and Moody's in the Highest Rating Category of S&P and of Moody's; (iii) obligations of the State or any other state or territory of the United States of America., or obligations of any agency, instrumentality, authority or political subdivision of the State or of such state or territory,or obligations of any public benefit or municipal corporation the principal of and interest on which are guaranteed by the State or such other state or political subdivision and the interest on which is payable on a current basis, and which obligations are rated in the Highest Rating Category of S&P and of Moody's; DOCSLA?,296342. 40929-?70 MM3 19 (iv) any written repurchase agreement entered into with a',Qualified Financial Institution whose unsecured short-term obligations are rated in the Highest Rating Category of S&P and of Moody's, provided such agreement has a Term not to exceed 30 days; (v) commercial paper rated in the Highest Rating Category of S&P and of Moody's; (vi) (a) interest-bearing negotiable certificates of deposit, interest-bearing time deposits, interest-bearing savings accounts or bankers' acceptances, issued by a Qualified Financial Institution whose unsecured short-term obligations are rated in the Highest Rating Category of S&P and of Moody's, or (b) interest-bearing negotiable certificates of deposit, interest-bearing time deposits or interest-bearing savings accounts, issued by a Qualified Financial Institution, if such deposits or accounts are fully insured by the Federal Deposit Insurance Corporation; (vii) an agreement for the investment of moneys at a guaranteed rate (an "Investment Agreement")held by the Trustee with: (_A) a Qualified Financial Institution whose unsecured long-term obligations are rated in the Highest Rating Category of S&P and of Moody's, or whose obligations are unconditionally guaranteed or insured by a Qualified Financial Institution whose unsecured long-term obligations are rated in the Highest Rating Category of S&P and of Moody's, provided that notice of the Investment Agreement shall be provided to the Rating Agency prior to the execution and delivery of the Investment Agreement, provided, further, that the Investment Agreement shall be in a form acceptable to Fannie ?viae, and provided, further, that the Investment Agreement shall include, without limitation, the following restrictions; (1) the invested funds shall be available for withdrawal without penalty or premium at any time that (a) the Trustee is required to pay moneys from the Fund(s) established under this Indenture to which the Investment Agreement is applicable or (b) any Rating Agency indicates that it will lower, suspend or withdraw or actually lowers, suspends or withdraws the rating on the Bonds on account of the rating of the Qualified Financial Institution providing, guaranteeing or insuring, as applicable, the Investment Agreement; (2) the Investment Agreement shall be the unconditional and general obligation of, and shall not be subordinated to any other obligation of, the provider and, if applicable,the guarantor or insurer, of the Investment Agreement; (3) the Trustee shall receive an Opinion of Counsel that the Investment Agreement is legal, valid, binding and enforceable upon the provider of the Investment Agreement, in accordance with its terms and, if applicable, that any guarantee or other facility backing the Investment Agreement is legal, valid, binding and enforceable upon the provider of such guarantee or other facility, in accordance with its terms; and DOCS I..A t:296342. 40929-170 MM3 20 (4) the Investment Agreement shall provide that if during its terra the rating of the Qualified Financial Institution providing, guaranteeing or insuring, as applicable, the Investment Agreement, by either S&P or Moody's is withdrawn or suspended or falls below the Highest Dating Category, the provider must provide immediate notice to the Issuer and the Trustee and must, at the written direction of the Trustee (given after receipt of written notice of such', rating withdrawal, suspension or downgrade), within 10 days following receipt of such direction, either: (a) collateralize the Investment Agreement (if the Investment Agreement is not already collateralized) with Permitted Investments described in paragraphs (i) or (ii) above by depositing such collateral with the Trustee or a third party custodian, such collateralization to be effected in a manner and in an amount sufficient to maintain (1) the integrity of the Cash Flow Projection most recently provided with respect to the Bonds and (2) the then current rating of the Bonds, or, if the Investment Agreement is already collateralized, increase the collateral with Permitted Investments described in paragraphs (i) or(ii) above by depositing such collateral with the Trustee or a third party custodian, such collateralization to be effected in a manner and in an amount sufficient to maintain(3) the integrity of the Cash Flow Projection most recently provided with respect to the Bonds and (4) the then current rating of the Bonds, but in neither circumstance under this clause (a) shall (A) the Investment Agreement be collateralized at less than 110% of the value of the Investment Agreement, or (B) the collateral be marked to market less frequently than weekly, or(b) unless waived by the Trustee, repay the principal of and accrued but unpaid interest on the investment, in either case with no penalty or premium to the Trustee unless required by law (the choice of(a) or (b)shall be that of the Trustee); and (5) the Investment Agreement shall provide that the principal of and accrued but unpaid interest on the investment (with no penalty or premium), shall be paid to the Trustee upon a defeasance or acceleration, in whole or in part, of the Bonds; or (B) Fannie Mae; (viii) money market mutual funds (including any proprietary mutual fund of the Trustee for which the Trustee or an affiliate is investment advisor or provides other services to such mutual fund and receives reasonable compensation for such services) registered under the Investment Company Act of 1940 that have been rated "AAAm-G" or "AAAm" by S&P and "Aaa" by Moody's, provided that the portfolio of such money market mutual fund is limited to obligations described in(x)paragraph(i) above and to agreements to repurchase such obligations or(y) paragraphs (ii)or(iii) above and approved in writing by Fannie Mae; and (ix) any other investment authorized by the laws of the State if such investments are approved by Fannie Mae and the dating Agency; provided that Permitted Investments shall not include the following: (1) any investments with a final maturity or any agreements with a term greater than 365 days from the date of the investment (except (a) obligations that provide for the optional or mandatory tender, at par, by DOC'SLA 1:296342. 40929-170 MM3 21 the holder of such obligations at least once within 365 days of the date of purchase, (b) Government Obligations irrevocably deposited with the Trustee for payment of Bonds pursuant to Section 8 of this Indenture, and (c) agreements or investments listed in paragraphs (vii) and (ix) above), (2) any obligation (other than obligations described in paragraphs (i) and (ii) above) with a purchase price greater or less than the par value of such obligation, (3) mortgage-backed securities, real estate mortgage investment conduits or collateralized mortgage obligations, (4) interest-only or principal-only stripped securities, (5) obligations bearing interest at inverse floating rates, (6) any investment which may be prepaid or called at a price less than its purchase price prior to stated maturity, (7) any investment described in paragraph(iv)or(vii) above with a Qualified Financial Institution. (as defined in clause (d) of the definition of``Qualified Financial Institution") if the Qualified Financial Institution does not agree to submit to jurisdiction, venue and service of process in the United States of America in the Investment Agreement and (8) any investment the interest rate on which is variable, and is established other than by reference to a single interest rate index plus a single fixed spread, if any, and which interest rate moves proportionately with that index, provided further that if any such investment described in paragraphs (i) through (ix) above is required to be rated, such rating requirement will not be satisfied if an"r"highlighter or a"t"highlighter is affixed to its rating or is otherwise applicable. If an Investment Agreement is entered into which does not require the provider to either(a)post collateral as described in paragraph(vii) above upon a downgrade in the rating of the provider or (b) compensate the Trustee for any loss in yield upon reinvestment if the Investment Agreement is terminated following a downgrade in the rating of the provider, the yield on the Investment Agreement above the minimum yield permitted by the Rating Agency (presently [2.5]% per annum) shall not be taken into account in any Cash Flow Projection provided to the Rating Agency in connection with its rating of the Bonds. "Permitted Miens" has the meaning given to that term in the Reimbursement Agreement. "Person" means any natural person, firm, partnership, association, limited liability company, corporation, company or public body. "Pledged. Collateral" shall have the meaning given to that term in the Collateral Agreement. "Principal Amount" means the sum of the Tax-Exempt Principal Amount and the Taxable Principal Amount. "Principal Office" of the Trustee means the corporate trust office of the Trustee at the address set forth in Section 12.4 of this Indenture or such other address as may be specified in writing by the Trustee, as provided in said Section 12.4; and"Principal Office" of the Servicer means the office of the Servicer at the address set forth in Section 12.4 of this Indenture or such other address as may be specified in writing by the Servicer, as provided in said Section 12.4. "Principal Subaccount" means the Principal Subaccount of the Credit Facility Account established within the Revenue Fund created by Section 4.1 of this Indenture. Docs€A€:296342. 40929-170 MM3 22 "Project" means the Willow Pass Apartments complex located in the County of Contra Costa, California, on the real property described in the Mortgage, including the Land on which such complex is located and the Improvements thereon. "Project Purposes" means use of the Project as a multifamily residential rental property for persons and families of low and moderate income, or any other use of the Project which will not (a) cause the Project to cease to qualify for financing under the Act or (b) cause the interest on the Tax-Exempt Bonds to become includable for federal income tax purposes in the gross income of the owners thereof(other than a holder who is a "substantial user's of the Project or a"related person"as such terms are used in the Code). "Qualified Financial Institution" means any of the following having a senior unsecured debt rating in the highest Rating Category of S&P and Moody's, and approved by Fannie Mae: a (a) bank or trust company organized under the laws of any state of the United States of America, (b) national banking association, (c) savings bank, a savings and loan association, or an insurance company or association chartered or organized under the laws of any state of the United States of America, (d) federal branch or agency pursuant',to the International Banking Act of 1978 or any successor provisions of law or a domestic branch or agency of a foreign bark which branch or agency is duly licensed or authorized to do business under the laws of any state or territory of the United States of America, (e) government bond dealer reporting to, trading with, and recognized as a primary dealer by the Federal Reserve Bank of New York, and (f) securities dealer approved in writing by Fannie Mae the liquidation of which is subject to the Securities Investors Protection Corporation or other similar corporation. "Qualified Project Costs" means any expenditure: (a) to provide facilities and improvements that constitute part of a qualified residential rental project within the meaning of Section 142(4) of the Code; (b) that is properly chargeable to the Project's capital account under general Federal income tax principles or that would be so chargeable with a proper election or but for a proper election by the Borrower to deduct such expenditure; and (c) that was incurred after the date 60 days before , 1999, as more fully set forth in the Tax Certificate. "Qualified Project Period"has the meaning given to that term in the Regulatory Agreement. "Rating Agency" means any national rating agency then maintaining a rating on the Bonds at the request of the Borrower, the Issuer or Fannie Mae. "Rating Category" means one of the generic rating categories of the Rating Agency. "Rating Confirmation" means confirmation from the Rating Agency that the rating on the Bonds will not be reduced or withdrawn as a result of any proposed investment, redemption, substitution, amendment or other action with respect to which such Rating Confirmation is required to be received. "Rebate Amount" shall mean the sum of the Excess Earnings plus all investment earnings on such Excess Earnings; it being the intent of this definition that the Rebate Amount i)OCSLA'::296342. 40929-170 MM3 23 shall be calculated in accordance with the requirements of the Tax Certificate and Section 148 of the Code(or any successor thereto). "Rebate Analyst" means a firm of independent certified public accountants or other firm or organization designated by the Borrower and reasonably acceptable to Fannie Mae, and qualified and experienced in the calculation of rebatable arbitrage under Section 148 of the Code and in compliance with the regulations promulgated under the Code,',and then providing rebate calculation services. "Rebate Analyst's Annual Fee" means the fee of the Rebate Analyst, if any, for its rebate calculation services. "Rebate Fund"means the Rebate Fund created by Section 4.1 of this Indenture. "Rebate Report" shall mean a report for each Calculation Period prepared by a Rebate Analyst calculating the Rebate Amount, all for the purpose of enabling the Borrower and the Issuer to comply with the requirements of Section. 148 of the Code(or any successor thereto). "Record Date" means, with respect to any Interest Payment Bate, the fifteenth day of the month preceding the month in which such Interest Payment Date falls. "Redemption Account" means the Redemption Account of the Revenue Fund created by Section 4.1 of this Indenture. "Redemption hate" means any date designated as a date upon which Bonds are to be redeemed pursuant to'this Indenture. "Regulatory Agreement" means the Regulatory Agreement and Declaration of Restrictive Covenants, dated as of April 1, 1999, by and among the Issuer,',the Trustee and the Borrower, as amended, modified, supplemented or restated from time to time to the extent permitted by this Indenture. "Rehabilitation Fund" means the Rehabilitation Fund created under Section 4.1 of this Indenture. "Rehabilitation Fund Deposit" means the deposit to be made by the Borrower with the Trustee on the Closing Mate in the amount specified in the Financing Agreement, which amount is to be deposited into the Rehabilitation Fund. "Rehabilitation Fund Requisition Certificate" means a certificate in the form. of Exhibit E to this Indenture. "Reimbursement Agreement" means the Reimbursement agreement, dated as of April 1, 1999,between Fannie Mae and the Borrower, as amended, modified, supplemented or restated from time to time or any agreement entered into in substitution therefor. "Reserved Rights" means those certain rights of the Issuer under the Financing Agreement to indemnification and to payment or reimbursement of fees and expenses of the "'OCS#..A::296342. 40929-]70 Mh43 24 Issuer, including the Issuer's Annual Fee and fees and expenses of counsel, assumption fees and indemnity payments, its nonexclusive right to enforce the Regulatory Agreement in accordance with the terms thereof, its right to give and receive notices and to enforce notice and reporting requirements and restrictions on transfer of ownership, its right to inspect and audit the books, records and premises of the Borrower and of the Project, its right to collect attorneys' fees and related expenses, its right to enforce the Borrower's covenants to comply with applicable federal tax law and State law (including the Act) and the requirements of the Issuer, its right to receive notices under the Financing Agreement and its rights to give or withhold consent to amendments, changes, modifications and alterations to the Financing Agreement. "Responsible Officer" means any officer of the Trustee assigned to administer the duties of the Trustee under this Indenture, the Financing Agreement, the Regulatory Agreement and the Collateral Agreement. "Revenue Fund" means the Revenue Fund created by Section 4.1 of this Indenture, comprising the Accounts and subaccounts created within the Revenue Fund. "Revenues" means all (a) Investment Income (other than ',Investment Income earned from moneys on deposit in the Rebate Fund and the Costs of Issuance,Fund(except to the extent Investment Income earned from moneys on deposit in the Costs of Issuance Fund is transferred to the General Receipts and Disbursements Account)), (b) prior to the Fannie Mae Dass-Through Certificate Delivery Date, all payments made under the Mortgage Note, (c) all payments made under the Collateral Agreement, and (d) on and after the Fannie Mae Pass- Through Certificate Delivery Date, all distributions made by Fannie Mae under the Fannie Mae Pass-Through Certificate. "Securities Depository" means, initially, The Depository Trust Company, New York, New York, and its successors and assigns, and any replacement securities depository appointed under this Indenture. "Servicer" means ARCS Commercial Mortgage Co., L.P., a California limited partnership, as servicer of the Mortgage Loan, and any successor Servicer appointed by Fannie Mae. "Servicer Assignment's means the Assignment of Mortgage Loan (Servicer Assignment), which is to be delivered by the Servicer to Fannie Mae in connection with the issuance of the Fannie 'Viae Pass-Through Certificate, which assignment shall be in substantially the farm attached to this Indenture as Exhibit C. "Servicer Commitment" means the Servicer Commitment, dated , 1999, accepted by the Borrower, as the same may be amended, modified, supplemented or restated from time to time. "Servicing Fee"means the Servicing Fee payable to the Servicer for servicing the Mortgage Lean for Fannie Mae. "Sinking Fund Redemption Date" means each mandatory bond sinking fund redemption date provided for in Section 3.3.4 of this Indenture. DOCS t.A 1: 296342. 40929-170 MM3 25 "S&P" means Standard & Poor's Ratings Services, a division of The McCraw- Hill Companies, Inc., and its successors and assigns, or if it shall be dissolved or shall no longer assign credit ratings to long terra debt, then any other nationally recognized statistical rating agency, designated by the Issuer and acceptable to Fannie Mae and the Borrower, as shall assign credit ratings to long term debt. "State"means the State of California. "Stated Principal Balance" has the meaning given to that term in the Fannie Mae Trust Indenture. "Substitute Fannie Mae Pass-Through Certificate" has the meaning given to that term in Section 7.2.2(b) of this Indenture. "Substitution Date" means, with respect to the effective date of substitution of a Credit Facility other than the Collateral Agreement or the Fannie Mae Pass-Through Certificate, the first day of any month. "Supplemental Indenture" means any indenture duly authorized and entered into between the Issuer and the Trustee amending or supplementing this Indenture in accordance with the provisions of this Indenture. "Tax Certificate" means the Tax Certificate and Agreement dated the Closing Date, executed and delivered by the Issuer and the Borrower, containing various representations, warranties and covenants intended to demonstrate that the interest on the Tax-Exempt Bonds is excludable under Section 103 of the Code from the gross incomes of the owners thereof for federal income tax purposes and to maintain such excludability from gross income. "Tax Covenants" means any and all covenants entered into by the Borrower to comply with all requirements of the Code that must be met or observed under Code sections 103 and 141 through 150, and the regulations promulgated thereunder, to maintain under Code section 103 the exclusion of the interest on the Tax-.Exempt Bonds from the gross incomes of the owners thereof. "Taxable Bands" means the County of Contra Costa, California Multifamily Housing Revenue Bonds(Willow Pass Apartments), Series 1999D-T. "Taxable Principal Amount"means $2,500,000, the original aggregate principal amount of the Taxable Bonds. "Tax-Exempt Bands"means the County of Contra Costa, California Multifamily Dousing Revenue Bonds (Willow Pass Apartments), Series 1999D. "Tax-Exempt Principal Amount" means $5,400,000, the original aggregate principal amount of the Tax-Exempt Bonds. "Term Bonds" means (a) the Bonds having a Maturity Date of November 1, 20_, and (b)the Bonds having a Maturity Date of May 1, 20—. DOCSLA 1:296342_ 40929-170 MM3 26 "Termination Date" means has the meaning given that term in the Fannie Mae Commitment. "Trustee" means U.S. Bank Trust National Association, a national banking association organized and existing under the laws of the United States, and any successors or assigns to U.S. Bank Trust National Association or any other corporation or association resulting from or surviving any consolidation or merger to which it or its successors may be a party and any successor trustee at any time serving as successor trustee under this Indenture. "Trustee Assignment" means the Assignment of Mortgage Loan (Trustee Assignment), which is to be delivered by the Trustee to the Servicer in connection with the issuance of the Fannie Mae Pass-Through Certificate, which assignment shall be in substantially the form attached to this Indenture as Exhibit B. "Trust Estate" means the property, rights, money, securities and other amounts pledged and assigned pursuant to this Indenture. "Trustee's Annual Fee"means the annual ongoing trust administration fee of the Trustee equal to % per annum of the principal amount of the Bonds Outstanding, as provided in paragraph (i)(A) of Section 4.3 of the Financing Agreement, computed and paid semiannually in arrears on each Interest Payment Date, provided that such fees shall be reduced pro rata to the extent the Mortgage Loan is prepaid prior to maturity. "U.C.C." means the Uniform Commercial Code of the State as now or hereafter amended, whether or not such Uniform Commercial Code is applicable to the parties or the transactions. "Underwriter"means, together, Hutchinson, Shockey, Erley& Co. and Newman and Associates, Inc. "'Verification Agent" means an independent firm of certified public accountants, an independent financial advisory firm or other independent third party qualified and experienced in the verification of the mathematical accuracy of scheduled cash flows and other funds to pay the principal of and interest on bonds and fees, designated by the Borrower and acceptable to Fannie Mae,preparing a Verification Report. "Verification Report" means a report prepared by a Verification Agent verifying the mathematical accuracy of a Cash Flow Projection. All references to the term "includes" or "including" shall mean includes without limitation, or including without limitation. All references to "attorney fees" or "counsel fees" shall mean attorney fees 'incurred before trial, at trial, on appeal or in any bankruptcy or arbitration. Section 1.3 Rules of Construction. The following rules of construction shall apply: DOC K A 1:296342. 40929-170 MM3 27 (i) the singular form of any word used in this Indenture, including the terms defined in Section 1.2, shall include the plural, and vice versa, unless the context otherwise requires; the use herein of a pronoun of any gender shall include correlative words of the other genders; (ii) all references in this Indenture to "sections" and other subdivisions of this Indenture are to the corresponding Sections or subdivisions of this Indenture as originally executed; (iii) the headings or titles of the Sections and other subdivisions of this Indenture, and any table of contents appended to copies of this Indenture, shall be solely for convenience of reference and shall not limit or otherwise affect the meaning, construction or effect of this Indenture or describe the scope or intent of any provisions of this Indenture; (iv) all accounting terms not otherwise defined in this Indenture have the meanings assigned to them in accordance with applicable generally accepted accounting principles as in effect from time to time; (v) every "request," "order," ..demand," ..direction," "application," ••appointment," "notice," "statement," "certificate," "Consent," or similar action under this Indenture by any party shall, unless the form of such instrument is specifically provided, be in writing signed by a duly authorized representative of such party with a duly authorized signature; (vi) if any provision of this Indenture calls for the approval or consent of any party, whether stated as "consent," "written consent," `•prior written Consent,""approval,""written approval,""prior written approval"or otherwise, or any waiver by such party, and if a basis for such party granting such approval, consent or waiver is not otherwise stated, then it is understood and agreed that such approval, consent or waiver will be given by such party in its discretion; (vii) whenever any party shall have the right or option in this Indenture to exercise any discretion, to determine any matter, to accept,any presentation or to consent to or approve any matter or to grant any waiver, such exercise, determination, acceptance, consent, approval or waiver shall, without exception, be in such party's sole and absolute discretion; and (viii) all references in this Indenture to "counsel fees," "attorneys fees" or the like shall mean and include fees and disbursements of in-house or outside counsel, whether or not suit is instituted, and including fees and disbursements preparatory to and during trial and appeal and in any bankruptcy or arbitration proceeding. (ix) "immediate" or "immediately" when used with respect to any notice or action is satisfied if such notice or action is given or taken on the same Business Day. DaCKA 1:296342. 40929-170 MM3 28 Section 1.4 Content of Certificates and Opinions. Every certificate or opinion with respect to compliance by or on behalf of the Issuer with a condition or covenant provided for in this Indenture or the Financing Agreement shall include. (i) a statement that the person or persons providing or giving the certificate or opinion have read the covenant or condition and the definitions in this Indenture relating to the covenant or condition; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in the certificate or opinion are based; (iii) a statement that, in the opinion of the signers, they have made or caused to be made such examination or investigation as is necessary to enable them to express an informed opinion as to whether or not the covenant has been complied with or the condition has been satisfied; and (iv) a statement as to whether, in the opinion of the signers, the condition has been satisfied or the covenant has been complied with. Any such certificate or opinion provided or given by an officer of any party may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representation with respect to any matter upon which his or her certificate or opinion may be based is erroneous, or in the exercise of reasonable care should have known that the same is erroneous. Any certificate or opinion provided or given by counsel may be based, insofar as it relates to factual matters (with respect to which information is in the possession of a party), upon the certificate or opinion of or representation by an officer of the party, unless such counsel knows that the certificate or opinion or representation with respect to the matter upon which his or her opinion may be based is erroneous, or in the exercise of reasonable care should have:known that the same is erroneous. Section 1.5 Interpretation. The parties to this Indenture acknowledge that each party and its counsel have participated in the drafting of this Indenture. Accordingly, the parties agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in the interpretation of this Indenture or any amendment, modification, supplement or restatement of this Indenture or of any exhibit to this Indenture. Section 2. The Bonds. Section 2.1 Issuance of Bonds. Section 2.1.1 Issuance of Tax-Exempt_ Bonds. The Tax-Exempt Bonds are authorized to be issued pursuant to and in accordance with this Indenture and shall (a)be designated "County of Contra Costa, California Multifamily Housing Revenue Bonds (Willow Pass Apartments), Series 1999D", (b)be issued in the Tax-Exempt Principal Amount, (c)be dated the Dated Date, (d) bear interest from the Dated Bate at the rate(s) provided in Section 2.4.1 of this Indenture, until maturity or earlier redemption, payable on each Interest Payment Date and on each other Bond Payment Date on which interest is payable until the DOCSLAi:2963€2. 40929-170 MM3 29 Bonds are paid in full, (e) mature on the dates and in the principal amounts set forth in Section 2.4.1 of this Indenture, and (f)be subject to redemption prior to maturity as provided in Section 3 of this Indenture. Section 2.1.2 Issuance of Taxable Bonds. The Taxable Bonds are authorized to be issued pursuant to and in accordance with this Indenture and shall (a)be designated "County of Contra Costa, California Multifamily Housing Revenue Bonds (Willow Pass Apartments), Series 1999D-T", (b)be issued in the Taxable Principal Amount, (c)be dated the Dated Date, (d)bear interest from the Dated Date at the rate(s) provided in Section 2.4.1 of this Indenture, until maturity or earlier redemption, payable on each Interest Payment Date and on each other Bond Payment Date on which interest is payable until the Bonds are paid in full, (e)mature on the dates and in the principal amounts set forth in Section 2.4.1 of this Indenture, and(f)be subject to redemption prior to maturity as provided in Section 3 of this Indenture. Section 2.2 Authorized Amount of Bonds. No Bonds may be issued under the provisions of this Indenture except as provided in Section 2.1. The totalprincipal amount of Bonds that may be issued and outstanding under this Indenture is expressly limited to the Principal Amount. No additional bonds shall be issued under this Indenture. Section 2.3 Registered Bonds Authorized Denomination; Numbering. The Bonds shall be issued as fully registered bonds without coupons. Each Boyd shall be issued in an Authorized Denomination, The Bonds shall be numbered consecutively from 1 upwards, bearing numbers not then contemporaneously outstanding (in order of issuance) according to the Bond Register. The Bonds shall be issued initially as Book-Entry Bonds subject to the Book- Entry System of registration and transfer, as provided in Section 2.13 of this Indenture. Section 2.4 Terms of Bonds. Section 2.4.1 Interest Rates, Principal Maturity. (a) Interest Rates: Principal Maturity of Tax-Exempt Bonds. The Tax- Exempt Bonds shall bear interest at the rate(s) per annum and shall mature, subject to redemption prior to maturity, on the dates and in the principal amounts, all as set forth in the following table: Principal Amount Interest Maturity Date to Mature Rate Interest shall be calculated on the basis of a 360-day year consisting of twelve 30-day months. (b) Interest hates: Principal Maturity of Taxable Bonds. The Taxable Bonds shall bear interest at the rate(s) per annum and shall mature, subject to redemption prior to maturity, on the dates and in the principal amounts, all as set forth in the following table: 3{7CS LA 4:296342. 40929-470 MW 30 Principal Amount Interest Maturity)date to Mature Rate Interest shall be calculated on the basis of a 360-day year consisting of twelve 30-day months. Section 2.4.2 Accrual of Interest. The Bonds shall bear interest from the Interest Payment Date next preceding the date of authentication of the Bonds,provided that if the date of authentication is an Interest Payment Date for which interest has been paid or is after the Record Date, but prior to the next Interest Payment Date, the Bonds shall bear interest from such Interest Payment Date,provided-further that if the date of authentication is on or prior to the Record Date for the first Interest Payment Date, the Bonds shall bear interest from the Dated Date of the Bonds. Notwithstanding the foregoing, if at the time of authentication of any Bond, interest on the Bond is in default, the Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment, or if no interest has theretofore been paid on the Bond, from the Dated Date of the Bond. Section 2.4.3 Payment of Principal and Interest. The principal of and the interest on the Bonds shall be payable in lawful money of the United States of America to the persons in whose names the Bonds are registered on the Band Register at the close of business on the applicable Record Date. Payment of the. (i) interest on the Bonds shall be made to the Registered Owners of the Bonds (as determined at the close of business on the Record Date next preceding the applicable Interest Payment Date) by check mailed by first class mail, postage prepaid, on the Interest Payment Date to the addresses of such Registered Owners as they appear on the Bond register maintained by the Trustee as Bond Registrar or to such other address as may be furnished in writing by a Registered Owner to the Trustee prior to the applicable Record Date; and (ii) principal amount of any Bond, and premium, if any, and interest payable on any Bond Payment Date other than a regularly scheduled Interest Payment Date shall be made by check only upon presentation and surrender of the Bond on or after its maturity date or date fixed for redemption or other payment at the office of the Trustee designated by the Trustee for that purpose; provided, however, that payment of principal of, premium., if any, and interest on any Bond shall be made by wire transfer to any account within the United States of America designated by a Registered Owner owning $1,000,000 or more in aggregate principal amount of Bonds if a written request for wire transfer is delivered to the Trustee by such a Registered Owner not less than five days prior to the applicable Bond Payment Date and if such Registered Owner otherwise complies with the reasonable requirements of the Trustee (such request may specify that it is effective with respect to all succeeding payments of principal, premium, if any, and interest and will be so effective unless and until rescinded in writing by the Registered Owner at least five days prior to the Record Date for the Bond Payment Date to which such rescission is designated to apply). DOCSLAI:296342. 43929-171)MM3 31 Notwithstanding the foregoing, payments of the principal of and interest on any Bonds that are subject to the Book-Entry System shall be made in accordance with the rules, regulations and procedures established by the Securities Depository in connection with the Book-Entry System. If interest on the Bonds is in default, the Trustee shall, prior to the payment of interest, establish a special record date (the "Special Record Date") for such payment, which Special Record Date shall be not more than fifteen(15) nor less than ten (10) days prior to the date of the proposed payment, and provide notice to the Registered {owner as of such Special Record Date. Payment of such defaulted interest shall then be made by check or wire transfer, as permitted above, mailed or remitted to the persons in whose names the.Bonds are registered on the Special Record Bate at the addresses or accounts of such persons shown on the BondRegister. Section 2.4.4 Sources for Payments of Principal and Interest Limited Obligations of the Issuer. The Bonds are payable from Revenues, from amounts held in the Funds and Accounts (specifically including the Revenue Fund and specifically excluding amounts from time to time on deposit in the Rebate Fund, the Costs of Issuance Fund and the Fees Account) and from Investment Income (excluding Investment Income earned on amounts on deposit in the Rebate Fund and the Costs of Issuance Fund (other than Investment Income earned on amounts of Net Bond Proceeds deposited into the Costs of,Issuance Fund and Investment Income on such Investment Income and transferred to the General Receipts and Disbursements Account)). The Bonds and all obligations of the Issuer under or with respect to the Bands, this Indenture, the Regulatory Agreement and the Financing Agreement shall be and remain limited obligations of the Issuer payable solely and only out of the Trust Estate specifically pledged thereto, including but not limited to distributions to be made to the Trustee under the Fannie Mae .Pass-Through Certificate and payments made to the Trustee under the Collateral Agreement. No recourse shall be had against any properties, funds or assets of the Issuer (other than the Trust Estate) for the payment of any amounts owing under or with respect to the Bonds, this Indenture, the Regulatory Agreement or the Financing Agreement. Neither the Bonds, this Indenture, the Regulatory Agreement or the Financing Agreement, nor the obligations of the Issuer under or with respect thereto, constitute or create an indebtedness of the Issuer within the meaning of any constitutional or statutory debt limitation. The Bondholders, Fannie Mae, the Servicer and the Borrower shall have no right to compel the payment of any amounts owing under or with respect to the Bonds, this Indenture,the Regulatory Agreement, the Financing Agreement or the Mortgage Loan Documents out of any tax revenues, funds or other assets of the Issuer,and such amounts shall be payable only out of the Trust Estate. Section 2.4.5 Designation of Paying Agent. The Trustee is designated as Paying Agent for the Bonds. Section 2.5 Farm of Bonds. The Bonds, the certificate of authentication on the Bonds and the form of assignment on the Bonds shall be in substantially the forms set forth in Exhibit A to this Indenture with such appropriate variations, omissions, substitutions and insertions as are permitted or required by this Indenture or are required by law, and may have such letters, numbers or other marks of identification and such legends and endorsements placed on the Bonds as may be required to comply with any applicable laws or rules or regulations, or as DOCSLA,:29,6342. 40929-170 MM3 32 may, consistent with this Indenture, be determined by the officers executing such Bonds, as evidenced by their execution of the Bonds. Certificated Bonds may be typewritten, printed, engraved, lithographed or otherwise reproduced. Any portion of the text of any Bond may be set forth on the reverse side of the Bond, with an appropriate reference to such text on the face of such Bond or on one or more pages without a reverse side. Section 2.6 Execution. The Bonds shall be executed on behalf of the Issuer by the manual or facsimile signatures of the Chairman of the Board of Supervisors, attested by the manual or facsimile signature of County Administrator and Clerk of the Board of Supervisors. Facsimile signatures on the Bonds shall have the same farce and effect as if each of such Bonds had been manually signed. In case any official of the Issuer whose signature or facsimile signature shall appear on the Bonds shall cease to hold such office before the delivery of such Bonds, such signature or facsimile signature shall nevertheless be valid and sufficient for all purposes, as if such official had remained in office until delivery. At the direction of the Issuer, the Trustee shall authenticate and deliver the Bonds. The proceeds of the Bonds shall be paid over to the Trustee for the account of the Issuer and deposited as provided herein. Section 2.7 Authentication. Only such Bonds as shall have endorsed on them a certificate of authentication substantially in the form set forth in Exhibit A to this Indenture duly executed by the Trustee, as Bond Registrar, shall be entitled to any right or benefit under this Indenture. No Bond shall be valid or obligatory for any purpose unless and until such certificate of authentication shall have been manually executed by the Trustee; and such executed certificate upon any such Bond shall be conclusive evidence that such Bond has been authenticated and delivered under this Indenture. The Trustee's certificate of authentication on any Bond shall be deemed to have been executed by it if signed by an authorized representative of the Trustee, but it shall not be necessary that the same person sign the certificates of authentication on all of the Bonds. Section 2.8 Temporary_Bonds. If definitive Bonds are not ready for delivery on the Closing Date, there may be executed, and upon the request of the Issuer, the Trustee, as Bond Registrar, shall authenticate and deliver, in lieu of definitive Bonds, one or more temporary typewritten, printed or lithographed Bonds, in any Authorized Denomination, in fully registered form, and in substantially the tenor set forth above and with such appropriate omissions, insertions and variations as may be required. If temporary Bonds shall be issued, the Issuer shall prepare and deliver to the Trustee a supply of blank forms of the Bonds, executed by facsimile signatures on the forms for issuance upon subsequent transfers or in the event of partial redemption. In the event that such supply of blank forms shall be insufficient to meet the requirements of the Trustee, the Trustee shall order printed, at the Borrower's expense, an additional supply of blank forms and request their execution by manual or facsimile signature of an Authorized Officer of the Issuer then duly qualified and acting and attested by an Authorized Officer of the Issuer. The Issuer shall cause definitive Bonds to be prepared and to be executed and delivered to the Trustee, and the Trustee, upon presentation to it of any temporary Bond, shall cancel the same and authenticate and deliver in exchange therefor, without charge to the owner of such Bond, a definitive Bond or Bonds of an equal aggregate principal amount of Authorized Denominations, of the same maturity and series, and bearing interest at the same rate as the temporary Bond surrendered. Until so exchanged, the temporary. Bonds shall in all respects be entitled to the same benefit and security of this Indenture as the definitive Bonds to D()CS I-A'1:296342. 40929-170 MM3 33 be issued and authenticated under this Indenture. Interest on temporary Bands, when due and payable, if the definitive Bonds shall not be ready, shall be paid on presentation of such temporary Bonds for notation of such payment on such Bonds by the Trustee; Section 2.9 Mutilated, Last, Stolen or Destroyed Bonds. Subject to the laws of the State pertaining thereto and any other applicable law, 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, the mutilated Bond shall first be surrendered to the Trustee, and in the case of any lost, stolen or destroyed Bond, there shall be first furnished to the Trustee evidence satisfactory to it of the ownership of the Bond, and of the loss, theft or destruction, together with indemnity satisfactory to the Trustee and the Issuer and compliance with such other reasonable requirements as the Issuer and the Trustee may prescribe. If any such Bond shall have matured or be about to mature (i.e., will mature within the ensuing 60 day period), or if such Bond shall have been called for redemption or a redemption date pertaining to such Bond shall have passed, instead of replacing the Bond, the Trustee may, upon receipt of such indemnity, pay the Bond. Any mutilated Bond surrendered to the Trustee shall be cancelled by it. In connection with any such payment, the Issuer and the Trustee may charge the holder of such Bond with their reasonable fees and expenses, including attorneys fees and expenses. Section 2.10 Band Registrar; Exchange and Transfer of Bonds persons Treated as the Bondholders. At any time that the Bonds are not in the Book-Entry System, the provisions of this Section 2.10 shall govern the transfer and exchange of the Bonds. Section 2.10.1 Bond Re-2istran Bond Register. The Trustee is, by this Indenture, constituted and appointed the Bond Registrar for the Bonds. The Trustee shall beep the Bond Register for the registration of the Bonds and for the registration of transfer of the Bonds. Section 2.10.2 Transfers. Subject to the express limitations contained in this Section 2.10, any Bondholder or its attorney duly authorized in writing may transfer title to such Bond on the Bond Register kept by the Trustee, upon surrender of the Bond at the office of the Trustee designated by the Trustee for that purpose, together with a written instrument of transfer (in substantially the form of assignment, including signature guarantee, attached to the Bond) satisfactory to the Trustee executed by the Bondholder or its attorney duly authorized in writing, and upon surrender for registration of transfer of any Bond, the Issuer 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 of interest, maturity, series and tenor as the Bond surrendered and of any Authorized Denomination. Transfers of an interest in the Bonds shall be in principal amounts equal to any Authorized Denomination. Section 2.10.3 Exchanges. Subject to the express limitations contained in this Section 2.10, Bonds may be exchanged upon surrender of such Bonds at the office of the Trustee designated by the Trustee for that purpose together with a written instrument of transfer (in substantially the form of assignment, including signature guarantee, attached to the Bond) satisfactory to the Trustee, executed by the Bondholder or its attorney duly DOCS LA 3:296347. 40929-170 MM3 34 authorized in writing, for an equal aggregate principal amount of Bonds of the same aggregate principal amount, rate of interest, maturity, series and tenor as the Bonds being exchanged and of any Authorized Denomination. The Issuer 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. Section 2.10.4 Exceptions to Transfers and Exchanges. The Trustee shall not be required to register any transfer or exchange of any Bond (or portion of any Bond) called for redemption. Section 2.10.5 Charges. Registrations of transfers or exchanges of Bonds shall be without charge to the Bondholders, but any taxes or other governmental charges required to be paid with respect to a transfer or exchange shall be paid by any Bondholder requesting the registration of transfer or exchange as a condition precedent to the exercise of such privilege. Any service charge made by the Trustee for any such registration, transfer or exchange shall be paid by the Borrower. Section 2.10.6 Recognized Owners. The person in whose name any Bond is registered on the Bond Register shall be deemed and regarded as the absolute owner of such Bond for all purposes, and payment of or on account of either principal or interest shall be made only to or upon the order of such person or its attorney duly authorized in writing, but such registration may be changed as provided above in this Indenture. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid. Section 2.10.7 Bonds Protected. All Bonds issued upon any registration of 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. Section 2.10.8 Issuer's Reliance. In executing any Bond upon any exchange or registration of transfer provided for in this Section 2..10, the Issuer may rely conclusively on a representation of the Trustee that such execution is required. Section 2.11 Cancellation. All Bonds which have been surrendered pursuant to Section 2.4.3 or Section 3 of this Indenture for payment upon maturity or redemption prior to maturity shall be cancelled by the Trustee and shall not be reissued. Cancelled Bonds shall be destroyed by the Trustee unless the Trustee receives contrary instructions from the Issuer with respect to the disposition of such cancelled Bonds. Section 2.12 Ratably Secured. All Bonds issued under this Indenture are and are to be, to the extent provided in this Indenture, equally and ratably secured by this Indenture without preference, priority or distinction on account of the actual time or times of the authentication or delivery or maturity of the bonds so that all Bonds at any time Outstanding under this Indenture shall have the same right, lien and preference under and by virtue of this Indenture and shall all be equally and ratably secured by this Indenture with like effect as if they had all been executed, authenticated and delivered simultaneously on the mated Date, whether DOCS LA I:296342. 40929-170 MN.3 35 the same, or any of them, shall actually be disposed of at such date, or whether they, or any of there, shall be disposed of at some future date. Section. 2.1.3 Book-Entry System. The Bonds will be subject to a Book-Entry System of ownership and transfer, except as provided in (iii) below. The general provisions for effecting such Book-Entry System are as follows: (i) The Issuer hereby designates DTC as the initial Securities Depository hereunder. (ii) Notwithstanding the provisions regarding exchange and transfer of Bonds under this Indenture, the Bonds shall initially be evidenced by one certificate for each maturity, in an amount equal to the aggregate principal amount of such maturity. The Bonds so initially delivered shall be registered in the name of "Cede& Co." as nominee for DTC. The Bonds may not thereafter be transferred or exchanged on the registration books held by the Trustee as Bond Registrar except. _ to any successor Securities Depository designated pursuant to (iii)below; _ to any successor nominee designated by a Securities Depository; or if the Issuer shall elect to discontinue the Boob-Entry System. (iii) Upon the resignation of any institution acting as Securities Depository hereunder, or if the Issuer determines that continuation of DTC as Securities Depository is not in the best interests of the Beneficial Owners, the Issuer will: _ attempt to identify another institution qualified to act as Securities Depository hereunder; or discontinue the Book-Entry System by written action of the Issuer; provided that if the Issuer is unable to identify a successor Securities Depository prior to the effective date of the resignation, the Issuer shall discontinue the Book-Entry System. (iv) If the Issuer discontinues the Book-Entry System., the Issuer will cause the Trustee to authenticate and deliver replacement Bonds in fully registered form in Authorized Denominations in the names of the Beneficial Owners or their nominees; thereafter the provisions set forth in the Bond Form Appendices hereto regarding registration, transfer and exchange of Bonds shall apply. DOCSLA;:296342. 40929-17MM3 36 (v) So long as the .Book.-Entry System is used for the Bonds, the Trustee will give any notice of redemption or any other notices required to be given to Owners of Bonds only to the Securities Depository or its nominee registered as the Owner thereof. Any failure of the Securities Depository to advise any of its Participants, or of any Participant to notify the Beneficial Owner, of any such notice and its content or effect will not affect the validity of the redemption of the Bonds called for redemption or of any other action premised on such notice. Neither the Issuer, the Trustee, Fannie Mae nor the ,Servicer is responsible or liable for the failure of the Securities Depository or any Participant thereof to make any payment or give any notice to a Beneficial Owner in respect of the Bonds or any error or delay relating thereto. Notwithstanding the provisions of Sections 2.4 and 2.14 hereof or anything else expressed or implied herein to the contrary, so long as the Bonds are subject to the Book-Entry System, all payments on the Bonds and all transfers and exchanges of beneficial ownership interests in the Bonds shall be made in accordance with the Book-Entry System agreement entered into among the Issuer and the Securities Depository and shall be subject in all respects to the rules and regulations governing such Book-Entry System. Section 2.14 Conditions for Delivery of Bonds. The Issuer shall execute and deliver the Bonds to the Trustee for authentication, and the Trustee shall authenticate the Bonds and deliver them to or for the accounts of the purchasers of the Bonds or to such persons as the purchasers shall specify, in each case in the records of DTC, as directed by the Issuer;provided, however, that prior to delivery of the Bonds to the purchasers there shall be delivered to the Trustee the following: (i) a certified copy of the Determination of the Issuer authorizing the execution and delivery on behalf of the Issuer of the Bond Documents to which it is a party and related matters; (ii) executed original counterparts of this Indenture, the Financing Agreement, the Regulatory Agreement, the original Mortgage Note, the Mortgage, the Assignment, the Collateral Agreement, the Reimbursement Agreement, the Disclosure Agreement, the Tax Certificate, the Contract of Purchase and all other Bond Documents and Mortgage Loan Documents to be executed and delivered on the Closing Date by the parties to those documents; (iii) an Opinion of Bond Counsel to the effect that the Bands constitute valid and binding limited obligations of the Issuer, that the interest on the Tax-Exempt Bonds is excluded from gross income for federal income tax purposes and that the Indenture has been duly executed and delivered by and constitutes the valid and binding obligation of the Issuer, subject to customary qualifications on enforceability, (iv) a request and authorization by an Authorized Officer of the Issuer to authenticate and deliver the Bonds against payment therefor to or for the account of the purchasers thereof; DOCS I_A I:246342. 4"0924-1701 MM3 37 (v) receipt of the purchase price of the Bonds as set forth in the Contract of Purchase; (vi) receipt from the Borrower of the Costs of Issuance Deposit to be deposited into the Costs of Issuance Fund; (vii) receipt from the Borrower of the Initial Debt Service Deposit to be deposited into the General Receipts and Disbursements Account; (viii) evidence acceptable to the Servicer of proper recordation of the Regulatory Agreement; (ix) evidence, acceptable to Fannie Mae and the Servicer, of proper recordation of the Mortgage; or a title insurance binder acceptable to Fannie Mae and the Servicer insuring the "gap" in a manner acceptable to Fannie Mae and the Servicer, such acceptability to be evidenced by the execution and delivery of the Collateral Agreement; (x) written evidence that the Bonds have been assigned a rating in the Highest Rating Category by S&P; (xi) a copy of the Cash Flow Projection required by S&P; and (xii) the Verification Report. Section 7.15 Fannie Mae_ _Pass-Through Certificate Deliverv. Upon satisfaction of the conditions set forth in the Fannie Mae Commitment for Fannie Mae's acquisition of the Mortgage Loan in exchange for the Fannie Mae Pass-Through Certificate, the Servicer shall, following consultation with Fannie Mae to coordinate the timing of the issuance of the Fannie Mae Pass-Through Certificate and to establish the anticipated Fannie Mae Pass- Through Certificate Delivery Date and, correspondingly, the anticipated Issue Date of the Fannie Mae Pass-Through Certificate, notify the Trustee in writing (the "Fannie Mae Pass-Through Certificate Delivery notice") of the anticipated Fannie Mae Pass-Through Certificate Delivery Date and the anticipated Issue Date of the Fannie ?Viae Pass-Through Certificate. The Trustee shall, not later than three (3) Business Days following issuance of the Fannie Mae Pass-Through Certificate Delivery Notice, give written notice by first class mail to the Bondholders of the pending issuance of the Fannie Mae Pass-Through Certificate, but issuance of the Fannie Mae Pass-Through Certificate shall not require, and shall be effective without, the consent of the Bondholders. The Trustee's notice to the Bondholders shall state the anticipated Fannie Mae Pass-Through Certificate Delivery Date and the anticipated Issue Date. The Trustee and the Issuer acknowledge and agree that in consideration of the execution and delivery to the Servicer of the Trustee Assignment and the concurrent execution and delivery to Fannie Mae of the Servicer Assignment in exchange for the Fannie Mae Pass-Through Certificate, the Trustee will acquire the Fannie Mae Pass-Through Certificate or the beneficial interest in the Fannie Mae Pass-Through Certificate as provided in and subject to the terms and conditions set forth in this Indenture. On the Fannie Mae Pass-Through Certificate Delivery bate: DCICS LA E:246342. 40,424-170,MM3 38 (i) the Trustee shall (a) assign all of its right, title and interest in and to the Mortgage Lean, including the Mortgage Nate and the Mortgage, to the Servicer, effective as of the Issue Date, without recourse, pursuant to the Trustee Assignment in the form attached to this Indenture as Exhibit B or in such other form as shall be acceptable to the Trustee, the Servicer and Fannie Mae, in either case, in appropriate form for recordation, and(b)endorse the Mortgage Note to the Servicer, without recourse; (ii) the Servicer shall (a) assign all of its right, title and interest in and to the Mortgage Loan acquired pursuant to the Trustee Assignment, including the Mortgage Note and the Mortgage, to Fannie Mae, effective as of the Issue Date, without recourse, pursuant to the Servicer Assignment in the form attached to this Indenture as Exhibit C or in such other form as shall be acceptable to the Servicer and Fannie Mae, in either case, in appropriate form for recordation, and (b) endorse the Mortgage Note to Fannie Mae, without recourse; (iii) Fannie Mae shall issue the Fannie Mae Pass-Through Certificate as provided in Section 7.2.1 of this Indenture and an Issue Supplement to the Fannie Mae Trust Indenture which has attached to it a Mortgage Loan Schedule specifying the Mortgage Loan (and no other mortgage loan) as the Mortgage Loan constituting the Pool (as defined in the Fannie Mae Trust Indenture), provided that the obligation of the Trustee to accept the Fannie Mae Pass-Through Certificate is subject to satisfaction of the conditions set forth in Section 7.2.1 of this Indenture; (iv) at the request of the Servicer, the Legal Department of Fannie Mae shall issue and deliver to the Trustee an Opinion of Counsel to the effect that the Fannie Mae Pass-Through Certificate constitutes a valid and binding obligation of Fannie Mae, entitled to the benefits of the Fannie Mae Trust Indenture, subject to any applicable bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights from time to time in effect and to general equity principles; (v) the Trustee shall relinquish all of its rights and interests in the Collateral Agreement effective as of the expiration or earlier termination of the Collateral Agreement in accordance with its terms; and (vi) all other agreements, documents, instruments, certificates and opinions as the Issuer, the Trustee, the Servicer or Fannie Mae shall require, in their respective discretion, to effect Fannie Mae Pass-Through Certificate Delivery shall be delivered. The requirements for the Trustee to provide notice of the pending issuance of the Fannie Mae Pass-Through Certificate to the Bondholders are the following: (i) the Servicer shall have issued the Fannie Mae Pass-Through Certificate Notice to the Trustee prior to the Termination Date; (ii) the Servicer shall have confirmed to the Trustee that the Servicer has ordered the Fannie Mae Pass-Through. Certificate (a) in a principal amount equal to the Issue Date Principal Balance and (b) with an interest rate equal to the Fannie Mae Pass- Through Certificate Rate; s OOSi_Ai:296342. 40929-170 MM3 39 (iii)' the Trustee shall have received confirmation from the Servicer that the Servicer has received confirmation from Fannie Mae that Fannie Mae intends to issue the Fannie Mae Pass-Through Certificate; (iv) the Trustee shall have received confirmation from Fannie Mae that Fannie Mae will, on the Fannie Mae Pass-Through Certificate Delivery Date, deliver to the Trustee an Issue Supplement to the Fannie Mae Trust Indenture which will have attached to it a Mortgage Loan Schedule specifying the Mortgage Loan (and no other mortgage loan) as the Mortgage Loan constituting the Pool (as defined in the Fannie Mae Trust Indenture); (v) the Servicer shall have confirmed to the Trustee that the Servicer has received confirmation from Fannie Mae that the Fannie Mae Legal Department will issue to the Trustee on the Fannie Mae Pass-Through Certificate Delivery Date, an Opinion of Counsel to the effect that the Fannie Mae Pass-Through Certificate constitutes a valid and binding obligation of Fannie Mae, entitled to the benefits of the Fannie Mae Trust Indenture, subject to any applicable bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors"rights from time to time in effect and to general equity principles; (vi) the Trustee, the Servicer, the Issuer, the Borrower, Fannie Mae and the Rating Agency shall have received either (a) a written confirmation of the original Cash Flow Projection from a Verification Agent or(b) a then current CashFlow Projection, in the latter instance accompanied by a Verification Report, showing', that the scheduled payments to be made under the Mortgage Loan and the corresponding distributions to be made under the Fannie Mae Pass-Through Certificate, together with other Revenues, will be sufficient to timely pay the principal of and interest on the Bonds and the Fees when the same shall become due and payable; (vii) the Trustee shall have received from Bond Counsel the form of, and confirmation from Bond Counsel that, subject to satisfaction of the Fannie Mae Pass- Through. Certificate Delivery Requirements, Bond Counsel will issue to the Trustee, Fannie Mae and the Issuer on the Fannie Mae Pass-Through Certificate Delivery Date, a then current Opinion of Bond Counsel to the effect that, absent a change in law or material fact bearing on the matters covered in the form of Opinion of Bond Counsel, the substitution of the Fannie Mae Pass-Through Certificate for the Collateral Agreement is permitted by this Indenture and will not affect the excludability from gross income, for federal income tax purposes, of the interest payable on the Tax-Exempt Bonds; (viii) the Trustee shall have determined or received confirmation that all other agreements, documents, instruments, certificates and opinions as the Issuer, the Trustee or Fannie Mae shall require, in their respective discretion, to effect Fannie Mae Pass- Through Certificate Delivery have been prepared, agreed upon and accepted as to form and content by the intended recipients of such agreements, documents, instruments, certificates and opinions; DOCSLA 1:246342. 40929-170 MM3 40 (ix) the Trustee shall have received written confirmation from the Rating Agency that the Bonds will be assigned a rating, or will maintain a'rating, not less than the rating in effect prior to the Fannie Mae Pass-Through Certificate Delivery Date; (x) the Borrower shall have deposited with the Trustee moneys sufficient to pay all fees, costs and expenses (including attorneys' fees and expenses) necessary to effectuate the terms and conditions of this Section 2.15, which moneys shall be held by the Trustee, pending disbursement, in a separate escrow account; and (xi) any special mandatory redemption pursuant to Section 3.3.1(1) and/or (iv) of this Indenture shall have been made or Available Moneys shall be on deposit with the Trustee and separately identified in the Redemption Account in an amount sufficient to effect any such redemption. Section 3. Redemption of Bonds. Section 3.1 Redem tp ion. The Bonds are subject to redemption prior to maturity only as set forth in this Section 3. Section 3.2 011tional Redemption. The Bonds are not subject to optional redemption prior to November 1, 20_. Section 3.2.1 Optional Redemption On and After November 1. 20 . On and after November 1, 20—, the Bonds shall, to the extent optional prepayment of the Mortgage Loan in whole is made pursuant to and as permitted by the terms of the Mortgage Loan .Documents, be subject to corresponding optional redemption in whole, and not in part, on the first day of any month for which timely notice of redemption can be given during the periods set forth in the below table and at the respective redemption prices set forth below (expressed as percentages of the principal amounts of the Bonds called for redemption), plus accrued interest, if any: Redemption Period Redemption Prices (Both Dates Inclusive) (Expressed as a Percentage) Section 3.2.2 Available Moneys Requirement. Optional redemption pursuant to Section 3.2.1 shall not be permitted unless such redemption is effected solely with Available Moneys. Notwithstanding any other provision of this Indenture to the contrary, the optional redemption of the Bonds arising from the optional prepayment of the Mortgage Loan shall not be made, and notice of any redemption arising from the optional prepayment of the Mortgage Loan shall not be given to Bondholders, unless and until the"Trustee has on hand Available Moneys or has reasonable evidence that such amounts will be paid on the Redemption Date in an amount sufficient to pay the End Period Payment. Neither the Issuer, Fannie Mae, the Trustee nor the Servicer shall have any responsibility or liability to provide funds to be included in the End Period Payment. DOCS[.A i:296342. 40929-370 MM3 41 Section 3.2.3 Conditions to Optional Redemption Based on Prepayment of the Morrt = Loan. Linder the Financing Agreement, the Borrower is required to provide to the Trustee, the Servicer and Fannie Mae written notice of the optional prepayment of the Mortgage Loan, not less than sixty(60) days prior to the date of the prepayment. As soon as practicable after receipt of such notice, the Trustee shall send notice, in accordance with Section 3.4 of this Indenture, of redemption of the Bonds to the Bondholders, Fannie Mae and the Rating Agency. Under the Mortgage Note,prepayment of the Mortgage Loan must be made on the last Business Day of a month, and therefore on a day immediately preceding a scheduled payment date under the Mortgage Note. Section 3.2.4 Timing. Following the Fannie Mae Pass-Through Certificate Delivery Date, an optional prepayment of the Mortgage Loan will be distributed by Fannie Mae on the Distribution Date in the month following the month in which the prepayment is made by the Borrower. Because of the timing of the distribution of the prepayment of the Mortgage Loan under the Fannie Mae Pass-Through Certificate, the Redemption Date of any such optional redemption shall be the first day of the month following the month in which falls the Distribution Date on which Fannie Mae will distribute the prepayment of the Mortgage Loan. Section 3.3 Special Mandatory Redemption. Section 3.3.1 Special Mandatory Redemption from Unexpended Net Bond Proceeds, Special Mandatory Redemption Prior to the Fannie Mae Pass-Through Certificate Deliyery Dater Special Mandator y Redemption_ Upon Mandatory Mortgage Loan Prepayment in Part. Prior to the Fannie Mae Pass-Through Certificate Delivery Date, the Bonds are subject to special mandatory redemption plus accrued interest to the redemption date: (i) in part, from Net Bond Proceeds remaining in the Mortgage Loan Fund or the Rehabilitation Fund which are transferred to the Redemption Account pursuant to Section 4.3.3 or Section 4.7.3, as the case may be, of this Indenture for application to the redemption of Bonds; or (ii) in whole or in part, as applicable, from proceeds of insurance from any casualty to, or proceeds of any award from any condemnation or any award as part of a settlement in lieu of condemnation, of the Project which are not applied in accordance with the Mortgage Loan Documents to the rebuilding, restoration or replacement of, or other improvements to, the Project, or, with the prior written consent of Fannie Mae, otherwise used for improvements to the Project, or applied to the reimbursement of amounts owed to Fannie Mae pursuant to the Reimbursement Agreement as follows: (a)in whole, upon the involuntary destruction or loss of the Project in its entirety or nearly in its entirety as a result of casualty or condemnation, such special mandatory redemption to be a redemption of all of the Bonds Outstanding and, therefore, in a principal amount at least equal to the unpaid principal balance of the Mortgage Loan, provided that the Trustee shall be entitled to payment under the Collateral Agreement, in accordance with its terms, to the extent the insurance or condemnation proceeds, as applicable, applied to the payment of the Mortgage Note, and moneys, if any, on deposit in the Funds and Accounts(other than the Rebate Fund)are less than the unpaid principal balance of the Mortgage Note and are, therefore, insufficient to redeem all of the Bonds DOC SLA 1:296342. 40929-170 MM3 42 Outstanding and (b) in part, upon the partial destruction or condemnation of the Project, such special mandatory redemption of Bonds to be a redemption of Bonds Outstanding in a principal amount equal to the insurance or condemnation proceeds received with respect to the Project; (iii) in whole or in part, at the written direction or with the prior written consent of Fannie Mae to the Trustee and in the amount specified by Fannie Mae, following any event of default under the Mortgage Loan, including any default under the Mortgage Note, the Mortgage or any other Mortgage Loan Document or any "Event of Default" under and as defined in the Reimbursement Agreement or the Financing Agreement (including any Event of Default under, and as defined in, the Reimbursement Agreement or the Financing Agreement caused by a default under the Mortgage Note, the Mortgage or any other Mortgage Loan Document); and (iv) in part, upon the Trustee's receipt of written notice from the Servicer(with a copy to Fannie Mae) that the Mortgage Loan is subject to mandatory prepayment in part in an amount equal to the difference between the outstanding principal balance of the Mortgage Loan and the Maximum Mortgage Loan Amount (as such term is defined in, and determined in accordance with, the terms and conditions of, the Fannie Mae Commitment) permitted by the Fannie Mae Commitment and directing the Trustee to effect a special mandatory redemption of a corresponding principal amount of the Bonds. A special mandatory redemption pursuant to paragraph(i), (ii), (iii) or (iv) above shall be effected on the earliest practicable Redemption Date for which timely notice of redemption can be given pursuant to Section 3.4 of this Indenture following the occurrence of any of the events described in such paragraphs, provided that a special mandatory redemption under paragraph(i)(A) shall be effected only after the Trustee has made the final transfer, if any, pursuant to Section 4.3.3 or Section 4.7.3 of this Indenture to the Redemption Account from the Mortgage Loan Fund (and, therefore following the final disbursement from the Mortgage Loan Fund) or from the Rehabilitation Fund (and, therefore, following the final disbursement from the Rehabilitation Fund), as the case may be. A special mandatory redemption pursuant to paragraph(i), (ii), (iii) or (iv) above shall be at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest on such Bonds to the Redemption Date. Notwithstanding the provisions of this Section 3.3.1, the Trustee shall not give notice of a special mandatory redemption pursuant to paragraph(iv) above unless it has received (a) a then current Cash Flow Projection, accompanied by a Verification Report, showing that the scheduled payments to be made under the Mortgage Note following the proposed prepayment and re- amortization of amounts due under the Mortgage Note, together with other Revenues and other moneys held under this Indenture available for such purpose, will be sufficient to pay timely the principal of and interest on the Bonds and the Fees (to the extent included in the Mortgage Note Rate)when the same shall become due and payable, and(b)a written Rating Confirmation. Section 3.3.2 Special Mandatory Redemption From Certain Fannie Mae Pass-Through Certificate Distributions. The Bonds are subject to special mandatory redemption in whole or in part after the Fannie Mae Pass-Through Certificate Delivery Date and prior to their stated maturity at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest to the Redemption Date, but DOCSLA 1:296342. 40929-170 MM3 43 without premium, in each case from and to the extent that the Trustee receives a distribution under the Fannie Mae Pass-Through Certificate resulting from: (i) Fannie Mae's determination that the Mortgage Loan is or is to be deemed a Fully Prepaid Mortgage Loan (other than by reason of optional prepayment of the entire principal balance of the MortgageDoan prior to final maturity, causing an optional redemption of the Bonds pursuant to Section 3.2 of this Indenture); or (ii) other moneys received by Fannie Mae on account of the Mortgage Loan (other than by reason of optional prepayment of the entire unpaid principal balance of the Mortgage Loan prior to final maturity, causing an optional redemption of the Bonds pursuant to Section 3.2 of this Indenture), including, without limitation, prepayment as a result of a casualty or condemnation affecting the Project, or a default under the Mortgage Loan; provided, however, that at the direction of Fannie Mae, all or part of the proceeds of any such prepayment of the Mortgage Loan shall be used, in lieu of redeeming Bonds, to acquire a Substitute Fannie Mae Pass-Through Certificate pursuant to Section 7.2.2(b) of this Indenture. Because of the timing of the distribution under the Fannie Mae Pass-Through Certificate, the Redemption Date of any such special mandatory redemption shall be the first day of the month following the month in which falls the Distribution Date on which Fannie .Mae will mare such distribution. Section 3.3.3 Special Mandatory Redemption Upon Purchase of Fannie Mae Pass-Through Certificate. In the event that Fannie Mae is in default in its payment obligations under the Fannie Mae Pass-Through Certificate, the Trustee is authorized to accept from Fannie Mae an offer to purchase the Fannie Mae Pass-Through'Certificate from the Trustee at a purchase price not less than the Stated Principal Balance (as defined in the Fannie Mae Trust Indenture and specified in writing to the Trustee by Fannie Mae or the Servicer) of the Mortgage Loan plus accrued interest. If such a purchase occurs, the Trustee shall thereafter immediately call all of the Outstanding Bonds for redemption on the first day for which the requisite notice of redemption can be given but in no event more than ten (10) days after the Trustee receives the purchase price from Fannie Mae, and shall apply the proceeds received from Fannie Mae in respect of purchase of the Fannie Mae Pass-Through Certificate, together with Available Moneys held by the Trustee, to the payment of the redemption price of the Bonds. No such offer from Fannie Mae shall be accepted by the Trustee unless the Available Moneys held by the Trustee under this Indenture, together with the amounts to be paid by Fannie Mae in respect of the purchase of the Fannie Mae Pass-Through Certificate, are sufficient to pay in full the principal amount of the Bonds Outstanding and interest accrued and to accrue on such Outstanding Bonds to the Redemption Date. Any redemption of Bonds pursuant to this Section 3.3.3 shall be at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued and unpaid interest on the Bonds to the Redemption Date, but without premium. DOC'SLA 1:296342. 40929-170 MM3 44 Section 3.3.4 Mandatory Sinking Fund Redemption. (a) Bonds Maturing--on November 1. 20 . The Bonds maturing on November 1, 20 (the"20 Term Bonds") are subject to mandatory redemption in part, by lot,prior to maturity, on each May 1 and November 1 of the years and in the aggregate principal amounts set forth in Schedule I hereto, any such redemption to be at a redemption price equal to 100% of the principal amount of the 20 Term Bonds to be redeemed, plus accrued interest,to the Redemption Date,but without premium. If less than all of the 20 Term Bonds shall have been redeemed other than pursuant to the provisions of this Section 3.3.4(a), the principal amount of 20_Term Bonds to be redeemed in each year under this Section 3.3.4(x) pursuant to Schedule I hereto shallbe decreased by an amount (and the Trustee shall redeem as nearly as practicable a corresponding principal amount of 20 Terra Bonds), in proportion, as nearly as practicable, to the decrease in the distributions under the Fannie Mae Pass-Through Certificate in such year or, if there is no decrease in the distributions under the Fannie Mae Pass-Through Certificate, pro rata among the principal amounts of 20_ Term Bonds required to be redeemed in each subsequent year pursuant to this section. The Servicer shall provide written notification to the Trustee of the amount of the decrease, if any in the amount of such distributions and the Trustee shall not be held liable in relying on such notification for purposes of this section. (b) Bonds Maturing on :May 1. 20—. The Bonds maturing on May 1, 20® (the "20_ Term Bonds") are subject to mandatory redemption in part, by lot, prior to maturity, on each May I and November 1 of the years and in the aggregate principal amounts set forth in Schedule II hereto, any such redemption to be at a redemption price equal to 100% of the principal amount of the 20— Term Bonds to be redeemed, plus accrued interest, to the Redemption Date,but without premium: If less than all of the 20_Term Bonds shall have been redeemed other than pursuant to the provisions of this Section 3.3.4(b), the principal amount of 20 Terra Bonds to be redeemed in each year under this Section 3.3.4(b) pursuant to Schedule II hereto shall',be decreased by an amount (and the Trustee shall redeem as nearly as practicable a corresponding principal amount of 20 Term Bonds), in proportion, as nearly as practicable, to the decrease in the distributions under the Fannie Mae Pass-Through Certificate in such year or, if there is no decrease in the distributions under the Fannie Mae Pass-Through Certificate, pro rata among the principal amounts of 20_ Term Bonds required to be redeemed in each subsequent year pursuant to this section. The Servicer shall provide written notification to the Trustee of the amount of the decrease, if any in the amount of such distributions and the Trustee shall not be held liable in relying on such notification for purposes of this section. Section 3.4 Notice of Redemption. Section 3.4.1 Notice Requirement. Notice of the call for redemption of any Bonds shall be given by the Trustee in the name and on behalf of the Issuer not less than 30 nor more than 45 days prior to the anticipated Redemption Date to the Registered Owner of each Bond to be redeemed at the address of such Registered Owner as shown on the Bond Register, provided that notice of any optional redemption pursuant to 'Section 3.2 of this DOC'S LA i:296342. 40929-170 MM3 45 Indenture or any special mandatory redemption pursuant to Section 3.3!1, Section 3.3.2 or Section 3.3.3 of this Indenture may be given not less than 15 nor more than 20 days prior to the date fixed for such redemption. Notwithstanding the foregoing, so longas the Book-Entry System is maintained in effect, notice of redemption shall be given to the entity designated in any agreement between the Issuer and DTC relating to the Book-Entry System and otherwise in accordance with the rules and regulations instituted with respect to the Book-Entry System, provided that notice shall not be required to be given more than 20 days prior to the date fixed for such redemption, and the Trustee shall not be required to give any other notice of redemption. In the event of. (i) a prepayment that will give rise to an optional redemption under Section 3.2, (ii) a special mandatory redemption under Section 3.3.1, (iii) a prepayment of amounts payable to the Trustee under the Fannie Mae Pass-Through Certificate that will give rise to a special mandatory redemption under Section 3.3.2 of this Indenture, or (iv) a purchase by Fannie Mae of the Fannie Mae Pass-Through Certificate that will give rise to a special mandatory redemption under Section 3.3.3 of this Indenture, then: (A) immediately following receipt of notice of a prepayment that will give rise to a Fannie Mae Pass-Through Certificate distribution that in turn will give rise to an optional redemption under Section 3.2 of this Indenture, (B) immediately following receipt of any funds due from Fannie Mae with respect to a special mandatory redemption under paragraph(ii) or (iii) of Section 3.3.1 of this Indenture or immediately following receipt of Fannie Mae's written direction or written consent with respect to a special mandatory redemption under paragraph(iii) of Section 3.3.1 of this Indenture or immediately following receipt of notice from the Servicer of a mandatory prepayment of the Mortgage Loan resulting in a mandatory redemption under paragraph(iv) of Section 3.3.1 of this Indenture, (C) immediately following receipt of notice of a Fannie Mae Pass- Through Certificate distribution that will give rise to a special mandatory redemption under Section 3.3.2 of this Indenture, or (D) immediately following receipt by the Trustee of notice from.Fannie Mae that a purchase is to be made in the case of a special mandatory redemption under Section 3.3.3 of this Indenture, DOCsi.A t:296342. 40929-170 MM3 46 the Trustee shall select the Bonds to be redeemed pursuant to Section 3.2, Section 3.3.1, Section 3.3.2 or Section 3.3.3 of this Indenture, as the case may be, and notify the Securities Depository by Electronic Means of the redemption of Bonds on the date fixed for redemption of Bonds in accordance with Section 3.2, Section 3.3.1, Section 3.3.2 or Section 3.3.3 of this Indenture, as the case may be. Whenever possible, the Trustee shall try to provide notice of any redemption to the Securities .Depository, at least 20 days prior to the Redemption Date (15 days in the case of redemption under Section 3.2, Section 3.3.1, Section 3.3.2 or Section 3.3.3 of this Indenture). With respect to any redemption that takes place at any time that the Bonds are not subject to the Book-Entry System, the Trustee shall cause a second notice of redemption to be sent by first class mail, postage prepaid, on or about the 45th day following the Redemption Date, to any Bondholder who has not submitted its Bond to the Trustee for payment on or before the 45th day following the Redemption Date. Notice of redemption may be given by the Trustee prior to the receipt of all funds necessary to effect the redemption, in which event such notice shall state that it may be rescinded if all conditions to such redemption are not satisfied; provided that an optional redemption under Section 3.2.1 hereof or a special mandatory redemption under Section 3.3.1 hereof shall not occur unless and until the Trustee has on deposit and available or, if applicable, has received from Fannie Mae, all of the funds necessary to effect such optional or special mandatory redemption, and such redemption shall be cancelled if, as of the date fixed for redemption, the Trustee does not have on deposit and available or, if applicable, shall not have received from Fannie Mae, all of the funds necessary to effect such redemption. Section 3.4.2 Content of Notice. Each notice of redemption shall state: (i) the date of the redemption notice; (ii) the date of issue of the Bonds as originally issued and the complete official name of the Bonds, including the series designation; (iii) the numbers of the Bonds to be redeemed, by giving the individual certificate number of each Bond to be redeemed (or stating that all Bonds between two stated certificate numbers, both inclusive, are to be redeemed, or that all or a stated portion of the Bonds of one or more maturities have been called for redemption); (iv) the CUSIP numbers of all Bonds being redeemed; (v) in the case of a partial redemption of Bonds, the principal amount of each Bond being redeemed; (vi) the rate or rates of interest borne by each Bond being redeemed; (vii) the maturity date of each Bond being redeemed; (viii) the place or places where amounts due upon such redemption will be payable; :iC3L'S L.A i:296342. 40929-1700 MM3 47 (ix) the Redemption Date and redemption price of each Bond being redeemed; (x) the name, address and telephone number and the office of the Trustee with respect to such redemption; (xi) that all Bonds to be redeemed are required to be surrendered at the office of the Trustee designated by the Trustee for that purpose for redemption at the redemption price; (xii) that interest on such Bonds will not accrue from and after the Redemption Date; and (xiii) that optional redemption pursuant to Section 3.2 or special mandatory redemption pursuant to Section 3.3.1 is conditional upon receipt by the Trustee of sufficient Available Moneys to redeem the Bonds. Section 3.4.3 Additional Notice. Notice of redemption also shall be sent by the Trustee by any secure overnight means, charges prepaid, at the same time notice is mailed to the Registered Owners pursuant to Section 3.4.1 of this Indenture to (a) the Rating Agency, (b) any Registered Owner of $1,000,000 or more in aggregate principal amount of Bonds to be redeemed, if the Bonds are not subject to the Book-Entry System, (c) certain municipal registered Securities Depositories (described below) which are known to the Trustee, on the second Business Day prior to the date the notice of redemption is mailed to the Bondholders, to be holding Bonds, if the Bonds are not subject to the Book-Entry System, and (d) at least two (2) of the national information services (described below) that disseminate securities redemption notices. For this purpose. (i) Securities Depositories include: The Depositary Trust Company, 711 Stewart Avenue, Garden City, New York 11530, Fax-(516) 227-4039 or 4110; Midwest Securities Trust Company, Capital Structures-Call Notification, 440 South LaSalle Street, Chicago, Illinois 64605, Fax-(312) 663-2.343; Philadelphia Depository Trust Company, Reorganization Division, 1900 Market Street, Philadelphia, Pennsylvania 19103, Attention; Bond Department, Fax-(215) 495-5058; or, in accordance with the then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other securities depositories or any such other depositories as the Issuer may designate in writing to the Trustee; and (ii) Information Services include: Financial Information, Inc. "Daily Called Bond Service," 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302, Attention: Editor; Kenny Information Services, "Called Bond Service," 65 Broadway, 16th Floor, New York, New York 10004; Moody's Investors Service"Municipal and Government," 99 Church Sheet, 8th Floor, New York, New York 10007, Attention: Municipal News Reports; and Standard and Poor's Ratings Group "Called Bond Record," 25 Broadway, New York, New York 10004; or, in accordance with then current guidelines of the Securities and DOC"S .A::295342. 40929-170 MV13 48 Exchange Commission, such other addresses and/or such other services providing information with respect to called bonds, or any other such services as the Issuer may designate in writing to the Trustee. Section 3.4.4 Validity of Proceedings far the Redemption of Bands. Neither failure to give or receive any notice described in Sections 3.4.1 or 3.4.3 of this Indenture, nor any defect in any notice (or in its content, as required by Section 3.4.2 of this Indenture or in the manner in which notice is given), nor the failure to give any such notice within the time period required under this Indenture, shall affect the validity or sufficiency of any proceedings for the redemption of the Bonds to be redeemed. Section 3.4.5 Revocation of Notice; Cancellation of Redemption. Any notice of optional redemption under Section 3.2 hereof or special mandatory redemption under Section 3.3.1 hereof given as provided herein shall be revoked by the Trustee by notice given in the same manner as provided herein for the giving of notice of redemption or by Electronic Means, confirmed in writing, and the redemption cancelled, if Available Moneys or, if applicable, other funds, sufficient to effect such redemption have not been received by, or are not on hand with, the Trustee five (5)days prior to the Redemption Date. Section 3.4.6 Copies to Fannie Mae. The Trustee shall provide to Fannie Mae and the Servicer copies of all notices given under this Section 3.4 and of all cancellations of notices, but neither the failure to give such notice to Fannie Mae or the Servicer nor any defect in such notice shall affect the validity of any proceedings for the redemption of the Bonds. Section 3.5 Redemption Payments. If on a Redemption Date, Available Moneys in an amount sufficient (including principal, interest and premium, if any) to effect the redemption of the Bonds to be redeemed on such Redemption Date are held by the Trustee for the purpose of effecting the redemption of such Bonds, the Bonds called for redemption shall become due and payable on such Redemption Date, interest on those Bonds shall cease to accrue on such Redemption Date and the called Bonds shall no longer be deemed Outstanding; the Registered Owners 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 from the moneys held by the Trustee for such purpose upon surrender of such Bonds to the Trustee. Except during any period in which the Bonds are subject to the Boob-Entry System: (i) no payment shall be made by the Trustee upon any Bond or portion of a Bond called for redemption until such Bond or portion shall have been presented and surrendered for payment or cancellation or the Trustee shall have received the items required by Section 2.9 of this Indenture with respect to any mutilated, lost, stolen or destroyed Bond; and (ii) if there shall be so called for redemption less than the entire principal amount of a Bond, the Issuer shall execute, and the Trustee shall authenticate and deliver, upon the surrender of such Bond to the Trustee, without charge by the Issuer or the Trustee to the Bondholder, in exchange for the DOCSL.A 1:296342. 40929-170 MM3 49 unredeemed principal amount of such Bond, a new Bund or Bonds of the same interest rate, maturity and term, in any Authorized Denomination, in aggregate principal amount equal to the unredeemed balance of the principal amount of the Bond so surrendered. During any period in which the Bonds are subject to the Book-Entry System, the rules, regulations and practices governing the Book-Entry System shall govern whether and the extent to which the Trustee shall mare payments on any Band called for redemption with or without surrender of the Bond (or portion of the Bond) to be redeemed, and the circumstances (if any) under which the Issuer shall be required to execute, and the Trustee shall authenticate and deliver, a new Bond in exchange for the unredeemed portion of any Bond called for redemption in part. All moneys held by or on behalf of the Trustee for the redemption of particular Bonds shall be held in trust for the account of the holders of the Bonds to be redeemed as provided in and in accordance with Section 4.10 of this Indenture. Section 3.6 Cancellation of Bonds. All Bonds which have been redeemed, paid, retired or delivered to the Trustee for exchange shall not be reissued but shall be cancelled and destroyed by the Trustee as provided in Section 2.11 of this Indenture, except to the extent the certificate evidencing any redeemed or paid Bond has not been delivered to the Trustee as a result of such Bond being subject to the Book-Entry System. Section 3.7 Selection of Bonds to be Redeemed Upon Partial Redemption of Bonds. Except in the case of Bonds redeemed in part pursuant to Sections 3.3.4(a), 3.3.4(b) or 3.3.4(c) hereof, if less than all of the Outstanding Bonds are to be called for redemption, Bonds to be redeemed shall be selected by the Trustee on a reasonably proportionate basis, in minimum amounts of $5,000, from among all the then existing maturities of the Bonds Outstanding, such reasonably proportionate basis to be determined and effectuated as nearly as practicable by multiplying the total amount of money available to redeemBonds by the ratio which the principal amount of Bonds Outstanding in each maturity bears to the principal amount of all of the Bonds Outstanding, and within a maturity by lot,provided that with respect to any redemption of Bonds in part pursuant to Section 3.2, 3.3.1 or 3.3.2 of this Indenture, the sufficiency of the scheduled payments on the Mortgage Loan and the 'scheduled monthly distributions to be made under the Fannie Mae Pass-Through Certificate and Investment Income with respect to the General Receipts and Disbursements Account to pay the principal of and interest on the Bonds and the Fees, to the extent included in the Pass-Through hate, when due and payable after such redemption, shall be established by a then current Cash Flow Projection which shall be verified by a Verification Report (upon each of which the Trustee may rely), each prepared and delivered to the Trustee, the Servicer and Fannie Mae at least 45 days prior to the Redemption Date, which Cash Flow Projection and Verification Report shall be prepared at the expense of the Borrower whose Mortgage Loan has given rise to such redemption. In the event that any Bonds of the same maturity are to be redeemed in part, the Trustee!shall assign to each Bond then Outstanding a distinctive number for each $5,000 of the principal amount of such Bond and from the numbers so assigned to such Bonds, the Trustee shall randomly select as many numbers as, at $5,000 for each number, shall equal the principal amount of such Bonds to be redeemed. The Bonds within a maturity that are to be redeemed shall be the Bonds to which are assigned the numbers selected by the Trustee, but only so much of the principal amount of each such Bond of a denomination of more than $5,040 shall be redeemed as shall equal $5,000 DOCSIA 1:296342. 40929 70 MM3 50 for each number assigned to it and so selected.. Bonds may be redeemedonly in Authorized Denominations. Notwithstanding the foregoing, so long as the Bonds remain in the Book-Entry System, the DTC Participants interests in the Bonds to be redeemed shall be selected by DTC, or any successor Securities Depository, and the DTC Participant through such selection process as is applicable at such time. For the purposes of this Section 3.7, Bonds which have theretofore been selected for redemption shall not be deemed Outstanding. Section 3.8 Purchase of Bands In Lieu of Redemption. (a) The Issuer may purchase or cause to be purchased any Bonds in lieu of redemption of such Bonds (in which event any Bonds so purchased shall be cancelled as provided in Section 2.11) or for any other purpose pursuant to written instructions given by the Issuer to the Trustee. The issuer or the Trustee shall pay the purchase price of such Bonds together with accrued interest thereon from such funds as may be available therefor pursuant to this Indenture, or as otherwise may be made available by the Issuer. (b) If at any time moneys are held in any Fund or Account to be used to redeem Bonds, in lieu of such redemption the Borrower or the Issuer at the request of the Borrower may in writing direct the Trustee, at the expense of the Borrower, to use part or all of such moneys to purchase Bonds which would otherwise be subject to redemption from such moneys. The purchase price of such Bonds (excluding accrued interest, but including any brokerage and other charges) shall not exceed the applicable redemption price of the Bonds which would be redeemed but for the operation of this Section 3.8 (accrued interest to be paid from the same Fund or Account from which accrued interest would be paid upon the redemption of such Bonds). Any such; purchase must be completed prior to the time notice would otherwise be required to be given to redeem the Bonds and may not occur, without the consent of the Trustee, after a Record Date. All Bonds so purchased shall be cancelled by the Trustee and the face amount of the Bonds so purchased shall be applied as a credit against the Issuer's obligation to redeem such Bonds from such moneys. Savings resulting from the purchase of Bonds at less than their respective redemption prices shall be used to purchase or redeem additional Bonds to the extent permitted by the provisions of this Indenture. (c) The Issuer may from time to time in its discretion direct the Trustee to invite the submission of tenders for sale of Bonds to the Issuer or a person designated by the Issuer, either by public offer or private invitation, at such prices or bidding procedures as may be determined by the Issuer. Such tender invitations may be in lieu of redemption of Bonds or for any other purpose. Section 4. Funds and.Accounts. Section 4.1 Creation of Funds and Accounts. There are created by the Issuer and established with the Trustee the following Funds and Accounts to be held and administered by the Trustee in accordance with the provisions of this Indenture: (i) the Mortgage Loan Fund; DOCSLA1:296342. 40929-170 WIM3 51 (ii) the Revenue Fund and within the Revenue Fund, the General Receipts and Disbursements Account, the Credit Facility Account(and within the Credit Facility Account, a Pass-Through Rate Subaccount and a Principal Subaccount), the Redemption Account, the Ineligible Moneys Account and the Fees Account; (iii) the Costs of Issuance Fund, (iv) the Rehabilitation Fund, and (v) the.Rebate Fund. Section 4.2 Initial Deposits. Can the Closing Date, the Trustee shall make the following deposits: (i) $ representing the Net Bond Proceeds, shall be deposited into the Mortgage Loan Fund; (ii) $ , representing accrued interest on the Bonds, shall be deposited into the General Receipts and Disbursements Account; (iii) $ , representing the Initial Debt Service Deposit, shall be deposited into the General Receipts and Disbursements Account; (iv) $ , representing the Costs of Issuance Deposit, shall be deposited into the Costs of Issuance Fund; and (v) $0.40 shall be deposited into the Rehabilitation Fund. Section 4.3 The Mortgage Loan Fund. Section 4.3.1 Deposit. The Trustee shall receive the Net Bond Proceeds and deposit them into the .Mortgage Loan Fund as provided in paragraph(i) of Section 4.2 of this Indenture. Section 4.3.2 Disbursements from the Mortgage Loan Fund. The Net Bond Proceeds on deposit in the Mortgage Loan Fund shall be disbursed by the Trustee in a single disbursement, such disbursement to be made on the Closing Date (if the applicable conditions set forth in this Section 4.3.2 and in Section 4.2 of the Financing Agreement have been satisfied) or as soon after the Closing Date as the requirements of this Section 4.3.2 and Section 4.2 of the Financing Agreement have been satisfied, in an amount approved by the Servicer, solely to pay the specified portion of the Costs of the Project approved by the Servicer. This single disbursement from the Mortgage Loan Fund shall be made by the Trustee only upon receipt by the Trustee of a 'Mortgage Loan Fund Requisition Certificate, signed by the Authorized Borrower Representative and approved by the signature of an .Authorized Servicer Representative. The Trustee shall have no duty to determine whether the requested disbursement from the Mortgage Loan Fund is a proper charge against the Mortgage Loan Fund, but shall make such disbursement upon receipt of a Mortgage Loan Fund Requisition Certificate signed by I3CCS I,A I:296342. 40929-170 MM3 52 the Authorized Borrower Representative and approved by the signature of an Authorized Servicer Representative. The written approval of the Authorized Servicer Representative and in the amount so approved by the Authorized Servicer Representative on the Mortgage Loan Fund Requisition Certificate shall be deemed a certification and, insofar as the Trustee and the Issuer are concerned, constitute conclusive evidence, that all of the terms, conditions and requirements applicable to the disbursement have been fully satisfied. This disbursement from. the Mortgage Loan Fund shall be made prior to any disbursement from the Rehabilitation Fund pursuant to Section.4.7 of this Indenture. Notwithstanding any provision of this Indenture to the contrary, the disbursement from the Mortgage Loan Fund is expressly conditioned on the Trustee's receipt of the Collateral Agreement. The Mortgage Loan Fund Requisition Certificate with respect to the disbursement from the Mortgage Loan Fund, signed by the Authorized Borrower Representative and approved by the Authorized Servicer Representative shall be paid on the day received by the Trustee, if received by noon, Pacific time, on any Business Day, or on the neat Business Day if received after noon, Pacific time. Investment Income on the Mortgage Loan Fund, if any, shall, upon receipt, be transferred to, and deposited into, the General Receipts and Disbursements Account. Section 4.3.3 Transfers to Effect Certain Special_ :?Mandatory Redemptions_of Bonds. Any amount remaining on deposit in the Mortgage Loan Fund on the first to occur of the Business Day immediately fallowing payment of the single disbursement from the Mortgage Loan Fund, or the Termination Date shall be transferred on such date, as applicable, to the Redemption Account of the Revenue Fund and applied to the redemption of Bonds pursuant to paragraph(i) of Section 3.3.1 of this Indenture,provided that any amount in excess of a multiple of $5,000 shall be transferred on such date to the General Receipts and Disbursements Account of the Revenue Fund. Immediately prior to any special mandatory redemption of :Bonds pursuant to paragraph(ii)(a) of Section 3.3.1 or paragraph(iii) of Section 3.3.1 of this Indenture, as the case may be, any amounts then remaining in the Mortgage Loan Fund shall, at the written direction of Fannie Mae, be transferred to the Redemption Account of the Revenue Fund to be applied to the redemption of Bonds pursuant to paragraph(ii)(a) of Section 3.3.1 or paragraph(iii) of Section 3.3.1 of this Indenture, as the case may be. Section 4.4 The Revenue Fund. Section 4.4.1 General. honeys in the Revenue Fund shall be used solely for the purposes set forth in Section 4.4.4 of this Indenture. Section 4.4.2 Aging of -Moneys. Notwithstanding anything contained in this Indenture to the contrary, all moneys deposited to the credit of the Revenue Fund which do not constitute Available Moneys at the time of such deposit, shall be held in the Ineligible Moneys Account of the Revenue Fund until such time as the same constitute Available ?Moneys under this Indenture; provided that, in each case, after such moneys shall become Available Moneys (or if at the time of deposit such moneys are Available Moneys), such moneys shall be transferred to the General Receipts and Disbursements Account or the Redemption Account of the Revenue Fund, as appropriate;providedfurther further that this Section 4.4.2 shall have no applicability to. (a) the Initial Debt Service Deposit, (b)any payment received by the Trustee DOCSLA 1:290342. 40929-170 MM3 S3 which constitutes a Required Mortgage Payment (as defined in the Collateral Agreement), (c)Investment Income arising out of the investment of any such Required Mortgage Payment, or (d) any earnings from time to time on deposit in the Fees Account. The Trustee shall establish separate subaccounts for all such moneys so as to ensure the separate identity of moneys received on a given date from each discrete source for the credit of such account frommoneys received on any other date from each discrete source for the credit of such account and to separately identify moneys intended by the Borrower for eventual transfer to the General Receipts and Disbursements Account or the Redemption Account of the Revenue Fund. Section 4.4.3 Deposits Into the Accounts of the Revenue Fund. (a) Deposits Into the General Receipts and Disbursements Account. The Trustee shall deposit each of the following amounts into the General Receipts and Disbursements Account of the Revenue Fund. (i) on the Closing Date, the accrued interest, if any, on the Bonds, as provided in Section 4.2(ii)of this indenture; (ii) on the Closing Date, the Initial Debt Service Deposit, as provided in Section 4.2(iii)of this Indenture; (iii) prior to the Fannie Mae Pass-Through Certificate Delivery Date, all regularly scheduled payments of principal, if any, and interest on the Mortgage Loan; (iv) prior to the Fannie Mae Pass-Through Certificate Delivery Date, any transfer from the Credit Facility Account pursuant to Section 4.4.5 of this Indenture; (v) prior to the Fannie Mae Pass-Through Certificate Delivery Date, interest paid in connection with any prepayment of the Mortgage Loan; (vi) after the Fannie Mae Pass-Through Certificate Delivery Date, upon receipt, all distributions of principal and interest under the Fannie Mae Pass- Through Certificate; (vii) after the Fannie Mae Pass-Through Certificate Delivery Date, the interest component of any prepayment of the Fannie Mae Pass-Through Certificate (specifically excluding the principal component of any prepayment of the Fannie Mae Pass-Through Certificate, which principal component prepayment shall, as provided in Section 4.4.3(b)(ii) of this Indenture, be deposited into the Redemption Account); (viii) all Investment Income on the Funds and. Accounts (except that Investment Income earned on amounts on deposit in the Rehabilitation Fund shall be credited to and be retained in the Rehabilitation Fund, 'Investment Income earned on accounts on deposit in the Rebate Fund shall be credited to and be retained in the Rebate Fund and Investment Income earned on amounts on deposit DOCS I.A;;296342. 4£3929-170 M V13 54 in the Costs of Issuance Fund which is not attributable to Net Bond Proceeds or the Investment Income on Net Bond Proceeds shall be credited to and be retained in the Costs of Issuance Fund); (ix) from time to time, upon receipt, Available Moneys provided by or on behalf of the Borrower pursuant to Section 3.2.2 of this Indenture to fund the interest portion of any End-Period Payment; and (x) any other moneys made available for deposit into the General Receipts and Disbursements Account from any ether source, and moneys held in the Ineligible Moneys Account of the Revenue Fund and transferred to the General Receipts and Disbursements Account,provided that such moneys shall be transferred to the general Receipts and Disbursements Account only after they shall have become Available Moneys. (b) Deposits Into the Redemption Account. The Trustee shall deposit each of the following amounts into the Redemption Account of the Revenue Fund: (i) prior to the Fannie Mae Pass-Through Certificate Delivery Date, any prepayment of principal of the Mortgage Loan, and any premium on the Fonds to be pard in connection with such prepayment; (ii) prior to the Fannie Mae Pass-Through Certificate Delivery Date, that portion of any other deposit or transfer of funds representing principal corresponding to the principal to be paid on any optional or special mandatory redemption of the Bonds; (iii) prior to the Fannie Mae Pass-Through Certificate Delivery Date, any transfer from the Credit Facility Account pursuant to Section 4.4.5 of this Indenture; (iv) prior to the Fannie Mae Pass-Through Certificate Delivery Date, any other moneys to be transferred to the Redemption Account pursuant to any provision of this Indenture; (v) any amounts required to be transferred to the Redemption Account pursuant to Section 4.3.3 of this Indenture; (vi) any amounts required to be transferred to the Redemption Account pursuant to Section 4.7.3 of this Indenture; (vii) after the Fannie Mae Pass-Through Certificate Delivery Date, distributions under the Fannie Mae Pass-Through Certificate corresponding to a voluntary prepayment of principal of the Mortgage Loan; (viii) after the Fannie Mae Pass-Through Certificate Delivery Date, distributions under the Fannie Mae Pass-Through Certificate resulting from (a) Fannie Mae's determination that the Mortgage Loan is or is to be deemed a DOCS LA:;296342. 40929-1 70 MM3 55 Fully Prepaid Mortgage Loan (other than by reason of optional prepayment of the entire principal balance of the Mortgage Loan prior to final maturity, causing an optional redemption of the Bonds pursuant to Section 3.2 of this Indenture), or (b)other moneys from time to time received by Fannie Mae with respect to the principal of the mortgage Loan and distributed to the Trustee (other than by reason of optional prepayment of the entire principal balance of the Mortgage Loan prior to Final maturity, causing an optional redemption of the Bonds pursuant to Section 3.2 of this Indenture), (ix) after the Fannie Mae Pass-Through Certificate Delivery Date, from time to time, upon receipt, Available Moneys provided by car on behalf of the Borrower pursuant to Section 3.2.2 of this Indenture to fund the premium portion of any End-Period Payment, (x) any other Available Moneys which may be deposited into the Redemption Account for the optional redemption of Bonds pursuant to Section 3.2.2 of this Indenture; and (xi) any ether amount received by the Trustee and required by the terms of this Indenture or the Financing Agreement to be deposited into the Redemption Account, including amounts held in a separate account of the Revenue Fund under Section 4.4.2 of this Indenture for deposit into the Redemption Account, provided that such inoneys shall be transferred to the Redemption Account only after they shall have become Available moneys. (c) Deposits Into the Credit Facilijy Account. In connection with the Mortgage Loan, the Trustee shall deposit each of the following amounts into the subaccounts of the Credit Facility Account of the Revenue Fund: (i) all amounts derived from the Collateral Agreement in respect of principal payments on the Mortgage Doan, which amounts shall be deposited in the Principal Subaccount; and (ii) all amounts derived from the Collateral Agreement in respect of payments of the Pass-Through Rate, which amounts shall be deposited into the Pass-Through Rate Subaccount. No other moneys shall be deposited in the Credit Facility Account. The Credit Facility Account shall be closed at such time as Fannie Mae has no continuing liability under the Collateral Agreement. (d) Deposits into the Fees Account. The Trustee shall deposit into the Fees Account of the Revenue Fund the amounts provided for in paragraph (iv) of Section 4.4.4 of this Indenture and the amounts transferred by the Servicer to the Trustee pursuant to Section 4.3(ii)of the Financing Agreement. DOCS L.A;:296342. 40929-170 MM3 56 Section 4.4.4 Disbursements From the Accounts of the .Revenue Fund. Moneys on deposit in the various Accounts of the Revenue Fund shall be disbursed at the following tunes, applied in the following manner and in the following order of priority: (i) on each Interest Payment Date, the Trustee shall disburse from the General Receipts and Disbursements Account an amount equal to the amount of interest due on the Bonds on such Interest .Payment Date and shall apply such amount to the payment of such interest so due, (ii) on each Redemption Date on which a mandatory sinking fund redemption pursuant to Section 3.3.4 of this Indenture is scheduled to take place, each ':Maturity Date and the date of acceleration of the Bonds, the Trustee shall disburse from the General Receipts and Disbursements Account an amount equal to the amount of principal due on the Bonds on such date and shall apply such amount to the payment of such principal so due; (iii) on each Redemption Date on which a redemption pursuant to Section 3.2 or Section 3.3 of this Indenture (other than a mandatory sinking fund redemption under Section 3.3.4 of this Indenture) is scheduled to take place, the Trustee shall apply amounts on deposit in the Redemption Account to the payment of principal of and premium, if any, on the Bonds to be redeemed on such date; (iv) on each May 1 and November 1, the Trustee shall transfer an aggregate amount equal to that portion of the Trustee's Annual Fee (to the extent the Trustee's Annual Fee is included in the Pass-Through Rate, as described in Section 4.3 of the Financing Agreement) payable on such date (or on any date prior to the next Interest Payment Date), from the General Receipts and Disbursements Account to the Fees Account; (v) the Trustee shall disburse amounts on deposit in the Fees Account as follows. (1) on each May 1 and November 1 to the Trustee, an amount equal to one-half of the Trustee's Annual Fee, (2)on the first day of each month to the Issuer, an amount equal to one-twelfth of the Issuer's annual fee, as provided in Section 4.3(ii)(C) of the Financing Agreement, and (3) upon receipt of an invoice from the Rebate Analyst, if any, to the Trustee, an amount equal to the Rebate Analyst's Annual Fee; in the event the amount in the Fees Account is insufficient to pay such Fees, the Trustee shall make written demand on the Borrower for the amount of such insufficiency and, pursuant to the terms of the Financing Agreement, the Borrower shall be liable to promptly pay the amount of such insufficiency to the Trustee within five (5) Business Days after the date of the Trustee's written demand; (vi) on each May 1, following the disbursement, transfer and application of funds described in the preceding paragraphs (i) through (v), the Trustee shall transfer any amounts remaining in the General Receipts and Disbursements Account in excess of $15,000 to the Rebate Fund, up to the DDCSI AI:296342. 40929-170?VW 3 57 amount required to be deposited into the Rebate Fund to the extent sufficient funds are not otherwise available to the Trustee for the payment of arbitrage rebate to the United States Government, and (vii) any money remaining after the transfer pursuant to paragraph (vi) above shall be retained in or transferred to the General Receipts and Disbursements Account. Section 4.4.5 Transfers Within the Revenue Fund. The Trustee shall, on each Interest Payment Date and Redemption Date, transfer all amounts that are on deposit in the Pass-Through Rate Subaccount and the Principal Subaccount, as applicable, of the Credit Facility Account to the General Receipts and Disbursements Account or the Redemption Account, as applicable. Section 4.4.6 Funds Transfers to Facilitate Purchases. The Trustee is authorized to treat the date of any purchase of Bands pursuant to Section 3.8 as a Redemption Date, and for such purpose to transfer moneys to the Redemption Account from. the General Receipts and Disbursements Account as necessary in connection with any such application of moneys. Section 4.4.7 Investment Income on Revenue Fund. Amounts on deposit in the Revenue Fund shall be invested as provided in Section 5 of this Indenture. All Investment Income earned on amounts on deposit in the Revenue Fund shall be retained in or transferred to, as the case may be, and credited to and become part of the amounts on deposit in the General Receipts and Disbursements Account. Section 4.5 The Casts of Issuance Fund. Section 4.5.1 Deposits Into Costs of Issuance Fund. On or before the Closing Date the Borrower shall deliver the Costs of Issuance Deposit to the Trustee as provided in the Financing Agreement. If the Costs of Issuance Deposit is received by the Trustee prior to the Closing Date, it shall be held in a temporary account of the Trustee until the Closing Date and, if received on the Closing Date, shall be deposited in the Costs of Issuance Fund. On the Closing Date, the Trustee shall, if the Costs of Issuance Deposit is held in a temporary account, transfer the Costs of Issuance Deposit into the Costs of Issuance Fund. Any Net Bond Proceeds to be applied to pay Costs of Issuance, as provided in paragraph(iv) of Section 4.2 of this Indenture, shall be deposited into the Costs of Issuance Fund. Section 4.5.2 Disbursements from the Costs of Issuance Fund. Moneys on deposit in the Costs of Issuance Fund shall be disbursed from time to time by the Trustee to pay Costs of Issuance upon receipt of a Costs of Issuance Fund Requisition Certificate signed by the Authorized Borrower Representative, to pay Costs of Issuance. The Trustee may conclusively rely on such requisitions for purposes of making such disbursements. Moneys on deposit in the Costs of Issuance Fund shall not be part of the Trust Estate and shall be used solely to pay Costs of Issuance. Section 4.5.3 Disposition of Remaining Amounts. Any moneys remaining in the Costs of Issuance Fund four(4)months after the Closing Date and not needed to DOCS LA::296342. 40929-170 MIM3 58 pay still unpaid Costs of Issuance shall be returned to the Borrower, except that portion of Investment Income earned on Net Bond Proceeds deposited into the Costs of Issuance Fund and Investment Income on such Investment Income, which shall be transferred to the Mortgage Loan Fund. Upon such final disbursement, the Trustee shall close the Costs of Issuance Fund. Section 4.5.4 Investment Income on Costs of Issuance Fund. Amounts on deposit in the Costs of Issuance Fund shall be invested as provided in Section 5 of this Indenture. All Investment Income earned on amounts on deposit in the Costs of Issuance Fund, except that portion of Investment Income earned on Net Bond Proceeds deposited into the Costs of Issuance Fund and Investment Income on such Investment Income, which shall be transferred to the Mortgage Loan Fund, shall be retained in the Casts of Issuance Fund. Section 4.6 The Rebate Fund. Subject to the transfer provisions provided below, all money at any time deposited in the Rebate Fund shall be held by the Trustee in trust for payment of the Rebate Amount to the United States Government, and neither the Borrower, the Issuer, the Servicer, Fannie Mae nor the Bondholders shall have any rights in or claim to such moneys. All amounts deposited into or on deposit in the Rebate Fund shall be governed by this Section 4.6 through Section 4.6.4. Section 4.6.1 Calculation of Rebate Amount, Deposits to and Withdrawals from Rebate Fund. In the Financing Agreement, the Borrower covenants and agrees that, in accordance with the applicable provisions of the Code, it shall cause to be calculated the Rebate Amount. Within 25 days after the close of each Calculation Period and within 25 days after the final payment in fall of all Bonds,the Trustee shall provide the Borrower and the Rebate Analyst with information concerning the investmentsmade during the Calculation Period just ended with any moneys held by the Trustee hereunder. Upon receipt of such information from the Trustee, the Rebate Analyst shall compute the Rebate Amount for the Tax-Exempt Bonds in accordance with the requirements of Section 148(f) of the Code and shall provide to the Trustee and the Borrower a Rebate Report setting forth such calculations. Within thirty (30) days after the end of every fifth Bond Year, and within fifty-five (55) days after the date on which no Tax-Exempt Bonds are outstanding, the Trustee shall request the Borrower to deliver to the Trustee and the Issuer a certificate stating whether any rebate payment is required to be made and the amount of any such rebate payment to be made, as set forth in the Tax Certificate, and to deliver to the Trustee any amount so required to be paid. In the event a Rebate Report shows a positive Rebate Amount, the Borrower shall, within five days of the delivery to the Trustee of such Rebate Report but in no event later than the date by which the Trustee is required to pay such Rebate Amount to the United' States of America, make a Rebate Payment by depositing into the Rebate Fund an amount equal to such Rebate Amount. In the event that a Rebate Report shows that the amounts on deposit in the Rebate Fund exceed the cumulative Rebate Amount for all prior Calculation Periods, the Trustee is directed to transfer to the Borrower an amount equal to the amount of such excess from the Rebate Fund (but only to the extent of any amounts on deposit in the Rebate Fund). i3C C'SI..A l:24fi342. 40929-170 MM3 59 Amounts on deposit from time to time in the Rebate Fund shall, to the extent practicable, be invested by the Trustee in Government Obligations as the Borrower shall direct in writing. Section 4.6.2 Payment of Rebate Amount to United Mates. Not later than 30 days after each Computation Date, the Trustee shall pay to the United States of America, from moneys on deposit in the Rebate Fund or, if moneys on deposit in the Rebate Fund are insufficient or unavailable to make such payments, from moneys paid by the Borrower, at least 90% of the Excess Earnings during the preceding five Bond Years and 100% of the investment earnings on such Excess Earnings. In addition, not later than 60 days after each Final Computation Date, the Trustee shall pay to the United States of America all amounts required to be paid thereto pursuant to Section 148(f)of the Code as set forth in the finalRebate Report, said payment to be made out of moneys on-deposit in the Rebate Fund or, to the extent the moneys on deposit in the Rebate Fund are insufficient for such purpose, out of moneys paid by the Borrower. Notwithstanding anything expressed or implied herein to the contrary, it is the intent that there shall be paid to the United States of America, out of moneys on deposit in the Rebate Fund or payments made by the Borrower, all amounts required to be paid pursuant to Section 148(0 of the Code at the times required thereby. The Trustee shall have no obligation to use its own funds to make any rebate payment. Section 4.6.3 Conformance to the Code Requirements, Covenant to Survive Payment. Notwithstanding anything expressed or implied herein to the contrary. (a) the provisions of Section 4.6 through Section 4.6.4, inclusive, may be amended from time to time by the .Issuer, the Borrower and the Trustee without the consent of or notice to any Owners, the Servicer or Fannie Mae in order to conform to the requirements of the Code regarding the payment of the Rebate Amount to the United States of America or the 'manner or time of calculating such Rebate Amount; and (b) in no event shall the Borrower be deemed to be in default in respect of its obligations under said Sections so long as all actions taken by the Borrower with respect to the calculation of the Rebate Amount and the payment thereof to the United States of America conform to the requirements of the Code as such requirements may be changed, modified or amended from time to time. Notwithstanding anything expressed or implied herein or in any Supplemental Indenture to the contrary, the covenants of the Borrower set forth in Section 4.6 through Section 4.6.4, inclusive, shall survive the payment in full and/or defeasance of the Mortgage Loan and all Outstanding Bonds or any particular series of Bonds. Section 4.6.4 Actions by the Trustee. In the event the Borrower shall fail to appoint the Rebate Analyst or otherwise fail to perform its obligations hereunder, the Trustee shall have the right to appoint, and at the direction of the Issuer shall appoint, at the expense of the Borrower, such Rebate Analyst and otherwise cause such report to be completed and to cause the Rebate Amounts to be paid as provided in the Tax Certificate and Section 7.2.9 of the Financing Agreement. DOCS LA;:296342. 40929-170 MM3 60 Section 4.7 The Rehabilitation Fund. Section 4.7.1 Deposit, Purpose. On or before the Closing Date, the Borrower shall deliver to the Trustee the Rehabilitation Fund Deposit required to be delivered pursuant to the Financing Agreement. Upon receipt, the Rehabilitation Fund Deposit shall be deposited by the Trustee into the Rehabilitation Fund as provided in paragraph(vi) of Section 4.2 of this Indenture. The moneys in the Rehabilitation Fund shall be disbursed by the Trustee solely to pay Project Costs. leo amounts shall be deposited into the Rehabilitation Fund other than the Rehabilitation Fund Deposit (in accordance with Section 4.2 of this Indenture); provided that Investment Income derived from amounts on deposit in the Rehabilitation Fund shall be retained in the Rehabilitation Fund. The amounts on deposit in the Rehabilitation Fund at any time, including all Investment Income derived from amounts on deposit therein shall not be disbursed unless and until the applicable conditions set forth in Section 4.7.2 of this Indenture and in Section 4.2 of the Financing Agreement have been satisfied. Upon finaldisbursement of all amounts on deposit in the Rehabilitation Fund, the Trustee shall close such Rehabilitation Fund. Section 4.7.2 Disbursements from the Rehabilitation Fund. (a) In General. Amounts on deposit in the Rehabilitation Fund, including Investment Income derived from amounts on deposit therein, shall be disbursed by the Trustee to, and used and applied by, the Borrower solely to pay Project Costs. Notwithstanding anything expressed or implied herein or in the Financing Agreement to the contrary, all amounts on deposit in the Rehabilitation Fund and Investment Income thereon shall be deemed to constitute Bond Proceeds for purposes of the Borrower's covenant in Section 7.2.8(ii)(D) of the Financing Agreement to cause not less than 95% of net proceeds of the Bonds (within the meaning of Section 142(x) of the Code) to be expended for Qualified Project Costs, it being the intent of the foregoing that, in addition to otherwise complying with the covenant set forth in Section 7.2.8(ii)(D)with respect to other Bond proceeds, the Borrower shall cause not less than 95% of the moneys (including Investment Income thereon) in the Rehabilitation Fund to be expended for Qualified Project Costs. (b) Procedures. The Trustee shall disburse the amounts on deposit in the Rehabilitation Fund (including Investment Income) to the Borrower only upon receipt by the Trustee of a Rehabilitation Fund Requisition Certificate signed by an Authorized Borrower Representative and approved by the signature of an Authorized Servicer Representative. The Trustee shall have no duty to determine whether any requested disbursement from the Rehabilitation Fund is a proper charge against the Rehabilitation Fund, but shall make each such disbursement upon receipt of a Rehabilitation Fund Requisition Certificate signed by the Authorized Borrower Representative and approved by the Authorized Servicer Representative and in the amount so approved by the Authorized Servicer Representative. The written approval of the Authorized Servicer Representative on the Rehabilitation Fund Requisition Certificate shall be deemed a certification and, insofar as the Trustee and the Issuer are concerned, constitute conclusive evidence, that all of the terms, conditions and requirements applicable to the disbursement have been fully satisfied. DOCSf_A t:295342. 40929-11170,MM3 61 If a Rehabilitation Fund Requisition Certificate signed by the Authorized Borrower Representative and approved by the signature of the Authorized Servicer Representative is received by the Trustee by noon., Pacific time, on any given Business Day, the disbursement requested thereby shall be paid by the Trustee within three calendar days; provided that if a Rehabilitation Fund Requisition Certificate signed by the Authorized Borrower Representative and approved by the signature of an Authorized Servicer Representative is received by the Trustee after noon, Pacific time, on any given Business Day, the disbursement requested thereby shall be paid by the Trustee within four calendar days. Within one Business Day after each receipt of a completed Rehabilitation Fund Requisition Certificate signed by the Authorized Borrower Representative and approved by the signature of an Authorized Servicer Representative, the Trustee shall initiate procedures with the provider of the Investment Agreement applicable to the Rehabilitation Fund, if any, to make withdrawals under that Investment Agreement as necessary to fund the disbursement requested. (c) Investment Income on Rehabilitation Fund. All Investment Income earned on amounts on deposit in the Rehabilitation Fund shall be credited to and become part of the amounts on deposit in the Rehabilitation Fund. Section 4.7.3 Transfers to Effect Certain Special Mandatory Redemptions of Bonds. Any amounts remaining on deposit in the Rehabilitation Fund on the Termination Date shall be transferred on such date to the Redemption Account of the Revenue Fund and applied to the redemption of Bonds pursuant to paragraph(i) of(Section 3.3.1of this Indenture; provided that any amount in excess of a multiple of $5,000 shall be transferred on such date to the General Receipts and Disbursements Account of the Revenue Fund. Immediately prior to any special mandatory redemption of Bonds pursuant to paragraph(ii)(a) of Section 3.3.1 or paragraph(iii) of Section 3.3.1 of this Indenture, as the, case may be, any amounts then remaining in the Rehabilitation Fund shall, at the written direction of Fannie Mae, be transferred to the Redemption Account of the Revenue Fund to be applied to the redemption of Bonds pursuant to paragraph(ii)(a) of Section 3.3.1 or paragraph(iii) of Section 3.3.1 of this Indenture, as the case may be. Section 4.8 Moneys to be Held in Trust; Records. All moneys required to be deposited with or paid to the Trustee for the account of any Fund or Account established under any provision of this Indenture shall be held by the Trustee in trust, and, except for moneys deposited with or paid to the Trustee for the redemption of Bonds, notice of the redemption of which has been duly given, and except for moneys on deposit in the Costs of Issuance Fund, the Rebate Fund and the Fees Account, shall, while held by the Trustee, constitute part of the Trust Estate and be subject to the security interest created by this Indenture. The Trustee shall keep and maintain accurate records with respect to the Funds and Accounts under this Indenture. The Trustee shall file at least an annual accounting of the Funds and Accounts, and the payment history on the Bonds and the Mortgage Loan, with the Issuer, Fannie Mae, the Servicer and the Borrower. Any notices, reports or other information delivered by the Trustee to Fannie Mae with respect to any Fund or Account shall also be delivered to the Servicer and the Issuer. DOC'SLAI:246342. 40929-170 MM3 62 Section 4.9 Reports From the Trustee. The Trustee shall, on or before the twentieth (20th) day of each month, file with the Servicer and the Borrower a statement setting forth in respect of the preceding calendar month. (i) the amount withdrawn or transferred by it and the amount deposited within or on account of each Fund and Account held by it under the provisions of this Indenture, including the amount of Investment Income on each Fund and Account transferred to the General Receipts and Disbursements Account; (ii) the amount on deposit with it at the end of such month to the credit of each Fund and Account, (iii) a brief description of all obligations held by it as an investment of moneys in each such Fund and Account, (iv) the amount applied to the purchase or redemption of Bonds and a description of the Bonds or portions of Bonds so purchased or redeemed; and (v) any other information which the Borrower, the Servicer, Fannie Mae or the Issuer may reasonably request. No such statement need be rendered pursuant to the provisions of this Indenture if no activity occurred in the fund or account during such preceding month. Upon the written request of any Bondholder owning twenty-five percent (25%) or more in aggregate principal amount of Bonds then Outstanding, the Trustee, at the Borrowers expense, shall provide a copy of such statement to the Bondholder. All records and files pertaining to the Trust Estate shall be open at all reasonable times to the inspection of the Issuer and Fannie Mae and their agents and representatives upon reasonable prior notice. Section 4.10 Unclaimed Monas Due to Nonpresentment of Bonds. In the event any Bond shall not be presented for payment when the principal of such Bond becomes due, either at maturity or at the date fixed for redemption of such Bond or otherwise, if amounts sufficient to pay such Bond shall have been deposited with the Trustee for the benefit of the owner of the Bond and shall have remained unclaimed for two (2) years after such principal has become due and payable, such amounts shall be paid to Fannie Mae to the extent amounts are owed to Fannie Mae as set forth in a written statement of Fannie Mae to the Trustee, with any excess to be paid to the Borrower; and all liability of the Issuer and the Trustee to the holder thereof for the payment of such Bond shall forthwith cease, determine and be completely discharged and thereafter the owners of such Bonds shall look only to the Borrower for payment of such Bonds, and the Borrower shall be liable for the payment of such Bands to extent of the moneys paid to the Borrower under this Section; provided, however, that the Trustee, before being required to make any such payment to Fannie Mae or the Borrower, may at the request of the Issuer cause to be published once in a financial newspaper or journal of general circulation in New Fork, New Fork, notice that such moneys remain unclaimed and that, after a date specified in such notice,which shall not be less than thirty (30) days from the date of such publication, any unclaimed balance of such moneys then remaining will be paid to Fannie Mae or the Borrower. DOCSLA 1:296342. 40429-170 N M3 63 The cost of such publication shall be paid from the unclaimed amounts so held by the Trustee. The obligation of the Trustee under this Section 4.10 to pay any such amounts to Fannie Mae or the Borrower shall be subject to any provisions of law applicable to the Trustee or to such amounts providing other requirements for disposition of unclaimed property.' Section 4.11 Moneys Field for Particular Bonds. The amounts held by the Trustee for payment of the interest,principal or redemption price due on any date with respect to particular Bonds shall, pending such payment, be set aside and held in trust by it for the Bondholders entitled to such payment, and for the purposes of this Indenture such interest, principal or redemption price, after the due date of payment, shall no longer be considered to be unpaid. Section 5. Investments. Moneys held as part of any Fund or Account shall be invested and reinvested in Permitted Investments; provided that such investments shall have maturities corresponding to the dates upon which such moneys will be needed for the purpose for which such moneys are held; and provided further, that: (a) moneys on deposit in the Rehabilitation Fund, the General Receipts and Disbursements Account and the Credit Facility Account of the Revenue Fund shall be invested only in investments described in paragraphs (i), (ii), (iii), (vii) and (viii) of the definition of Permitted Investments; (b) moneys on deposit in the Redemption Account shall be invested only in investments described in paragraph(i) or(viii) of the definition of Permitted Investments; and (c) moneys on deposit in the Costs of Issuance Fund shall, until disbursed or returned to the Borrower pursuant to Section 4.5 of this Indenture, be invested in Permitted Investments described in paragraph (viii) of the definition of Permitted Investments. Permitted Investments shall be held by or under the control of the Trustee. All Investment Income from moneys held in all Funds and Accounts other than the Rehabilitation Fund, the Rebate Fund and the Costs of Issuance Fund(other than as provided below) shall, upon receipt, if applicable, be transferred to, and deposited into the General Receipts and Disbursements Account of the Revenue Fund. Investment Income from moneys held in the Rehabilitation Fund shall be retained in the Rehabilitation Fund. Investment Income from moneys held in the Rebate Fund shall be retained in the Rebate Fund. Investment Income from moneys held in the Costs of Issuance Fund (other than Investment Income on Net Bond Proceeds deposited into the Costs of Issuance Fund and Investment Income on such Investment Income which shall be transferred to the Mortgage Loan Fund)shall be retained in the Costs of Issuance Fund. The Trustee is authorized to cause to be sold and reduced to cash a sufficient amount of Permitted Investments whenever the cash balance is or will be insufficient to lmake a requested or required disbursement. The Trustee shall not be accountable for any depreciation in the value of any Permitted Investment or for any loss resulting from such sale. The Trustee may trade with itself and its affiliates in the purchase and sale of securities for such investments and may DOCSi.A 1:295342. 40929-170 MM3 64 transact purchases and sales through its investment department or that of its affiliates. The Trustee and its affiliates may act as principal, agent, sponsor, advisor or depository with respect to any investments. All Permitted Investments shall be made by the Trustee in its name, as Trustee, subject to the limitations contained in this Indenture. All investments in all Funds and Accounts shall be made at the written direction of the Authorized Borrower Representative. If no direction is provided to the Trustee, the Trustee will invest such moneys in investments described in paragraph (viii) of the definition of Permitted Investments, subject to the limitations contained in this Indenture. In computing the amount in any Fund or Account held by the Trustee under the provisions of this Indenture, Permitted Investments if purchased at par shall be valued at principal cost plus accrued interest, or, if purchased at other than par, at principal cost plus amortized discount or less amortized premium (amortization to be on a straight-line basis to the date of stated maturity without regard to redemptions or repayments of principal which may occur prior thereto) plus accrued interest. The Trustee shall take such actions as shall be necessary to assure that Permitted Investments purchased by it under this Indenture are held pursuant to the terms of this Indenture and are subject to the trusts and security interests created in this Indenture. The Trustee shall furnish to the Issuer and the Borrowermonthly statements detailing all investment activity of the Trustee with respect to the Funds and Accounts. The Issuer(and the Borrower by its execution of the Financing Agreement) acknowledges that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Issuer or the Borrower the right to receive brokerage confirmations of security transactions as they occur, the Issuer and the Borrower specifically waive receipt of such confirmations to the extent permitted by law. The Trustee will furnish to the Borrower and the Issuer periodic cash transaction statements which include detail for all investment transactions made by the Trustee hereunder. Section 6. Security. Section 6.1 Security; Pledge of Trust Estate, Compliance with_Law. Any and all interest in property acquired after the date of this Indenture of any kind or nature which is to become subject to the lien of this Indenture shall, without any further conveyance, assignment or act on the part of the Issuer or the Trustee, be subject to the lien of this Indenture as fully and completely as though specifically described in this Indenture, but nothing contained in this sentence shall be deemed to modify or change the obligations of the Issuer under Section 6.7 of this Indenture. The Issuer shall not create or suffer any lien or charge upon the Trust Estate prior to or on a parity with the pledge, security interest and lien created by this Indenture for the payment of the principal of, premium, if any, and interest on the Bonds. The Trustee shall at all times, to the extent permitted by law, defend, preserve and protect the pledge and assignment in trust of the Trust Estate and all the rights of the Bondholders and Fannie Mae under this Indenture against all claims and demands of all persons. Notwithstanding the assignment of the Mortgage Loan to the Trustee as part of the Trust Estate, it is understood by the Issuer and the Trustee that: (a) prior to the Fannie Mae Pass-Through Certificate iDelivery Date, the Trustee's interest in the Mortgage Loan, including the Mortgage :Mote and the Mortgage, DOCSLA3:296342. 43929-1170 MM3 65 is, at the direction of Fannie Mae, subject to assignment to, or at the direction of, Fannie Mae under the conditions set forth in the Collateral Agreement; and (b) on the Fannie .Mae Pass-Through Certificate Delivery .Date, the Trustee's interest in the Mortgage Loan, including the Mortgage Note and the Mortgage, shall be assigned by the Trustee to the Servicer and in turn assigned by the Servicer to Fannie Mae, as provided in Section 2.15.1 of this Indenture. Subject to the assignment of the Trustee's interest in the Mortgage Loan, including the Mortgage Note and the Mortgage, as provided above, upon the Issuer's assignment and delivery of the Mortgage Loan to the Trustee and Fannie Mae, as their interests may appear, pursuant to the Assignment, and at all times during which such assignment is effective, the Trustee shall receive and hold the original Mortgage Note duly endorsed to the Trustee, an executed copy of the recorded Mortgage and copies of all other Mortgage Loan Documents. Section 6.2 Preservation of Security. The Issuer covenants that, except as otherwise provided in this Indenture, the Financing Agreement and the Credit Facility Agreement, it will not sell, convey, mortgage, encumber or otherwise dispose of any portion of. the Trust Estate. Section 6.3 Payment of Bonds. The Issuer shall (but only from the Trust Estate) promptly pay or cause to be paid the principal of and interest on the Bonds at the place, on the dates and in the manner provided in this Indenture and the Bonds. Section 6.4 Performance of Covenants. The Issuer shall promptly perform and observe all covenants, undertakings and obligations set forth in this indenture, in the Financing Agreement and in the Bonds to be performed or observed by the Issuer. Section 6.5 Enforcement. The Issuer agrees that the Trustee and, so long as the Collateral Agreement shall continue in effect, Fannie Mae, in its name or in the name of the Issuer may enforce against the Borrower or any Person any rights of the Issuer under the .Bonds or the Bond Documents whether or not the Issuer is in default under this Indenture or under the Financing Agreement, but neither Fannie iMac nor the Trustee shall be deemed to have assumed any of the obligations of the Issuer under the Bond Documents except as specifically provided in such Financing Agreement with respect to the Trustee. Section 6.6 Limitations on Liability. Notwithstanding any other provision of this Indenture to the contrary: (i) the obligations of the Issuer with respect to the Bonds are not general obligations of the Issuer but are special, limited obligations of the Issuer payable by the Issuer solely from the Trust Estate for the Bonds; (ii) nothing contained in the Bonds or in this Indenture shall be considered as assigning or pledging any funds or assets of the Issuer ether than the Trust Estate; [)OCSLA 1:296342. 40929-170 MI M3 66 (iii) the Bonds shall not be a debt of the State, any political subdivision thereof or the Issuer and neither the State, any political subdivision thereof or the Issuer shall be liable for the payment of the Bonds, (iv) neither the faith and credit of the State, any political subdivision thereof or the Issuer nor any other public body of the State are pledged to the payment of the principal or of interest on the Bonds, (v) no failure of the Issuer to comply with any term, condition, covenant or agreement in this Indenture or in any document executed by the Issuer in connection with the Project or the issuance, sale and delivery of the Bonds shall subject the Issuer to liability for any claim for damages, costs or other charge except to the extent that the same can be paid or recovered from the Trust Estate; and (vi) the Issuer shall not be required to advance any moneys derived from any source other than the Trust Estate for any of the purposes of this Indenture, the Bonds, the Mortgage Loan, the Financing Agreement, the Credit Facility Agreement, any Mortgage Loan Document or any related document, for the payment of the principal or redemption price of, or interest on, the Bonds, the payment of Fees or administrative expenses or for any other purpose of any of the Bond Documents or any of the Mortgage Loan Documents. The Issuer and the Trustee acknowledge that (a)the obligations of Fannie 'Viae, under the Collateral Agreement, the Fannie Mae Pass-Through Certificate or otherwise, are not backed by the full faith and credit of the United States of America, but by the credit of Fannie Mae, a federally-chartered, stockholder owned corporation, and (b)payment of principal of, and interest on and premium, if any, on the Bonds is not guaranteed by Fannie Mae. Section 6.7 Further Assurances. The Issuer covenants that it will, to the extent permitted by law, execute, acknowledge and deliver such supplemental indentures, and the Issuer shall perform such further acts, execute and deliver such other instruments, documents and financing statements and make such further transfers, as the Trustee or Fannie Mae may reasonably require to perfect, and maintain perfected, the security interest in the Trust Estate or to better assure, transfer, convey, pledge, assign and confirm to the Trusteeall of its interest in the property described in this Indenture and the revenues, receipts and other amounts pledged by this Indenture for the purposes set forth in Section 6.1 of this Indenture. The Issuer further covenants that it will, at the sole expense of the Borrower, cooperate to the extent necessary with the Borrower, the Trustee, the Servicer and Fannie Mae (subject to Section 12.5 of this Indenture) in their defenses of the Trust Estate against the claims and demands of all Persons. The Issuer shall not agree to any amendment, modification, supplement, waiver or consent with respect to the Financing Agreement without the prior written consent of the Trustee and Fannie :Viae (subject to Section 12.5 of this Indenture), which consent of the Trustee shall be governed by Section 10 of this Indenture. Section 6.8 Possession of the IVfurtgage Note and Mortgage. Prior to the Fannie Mae Pass-Through Certificate Delivery Date, the Trustee shall hold'the Mortgage Note DOCS LA 1:296342. 40929-170 MM3 67 and the Mortgage for the benefit of the Bondholders and Fannie Mae, as their interests may appear, as set forth in the Assignment, subject to the provisions of(a)the Collateral Agreement providing for the assignment of the Mortgage Note and the Mortgage to Fannie Mae in certain events and (b) this Indenture providing for the assignment of the Mortgage Nate and the Mortgage to Fannie Mae on the Fannie Mae Pass-Through Certificate Delivery Date. Section 6.9 No Disposition of Mortgage Loan, Mortgage Note or Mortgage Prior to the Fannie Mae Pass-Through_Certificate Delivery Date, Excepted Assignments: Substitution. Section 6.9.1 No Disposition of Mortgage Loan. MortZage Note or ?V1ortgage Prior to the Fannie Mae Pass-Through Certificate Deiivery Date: Excepted Assignments. Prior to the Fannie Mae Pass-Through Certificate Delivery Date, the Trustee shall not, except at the prior written direction of Fannie Mae, dispose of the Mortgage Loan or any interest in the Mortgage Loan, the Mortgage Note or the Mortgage or any interest in the Mortgage Note or the Mortgage: (a) other than to: Fannie Mae as provided in the Collateral Agreement, the Servicer as provided in Section 2.15.1 of this Indenture; or a successor Trustee, and (b) other than as provided in Section 6.9.2 of this Indenture. The Trustee and the Issuer acknowledge the Trustee's obligation to assign its interest in the Mortgage Note and the Mortgage to (i) Fannie Mae under, and on the terms provided in, the Collateral Agreement, (ii) the Servicer on the Fannie Mae Pass-Through ';Certificate Delivery Date and(iii) as provided in Section 6.9.2 of this Indenture. Section 6.9.2 Substitution. Upon receipt of written direction from Fannie Mae prior to the Fannie Mae Pass-Through Certificate Delivery Date, the Trustee shall amend, modify, supplement or restate the Mortgage Note and/or the Mortgage, or exchange the Mortgage Note and/or the Mortgage for a new mortgage note and/or mortgage on the Project which may be executed by a person (the "New Borrower") other than the Borrower. Except in the event of a transfer of the Mortgage Loan to Fannie Mae in accordance with the Collateral Agreement, prior to accepting a new mortgage note and mortgage, the Trustee and the Issuer shall have: (i) received written evidence that: (a)the New Borrower shall have executed and recorded a document, acceptable to the Issuer and Fannie Mae, substantially in the form of the Regulatory Agreement (or executed and recorded an assumption, acceptable to the Issuer and Fannie Mae, of all of the Borrower's obligations under the Regulatory Agreement), and (b) the Credit Facility Agreement and. the Collateral Agreement, if required, shall have been modified to be applicable to the new mortgage loan; DOCS LA 1:296342. 40929-170 MN:3 68 (ii) received a Rating Confirmation; (iii) received an Opinion of Bond Counsel to the effect that such exchange and modification, in and of itself, shall not affect the exclusion of the interest payable on the Tax-Exempt Bonds from gross income for federal income tax purposes, and the Trustee shall have received from the Issuer any consent to such transfer required by the Regulatory Agreement or the Financing Agreement, provided that if Fannie Mae or its designee shall have acquired the Project through foreclosure, by accepting a deed in lieu of foreclosure or by comparable conversion of the Mortgage Loan, no such consent from the Issuer shall be required. In addition, if the substitution has resulted in an amendment of (or other modification to) the Credit Facility Agreement or the Collateral Agreement, the Trustee and the, Issuer shall receive from Fannie Mae an Opinion of Counsel to Fannie Mae, who may be an employee of Fannie Mae, to the effect that the modified Credit Facility Agreement and Collateral Agreement are valid and binding obligations of Fannie Mae, subject to any applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights of creditors generally, and general equitable principles. Prior to accepting any amended, modified, supplemented or restated Mortgage Note or Mortgage which changes the payment terms of the Mortgage Loan, the Trustee and the Issuer shall have received a written.Rating Confirmation. Section 6.10 Books,Records and Accounts. Section 6.10.1 Books Records and Accounts. The Trustee, on behalf of the Issuer, shall keep and maintain, or cause to be kept and maintained, proper books, records and accounts, including the Bond Register, in which complete and accurate entries shall be made of all of its transactions relating to the Bonds, this Indenture, the Financing Agreement, the Regulatory Agreement, the Mortgage Loan (prior to the Fannie Mae Pass-Through Certificate Delivery Date), the Collateral Agreement, the Fannie Mae Pass-Through Certificate (on and after the Fannie Mae Pass-Through Certificate Delivery Date), including,without limitation,payments made by the Borrower under the Mortgage Loan and remitted to the Trustee by the Servicer on or before the Fannie Mae Pass-Through Certificate Delivery Date, receipts and disbursements of proceeds derived from distributions of principal and interest under the Fannie Mae Pass-Through Certificate after the Fannie Mae Pass-Through Certificate Delivery Date, the Funds and Accounts, Permitted Investments and Investment Income, all of which shall, at all reasonable times, and upon reasonable prior notice, be subject to the inspection of the Issuer, Fannie Mae, the Borrower, the Servicer or Bondholders owing not less than twenty five percent (25%) in aggregate principal amount of Bonds then Outstanding or their accountants or agents duly authorized in writing, each of whom shall have the right, at its expense, to make copies of any such books of record and accounts. Section 6.10.2 List of Bondholders. The Trustee'will keep on file at the Principal Office of the Trustee a list of names and addresses of all Bondholders as shown on the Bond Register maintained by the Trustee as Bond Registrar which shall be available for inspection by any Bondholder or its attorney duly authorized in writing during normal business hours of the Trustee upon reasonable prior notice. I)OCS L,A 1:296342. 40429-i70 MM3 69 Section 6.11 Compliance with Rating Agency Requests.] The Trustee shall comply with any reasonable request in writing by a Rating Agency for information in its possession regarding the Bonds which such Rating Agency requests in order to review its rating on the Bonds. Further, the Trustee shall comply with any reasonable request by the Issuer or Bondholders holding not less than fifty-one percent (51%) in aggregate principal amount of Bonds then Outstanding for information in its possession regarding the Bunds, the Mortgage Loan, the Collateral Agreement, the Fannie Mae Vass-Through Certificate or the Project. Any expense incurred by the Trustee pursuant to this Section 6.11 shall be borne by the Borrower. Section 6.12 Enforcement of Obligations. Section 6.12.1 Enforcement by the Trustee. Upon the occurrence of an Event of Default under this Indenture, the Trustee, on behalf of the Issuer, if the sane is in the best interests of the.Bondholders, or on behalf of the Bondholders, shall, subject to the provisions of this Indenture, including, particularly, Section 6.12.2 of this Indenture, enforce any and all rights and take all reasonable steps, actions and proceedings as the Trustee in its sole judgment shall deem necessary and reasonable to enforce the terms, covenants and conditions of the Credit Facility then in effect, the Financing Agreement and the Regulatory Agreement. Except in the case of a default under the Financing Agreement or the Regulatory Agreement, the Trustee's responsibility with respect to the provisions of the Financing Agreement and the .Regulatory Agreement shall be limited to the receipt of payments from and reports of the Borrower pursuant to the terms of the Financing Agreement and the Regulatory Agreement. All affidavits, notices, certificates and schedules received by the Trustee from the Borrower may in good faith be relied upon by the Trustee and shall be maintained in its possession subject at all tunes during normal business hours to inspection by the Issuer and Fannie Mae. Section 6.12.2' Notification of Non-Payment Under the Fannie Mae Pass-Through Certificate. From and after the Fannie Mae Pass-Through Certificate Delivery .Date, in the event that the Trustee shall fail to receive a distribution under the Fannie Mae Pass- Through Certificate by the close of business on the Business Day following any Distribution Date, or if such distribution is to be made to a custodian under any Investment Agreement applicable to the moneys on deposit in the Revenue Fund or any Account within the Revenue Fund and the Trustee shall receive notice from such custodian that a distribution under the Fannie Mae Pass-Through Certificate has not been received by the close',of business on the Business Day following any Distribution Date, the Trustee shall give written notice (not later than the following Business Day) to Fannie Mae, the Servicer, the Issuer and Fannie Mae's mortgage backed securities transfer and paying agent, the Federal Reserve Bank of New York (or such other paying agent as is designated in writing by Fannie Mae), by Electronic Means, that such distribution has not been received and request wire transfer of immediately available funds in the amount of such distribution from such paying agent to the account of the Trustee or such custodian, as the case may be. Section 6.13 Maintenance of Lien on Trust Estate. The Trustee, at the written direction and expense of the Borrower, will cause financing statements and continuation statements with respect to the Trust Estate which have been furnished to the Trustee and for which the Trustee is the secured party described in this Indenture to be at all times filed in such manner and in such places, if any, as may be required by law. To the extent possible under DOCS LA i:29,6342. 40929-170 MM3 70 applicable law, as in effect in the jurisdiction(s) in which the Trust Estate is located, the Issuer and the Trustee will cooperate with each ether to maintain the priority of the security interest created by this Indenture in the Trust Estate as a first lien on the Trust Estate, and warrant, protect,preserve and defend its interest in the Trust Estate and the security interest of the Trustee in the Trust Estate and all rights of the Trustee under this Indenture 'against all actions, proceedings, claims and demands of all Persons, and all costs and expenses thereof may be paid for from the Trust Estate. Notwithstanding the foregoing, so long as the Collateral Agreement is in effect and Fannie Mae has not defaulted in payment under paragraph (i) of Section 5.1 of the Collateral Agreement, the Trustee shall not take any action pursuant to this Section 6.1.3 with respect to its interest in the fledged Collateral(as defined in the Collateral Agreement). Section 6.14 No Modification of Security; No AdditionalIndebtedness, The Issuer expressly reserves the right to adopt one or more general or special band resolutions or to enter into one or more other indentures for any of its purposes including the issuance of bonds for other multifamily rental housing developments similar to the Project and reserves the right to issue other obligations so long as any such resolution, indenture or obligation is not a charge or lien prohibited by this Indenture. The Issuer shall not, without the prior written consent of the Trustee and Fannie Mae and prior notification to the hating Agency and the Servicer, alter, modify or cancel, or agree to consent to alter, modify or cancel, any agreement to the extent any such alteration, modification or cancellation affects the Trust Estate. Without the prior written consent of Fannie Mae, prior written notice to the Servicer and prior notification to and receipt of a Rating Confirmation from the Rating Agency, the Issuer shall not incur any additional indebtedness having a lien on the Trust Estate. Section 6.15 Tax Covenants. Section. 6.15.1 Issuer's Covenants. The Issuer covenants to and for the benefit of the Bondholders that, notwithstanding any other provisions of this Indenture or of any other instrument,it will: (i) neither mare or use nor cause to be made or used any investment or other use of the proceeds of the Tax-Exempt Bonds or the moneys and investments held in the Funds and Accounts established under this Indenture which would cause the Tax-Exempt Bonds to be arbitrage bonds under Section 148 of the Code and the Regulations issued under Section 148 of the Code or which would otherwise cause the interest payable on the Tax-Exempt Bonds to be includable in gross income for federal income tax purposes, provided that it is expressly stated and acknowledged that the use and investment of moneys held in the Funds and Accounts established hereunder will not be under the control or subject to the direction of the Issuer, but shall be under the control and direction of Trustee and the Borrower; and (ii) not take or cause to be taken any other action or actions, or fail to take any action or actions, which action or failure to act is within the Issuer's control, which would cause the interest payable on the Tax-Exempt Bonds to be includable in gross income for federal income tax purposes; D- OCSLA i:295342. 40929-170 MM3 71 (iii) not take any action or permit or suffer any action to be taken if the result of the same would be to cause the Tax-Exempt Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the Code and the Regulations. In furtherance of the covenants in this Section 6.15, the Issuer and the Borrower shall execute, deliver and comply with the provisions of the Tax Certificate, which is by this reference incorporated into this Indenture and made a part of this Indenture as if set forth in this Indenture in full, and by its acceptance of this Indenture the Trustee acknowledges receipt of the Tax Certificate and acknowledges its incorporation in this Indenture by this reference. The Trustee agrees it will invest funds held under this Indenture in accordance with the terms hereof(this covenant shall extend throughout the term of the Bonds, to all Funds and Accounts created under this Indenture and all moneys on deposit to the credit of any Fund or Account). Section 6.15.2 Trustee's Covenants. The Trustee covenants that should the Borrower file with the Trustee (it being understood that the Borrower has no obligation to so file),or should the Trustee receive, an Opinion of Bond Counsel to the effect that any proposed investment or other use of proceeds of the Bonds would cause the Bonds to become "arbitrage bonds," then the Trustee will comply with any written instructions of the Borrower or Bond Counsel regarding such investment or use so as to prevent the Bonds from becoming"arbitrage bonds,"and the Trustee will bear no liability to the Issuer, the Borrower, the Bondholders or Fannie Mae for investments made in accordance with such instructions. Section 6.15.3 Trustee's Acknowledgments. The Trustee agrees not to take any action inconsistent with Section 148 of the Code, it beim understood that the Trustee shall have sole responsibility for the holding and investment of moneys in the funds and accounts strictly in accordance with the terms of this Indenture; provided that the Trustee shall be deemed to have complied with such requirements and shall have no liability to the extent it follows the written directions of the Authorized Borrower Representative. Except as permitted by the rules set forth in the regulations under the Code, as they may be revised from time to time, with respect to investments made during a temporary period or investments in acquired obligations which are part of a reasonably required reserve or replacement fund (or attributable to a minor portion or bona fide debt service fund), the proceeds of the Tax-Exempt ',Bonds shall not be invested in materially higher yield investments. Section 6.15.4 Definitions. All terms used in Sections 6.15 through 6.15.4, inclusive, which are defined in Section 148 of the Code shall have the same meanings in said Sections. Section 6.16 Preservation of Revenues. The Issuer shall not take any action to interfere with or impair the pledge and assignment of the Trust Estate under this Indenture, or the Trustee's enforcement of any rights under this Indenture or under the Financing Agreement or the Regulatory Agreement without the prior written consent of the Trustee. The Trustee may give such written consent, and may itself take any such action or consent to an amendment or modification to the Financing Agreement, the Regulatory Agreement or the Credit Facility then in effect, only. DOCSLA 1:296342 4.0929-1,70 MM3 72 (i) with the prior written consent of Fannie Mae and prior written notice to the Servicer; (ii) following receipt by the Trustee and the Issuer of a written Rating Confirmation; and (iii) if the Trustee shall have received an opinion of Bond Counsel to the effect that such action or such amendment or modification will not affect adversely the validity of the Bonds or the exclusion from gross income, for federal income tax purposes, of the interest payable on the Tax-Exempt Bonds. Notwithstanding the foregoing, on and after the Fannie Mae Pass-Through ';Certificate Delivery Date, Fannie Mae and the Borrower may amend the Mortgage Note and the Mortgage without the consent of the Issuer, the Trustee or the Bondholders so long as any such amendment does not, absent a corresponding redemption of Bonds, reduce or modify the payments due under the Fannie Mae Pass-Through Certificate. This Section provides a separate method for amending the documents mentioned herein., without regard to any of the requirements of Section 11 through Section 11.13 hereof: Section 6.17 Bequest and Indemnification. If any consent or other action on the part of the Issuer is required in this or any other document, the Issuer shall have no obligation to act unless first requested to do so, and the Issuer shall have no obligation to expend time or money or to otherwise incur any liability unless indemnity satisfactory to the Issuer has been furnished to it. Section 7. The Credit Facilities. Section 7.1 The Collateral A_reernent. On the Closing Date, the Trustee shall eater into the Collateral Agreement with Fannie Mae. The Trustee shall abide by and tape all actions required of the Trustee under the Collateral Agreement in accordance with its terms. Section 7.1.1 No Disposition of Collateral AUreem+ent. The Trustee shall not, without the prior written consent of the Registered Owners of all of the Bonds then Outstanding, transfer, assign or release the Collateral Agreement until the principal of and interest on the Bonds shall have been paid or duly provided for in accordance with the terms of this Indenture, except that the Trustee may transfer, assign or release the Collateral Agreement: (a) to a successor Trustee; or (b) to Fannie Mae upon expiration or other termination of the Collateral Agreement in accordance with its terms, including termination on its stated expiration date and upon payment under the Collateral Agreement of the full amount payable under the Collateral Agreement. If at any time during the term of the Collateral Agreement, a successor Trustee shall be appointed and qualified under this Indenture and the Collateral Agreement is not assignable or transferable to the successor Trustee, the resigning Trustee shall request that Fannie Mae enter into a new (>OCS LA i:296342. 40929-170 MM3 73 Collateral Agreement, substantially identical to the then. existing Collateral Agreement, with the successor Trustee for the.benefit of the holders of the Brands, and the resigning Trustee shall continue to serve as Trustee under this Indenture until such time as the new Collateral Agreement is delivered to the successor Trustee. If the resigning Trustee fails to make this request, the successor Trustee shall do so before accepting its appointment. Upon issuance of the new Collateral Agreement to the successor Trustee, the Collateral Agreement being replaced shall be returned to Fannie Mae and cancelled, and the new Collateral Agreement shall thereafter be subject to all of the provisions of this Indenture relating to the Collateral Agreement, and shall be deemed for all purposes of this Indenture to be the Credit Facility in effect prior to the Fannie Mae Pass-Through Certificate Delivery Date. Section 7.1.2 leo Disposition of Fledged Collateral. Except as expressly provided in the Collateral Agreement, the Trustee shall not dispose of any of its interest in the Pledged Collateral (as defined in the Collateral Agreement) unless Fannie Mae shall have defaulted in payment under paragraph(i) of Section 5.1 of the Collateral Agreement. Section 7.1.3 Payment Under the Collateral Agreement. (a) ReQuired Notices: Application of Moneys. The Trustee shall give notices to Fannie Mae as required by, and pursuant to and in accordance with, the terms and conditions of the Collateral Agreement, in order to receive payments from Fannie Mae under, and as and to the extent provided in and permitted by, the Collateral Agreement, and shall cause moneys received from Fannie Mae to be applied for the purposes specified in this Indenture and the Collateral Agreement, provided that the Trustee shall, in accordance with this Indenture and the Collateral Agreement, first apply any amounts then on deposit in the Funds and Accounts (other than the Rebate Fund) for such purposes, as provided in Section 3.8.3 of the Collateral Agreement. (b) Deposit of Moneys Derived from the Collateral Agreement. All moneys derived from the Collateral Agreement pursuant to Section 7.1.3(x) of this Indenture shall be deposited in the Credit Facility Account of the Revenue Fund pending their application by the Trustee. (c) Return.of PgMents Under the Collateral Agreement. In the event that the Trustee shall have received any payment from Fannie Mae under' or pursuant to the Collateral Agreement, and thereafter amounts shall be received by the Trustee from. the Borrower or other source, which later received amounts were in payment of amounts satisfied by the payment under or pursuant to the Collateral Agreement, thein such later received amounts shall be promptly reimbursed to Fannie Mae to the extent of the amount so paid by Fannie Mae. (d) Enforcement of Collateral Ageeent. The Trustee shall hold the Collateral Agreement and subject to the provisions of this Indenture shall in its name enforce all rights of the Trustee and all obligations of Fannie Mae under the Collateral Agreement for the benefit of the Bondholders. DOCS LA?:296342. 40929-170 MM3 74 (e) Certain Rights of Fannie Mae. Each Bondholder, by its purchase of Bonds, the Trustee and the Issuer agree that Fannie Mae may at any time during the continuation of an insolvency proceeding of the Issuer or the Borrower (an "Insolvency Proceeding")direct all matters relating to such Bonds in any such Insolvency Proceeding, including, without limitation, (i) all matters relating to any Preference Claim-(as defined in Section 7.1.4 of this Indenture), (ii) the direction of any appeal of any order relating to any Preference Claim and (iii) the posting of any surety, supersedeas or performance bond pending any such appeal. In addition, and without limitation of the foregoing, Fannie Mae shall be subrogated to the rights of the Issuer (but not including the Issuer's Reserved Rights), the Trustee and the Bondholders in any Insolvency Proceeding to the extent it has performed its payment obligations under the Collateral Agreement, including, without limitation, any rights of any party to an adversary proceeding with respect to any court order issued in connection with any such Insolvency Proceeding and rights pertaining to the filing of a proof of claim, voting on a reorganization plan and rights to payment. Section 7.1.4 Certain Notices to Fannie Mae. The Trustee shall promptly give written notice to Fannie Mae, the Issuer and the Servicer of: (i) an Act of Bankruptcy or an Event of Default under paragraph (vi) of Section 11.1.1 of the Financing Agreement, (ii) the making of any claim in connection with seeking the avoidance as a preferential transfer(a"Preference Claim")of any payment of principal of, or interest on, the Bonds, (iii) the occurrence of any Event of Default known to it under this Indenture or under the Collateral Agreement, the Financing Agreement, the Regulatory Agreement, the Mortgage Note, the Mortgage or any of the other Mortgage Loan Documents, or any event known to it which, with the passage of time or service of notice, or both, would constitute an Event of Default under this Indenture or under the Collateral Agreement, the Financing Agreement, the Regulatory Agreement, the Mortgage Note, the Mortgage or any of the other Mortgage Loan Documents, specifying the nature and period of existence of such event and the actions being taken or proposed to be taken with respect to such event, (iv) the receipt of any prepayment, in whole or in part, with respect to the Mortgage Loan; and (v) each proposed redemption of Bonds, such notice to be given at least 20 days prior to the scheduled Redemption Date. Section 7.1.5 Assignment of Mortgage, Liability of Fannie Mae. The Trustee and the Issuer acknowledge and agree to the right of Fannie Mae to direct the Trustee to assign the Mortgage Loan, including the Mortgage Note and the Mortgage to Fannie Mae as set forth in the Collateral Agreement. The Issuer and the Trustee agree that Fannie Mae ixOcs A1:a96342. 40929-170 MM3 75 shall not be liable to the Trustee, the Issuer or any Bondholder for any action taken by Fannie Mae pursuant to any such assignment. Section 7.1.6 Termination of Trustee's Interest in the Collateral Agreement. Upon receipt of the Fannie Mae Pass-Through Certificate, the Trustee shall relinquish all of its rights and interests in the Collateral Agreement effectiveas of the expiration or earlier termination of the Collateral Agreement and upon such expiration or termination, shall return the Collateral Agreement to Fannie Mae. Section 7.2 The Fannie Mae Pass-Through Certificate. Section 7.2.1 Issuance of the Fannie Mae Pass-Through Certificate. The Trustee acknowledges and agrees that the Trustee, acting for and on behalf of the Issuer, will, on the Fannie Mae Pass-Through Certificate Delivery Date, assign its interest in the Mortgage Loan to the Servicer who, in turn will assign that interest to Fannie Mae in exchange for the Fannie Mae Pass-Through Certificate as provided in and subject to the terms and conditions set forth in this Indenture. The Issuer and the Trustee understand that the Fannie Mae Pass-Through Certificate will be issued, on the Fannie Mae Pass-Through Certificate Delivery Date, in accordance with the Fannie Mae Trust Indenture, electronically, in "book entry" form, as shown on the records of the Federal Reserve Bank. of New York., Fannie Mae's mortgage-backed securities transfer and paying agent; accordingly, all references in this Indenture to the Fannie Mae Pass-Through Certificate shall be deemed references to the electronic book entry reflecting the interest of the Trustee or a custodian for the Trustee in the Fannie Mae Pass-Through Certificate as shown in the records of the Federal Reserve Bank of New York. Delivery of the Fannie Mae Pass-Through Certificate to the Trustee or a custodian for the Trustee shall be deemed to have occurred when the Trustee shall have received confirmation from the Federal Reserve Bank of New York that the Fannie Mae Pass-Through Certificate has been issued in book-entry form and registered on the registration books of the Federal Reserve Bank of New York, in the name of the Trustee or a custodian for the Trustee. Registration of the Fannie Mae Pass-Through Certificate in the name of the Trustee or in the name of a custodian for the Trustee shall be made with such recitals as are appropriate to indicate that the Fannie Mae Pass-Through Certificate is to be held by or for the benefit of the Trustee in its capacity as trustee under this Indenture and subject to the terms and provisions of this Indenture. The Trustee shall give written notice to the Rating Agency upon receipt by the Trustee or a custodian for the Trustee of the Fannie Mae Pass-Through Certificate. If the Trustee or a custodian for the Trustee does not, for any reason, acquire the Fannie; Mae Pass-Through Certificate on the Fannie Mae Pass-Through Certificate Delivery Date, the Trustee shall immediately give notice of that fact to Fannie Mae. The obligation of the Trustee to accept delivery of the Fannie Mae Pass-Through. Certificate shall be subject to the following conditions (all of which shall be provided at the sole cost and expense of the Borrower): (i) the Trustee's receipt of either (a) a written confirmation of the original Cash Flow Projection or (b) a then current Cash Flow Projection, in the latter instance accompanied by a Verification Report, showing that the scheduled payments to be made under the Mortgage Loan and the corresponding distributions to be made under the Fannie Mae Pass-Through'Certificate, together with other Revenues and other moneys held under this Indenture that are available DOCSLA1:296342. 40929-170 MM3 76 to be used for such purpose, will be sufficient to timely pay the principal of and interest on the Bonds and the Fees (to the extent included in the Mortgage ?Mote Rate)when the same shall become due and payable; (ii) the Trustee's confirmation based on information furnished to it by Fannie Mae or the Servicer (a)that the Fannie Mae Pass-Through Certificate has an Issue Date Principal Balance equal to the then aggregate unpaid principal balance of the Mortgage Loan, which written confirmation may be an Issue Supplement, and(b)of the Fannie Mae Pass-Through Certificate Rate; (iii) the Trustee's confirmation based on information provided to it by the Servicer that the last scheduled distribution under the Fannie Mae Pass- Through Certificate will be made not later than in the month preceding the final Maturity Date of the Bonds; (iv) the Trustee's receipt of an Issue Supplement'to the Fannie Mae Trust Indenture which has attached to it a Mortgage Loan Schedule specifying the Mortgage Loan (and no other mortgage loans) as the Mortgage Loan constituting the Pool(as defined in the Fannie Mae Trust Indenture); and (v) the Trustee's receipt of confirmation from the Servicer that the Fannie Mae Legal Department will issue to the Trustee on the Fannie Mae Pass- Through Certificate Delivery Date, an Opinion of Counsel to the effect that the Fannie Mae Pass-Through Certificate constitutes a valid and binding obligation of Fannie Mae, entitled to the benefits of the Fannie Mae Trust Indenture, subject to any applicable bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights from time to time in effect and to general equity principles. From and after the Fannie Mae Pass-Through Certificate Delivery Date, the Trustee shall hold the Fannie Mae Pass-Through Certificate(or evidence of the Trustee's interest in the Fannie Mae Pass-Through Certificate) for the benefit of the Bondholders. Upon issuance of the Fannie Mae Pass-Through Certificate, the Trustee shall receive distributions from Fannie Mae under the Fannie Mae Pass-Through Certificate in accordance with the terms of the Fannie Mae Pass- Through Certificate and shall deposit, hold and invest such amounts in accordance with this Indenture. In the event that an investment Agreement shall at any time be in effect for the investment of funds on deposit in any Account within the Revenue Fund, the Trustee may, in its discretion, designate the office of the custodian of funds invested under the Investment Agreement as the address to which distributions under the Fannie Mae Pass-Through Certificate are to be made; provided that such custodian shall have agreed to notify the Trustee by telephone in the event that any amount distributable under the Fannie Mae Pass-Through Certificate is not received by the close of the Business Day following the Distribution Date. DOCSL.A i:296342. 40929-170 MM3 77 Section 7.2.2 Disposition; Substitution or Replacement of a Fannie Mae Certificate. (a) Disposition. Following its acquisition of the Fannie Mae Pass-Through Certificate, the Trustee shall not, without the prior written consent of Fannie Mae and of the owners of all of the Bonds then Outstanding, sell, exchange, transfer, assign or otherwise dispose of the Fannie Mae Pass-Through Certificate other than to Fannie Mae in exchange for (i) a Substitute Fannie Mae Pass-Through Certificate pursuant to Section 7.2.2(b) of this Indenture or (ii)payment to the Trustee of Available Moneys in an amount sufficient to pay or defease, in accordance with Section 8.2 of this Indenture, the principal of and interest due and owing on the Bonds, provided that the Fannie Mae Pass-Through Certificate may be assigned to a successor Trustee under this Indenture. (b) Substitution. Upon receipt of written notice from Fannie Mae, the Trustee shall exchange the Fannie Mae Pass-Through Certificate with Fannie Mae for one or more substitute Fannie Mae Pass-Through Certificates (in any such event, the "Substitute Fannie Mae Pass-Through Certificate") backed by the Mortgage Loan or by a different mortgage loan on the Project which different Mortgage Loan may be executed by a person other than the Borrower (the "New Borrower"). In the event that Fannie Mae directs that the Trustee exchange the Fannie Mae Pass-Through Certificate for a Substitute Fannie Mae Pass-Through Certificate, the Trustee shall immediately notify the Rating Agency in writing of Fannie Mae's request and of the date on which the substitution is expected to occur. The terms of the Substitute Fannie Mae Pass-Through Certificate, including, without limitation, the Fannie Mae Pass-Through Certificate Rate, term to maturity, payment schedule, principal amount and prepayment terms may be the same or different from those of the Fannie Mae Pass-Through Certificate in effect immediately prior to the exchange. The obligation of the Trustee to accept delivery of a Substitute Fannie Mae Pass-Through Certificate shall be subject to the following (all of which shall be provided at the sole cost and expense of the Borrower or the New Borrower, as the case may be). (i) the Trustee's receipt of either. (a) a written confirmation of the existing Cash Flow Projection or (b)a then current Cash Flow Projection (prepared at the expense of the Borrower or such New Borrower, as the case may be), in each instance accompanied by a Verification Report, showing that the scheduled payments to be made under the Mortgage Loan and the corresponding distributions to be made under the Substitute Fannie Mae Pass-Through Certificate, together with other Revenues and other moneys held under this Indenture that are available for such purpose, will be sufficient to timely pay the Fees and the principal of and interest on the Bonds when the, same shall become due and payable; (ii) the Trustee's confirmation based on information provided to it by Fannie Mae (a)that the Substitute Fannie Mae Pass-Through Certificate has an Issue Date Principal Balance equal to the then unpaid principal balance of the Mortgage Loan, which written confirmation may be an Issue Supplement, and DOCSLAI:296342. 4'0929-170 M,M3 78 (b)of the Fannie Mae Pass-Through Certificate Rate applicable to such Substitute Fannie Mae Pass-Through Certificate; (iii) the Trustee's confirmation based on information provided to it by Fannie Mae that the last scheduled distribution under the Substitute Fannie Mae Pass-Through Certificate will be made not later than in the month preceding the final maturity date of the Bonds; (iv) the Trustee's receipt of an Issue Supplement to the Fannie Mae Trust Indenture which has attached to it the Mortgage Loan Schedule specifying the Mortgage Loan (and no other mortgage loan) as the Mortgage Loan constituting the Pool(as defined in the Fannie Mae Trust Indenture); (v) the Trustee's receipt of written evidence that the New Borrower either shall have executed and recorded a document substantially in the form of the Regulatory Agreement and that such document has been approved by Fannie Mae or shall have assumed the Borrower's obligations under the Regulatory Agreement by recorded instrument; (vi) the Trustee shall have provided written notice to the Rating Agency not less than 30 days prior to the date of acceptance of the Substitute Fannie Mae Pass-Through Certificate of the proposed substitution; (vii) the Trustee's receipt from the Rating Agency of a written Rating Confirmation; (viii) the Trustee's receipt of an Opinion of Bond Counsel, upon which the Underwriter, Fannie Mae, the Trustee and the Issuer may rely, to the effect that such substitution, in and of itself, is permitted under this Indenture and will not adversely affect the excludability of the interest on the Tax.-Exempt Bonds, for federal income tax purposes, from the gross incomes of the owners thereof; and (ix) the Trustee's receipt of confirmation from Fannie Mae that the Fannie Mae Legal Department will issue to the Trustee on the Fannie Mae Passes Through Certificate Delivery Bate applicable to the Substitute Fannie Mae Pass- Through Certificate, an Opinion of Counsel to the effect that the Substitute Fannie Mae Pass-Through Certificate constitutes a valid and binding obligation of Fannie Mae, entitled to the benefits of the Fannie Mae Trust Indenture, subject to any applicable bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights from time to time in effect and to general principles of equity. In addition, if the principal amount of the Substitute Fannie Mae Pass-Through Certificate is less than the principal amount of the Fannie Mae Pass-Through Certificate being replaced, sufficient Available Moneys must be available to the Trustee to redeem Bonds such that the principal amount of Bonds to remain Outstanding after such redemption will be equal to the outstanding principal amount of the Substitute Fannie Mae Pass-Through Certificate. €)OCSLA i;296342. 40929-370 MM3 79 (c) Return of the Fannie Mae Pass-Through Certificate. Upon the discharge of the lien of this Indenture, the Trustee shall return the FannieMae Pass-Through Certificate to Fannie Mae and shall, consistent with Section 8.1 of this Indenture, distribute any payments received by it in respect of the Fannie', Mae Pass-Through Certificate after such discharge to Fannie Mae to the extent, as.set forth in a statement from Fannie Mae, of any moneys then owed to Fannie Mae on account of the Mortgage Loan, or if a default shall have occurred and remain uncured under the Mortgage Loan of which the Trustee shall have received written notice from Fannie Mae or the Servicer; provided that upon payment in full of all obligations owed by the 'Borrower under the Bond Documents and under the Mortgage Loan Documents and termination of all obligations owed to Fannie Mae, the Trustee shall, except as provided in Section 8.1, pay such amounts to the Borrower, as their interests may appear. fending such distributions, the Trustee shall hold such amounts in trust for the benefit of Fannie Mae and the Borrower. This Section 7.2.2(c) may not be modified or amended without the prior written consent of Fannie Mae and the holders of all of the Bonds then.Outstanding. Section 7.3 Requirement of Credit Facility. So long as the Bonds are Outstanding, a Credit Facility must be in effect with respect to the Bonds. Section 8. Discharge of Lien. Section 8.1 Discharge of Lien and Security Interest. Section 8.1.1 General. Upon: (i) payment in full of the Bonds, (ii) payment of all amounts due to the Trustee under this Indenture, (iii) receipt by the Trustee of a written statement from Fannie Mae stating that all obligations owed to Fannie Mae in respect of the Bonds and the Mortgage Loan, whether with respect to the Bond Documents, the Mortgage Loan Documents, the Credit Facility Agreement, the Financing Agreement or otherwise in connection with the Bonds or the Mortgage Loan, have been .fully paid, satisfied, and discharged, and (iv) payment and performance of all obligations ',owed to the Issuer under this Indenture and the Financing Agreement, in respect of the Reserved Rights, the Trustee shall (1) cancel and discharge this Indenture and the pledge and assignment of the Trust Estate, (2) execute and deliver to the issuer such instruments in writing as shall be required to evidence the cancellation and discharge of this Indenture and the pledge and assignment under this Indenture and (3) reconvey, assign and deliver to the Issuer so much of the Trust Estate as may be in its possession or subject to its control, except for(a) the Credit Facility, which shall be returned to Fannie Mae, (b)moneys and Government Obligations held for the purpose of paying Bonds and (c)moneys and Permitted Investments held in the Rebate Fund.' for payment to the United States Government. DOCS LA 1:296342. 40929-170 MM3 80 Section 8.1.2 Fannie Mae. If the Trustee shall receive a written statement from Fannie Mae stating that moneys are owed to Fannie Mae on account of the Bonds and/or the Mortgage Loan, whether with respect to the Band Documents, the Mortgage Loan Documents, the Credit Facility Agreement or otherwise in connection with the Bonds or the Mortgage Loan, the Trustee shall, prior to cancellation and discharge of this',Indenture and prior to any conveyance, assignment and delivery of the Trust Estate or any part of it pursuant to Section 8.1.1 of this Indenture, but after payment as provided for in paragraphs (i) and (ii) of Section 8.1.1 of this Indenture, as a first priority payment, pay over, assign and deliver to Fannie Mae so much. of(and not to exceed) the Trust Estate as shall be necessary to fully pay, satisfy and discharge all amounts due and owing to Fannie Mae in respect of the Bonds and the Mortgage Loan whether with respect to the Band Documents, the Mortgage Loan Documents, the Credit Facility Agreement or otherwise in connection with the Bonds or the Mortgage Loan, as determined by Fannie Mae, in its sale and absolute discretion, provided that for purposes of this Section 8.1.2,payments due to theTrustee under clause(b) of Section 8.1.1 of this Indenture that shall have priority over amounts due and owing to Fannie Mae shall be limited to the unpaid portion of the Trustee's Annual Fee currently due and unpaid and ordinary casts and expenses of the Trustee and shall not include Extraordinary Items, the payment of which shall be subordinate to the payment of amounts due to Fannie Mae. Section 8.1.3 Default. If a default shall have occurred and remain uncured under the Mortgage Loan of which the Trustee shall have receivedwritten notice from. Fannie Mae or the Servicer, at the written direction of Fannie Mae, the Trustee shall pay over, assign and deliver to Fannie Mae, as a second priority payment, so much of the Trust Estate as shall be necessary to fully pay, satisfy and discharge all obligations due and owing to Fannie Mae, as determined by Fannie Mae in its sole and absolute discretion, provided that the Trustee shall not pay over, assign or deliver to Fannie Mae pursuant to this Section any Credit Facility or any Revenues needed by the Trustee to pay when due the principal of and interest on the Bonds, all of which shall be retained by the Trustee until such time as all Bonds have been paid in full. Section 8.1.4 Issuer. If the Trustee shall be owed for Extraordinary Items and/or if the Trustee shall receive a written statement from the Issuer',stating that moneys are owed to the Issuer in respect of the Reserved Rights, the Trustee shall, prior to cancellation and discharge of this Indenture, and prior to any reconveyance, assignment'and delivery of the Trust Estate or any part of it, but only after payment pursuant to Sections 8.1.2 and 8.1.3 of this Indenture, pay over, assign and deliver to itself and to the Issuer, in that order of priority, so much of (and not to exceed) the Trust Estate as shall be necessary to fully satisfy, pay and discharge all amounts owing to the Trustee for Extraordinary Items and to the Issuer in respect of the Reserved Rights. Section 8.1.5 Convevance of Trust Estate. Upon payment in full of all obligations owed by the Borrower under the Bond Documents and under',the Mortgage Loan Documents, payment in full of all amounts owing to Fannie Mae, the Trustee and the Issuer, as provided in this Section 8.1, and termination of all obligations of Fannie Mae under the Collateral Agreement, the Trustee shall convey so much of the Trust Estate as shall remain to the Borrower. Notwithstanding the foregoing, the Trustee shall not reconvey, assign and deliver the Trust Estate to the Issuer if Fannie Mae remains obligated for any payments under the Collateral Agreement. "OCS LA 1:296342. 40929-170 MW 81 Section 8.1.6 Additional Fannie Mae_Pass-Through Certificate Distributions. Notwithstanding the foregoing provisions of Section 8.1 through Section 8.1.5, inclusive, if, at the time this Indenture is to be cancelled and discharged as provided herein, the Trustee is to receive additional distributions under the Fannie Mae Pass-`through Certificate, then this Indenture shall remain in effect and shall not be cancelled or discharged until all such distributions have been received by the Trustee and the distributions so received by the Trustee applied as provided in this Indenture. Section 8.1.7 Survival of Rights and Powers. The (a)rights and powers granted to the Trustee with respect to the payment, transfer and exchange of Bands and (b) the Reserved Rights of the Issuer shall survive the cancellation and discharge of this Indenture. Section 8.2 Limitation on Transfer or Release of Mortgage Loan. Notwithstanding anything contained in this Indenture to the contrary, so long as Fannie Mae is obligated under the Collateral Agreement and has not defaulted in its obligations under the Collateral Agreement, the Trustee shall not transfer the Mortgage Rote or the Mortgage or any interest in the Mortgage Nate or the:Mortgage other than as provided in this;Indenture or release the Mortgage Doan from the lien of this Indenture without Fannie Mae's prior written consent. Section 8.3 Defeasance. Section 8.3.1 Provision for Payment of Bonds. Any Bond shall be deemed to have been paid within the meaning of Section 8.1 of this Indenture if- (i) there shall have been irrevocably deposited with the Trustee either: sufficient Available Moneys; or _ Government Obligations, which are not subject to early redemption and which are purchased with Available Moneys, of such maturities and interest payment dates and bearing such interest as will, without further investment or reinvestment of either the principal amount of such Government Obligations or the interest earnings on Government Obligations (the earnings to be held in trust also), be sufficient, together with any Available Moneys deposited pursuant to paragraph (i) above, as verified by a written report of an independent certified public accountant; in each case for the payment on their respective maturity dates, or redemption dates prior to maturity, of the principal of such Bonds and redemption premium, if any, and interest to accrue on such Bonds to such maturity or redemption dates; provided, however, that the Trustee shall have received, at the expense of the Borrower, (a) an Opinion of Counsel rendered by bankruptcy counsel that such Available Moneys or Government Obligations purchased with Available Moneys are not subject to avoidance under Section 547 or 544 and are not subject to an automatic stay pursuant to Section 362 of the Bankruptcy Code or any successor statute, and, as such, are not recoverable under Section 550(a)of the Bankruptcy Code or other applicable insolvency law, should there be a petition by or against the Borrower, any general partner of the Borrower or the Issuer under the Bankruptcy Code or any other bankruptcy act, and (b) an I)UCSI-A 1:2953&2. 40929-170 MM3 82 Opinion of Bond Counsel to the effect that such deposit with the Trustee and consequent defeasance of such Bond does not adversely affect the exclusion of the interest payable on the Tax-Exempt Bonds from gross income for federal income tax purposes, (ii) there shall have been paid all Fees due or to become due or there shall be irrevocably deposited with the Trustee sufficient additional moneys to make the required payments; and (iii) for any such Bonds to be redeemed on any date prior to their stated maturity date,the Trustee shall have received in form satisfactory to it irrevocable instructions to redeem such Bonds on a date on which the Bonds are subject to redemption, and either evidence satisfactory to the Trusteethat all redemption notices required by this Indenture have: been given or irrevocable power authorizing the Trustee to give such redemption notices. The Trustee shall redeem the Bonds specified by such irrevocable instructions on the date specified by such irrevocable instructions. Section 8.3.2. Defeased Bonds No Longer Outstanding. At such time as a Bond shall be deemed to be paid under this Indenture, it shall no longer be secured by or entitled to the benefits of this Indenture, except for the purposes of payment from moneys held by the Trustee for such purpose in accordance with the terms of this Indenture. Section 8.3.3 Investment Limitations Not Ap izp_'cable. Limitations elsewhere specified in this Indenture regarding the investment of moneys held by the Trustee, other than with respect to the Tax Certificate, shall not be construed to prevent the depositing and holding of the obligations described in paragraph(b) of Section 8.3.1(1) of this Indenture for the purpose of providing for the defeasance of the lien of this Indenture as to Bonds which have not yet become due and payable. All income from all Government Obligations in the hands of the Trustee pursuant to this Section 8.3 which has been identified by an independent certified public accountant as not required for the payment of the Bonds and interest on such income with respect to which such moneys shall have been so deposited shall be deposited with the Trustee as and when realized and collected for use and application as are other moneys] deposited with the Trustee. Section 8.3.4 Particular Bonds. Notwithstanding any other provision of this Indenture to the contrary, all moneys or Government Obligations set aside and held in trust pursuant to the provisions of this Section 8 for the payment of.Bonds (including accrued interest on such Bonds) shall be applied to and used solely for the payment of the particular Bonds (including interest on such Bonds) with respect to which such moneys or Government Obligations have been so set aside in trust. Section 8.3.5 Restrictions on Amendments. Notwithstanding anything contained in Section 11.1 through Section 11.13, inclusive, to the contrary, if moneys or Government Obligations have been deposited or set aside with the Trustee pursuant to this Section 8 for the payment of Bonds and such Bonds shall not have in fact been actually paid in I)OcsLA I:296342. 40429 70 MM3 83 full, no amendment to the provisions of this Section 8 shall be made without the consent of the Bondholders affected by such amendment. Section 8.3.6 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 8.1, this Indenture, the rights granted and duties imposed by this Indenture,to the extent not inconsistent with the fact that the lien upon the Trust Estate may have been discharged and cancelled, shall nevertheless continue and subsist after payment in full of the Bonds until the Trustee shall, following the payment in full of all Rebate Amounts that may be or become owing, have returned to Fannie Mae, the Issuer or the Borrower, as appropriate, all amounts, if any, held by the Trustee in the Funds and Accounts. Section 9. Default Provisions and Remedies. Section 9.1 Events of Default., Preliminary Notice. Section 9.1.1 Events of Default. Each of the following shall constitute an Event of Default under this Indenture. (i) default in the payment of any interest due on any Bond on any Interest Payment Date or any other date when and as the same shall have become due, (ii) default in the payment of the principal of any Bond when and as the same shall become due, whether at the stated maturity of the Bond or upon any redemption(including any mandatory sinking fund redemption)of the Bond; (iii) default in the observance or performance of any other of the covenants, agreements or conditions on the part of the Issuer included in this Indenture or in the Bonds(other than an Event of Default set .forth in paragraph(i) or (ii) above) and the continuance of such default for a period of 30 days after receipt of written notice of such default from the Trustee to the Issuer, Fannie Mae, the Servicer and the Borrower; provided. that Fannie Mae shall have consented in writing to the same constituting an Event of Default, or (iv) an Act of Bankruptcy, provided that Fannie Mae shall have consented in writing to the same constituting an Event of Default. A payment default on the part of Fannie ?viae under the Collateral Agreement or in making any distribution under the Fannie Mae Pass-Through Certificate or in failing to observe or perform any covenant, agreement or condition contained in the Fannie Mae Pass-Through Certificate shall not in and of itself constitute an Event of Default under this Indenture, but shall entitle the Trustee to exercise its rights and remedies under the Collateral Agreement or the Fannie Mae Pass-Through Certificate (and as provided in Section 6.12.2 of this Indenture), provided that the Trustee shall not accelerate payment of the Bonds except as permitted by Section 9.2 of this Indenture. I}ocs LA 1.296342. 40929-170 MM3 84 Section 9.1.2 preliminary, Notice. The Trustee will immediately notify the Issuer, the Servicer, the Borrower and Fannie Mae after a Responsible Officer obtains knowledge or receives notice of the occurrence of an Event of Default or an event which would become an Event of Default with the passage of time or the giving of notice, or both, identifying the paragraph in Section 9.1.1 of this Indenture under which the Event of Default has occurred or may occur. Section 9.1.3 Effect of Tax Event. The occurrence of any event (a "Tax Event") which results in the interest payable on the Tax-Exempt Bonds being, for federal income tax purposes, includable under Section 103 of the Code in the gross incomes of the owners thereof, including, without limitation, any violation of any provision of any of the Bond Documents: (i) may, if a violation of any provision of the Regulatory Agreement has occurred, constitute an Event of Default under the Regulatory Agreement;but (ii) shall not constitute an Event of Default under and as defined in this Indenture and the Financing Agreement and shall not constitute a default under the Bonds, the Mortgage Loan or any other Bond Document',unless Fannie Mae, in its sole and absolute discretion provides written notice to the Trustee that the Tax Event default constitutes a default under the Mortgage Loan, the 'Mortgage Dote and the Mortgage by cross default.. No such Event of Default under the Regulatory Agreement shall permit any party (other than Fannie Mae) to accelerate, or require acceleration of, the Mortgage Loan or the Bonds, or give rise to a mandatory redemption of the Bonds, or give rise to the payment to the owners thereof of any amount, denoted as "supplemental interest," "additional interest," "penalty interest," "liquidated damages" or otherwise, in addition to the amounts payable to the owners of the Bonds prior to the occurrence of the Tax Event, it being the intent of the foregoing that the sole remedy of the Issuer, the Trustee and the owners thereof upon the occurrence of an Event of Default under the Regulatory Agreement arising from a Tax Event will be to compel specific performance of the Borrower's obligations under the Regulatory Agreement to comply with the Tax Covenants and otherwise cure such Event of Default or default. Nothing contained in this Section 9.1.3 shall be deemed to amend or modify the terms of the Mortgage Loan Documents. Promptly upon determining that a Tax Event has occurred, the Issuer or the Trustee shall, by notice in writing to Fannie Mae and the Servicer, inform Fannie Mae and the Servicer that a Tax Event has occurred and has been cured, or has occurred and has not been cured within a reasonable period, or has occurred and is incurable. Notwithstanding the availability of the remedy of specific performance to cure a Tax Event that is curable within a reasonable period, neither the Issuer nor the Trustee shall have, and each of them acknowledges that they shall not have, upon the occurrence of a Tax Event, any right or obligation to cause or direct acceleration of the Bonds or the Mortgage Loan, to enforce the Mortgage Note or to foreclose the Mortgage, to accept a deed to the Project in lieu of foreclosure, or to effect any other comparable conversion of the Project. rocsLA t:z96342. 40929-170 MM13 85 Section 9.2 Remedies, Rights of Bondholders. Section 9.2.1 General. Upon the occurrence of an Event of Default, the Trustee may pursue any available remedy at law or in equity to enforce the payment of the principal of and interest on the Bands then Outstanding, including enforcement of any rights of the Trustee under the Collateral Agreement or the Fannie Mae Pass-Through Certificate, as applicable, or of the Issuer and the Trustee under the Financing Agreement and the Regulatory Agreement. In the case of an Event of Default other than an Event of Default described in paragraph (iii) of Section 9.1.1 of this Indenture, the Trustee shall, to the extent provided for in Section 9.2.2 of this Indenture, be entitled, but not obligated, to declare the principal amount of the Outstanding Bonds and interest accrued, and to accrue, on the Outstanding Bonds to the date of payment, to be immediately due and payable. Section 9,2.2 Acceleration' Rescission of Acceleration. (a) Acceleration Prior to the Fannie Mae Dass-Through Dpliver)Date. Upon: (i) the occurrence of an Event of Default described in paragraph (i) or (ii) of Section 9.1.1 of this Indenture prior to the Fannie Mae Pass-Through Certificate Delivery Date,the Trustee: upon receipt of indemnity satisfactory to the Trustee, may, and upon the written request of the Owners of not less than fifty-one percent (51%) in aggregate principal amount of the Bonds then Outstanding, shall by written notice to the Issuer, the Borrower, Fannie Mae and the Servicer, declare the principal of all Bonds then Outstanding (if not then due and payable) and the interest accrued, and to accrue, on the Outstanding Bonds to the date of payment to be immediately ldue and payable, in which event such principal and interest shall become and be immediately dueand payable, and (ii) upon the occurrence of the Event of Default described in paragraph (iii) or (iv) of Section 9.1.1 of this Indenture prior to the Fannie Mae Pass- Through Certificate Delivery Date, the Trustee. _ upon receipt of indemnity satisfactory', to the Trustee and upon receiving the prior written consent of Fannie Viae,may, and upon the written direction of Fannie Mae, shall declare, by written notice to the Issuer, the Borrower, Fannie Mae and the Servicer, the principal of all Bonds then Outstanding (if not then due and payable) and the interest accrued, and to accrue, on the Outstanding Bonds to the date of payment to be immediately due and payable, in which event such principal and interest shall become and be immediately due and payable. €OCSLA1:296342. 40929-?70 MM3 86 Upon any such declaration of acceleration, the Trustee shall: _ give immediate written notice to Fannie Mae as contemplated in Section 3.8.2(b) of the Collateral Agreement, activating Fannie Mae's obligation to redeem the Trustee's interest in the Pledged Collateral pursuant to Section 3.8.2(b) of the Collateral Agreement, subject to the limitations of 3.8.3(a) of the Collateral Agreement,and exercise such rights as it may have under the Financing Agreement to declare all payments under this Indenture to be immediately due and payable. (b) Acceleration On or After_the Fannie Mae Pass-Through Certificate Delivery Date. Upon: (i) the occurrence of an Event of default described in paragraph (i) or (ii) of Section 9.1.1 on or after the Fannie Mae Pass-ThroughCertificate Delivery Date, the Trustee may, upon receipt of indemnity satisfactory to the Trustee, and shall upon the written request of the Owners of not less than .fifty-one percent (S 1%) in aggregate principal amount of Bonds then Outstanding, which written request shall acknowledge that the amounts due on the Fannie Mae Pass-Through Certificate cannot be accelerated by virtue of acceleration of the.Bonds,by written notice to the Issuer, the Borrower, Fannie Mae and the Servicer, declare the principal of all Bonds then Outstanding (if not then due and payable) and the interest accrued, and to accrue, on the Outstanding Bonds to the date of payment to be immediately due and payable, in which event such principal and interest shall become and be immediately due and payable; and (ii) the occurrence of an Event of Default described in paragraph (iii) or(iv) of Section 9.1.1 of this Indenture on or after the Fannie Mae Pass-Through Certificate Delivery Date, the Trustee: _ upon receipt of indemnity satisfactory to the Trustee and upon receiving the prior written consent of Fannie Mae,may, and upon the written direction of Fannie Mae shall, by notice in writing delivered to the Issuer, the Borrower, Fannie Mae and the Servicer, declare the principal of all Bonds then Outstanding and the interest accrued, and to accrue, on the Outstanding Bonds to the date of payment immediately due and payable, in which event such principal and interest shall become and be immediately due and payable. The acceleration of the Bonds shall not constitute a default under, or cause'the acceleration of, the Fannie Mae Pass-Through Certificate. (c) Notice. Upon any decision to accelerate payment of the Bonds, the Trustee shall notify the Bondholders of the declaration of acceleration, that interest on the Bonds DOCSLA#:296342. 40929-170 MW 87 will cease to accrue upon such declaration, and that payment of such Bonds will be made upon presentment of the Bonds at the Principal Office of the Trustee not earlier than fifteen (15) days following the date of acceleration. Such notice shall be sent by registered mail, overnight delivery service or other secure means, postage prepaid, or, at the Trustees option, may be given by Electronic Means to each Registered Owner of Bonds at such Registered Owner's last address appearing in the Band Register. Any defect in or failure to give notice of such declaration shall not affect the validity of such declaration. (d) Rescission of Acceleration. If at any time after a declaration of acceleration and before the payment of any money due to the Bondholders. (i) the Issuer, the Borrower or Fannie Mae shall pay to or deposit with the Trustee a sum sufficient to pay all principal of the Bonds then due (other than solely by reason of such declaration) and all unpaid installments of interest (if any) on all the Bonds then due, with interest at the rate borne by the :Bonds on such overdue principal and (to the extent legally enforceable) on such overdue installments of interest, (ii) the reasonable expenses of the Trustee (including the reasonable fees and expenses of the Trustee's counsel) and the Issuer incurred in connection with the acceleration shall have been paid or adequate provision shall have been made therefor, and (iii) all other defaults under this Indenture shall have been cured or waived in writing by Fannie Mae or, in the case of an Event of Default under paragraph (v) of Section 9.1.1 of this Indenture, by the holders of not less than fifty-one percent(51%) in aggregate principal amount of Bonds then Outstanding, then and in every case, the Trustee on behalf of the Bondholders of all the Bonds then Outstanding shall, rescind and annul such declaration and its consequences, provided that no such rescission and annulment shall extend to or shall affect any subsequent Event of Default, or impair or exhaust any right or power arising by virtue of any subsequent Event of Default. Section 9.3 Other Remedies. Subject to Section 9.9.4 of this Indenture, upon the occurrence and continuance of an Event of Default, the Trustee may, with or without taping action under Section 9.2 of this Indenture, but only with the prior written consent of Fannie Mae, and shall, at the direction of Fannie Mae if the Event of Default occurs under paragraphs (iii) or (iv)of Section 9.1.1 of this Indenture, pursue any of the following remedies: (i) an action in mandamus or other suit, action or proceeding at law or in equity (a)to enforce the payment of the principal of, premium, if any, or interest on the Bonds then Outstanding, (b) for the specific performance of any covenant or agreement contained in this Indenture or in the Financing Agreement or the Regulatory Agreement or (c)to require the Issuer to 'carry out any other covenant or agreement with Bondholders and to perform its deities under the Act; DOCSI.A i:296342. 40929-170 MM3 88 (ii) the liquidation of the Trust Estate pledged under this Indenture (subject to the provisions of Section 8.1 of this Indenture) but not including the sale, assignment or disposition of the Collateral Agreement or of the Fannie Mae Pass-Through Certificate (if such Event of Default occurs atter the Fannie Mae Pass-Through Certificate Delivery Date) without satisfying the conditions set forth in Section 7.2 of this Indenture and without the prior written consent of Fannie Mae; or (iii) an action or suit in equity, to enjoin any acts or things which may be unlawful or in violation of the rights of the Bondholdersand to execute any other papers and documents and do and perform any and all such acts and things as may be necessary or advisable in the opinion of the Trustee in order to have the respective claims of the Bondholders against the Issuer allowed in any bankruptcy or other proceeding. Subject to the provisions of Section 9.9 of this Indenture and the requirement, if any, that Fannie Mae consent in writing to the exercise by the Trustee of any such available remedy, upon the occurrence and continuance of an Event of Default and provided that the Trustee is indemnified and assured of the payment of its fees and expenses in connection therewith as provided in Section 10.4 of this Indenture, the Trustee shall exercise such of the rights and powers conferred by this Section 9.3 as the Trustee,being advised by counsel, shall deem most effective to enforce and protect the interests of the Bondholders. Section 9.4 Remedies Not Exclusive. Subject to the provisions of Section 9.9 of this Indenture, no right or remedy by the terms of this Indenture conferred',upon or reserved to the Trustee (or to the Bondholders) is intended to be exclusive of any other right or remedy, but each and every such right and remedy shall be cumulative and shall be in addition to any other right or remedy given to the Trustee or to the Bondholders under this Indenture or under the Financing Agreement, the Regulatory Agreement or the Credit Facility or now or hereafter existing at law or in equity. Section 9.5 Waiver. To the extent not precluded by law, or Section 9.2..2 of this Indenture, the Trustee upon notice to and with the prior written consent of Fannie Mae may waive any Event of Default under this Indenture and its consequences and, if the Trustee has accelerated payment of the Bonds, rescind the declaration of acceleration upon the written request of (a)Fannie Mae or (b) Bondholders owning not less than fifty-one percent (51%) in aggregate principal amount of Bonds then Outstanding;provided, however,'that there shall not be waived: (i) any default in the payment of the principal amount of any Bonds at the date of maturity of such Bonds, at the due date of any sinking fund installment or upon proceedings for mandatory redemption, or (ii) any default in the payment when due of the interest or premium, if any, on any such Bonds, DO S LA I:296342. 40929-370 MM3 89 unless prier to such waiver or rescission all arrears of interest, with interest (to the extent permitted by law) at the rate borne by the Bonds in respect of which such Event of Default shall have occurred on overdue installments of interest or all arrears of payments of principal or premium, if any, when due (whether at the stated maturity of the Bonds, at the due date of any sinking fund installment or upon proceedings for mandatory redemption) as the case may be, and all expenses of the Trustee and the Issuer in connection with such monetary default, shall have been paid or provided for. In the case of any such waiver, the Issuer, the Borrower, the Trustee and the Bondholders shall be restored to their former positions and rights under this Indenture. No waiver of any Event of Default under this Indenture shall extend to or shall affect any subsequent Event of Default or shall impair any rights or remedies arising by virtue of any subsequent Event of Default. The Trustee may not waive any Event of Default under this Indenture unless the Credit Facility will remain in effect after the waiver, provided that such waiver will be permitted if the Issuer consents to the waiver, _ the Rating Agency then rating the Bonds is notified and the Trustee gives written notice to the Bondholders that the ratings on the Bonds may be reduced or withdrawn upon the occurrence of such waiver, and 104%of the Bondholders consent to the waiver. Section 9.6 Limited Effect of Waiver. No waiver of any .Event of Default, whether by the Trustee or by the Bondholders, shall extend to or shall affect any subsequent Event of Default or shall impair any rights or remedies consequent to such Event of Default. Section 9.7 Delay or Omission. No delay or omission to exercise any right or remedy provided in this Indenture upon any Event of Default shall impair any such right or remedy or shall be construed to be a waiver of any such Event of Default or acquiescence in it and every such right and remedy may be exercised from time to time as often as may be deemed expedient. Section 9.8 Enforcement of FinanciU_Agreement. The Trustee, as assignee of all right, title and interest of the Issuer in and to the Financing Agreement,lshall be empowered to enforce each and every right granted to the Issuer under the Financing Agreement, which enforcement shall be limited as provided in the Financing Agreement, and particularly but without limitation as provided in Section 11.2 of the Financing Agreement. Section 9.9 Rights of Fannie Mae and the Bondholders To Direct Proceedings: Rights and Limitations Applicable to Bondholders. Issuer and Trustee. Section 9.9.1 Rights to Direct Proceedings. Notwithstanding anything contained in this Indenture to the contrary, Fannie Mae itself or Bondholders owning not less than fifty-one percent (51%) in aggregate principal amount of Bonds then Outstanding, but only with the prior written consent of Fannie Mae, shall have the right, at any time, by an instrument or instruments in writing executed and delivered to the Trustee, to direct the method and place of conducting all proceedings to be taken in connection with the enforcement of the DOCSLA I:296342. 40929-170 MM3 90 terms and conditions of this Indenture or any ether proceedings under this Indenture; provided that such direction shall not be otherwise than in accordance with the provisions of law and of this Indenture, and provided further that the Trustee shall be indemnified to its satisfaction. Section 9.9.2 Limitations on Bondholders' l~tights. No Bondholder shall have the right to enforce the provisions of this Indenture or the Financing Agreement, or to institute any proceeding in equity or at law for the enforcement of this Indenture or the Financing Agreement, or to take any action with respect to an Event of Default under this Indenture or an Event of Default under (and as defined in) the Financing Agreement, or to institute, appear in or defend any suit or other proceeding with respect to this Indenture or the Financing Agreement, upon an Event of Default unless: (i) such Bondholder has given the Trustee, the Issuer, Fannie Mae, the Servicer and the Borrower written notice of the Event of Default, (ii) the holders of not less than fifty-one percent (51%) in aggregate principal amount of Bonds then Outstanding shall have requested the Trustee in writing to institute such proceeding, (iii) the Trustee shall have been afforded a reasonable opportunity to exercise its powers or to institute such proceeding, (iv) there shall have been offered to the Trustee indemnity, where required, (v) the Trustee shall have thereafter failed or refused to exercise such powers or to institute such proceeding within a reasonable time, and (vi) Fannie Mae shall have given its prior written consent to such action. No Bondholder shall have any right in any manner whatever by his or her action to affect, disturb or prejudice the pledge of revenues or of any ether moneys, funds or securities under this Indenture or, except in the manner and on the conditions provided in this Section 9.9.2 to enforce any right or duty under this Indenture. No Bondholder shall have the right, directly or indirectly, individually or as a group, to seek to enforce, collect amounts available under, or otherwise realize on,the Credit Facility. Section 9.9.3 Obligation of Issuer To_ Pay and Right of Bondholders to Payment When Due. Nothing in this Indenture shall affect or impair any right of enforcement conferred on any Bondholder by the Act or other laws of the State to enforce (a)the obligation of the Issuer to pay the principal of and interest on the Bonds to such Bondholder at the time and place, from the source and in the manner as provided in this Indenture or (b)the payment of the principal of and interest on any Bonds at and after the maturity of such Bands. Section 9.9.4 Non-Interference and Non-Impairment of Mortgage Loan. 'Notwithstanding anything contained in this Indenture to the contrary, so long as the exams`Ar:2963a2. 409299-170 MM3 91 Credit Facility remains in effect and Fannie Mae is not in default in its payment obligations under the Credit Facility, neither the Issuer, the Trustee nor any person under their control nor the Bondholders shall, without the prior written consent of Fannie Mae, exercise, directly or indirectly, any remedy or direct any proceeding under the Bond Documents or with respect to the Mortgage Loan or, directly or indirectly: (i) initiate or take any action which may have the effect, directly or indirectly, of(A)impairing the ability of the Borrower to timely pay the principal of, interest on, or other amounts due and payable under, any Mortgage Lean Documents or(B)impairing or defeating the validity or priority of the lien created by the Mortgage, (ii) interfere with or attempt to influence the exercise by Fannie Mae of its rights under the Mortgage Loan Documents, including, without limitation, Fannie Mae's remedial rights under the Mortgage Doan upon the occurrence of an event of default by the Borrower under the Mortgage Loan; (iii) upon the occurrence of an event of default under the Mortgage Loan, take any action to accelerate or otherwise enforce payment or seek other remedies with respect to the Mortgage Loan; or (iv) exercise any remedies or direct any proceeding under the Mortgage Loan Documents; provided that, subject to the foregoing paragraphs (i) through (iv), this Section 9.9.4 shall not prohibit the Issuer's right to enforce its Reserved Rights. Notwithstanding the foregoing, the Issuer or the Trustee, as the case may be,may: _ enforce rights under the Collateral Agreement (so long as the Collateral Agreement is in effect), enforce the tax covenants set forth in this Indenture, the Regulatory Agreement and the Financing Agreement and _ enforce rights of'specific performance under the Financing Agreement and the Regulatory Agreement, provided that subject to the foregoing paragraphs (i) through (iv) neither the Issuer nor the Trustee shall seep damages or any monetary recovery under the Financing Agreement or the Regulatory Agreement except monetary recovery with respect to the enforcement of the Issuer's Reserved Rights. Section 9.10 Discontinuance of Proceedings. Prior to a demand For payment ander the Collateral Agreement pursuant to Section 7.l.3(a) of this Indenture, in case the Trustee shall have proceeded to enforce any right under this Indenture by the appointment of a receiver or otherwise, and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely, then and in every such case the Issuer, Fannie Mae and the Trustee shall be restored to their former positions and rights under this Indenture, and all rights, DOCSLA1:296342. 40929-170 MM3 92 remedies,powers, duties and obligations of the Issuer, the Trustee and Fannie Mae shall continue as if no such proceedings had been taken, subject to the limits of any adversedetermination. Section 9.11 Action by Trustee. All rights of action under this Indenture or upon any of the Bonds enforceable by the Trustee may be enforced by the(Trustee without the possession of any of the Bonds, or the production of the Bonds at the trial or other proceedings relative to such suit, action or proceeding, and any such suit, action or proceeding instituted by the Trustee may be brought in its name for the ratable benefit of the Bondholders without the necessity of joining any Bondholder as a party. In any action, suit or other proceeding by the Trustee, the Trustee shall be paid fees, counsel fees and expenses in accordance with Section 10.4 of this Indenture. Section 9.12 Accounting and Examination of Records after Default. The Issuer covenants with the Trustee and the Bondholders that if an Event of Default shall have occurred and shall not have been remedied, the books of record and account of the Issuer relating to the Bonds and the Project shall at all times during normal business hours be subject to the inspection and use of the Trustee and of its agents and attorneys. Section 9.13 Agplication of Moneys. Amounts derived from payments under the Collateral Agreement shall be deposited into the Credit Facility Account and applied solely to pay the principal of and interest on the Bonds and shall not be applied to pay any fees or expenses or advances of the Trustee or the Issuer (except to the extent such fees are payable out of the Fees Account from transfers to the Fees Account from the ',Pass-Through Rate Subaccount). All other moneys received by the Trustee pursuant to any action taken under this Section 9 (other than moneys recovered as a result of the enforcement of the Issuer's Reserved Rights, which shall be paid over to the Issuer) and all moneys on deposit in the Funds and Accounts (other than the Rebate Fund) under this Indenture shall be deposited into the General Receipts and Disbursements Account of the Revenue Fund, and, other than with respect to an Event of Default under paragraph (iii) of Section 9.1.1 of this Indenture, after payment of any unpaid portion of the Trustee's Annual Fee currently due and unpaid and the ordinary costs and expenses of the Trustee, the balance of such moneys, less such amounts as the Trustee shall determine may be needed for possible use in paying future fees and expenses and for the preservation and management of the Project (as identified by Fannie Mae), shall be applied as follows: (i) unless the principal on all Bonds shall have become or been declared due and payable, all such moneys shall be applied: First - together with any moneys then on deposit in the Rebate Fund, to the payment of Rebate Amounts, if any, payable to the United States pursuant to Section 4.6 of this Indenture, Second - to the payment to the persons entitled to such payment of all interest then due on the Bonds, in the order of the maturity of such interest and, if the amount available shall not be sufficient to pay in full said amount, then to the payment ratably, according to the amounts due to the persons entitled to such payment, without any discrimination or privilege, D005LA I:296342. 40929-170?V-M3 93 Third - to the payment to the persons entitled to such payment of the unpaid principal of any of the Bands which shall have became due (other than Bonds matured or called for redemption for the payment of which moneys are held pursuant to the provisions of this Indenture), in the order of their due dates, upon which they became due with interest on such Bonds from the respective dates upon which they became due at the rate borne by the Bonds and, if the amount available shall not be sufficient to pay in full Bonds due on any particular date, together with such interest, then to the payment ratably, according to the amount of principal due on such date, to the persons entitled to such payment without any discrimination or privilege; Fourth - to be held for the payment to the persons entitled to such payment, as the same shall become due, of the principal of and interest on the Bonds which may thereafter become due either at maturity or upon call for redemption prior to maturity and, if the amount available shall not be sufficient to pay in full Bonds due on any particular date, together with interest then due and owing on such Bonds, payment shall be made ratably according to the amount of principal due on such date to the persons entitled to such payment without any discrimination or privilege; and Fifth - to the payment of amounts owed to Fannie Mae under the Credit Facility Agreement, the Financing Agreement and the Mortgage Loan Documents, including amounts to reimburse Fannie Mae to the extent it has made payments under the Credit Facility, as specified to the Trustee in writing by Fannie Mae and then to any amounts due to the Trustee as Extraordinary Items, for this purpose including the costs and expenses of any proceedings resulting in the collection of such moneys and of advances incurred,or made by the Trustee; (ii) if the principal of all the Bonds shall have become or been declared due and payable, all such moneys shall be applied first to the payment of amounts, if any, payable to the United States pursuant to Vection 4.6 of this Indenture; second to the payment of the principal and interest then due and unpaid upon the Bonds, without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Bond over any other Band, ratably according to the amounts due respectively for principal and interest to the persons entitled to payment, until all such principal and interest has been pari; and third to pay Fannie Viae amounts owed to it under the Credit Facility Agreement, the Financing Agreement and the Mortgage Loan Documents, including reimbursement to the extent it has made payments under the Credit Facility as specified to the Trustee in writing by Fannie Mae; and (iii) if the principal of all the Bands shall have been declared due and payable, and if such declaration shall thereafter have been rescinded under this Section 9.13, then, in the event that the principal of all the Bonds shall later become or be declared due and payable, the moneys shall be applied in accordance with paragraph(ii)of this Section 9.13. Docsi A 1:296342. 40929-270 MM3 94 Whenever moneys are to be applied pursuant to this Section 9.13, such moneys shall be applied at such times, and from time to time, as the Trustee shall determine, having due regard for the amount of such moneys available for application, the likelihood of additional moneys becoming available for such application in the future, and potential expenses relating to the exercise of any remedy or right conferred on the Trustee by this Indenture. Whenever the Trustee shall apply such moneys, it shall fix the date (which shall be an Interest Payment Date;unless it shall deem an earlier date more suitable) upon which such application is to be made, and upon such date interest on the amounts of principal to be paid on such date shall cease to accrue. The Trustee shall ,give such notice as it may deem appropriate of the deposit with it of any such moneys and of the fixing of any such date, and shall not be required to make payment to the owner of any Bond until such .Band shall be presented to the Trustee for appropriateendorsement or for cancellation if fully paid. Whenever the principal of and interest on all Bonds have been paid in full under the provisions of this Section 9.13 and all expenses and charges of the Trustee and the Issuer have been paid, any balance remaining in the Funds and Accounts shall be paid as provided in Section 8.1 of this Indenture. Section 9.14 Mor gage Loan: Issuer's and Trustee's Acknowledgments with ResRect to the Moriggle Loan. The Issuer and the Trustee acknowledge and agree that the occurrence of an Event of Default under the Financing Agreement will not by itself cause a default to arise under the Mortgage Loan, including, without limitation, the Mortgage Note or the Mortgage. Section 10. The Trustee. Section 10.1 Al2point ent of Trustee; Duties. The Trustee is hereby appointed, and does hereby agree to act in such capacity and to perform the duties of the Trustee, the Bond.Registrar and Paying Agent under the Financing Agreement, the Regulatory Agreement and this Indenture, but only upon and subject to the fallowing 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 from the Borrower for all such compensation paid to such attorneys, agents and receivers. The Trustee may act upon the opinion or advice of counsel, accountants,or such other professionals as the Trustee deems necessary and selected by it in the exercise of reasonable care. The Trustee shall not be responsible for any lass or damage resulting from any action or nonaction based on its good faith reliance upon such opinion or advice. (b) Except as otherwise specifically provided elsewhere in this Indenture, the Trustee shall not be responsible for any recital herein (other than recital (1) of this Section 10.1) 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 (other than as provided' in Section 6.7 and Section 10.7 hereof) or collecting any insurance moneys, or for the validity of this DOCSt..AI:295342. 40925-170 Mi.3 95 Indenture or of any supplements thereto or instruments of further assurance, or for the sufficiency of the security for the Bonds issued hereunder or intended to be secured hereby, or for the value or title of the Project or otherwise as to the maintenance of the Trust Estate, but the Trustee may require (but shall be under no duty to require) of 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 9.2.2 hereof, the Trustee shall have no obligation to perforin any of the duties of the Issuer under the Financing Agreement, and the Trustee shall not be liable for any loss suffered in connection with any investment of amounts made by it in accordance with this Indenture. (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 Mortgage Loan, or for the use or application of any moneys received by the Trustee, except to the extent that the Trustee is obligated to apply such moneys in accordance with the provisions hereof and to invest moneys under and in the manner provided in Section 5 hereof. The Trustee may become the owner of Bonds secured hereby with the same rights as any other Bondholder. (d) The Trustee shall not be held liable in acting upon opinions of counsel and upon any notice,request, consent, direction,requisition, 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 as shown on the Bond Register 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. (e) The permissive right of the Trustee to do things !enumerated in this Indenture, Regulatory Agreement or the Financing Agreement shall not be construed as duties. The Trustee shall only be responsible for the performance of the duties expressly set forth herein and in the other Bond Documents and shall not be answerable for other than its negligence or willful misconduct 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 give any bond or surety in respect of the execution of the said trust and powers or otherwise in respect of the premises. (h) Before taking any action requested hereunder (except for acceleration of the Bonds as required by Section 9.2.2 hereof, or a payment pursuant to Sections 7.1 or 7.2 hereof), 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, DOCS[AI:296342. 40929-1703 MM3 96 except liability which is adjudicated to have resulted from its own negligence or bad faith by reason of any action so taken. (i) Before taking any action requested by a Bondholder or Bondholders under or pursuant to Section 9.1 through 10.13, inclusive, the Trustee may require satisfactory security or an indemnity bond from such Bondholder or Bondholders for the reimbursement of all expenses to which it may be put and to protect it against all liability, except liability which is adjudicated to have resulted from its own negligence or bad faith by reason of any such action so taken. (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, Fannie Mae and the Persons to whom fees are owed as herein provided. Such moneys need not be segregated from other moneys 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. The Trustee shallbeep and maintain records with respect to all investments of moneys held under the Indenture for a period of at least seven (7) years or such longer period in order to permit calculation of any rebate payable to the United States pursuant to 1986 Code §148(f). (k) The Trustee shall not be bound to ascertain or inquire as to the performance of the obligations of the Borrower under the Financing Agreement or the Issuer under this Indenture, and shall not be deemed to have, or required to tape,notice of default under this Indenture except any default under Section 9.9.2(1) or (ii) hereof or in the event of written notification of such default by, Fannie Mae, any party to the Financing Agreement or the holders of not less than twenty-five percent (25'/0) of the principal amount of Bonds Outstanding, 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 Financing Agreement and this Indenture,but is not obligated to do so. (1) The Trustee shall be obligated to perform such duties and only such duties of the Trustee as are specifically set forth in this Indenture, the Regulatory Agreement and the Financing Agreement, and no implied duties shall be read into this Indenture, the Regulatory Agreement or the Financing Agreement. The Trustee shall, during the existence of any Event of Default(which has not been cured), exercise such of the rights vested in it by this Indenture and the Financing Agreement, and use the same degree of care and skill in their exercise, as a reasonable person would exercise or use under the circumstances in the conduct of his own affairs. The foregoing shall not limit the Trustee's obligations under Section 9.2.2 hereof. ( ) The Trustee shall, if the Bonds are then rated by a bating Agency, give notice by mail to that Rating Agency at its address promptly upon the occurrence of any of the following: DOCS .A I:296342. 40929-1170 MM3 97 (i) any change in the Trustee serving under this Indenture; (ii) any modifications, amendments, supplements or revisions to this Indenture,the Financing Agreement, the Collateral Agreement or the Fannie Mae Pass-Through Certificate, as applicable, or any.Mortgage Loan Document known to the Trustee; (iii) receipt of the Fannie Mae Pass-Through Certificate; (iv) the termination of the Collateral Agreement or the Fannie Mae Pass-Through Certificate, as applicable, or the substitution thereof; (v) an Event of Default hereunder; (vi) a redemption of the Bonds in whole or in part or a defeasance of the Bonds in whole; (vii) execution by the Trustee of an investment agreement, or any amendment, modification or replacement of any investment agreement; (viii) any change in the provider of an investment agreement; (ix) any partial prepayment of the Mortgage Loan; or (x) such additional information concerning the Bonds and the transactions contemplated by this indenture as the Rating Agency may from time to time request. Notwithstanding the foregoing, it is expressly understood and agreed that failure to provide any such notice to any Rating Agency or any defect therein will not affect the validity of any action with respect to which notice is to be given or the effectiveness of any such action. (n) The Trustee shall promptly notify the Servicer if the fees and expenses of the Trustee have not been paid under the Financing Agreement. (o) The Trustee is authorized and directed by the Issuer to execute in its capacity as Trustee the Financing Agreement, the Regulatory Agreement, the Collateral Agreement or any Mortgage Loan Document to which it is a party, as applicable, the Reimbursement Agreement and any financing statements. (p) The Trustee shall comply with the provisions of 'Sections 6.10.1 and 6.10.2 hereof. (q) The Trustee shall not be responsible for the actions or omissions of the Servicer and shall have no duty or responsibility to monitor the 'performance of the Servicer. (r) The Trustee shall have no responsibility with respectto any information, statement or recital in any official statement, offering memorandum or any ether disclosure material prepared or distributed with respect to the Bonds. DOC'S LA1:296342, 40929-570 MM3 98 (s) No provision of this Indenture, the Regulatory Agreement, the Financing Agreement, the Collateral Agreement or the Fannie Mae Pass-Through Certificate, as applicable, the Reimbursement Agreement, the Mortgage Loan Documents or any other documents related thereto shad require the Trustee to risk or expend its own funds or otherwise incur any financial liability in the performance of its duties and obligations hereunder or thereunder. (t) The Trustee shall not be liable for any action taken or not taken by it in accordance with the direction of the owners of a majority (or other percentage provided for herein) in aggregate principal amount of Bonds outstanding relating to the exercise of any right or remedy available to it or the exercise of any trust or power available to the Trustee. The Trustee shall not be obligated to undertake the performance of extraordinary services without the approval of Fannie Mae pursuant to Section 10.4 of this Indenture. Section 10.2 Receipt of Tannie Mae Pass-Thrpyph Certificate. The Trustee agrees to receive and accept the Fannie Mae Pass-Through Certificate on the Fannie Mae Pass- Through Certificate Delivery Date, subject in all respects to the terms of the Fannie Mae Trust Indenture, and declares that it or its custodian holds and will hold the Fannie Mae Pass-Through Certificate for the sole benefit of the Bondholders. In making determinations required by this Indenture with respect to the Fannie Mae Pass-Through Certificate, the Trustee may rely in good faith upon certifications and other information provided by the Servicer, provided that the Fannie Mae Trust Indenture and related Issue Supplement relating to the Fannie ?viae Pass-Through Certificate shall in all events govern the Fannie Mae Pass-Through Certificate notwithstanding any certification by the Servicer inconsistent with the Fannie Mae Trust Indenture or the related Issue Supplement. Section 10.3 Representation. The Trustee represents and warrants to the Issuer that it is a national banking association having a combined capital stock, surplus and undivided profits aggregating at least $50,000,000 or a wholly-owned subsidiary of an entity meeting that requirement. Section 10.4 Fees; Expenses. The Trustee shall be entitled to payment and/or reimbursement from the Borrower for the Trustee's Annual Fee and the Trustee's ordinary casts and expenses in connection with its services under this Indenture and under the Financing Agreement, the Regulatory Agreement and the Collateral Agreement, and, in the event that it should become necessary that the Trustee perform extraordinary services, it shall be entitled to Extraordinary Items; provided that if such .Extraordinary Items are incurred as a result of the negligence or willful misconduct of the Trustee, it shall not be entitled to compensation or reimbursement therefor, provided further however, that the Borrower's failure to pay amounts owed to the Trustee shall not excuse the Trustee's performance of its obligations under this Indenture and under the other Bond Documents, except that the Trustee shall not be required to expend, risk or advance its own funds or otherwise incur any financial liability in connection therewith unless payment of its fees and expenses are assured to the satisfaction of the Trustee. The approval of Extraordinary Items by Fannie Mae shall constitute Fannie Mae's agreement to pay such approved Extraordinary Items to the extent such Extraordinary Items are not otherwise `OCst.A 1:296342. 40929-170 MM3 99 provided for under the terms of this Indenture. The Trustee shall also be indemnified by the Borrower as provided in the Financing Agreement. The Trustee recognizes that all fees, charges and ether compensation to which it may be entitled under the provisions of this Indenture are required to be paid by the Borrower under the terms of the Financing Agreement, and, accordingly, the Trustee agrees that except for moneys that the Issuer may derive from the Borrower for purposes of the foregoing, the Issuer shall not be liable for any such fees, charges and ether compensation. Section 10.5 Intervention in Litigation. In any judicial proceedings with respect to the Bonds to which the Issuer is a party the Trustee may intervene on behalf of Bondholders or Fannie Mae (with the prior written consent of Fannie Mae), and shall, subject to the Trustee's rights to indemnification and assurance that its fees and expenses will be paid as provided in Section 10.4 of this Indenture, intervene if(a)requested in writing by Bondholders owning not less than fifty-one percent (51%) in aggregate principal amount of Bonds then Outstanding and with the consent of Fannie Mae, or(b) if requested in writing by Fannie Mae. Section 10.6 Instruments of Bondholders. Any instrument required by this Indenture to be executed by Bondholders may be in any number of writings of similar tenor and may be executed by Bondholders in person or by agents appointed in writing. Proof of the execution of any such instrument or of the writing appointing any such agent and of the ownership of Bonds shall be sufficient for any of the purposes of this Indenture if given by a certificate of any officer in any jurisdiction who by law has power to tape acknowledgments within such jurisdiction that the person signing such instrument acknowledged before such officer the execution of such instrument. The Trustee may rely on such an instrument of Bondholders unless and until the Trustee receives written notice that the original of such instrument is no longer valid. In the event that the Trustee shall receive conflicting directions from two groups of Bondholders, each with combined holdings of not less than twenty-five percent (25%) in aggregate principal amount of all Bonds then Outstanding,'the directions given by the group of Bondholders which hold the largest percentage of Bonds shad be controlling and the Trustee shall follow such directions. Section 10.7 Filing of Financing; Statements. From time to time, the Trustee, at the expense of the Borrower, shall file or record or cause to be filed or recorded all financing statements which are required to be filed or recorded in order fully to protect and preserve the security interests relating to this Indenture and the Trust Estate and, prior to the Fannie Mae Pass-Through Certificate Delivery Bate, the Mortgage Loan, and the priority of such security interests and the rights and powers of the Issuer and the Trustee in connection therewith, including, without limitation, all continuation statements for the purpose of continuing without lapse the effectiveness of(a) those financing statements which shall have been filed at or prior to the Closing Date in connection with the security for the Bonds pursuant to the authority of the U.C.C., and (b)any previously filed continuation statements which shall',have been filed as required by this Indenture; provided that if Fannie Mae or the Servicer gives written notice to the Trustee that it has filed or recorded all applicable financing statements, the Trustee shall be entitled to rely on such written notice. The Issuer shall sign, and the Borrower shall deliver to the Trustee or its designee, all such financing statements as may be required for the purposes specified in the preceding sentence. Each financing statement so delivered to the Trustee shall be accompanied by a notice from the Borrower instructing the Trustee to file such financing DOCSLA#.296342. t� 40929-1170 MNI3 IN statement in all appropriate places, which places shall be designated in such notice. Upon the filing of any such financing statement the Trustee shall promptly notify the Issuer, the Borrower, the Servicer and Fannie Mae that the same has been accomplished. Section 10.8 Servicing the Mortgage Loan. The Issuer and the Trustee acknowledge that the Servicer, as Servicer, will be responsible for servicing and administering the Mortgage Loan, but that Fannie Mae, in its discretion, may contract with anther servicer designated by Fannie Mae to perform such functions for Fannie Mae. Any servicing contracts or arrangements by Fannie Mae with such servicer for servicing the Mortgage Loan shall constitute a contractual obligation only between Fannie Mae and such servicer and neither the Trustee nor the Issuer will be deemed to be a party to such arrangements or to have any claim, right,duty, obligation or liability with respect to the servicing of the Mortgage Loan. Section 10.9 Requests from Rating Agency. The Trustee shall promptly respond in writing, or in such other manner as may be reasonably requested, to requests from the Rating Agency for information deemed necessary by the Rating Agency in order to maintain the rating assigned to the Bonds. The Trustee shall promptly famish ish any such requested information in its possession to the hating Agency and shall, as may be reasonably requested by the Rating Agency, assist in efforts to obtain any necessary information from the Issuer or the Borrower or Fannie Mae as applicable. Section 10.10 Resignation of Trustee. The Trustee and any successor Trustee may resign only upon giving sixty (60) days prior written notice to the Issuer, Fannie Mae, the servicer, the Borrower and to each registered owner of Bonds 'then outstanding as shown on the records of the Trustee. Notwithstanding such notice, such resignation shall take effect only upon the appointment of a successor Trustee as provided in Section 10.11. If no successor is appointed within sixty (60) days after the notice of resignation, the resigning party shall appoint a successor with the written consent of the Issuer and Fannie Mae or apply to a court of competent jurisdiction for the appointment of a successor. 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 Collateral Agreement or the Fannie Mae Passe Through Certificate, as applicable, and this Indenture, to the successor Trustee. Section 10.11 Appointment of Successor Trustee. Upon the resignation or removal of the Trustee, a successor Trustee shall be appointed by the Issuer upon consultation with the Borrower (if the Borrower is not then in default under any Bond Document or any Mortgage Loan Document and if no event shall have occurred which with notice or the passage of time or both would constitute such a default shall have occurred and be continuing) and with the prior written consent of Fannie Mae. If, in the case of resignation' of the Trustee, no successor is appointed within sixty(60) days after the notice of resignation, the resigning Trustee shall appoint a successor with the prior written consent of the Issuer and Fannie Mae or apply to a court of competent jurisdiction for the appointment of a successor. The successor Trustee shall (a)be a bank or trust company organized under the laws of the Untied States of America or any state of the United States of America, having (or its parent having) a combined capital stock, surplus and undivided profits aggregating at least $50,000,000, and shall (b) accept in writing its duties and responsibilities under this Indenture, the Financing Agreement'and the Regulatory Agreement; such written acceptance shall be filed with the Issuer, Fannie Mae, the Servicer, and DOCSLA 1:296342. 40929-11 70 MM3 i 01 the Borrower. The successor Trustee shall give notice of such succession by first-class mail, postage prepaid, to each Bondholder at the address of such Bondholder shown on the Bond Register. Upon appointment of a successor Trustee, the resigning or removed Trustee, as the case may be, shall assign all of its right, title and interest in the Trust Estate, including its right, title and interest in the Credit Facility and this Indenture,to the successor Trustee. Section 10.12 Removal of Trustee. The Trustee may be removed at any time, upon thirty(30) days prior written notice to the Trustee and the Borrower(if the Borrower is not then in default under any Bond Document or any Mortgage Loan Document and if no event shall have occurred which with notice or the passage of time or both would constitute such a default shall have occurred and be continuing), (i)by the Issuer, with the consent of Fannie Mae, (ii)by an instrument or concurrent instruments in writing delivered to the Issuer, Fannie Mae, the Trustee, the Servicer and the Borrower, signed by the owners of a majority in aggregate principal amount of Bonds then Outstanding, and approved by Fannie Mae, which written instrument shall designate a successor Trustee or (iii)by Fannie Mae so long as Fannie Mae has not defaulted in payment under the Collateral Agreement or the FannieMae Pass-Through Certificate, as applicable,. Upon such removal, which shall not be effective until a successor Trustee satisfying the requirements of Section 10.11 is appointed and the successor Trustee has accepted such appointment, 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 10.11 hereof. Section 10.13 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 (at the request of the Borrower) shall have the power, subject to the approval of Fannie Mae, to appoint one or more persons approved by the Trustee either to act as co-trustee or co-trustees jointly with the Trustee, or to act as separate trustee or separate co-trustees, of all or any part of the Trust Estate, and to vest in such person or persons, in such capacity, such title to the 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 Brands 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 in case an Event of Default shall have occurred and be continuing, subject to Fannie Mae's right to approve, the Trustee alone shad have the power to make such appointment. The Issuer shall execute, acknowledge and deliver all such instruments as may be required by any such co-trustee or separate trustee for more fully confirming such title, rights, powers, trusts, duties and obligations to such co-trustee or separate trustee. Every co-trustee or separate trustee shall, to the extent permitted by law or any applicable contract, be appointed subject to the following terms, namely: DOCSLA I:296342. 40929-170 MM3 102 (a) This Indenture shall became effective once executed and delivered by the Issuer and the Trustee and the Bonds have been authenticated and delivered, and thereupon the Trustee shall have all rights, powers, trusts, duties and obligation 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 performed, the Trustee shall be incompetent or unqualified to perforin 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 taping 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, may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section, and, in case an Event of Default shall have occurred and be continuing, the Trustee shall have power to accept the resignation of,or remove, any such co-trustee or separate trustee without the concurrence of the Issuer. 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. (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 DOCSLA i:29(1342. 40929-170 MM3 103 rights,powers, duties, trusts or obligations as shall be specified in the instrument of appointment, jointly with the Trustee (except insofar as local law makes it necessary for any such co-trustee or separate trustee to act alone), subject to all the terms of this Indenture. Every such acceptance shall be filed with the Trustee. In case any co-trustee or separate trustee shall die, 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 10.11 hereof. Notwithstanding anything else to the contrary in this Section 10, no successor trustee or any co-trustee or separate trustee shall assume its duties hereunder without the prior written approval of the Issuer. Section 10.14 iYier era Consolidation. Any corporation or association into which the Trustee may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer its corporate trust business and assets as a whole or substantially as a whole, or any corporation or association resulting from any such conversion, sale, merger, consolidation or transfer to which the Trustee is a party shall, provided such corporation or association otherwise qualifies under Section 10.11 of this Indenture, be and become the successor Trustee under this Indenture, vested with title to the Trust Estate and having all the trusts, powers, discretion,rights, duties, immunities and privileges as its predecessor, without the execution or filing of any instrument or any further act, deed or conveyance on the part of the Issuer(other than the provision of notice to the Issuer,Fannie Mae and the Servicer). Section 10.15 Transfer of Rights and Property to 'Successor Trustee. Upon the execution of the written acceptance provided for in Section 10.11 of this Indenture, the successor Trustee shalt, without any further act, deed or conveyance, become fully vested with all moneys, estates, properties, rights, powers, duties and obligations of the predecessor Trustee, with like effect as if named in this Indenture as such Trustee, but the firmer Trustee shall nevertheless, on the written request of the Issuer, Fannie Mae or the successor Trustee, execute, acknowledge and deliver such instruments of conveyance and further assurance and do such other things as may be reasonably required for more fully and certainly vesting and confirming in the successor Trustee all the right, title and interest of the predecessor Trustee in and to any properties held by it under this Indenture, and shall pay over, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions set forth in this Indenture. Should any deed, conveyance or instrument in writing from the Issuer be required by such successor Trustee for more fully and certainly vesting in and confirming to the successor Trustee any such moneys, estate, properties, rights, powers and duties, any and all such deeds, conveyances and instruments in writing, shall, on request, and as may be authorized by law, be executed, acknowledged and delivered by the Issuer. Section 10.16 Continuing Disclosure. Pursuant to Section 7.2.13 of the Financing Agreement, the Borrower shall undertake the continuing disclosure requirements promulgated under S.E.C. Rule 15c2-12, as it may from time to time hereafter be amended or DOC;SI_A i;296342. 40929-170 MM3 104 supplemented, and the Issuer shall have no liability to the holders of the(Bonds or any other person with respect to the actions by the Borrower relating to such disclosure matters. Notwithstanding any other provision of this Indenture, failure of the Borrower to comply with the requirements of S.E.C. Rule 15c2-12, as it may from time to time hereafter be amended or supplemented, shall not be considered an Event of Default; however, the Trustee at the written request of the holders of at least 25% aggregate principal amount of Outstanding Bonds, shall, but only to the extent the Trustee has been provided indemnity satisfactory to it from any costs, liabilities or expenses, including fees and expenses of its attorneys and additional fees and charges of the Trustee, or any Bondholder may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court'order, to cause the Borrower to comply with its obligations under Section 7.2.13 of the Financing Agreement. Section 11. Sup lemental Indentures; Amendments. Section 11.1 Supplemental Indentures Not Requiring Bt)ndholder Consent. The Issuer and the Trustee, without the consent of or notice to any of the Bondholders, but subject to the provisions of Section 11.10 of this Indenture, may enter into an indenture or indentures supplemental to this Indenture for one or more of the following purposes. (i) to cure any ambiguity or to correct or supplement any provision contained in this Indenture or in any supplemental indenture which may be defective or inconsistent with any other provision contained in this Indenture or in any supplemental indenture; (ii) to make such other provisions in regard to matters or questions arising under this Indenture which are not materially adverse to the interests of the Bondholders; (iii) to amend, modify or supplement this Indenture in any respect if such amendment, modification or supplement is not materially adverse to the interests of the Bondholders; (iv) to grant to or confer upon the Trustee for the benefit of the Bondholders any additional rights, remedies, powers or 'authority that may lawfully be granted to or conferred upon the Bondholders or the Trustee, or to grant or pledge to the Trustee for the benefit of the Bondholders any additional security other than that granted or pledged under this Indenture; (v) to modify, amend or supplement this Indenture or any supplemental indenture in such manner as to permit the qualification of this Indenture or such supplemental indenture under the Trust Indenture Act of 1939, as amended, or any similar federal statute then in effect, or to permit the qualification of the Bonds for sale under the securities laws of any of the States of the United States; (vi) to mare any change requested by Fannie Mae which, is not materially adverse to the interests of the Bondholders, including, without limitation, provision of a Credit Facility other than or in 'substitution for the DOCS[_A t:296342. 40929-170 MM3 105 Collateral Agreement or the Fannie Mae Pass-Through Certificate, provided that the provision of such Credit Facility does not adversely affect the rating then in effect for the Bonds, and the Trustee may, at the Borrower°s',expense, request an Opinion of Counsel to the effect that any such change meets the requirements of this clause, (vii) to comply with requirements of any Rating Agency then rating the Bonds, (viii) to comply with the Code and the regulations and rulings issued with respect to the Code, to the extent determined as necessary or desirable in the Opinion of Bond Counsel; (ix) to permit the Borrower to enter into a modification of the Mortgage Loan provided that the terms of such modification are approved by Fannie Mae, and provided further that there has first been delivered to the Trustee (a)written evidence of such approvals and the approval by Fannie Mae of the proposed form of supplemental indenture and any other documents relating to the supplemental indenture; and(b) a written Rating Confirmation; (x) to implement any secondary market disclosure, required under applicable law with respect to the Bonds, the Issuer,the Borrower or the Project; (xi) to make any changes in this Indenture or in the terms of the Bonds necessary or desirable in order to (a) obtain a Fannie IMae Pass-Through Certificate or (b)maintain the rating of "AAA" awarded to the Bonds by the Rating Agency, provided that any change under this clause (b), if made at all, must be made prior to the Fannie Mae Pass-Through Certificate Delivery Date; (xii) to subject to this Indenture additional revenues, properties or collateral; (xiii) to modify, amend or supplement this Indenture as may be necessary or desirable in order to enable the Trustee to accept the Fannie Mae Pass-Through Certificate in certificated form instead of in book-entry form, and to make conforming amendments or supplements to this Indenture in connection therewith; or (xiv) in connection with any other change in this Indenture which is not materially adverse to the interests of the Bondholders. provided that the Trustee shall have received, in each instance, a written sating Confirmation. When requested by the Issuer or the Borrower, and if all conditions precedent in this Section 11.1 and. in Sections 11.10 and 11.11 of this Indenture have been satisfied, the Trustee shall join the Issuer in the execution of any such supplemental indenture. A copy of any such supplemental indenture shall be promptly furnished by the Trustee to Fannie Mae, the Servicer and the Borrower. DOc SLA I:296342. 40929-170 NIM3 106 Section 11.2 Supplemental Indentures Requiring Bondholder Consent. Exclusive of supplemental indentures covered by Section 11.1 of this Indenture and subject to the terms and provisions contained in this Section 1.1.2 and in Sections 11.14 anal 11.11, and not otherwise,the Issuer, in its sole discretion, and the Trustee may, with the consent of Bondholders owning net less than fifty-one percent (51%) in aggregate principal amount of Bonds then Outstanding and affected by such indenture or indentures supplemental to this Indenture, from time to time, anything contained elsewhere in this Indenture to the contrary notwithstanding, execute an indenture or indentures supplemental to this Indenture for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the 'terms or provisions contained in this Indenture or in any supplemental indenture, provided that nothing contained in this Section 11.2 shall permit, or be construed as permitting, without the approval of Bondholders owning one hundred percent (100%) in aggregate principal amount of Bonds then Outstanding: (i) an extension of the maturity of the principal of or interest on, any Bond, without the consent of the owners of all of the Bonds then Outstanding; (ii) a reduction in the principal amount of, or the rate of interest on, any Bond, without the consent of the owner of such Bond; (iii) a preference or priority of any Bond or Bonds over any other Bond or Bonds,without the consent of the owners of all such Bonds; (iv) the creation of a lien prior to or on parity with the lien of this Indenture,without the consent of the owners of all of the Bonds then.Outstanding; (v) a change in the percentage of Bondholders necessary to waive an Event of Default or otherwise approve matters requiring Bondholder approval under this Indenture,including consent to any supplemental indenture,without the consent of the owners of all the Bonds then Outstanding; (vi) so long as the Collateral Agreement is in effect, a transfer, assignment or release of the Collateral Agreement (or modification of the previsions of this Indenture governing such transfer, assignment or release), other than as permitted by this Indenture or the Collateral Agreement without the consent of all of the Bonds then Outstanding; (vii) on and after the Fannie Mae Pass-Through Certificate Delivery Date, a transfer, assignment, or release of the Fannie Mae Pass-Through Certificate, other than as permitted by this Indenture, at an aggregate price less than the Stated Principal Balance (as defined in the Fannie Mae Trust Indenture) of the Mortgage Loan, plus accrued interest, without the consent of the holders of all of the Bonds then Outstanding, (viii) a reduction in the aggregate principal amount of the Bonds required for consent to such supplemental indenture, without the consent of the holders of all of the Bonds then Outstanding; DOCS LA::296342. 40929-170 MM3 107 (ix) the creation of any lien other than a lien ratably securing all of the Bonds at any time Outstanding under this Indenture without the consent of the holders of all of the Bonds then Outstandings or (x) the amendment of this Section 11.2. The giving of notice to and consent of the Bondholders to any such supplemental indenture shall be obtained as provided in Section 11.8 of this Indenture. When requested by the Issuer or the Borrower, and if all conditions precedent under this Section 11.2 and Sections 11.8, 11.10 and 11.11 of this Indenture have been satisfied, the Trustee shall join the Issuerin the execution of any such supplemental indenture. The Trustee shall promptly furnish a copy of any such supplemental indenture to Fannie Mae,the Servicer and the Borrower. Section 11.3 Amendments to the Financing Agreement riot Requiring Bondholder Consent. In addition to any amendments permitted by Section 6.16 hereof, the Issuer and the Trustee, without the consent of or notice to any of the Bondholders and without a Rating Confirmation, but subject to the provisions of Sections 11.10 and 11.11 of this Indenture, (a) may enter into or permit any amendment of the Financing Agreement and (b) shall, at the direction of Fannie Mae, enter into any amendment of the Financing Agreement, for one or more of the fallowing purposes: (i) to cure any ambiguity or to correct or supplement any provision contained in the Financing Agreement which may be defective or inconsistent with any other provision of the Financing Agreement; (ii) to make such other provisions in regard to matters or questions arising under the Financing Agreement which are not materially adverse to the interests of the Bondholders, (iii) to amend, modify or supplement the Financing Agreement in any respect if such amendment, modification or supplement is not materially adverse to the interests of the Bondholders; (iv) to grant to or confer upon the Issuer or the Trustee for the benefit of the Bondholders any additional rights, remedies, powers or authority that may lawfully be so granted or conferred, or to grant or pledge to the Issuer or the Trustee for the benefit of the Bondholders any additional security; (v) to make any change requested by Fannie Mae which, based on an Opinion of Counsel obtained at the expense of the Borrower, is not materially adverse to the interests of the Bondholders; (vi) to comply with the requirements of any Rating',Agency then rating the Bunds; (vii) to comply with regulations or rulings issued ;with respect to the Code, to the extent determined as necessary or desirable in the opinion of Bond Counsel; DOCSLA::296342. 40929-170 MM3 108 (viii) to permit the Borrower to enter into a modification of any Mortgage Loan.Document on terms approved by Fannie Mae, provided that there has first been delivered to the Trustee (a:)written evidence of such approval and the approval by Fannie Mae of the proposed form of amendment and any other documents relating to the amendment and(b)a written Rating Confirmation; or (ix) in connection with any other change which, is not materially adverse to the interests of the Bondholders, provided that the Trustee shall have received, in each instance, a written dating Confirmation. When requested by the Issuer or the Borrower, and if all conditions precedent in this Section 11.3 and in Sections 11.9 and 11.10 of this Indenture have been satisfied, the Trustee shall join the Issuer, the Servicer and the Borrower in the execution of any such amendment. The Trustee shall furnish copies of any such amendments to the Financing Agreement to Fannie Mae, the Servicer, the Issuer and the Borrower. Section 114 Amendments to the Financing AgreeinentRequiring Bondholder Consent. Except as provided in Section 11.3 of this Indenture and subject to the provisions of Sections 11.10 and 11.11 of this Indenture, the Issuer and the Trustee shall not enter into any other modification or amendment of the Financing Agreement, nor shall any such modification or amendment become effective, without the written consent of the owners of not less than a majority in aggregate principal amount of Bonds then Outstanding, such consent to be obtained in accordance with Section 11.8 of this Indenture. No such amendment may, without the consent of the owners of all the Outstanding Bonds, reduce or delay the amounts payable on the Mortgage Loan under the Financing Agreement; provided that any such amounts may be reduced without such consent solely to the extent that such reduction (a)results from a partial redemption from other than sinking fund installments or (b)represents a reduction in any fees payable from such amounts (including, but not limited to, a reduction in the Facility Fee, the Servicing Fee and/or the Guaranty Fee). A copy of any such modification or amendment shall be provided to the Servicer. 'Notwithstanding the foregoing, on and after the Fannie Mae Pass- Through Certificate Delivery bate, Fannie Mae and the Borrower may amend the Mortgage Note and the Mortgage without the consent of the Issuer, the Trustee or the Bondholders so long as any such amendment does not reduce or modify the payments due under the Fannie Mae Pass- Through Certificate. Section 11.5 Amendments# Chafes and Modificationsto the Collateral Agreement and the ftulatory Agreement. The provisions of Sections 11.5.1 and 11.5.2 are in addition to amendments permitted by Section 6.16. Section 11.5.1 The Collateral Agreement. Subject to the provisions of Section 11.10 and Section 11.11 of this Indenture, the Trustee may, without notice to or the consent of the owners of the Bonds and without a Rating Confirmation, enter into any amendment of the Collateral Agreement as may be required for purposes of curing any ambiguity, formal defect or omission which is not materially adverse to the interests of the Bondholders. Except for such amendments, the Collateral Agreement may be amended only with the consent of the Issuer, the Trustee and the owners of not less than fifty-one percent(51%) in aggregate principal amount of Bonds then Outstanding, except that, without the written DOCSLA'-:296342. 40929-1703 MM3 109 consent of the owners of all Outstanding Bonds, no amendment may be made to the Collateral Agreement which would reduce the amounts required to be paid under the Collateral Agreement or change the time for payment of such amounts; provided that any such amounts may be reduced without such consent solely to the extent that such reduction is made to reflect a reduction in fees payable from such amounts. Section 11.5.2 The Regulatory Agreement. Subject to the provisions of Section 11.14 and Section 11.11 of this Indenture, the Borrower, the Trustee and the Issuer may enter into any amendment or modification of the Regulatory Agreement without the consent of the owners of the Bonds and without a Rating Confirmation (a) as may be required in connection with any amendment or modification to the Financing Agreement, the Mortgage Note, the Mortgage or any of the other related Mortgage Loan .Documents and (b)provided that the Borrower shall fiurnish to the Trustee and the Issuer (1) an Opinion of Bond Counsel to the effect that such amendment or modification of the Regulatory Agreement will not adversely affect the exclusion of interest on the Tax-Exempt Bonds from gross income for federal income tax purposes and(2) the written consent of Fannie Mae. Section 11.6 Amendments to Mortgage Loan_ Documents Not Requiring Bondholder Consent. In addition to amendments permitted by Section 6.16, Fannie Mae shall have the right, without the consent of or notice to the Issuer, the Trustee or the Bondholders and without a Rating Confirmation, but subject to the provisions of Section 11.10 of this Indenture, to enter into or permit or direct, as the case may be, any amendment or modification of any Mortgage Loan Document for one or more of the following purposes: (i) to cure any ambiguity or to correct or supplement any provision which may be defective or inconsistent with any other provision of the same or any other Mortgage Loan Document or any Bond Document; (ii) to amend, modify or supplement any Mortgage Loan Document in any respect if such amendment, modification or supplement is not materially adverse to the interests of the Bondholders; (iii) to grant to or confer upon Fannie Mae any additional rights, remedies, powers or authority that may lawfully be so granted or conferred with respect to the Mortgage Loan, or to grant or pledge to FannieMae any additional security; (iv) to comply with the requirements of any Rating Agency, (v) to comply with regulations or rulings issued with respect to the Code, to the extent determined as necessary or desirable by Band Counsel; (vi) to amend the Mortgage Note in order to provide for reamortization of principal over the remaining term of the Mortgage Note in;connection with the final disbursement from the Mortgage Loan Fund in the event of any partial prepayment of the Mortgage Note and corresponding partial redemption of Bonds or to restate the terms of the Mortgage Note in connection with the final disbursement from the Mortgage Loan Fund; or DOC"SLA::246342. 40929-1717 MM13 110 (vii) to make any change requested by Fannie Mae which, in the judgment of the Trustee, is not materially adverse to the interests of the Bondholders; provided that there has first been delivered to the Trustee (a)written evidence that any such modification will not affect (1) Fannie Mae's obligations under the Collateral Agreement, so long as the Collateral Agreement is in effect or (2) on and after the Fannie Mae Pass-Through Certificate Delivery :Date, the distributions to be made by Fannie Mae under the Fannie Mae Pass-Through Certificate and(b)a written Rating Confirmation. The Trustee agrees to cooperate in effecting any such amendment or modification and shall furnish copies of any such amendment to the Issuer,the Servicer and the Rating Agency. Section 11.7 Amendments to ;mortgage Loan Documents Re um—R9 Bondholder Consent. Except as provided in Section 11.6 of this Indenture and subject to the previsions of Sections 11.10 and Section 11.11 of this Indenture, Fannie Mae shall not enter into any other amendment or modification of the Mortgage mote or the Mortgage, nor shall any such amendment or modification become effective, without the written consent of Bondholders owning not less than fifty-one percent (51%) in aggregate principal amount of all Bonds at the time Outstanding, such consent to be obtained in accordance with Section 11.6 of this Indenture, unless such amendment or modification will have no effect on the security for the Bends. Section 11.8 Notice to and Consent of Bondholders. If consent of the Bondholders is required under the terms of this Indenture for any supplement, amendment or modification to this Indenture, the Financing Agreement, the Regulatory Agreement, the Mortgage Note, the Mortgage or any other Mortgage Loan Document, or for any other similar purpose, the Trustee shall cause notice of the proposed execution of the supplement, amendment or modification to be given by first class mail to the Bondholders. Such notice shall briefly set forth the nature of the proposed supplement, amendment or modification, and shall state that copies of any such supplement, amendment or modification are on file at the Principal Office of the Trustee for inspection by the Bondholders. If,within sixty(60) days or such longer period as shall be prescribed by the Trustee following the mailing of such notice, the holders of not less than fifty one percent (51%) in aggregate principal amount of all Bonds then. Outstanding, by instruments filed with the Trustee, shall have consented to the supplement, amendment or modification, there the Trustee may execute such supplement, amendment or modification, and the consent of the Bondholders shall be conclusively presumed. The consentof the holder of any Bond shall be binding on any transferee and successor transferees of such Bond. Any other notice required to be delivered to Bondholders pursuant to this Indenture shall be given, or caused to be given, by the Trustee by first class mail. Section 11.9 Waivers. The Trustee shall not waive, on its own behalf or on behalf of the Issuer, any obligation of the Borrower under the Financing Agreement without the prior written consent of Fannie Mae. Section 11.10 Required Approvals. 'notwithstanding anything in this Indenture to the contrary, no amendment, supplement, change or modification may be made to this Indenture, the Financing Agreement, the Regulatory Agreement, any of the Mortgage Loan Documents or any of the other documents executed and delivered in connection with the Bonds [)OCSI,A'::296342. 40929-170 MM3 111 without the prior written consent of Fannie Mae and written notice to the Servicer, provided that Fannie ?Viae is not then in default under a Credit Facility then in effect. Anything in this Indenture to the contrary notwithstanding, a supplement or amendment or other document described under this Section 11 which affects any rights or obligations of the Borrower shall not become effective unless and until the Borrower(if the Borrower is not then in default under any Bond Document or any Mortgage Loan Document and if no event shall have occurred which with notice or the passage of time or both would constitute such a default shall have occurred and be continuing) shall have consented in writing to the execution of such supplemental indenture, amendment or other document. The Trustee shall not be required to enter into any supplement or amendment or other document described under this Section 11 which is, in the judgment of the Trustee, to the prejudice of the Trustee. Section 11.11 Opinions of Counsel. Subject to the provisions of Section 10.1 of this Indenture,the Trustee may request, at the expense of the(Borrower, and shall be fully indemnified in relying upon, an Opinion of Counsel as conclusive evidence that any supplement or amendment to this Indenture, the Financing Agreement, the Regulatory Agreement, the Mortgage 'Note, the Mortgage or a Credit Facility at the time in effect is authorized and permitted by this indenture, and, unless a Rating Confirmation is obtained, is not materially adverse to the interests of the Bondholders. No supplement or amendment with respect to this Indenture, the Financing Agreement, the Mortgage Note, the Mortgage or the Credit Facility at the time in effect shall be effective until the Issuer and the Trustee shall have received an Opinion of Bond Counsel to the effect that such supplement or amendment will not adversely affect the exclusion under Section 103 of the Code of the interest payable on the Tax- Exempt Bonds from the gross incomes of the owners thereof for federal income tax purposes. Section 11.12 Certificate of Borrower. In connection with any supplement, amendment or modification, the Trustee and the Issuer may obtain and shall be fully indemnified in relying upon a certificate of the Borrower to the effect that, as of the date of such certificate, the Borrower and the Project are in compliance with all requirements of the Bond Documents and the Mortgage Loan Documents (with such exceptions as shall be acceptable to the Issuer in its sole discretion). Section 11.13 Notation of Modification on Bonds. Preparation of New Bonds. Bonds authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Section 11 may bear a notation, in form approved by the Issuer as to any matter provided for in such supplemental indenture, and if such supplemental indenture shall so provide, new Bonds, so modified as to conform., in the opinion of the Issuer, to any modification of this Indenture contained in any such supplemental indenture, may be prepared, authenticated by the Trustee and delivered without cost to the Bondholders, upon surrender for cancellation of such:Bonds in equal aggregate principal amounts. Section 12. Miscellaneous. Section 12.1 lReserved1. Section 12.2 Limitation of Rights. With the exception of rights expressly conferred in this Indenture, nothing expressed or mentioned in or to be implied from this [Wo SLA i:296342. 40929 70lylM312 Indenture or the Bonds is intended or shall be construed to give to any Person other than the Issuer, the Trustee, the Bondholders, Fannie Mae and the Borrower any legal or equitable right, remedy or claim under or in respect of this Indenture or any covenants, conditions and provisions contained in this Indenture; this Indenture and all of the covenants, conditions and provisions in this Indenture being intended to be and being for the sole and exclusive benefit of the parties to this Indenture, the Bondholders, Fannie Mae and the Borrower as provided in this Indenture. Section 12.3 Severability. If any provision of this Indent-are is held to be in conflict with any applicable statute or rule of law, or is otherwise held to be unenforceable for any reason whatsoever, such circumstance shall not have the effect of rendering the provision in question inoperative or unenforceable in any other part or circumstance, or of rendering any other provision or provisions contained in this Indenture invalid, inoperative or unenforceable to any extent whatsoever. The invalidity of any one or more phrases, sentences, clauses or Sections of this Indenture shall not affect the remaining portions of this Indenture. Section 12.4 Notices. Unless otherwise specified in this Indenture, it shall be sufficient service or giving of any notice, request, certificate, demand or other communication if the same shall be sent by, and all notices required to be given shall be given by, (i) first-class registered or certified mail, return receipt requested,or (ii) by private courier service which provides evidence of delivery, postage or other charges prepaid, or (iii) sent by telecopy or other Electronic Means which produces evidence of transmission, confirmed by first-class mail, and in each case shall be deemed to have been given on the date evidenced by the postal or courier receipt or other written evidence of delivery or electronic transmission. Unless a different address is given by any party as provided in this Section 12.4, all such communications shall be addressed as follows: To the Issuer: County of Contra Costa, California County Administrative Building 651 Pine Street, 4ffi Floor,North Wing Martinez, CA 94553-0095 Attention: Deputy Director Redevelopment Telephone: (925) 335-12.55 ' Facsimile: (925) 335-1265 To the Trustee: U.S. Bank Trust National Association 550 South Hope Street, Suite 500 Los Angeles, CA 90071 Attention: Corporate Trust Department Telephone: (213) 533-8708 ' Facsimile: (213) 533-8729 '30CS[_h 1:296342. 4092'-170 MM3 113 To the Borrower: Willow Partners, L.P. c/o Partners Realty Capital 4685 MacArthur Court,Suite 422 Newport Beach, CA 92660 Attention: Marr Hyatt Telephone: (949) 851-1954',x212 Facsimile: (949) 551-1819 With a copy to(which copy;shall not constitute notice to the Borrower): Bret H. Reed,Jr.,A Law Corporation 200 Garnet Avenue Balboa Island, CA 92662 Attention: Bret H. Reed, Jr. Esq. Telephone: (949) 955-9150' Facsimile: (949) 673-9285 To S&P: Standard&Poor's Ratings Services 25 Broadway New York,NY 10004 Attention: Public Finance Surveillance Group Telephone: (212) 208-1766' Facsimile: (212) 412-0393 To the Credit Facility Fannie Mae Provider: 3900 Wisconsin Avenue,'_BTW Washington, D.C. 20016-2899 Attention: Senior Vice President, Multifamily Telephone: (202) 752-7405' Facsimile: (202) 752-4231 With copies to: Fannie Mae 3900 Wisconsin Avenue,NW Washington, I .C. 20016-2899 Attention: Manager, Multifamily Operations Facsimile: (202) 752-8369 Fannie Mae Western Regional Office 135 forth Los Robles Avenue Pasadena, California 91101-1097 Attention: Vice President—Multifamily Telephone: (626) 396-5428 Facsimile: (626) 396-5411 DOCS LA 1:296342, 40929-1703 3 M3 114 Arent Fox Kintner Plotkin&Kahn 1050 Connecticut Avenue,NW Washington, D.C. 20036 Attention: William C. Basil, Esq. Telephone: (202) 857-6186 Facsimile: (202) 857-6395 To the Servicer: ARCS Commercial Mortgage Company, L.P. 26901 Agoura Road, Suite 200 Calabasas Hills, CA 91301 Attention: Servicing Telephone: (818) 880-3300', Facsimile: (818) 676-3200 The Issuer, the Borrower, Fannie Mae, the Servicer and the Trustee, by notice given under this Indenture, may designate any different addresses to which subsequent notices, certificates, requests, demands or other communications shall be sent, but no notice directed to any one such entity (except for Fannie Mae) shall be required to be sent to more than two addresses. All approvals required under this Indenture shall be given in writing. Failure to provide any copy of a notice to any party, or any defect in any such duplicate notice so provided, shall not be treated as a failure to give; the primary notice or affect the validity thereof or the effectiveness of any action taken pursuant thereto. Section 12.5 Limitations can Ri&hts of Fannie Mae. Notwithstanding anything contained in this Indenture to the contrary, all provisions of this Indentureregarding consents, approvals, directions, waivers, appointments, requests or other actions by Fannie Mae shall be deemed not to require or permit such consents, approvals, directions, waivers, appointments, requests or other actions and shall be read as if Fannie Mae were not ',mentioned in such provisions after a Credit Facility then in effect shall at any time for any reason cease to be valid and binding on Fannie Mae (other than in accordance with its terms or the terms of this Indenture), or shall be declared to be null and void by final judgment of a'court of competent jurisdiction., provided, however, that the payment of amounts due to Fannie viae pursuant to the terms of this Indenture shall continue in full force and effect. The foregoing shall not affect any other rights of Fannie Mae. In addition, all provisions in this Indenture relating to the rights of Fannie Mae shall be of no force and effect if there is no Credit Facility provided by Fannie Mae in effect and all amounts owing to Fannie Mae under the Credit Facility Agreement shall have been paid in full. In such event, all references to Fannie Mae shall have no farce or effect. Section 12.6 Action Required to be taken on a Non-Business DAy. In any case where any Bond Payment hate or any date on which action is required to be taken shall be a day ether than a Business Day, then any action required to be taken or any payment required to be made on such date need not be taken or made on such date, but may be taken or made on the next succeeding Business Day with the same force and effect as if made or taken on the date otherwise provided for in this Indenture and, in the case of any payment date, no interest shall accrue for the period from and after such date. C3tC I..A 1:296342. 40929-170 MM3 115 Section 12.7 Binding Effect. This Indenture shall from and after the Closing Date be binding upon the Issuer, the Trustee, the Borrower and Fannie ?viae and their respective successors and assigns, subject,however, to the limitations contained in this Indenture. Section 12.8 Governing Lawn. This Indenture shall be governed by and interpreted in accordance with internal laws of the State without regard to conflicts of laws principles. Section 12,9 No Personal Liability; No Recourse. No recourse under or upon any obligation, covenant, warranty or agreement contained in this Indenture or in any Bond, or under any judgment obtained against the Issuer, or the enforcement of any assessment, or any legal or equitable proceedings by virtue of any constitution or statute or otherwise, or under any circumstances under or independent of this Indenture, shall be had against the elected or appointed officials of the Issuer or any of the supervisors, officers, agents or employees of the Issuer, as such, past, present or future of the Issuer, either directly or through the Issuer or otherwise, for the payment for or to the Issuer or any receiver of the Issuer, or for or to the owner of any Bond, or otherwise, of any sum that may be due and unpaid by the Issuer upon any such Bond. Any and all personal liability of every nature whether at common law or in equity or by statute or by constitution or otherwise of the elected or appointed officials of the Issuer or of any such supervisor, officer, agent or employee, as such, by reason of any act of omission on his or her part or otherwise, for the payment for or to the owner of any Bond or otherwise of.any sum that may remain due and unpaid upon the Bonds secured by this Indenture or any of them is, by the acceptance of such Band, expressly waived and released as a condition of and in consideration for the execution of this Indenture and the issuance of the Bonds. Anything in this Indenture to the contrary notwithstanding, it is expressly understood by the parties to this Indenture that (a)the Issuer may rely exclusively on the truth and accuracy of any certificate, opinion,notice or other instrument furnished to the Issuer by the Trustee or any Bondholder as to the existence of any fact or state of affairs, (b)the Issuer shall not be under any obligation under this Indenture to perform any record keeping or to provide any legal services, it being understood that such services shall be performed or caused to be performed by the Trustee or by the Bondholders and(c)none of the provisions of this Indenture shall require the Issuer to expend or risk its own funds or otherwise to incur financial liability in the performance of any of its duties or in the exercise of any of its rights or powers under this Indenture. No recourse for the payment of any part of the principal of, premium, if any, or interest on the Bonds or for the satisfaction of any liability arising from, founded upon or existing by reason of the issuance, purchase or ownership of the Bonds shall be had against the elected or appointed officials of the Issuer or any officer, supervisor, agent or employee of the Issuer, as such, all such liability being expressly released and waived as a condition of and as a part of the consideration for the execution of this Indenture and the issuance of the Bonds. No covenant, stipulation, obligation or agreement of the Issuer contained in this Indenture shall be deemed' to be a covenant, stipulation, obligation or agreement of any present or future supervisor, officer, agent or employee of the Issuer or the elected or appointed officials of the Issuer in other than that person's official capacity. No supervisor, officer, agent or employee of the Issuer shall be individually or personally liable for the payment of the principal or redemption price of or interest on the Bonds or be subject to any personal liability or accountability by reason of the issuance of the Bonds. rDOCS LA 1:296342. 40929-170 MM3 116 Section 12.10 Ca tions. The captions or headings in this Indenture are for convenience only and in no way define, limit or describe the scope or intent of any provisions of Sections of this Indenture. Section 12.11 Counteruarts. This Indenture may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. [SIGNATURES APPEAR ON THE FOLLOWING PACES] DOCS LA I:296342, 40929-170 MM3 117 The Issuer and the Trustee have caused this Indenture to be executed in their respective names by their respective duly authorized officers, all as of the date set forth above. COUNTY OF CONTRA COSTA, CALIFORNIA, as Issuer By: Deputy Director --Redevelopment U.S. BAND TRUST NATIONAL ASSOCIATION, as Trustee By: Authorized Officer Attest: By: Authorized Officer DOC'SLA 1:296342. 40929-170MM3 11$ Schedule I Mandatory Sinking Fund Redemption of Bunds Maturing on November 1, 20 REDEMPTION DATE PRINCIPAL AMOUNT *Maturity S-I-1 DOCS 1,A i:296342. 40929-17()MM3 Schedule II Mandatory Sinking Fund Redemption of Bonds Maturing on May 1, 20_ REDEMPTION DATE PRINCIPAL AMOUNT *Maturity S-II-1 DOC;SLA I:296342. 40924-170 MW3 EXHIBIT A Form of Bond No. $ COUNTY OF CONTRA COSTA, CALIFORNIA MULTIFAMILY HOUSING REVENUE BONDS (WILLOW PASS APARTMENTS),SERIES [1999D[![1999D-T] Interest Rate Maturity Date Dated Date CUSIP % [MATURITY DATE] [ISSUE DATE] REGISTERED OWNER: CEDE& CO. PRINCIPAL AMOUNT: [AMOUNT] DOLLARS FOR VALUE RECEIVED, the COUNTY OF CONTRA COSTA, 'CALIFORNIA (the "Issuer"), a Political subdivision of the State of California(the "State"), hereby promises to pay, in lawful money of the United States of America, to the person in whose] name this Bond is registered on the Bond Register at the close of business on the applicable Record Date, but only from the sources provided in the Indenture: (i)the principal amount of this Bond, and premium, it any, and interest payable on any Bond Payment bate other than a regularly scheduled Interest Payment Date, by check, only upon presentation and surrender of this Bond on or after its maturity date or date fixed for redemption or other payment at the office of U.S. Bank. Trust National Association, as trustee (the "Trustee") designated by the Trustee for that purpose and (ii)interest on this Bond to the Registered Owner thereof(as determined at the close of business on the Record. Date next preceding the applicable Interest Payment Date), by check wiled by first class mail, postage prepaid, on the Interest Payment Date to the address of such Registered Owner as it appears on the Bond Register maintained by the Trustee as Bond Registrar or to such other address as may be furnished in writing by the Registered Owner to the Trustee prior to the applicable Record Date; provided, however, that payment of principal of, premium, if any, and interest on this Bond shall be made by wire transfer to any account within the United States of America designated by a Registered Owner if such Registered Owner owns ;$1,000,000 or more in aggregate principal amount of Bonds if a written request for wire transfer is delivered to the Trustee by such Registered Owner not less than five days prior to the applicable Bond Payment Date and if such Registered Owner otherwise complies with the reasonable',requirements of the Trustee (such request may specify that it is effective with respect to all succeeding payments of principal, premium, if any, and interest and will be so effective unless and until rescinded in writing by the Registered. Owner at least five days prior to the Record 'Date for the Bond Payment Date to which such rescission is designated to apply). Notwithstanding the foregoing, so long as this Bond is subject to the Book-Entry System, payments of the principal of and interest on this Bond will be made in accordance with the rules, regulations and procedures established by the Securities Depository in connection with the Book-EntrySystem. Interest is payable on May I and November I of each year (each, an "Interest Payment Date"), DOCS F_A i:296342. 40929-]70 MM3 A-1 commencing November 1, 1999. Interest shall be calculated on the basis of a 360-day year consisting of twelve 30-day months. This Band shall bear interest from the Interest Payment Date next preceding the date of authentication of this Band., ,provided ;that if the date of authentication is an Interest Payment Date for which interest has been paid or is after the Record Date, but prior to the next Interest Payment Date, this Bond shall bear interest from such Interest Payment Date,providedfurther that if the date of authentication is prier to the Record Date for the first Interest Payment Date, this Bond shall bear interest from the .Dated. Date of this Bond. Notwithstanding the foregoing, if at the time of authentication of this Bond, interest on this Bond is in default, this Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment, or if no interest has theretofore been paid on this Bond, from the Dated Date of this Bond. [The Bonds are issued pursuant to and in compliance with the laws of the State, particularly Chapter 7 of Part 5 of Division 31 of the California Health and Safety Code, as amended, and a resolution duly adopted by the Issuer. The Bonds are limited obligations of the Issuer payable solely from 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 State or any political subdivision thereof, including the Issuer, to pay the principal of this Bond or the interest or any premium hereon or any other cost incident hereto, or to enforce payment hereof against any property of the State or any political subdivision thereof, including the Issuer, other than the Trust Estate.] The term "Bond Payment Date" means (a) any Interest Payment Date, (b) any other date on which interest is payable, including any Redemption Date, each Maturity Date and the date of acceleration of the Bonds and(c) any date on which principal of the Bonds is payable. THE BONDS AND THE PREMIUM, IF ANY, AND THE INTEREST THEREON, ARE SPECIAL. OBLIGATIONS OF THE ISSUER. PAYABLE SOLELY FROM THE REVENUES TO BE RECEIVED IN CONNECTION WITH THE FINANCING OF THE PROJECT (HEREINAFTER DEFINED) AND FROM .ANY OTHER'MONEYS MADE AVAILABLE TO THE ISSUER FOR SUCH PURPOSE, INCLUDING BUT NOT LIMITED TO DISTRIBUTIONS TO BE MADE TO THE TRUSTEE UNDER THE FANNIE MAE PASS-THROUGH CERTIFICATE AND PAYMENTS MADE TO THE TRUSTEE UNDER THE COLLATERAL, AGREEMENT. NEITHER THE BONDS NOR THE INTEREST OR PREMIUM, IF ANY, THEREON, NOR THE PURCHASE PRICE THEREOF, CONSTITUTE A DEBT OF AND DO NOT PLEDGE THE FAI'T'H, CREDIT OR TAXING POWER OF THE STATE, THE DEPARTMENT, THE ADMINISTRATION OR ANY POLITICAL SUBDIVISION, BUT ARE PAYABLE SOLELY FROM THE REVENUES AND ASSETS PROVIDED FOR IN THE WITHIN DESCRIBED INDENTURE. PAYMENT OF THE PRINCIPAL OF PREMIUM, IF ANY, AND INTEREST ON, THE BONDS IS NOT GUARANTEED BY FANNIE MAE. FANNIE MAE'S SOLE OBLIGATION WITH RESPECT TO THE MORTGAGE LOAN 'MILL BE CONTAINED IN THE COLLATERAL AGREEMENT, SO LONG AS IT IS IN EFFECT, AND UPON DELIVERY OF THE FANNIE MAE PASS-THROUGH CERTIFICATE, IF IT OCCURS, IN THE FANNIE MAE PASS-THROUGH CERTIFICATE, AND WILL BE LIMITED, DOCSL At:296342. 40929-170 MM3 Aa2 AS TO THE COLLATERAL AGREEMENT, SOLELY TO ITS OBLIGATIONS THEREUNDER AND, AS TO THE FANNIE MAE PASS-THROUGH CERTIFICATE, TO MAKING DISTRIBUTIONS OF PRINCIPAL AND INTEREST UNDER THE FANNIE MAE PASS-THROUGH CERTIFICATE, IN ACCORDANCE WITH ITS TERMS, TO THE RECORD OWNER OF THE FANNIE MAE ',PASS-THROUGH CERTIFICATE. THE OBLIGATIONS OF FANNIE MAE ARE NOT BACKED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERIKA, BUT BY THE CREDIT OF FANNIE MAE, A FEDERALLY CHARTERED, STOCKHOLDER- OWNED CORPORATION. This Band is one of a duly authorized issue of bands of the Issuer designated as "County of Contra Costa, California Multifamily Housing Revenue Bonds (Willow Pass Apartments), Series [1999D]/[1999D-T]" limited in aggregate principal amount to $[5,400,000]/[2,500,000] (the"Bonds"). 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, 1999, between the Issuer and the Trustee (the "Indenture"), to which Indenture and all indentures supplemental thereto (copies of which are on file at the Principal Office of the Trustee) 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 The Bonds are being issued to provide funds to fund the Mortgage Loan, the proceeds of which will be applied to finance the acquisition, rehabilitation and equipping of a multifamily rental housing development located in the County of Contra Costa, California (the "Project"), to be owned by Willow Partners, L.P., a California limited partnership (the"Borrower"). Defined terms used herein and not defined herein shall,have the meanings assigned to them in the Indenture. The Bonds are secured by the Trust Estate, which includes, among other interests, (i)the Mortgage Loan, (ii)prior to the Fannie Mae Pass-Through Certificate Delivery bate, the Collateral Agreement, and (iii) after the Fannie Mae Pass-Through Certificate Delivery Date, the Fannie Mae Pass-Through Certificate. The Trustee is the Bond Registrar for the Bonds and will keep the Bond Register for the registration of the Bonds and for the registration of transfer of Bonds. The Bonds shall be issued as fully registered bonds without coupons in the "Authorized Denominations" of$5,000 or any integral multiples of$5,000 in excess thereof. Subject to the express limitations contained in the Indenture, the Bondholder or its attorney duly authorized in writing may transfer title to this Bond on the Bond Register kept by the Trustee, upon surrender of this Bond at the office of the Trustee designated by the Trustee for that purpose, together with a written instrument of transfer (in substantially the form of assignment, including signature guarantee, attached to this Bond) satisfactory to the Trustee executed by the Bondholder or its attorney duly authorized in writing, and upon surrender for registration of transfer of this 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 of DOCSLA 1:29£:342. 40929-170 MM3 A-3 interest,maturity, series and tenor as the Bond surrendered and of any Authorized Denomination. Transfers of an interest in the Bonds shall be in principal amounts equal to any Authorized Denomination. Subject to the express limitations contained in the Indenture, Bonds may be exchanged upon surrender of such Bands at the office of the Trustee designated by the Trustee for that purpose together with a written instrument of transfer (in substantially the form of assignment, including signature guarantee, attached to the Bond) satisfactory to the Trustee, executed by the Bondholder or its attorney duly authorized in writing, for an equal 'aggregate principal amount of Bonds of the same aggregate principal amount, rate of interest, maturity, series and tenor as the Bonds being exchanged and of any Authorized Denomination. The Issuer will execute and the Trustee will authenticate and deliver Bonds which the Bondholder making the exchange is entitled to receive, bearing numbers not contemporaneously then outstanding. Registrations of transfers or exchanges of this Bond shall be without charge to the Bondholder, but any taxes or other governmental charges required to be paid with respect to a transfer or exchange shall be paid by the Bondholder requesting the registration of transfer or exchange as a condition precedent to the exercise of such privilege. Any service charge made by the Trustee for any such registration, transfer or exchange shall be paid by the Borrower. The Trustee shall not be required to register any transfer or exchange of any Bored (or portion of any Bond)called for redemption. The person in whose name this Bond is registered on the Bond Register shall be deemed and regarded as the absolute owner of this Bond for all purposes, and payment of or on account of either principal or interest shall be made only to or upon the order of such person or its attorney duly authorized in writing, but such registration may be changed as provided above in the Indenture. All such payments shall be valid and effectual to satisfy and discharge the liability upon this Bond to the extent of the sum or suras so paid. This Bond is subject to optional and special mandatory redemption as provided in the Indenture. Notice of redemption will be given as provided in the Indenture. If on a Redemption Date, Available Moneys in an amount sufficient (including principal, interest and premium, if any) to effect the redemption of the Bonds to be redeemed on such Redemption Date are held by the Trustee for the purpose of effecting the redemption of such Bonds, the Bands called for redemption shall become due and payable on such Redemption Date, interest on those Bonds shall cease to accrue on such Redemption Date and the called Bonds shall no longer be deemed Outstanding, the Registered Owners of the Bonds so called for redemption shall thereafter no longer have any security or benefit under the Indenture except to receive payment of the redemption price for such Bonds from the moneys held by the Trustee for such purpose upon surrender of such Bonds to the Trustee. Under certain circumstances as described in the Indenture, the principal sof all of the Bonds may be declared due and payable in the manner and with the effect provided in the Indenture. Upon any decision to accelerate payment of the Bonds, the Trustee shall notify the Bondholders of the declaration of acceleration, that interest on the Bonds will cease to accrue upon such declaration, and that payment of such Bonds will be made upon presentment of the I)OCS i,A 1:296342. 40929-170 MW A-4 ' Bonds at the Principal Office of the Trustee not earlier than fifteen (15) days following the date of acceleration. Such notice shall be sent by registered mail, overnight delivery service or other secure means, postage prepaid, or, at the Trustee's option, may be given by Electronic Means to each Registered Owner of Bonds at such Registered Owner's last address appearing in the Bond Register. Any defect in or failure to give notice of such declaration shall not affect the validity of such declaration. The Indenture permits, under certain circumstances therein provided, amendments and supplements thereof and of the Financing Agreement, the Collateral Agreement, the Regulatory Agreement and the Mortgage Loan Documents, in certain instances without the consent of any Bondholders and in certain instances permits amendments and supplements to the Financing Agreement, the Collateral Agreement, the Regulatory Agreement, the Mortgage Note and the Mortgage only with the consent of a specified percentage of Bondholders. No Bondholder shall have the right to enforce the provisions of the Indenture or the Financing Agreement, or to institute any proceeding in equity or at law for, the enforcement of the Indenture or the Financing Agreement, or to take any action with respect to an Event of Default under the Indenture or an Event of Default under (and as defined in) the Financing Agreement, or to institute, appear in or defend any suit or other proceeding with respect to the Indenture or the Financing Agreement, upon an Event of Default, except as provided under certain limited circumstances described in the Indenture, provided, however, that nothing in the Indenture shall affect or impair any right of enforcement conferred on any Bondholder by the Act or other laws of the State to enforce (a)the obligation of the Issuer to pay the principal of and interest on the Bonds to such Bondholder at the time and place, from the source and in the manner as provided in the Indenture or (b) the payment of the principal of and interest on any Bonds at and after the maturity of such Bonds. The registered owner of this Bond, by acceptance hereof, consents to all of the tens and provisions of the Indenture and the Financing Agreement. No recourse for the payment of any part of the principal of, premium, if any, or interest on the Bonds or for the satisfaction of any liability arising from, founded upon or existing by reason of the issuance, purchase or ownership of the Bonds shall be had against the elected or appointed officials of the Issuer or any officer, supervisor, agent or employee of the Issuer, as such, all such liability being expressly released and waived as a condition of and as a part of the consideration for the execution of the Indenture and the issuance of the.Bonds. IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required to exist, happen and be performed precedent to 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 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,endorsed hereon. DOCK A P:296342. 40929-170 MM3 A-5 IN FITNESS 'WHEREOF the Issuer has caused this Bond to be duly executed in its name by the manual or facsimile signature of the Chairman of the Boardof Supervisors and attested by the manual or facsimile signature of the County Administrator and Clerk of the Board of Supervisors, COUNTY OF CONTRA COSTA, CALIFORNIA By Chairman of the Board of Supervisors Attest: By: County Administrator and Clerk of the Board of Supervisors DOCS[.A 1:296342. 40929-170 MM3 A-6 Certificate of Authentication This Bond is one of the Bonds described in the within mentioned Indenture. Date of Authentication: April_, 1999 U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee By: Authorized Signatory DOC.SL.A 1:296342. 40929-170 MIM3 A-7 ASSIGNMENT FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto (Narne, Address and.Taxpayer I.D. of Assignee) the within Bond and does hereby irrevocably constitute and appoint , Attorney, to transfer the said Bond on the .Bond Register with full power of substitution in the premises. Dated: Signature guaranteed: NOTICE: The signature to this assignment must correspond with the name of the registered owner as it appears upon the face of the within Bond in every particular, without alteration or enlargement or any change whatever. Signature(s) must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Trustee, which requirements include membership or participation in STAMP or such other"signature guaranty program." as may be determined by the Trustee in addition to or in substitution for STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. DOCSLA 1:296342. 40929-?70 MM3 A-8 EXHIBIT D Form of Mortgage Loan Fund Requisition Certificate' Mortgage Loan Fund requisition Certificate To: U.S. Bank Trust National Association,Trustee From: Willow Partners,L.P. (the"Borrower") Subject: County of Contra Costa, California Multifamily housing Revenue Bonds (Willow Pass Apartments), Series 1999D and Series 1999D-T Project Name: Willow Pass Apartments This Mortgage Loan Fund Requisition Certificate is being delivered by the Borrower to the Trustee pursuant to Section.4.3.2 of that certain Trust Indenture dated as of April 1, 1999 (the "Indenture") between the Trustee and the County of Contra Costa., California (the "Issuer"). All terms used herein and not otherwise defined herein shall',have the respective meanings assigned thereto in the Indenture. The Trustee is hereby are requested to disburse from the Mortgage Loan Fund to the Borrower the following sum: Amount Of Requested Disbursement: $ The amount requested to be disbursed pursuant to this Requisition Certificate will be used to pay, or reimburse the Borrower for, Project Costs of the Project identified above, which Project Costs are detailed in the schedule attached hereto. The undersigned does certify that: 1. The expenditures for which moneys are requisitioned hereby were paid or incurred with respect to the acquisition, rehabilitation and equipping of the above- mentioned Project and are requisitioned hereby were paid or incurred solely with respect for the rehabilitation and equipping of the above-mentioned Project and represent proper charges against the Mortgage Loan Fund, have not been included in a previous requisition and have been properly recordedon the Borrower's books. The expenditures for which moneys are hereby requisitioned are set forth DOCS LA 1:295342. 40929170 MW D-1 in the schedule attached hereto, with paid invoices attached for any sums for which reimbursement is requested. 2. The moneys requisitioned hereby are not greater than those necessary to meet obligations due and payable or to reimburse the Borrower for its funds actually advanced for costs of the above-mentioned Project and do not represent a reimbursement to the Borrower for working capital. 3. The Borrower is not in default under the Financing Agreement, the Regulatory Agreement or the Mortgage Loan Documents and nothing has occurred to the knowledge of the Borrower that would prevent the performance of its obligations under such Financing Agreement, Regulatory Agreement or Mortgage Loan Documents. 4. No amounts being requisitioned hereby will be used to pay, or reimburse, any Costs of Issuance incurred in connection with the issuance of the Bonds. 5. All of the funds being requisitioned are being used in compliance with the Tax Covenants. In particular and without limiting the generality of the foregoing, the Borrower hereby certifies that not less than 95%of the sum of- (a) the amounts requisitioned hereby; plus (b) all amounts heretofore requisitioned and disbursed from the Mortgage Loan Fund; have been or will be applied by the Borrower to pay Qualified Project Costs that relate to the above-mentioned Project. Bate Of Requisition: WILLOW PARTNERS,L.P. By. Authorized Borrower Representative [Approval Of The Servicer Appears On The Next Page.] DOCSI Ai:296342. 40929-170 MM3 D-2 Pursuant to and in accordance with the requirements of Section 4.3.2 of the Indenture, the undersigned, being a duly authorized officer of the Servicer, does hereby approve the disbursement by the Trustee of the amount requisitioned by this Requisition Certificate. The Servicer's execution of this Requisition Certificate, approval of any plans for any rehabilitation work, inspection of the Project by the Servicer or its agents, or other acknowledgment of completion of any portion of the rehabilitation work in a manner satisfactory to the Servicer shall not be deemed an acknowledgment or warranty to any person that the rehabilitation work has been completed in accordance with applicable building, zoning or othercodes, ordinances, statutes, laws, regulations or requirements of any governmental agency. ARCS COMMERCIAL MORTGAGE CO., L.P., as Servicer By: ACMC Realty, Inc., its General Partner By: Authorized Representative [)OCS t_A i:296342. 40929-170 MN13 D-3 Schedule to Requisition Certificate Item Of Project Cost: Amount: f1 2 3 4 5 b I 7 4 8 9 10 11 12 13 14 15 16 I 1 17 18 E i 19 t 20 DOCSLA I:296342. 40929-170 MM3 D-4 EXHIBIT E Form of Rehabilitation Fund Requisition Certificate Rehabilitation Fund Requisition Certificate To: U.S. Bank Trust National Association, Trustee From: Willow Partners,L.P. (the"Borrower") Subject; County of Contra Costa, California Multifamily Rousing Revenue Bonds (Willow Pass Apartments), Series 1999D and Series 1999D-T Project dame: Willow Pass Apartments This Rehabilitation Fund Requisition Certificate is being delivered by the Borrower to the Trustee pursuant to Section 4.7 of that certain Trust Indenture dated as of April 1, 1999 (the "Indenture") between the Trustee and the County of Contra Costa, California (the "Issuer"). All terms used herein and not otherwise defined herein shallhave the respective meanings assigned thereto in the Indenture. The Trustee is hereby are requested to disburse from the Rehabilitation Fund to the Borrower the following sum: Amount Of Requested Disbursement: $ The amount requested to be disbursed pursuant to this Requisition Certificate',will be used to pay, or reimburse the Borrower for, Project Costs of the Project referred to above, which Project Costs are detailed in the schedule attached hereto. The undersigned does certify that: 1. The expenditures for which moneys are requisitioned hereby represent proper charges against the Rehabilitation Fund, have not been included in a previous requisition and have been properly recorded on the Borrower's boobs. The expenditures for which moneys are hereby requisitioned are set forth in the schedule attached hereto, with paid invoices attached for any sums for which reimbursement is requested. I)OC S LA I;296342. 40929-170 MW E-I 2. The moneys requisitioned hereby are not greater than those necessary to meet obligations due and payable or to reimburse the Borrower for its funds actually advanced for costs of the Project identified above and Bio not represent a reimbursement to the Borrower for working capital. 3. The Borrower is not in default under the Financing Agreement, the Regulatory Agreement or the Mortgage Loan Documents to which the Borrower is a party and nothing has occurred to the knowledge of the Borrower',that would prevent the performance of its obligations under such Financing Agreement, Regulatory Agreement or Mortgage Loan Documents. Date Of Requisition: WILLOW PARTNERS,L.P. By: Authorized Borrower Representative [Approval Of The Servicer Appears On The?text Page.] I)OCS LA I:296342. 40929-170 MM3 E-2 Pursuant to and in accordance with the requirements of Section 4.7 of the Indenture, the undersigned, being a duly authorized officer of the Servicer, does hereby approve the disbursement by the Trustee of the amount requisitioned by this Requisition Certificate. The Servicer's execution of this Requisition Certificate, approval of any plans for any rehabilitation work, inspection of the Project by the Servicer or its agents, or other acknowledgment of completion of any portion of the rehabilitation work in a manner satisfactory to the Servicer shall not be deemed an acknowledgment or warranty to any person that the rehabilitation work has been completed in accordance with applicable building, zoning or othercodes, ordinances, statutes, laws, regulations or requirements of any governmental agency. ARCS COMMERCIAL MORTGAGE CO., L.P., as Servicer By: ACMC Realty, Inc., its General Partner By. Authorized Representative Date of Servicer's Approval: DOCS L.A 1:296342. 40929-170 MM3 E-3 Schedule to Requisition Certificate Item Of project Cost: Amount. 2 3 4 5 i E 6 E �7 4 i i s E 8 € € i 9 i i 10 c i 11 i ! s 9 i 12 s s € i 13 t s 14 E � 15 16 17 3 18 3i } 19 j 9 s i 20 i DOCS LA t.296342. 40929-170 MM3 E-4 EXHIBIT F Form of Costs of Issuance Fund Requisition Certificate Costs of Issuance Fund requisition Certificate TO: U.S. Bank Trust National Association., Trustee FROM: The Authorized Borrower Representative of Willow Partners,L.P. (the "Borrower"): SUBJECT: County of Contra Costa, California Multifamily Dousing Revenue Bonds (Willow Pass Apartments), Series 1999D and Series 1999D-T This Costs of Issuance Fund Requisition Certificate is being delivered by the Borrower to the Trustee pursuant to Section 4.5.2 of that certain Trust Indenture dated as of April 1, 1999 (the "Indenture") between the Trustee and the County of Contra Costa, California (the "Issuer"). All terms used herein and not otherwise defined herein shall have the respective meanings assigned thereto in the Indenture. The Trustee is hereby are requested to disburse from the Costs of Issuance Fund to the Borrower the following sum: Amount Of Requested Disbursement: $ The amount requested to be disbursed pursuant to this Requisition Certificate will be used to pay, or reimburse the Borrower for, those Costs of Issuance detailed in the schedule attached hereto. The undersigned does certify that: 1. The expenditures for which moneys are requisitioned hereby represent proper charges against the Costs of Issuance Fund, have not been included in a previous requisition and have been properly recorded on the Borrower's books. The expenditures for which moneys are hereby requisitioned are set forth in the schedule attached hereto, with paid invoices attached for any sums for which reimbursement is requested. DOCS LA t:296342. 40929-170 MM3 F-1 2. The moneys requisitioned hereby are not greater than those necessary to meet obligations due and payable or to reimburse the Borrower for its funds actually advanced for costs of the Traject. 3. The Borrower is not in default under the Financing Agreement, the Regulatory Agreement or the Mortgage Loan Documents and nothing has occurred to the knowledge of the Borrower that would prevent the performance of their respective obligations under the Financing Agreement, the Regulatory Agreement or the Mortgage Loan Documents. Date Of Requisition: WILLOW PARTNERS, L.P. By: Authorized Borrower Representative DOC'S L A1:296342, 44929-170 MW F-2 Schedule to Requisition Certificate' I Item Of Project Cast. Amount: 1 ; ; 2 3 4 ; 5 i ; 6 7 1 ; 8 i € 9 10 11 12 ; 13 14 15 ; 16 17 ! 18 € 19 2£1 DOG'S€.,A€:295342. 40929-170€ M,3 F-3 FINANCING AGREEMENT Among COUNTY OF CONTRA COSTA, CALIFORNIA, as Issuer, WILLOW PARTNERS, L.P., a California limited partnership, as Borrower, ARCS COMMERCIAL MORTGAGE CO., L.P., as Servicer, and U.S. BANK.TRUST NATIONAL ASSOCIATION, as Trustee Dated as of April 1, 1999 Relating to County of Contra Costa, California County of Contra Costa, California Multifamily Housing Revenue Bonds Multifamily Mousing Revenue Bonds (Willow Pass Apartments), Series 1999D (Willow Pass Apartments), Series 1999D-T The interest of the Issuer in this Financing Agreement (subject to certain specified exclusions) has been assigned to U.S. Bank Trust National Association, not in its individual capacity but solely as Trustee(the"Trustee")under a Trust Indenture dated as of April 1, 1999,between the Issuer and the Trustee. DOCSI..A I:296344. 40929-170 MM3 TABLE OF CONTENTS Page SECTION 1. DEFINITIONS AND INTERPRETATION.................................................... 1 Section 1.1 Incorporation of Recitals...................................................................... 1 Section1.2 Definitions............................................................................................ I Section 1.3 Rules of Construction .......................................................................... I Section 1.4 Content of Certificates and Opinions...................................................2 Section1.5 Effective Date ...................................................................................... 3 Section1.6 Interpretation............................................................ ...........................3 SECTION 2. REPRESENTATIONS AND WARRANTIES................................................ 3 Section 2.1 Representations and Warranties of the Issuer...................................... 3 Section 2.2 Representations and.Warranties of the Borrower................................4 Section 2.3 Representations and Warranties of the Trustee.................................. 12 Section 2.4 Representations and Warranties of the Servicer................................ 12 SECTION3. THE BONDS ................................................................................................. 13 Section 3.1 Issuance of the Bonds; Application of the Proceeds; Conditions Precedent to Issuance of Bonds and Making of Mortgage Loan....... 13 Section 3.2 Borrower's Obligations Upon Redemption....................................... 13 Section 3.3 Issuance of Fannie Mae Pass-Through Certificate .. ......................... 15 Section 3.4 Change in Fannie Mae Credit Facility..................... ......................... 16 SECTION 4. THE MORTGAGE LOAN..................................................................... Section 4.1 Amount and Source of Mortgage Loan.................... ......................... 16 Section 4.2 Terms of the Mortgage Loan; Funding.............................................. 16 Section 4.3 Payment of Fees and Expenses................................ .........................20 Section4.4 Notice.................................................................................................23 Section4.5 Deposits..............................................................................................23 Section 4.6 Mortgage Loan Payments..................................................................24 Section 4.7 Certain Notices From Trustee............................................................24 Section 4.8 Obligations Relating to Mortgage Loan .................. .........................24 Section 4.9 Modification of Mortgage Loan Documents; Consent at Direction of Fannie Mae....................................................................25 Section4.10 Prepayment ........................................................................................25 DOC'SLA I:296344. 40929-170 MM3 v_ TABLE OF CONTENTS (continued) Page Section 4.11 Assignment to Trustee.......................................................................27 SECTION 5. FANNIE MAE COMMITMENT; FANNIE MAE PASS-THROUGH CERTIFICATE, DISTRIBUTIONS UNDER FANNIE MAE PASS- THROUGH CERTIFICATE .........................................................................27 Section 5.1 Fannie Mae Commitment ..................................................................27 Section 5.2 Fannie Mae Pass-Through Certificate................................................ 27 SECTION 6. SERVICING OF THE MORTGAGE LOAN................................................ 27 Section 6.1 Rights of Fannie Mae......................................................................... 27 Section 6.2 Servicing Fee ..................................................................................... 28 Section 6.3 Notices .............. Section6.4 Removal................................................__........................................28 SECTION7. COVENANTS ...............................................................................................28 Section 7.1 Covenants of the Issuer......................................................................28 Section 7.2 Covenants of the Borrower................................................................29 SECTION 8. MORTGAGE LOAN DOCUMENTS................................. ......................... 44 Section 8.1 Assurances .........................................................................................44 Section 8.2 Assignment of Certain Rights............................................................45 Section 8.3 Nature of Borrower's Financial Obligations......................................45 SECTION 9. THE PROJECT..............................................................................................46 Section 9.1 Regulatory Agreement.......................................................................46 Section 9.2 Right To Enforce Compliance...........................................................46 Section 9.3 Damage, Destruction and Condemnation..........................................46 Section 9.4 Obligation of the Borrower To Acquire and Rehabilitate the Project......................................................................:......................... 46 SECTION 10. TRUSTEE'S INTEREST IN AGREEMENT................................................47 Section 10.1 Issuer Assignment of Financing Agreement......................................47 Section 10.2 Rights of Trustee; Third-Party Beneficiaries..................................... 48 SECTION 11. EVENTS OF DEFAULT AND REMEDIES ................................................48 Section 11.1 Events of Default..................................................... .........................48 Section 11.2 Remedies Upon an Event of Default........................ ......................... 50 -ii- DOC"SLA 1:296344. 46429-170 MM3 TABLE OF CONTENTS (continued) Page Section 11.3 Default Linder Regulatory Agreement............................................... 54 Section 11.4 Delay or Omission............................................................................. 54 Section 11.5 Limitations on Waivers...................................................................... 54 Section 11.6 Notice of Default; Fannie Mae's Right To Cure................................ 55 Section 11.7 Right to Specific Performance........................................................... 55 Section 11.8 Rights Cumulative............................................................................. 56 Section 11.9 Assignment to Fannie Mae................................................................ 56 Section 11.10 Limitations.............................................................. ....................... 56 SECTION 12. MISCELLANEOUS ...................................................................................... 57 Section 12.1 Amounts Remaining in Funds ........................................................... 57 Section12.2 Notices ............................................................................................... 57 Section12.3 Amendment........................................................................................57 Section 12.4 Entire Agreement............................................................................... 57 Section 12.5 Binding Effect.......................................................... ......................... 58 Section 12.6 Severability..............................................>.........................................58 Section 12.7 Execution in Counterparts.................................................................. 58 Section 12.8 Governing Law.................................................................................. 58 Section 12.9 Limited Liability................................................................................ 58 Section12.10 Reliance.............................................................................................. 59 Section 12.11 Rights of the Trustee.......................................................................... 59 Section 12.12 Financing Statements.........................................................................60 Section 12.13 Term of This Financing Agreement...................................................60 Section 12.14 Limitations on Rights of Fannie?Viae................................................ 60 Section 12.15 Capacity of the Trustee...................................................................... 60 SECTION 13. SUBORDINATION.......................................................................................60 SECTION 14. NO LIMITATIONS ON T ACTIONS OF ISSUER IN EXERCISE OF ITS GOVERNMENTAL POWERS..............................................................61 DOCSLA 1:296344. 40929-170 MM3 FINANCING AGREEMENT This FINANCING AGREEMENT made and entered into as of April 1, 1999 (this "Financing Agreement"), by and among COUNTY OF CONTRA COSTA., CALIFORNIA, a political subdivision of the State of California (the "Issuer"), WILLOW PARTNERS, L.P., a California limited partnership (the "Borrower"), ARCS COMMERCIAL MORTGAGE CO., L.P. (the "Servicer"), and U.S. BANK TRUST NATIONAL ASSOCIATION, as trustee under the Indenture identified herein(the"Trustee"). RECITALS: The Borrower has requested that the Issuer provide permanent financing for the acquisition and rehabilitation of a multifamily rental housing development (as more fully described herein, the"Project"). SECTION 1. DEFINITIONS AND INTERPRETATION. Section 1.1 Incorporation of Recitals. The Recitals to the Indenture are, by this reference, incorporated into and deemed a part of this Financing Agreement. Such financing is being provided through the issuance by the Issuer of its Multifamily Housing Revenue Bonds (Willow Pass Apartments), Series 1999D in the aggregate principal amount of$5,400,000 and its Multifamily Housing Revenue Bonds (Willow Pass Apartments), Series 1999D-T, in the aggregate principal amount of$2,500,000, pursuant to a Trust Indenture, of even date herewith, between the Issuer and the Trustee (as the same may be amended as provided therein, the "Indenture"). The parties to this Financing Agreement, in consideration of the premises and the mutual covenants and commitments of the parties set forth in this Financing Agreement, the receipt and sufficiency of which are acknowledged by the parties to this Financing .Agreement, agree as follows: Section 1.2 Definitions. All capitalized terms used in this Financing Agreement shall have the meanings given to those terms in the Indenture or, if not defined in the Indenture, shall have the meanings given to those terms in the Mortgage Nate or the Collateral Agreement, as applicable. Section 1.3 Rules of Construction. The following rules of construction shall apply: (i) the singular form of any word used in this Financing Agreement, including the terms defined by reference in Section 1.2, shall include the plural, and vice versa, unless the context otherwise requires; and the use in this Financing Agreement of a pronoun of any gender shall include correlative words of the other genders; DOCSLA 1:296344. 43929-;70 MI M3 1 (ii) all references in this Financing Agreement to "Sections" and other subdivisions of this Financing Agreement are to the corresponding, Sections or subdivisions of this Financing Agreement as originally executed; (iii) the headings or titles of the Sections of this Financing Agreement, and any table of contents appended to copies of this Financing Agreement, shall be solely for convenience of reference and shall not limit or otherwise affect the meaning, construction or effect of this Financing Agreement or describe the scope or intent of any provision of this Financing Agreement, (iv) all accounting terms not otherwise defined in this Financing Agreement have the meanings assigned to them in accordance with applicable generally accepted accounting principles as in effect from time to time; (v) every "request," ..order," "demand," "application," "appointment," "nonce," "statement," "certificates. ..consent" or similar action under this Financing Agreement by any party shall, unless the form of such instrument is specifically provided, be in writing signed by a duly authorized representative of such party with a duly authorized signature; (vi) if any provision of this Financing Agreement cells for the approval or consent of any party, whether stated as "consent," "written consent," "prior written consent," "approval," "written approval," •`prior written approval" or otherwise, or any waiver by any party, and if a basis for such party granting such approval, consent or waiver is not otherwise stated, then it is understood and agreed that such approval, consent or waiver will be given by such party in its discretion; and (vii) whenever any party shall have any right or option to exercise any discretion, to determine any matter, to accept any presentation or to approve or consent to any matter, such exercise, determination, acceptance, approval or consent shall,without exception, be in such party's sole and absolute discretion. Section 1.4 Content of Certificates and Opinions. Every certificate or opinion with respect to compliance by or on behalf of the Issuer, the Borrower, the Servicer or the Trustee with a condition or covenant provided for in this Financing' Agreement or the Indenture shall include: (i) a statement that the person or persons providing or giving the certificate or opinion have read the covenant or condition and the definitions in the Indenture or this Financing Agreement relating to the covenant or condition; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained'in the certificate or opinion are based; DOCSL.A i:296344. 40929-170 MM3 2 (iii) a statement that, in the opinion of the signers, they have made or caused to be made such examination or investigation as is necessary to enable them to express an informed opinion as to whether or not the covenant or condition has been complied with; and (iv) a statement as to whether, in the opinion of the signers, the condition or covenant has been complied with. Any such certificate or opinion made or given by an officer of any party may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless the officer knows that the certificate or opinion or representation with respect to any matter upon which his or her certificate or opinion may be based is erroneous, or in the exercise of reasonable care should have known that the same is erroneous. Any certificate or opinion provided or given by counsel may be based, insofar as it relates to any factual matter (with respect to which information is in the possession of a party), upon the certificate or opinion of or representations by an officer of the party, unless such counsel knows that the certificate or opinion or representation with respect to the matter upon which his or her opinion may be based is erroneous, or in the exercise of reasonable care should have known that the same is erroneous. Section 1.5 Effective hate. The provisions of this Financing Agreement shall be effective on and as of the Closing Date. Section 1.6 Interpretation. The parties to this Financing Agreement acknowledge that each party and its counsel have participated in the drafting',and revision of this Financing Agreement. Accordingly, the parties agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in the interpretation of this Financing Agreement or any amendment, modification, supplement or restatement of any of the foregoing or of any exhibit to this Financing Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES. Section 2.1 Representations and Warranties of-the—Issue The Issuer represents and warrants that. (A) The Issuer has found that the financing of the Project through issuance of the Bonds and the application of the Net Bond Proceeds to fund the Mortgage Loan will promote the public purposes of the Act by preserving the stock of low income residential rental housing in the County of Contra Costa, California. (B) The Issuer has the necessary power under the Act, and has duly taken all action on its part required, to authorize, execute and deliver this Financing Agreement and to issue the Bonds and apply the Net Bond Proceeds to fund the Mortgage Loan, Section 2.2 Roresentations and Warranties of the Borrower. Section 2.2.1 Spggific Representations and Warranties. DCCSLA1:296344, 40929-170 MM3 3 The Borrower represents and warrants that: (i) the Borrower is a limited partnership, duly organized and validly existing and in good standing under the laws of the State and is duly qualified to conduct its business wherever such qualification is required, including the State and every other state in which the nature of its business requires such qualification; (ii) the Borrower has the full legal right, power and authority to own its properties and to carry on its business as now being conducted and as the Borrower contemplates it to be conducted with respect to the Project, and to execute and deliver, to carry out its obligations under, and to close the transactions provided for in, this Financing Agreement, the other Bond Documents and the Mortgage Loan Documents; (iii) this Financing Agreement, the other Bond Documents, the Mortgage Loan Documents and all other documents to which the Borrower is a party and which are being executed and delivered by the Borrower in connection with the transactions provided for in the Indenture, this Financing Agreement, the Regulatory Agreement, the other Bond Documents and the Mortgage Loan Documents have been duly authorized, executed and delivered by the Borrower and constitute the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights of creditors generally and general equitable principles; (iv) no authorization, consent, approval, order, registration, declaration or withholding of objection on the part of, or ding of or with any governmental authority, not already obtained or made (or to the extent not yet obtained or made the Borrower has no reason to believe that such authorizations, consents, approvals, orders, registrations or declarations will not be obtained or made in a timely fashion) is required for (a) the execution and delivery or approval, as the case may be, by the Borrower of this Financing Agreement, the Regulatory Agreement, the other Bond Documents, the Mortgage Loan'Documents or any other documents or (b) the performance by the Borrower' of the terms and provisions of this Financing Agreement or of such other documents by the Borrower; (v) neither the execution, delivery or approval by the Borrower of this Financing Agreement, the other Bond Documents to which the Borrower is a party, the Mortgage Loan Documents, or any other documents to which the Borrower is or will be a party and which are being or will be executed and delivered by the Borrower in connection with the transactions'provided for in the Indenture, this Financing Agreement, the Regulatory Agreement, the other Bond Documents and the Mortgage Loan Documents, nor the closing of the transactions provided for in the Indenture, the Financing Agreement, the Regulatory i)OC'.SLA1:296344. 40929-1.70 MM3 4 Agreement, the other Bond Documents or the Mortgage Loan Documents, nor the fulfillment of or compliance by the Borrower with the terms and conditions of this Financing Agreement, the Regulatory Agreement, the other Fond Documents to which the Borrower is a party, the Mortgage Loan Documents or any other documents to which the Borrower is a party and which are being or will be executed and delivered by the Borrower in connection with the transactions provided for in the Indenture, this Financing Agreement, the Regulatory Agreement, the other Bond Documents, the Mortgage Loan Documents or such other documents violates or will violate any law, rule or regulation of any governmental agency or body having jurisdiction over the Borrower or its general partners or any of their activities or properties, or any judgment, order, writ, injunction or decree to which the Borrower or its general partners are subject, or any of the organizational or other governing documents of the Borrower or its general partners, or conflicts or will conflict with any agreement, instrument or license to which the Borrower or its general partners are now a party or by which the Borrower or its general partners or any of their properties or assets is bound or results or will result in a breach by the Borrower or its general partners of, or constitutes or will constitute a default by the Borrower or its general partners (with due notice or the passage of time or both) under, any such agreement, instrument or license, or contravenes or will contravene any such law, rule or regulation or any such judgment, order, writ, injunction or decree, or, except as provided in the Mortgage Loan Documents, result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Borrower or its general partners, except for any lien, charge or encumbrance allowed under the terms of the Mortgage Loan Documents and any other Permitted Lien, (vi) the Borrower has made all filings with and has obtained all approvals, permits, authorizations and consents from all federal, state and local regulatory agencies having jurisdiction to the extent, if any, required on or before the date of this Financing Agreement by applicable laws and regulations to be made or to be obtained in connection with the (a) acquisition, rehabilitation and equipping of the Project (other than such rehabilitation permits as may be obtained in the ordinary course of the work) and (b) execution and delivery by the Borrower of, and performance by the Borrower of its obligations under, the Indenture, this Financing Agreement, the Regulatory Agreement, the other Bond Documents and the Mortgage Loan Documents; (vii) the Borrower is not presently under any cease or desist order or other orders of a similar nature, temporary or permanent, of any federal or state authority which would have the effect of preventing or hindering the performance of the Borrower's duties under any of the Bond Documents or the Mortgage Loan Documents; nor are there any proceedings presently in progress or to its knowledge contemplated which would, if successful, lead to the issuance of any such order; DOCSLA1:296344. 40929-170 MM3 5 (viii) no litigation or proceeding is pending or, to the knowledge of the Borrower or the general partners of the Borrower or any Key Principal (as such terra is defined in the Mortgage Note), threatened against the Borrower or its general partners or any Key Principal, or with respect to the Project which has a reasonable probability of having a material adverse effect on its financial condition or business, or the transactions provided for in the Indenture, this Financing Agreement, the Regulatory Agreement, the other Bond Documents or the Mortgage Loan Documents, or which in any way seeks to prohibit, restrain or enjoin the issuance, sale or delivery of the Bonds, the funding of the Mortgage Loan or the execution and delivery of the Bonds, the Indenture, this Financing Agreement, the Regulatory Agreement, any of the other Bond. Documents or the Mortgage Loan Documents, or which in any way would adversely affect or call into question the validity or enforceability of the Bonds, the Indenture, this Financing Agreement, the Regulatory Agreement, the other Bond Documents or the Mortgage Loan Documents, or the power or authority of the Borrower to incur, or the ability of the Borrower to perform, its obligations under this Financing Agreement, the Regulatory Agreement, the other Bond Documents to which the Borrower is a party or the Mortgage Loan Documents, or which questions the power or authority of the Borrower to carry out the transactions provided for in, or to perform its obligations under, the Bond Documents to which it is a party or any of the Mortgage Loan Documents, or which would affect the power of the Borrower to own, equip or operate the Project or which questions the exclusion from gross income for federal income tax purposes of the interest payable on the Tax-Exempt Bonds; (ix) the Borrower is not in default under any document, instrument or commitment or to which it or any of its property or assets is subject, which default would or could affect the ability of the Borrower to carry out its obligations under this Financing Agreement, the Regulatory Agreement, the other Bond Documents or the:Mortgage Loan Documents; (x) the financial statements which have been furnished by or on behalf of the Borrower and its general partners to Fannie Mae and/or the Servicer and the Issuer are complete and accurate in all material respects and present fairly and consistently the financial condition of the Borrower and its general partners as of their respective dates in accordance with generally accepted accounting principles applied on a consistent basis, and since the date of the most recent of such financial statements there has not been any material adverse change, financial or otherwise, in the condition of the Borrower or its general partners, and there has not been any material transaction entered into by the Borrower or its general partners other than transactions in the ordinary course of business, and neither the Borrower nor its general partners have any material contingent obligations which are not otherwise disclosed in its financial statements; (xi) there (a) is no completed, pending or threatened bankruptcy, reorganization, receivership, insolvency or like proceeding, whether voluntary or DOCSL.A1:296344. 40929-170 MM3 6 involuntary, affecting the Project, the Borrower or the general partners of the Borrower or any Key Principal (as that term is defined in the Mortgage Dote) and (b) has been no assertion or exercise of jurisdiction over the Project, the Borrower, the general partners of the Borrower or any Ivey Principal of the Borrower by any court empowered to exercise bankruptcy powers; (xii) no event has occurred and no condition exists, with respect to the Borrower or the Project that would constitute an Event of Default or which, with the lapse of time, if not cured, or with the giving of notice or both, would become an Event of Default; (xiii) the Borrower has not taken and will not take any action, or permit any action that is within the Borrower's control to be taken, that would impair the exclusion from gross income for federal income tax purposes of the interest payable on the Tax-Exempt Bonds; (xiv) as of the dosing Date, the Borrower is in compliance with all requirements of the Tax Certificate, and the representations set forth in the Tax Certificate of Borrower executed by the Borrower pertaining to the Borrower and the Project are true and accurate; (xv) no information, statement or report furnished in writing to the Issuer, Fannie Mae, the Servicer or the Trustee by the Borrower in connection with the transactions provided for in the Indenture, this Financing Agreement, the Regulatory Agreement, the other Bond Documents, the Tax Certificate, the Mortgage Loan Documents, the Disclosure Agreement or the Fannie Mae Documents or the closing of the transactions provided for in the Indenture, this Financing Agreement, the Regulatory Agreement, the other Bond Documents or the Mortgage Loan Documents (including, without limitation, any information furnished by the Borrower in connection with the preparation of any materials related to the issuance, delivery or offering of the Bonds) contains any material misstatement of fact or omits to state a material fact concerning the Borrower, the general partners or other partners of the Borrower, the Projector other matters for which the Borrower has assumed responsibility with respect to the Bond financing, necessary to make the statements contained in such written materials or in any offering materials, in the light of the circumstances under which they were made, not misleading, provided, however, notwithstanding', the foregoing, the Borrower has no knowledge of any material misstatement of fact in the Official Statement for the Bonds, or of any omission to state a material fact necessary to make the statements contained in, the Official Statement for the Bonds, in light of the circumstances under which there were made, not misleading; the representations and warranties of the Borrower and the statements, information and descriptions contained in the Borrower's closing certificates, as of the Closing Date, are and will be true, correct and complete, do not and will not contain any untrue statement or misleading statement of a material fact, and do not and will not omit to state a material fact required to be stated in such certificates or JOE;S€.,A 1:296344. 40929-170 MM3 7 necessary to mare the certifications, representations, warranties, statements, information and descriptions contained in such certificatesor in any offering materials, in the light of the circumstances under which they were made, not misleading; the estimates and the assumptions contained', in this Financing Agreement and in any certificate of the Borrower delivered as,of the Closing Date are reasonable and based on the best information available to the Borrower; (xvi) to the best knowledge of the Borrower, no supervisor, officer, agent or employee of the Issuer has been or is in any manner interested, directly or indirectly, in that person's own name or in the name of any other person, in the Bonds, the Bond Documents, the Mortgage Loan Documents, the Disclosure Agreement, the Borrower or the Project, in any contract for property or materials to be furnished or used in connection with the Project, or in any aspect of the transactions contemplated by the Bond Documents, or the Mortgage Loan Documents; (xvii) the Borrower acknowledges that (a) it understands the nature and structure of the transactions relating to the financing of the Project, (b) it is familiar with the provisions of all of the documents and instruments relating to such financing to which it or the Issuer is a party or of which it is a beneficiary, (c) it understands the risks inherent in such transactions, including without limitation the risk of loss of the Project, and (d) that it has not relied on the Issuer, Fannie Mae or the Servicer for any guidance or expertise in analyzing the financial or other consequences of the transactions contemplated by this Financing Agreement and the other Bond Documents or the Mortgage Loan Documents or otherwise relied on the Issuer, Fannie Mae or the Servicer in any manner; (xviii) the Borrower is in compliance with (a) all provisions of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended ("CERCLA"), the Resource Conservation and Recovery Act, the Superfund Amendments and Reauthorization Act of 1986, the 'Toxic Substances Control Act, (b) all environmental laws of the ',State, (c) with any rules, regulations or administrative orders of any governmental agency, (all of the foregoing in clauses (a), (b) and (c) are, collectively, the "Environmental Laws"), and (d) with any judgments, decrees or orders of any court of competent jurisdiction with respect to CERCLA or any of the Environmental Laws; the Borrower has not received any assessment or notice of primary or secondary liability or financial responsibility, and no notice of any action, claim or proceeding to determine any such liability or responsibility, or the amount of any such action, claim or proceeding, or any assessment or notice seeking to impose civil penalties with respect to a site listed on any federal or state listing of sites containing or believed to contain "hazardous materials" (as defined in the Environmental Laws); nor has the Borrower received notification that any hazardous substances (as defined under CERCLA) that it has disposed of have been found in any site at which any governmental agency is conducting an investigation or other proceeding under any Environmental Lav; DOCSLA 1:296344. 40929-170 MM3 8 (xix) the Borrower has not received any notice that it is not in full compliance with ERISA and applicable Department of Labor regulations under ERISA, with the Code and applicable Treasury Regulationsunder the Code or with the terms of each pension or welfare benefit plan or makes any employer contributions with respect to its employees, for the current or prior plan years of such plans; (xx) the Bonds are not "federally guaranteed" as defined in Section 149(b) of the Code; (xxi) the information furnished by the Borrower and used by the Issuer in preparing the certificate pursuant to Section 148 of the Cade and information statement pursuant to Section 149(e) of the Code is accurate and complete as of the date of the issuance of the Bonds. (xxii) the Borrower is the sole borrower under the Mortgage ]Loan and a single asset entity, the single asset of which is the Project; (xxiii) the Borrower has and will have fee simple title to the Project, subject only to Permitted Liens; (xxiv) the Project is located entirely within the boundaries of the County of Contra Costa, California; (xxv) the Project, as designed, conforms or will, 'after rehabilitation, conform in all material respects with all applicable zoning, planning, building and environmental laws, ordinances and regulations of governmental authorities having jurisdiction over the Project, including, but not limited to, the Americans with Disabilities Act of 1990 ("ADA") (as evidenced by an architect's certificate to such effect); (xxvi) all necessary utilities are available to the Project in adequate supply; (xxvii) the Borrower has obtained or will, during the rehabilitation period, obtain all requisite zoning,planning, building and environmental and other permits which may become necessary with respect to the rehabilitation, equipping, use and occupancy of the Project; (xxviii) the Borrower has obtained or will during the rehabilitation period obtain all licenses, permits and approvals necessary for the ownership, operation and management of the Project, including compliance with the ADA (as evidenced by an architect's certificate to such effect) and farther including all approvals essential to the transactions contemplated by the indenture, this Financing Agreement, the other Bond Documents, the Mortgage Loan Documents, the Disclosure Agreement and any other documents contemplated by this Financing Agreement or by such other documents; DOCSLA 1:296344. 40,929-1,70 MM3 9 (xxix) the Project meets the requirements of this Financing Agreement, the Regulatory Agreement, the Act and the Code with respect to multifamily rental housing; (xxx) the Project is, as of the Closing Bate, in compliance with all requirements of the Regulatory Agreement, including all applicable requirements of the Code and the Act; (xxxi) the Borrower intends to hold the Project for its own account and has no current plans to sell, and has not entered into any agreement to sell, any part of the Project; (xxxii) the Borrower intends to cause the residential units in the Project to be rented or available for rental on a basis which satisfies the requirements of the Regulatory Agreement, including all applicable requirements' of the Act and the Code, and pursuant to leases which comply with all applicable laws and the Regulatory Agreement; (xxxiii) the Borrower intends to cause the Project to be occupied and to operate it or cause it to be operated at all times during the term of this Financing Agreement for Project Purposes and does not know of any reason why the Project will not be so used by it in the absence of circumstances not now anticipated by it or beyond its control; (xxxiv) the factual statements and representations concerning the Borrower and the Project set forth in the Fannie Mae Commitment and in the Servicer Commitment are now true, correct and complete in all material respects, will be true, correct and complete in all material respects on the Closing Date and will continue to be true, correct and complete in all material respects throughout the term of this Agreement; (xxxv) the information contained in the Official Statement with respect to the Project and the Borrower and all documents, is accurate in all material respects and does not contain any untrue statement of a maternal fact or omit to state a material fact required to be stated in the Official Statement or necessary to make the statements made in the Official Statement, in light of the circumstances under which they were made,not misleading; (xxxvi) the Borrower has filed or caused to be filed all federal, state and local tax returns which are required to be filed, and has paid or caused to be paid all taxes as shown on those returns or on any assessment received by it, to the extent that such taxes have become due; and (xxxvii) neither Fannie Mae nor any subsidiary or affiliate of Fannie Mae now owns or will, by conveyance from the Borrower or any affiliate of the Borrower, acquire (other than pursuant to a foreclosure under the Mortgage or DOCSLA2:296344. 40929-1170 MM3 10 pursuant to a deed in lieu of foreclosure or other comparable conversion of the ?Mortgage Loan) an equity ownership interest in the Project. Section 2.2.2 Certificates. Any certificate signed or to be signed by the Authorized Borrower Representative and delivered pursuant to the Indenture, this Financing Agreement, the Regulatory Agreement, the Tax Certificate, the other Bond',Documents or the Mortgage Loan Documents, when executed and delivered by the Borrower, shall be deemed a representation and warranty by the Borrower as to the statements contained in the certificate. Section 2.2.3 Incorporation of Other Representations, Warranties and Covenants. In addition to, and not in limitation or contravention' of, the foregoing representations, warranties and covenants contained in Section 2.2.1 and Section 2.2.2 of this Financing Agreement, the representations, warranties and covenants of the Borrower set forth in the Reimbursement Agreement are incorporated into this Financing Agreement as if restated in this Financing Agreement in full, for the benefit of, and may be relied upon by, the beneficiaries of this Financing Agreement. Section 2.2.4 Notification. The Borrower agrees to notify the Servicer, Fannie Mae, the Trustee and the Issuer immediately in writing of any misrepresentation made by the Borrower in, or any default by the Borrower in the performance or observance of any covenant, agreement, representation, writing or obligation of the Borrower set forth in, this Financing Agreement, the other Bond Documents the Mortgage Loan Documents, or any other documents which are being executed and delivered by the Borrower in connection with the transactions provided for or to be provided for in the Indenture, this Financing Agreement, the Regulatory Agreement, the Tax Certificate, the other Bond Documents or the ,Mortgage Loan Documents. Section 2.3 Representations and Warranties of the Trustee. The Trustee represents and warrants that: (i) it is a national banking association duly organized and validly existing under the laws of the United States of America, has all necessary power and authority to execute and deliver the Indenture, this Financing Agreement, the Collateral Agreement and the Disclosure Agreement and to carry out and perform all of its obligations and undertakings with respect to the transactions provided for in the Indenture, this Financing Agreement, the Collateral agreement and the Disclosure Agreement, and the execution, delivery and performance of the Indenture, this Financing Agreement,the Collateral Agreement and the Disclosure Agreement have been duly authorized by all necessary action required on the part of the Trustee and any administrative or regulatory body having jurisdiction over the Trustee; (ii) upon the execution and delivery of the Indenture, this Financing Agreement, the Collateral Agreement and the Disclosure Agreement by the other parties to those documents, the Indenture, this Financing Agreement, the Collateral Agreement and the Disclosure Agreement will constitute the legal, DOC'SL,A 1:296344. 40929-170 MM3 11 valid and binding obligations of the Trustee, enforceable against the Trustee in accordance with their respective terms, except as limited by bankruptcy, insolvency, reorganization, moratorium or other similar lawsaffecting creditors' rights generally and by general principles of equity; and (iii) neither the execution and delivery of the Indenture, this Financing Agreement, the Collateral Agreement or the .Disclosure Agreement, nor the closing of the transactions provided for in the Indenture, this Financing Agreement, the Collateral Agreement or the Disclosure Agreement, nor the fulfillment of or compliance with the terms and conditions of the Indenture, this Financing Agreement, the Collateral Agreement or the Disclosure Agreement, violates or will violate any law, rule, regulation or legal',restriction, or any judgment, order, writ, injunction or decree to which it is now(subject, or conflicts or will conflict with or results or will result in a breach of any of the terms, conditions or provisions of, or constitutes or will constitute a default under, any agreement or instrument to which the Trustee is now a party or by which it is now bound. Section 2.4 Representations and Warranties of the Servicer. The Servicer represents and warrants that. (i) the Servicer is a limited partnership duly organized and validly existing under the laws of the State of California, has all necessary power and authority to execute and deliver this Financing Agreement, to assign the Mortgage Loan, including the Mortgage Loan Documents, to Fannie Mae and to carry out and perform all of its obligations under this Financing Agreement and the Mortgage Loan Documents to which it is or will be a party', and its contractual arrangements with Fannie Mae; the execution, delivery, acceptance and performance of this Financing Agreement and any documents assigning the Mortgage Loan to Fannie Mae have been or will be duly authorized by all necessary action required on the part of the Servicer; (ii) the Servicer has been approved by Fannie Mae as a seller and servicer of multifamily mortgage loans under Fannie Mae's Delegated Underwriting and Servicing product line; and (iii) the Servicer has complied with the provisions' of the laws of the State which are prerequisites to the assignment and servicing of the Mortgage Loan. SECTION 3. THE BONDS. Section 3.1 Issuance of the Bonds: Application of the Proceeds: Conditions Precedent to Issuance of Bonds and Making of Mortgage Loan. The Issuer has authorized the issuance of the Bonds in the Principal Amount. The obligations of the Issuer, the Trustee, the Borrower and the Servicer under this Financing Agreement are expressly conditioned upon DOC'S LA i:296344. 40929-170 MM3 12 (a)the issuance, sale and delivery of the Bonds and (b)receipt by the Trustee of the proceeds of the Bonds. Neither the Issuer, the Servicer, the Trustee nor Fannie Mae shall have any liability for any fees, costs or expenses, including, without limitation, issuance costs relating to the Bonds, except to the extent the Trustee or the Issuer is required to pay such costs from amounts received as provided in the Indenture, it being understood that all of such fees, costs and expenses shall be paid by the Borrower. The Borrower is unconditionally obligated, anything else to the contrary notwithstanding, but subject to the nonrecourse provisions of the Mortgage Loan Documents, to timely pay amounts sufficient to pay when due, pursuant to the Mortgage Note or otherwise, the principal of, premium, if any, and interest on, the Bands allocable to the Mortgage Loan. Section 3.2 Borrower's Obligations_Ugon Redemption. Section 3.2.1 Optional Redem tp ion. In the event of an optional redemption. of Bonds pursuant to Section 3.2 of the Indenture as a result of an optional prepayment in whole of the Mortgage Loan pursuant to Section 4.10 of this Financing Agreement and in accordance with the terms of the Mortgage Note, and subject to the requirements of Section 3.2 of the Indenture, the Borrower shall timely pay, or cause to be paid: (i) to the Servicer, for remittance to Fannie Mae, an amount equal to the unpaid principal balance of the Mortgage Loan, (ii) to the Servicer, for remittance to Fannie Mae, (net of any Servicing Fee to which the Servicer is entitled), interest on the Mortgage Loan to the date of prepayment, (iii) to the Servicer, for remittance to the Trustee, interest payable on the Bonds to be redeemed to the Redemption Date, premium, if any, payable with respect to the Bonds to be redeemed (the premium to be paid with Available Moneys) and any other amount that is part of the End Period Payment, (iv) to the Servicer, for remittance to the party whom due, an amount sufficient to pay any fees, costs and expenses in connection with such redemption, and (v) all other amounts payable under the Indenture, this Financing Agreement, the Mortgage Note and the other Mortgage Loan Documents in connection with the prepayment of the Mortgage Loan and the corresponding redemption of the Bonds on the applicable Redemption Date. Section 3.2.2 Special Mandatory Redemption. In the event of a special mandatory redemption of Bonds that is required as a result of events or circumstances described in Section 3.3.1 of the Indenture that pertain to the Mortgage Loan: (i) if the Bonds are to be so redeemed in part pursuant to paragraph (i)(A) of Section 3.3.1 of the Indenture, the Borrower shall timely pay, or cause to be paid., to the Trustee, in addition to the proceeds of the Bonds on deposit in the DOCSLAI:246344. 40929-170 MM3 13 Mortgage Loan Fund to be applied to the redemption of Bonds, interest on the Mortgage Loan to the date of prepayment, interest payable on the Bonds to be redeemed to the Redemption Date, an amount sufficient to pay any fees, costs and expenses in connection with such redemption and all other amounts payable under the Indenture and this Financing Agreement in connection with the prepayment of the Mortgage Loan and the corresponding redemption of such Bonds on the applicable Redemption Date; (ii) if the Bonds are to be so redeemed in whole or in part pursuant to paragraph (ii) of Section 3.3.1 of the Indenture, the Borrower shall timely pay or cause to be paid, to the Trustee: (A) in the event of an involuntary destruction or loss of the Project in part as a result of casualty or condemnation, a principal amount equal to the insurance proceeds or condemnation award received by the Borrower and applied, in accordance with the Mortgage Loan Documents, to the prepayment, in part, of the Mortgage Loan and the corresponding redemption of the Bonds on the applicable Redemption Date, or (B) in the event of the involuntary destruction or loss of the Project in its entirety or nearly in its entirety as a result of casualty or condemnation, the unpaid principal balance of the Mortgage Loan and an amount sufficient to effect the corresponding redemption of the Bonds on the applicable Redemption Date, and (C) in the case of (a) or (b), interest on the Mortgage Loan to the date of prepayment, interest payable on the Bonds to be redeemed to the Redemption Date and an amount sufficient to pay any fees, costs and expenses in connection with such redemption and all other amounts payable under the Indenture and this Financing Agreement in connection with the prepayment of the Mortgage Loan and the corresponding redemption of the Bonds to be redeemed on the applicable Redemption Date; and (iii) if the Bonds are to be so redeemed in whole pursuant to paragraph(iii) of Section 3.3.1 of the Indenture, the Borrower',shall, at the written direction of Fannie Mae, pay, or cause to be paid, to the Trustee a principal amount, as specified by Fannie Mae, and not less than or equal to the unpaid principal balance of the Mortgage Loan corresponding to the principal amount of Bonds to be redeemed (and, therefore, a life principal amount of the Mortgage Loan) and interest on the Mortgage Loan to the date of prepayment, interest payable on the Bonds to be redeemed to the Redemption Date and an amount sufficient to pay any fees, costs and expenses in connection with such redemption and all other amounts payable under the Indenture and this Financing Agreement in connection with the prepayment of the Mortgage Loan and the corresponding redemption of the Bonds to be redeemed on the applicable Redemption Date. (iv) if the Bonds are to be redeemed in part pursuant to paragraph (iv) of Section 3.3.1 of the Indenture, the Borrower shall pay an amount equal to the DOCS LA::296344. 40929-170 MM3 14 difference between the outstanding principal balance of the Mortgage Loan and the Maximum Mortgage Loan Amount (as such Term is defined in, and determined in accordance with, the terms and conditions of the Fannie Mae Commitment), permitted by the Fannie Mae Commitment, and interest on the Mortgage Loan to the date of prepayment, interest payable on the Bonds to be redeemed to the Redemption Date and an amount sufficient to pay any fees, costs and expenses in connection with such redemption and all other amounts payable under the Indenture and this Financing Agreement in connection with the prepayment of the Mortgage Loan and the corresponding redemption of the Bonds to be redeemed on the applicable Redemption Date. All payments shall be made in accordance with the payment procedures set forth in the Mortgage Dote. Section 3.3 Issuance of Fannie Mae Pass-Through Ce rt ifcate. Subject to Section 3.4 of this Financing Agreement, on the Fannie Mae Pass-Through Certificate Delivery Date, the Fannie Mae Pass-Through Certificate shall be substituted for the Collateral Agreement. Section 3.4 Change in Fannie Mae Credit Facility. Without the consent of the Borrower, Fannie Mae may provide a Credit Facility with respect to the Mortgage Loan other than the Collateral Agreement or the Fannie Mae Pass-Through Certificate in substitution for the Collateral Agreement or the Fannie Mae Pass-Through Certificate, as the case may be, effective on a date specified by Fannie Mae if- (A) the hating Agency confirms in writing that such substitution will not adversely affect the rating then in effect with respect to the Bonds, (B) Fannie 'Viae delivers to the Issuer and the Trustee an Opinion of Counsel to Fannie Mae (who may be an employee of Fannie Mae) in form and substance satisfactory to the Issuer and the Trustee, to the effect that the new Credit Facility has been duly authorized and issued and is enforceable against Fannie ',Mae in accordance with its terms and an Opinion of Bond Counsel to the effect that the substitution of the new Credit Facility will not adversely affect the exclusion from grossincome, for federal income tax purposes, of the interest payable on the Tax-Exempt Bonds, and (C) the provision of the new Credit Facility does not increase the amounts required to be paid by, or other obligations of, the Borrower without its consent. The Borrower, the Issuer and the Trustee (at the expense of the Borrower) agree to execute and deliver such documents, certificates and opinions including, but not limited to, an amendment to this Financing Agreement and the Indenture, as Fannie Mae reasonably may request, or as may otherwise be necessary, in order to implement the new Credit Facility. SECTION 4. THE MORTGAGE LOAN. Section 4.1 Amount and Source of Mortg"e Loan. Upon the issuance and delivery of the Bonds pursuant to the Indenture, the Issuer shall apply the Net Bond Proceeds to DOCSLA1:296344. 40929-170 MM3 15 fund the Mortgage Loan. The Net Bond Proceeds shall be deposited into the Mortgage Loan Fund (the "Mortgage Loan Fund Deposit Amount") in the amount provided for in Section 4.2 of the Indenture. The Borrower accepts the Mortgage Loan from the Issuer, upon the terms and conditions set forth in this Financing Agreement, in the Mortgage Loan Documents and in the Indenture, and subject to the terms and conditions of the Regulatory Agreement. The Borrower agrees (a)that the Mortgage Loan has been fully funded as of the Closing Date and (b)to apply the proceeds of the Mortgage Loan to pay the costs of acquiring, rehabilitating and equipping the Project in accordance with the terms of this Financing Agreement and subject to the terms of the Reimbursement Agreement and the Mortgage Loan Documents. Section 4.2 Terms of the Mortgage Loan, Funding. Section 4.2.1 Terms. In consideration of and in repayment of the Mortgage Loan, the Borrower shall make payments on the Mortgage Nate, as provided in Section 4.6 of this Financing Agreement, which payments shall, in all events and at all times, be sufficient in amount to repay the Mortgage Loan, including all payments of principal and interest, when due, and to timely pay, when due, the principal of, premium, if any, and interest on, the Bonds plus (a) the Fees, and(b)the fees due to (1) Fannie Mae in respect of the Mortgage Loan(i.e., the Facility Fee for providing the Collateral Agreement or, after the Fannie Mae Pass- Through Certificate Delivery Bate and effective as of the Issue Date, the Guaranty Fee for issuing the Fannie Mae Pass-Through Certificate, in each case as provided in the Fannie Mae Commitment and as set forth in paragraphs(B)(I) and (C)(I) below) and the Servicer (i.e., the Servicing Fee for servicing the Mortgage Loan, as provided in the Fannie Mae Commitment and as set forth in paragraphs (B)(II) and (C)(II) below), notwithstanding any other provision of this Financing Agreement, the Mortgage Note, any other Bond Document or any Mortgage Loan Document which may state or imply to the contrary, and notwithstanding the amount of Investment Income available to be applied to the payment of the foregoing obligations. The Mortgage Loan shall: (1) be evidenced by the Mortgage Note, (2) bear interest at the Mortgage Note Rate, (3) be payable on the terms provided in the Mortgage Note, (4) be secured by, among other instruments, the Mortgage, (5) be subject to optional and mandatory prepayment at the times, in the manner and on the terms, and have such other terms and provisions, as are set forth in the Mortgage:Note, the Mortgage and the other Mortgage Loan Documents, and (6) otherwise comply in all respects with the requirements',of the Fannie Mae Commitment pertaining to the Mortgage Loan. DOCSI A t:296344. 40929-170 MM3 16 The Mortgage Note Rate shall be comprised of: (A) a pass-through rate of interest (the "Pass-Through Rate"), which shall be a rate sufficient to pay when due the interest on the Bonds and the Trustee's Annual Fee; and (B) a Fixed rate of interest, which prior to the Issue Date, shall be equivalent to the sum of. (I) the Facility Fee (as set forth in the Fannie Mae Commitment) payable to Fannie Mae for providing the Collateral Agreement, which Facility Fee shall be equal to .45% per annum, and (II) the Servicing Fee (as set forth in the Fannie Mae Commitment) for servicing the Mortgage Loan on and after the Conversion Date, which Servicing Fee shall be equal to .45% per annum, and (C) on and after the Issue Date, shall be equivalent to the sum of: (I) the Guaranty Fee (as set forth in the Fannie Mae Commitment) payable to Fannie Mae for issuing the Fannie Mae Pass-Through Certificate, which Guaranty Fee shall be equal to .45%per annum; and (II) the Servicing Fee (as set forth in the Fannie Mae Commitment) for servicing the Mortgage Loan on and after the Issuer Date, which Servicing Fee shall be equal to .45% per annum. The sum of the Guaranty Fee and the Servicing Fee payable on and after the Issue Date (that is, .45% per annum and .45% per annum, respectively, totaling .90% per annum, such total being the "Spread") may, by agreement between Fannie Mae and the Servicer, be reallocated among Fannie Mae and the Servicer so as to be payable to Fannie Mae and the Servicer in different proportions, provided that any such reallocation shall not affect the Borrower's obligations under the Mortgage Note. The Mortgage Note shall be payable in consecutive level monthly installments of principal and interest (computed at the Mortgage Note Rate, as specified above, on the outstanding principal balance of the Mortgage Loan) beginning on the First'day of the second month following the month in which the Closing Date occurs until the entire indebtedness evidenced by the Mortgage Note is paid in full, provided that any remaining indebtedness, if not sooner paid, shall be due and payable on the 30th anniversary of the first'day of the month following the month in which the Closing Date occurs. DOC SLA?:296344. 40929-170 MM3 17 Section 4.2.2 Funding. Upon issuance and deliveryof the Bonds, the Issuer shall cause: (1) Net Bond Proceeds in an amount equal to the Mortgage .Loan Fund Deposit Amount to be delivered to the Trustee for deposit into the Mortgage Loan Fund, and (2) the accrued interest on the Bonds to be delivered to the Trustee for deposit into the General Receipts and Disbursements Account. The Mortgage Loan shall be deemed to have been made to the Borrower in a principal amount equal to the full Mortgage Loan Amount immediately upon the deposit of the Net Bond Proceeds into the Mortgage Loan Fund and the accrued interest on the Bonds into the General Receipts and Disbursements Account, all as provided above. Upon such deposits, all Net Bond Proceeds so deposited into the Mortgage Loan Fund shall become and remain the property of the Borrower as a result of the Mortgage Loan having been so made, and the Issuer shall have no further right, title or interest in such proceeds (subject to the security interest granted by the Borrower to the Issuer pursuant to this Financing Agreement and also subject to the lien in favor of the Trustee created as a result of the pledge of the Trust Estate pursuant to the Indenture). The Trustee shall cause the moneys on deposit from time to time in the Mortgage Loan Fund and the Rehabilitation Fund to be disbursed as provided in the Indenture, provided that no disbursements from. the Mortgage Loan Fund or the Rehabilitation Fund shall be made unless and until (a)the conditions for disbursement set forth in Section 4.3 (as to the Mortgage Loan Fund) and Section 4.7 (as to the Rehabilitation Fund) of the Indenture have been satisfied, and (b)the following conditions have been satisfied: (i) the Regulatory Agreement shall have been executed and delivered by the Issuer and the Borrower, and shall have been properly recorded in the appropriate office for officially recording real estate documents in the jurisdiction in which the Project is located, (ii) the Borrower shall have executed and delivered the Mortgage Note to the Issuer, and the Issuer shall have endorsed the Mortgage Note (without recourse) to the order of the Trustee and Fannie Mae, as their interests may appear, and shall have delivered the Mortgage Note as so endorsed to the Trustee; (iii) the Borrower shall have executed and delivered the Mortgage to the Issuer; (iv) the Issuer shall have executed and delivered the Assignment to the Trustee and Fannie Mae, as their interests may appear, (v) the Mortgage and the Assignment shall have been properly recorded, in that order, in the appropriate office for officially recording real estate documents in the jurisdiction in which the Project is located; and i)UCSL,A::295344. 40929-170 MM3 18 (vi) the Borrower shall have delivered to the Trustee a certificate confirming the matters set forth in Section 2.2 of this Financing Agreement and an Opinion of Counsel, as of such date, required by Section[7(c)] of the Bond Purchase Agreement. For the purpose of establishing that the Regulatory Agreement, the Mortgage and the Assignment have been properly recorded, the Trustee, the Issuer, Fannie Mae and the Servicer shall be authorized and entitled to rely conclusively on the oral or written advice of an attorney- at-law or a title company to which any such instrument has been delivered and entrusted for filing that such instrument has been delivered to and accepted for recording by the public officer responsible under the laws of the State for receiving such instrument for recording in the appropriate public records; provided that based on local custom and practice, Fannie Mae and the Servicer may rely on a title insurance policy acceptable to them covering any "gap" in a manner acceptable to Fannie Mae and the Servicer. Section 4.3 moment of Fees and Expenses._nses. In addition to all fees, costs, expenses and other amounts required to be paid by the Borrower under the Mortgage Note and the Reimbursement Agreement, the Borrower shall pay, without duplication,'the following fees and expenses: (i) fees included in the Mortgage:'Mote Rate: (A) the Trustee's Annual Fee, (B) on or before the Issue fate, the Facility Fee, in the amount specified in the Fannie Mae Commitment and this Financing Agreement, based on the principal balance of the Mortgage Loan outstanding from time to time, payable monthly, in arrears, on the same dates on which and for the same periods for which interest is payable under the Mortgage Note, the Facility Fee shall be collected by the Servicer as part of the payments of interest on the Mortgage Note received by the Servicer and remitted by the Servicer to Fannie Mae, (C) after the Issue Bate, the Fannie Mae Guaranty Fee, in the amount specified in the Fannie Mae Commitment and in this Financing Agreement, based on the principal balance of the Mortgage Loan outstanding from time to time, payable monthly, in arrears, on the same dates on which and for the same period for which interest is payable under the Mortgage Note; the Fannie Mae Guaranty Fee shall be collected by the Servicer as part of the payments of interest on the Mortgage Note received by the Servicer and remitted to Fannie Mae as part of the Servicer's remittance of principal and interest to Fannie Mae and deducted by Fannie Mae prior to distribution under the Fannie Mae Pass-Through Certificate, and DOCSLA.1:296344. 40924-170 MM3 19 (D) the Servicing Fee, in the amount specified in the Fannie Mae Commitment and in this Financing Agreement, based on the principal balance of the Mortgage Loan outstanding from time to time, payable monthly, in arrears, on the same dates on which and for the same period for which interest is payable under the Mortgage Note; the Servicing Fee shall be deducted by the Servicer from paymentsof interest on the Mortgage Note received by the Servicer prior to remitting the balance of the payments on the Mortgage Note (other than the Facility Fee, which is to be remitted to Fannie Mae) to: (1) the Trustee on and before the Issue Date, and (2)Fannie Mae after the Issue Date. (ii) fees not included in the Mortgage Note Rate and expenses: (A) the fees (other than the Servicing Fee) and expenses due to the Servicer in connection with the Mortgage Loan; (B) to the extent not previously paid by the Borrower, the fees and expenses required to be paid by the Servicer to Fannie Mae under the terms of the Fannie Mae Commitment, such fees and expenses to be paid at the times and in the manner set forth in the Fannie'Mae Commitment, provided that the Servicer's imposition of such obligation on the Borrower shall not diminish the Servicer's obligation to pay such fees to Fannie Mae; (C) all amounts required to pay to the Issuer; (1) in connection with the issuance of the Bonds, the financing fee in an amount equal to $9,875.00 (.12.5% of the original Principal Amount of Bonds), which financing fee shall be paid upon the issuance and delivery of the Bonds; plus (2) notwithstanding any prepayment of the Mortgage Loan and discharge of the Indenture, an annual Issuer fee equal to $9,875.00 (.125% of the original Principal Amount of Bonds), payable in twelve equal installments of$822.92, in arrears, on the first day of each month, commencing May 1, 1999, for the terra of the Qualified Project Period; provided that such annual Issuer fee shall be paid by the Borrower to the Servicer for remittance to the Trustee and deposit into the Fees Account of the Revenue Fund; plus (3) all expenses of the Issuer incurred at any time related to the Project or the Bonds, including,lwithout limitation, out-of-pocket costs and expenses (including attorneys' fees and expenses) of the Issuer incidental to the performance of its obligations under this Financing Agreement, the Indenture and DOCS'A 1:296344. 410929-170 MM3 20 with respect to its authorization, sale and delivery of the Bonds, or incurred by the Issuer in defending any action brought against it by any person (including but not limited to the Borrower) relating to the Bonds, the Indenture, this Financing ',Agreement or the Regulatory Agreement or the transactions contemplated and to be effected by the Indenture, this Financing Agreement or the Regulatory Agreement, or in enforcing the provisions of the Indenture, this Financing Agreement or the Regulatory Agreement, including, without limitation, attorneys' feesand expenses and attorneys' fees and expenses on appeal, all such expenses shall be paid within 30 days of the date of an invoice therefor from the Issuer to the.Borrower; (D) the Trustee's acceptance fee, which shall be paid on the Closing Date, and all amounts required from time to time to. (a) pay the fees of the Trustee for its duties and services as Trustee in connection with the Bonds (as such duties and services are set out in the Indenture), provided that the Trustee's Annual Fee is included in the Mortgage Note Rate and, therefore, paid by the Borrower to the Servicer with each monthly payment on the Mortgage Note and, prior to the Fannie Mae Pass-Through Certificate Delivery Date, remitted by the Servicer to the Trustee, and (b) reimburse the Trustee for all advances, out-of- pocket expenses, fees, costs and other charges, including Extraordinary Items, and further including counsel fees and expenses, and taxes (excluding income, value added and single business taxes), reasonably and necessarily incurred by the Trustee in performing its duties as Trustee under the Indenture, this Financing Agreement the Disclosure Agreement, the Collateral Agreement and the Regulatory Agreement, and (c) all amounts required to pay and reimburse the Trustee for any fees and expenses incurred in connection with any default under the Indenture, this Financing Agreement or under the Regulatory Agreement, including Extraordinary Items, all payments for fees and expenses other than the Trustee's Annual Fee included in the Mortgage Note Rate shall be made by the Borrower to the Trustee not later than thirty (30) days after receipt of invoices rendered to the Borrower by the Trustee, (E) all amounts required from time to time to pay the fees and expenses of the Rebate Analyst as required by the Indenture and this DOC:SLAI:296344. 40929-170 MM3 21 Financing Agreement, provided that the Borrower shall, so long as the Bonds are Outstanding, pay to the Servicer monthly installments of$42, commencing May 1, 1999, for remittance to the Trustee and deposit into the Fees Account of the Revenue Fund, which amounts shall be held for payment of the Rebate Analyst's Annual Fee; provided further that such monthly installments need not be paid by the Borrowerif and to the extent that the Trustee holds at least $5,000 in the Fees Account for such purpose; all payments for fees and expenses of the Rebate Analyst shall be made by the Borrower not later than thirty (30) days after receipt of invoices rendered to the Borrower by the Rebate Analyst; (F) all Costs of Issuance (neither the Issuer, the Servicer, the Trustee nor Fannie Mae shall have any liability for any Costs of Issuance relating to the Bonds); (U) all costs of registering, printing, reprinting, preparing and delivering any replacement bonds required under the Indenture and in connection with the registration,printing, reprinting or transfer of Bonds; (H) all fees and expenses of Fannie Mae and the Servicer and their respective counsel, title insurance, survey, recording and other costs related to underwriting, closing and disbursing the Mortgage Loan and of the Assignment of the Mortgage Loan to the Trustee and Fannie Mae, as their interests may appear; and (I) all fees, costs and expenses in connection with issuance of the Fannie Mae Pass-Through Certificate, including, but not limited to, those incurred by Fannie Mae, the Servicer and their respective counsel. The Borrower acknowledges that all fees, costs, expenses and other amounts described in this Section 4.3 are obligations solely of the Borrower and (a) as to fees described in Section 4.3(i) above, must be paid by the Borrower in all events, including the insufficiency of the amounts included in the Mortgage Mote Rate to pay such fees, and (b) as to fees described in Section 4.3(ii) above, must be paid by the Borrower in all events separate and apart from payments due under the Mortgage Loan and will not be included in the Mortgage Note Rate. Neither the Servicer, the Trustee, the Issuer nor Fannie Mae shall have (a) any liability, responsibility or accountability for the payment, remittance or handling of any such fees, costs'or expenses or (b) any obligation to pay any such fees, costs or expenses. The payment of all fees, costs and expenses specified in this Financing Agreement not included in the Mortgage Mote Rate or provided for in the Reimbursement Agreement shall not be secured by the Mortgage or constitute a lien on the Project in any manner (unless the Servicer or Fannie Mad shall, in its sole discretion, advance such fees and expenses), shall be unsecured obligations of the Borrower and shall be subordinate to the Borrower's obligations under the Mortgage Note and the Reimbursement Agreement. DOC'SLA i:296344. 40929-170 MM3 22 Section 4.4 Notice. The Borrower shall give written notice to Fannie Mae and the Servicer of the payment of all fees and expenses specified in this Financing Agreement that are not included in the Mortgage Note Rate and not otherwise paid to the Servicer. Section 4.5 Deposits. It shall be a condition precedent to the issuance of the Bonds and the obligation of the Issuer to make the Mortgage Loan as contemplated herein that, on or before the scheduled Closing Date, the Borrower shall deliver to the Trustee the sum of: (a) the Costs of Issuance Deposit, which sum shall be deposited by the Trustee into the Costs of Issuance Fund as provided in paragraph (iv) of Section 4.2 of the Indenture and in Section 4.5.1 of the Indenture, (b) the Initial Debt Service Deposit, which sum shall be deposited by the Trustee into the General Receipts and Disbursements Account as provided in paragraph (iii) of Section 4.2 of the Indenture and in paragraph (ii) of Section 4.4.3(a) of the Indenture, and (c) the Rehabilitation Fund Deposit, which sum shall be deposited by the Trustee into the Rehabilitation Fund as provided in paragraph (v) of Section 4.2 of the Indenture and in Section 4.7.1 of the Indenture. Section 4.6 Mortge Loan Payments. All regularly scheduled payments due under the Mortgage Note shall be timely paid by the Borrower, when due, in immediately available funds. All payments of interest, principal or other amounts payable by the Borrower under the Mortgage Note shall be paid: (a) on or before the Issue Date, to the Servicer for remittance to the Trustee (net of the Servicing Fee and the Facility Fee), and (b) after the Issue Date, to the Servicer (or other entitythen servicing the Mortgage Loan for Fannie Mae) and remitted by the Servicer to Fannie Mae in accordance with the contractual agreements between Fannie Mae and the Servicer. The Borrower agrees to hold the Trustee, the Servicer and Fannie Mae harmless from any liability on account of such payments. Section 4.7 Certain Notices From Trustee. The Trustee shall, in accordance with the terms and conditions of the Collateral Agreement, timely give all notices required by the Collateral Agreement, including, without limitation, a notice to Fannie Mae, with copies to the Issuer and the Servicer, of the Trustee's failure to receive any Required Mortgage Payment (as defined in the Collateral Agreement) when due, which notice shall be given'by the Trustee not later than 4:00 p.m. Eastern Time on the Business Day next succeeding any day on which the Required Mortgage Payment was due. Section 4.8 Obligations Relating to Mortgage Loan. The Trustee agrees to accept the Assignment. Provided that all of the conditions to the issuance of the Fannie Mae Pass-Through Certificate have been satisfied, the Trustee agrees to execute and deliver the DOCSLA1:246344. 40929-170 Milia 23 Trustee Assignment on the Fannie Mae Pass-through Certificate Delivery Date and the Servicer agrees to accept the Trustee Assignment and to execute and deliver the Servicer Assignment to Fannie Mae on the Fannie Mae Pass-through Certificate Delivery Date. Section 4.9 Modification of Mortgage Loan Documents; Consent at Direction of Fannie Mae. The Trustee shall not, prior to the Fannie 'Mae Pass-Through Certificate Delivery Date: (i) consent or enter into, without the prior written consent of Fannie Mae, or fail to consent or enter into at the written direction of Fannie Mae, to any amendments or modifications to, or adjustments or revisions of, the terms and conditions of the Mortgage Note, the Mortgage or any of the other Mortgage Doan Documents, or (ii) take, without the prior written consent of Fannie Mae, or fail to tape at the written direction of Fannie Mae, any action in the event of a default or otherwise under any Mortgage Loan Document, including, without limitation, any action which would cause there to be insufficient money available for the scheduled payment of principal and interest on the Mortgage Loan. So long as no payment default by Fannie Mae has occurred and is continuing under the Collateral Agreement, the Trustee shall, at the written direction of Fannie Mae, consent to any proposed amendment or modification to, or adjustments or revisions of, the Mortgage Note, the Mortgage or any of the other Mortgage Loan Documents to the extent any such proposed amendment or modification is permitted by the terms of the Indenture. Section 4.10 Prepayment. Section 4.10.1 Op ional Prepayment. At any time that the Bonds are subject to optional redemption pursuant to Section 3.2 of the Indenture,',the Borrower shall have the right to prepay the Mortgage Loan in whole, but not in part, on the terms provided in, and subject to the limitations of, the Mortgage Note and the Mortgage and, if and to the extent applicable, the other Mortgage Loan Documents, provided that the Borrower shall comply with the provisions of Section 3.2.1 of this Financing Agreement. The Borrower expressly agrees and acknowledges that the payment of all amounts set forth in Section 3.2.1of this Financing Agreement shall be a condition precedent to the effectiveness of any such prepayment of the Mortgage Loam. Section 4.10.2 Mandatory Prepayment. The Mortgage Loan shall be subject to mandatory prepayment in whole or in part, on the terms provided in, and subject to the limitations of, the Mortgage Note. Section 4.10.3 Notices. In the event any prepayment of principal shall be made on account of the Mortgage Loan, whether optional or mandatory, and regardless of the underlying cause for the prepayment, the Borrower shall provide written notice of the prepayment to the Trustee, Fannie Mae and the Servicer, not less than sixty (60) days, or the longest period of time, if any, less than sixty (60) days that is possible in the case of involuntary DOC'SLA::296344. 40929-170 MM3 24 prepayments, prior to the date on which the Borrower will make the prepayment. The Servicer (or other entity then servicing the Mortgage Loan) shall provide an additional notice of the voluntary prepayment (a) to Fannie Mae and (b) to the Trustee; such notice shall contain the information provided for in this Section 4.10(3). Each such notice shall state: (i) the amount to be prepaid; (ii) the date on which the prepayment will be made by the Borrower to the Servicer; and (iii) the cause for the prepayment. The Servicer, upon receipt of the Borrower's notice of prepayment, shall provide an additional notice of the voluntary prepayment (a) to Fannie Mae and (b) to the Trustee; such notice shall contain the information provided for in this Section 4.10.3 to the extent such information has been provided by the Borrower to the Servicer. Section 4.10.4 Limit of Fannie Mae Oblintion. End Period Payment. The Borrower is required, and agrees, that in order to effect an optional prepayment of the Mortgage Loan whether before or after the Fannie Mae Pass-Through Certificate Delivery Date, the Borrower shall, to the extent the Trustee does not have on hand sufficient Available Moneys. (a) make an End Period Payment by paying or otherwise providing Available Moneys in an amount, calculated by the Trustee, equal to the difference between the principal of, premium, if any, and interest on the Bonds due on the Redemption Date (the "Total Redemption Amount") as a result of the prepayment, and the sura of: (A) the amount of principal and interest received by the Trustee for deposit into the Revenue Fund prior to the Redemption Date, (B) Investment Income on the Funds and Accounts held under the Indenture, which constitute Available 'Moneys and which are available to be applied on the Redemption Date to the payment of the Total Redemption Amount, and (C) any other Available Moneys to be held under the Indenture and available to be applied to the payment of the Total Redemption Amount on the Redemption Date, and (b) deliver to the Servicer a certificate from the Trustee stating that the Trustee has received, in Available Moneys, an amount equal to the End',Period Payment. Section 4.10.5 Credit Facility. No prepayment of the ?Mortgage Loan prior to the Fannie Mae Pass-Through Certificate Delivery Date shall create any obligation on the part of Fannie Mae to make any payments under the Collateral Agreement. Linder no circumstances shall any voluntary or involuntary prepayment create any obligation on the part of DOCS L A i:296344. 40929-170 MM3 25 Fannie Mae to make any distributions under the Fannie Mae Pass-Through Certificate, except as required by the terms and provisions of the Fannie Mae Pass-Through Certificate. Section 4.11 Assignment to Trustee. Pursuant to the Indenture, the Issuer shall pledge, assign and transfer to the Trustee all of its right, title and interest in and to this Financing Agreement(other than the Reserved Fights), the Regulatory Agreement(other than the Reserved Rights) and the revenues, receipts and collections under this Financing Agreement, as security for the payment of the principal of,premium, if any, and interest on the Bondsand as security for Fannie Mae with respect to the obligations of the Borrower under the Mortgage Loan Documents. The Issuer, the Borrower, the Trustee and the Servicer acknowledge that the covenants and agreements contained in this Financing Agreement and in the Regulatory Agreement are for the benefit of the Bondholders and Fannie Mae and may be enforced on behalf of the Bondholders and Fannie Mae by the Trustee. The Issuer shall execute and deliver from time to time, in addition to the instruments of assignment specifically provided for in this Financing Agreement, such other and further instruments and documents as may be requested by the Trustee from time to time to further evidence, effect or perfect such pledge and assignment for the purposes stated in the Indenture. SECTION 5. FANNIE MAE COMMITMENT; FANNIE MAE PASS-THROUGH CERTIFICATE; DISTRIBUTIONS UNDER FANNIE MAE PASS-THROUGH CERTIFICATE. Section 5.1 Fannie Mae Commitment. The Servicer acknowledges its receipt and acceptance of the Fannie Mae Commitment. Receipt of a copy of such executed Fannie Mae Commitment is acknowledged by the Issuer and the Trustee. Section 5.2 Fannie Mae Pass-Through Certifieate. On the Fannie Mae Pass- Through Certificate Delivery Date, the Servicer shall receive the Fannie Mae Pass-Through Certificate, which shall, at the direction of the Servicer, be delivered to, and in the name of, the Trustee, provided that the Trustee is an entity eligible to maintain a "boob-entry" account with a Federal Reserve Bank. If the Trustee is not an entity eligible to maintain a"book-entry" account with a Federal Reserve Bank, the Trustee shall designate an entity which does maintain a"book- entry" account with a Federal Reserve Bank and which has agreed to act as custodian of the Fannie Mae Pass-Through Certificate for the Trustee, as beneficial owner of the Fannie Mae Pass-Through Certificate, as the entity to whom the Fannie Mae Pass-Through'Certificate is to be issued. SECTION 6. SERVICING OF THE :MORTGAGE LOAN. Section 6.1 Rights of Fannie Mae. The Trustee, the Issuer and the Borrower acknowledge that the Mortgage Loan shall be serviced by Fannie Mae or, in the sole discretion of Fannie Mae, the Servicer, pursuant to contractual arrangements between Fannie Mae and the Servicer, or by any ether servicer selected by Fannie Mae pursuant to contractual arrangements between Fannie :Viae and such servicer. The Issuer, the Trustee and the Borrower acknowledge and agree that: DOC S LA 1:296344. 40929-170 MM3 26 (a) the selection of any servicer is in the sole and absolute discretion of Fannie Mae; (b) neither the Issuer nor the Trustee shall terminate or attempt to terminate the Servicer or any successor servicer as the servicer for the=Mortgage Loan or appoint or attempt to appoint a substitute servicer for the Mortgage Loan; (c) the servicing arrangements between Fannie Mae and the Servicer, are subject to amendment or termination without the consent of the Trustee, the Issuer or the Borrower; and (d) none of the Trustee, the Issuer or the Borrower shall have any rights under, or be a third party beneficiary of, any such servicing arrangement, including any servicing agreement. Section 6.2 Servicing Fee. The Trustee and the Issuer acknowledge and agree that any servicer designated by Fannie Mae shall be paid a fee for its services. 'Neither the Issuer, the Trustee nor Fannie Mae shall have any obligation to pay such fees from their own funds, provided that, the Trustee acknowledges the right of the Servicer to deduct the Servicing Fee from monthly payments of interest made by the Borrower on the Mortgage Note in accordance with and subject to its servicing arrangements with Fannie Mae. Section 6.3 Notices. Prior to the Fannie Mae Pass-Through Certificate Delivery Date, the Servicer shall provide written notice to the Trustee specifying the manner in which any prepayment of the Mortgage Loan is to be applied. Such notice shall specify the allocation of the prepayment among principal, interest and premium, if any, and shall be given to the Trustee at the same time the Servicer remits the prepayment to the Trustee. Section 6.4 Removal. Fannie Mae reserves the right to remove the Servicer and to terminate its right to service the Mortgage Loan and its right to be paid the Servicing Fee upon any default by the Servicer in its contractual arrangements with Fannie Mae. The Borrower,the Issuer and the Trustee acknowledge the authority of Fannie Mae under this Section 6.4. Upon any such removal, the successor Servicer appointed by Fannie Mae shall succeed to the rights and obligations of the predecessor Servicer under this Financing Agreement, without any action by any of the other parties hereto. SECTION 7. COVENANTS, Section 7.1 Covenants of the Issuer. Section 7.1.1 Pledge and Assignment. The Issuer has not pledged and will not pledge or assign its interest in this Financing Agreement or the revenues and receipts derived pursuant to this Financing Agreement (except for the Issuer's Reserved Rights) other than to the Trustee and Fannie Mae, as their interests may appear. Section 7.1.2 Compliance with Federal Tax Laws. The Issuer will take such action or actions from time to time, including amendment of this Financing Agreement, as DOCS I_A l:296344. 44929;70 MM3 27 may be necessary, as stated in an Opinion of.Bond Counsel, to comply fully with all applicable rules, rulings, policies, procedures, regulations or other official statements promulgated or proposed by the .Department of the Treasury or the Internal Revenue Service from time to time pertaining to obligations on which the interest is tax-exempt under Section 103 of the Code (including,without limitation of the foregoing, the provisions, therefore, of Section 142(d) of the Code). The Issuer will not knowingly tape, or knowingly permit to be taken on its behalf, any action that would cause the interest payable on the Tax-Exempt Bonds to cease to be excludable from gross income for federal income tax purposes under Section 103 of the Code, and it will take, at the sole cost and expense of the Borrower, such action as may be necessary in the Opinion of Bond Counsel to continue such exclusion from gross income. The parties to this Financing Agreement acknowledge and agree that, as a practical matter, compliance with the requirements of the Code necessary to maintain the federal tax-exempt status of the interest on the Bonds is and will be in the hands and under the control of the Borrower, and that the Issuer will not be obligated to undertake to monitor compliance with such requirements or inform any person as to whether or not such requirements are being complied with. Section 7.1.3 Notification of Violation of Regulatory Agreement. Upon the discovery by the Issuer of any noncompliance by the Borrower with the Regulatory Agreement, the Issuer will notify the Trustee, the Servicer and Fannie Mae of such noncompliance and will, subject to the provisions of the Indenture and Section 1I of this Financing Agreement, promptly institute legal action to correct such noncompliance, and will pursue such action and will attempt to cause Borrower to correct such noncompliance within sixty (60) days after such discovery, all strictly in accordance with the terms and conditions of this Financing Agreement and the Regulatory Agreement, as the case may be, provided that no such action shall be taken which would adversely affect the interests of the Bondholders or Fannie Mae. Section 7.2 Covenants of the Borrower. Nothing 'contained in this Section. 7.2 is intended to modify or limit any provisions of the Mortgage Loan Documents. Section 7.2.1 Maintenance of Project by, Borrower: Insurance. So long as any of the Bonds are Outstanding, the Borrower shall own and operate the Project as required by this Financing Agreement and the Regulatory Agreement and shall, as required by the Mortgage Loan Documents, keep and maintain the Project, including all appurtenances to it and any personal property in or on the Project(other than property of tenants), in good repair and good operating condition, normal wear and tear excepted, and shall insure the Project as required by the Mortgage Loan Documents. The Borrower will operate the Project in accordance with all federal, state and local laws, ordinances, orders, rules and regulations, including, without limitation, those relating to zoning, building, safety and environmental quality. The Borrower will operate the Project for Project purposes. Section 7.2.2 Taxes, Other Governmental Charges and Utility Charges. The Borrower will pay, or cause to be paid, promptly as the same become due and payable, every lawful cost, expense and obligation of every kind and nature, foreseen or unforeseen, for the payment of which the Issuer, the Trustee, the Servicer or Fannie Mae, or any other party, is or shall become liable by reason of its or their estate or interest in the Project or DOCS..A.:296344. 40929-170 MM3 28 any portion of it, by reason of any right or interest of the Issuer, the Trustee, the Servicer or Fannie Mae in or under this Financing Agreement, or by reason of or in any manner connected with or arising out of the possession, operation,maintenance, alteration,repair, rebuilding, use or occupancy of the Project or any portion of it, including, without limitation, all taxes, assessments, whether general or special, and governmental charges of any kind whatsoever that may at any time be lawfully assessed or levied against or with respect to the Project or any machinery, equipment or other property installed or brought by the Borrower in or on the Project; provided that any amounts payable under this Financing Agreement that are also required to be paid by the terms of the Mortgage shall be paid on the terms provided in the Mortgage. Upon request, the Borrower shall furnish to the Issuer, the Trustee, Fannie Mae and; the Servicer proof of the payment of any such tax, assessment or other governmental or similar charge, or any other charge which is payable by the Borrower as set forth above. Section 7.2.3 Remodeling and Improvements. Subject to the terms of the Mortgage Loan Documents, the Borrower may remodel the Project or make modifications or improvements on or to the Project from time to time as it, in its discretion., may deem to be desirable for its uses and purposes, provided that such remodeling,', modifications or improvements (a) do not materially alter the scope or character or diminish the value of the Project, (b) are permitted under the Act and the Code and (c) have been approved by the Servicer and Fannie Mae; provided further, however, that the Borrower may make any de minimis modifications and improvements which may be permitted by the Mortgage.' The cost of such remodeling, modifications or improvements shall be paid by the Borrower. Section 7.2.4 Compliance With Laws. The Borrower will, throughout the term of this Financing Agreement and at no expense to the Issuer, the Trustee, the Servicer or Fannie Mae promptly comply or cause compliance with all laws, ordinances, rules, regulations and requirements of duly constituted public authorities which may be applicable to the Project or to the rehabilitation, repair and alteration of the Project, or to the use or manner of use of the Project, including, but not limited to, the Act, the ADA, Environmental Laws and all federal, State and local labor, health and safety laws, rules and regulations. Subject to the provisions of the Mortgage Loan Documents, the Borrower may, at its expense and in its own name, provided that the Borrower is not in default under any Mortgage Loan Document or any Bond Document, and provided that no event has occurred which, with the passage of time or the giving of notice, or both, would constitute any such default, in good faith contest compliance with any such legal requirement and, in the event of any such contest, upon notice to the Issuer, the Trustee, the Servicer and Fannie Mae, may permit the legal requirement so contested to remain in noncompliance during the pendency of such contest and any appeal from it, unless the Issuer, the Trustee, the Servicer or Fannie Mae shall notify the Borrower that, in the opinion of counsel to the Issuer, the Trustee, the Servicer or Fannie Mae, by noncompliance with any such legal requirement (a) the Project or any part of it may be subject to being closed, ',lost or forfeited, or (b) any of the Issuer, the Trustee, the Servicer or Fannie Mae may be subject to any legal proceedings, penalties or fines, in which event such legal requirement shall be complied with. Nothing contained in this Section 7.2.4 is intended to modify or limit any provisions of the Regulatory Agreement or any of the Mortgage Loan Documents. DOCK A1:296344. 40929-170 MW 29 Section 7.2.5 Maintenance of Legal Existence. During the term of this Financing Agreement, the Borrower will maintain its existence in good standing in order to maintain the accuracy of the representation set forth in paragraph (i) of Section 2.2.1 of this Financing Agreement, and will not terminate, dissolve, or dispose of all or substantially all of its assets, provided, however, that the Borrower may, with the written permission of Fannie :Viae, consolidate with or merge into another entity or permit one or more other entities to consolidate with or merge into it, or transfer all or substantially all of its assets to another entity, but only on the condition that the assignee entity or the entity resulting from or surviving such merger or consolidation (if other than the Borrower), or the entity to which such transfer shall be made, shall be duly organized and existing and in good standing under the laws of a state of the United States of America and shall be qualified to do business and in good standing under the laws of the State, shall remain so continuously during the term of this Financing Agreement, and shall expressly assume in writing and agree to perform all of the Borrower's obligations under this Financing Agreement, under all other documents executed by the Borrowerin connection with the issuance of the Bonds and under the Mortgage Loan Documents; provided, further, that (a) the Borrower delivers an Opinion of Bond Counsel to the effect that such consolidation or merger will not cause the interest payable on the Tax-Exempt Bonds to be included in gross income for federal or State income tax purposes and (b) any transfer of the Project shall be effected in accordance with the Regulatory Agreement and the Mortgage Loan Documents. Nothing in this Section 7.2.5 shall be deemed to (i) relieve the Borrower of its obligations to comply with the provisions of the Mortgage Loan Documents or(ii) alter, subject to the terms of the Mortgage Loan Documents, the nonrecourse nature of the Mortgage Loan... Section 7.2.6 Access to Project and Records-, Reports. (a) Access to Prosect. Subject to reasonable notice, the Issuer, Fannie Mae, the Trustee and the Servicer, and the respective duly authorized agents of each, shall have the right at all reasonable times and during normal business hours to enter the Project and any other location containing the records relating to the Borrower, the Project, the ?Mortgage Loan, the Indenture, this Financing Agreement, the Regulatory Agreement or the Disclosure Agreement and to inspect and audit and make copies of any and all of the Borrower's records or accounts pertaining to the Borrower, the Project, the Mortgage Loan, the Indenture, this Financing Agreement, the Regulatory Agreement and the Disclosure Agreement, and the Borrower's compliance with the terms and conditions of the Mortgage Loan, the Indenture, this Financing Agreement, the Regulatory Agreement and the Disclosure Agreement and shall have the right to require the Borrower, at the Borrower's sole expense, to furnish such documents to the Issuer, the Trustee, Fannie Mae and the Servicer, as the Issuer, the Trustee, Fannie Mae or the Servicer, as the case may be, from time to time, deems reasonably necessary in order to determine that the provisions of the Mortgage Loan, the Indenture, this Financing Agreement, the Regulatory Agreement and the Disclosure Agreement have been complied with and to make copies of any records that Fannie Mae, the Trustee, the Issuer, or the Servicer, or their respective duly authorized agents, may reasonably require. The Borrower shall make available to the Issuer, the Trustee, Fannie ?Mae and the Servicer such information concerning the Borrower, the Project, the Mortgage Loan, the Indenture, this Financing € OCSLA.I:296344. 40929-170 MM3 30 Agreement, the Regulatory Agreement and the Disclosure Agreement as any of them may reasonably request. (b) Certificates and Reports. The Borrower shall file such certificates and other reports with the Servicer, the Issuer, the Trustee and Fannie Mac as are required by the Regulatory Agreement, including but not limited to the filing with the Trustee and the Issuer of true copies of each IRS Form 8703 ® "Annual Certification of a Residential Rental Project" (or any successor form thereto) as completed and filed with the Internal Revenue Service for each calendar year during the Qualified Project Period. (c) Reporting. The Borrower agrees to provide to the Issuer all information necessary to enable the Issuer to complete and file all forms and reports required by the laws of the State, the Code and any applicable federal laws, rules and regulations in connection with the Project and the Bonds. The Borrower shall deliver to the Servicer and, if requested in writing by the Issuer or the Trustee, to the Issuer and the Trustee, copies of all reports and notices required by the Mortgage Loan Documents. Section 7.22.7 Disposition of Project. Until payment in full of the Mortgage Loan, the Borrower will not sell or contract to sell or transfer or otherwise assign the Project except in accordance with and subject to the requirements of the Regulatory Agreement and the,Mortgage and without having first delivered to the Trustee an Opinion of Bond Counsel to the effect that the sale will not affect the exclusion from gross income for federal income tax purposes or the exemption from personal income taxes imposed by the State of the interest payable on the Tax-Exempt Bonds, provided that no such opinion shall be required in connection with a foreclosure sale, a deed in lieu of foreclosure or comparable conversion of the Mortgage Loan. The Borrower further agrees that any sale, transfer or other disposition of the Project in violation of this Section 7.2.7 shall be null, void and without effect and shall be ineffective to relieve the Borrower of its obligations under this Financing Agreement. nothing in this Section 7.2.7 shall be construed to prohibit (a) the granting by the Borrower of the Mortgage or a subordinate mortgage approved by Fannie Mae (the "Subordinate Mortgage"), provided that the Subordinate Mortgage shall be subject to a subordination agreement (the "Subordination Agreement") in form and substance acceptable to Fannie Mae, or (b)the 'foreclosure of the Mortgage, acceptance of a deed in lieu of foreclosure or comparable conversion of the Mortgage Loan or the Subordinate Mortgage by the holder of the Mortgage Note or the foreclosure of the Subordinate Mortgage by the beneficiary of the Subordinate Mortgage subject, in all cases, to the terms and conditions of the Subordination Agreement. Section 7.2.8 Tax Covenants. The Borrower covenants that: (i) it will comply with the requirements and conditions of the Tax Certificate and the Regulatory Agreement that pertain to the Project and the Mortgage Loan and will, at all times during the Qualified Project Period, fully comply with the provisions of the Regulatory Agreement, (ii) it will not take, or permit to be taken on its behalf, any action which would cause the interest payable on the Tax-Exempt Bonds to be included DOCS€.A€:296344. 40929-170 MM3 31 in gross income for federal income tax purposes and that it will take such action as may be necessary in the Opinion of:Bond Counsel to continue such exclusion from gross income, including, without limitation the following: (A) it will comply with all of the requirements of this Financing Agreement and the Regulatory Agreement; (B) it will prepare and file all statements required to be filed by it in order to maintain such exclusion, including but not limited to the filing of all reports and certifications required by the Regulatory Agreement; (C) it will timely pay to the United States of America any rebate amount required to be paid by the Issuer or the Borrower pursuant to Section 148(f) of the Code and the Treasury Regulations under Section 148, all as contemplated and required by the Indenture and this Financing Agreement; (D) it will cause not less than 95% of the net proceeds of the Bonds (within the meaning of Section 142(a) of the Code), including but not limited to moneys on deposit in the Rehabilitation Fund which, pursuant to the Indenture, are deemed to be Bond proceeds for purposes of this covenant, to be expended for Qualified Project Costs; and (E) it will cause an amount equal to 15% of the Acquisition Amount (as defined in the Tax Certificate) to be expended within two years from the Closing Date for rehabilitation expenditures, all within the meaning of and as required by Section 147(4) of the Cade; (iii) in order to satisfy the requirements set forth in subpart (4) of the definition of "program investment" that appears in Section. 1.148-1(b) of the Treasury Regulations (which requirements must be met in order for the Mortgage Loan to qualify as a program investment within the meaning of the aforementioned Treasury Regulation), neither the Borrower nor any related person (within the meaning of the aforementioned definition of "program investment") will purchase Bonds in an amount related to the amount of the'mortgage Loan; (iv) no changes will be made in the Project, no actions will be taken by the Borrower and the Borrower will not omit to tape any actions, which will in any way adversely affect the tax-exempt status of the Tax-Exempt Bonds; (v) the Borrower will not mare any use of the proceeds of the Bonds, or of any other funds which may be deemed to be proceeds of the Bonds pursuant to Section 148 of the Code and the Treasury Regulations issued under Section 148; which will cause the Bonds to be "arbitrage bonds" within the meaning of such Section and such Treasury Regulations, and will comply with the I3©CK.A 1:296344. 410929-1717 MM3 32 requirements of Section 148 and such Treasury Regulations throughout the terra of the Bonds; (vi) if the Borrower becomes aware of any situation., event or condition which would result in the interest payable on the Tax-Exempt Bonds becoming includable in gross income for federal income tax purposes, the Borrower will promptly give written notice of such situation, event or condition to the Issuer, the Trustee,the Servicer and Fannie Mae; and (vii) it will comply with the requirements and conditions of the Tax Certificate that pertain to the Project and the Mortgage Loan and will, at all times during the Qualified Project Period, fully comply with the provisions of the Regulatory Agreement; (viii) less than 25% of the net proceeds of the Mortgage Loan will be used, directly or indirectly, to pay or to reimburse the Borrower for the cost of acquiring land; and none of the proceeds of the Bonds (as defined for purposes of Section 147(g) of the Code)will be disbursed to provide working capital; (ix) the Borrower will cause all of the residential units in the Project to be rented or available for rental on a basis which satisfies the requirements of the Regulatory Agreement, including all applicable requirements of the. Code; all leases will comply with all applicable laws and the Regulatory Agreement; and (x) in connection with any lease or grant by the Borrower of the use of the Project, the Borrower will require that the lessee or user of any portion of the Project shall not use that portion of the Project in any manner which would violate the covenants set forth in this Financing Agreement; any lease or grant of use will be subject to compliance with this Financing Agreement. Section 7.2.9 moment of Rebate Amounts. (a) The Borrower covenants and agrees that it will hire a Rebate Analyst to calculate the Rebate Amount as required under the Indenture and will provide a copy of each rebate report to the Issuer and the Trustee. The Borrower further covenants and agrees that it will promptly pay, or cause to be paid, when due to the United States of America all Rebate Amounts that may be or become owing with respect to the Tax- Exempt Bonds, which payment may be made out of any available moneys on deposit in the various Funds and Accounts established under the Indenture or, in the absence of such available moneys, shall be paid by the Borrower(or the general partners of the Borrower) out of its own funds. For purposes of this Section, "available moneys", when used with respect to any Fund or Account established under the Indenture, shall mean moneys on deposit in such Fund or Account in excess of the amounts required to be on deposit in any such Fund or Account from time to time for the payment of interest, principal or premium, if any, due with respect to the Bonds and Fees. Notwithstanding anything to the contrary expressed or implied herein, in the Indenture or in this Financing Agreement, DOCS I.A;:246344. 40929-]70 MM3 33 the obligation of the Borrower to pay the Rebate Amount as required under this Financing Agreement shall be and remain the obligation of the Borrower. (b) Any and all costs and expenses of the Issuer in performing its obligations under Section 6.15.1 of the Indenture shall be paid by the Borrower. (c) Within thirty (30) days after the end of every fifth Bond Year (as defined in the Tax Certificate), and within fifty-five (55) days after the date on which no Tax- Exempt Bonds are outstanding, the Borrower shall cause the Rebate Analyst to deliver to the Trustee and the Issuer a certificate stating whether any rebate payment is required to be made, as set forth in the Tax Certificate, and the Borrower shall deliver to the Trustee any amount so required to be paid. Within ten (10) days after the Computation Date, the Issuer shall request written confirmation from the Borrower that the .Rebate Amount is being calculated by the Rebate Analyst and that the Borrower expects that the Rebate Amount will be computed within 30 days after the Computation Date. If the Borrower fails to provide such written confirmation within ten(10) days of the date of receipt of the Issuer's request, then the Issuer shall make a second written request. If the Borrower does not respond in writing within five (5) days of the date of receipt of the second request, then the Issuer shall hire a Rebate Analyst to calculate the Rebate Amount at the expense of the Borrower. Section 7.2.10 Qualification ,Under the Act. So long as the Mortgage Loan remains Outstanding, the Borrower will operate the Project so that it constitutes a "project"within the meaning of the Act and agrees to take all actions necessary to qualify and to continue to qualify the Project as a"project"under the Act. Section 7.2.11 Agreement Regarding Documents. The Indenture and the Collateral Agreement have been submitted to the Borrower for its examination, and the Borrower acknowledges,by execution of this Financing Agreement, that it has participated in the review of the Indenture and the Collateral Agreement, that it has reviewed, approved and agreed to each of the provisions of the Indenture and the Collateral Agreement and that it is bound by, shall adhere to the provisions of, and shall have the rights set forth by the terms and conditions of, the Indenture and covenants and agrees to perform all obligations required of the Borrower pursuant to the terms of the Indenture and the Collateral Agreement as if, in the case of the Indenture, the Borrower were a party to the Indenture. The Borrower acknowledges that it has no rights under, and is not, and is not intended to be, a third party beneficiary of, the Collateral Agreement. Section 7.2.12 Compliance with other Documents. The Borrower agrees to, assumes, and acknowledges and agrees to abide by, the terms and conditions of, and will make all payments and will observe and perforin all covenants, conditions and agreements required to be paid, observed or performed by the Borrower under, the Mortgage Note, the Mortgage, the other Mortgage Loan Documents, this Financing Agreement, the Regulatory Agreement and the other Bond Documents, the Credit FacilityAgreement and all other documents, instruments or agreements which are at any time, or from time to time, to be entered into by the Borrower with respect to the Project or the ownership, operation, occupancy, DOCSLAI:296344. 40929-170 MM3 34 use or financing of the Project. The Borrower acknowledges that the Borrower's failure to comply with the terms and conditions of the Credit Facility Agreement shall constitute an Event of Default under the Mortgage Loan, and, at the option of Fannie Mae (as set forth in Section 11.1.2 of this Financing Agreement), an Event of Default under this Financing Agreement, entitling the Trustee, but only at the direction of Fannie Mae, to exercise all available remedies set forth in this Financing Agreement. Section 7.2.13 Disclosure Al reement. The Borrower agrees to perform its obligations under the Disclosure Agreement, including without limitation, the payment of compensation to the Trustee and payment or reimbursement of expenses, disbursements and advances incurred or made by the Trustee, all in accordance with the provisions of the Disclosure Agreement. Notwithstanding any other 'provision of this Agreement, any failure by the Borrower to comply with any provision of the Disclosure Agreement shall not be a failure or a default, or an Event of Default, under this Financing Agreement or the Trust Indenture. Section 7.2.14 Security Interest. The Borrower, in order to secure its obligations under this Financing Agreement and under the Reimbursement Agreement, and the Mortgage Loan Documents, grants to the Issuer for the benefit of Fannie Mae and the Bondholders a security interest in all of its rights in and to all Funds and Accounts created or established under the Indenture. Section 7.2.15 Notice of Certain Events. The Borrower agrees to advise the Servicer, the Issuer, the Trustee and Fannie Mae promptly in writing of any misrepresentation or breach of warranty by Borrower, or the occurrence of any default by the Borrower in the performance or observance of any covenant, agreement, representation, warranty or obligation of the Borrower set forth in this Financing Agreement, in any of the other Bond Documents, the Disclosure Agreement, in any of the Mortgage Loan Documents or in any other documents contemplated by this Financing Agreement or by such other documents, or of any Event of Default under this Financing Agreement known to it or of which it has received notice, or any event which, with the passage of time or service of notice, or both, would constitute an Event of Default under this Financing Agreement, specifying the nature and period of existence of such event and the actions being taken or proposed to be taken with respect to such event. The Borrower's notice shall be given promptly, and in no event more than ten ('10) Business Days after the Borrower receives notice or has knowledge of the occurrence of any such event. The Borrower further agrees that it will give prompt written notice to the Trustee and the Servicer if insurance proceeds or condemnation awards are received with respect to the Project and are not used to repair or replace the Project, which notice shall state the amount of such proceeds or award. Section 7.2.16 Warranty of Truth. The Borrower agrees that no information, certificate, statement in writing or report required to be delivered by the Borrower to the Issuer, the Trustee, the Servicer or Fannie Mae 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. DOCSi..A 1:246344. 40929-170 MM3 35 Section 7.2.17 Operating Statements. The Borrower agrees to prepare and submit to the Issuer and the Servicer, annually within ninety (90) days after the close of the Borrower's fiscal year, a Project operating statement and balance sheet which have been audited by an independent certified public accountant or firm of independent certified public accountants, acceptable to the Servicer and Fannie Mae in their discretion. The Borrower further agrees to prepare and submit to the Issuer and the Servicer quarterly, within thirty (30) days after the close of each fiscal quarter (a) a statement showing, separately, the percentage of occupied and unoccupied units in the Project, (b) an unaudited Project operating statement certified by the Borrower as being tree, correct and complete and (c) a current rent roll for the most recent date available which has been certified by the Borrower as being true, correct and complete in all material respects. Section 7.2.18 Compliance with Rgport Requirements. The Borrower will comply with the reporting requirements set forth in the Regulatory Agreement and as required by the Mortgage Loan Documents. Section 7.2.19 Indemnification. (a) Borrower's-Obligations., The Borrower releases the Issuer, the Trustee, Fannie Mae and the Servicer, and their respective officers, directors, agents, officials, employees (and as to the Issuer,supervisors of its governing body) and any person who controls the Issuer, the Trustee, Fannie Mae or the Servicer within the meaning of the Securities Act of 1933, from, and covenants and agrees to indemnify, hold harmless and defend the Issuer, the Issuer's Agents, the Trustee, Fannie Mae and the Servicer and their ',respective officers, directors, agents, employees and officials, and any person who controls such party within the meaning of the Securities Act of 1933 and each of them (each an "Indemnified Party") from and against, any and all losses, claims, damages, demands, liabilities and expenses (including attorney's fees and expenses whether incurred before trial, at trial, on appeal or in any bankruptcy or arbitration proceeding), taxes, causes of action, suits, claims, demands and judgments of any nature,joint or several,by or on behalf of any person arising out of: (i) the transactions provided for in the Bond Documents or the Mortgage Loan Documents or otherwise in connection with the Project, the Bonds, the Mortgage Loan or the execution and delivery or amendment of any other document entered into in connection with the transactions provided for in the Bond Documents or the Mortgage Loan Documents, (ii) the approval of the financing for the Project or the making of the Mortgage Loan; (iii) the issuance and sale of the Bonds or any certifications or representations made by any person other than the party seeking indemnification; (iv) any and all claims arising in connection with the interpretation, performance, enforcement, breach, default or amendment of the Bond Documents, the Mortgage Loan Documents or any other documents relating to the Project or DOCS I-A I:296344. 40929-170 MM3 36 the Bands or in connection with any federal or state tax audit, or any questions or other matters arising under such documents; (v) the carrying out by the Borrower of any of the transactions provided for in the Bond.Documents or the Mortgage Loan Documents; (vi) the Trustee's acceptance or administration of the trusts created by the Indenture or the exercise of its powers or duties under the Indenture or under this Financing Agreement, the Regulatory Agreement or any ether agreements to which it is a party or otherwise in connection with the transactions provided for in the Bond Documents or the Mortgage Loan Documents; (vii) any and all claims arising in connection with the issuance and sale of the Bands or any certifications or representations made by any person other than the Indemnified Party seeking indemnification, including, without limitation, any statement or information made by the Borrower with respect to the Borrower or the Project in any offering document or materials regarding the Bonds, the Project or the Borrower or the Tax Certificate of the Borrower executed by the Borrower or any other certificate executed by the Borrower',which, at the time made, is misleading, untrue or incorrect in any material respect and any untrue statement or alleged untrue statement of a material fact relating to the Borrower or the .Project contained in any offering material relating to the sale of the Bonds, as from time to time amended or supplemented, or arising out of or based upon the omission or alleged omission to state in such offering material a material fact relating to the Borrower or the Project required to be stated in such offering material or necessary in order to make the statements in such offering material not misleading, or failure to properly register or otherwise qualify the sale of the Bonds or failure to comply with any licensing or other law or regulation which would affect the manner in which or to whom the Bonds couldbe sold; (viii) the Borrower's failure to comply with any requirement of this Financing Agreement including Section 7.2.8 of this Financing Agreement, or the Regulatory Agreement; (ix) any act or omission of the Borrower or any of its agents, servants, employees or licensees in connection with the Mortgage Loan or the Project, including without limitation violation of any law, ordinance, court order or regulation affecting the Project or any part of it or the ownership, occupancy or use of it; (x) any damage or injury, actual or claimed, of whatsoever kind, cause or character, to property (including without limitation loss of use of property) or persons, occurring or allegedly occurring in, on or about the Project or arising out of any action or inaction of the Borrower, whether or not related to the Project, or resulting from or in any way connected with specified events, including without limitation the rehabilitation or management of the Project, the issuance of the oaCsiA1:296344. 4029-170 MM3 37 Bonds or otherwise in connection with transactions contemplated or otherwise in connection with the Project, the Bonds or the execution or amendment of any document relating to the Project or the Bonds; (xi) any violation of any environmental law, rule or regulation with respect to, or the release of any toxic substance from, the Project; and (xii) any and all claims arising in connection with the operations of the Project, or the conditions, environmental or otherwise,', occupancy, use, possession, conduct or management of work done in or about, or from the planning, design, acquisition or rehabilitation of, the Project', or any part of it, including, but not limited to, the ADA (as evidenced by an architect's certificate to such effect). This indemnification shall extend to and include, without limitation., all reasonable casts, counsel fees, expenses or liabilities incurred in connection with any such claim, or proceeding brought with respect to such claim; except (A) in the case of the foregoing indemnification of the Trustee or any of the other Indemnified Parties (other than the Issuer or the Issuer's Agents or any of the Issuer's Indemnified Parties or Fannie Mae or the Servicer)to the extent such damages are caused by the negligence or willful misconduct of such Person; and (B) in the case of the foregoing indemnification of the Issuer or the Issuer's Agents or any of the Issuer's Indemnified Parties or Fannie Mae or the Servicer, to the extent such damages are caused by the willful misconduct of such Person. In addition, the Borrower shall indemnify, save and hold harmless the Issuer and the Issuer's Agents against any and all claims asserted by or on behalf of any person, firm, corporation,private or public, arising or resulting from, or in any way connected with: (1) any act, failure to act, misrepresentation or omission by any person, firm, corporation or governmental authority, including the Issuer or the Issuer's Agents (other than willful misrepresentations knowingly made by the Issuer or the Issuer's Agents and willful or wanton misconduct on the part of the Issuer or the Issuer's Agents), in connection with the issuance, sale or delivery of the Bonds, including',without limitation any material misrepresentation or omission, or.alleged material misrepresentation or omission, in any materials used in connection with the offering or sale of the Bonds; provided that the foregoing indemnity and hold harmless agreement shall not apply with respect to any information contained in any such offering materials which describes the Issuer; and (2) any act, failure to act or misrepresentation by the Issuer or the Issuer's Agents (other than willful misrepresentations knowingly made by the Issuer or the Issuer's Agents and willful or wanton misconduct on the part of the Issuer or the Issuer's DOC;Si_A',:296344. 40929-170 MM3 38 Agents) in connection with, or in the performance of, any obligation under this Financing Agreement, the Regulatory Agreement or the Indenture. In the event that any action or proceeding is brought against any Indemnified Party with respect to which indemnity may be sought under this Financing Agreement,',the Borrower, upon written notice from the Indemnified Party, shall assume the investigation',and defense of the action or proceeding, including without limitation the employment of counsel selected by the Borrower, subject to the approval of the Indemnified Party in such party's lsole discretion, and shall assume the payment of all expenses related to the action or proceeding, with full power to litigate, compromise or settle the same in its sole discretion, provided that the Issuer, the Servicer, Fannie Mae and the 'Trustee, as appropriate, shall have the right to review and approve or disapprove any proposed compromise or settlement. Each Indemnified Party shall have the right to employ separate counsel in any such action or proceeding and participate in the investigation and defense of the action or proceeding, but the Borrower shall not be obligated to pay the fees and expenses of such separate counsel, unless such separate counsel is employed with the approval of the Borrower, which approval shall not be unreasonably withheld, conditioned or delayed, or the Indemnified Party determines that conflict of interest exists between the interests of the Indemnified Party and the interests of the Borrower. The Borrower's obligations under this Section 7.2.19 shall survivetermination of this Financing Agreement, the payment of the Mortgage Loan, the payment of the Bonds and any transfer, sale or other disposition of the Project. Nothing expressed or implied in this Section 7.2.19(x) is intended, nor shall it be construed, to make the Mortgage Loan a full recourse obligation of the Borrower, it being the intent of the parties hereto that the Mortgage Loan shall be and remain',a limited recourse obligation of the Borrower as provided in Section 7.2.26 of this Financing Agreement. (b) Borrower's—Continuing Q-bli Notwithstanding any transfer of the Project to another owner, the Borrower shall remain obligated to indemnify each Indemnified Party pursuant to this Section 7.2.19 for all matters arising prior to the date of such transfer, and, as a condition to the release of the transferor on and after the transfer date, the transferee must assume the obligations of the Borrower under the Bond Documents and the Mortgage Loan Documents on an after such transfer date and indemnify each Indemnified Party pursuant to this Section 7.2.19 for all matters arising on and after the date of such transfer. The Indemnified Party's rights under this Section 7.2.19 shall survive the termination of this Financing Agreement, the payment of the Mortgage Loan and the payment or defeasance of the Bonds. (c) Limitation with Respect to Fannie Mae. Notwithstanding anything in this Financing Agreement to the contrary, to the extent that Fannie Mae shall become the owner of the Project as a result of a foreclosure or a deed in lieu of foreclosure or comparable conversion of the .Mortgage Loan, Fannie Mae shall only be responsible for defaults and obligations (a) incurred during the period that Fannie Mae is the owner of the Project and (b)directly attributable to Fannie Mae's operation of the Project.. Accordingly, during any period that Fannie Mae owns the Project and that this Section 7.2.19 is applicable to Fannie Mae, Docs€-A i:296344. 40929-170 MM3 39 Fannie Mae's obligations under this Section 7.2.19 shall be limited to acts and omissions of Fannie Mae (i) occurring during the period of Fannie Mae's ownership of the Project and (ii)directly attributable to Fannie Mae's operation of the Project. (d) Indemnification of Fannie Mae. So long as the indemnification provisions of the Reimbursement Agreement shall continue in effect, the indemnification provisions of the Reimbursement Agreement shall, as to any indemnification of Fannie Mae, supersede and take precedence over the provisions of this Section 7.2.19. Otherwise the provisions of this Section 7.2.19 shall apply to the indemnification of Fannie Mae. Section 7.2.20 Right To Perform Borrower's Obligations. In the event the Borrower fails to perform any of its obligations under this Financing Agreement, the Issuer, Fannie Mae (itself or through the Servicer) and/or the Trustee, after giving the requisite notice, if any, may, but shall be under no obligation to,perform such obligation and pay all costs related to such performance, and all such costs so advanced by the Issuer, Fannie Mae (itself or through the Servicer) or the Trustee shall become an additionalobligation of the Borrower under this Financing Agreement, payable on demand, with interest on such obligation at the maximum rate permitted by law. In the event of an advance made due to the Borrower's default, the interest on the advance shall be at the default rate of interest 'payable under the Mortgage Note. Nothing contained in this Section 7.2.20 is intended to modify or limit any provisions of the Mortgage Loan Documents which provide for sums advanced by the Servicer or Fannie Mae to be added to the principal balance of the 'Mortgage Loan and secured by the Mortgage. Section. 7.2.21 Obligations of the Borrower Unconditional. The obligation of the Borrower to repay the Mortgage Loan, to pay in all events amounts sufficient to timely pay, pursuant to the Mortgage Note or otherwise, when due, the principal of, premium, if any, and interest on, the Bonds, to reimburse Fannie Mae as provided in the Reimbursement Agreement, to perform all of its obligations under the Reimbursement Agreement and the Mortgage Loan Documents, to make all payments required by this Financing Agreement, to provide indemnification pursuant to Section 7.2.19 of this Financing Agreement, to pay rebate amounts pursuant to Section 7.2.9 of this Financing Agreement and to make any and all other payments required by this Financing Agreement, the Indenture, the Bond Documents, the Mortgage Loan Documents and any other documents contemplated by this Financing Agreement or by such other documents, shall be absolute and unconditional and shall', not be subject to diminution by set-off, recoupment, counterclaim, abatement or otherwise. Until the Mortgage Loan and the Bonds have been fully paid or the Mortgage Loan is fully paid and provision is made for payment of the Bonds in accordance with the Indenture or until such later time as is required by the terms of this Financing Agreement or any Mortgage Loan Document, the Borrower: (a) shall continue to repay the Mortgage Loan, (b) shall perform and observe all of its other obligations contained in this Financing Agreement, the Reimbursement Agreement, the Indenture, the other Bond DOCSLA1:296344. 40929-170 MM3 40 Documents,the Mortgage Loan Documents and all other documents contemplated by this Financing Agreement or by such other documents, and (c) shall not terminate this Financing Agreement for any cause, including, without limiting the generality of the foregoing, any defect in title to the Project, any acts or circumstances that may constitute failure of consideration, destruction of, damage to or condemnation of the Project, commercial frustration of purpose, any change in the tax or other laws of the United States of America or of the State or any political subdivision of either, or any failure of the Issuer to perform and observe any of its obligations arising out of or connected with this Financing Agreement. It is the intent and expectation of the Borrower that the Borrower's payments under this Financing Agreement and the Mortgage Note will be sufficient for the payment in full of the Bonds, including: (1) the total interest becoming due and payable on the Bonds to the respective dates of payment of the Bonds, (2) the Outstanding principal amount of the Bonds, and (3) the redemption price of the Bonds prior to their stated payment dates, including any premium required to be paid in connection with such redemption. In the event of any deficiency in the funds available under the terms of the Indenture for payment of the principal of, premium, if any, or interest on the Bonds when and as due, regardless of the reason for the deficiency, including any deficiency resulting from any shortfall in payments made or to be made by the Borrower under the Mortgage Loan Documents or any shortfall in Investment Income from that included in any Cash Flow Projection, whether occasioned by a change in Investment Agreements or otherwise, the Borrower agrees that upon notice of the deficiency from the Trustee or the Issuer it shall then immediately pay the amount of the deficiency to the Trustee on behalf of the Issuer, provided that if Fannie Mae shall have provided funds under the Collateral Agreement to pay principal of or interest on the Bonds, the Borrower agrees to immediately pay the amounts owed Fannie Mae in reimbursement of the funds provided by Fannie:Viae as provided in the Reimbursement Agreement. No payment made by Fannie Mae under the Collateral Agreement with respect to the payment of the principal and interest on the Mortgage Loan, to redeem Pledged Collateral or otherwise, shall relieve the Borrower of any of its obligations under the Bond Documents, the Mortgage Loan Documents or any other document contemplated by this Financing Agreement or by such other documents. Section 7.2.22 Saho-rdinationL Performance. Notwithstanding anything to the contrary contained in this Financing Agreement or in the Regulatory Agreement, all obligations under this Financing Agreement or the Regulatory Agreement'for the payment of money, if any, and all claims for damages or reimbursement or indemnification against the Borrower occasioned by breach or alleged breach by the Borrower of its obligations under this Financing Agreement or the Regulatory Agreement shall be subordinate in all respects to the obligations of the Borrower under the Mortgage Loan Documents; provided that the foregoing DOCS I-A I:296344. 44929-]70 MM3 4. subordination provision shall not apply to the Borrower's obligations arising in connection with the Issuer's Reserved Rights. Section 7.2.23 Servicer Has No Obligation to Monitor Compliance.ance. So long as the Servicer is servicing the Mortgage Loan, the Borrower shall furnish to the Servicer copies of all reports with respect to the Project required to be filed by the .Borrower pursuant to this Financing Agreement and/or the Regulatory Agreement. Notwithstanding anything contained in this Financing Agreement to the contrary, the Servicer shall have no duty or obligation to analyze or review any such reports for determining whether or not the Borrower and/or the Project are in compliance with the requirements of the Code for maintaining the excludability of the interest payable on the Tax-Exempt',Bands from gross income for federal income tax purposes. Section 7.2.24 Enforcement by the Trustee. In order to assure compliance by the Project with the requirements of this Financing Agreement, the Trustee, on behalf of the Issuer agrees that it shall, subject to the provisions of the Indenture and Section I I of this Financing Agreement, take such action at the direction of the Issuer as,may be required to achieve compliance by the Borrower with the terms and provisions of this Financing Agreement. Section 7.2025 Further Assurances and Corrective Instruments. The parties to this Financing Agreement agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such amendments and supplements to this Financing Agreement and to the other documents contemplated by this Financing Agreement, the Regulatory Agreement and the Mortgage Loan Documents as may reasonably be required to carry out the intention of or to facilitate the performance of this Financing Agreement and the Regulatory Agreement or, in the opinion of Fannie Mae, to carry out the intention of, or to facilitate the performance of, the Mortgage Loan Documents, and to execute and deliver such additional instruments and to perform such additional acts as may be necessary, in the opinion of the Issuer, to carry out the intent of the .Indenture, this Financing Agreement, the Regulatory Agreement and the Mortgage Loan Documents or to perfect or give further assurances of any of the rights granted or provided for in the Indenture, this Financing Agreement, the Regulatory Agreement and the Mortgage Loan Documents. The Borrower, the Issuer and the Trustee each agree that they will not, without the consent of the Servicer and Fannie Mae, enter into any contracts or agreements or perforin any acts or request any other party to this Financing Agreement to enter into any contracts or agreements or perform any acts,which may adversely affect the Mortgage Loan Documents. Section 7.2.26 Nonrecourse Provisions. (a) General Nonrecourse. Except as otherwise provided in the Mortgage Loan Documents and in paragraph(b) below, in any action or proceeding brought on any instrument evidencing any indebtedness to the Issuer or the Trustee with respect to the Mortgage Loan or the Bonds, no deficiency or other money judgment shall be enforced against the Borrower or any successor or assign of the Borrower, and any judgment obtained shall, subject to the provisions of Section 8.3 of this Financing Agreement, be enforced only against the Project and other property of the Borrower encumbered by the Mortgage Loan Documents, I7a'SLAI:296344. 40929-170 MM3 42 and not against the Borrower or any successor or assign of the Borrower. It is understood and agreed that nothing contained in this Financing Agreement shall be construedin any way to limit or restrict any of the Reserved Rights of the Issuer. (b) Exceptions. Notwithstanding anything to the contrary contained in Section 7.2.26(x) of this Financing Agreement, the following) obligations of the Borrower shall be and remain the joint and several full recourse obligations of the Borrower and its general partners: (i) the obligations under Section 4.3 of this Financing .Agreement, (ii) the obligations under Section 7.2..19 of this Financing Agreement , (iii) the obligation to pay any and all Rebate Amounts that may be or become owing with respect to the Tax=-Exempt Bonds, (iv) the obligations under Section 7.2.29 of this Financing Agreement regarding Continuing Disclosure and(v) the obligation to pay any and all amounts that may be or become owing to the Issuer. SECTION 8. Mortgage Loan Documents. Section 8.1 Assurances. The Borrower, the Issuer and the Trustee each agree that, without the consent of Fannie Mae and the other parties to this Financing Agreement, no party to this Financing Agreement shall enter into any contracts or agreements or perform any acts, or request any other party to this Financing Agreement to enter into any contracts or agreements or perform any acts which shall have the effect of amending or affecting any Mortgage Loan Document. Section 8.2 Assignment of Certain Rights. Pursuant to the Assignment and subject to the terms of the Collateral Agreement, the Borrower acknowledges, that the Issuer has assigned certain of its rights in the Mortgage Note and the Mortgage (excluding, as provided in and subject to the provisions of the Collateral Agreement, the right to receive payments in respect of principal and interest on the Mortgage Loan prior to the Fannie Mae Pass-Through Certificate Delivery Date)to Fannie Mae. Section 8.3 Nature of Borrower's Financial Obligations. The Issuer and the Trustee acknowledge that (a) the Project will be encumbered by the Mortgage Loan Documents and (b) all obligations of the Borrower under this Financing Agreement (in contrast to the Borrower's obligations under the Mortgage Loan Documents) or under the Regulatory Agreement (if any) for the payment of money, including, without limitation, fees, costs and expenses, and also including all claims for damages against the Borrower 'occasioned by the breach or alleged breach by the Borrower of its obligations under this Financing Agreement or the Regulatory Agreement, and further including indemnification obligations,'are not secured by and do not in any manner constitute a lien on the Project or any other property encumbered by any Mortgage Loan Document. Notwithstanding anything to the contrary contained in this Financing Agreement, the obligations of the Borrower to the Issuer and the Trustee or any other party (other than Fannie Mae) (a) under Section 4.3 and Section 7.2.19 of this Financing Agreement and (b) to pay any and all rebate amounts that may be or become awing with respect to the Tax-Exempt Bonds, shall be recourse to the Borrower, but not to the Project or any other property encumbered by any Mortgage Loan Document. No subsequent owner of the Project shall be liable or obligated for the breach or default of any obligation of any)prior owner under 1)OCSLA 1:296344. 40929-170 MM3 43 this Financing Agreement, including, but not limited to, any paymentor indemnification obligation, provided that any subsequent owner shall be bound by the terms of this Financing Agreement, including, but not limited to, the obligations to cause the use and occupancy of the Project to satisfy the terms and requirements of this Financing Agreement. Such obligations are personal to the Person who was the owner at the time the default or breach was alleged to have occurred and such Person shall remain liable for any and all damages occasioned by the default or breach even after such Person ceases to be the owner. It is understood and agreed that nothing contained in this Financing Agreement shall be construed in any way to limit or restrict any of the Reserved Rights of the Issuer or any of the rights and remedies of the Issuer in any proceedings for the enforcement of the Issuer's Reserved Rights subject to the limitations of this Section 8.3. Notwithstanding the foregoing, nothing herein shall prohibit the Issuer from exercising any right or remedy at law which may result in a judgment lien being filed against the property of the Borrower,provided that such lien shall be subordinate to the lien of the Mortgage and any other lien created by the Mortgage Loan Documents. The Issuer acknowledges that the imposition of any such lien will constitute a material violation of the Mortgage. SECTION 9. THE PROJECT. Section 9.1 Regulatory Agreement. The covenants of the Borrower in the Regulatory Agreement shall be deemed to constitute covenants of the Borrower running with the land and an equitable servitude for the benefit of the owners of the Bonds and shall be binding upon any owner of the Project until (a) such time as such restrictions expire under their own terms; or (b) the Issuer and the Trustee consent to the release of such restrictions, or (c) the Regulatory Agreement is otherwise terminated by its terms. The Borrower covenants to file of record the Regulatory Agreement and such other documents and take such other steps as are necessary in order to assure that the restrictions contained in the Regulatory Agreement will, subject to the terms of the Regulatory Agreement, be binding upon all owners of the Project. The Borrower covenants to include such restrictions or an incorporating reference to such restrictions in any documents transferring any interest in the Project to another to the end that such transferee has notice of, and is bound by, such restrictions. Subject to the provisions of Section 11 of this Financing Agreement, the Issuer and the Trustee shall have the right to seek specific performance of or injunctive relief to enforce the requirements of any covenants of the Borrower contained in the Regulatory Agreement or this Financing Agreement. Section 9.2 Right To Enforce Compliance. The Issuer, the Trustee, the Servicer and Fannie Mae shall each have the right, but not the obligation, to enforce compliance by the Borrower and its successors as subsequent owners of the Project with the requirements contained in this Financing Agreement. Section 9.3 Damage, Destruction and Condemnation. If prior to full payment of the Bonds (or provision for payment of the Bonds in accordance with the provisions of the Indenture) the Project or any portion of it is destroyed (in whole or in part) or is damaged by fire or other casualty, or title to, or the temporary use of, the Project or any portion of it shall be taken under the exercise of the power of eminent domain by any governmental body or by any person, firm or corporation acting under governmental authority, or shall be transferred pursuant to an agreement or settlement in lieu of eminent domain proceedings, the Borrower shall DOCS€.A I:296344. 40929-170 MM3 44 nevertheless be obligated to continue to pay the amounts specified in this Financing Agreement and in the Mortgage Note to the extent the Mortgage Loan is not prepaid in accordance with the terms of the Mortgage Loan Documents. The proceeds, if any, of any insurance or condemnation awards resulting from the damage, destruction or condemnation of the Project',or any portion of it shall be deposited in an account to be created and held by the Servicer and applied to the payment of all or a portion of the Mortgage Loan or to the repair, restoration, replacement, relocation or improvement of the Project, all as provided in the Mortgage. Section 9.4 Obligation of the Borrower To Acct ire and Rehabilitate the Project. The Borrower shall proceed with reasonable dispatch to complete the acquisition, rehabilitation and equipping of the Project. If amounts on deposit in the Mortgage Loan Fund and the Rehabilitation Fund designated for the Project and available to be disbursed to the Borrower are not sufficient to pay the costs of such acquisition, rehabilitationand equipping, the Borrower shall pay such costs from its own. funds. The Borrower shall not be entitled to any reimbursement from the Issuer, the Trustee, Fannie Mae, the Servicer or the Bondholders in respect of any such costs or to any diminution or abatement in the repayment of the Mortgage Loan. None of the Issuer, the Trustee, the Servicer or Fannie Mae shall be liable to the Borrower, the Bondholders or any other person if for any reason the Project is not completed or if the proceeds of the Mortgage Loan are insufficient to pay all Costs of the Project. THE ISSUER DOES NOT MAKE ANY REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, THAT MONEYS, IF ANY, WHICH WILL BE PAID INTO THE MORTGAGE LOAN FUND AND THE REHABILITATION FUND OR OTHERWISE MADE AVAILABLE TO THE BORROWER WILL BE SUFFICIENT TO COMPLETE THE PROJECT, AND THE ISSUER SHALL NOT BE LIABLE TO THE BORROWER, THE BONDHOLDERS OR ANY OTHER PERSON IF FOR ANY REASON THE PROJECT IS NOT COMPLETED. SECTION 10. TRUSTEE'S INTEREST IN AGREEMENT.' Section 10.1 Issuer Assignment of Financing Agreement. Pursuant to the Indenture, the Issuer shall pledge, assign and transfer all of its right, title and interest in and to this Financing Agreement (other than the Reserved Rights of the Issuer), and the revenues, receipts and collections under this Financing Agreement, to the Trustee, for the benefit of the Bondholders and Fannie Mae, as security for the payment of the principal of, premium, if any, and interest on the Bonds, as security for the reimbursement of amounts owing to Fannie Mae under this Financing Agreement and the Reimbursement Agreement, and as security for the payment of amounts due under the Mortgage Loan Documents. The parties to this Financing Agreement acknowledge that the covenants and agreements contained in this Financing Agreement and in the Indenture are for the benefit of the Bondholders from time to time and Fannie Mae, and may be enforced on their behalf by the Trustee. The Issuer shall, at the expense of the Borrower, execute and deliver from time to time, in addition to the instruments of assignment specifically provided for in this Financing Agreement, such ',other and further instruments and documents as may be reasonably requested by the Trustee from time to time to further evidence, effect or perfect such pledge and assignment for the purposes stated in the Indenture. The Borrower acknowledges and consents to the assignment and pledge of the Trust DOCSLA i:296344. 40929-170 MM3 4{ Estate (subject to the reservation by the Issuer of its Reserved Rights) by the Issuer to the Trustee, for the benefit of the Bondholders and Fannie Mae, as security for the payment of the Bonds and as security for the payment of amounts owing under this Financing Agreement, the Reimbursement Agreement and the Mortgage Loan Documents, including as part of the Trust Estate (a) the moneys deposited to the various Funds and Accounts under the Indenture (excluding the Rebate Fund, the Costs of Issuance Fund and the Fees Account), including Investment Income (other than Investment Income with respect to the Rebate Fund and certain Investment Income with respect to the Costs of Issuance Fund), and (b) all of the Issuer's rights and interests under this Financing Agreement (but excluding the Issuer's Reserved Rights) and the reserves,receipts and collections under this Financing Agreement and the right and interest to enforce, either jointly or separately, the performance of the obligations of the Borrower under this Financing Agreement. The Borrower further acknowledges and consents to the right of the Trustee to enforce all rights of the Issuer and the Bondholders assigned under the Indenture. Section 10.2 Hiphts of Trustee-, Third-Party Beneficiaries. The Issuer, the Borrower, the Trustee and the Servicer recognize and agree that the terms of this Financing Agreement and the enforcement of it are essential to the security of the Bonds and the security of Fannie Mae, and are entered into for the benefit of the Bondholders and Fannie Mae, The Trustee, as representative of the Bondholders and Fannie Mae, shall accordingly have contractual rights and duties in this Financing Agreement and be entitled to enforce separately or jointly with the Issuer, or to cause the Issuer to enforce, the terms of this Financing Agreement. In addition, the Bondholders and Fannie Mae are intended to be, and shall be, third-party beneficiaries of this Financing Agreement, and.Fannie Mae shall have the right (but not the obligation) to enforce the terms of this Financing Agreement insofar as this Financing Agreement sets forth obligations of the Borrower under this Financing Agreement. SECTION 11. EVENTS OF DEFAULT AND REMEDIES. Section 11.1 Events of Default. Section 11.1.1 Events of Default. At the option of the Issuer (but only with respect to the Borrower's failure to perforin an obligation relating to the Issuer's Reserved Rights) or at the option of Fannie Mae (with respect to the occurrence of any other event referred to in (i) through (viii) below), each of the following shall constitute an event of default under this Financing Agreement, and the term "Event of Default" shall mean, whenever used in this Financing Agreement, any one or more of the following events: (i) the failure by the Borrower to pay any amounts due under this Financing Agreement, the Mortgage Note, the Mortgage, the Reimbursement Agreement or any other Mortgage Loan Document at the times and in the amounts required by this Financing Agreement or by the Mortgage Note, the Mortgage, the Reimbursement Agreement or any of the other Mortgage Loan Documents; or (ii) the failure by the Borrower to observe or perform any covenants, agreements or obligations in this Financing Agreement on its part to be observed oacK,1:295344. 40929-11 70 MM3 46 or performed (other than as provided in paragraph(i) above) for a period of thirty (30) days after receipt of written notice from the Trustee specifying such failure and requesting that it be remedied; provided, however, that if the failure is such that it cannot be corrected within such period, it shall not constitute an Event of Default if the failure is correctable without material adverse effect on the validity or enforceability of the Bonds or the federal tax-exempt stags of the interest on the Bonds, and if corrective action is instituted by the Borrower within such period and diligently pursued until the failure is corrected, and provided further that any such failure shall have been cured within 90 days of receipt of notice of such failure; or (iii) the occurrence of a default under the Regulatory Agreement, including any exhibits to the Regulatory Agreement; or (iv) any representation or warranty made by the Borrower in this Financing Agreement or in any document delivered by or on behalf of the Borrower to the Trustee,Fannie Mae, the Servicer or the Issuer in connection with the Project, the Mortgage Loan or the Bonds is untrue or proves to have been untrue or misleading in any material respect as of the date made or deemed made; or (v) the occurrence of an Event of Default under and as defined in the Indenture or under and as defined in any other Bond Document caused by the Borrower's failure to comply with the terms or conditionsof any such Bond Document; or (vi) the occurrence of any of the following events:'the Borrower shall generally not pay its debts as they become due, or shall admit in writing its inability to pay its debts generally, or shall make a general'assignment for the benefit of creditors or shall institute any proceeding or voluntary case seeking to adjudicate it a bankrupt or insolvent or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief or protection of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property; or the Borrower shall 'take any action to authorize any of the actions described above in this paragraph (vi), or any proceeding shall be instituted against the Borrower seeking to adjudicate it a bankrupt or insolvent or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief or protection of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property, and, if such proceeding is being contested by the Borrower in good faith, such proceeding shall remain undismissed or unstayed'for a period of 60 days; DOCSLA1:296344. 40929-170 MM3 47 (vii) the filing or making of any claim is made against the Trust Estate as a result of any action or proceeding described in paragraph (vi) of this Section 11.1 by, or with respect to, the Issuer; or (viii) an Event of Default as a result of a determination by Fannie Mae pursuant to Section 11.1.2 of this Financing Agreement. The occurrence of any event (a "Tax Event") which results in the interest payable on the Tax- Exempt .Bonds being includable in gross income, for federal income tax purposes, including, without limitation, any violation of any provision of the Regulatory Agreement or any of the Bond Documents, shall not constitute a default under the Mortgage Loan or the Tax-Exempt Bonds, unless Fannie Mae, in its sole and absolute discretion provides written notice to the Trustee that the Tax Event constitutes a default under the Mortgage Loan, the Mortgage Note and the Mortgage by cross default, a default under this Financing Agreement or permit or require acceleration of the Mortgage Loan or a mandatory redemption of the Tax-Exempt Bonds, or give rise to the payment to the owners of the Tax-Exempt Bonds of any amount, denoted as "supplemental interest," "additional interest," "penalty interest,'. "liquidated damages" or otherwise, in addition to the amounts payable to the owners of the Tax-Exempt Bonds prior to the occurrence of the Tax Event. From and after the assignment and delivery of the Mortgage Loan to the Trustee, promptly upon determining that a Tax Event has occurred, the Trustee shall by notice in writing to Fannie Mae and the Servicer, inform Fannie Mae and the Servicer that a Tax Event has occurred and has been cured, or has occurred and has not been cured within a reasonable period, or has occurred and is incurable. Notwithstanding the availability of the remedy of specific performance to cure a Tax Event that is curable within a reasonable period, neither the Issuer nor the Trustee shall have, and each of them acknowledges that they shall not have, upon the occurrence of a Tax Event, any right or obligation to cause or direct acceleration of the Mortgage Loan, to enforce the :Mortgage Note or to foreclose the Mortgage, to accept a deed to the Project in lieu of foreclosure, or to effect any other comparable conversion of the Mortgage Loan. Section 11.1.2 Cross Default. The occurrenceof a default under the Mortgage Loan shall, at the option of Fannie Mae, in its sole and absolute discretion by written notice to the Trustee, constitute an Event of Default under this Financing Agreement, and the occurrence of a default under this Financing Agreement shall, at the option of Fannie Mae, in its sole and absolute discretion, by written notice to the Trustee constitute a default under the Mortgage Loan. The Issuer and the Trustee acknowledge that the occurrence of an Event of Default under this Financing Agreement will not by itself cause a default to arise under the Mortgage Loan or any of the Mortgage Loan Documents, Section 11.1.3 Mortgage Loan .Documents. Nothing contained in this Section 11.1 is intended to amend or modify any of the provisions of the Mortgage Loan Documents or the Reimbursement Agreement nor to bind the Servicer or Fannie Mae to any notice and cure periods other than as expressly set forth in the Mortgage Loan. Documents and the Reimbursement Agreement. Section 11.2 Remedies Upon an Event of Default. ?OCSLAI:296344. 40929-170 MM3 48 Section 11.2.1 General. Subject to Sections 11.2.7 and 11.10 of this Financing Agreement, whenever any Event of Default shall have occurred and be continuing under this Financing Agreement, the'Trustee may take any one or more of the following remedial steps: (i) solely with respect to an Event of Default prior to the Fannie Mae Pass-Through Certificate Delivery Date: (A) give Immediate Notice to the Issuer and Fannie Mae and, if the Event of Default is the failure to receive a Required;Mortgage Payment (as defined in the Collateral Agreement), the Trustee shall give notice to Fannie Mae, pursuant to and in accordance with Section 3.7.1 of the Collateral Agreement, and shall give notice to the Issuer and to the Servicer, of such failure and demand payment by Fannie Mae of a Required Fannie Mae Payment (as defined in the Collateral Agreement) in lieu of the Required Mortgage Payment; or 03) if, with the prior written consent or at the direction of Fannie Mae, the principal and interest accrued on the Bonds shall have been declared immediately due and payable pursuant to Section 9.2.2(a) of the Indenture, the Trustee shall thereupon give notice to the Issuer, the Servicer and Fannie Mae, as contemplated by Section 3.8.2(2) of the Collateral Agreement, activating Fannie Mae's obligation to redeem the Trustee's interest in the Pledged Collateral pursuant to Section 3.8.2.2 of the Collateral Agreement, subject to the conditions of Section 3.8.3.1 of the Collateral Agreement; provided, however, that if the Trustee shall annul a declaration of acceleration of Bonds pursuant to the Indenture, the Issuer, the Servicer, the Trustee and Fannie Mae shall be restored to their former rights and positions, and all rights, duties and obligations of the parties shall continue as if no adverse proceeding had been taken, subject to the limits of any adverse determination; and/or (C) take such action as is permitted by the Mortgage Loan Documents but only with the prior written consent of Fannie Mae; (ii) to the extent of any insufficiency in the payment of the amounts owing on the Bonds after the Trustee shall have received money pursuant to the Credit Facility, the Trustee may, by any suit, action or proceeding, pursue all remedies now or hereafter existing to collect all amounts then'due and thereafter to become due under this Financing Agreement (subject to the nonrecourse provisions of this Financing Agreement and the Regulatory Agreement); (iii) pursue equitable relief available under Section 11.7 of this Financing Agreement; or DOC'SLA.:296344. 40929-270 MM3 49 (iv) with the prior written consent of Fannie Mae, take whatever other action at law or in equity may appear necessary or desirable: (a) to enforce any monetary obligation of the Borrower under this Financing Agreement, or (b)to enforce any other covenant, obligation or agreement of the Borrower under (1) this Financing Agreement or(2)the Regulatory Agreement. In addition, upon the occurrence of an Event of Default, the Issuer, Fannie'Viae, the Servicer and the Trustee shall have access to and may inspect, examine, audit and make copies of the books and records and any and all accounts, data and income tax and other tax returns of the Borrowers Section 11.2.2 Waiver_ and Annulment. If. after any .Event of Default (a) all amounts which would then be payable under this Financing Agreement by the Borrower if such Event of Default had not occurred and was not continuing shall have been paid by or on behalf of the Borrower, and (b)the Borrower shall have also performed all other obligations in respect of which it is then in default under this Financing Agreement and shall have paid the reasonable fees and expenses of the Issuer, the Trustee, the Servicer and Fannie Mae, including reasonable attorney fees and expenses paid or incurred in connection with such default, then and in every such case, such Event of Default shall, but only',at the discretion of Fannie Mae, be waived and annulled by the Trustee, but no such waiver or annulment shall extend to or affect any subsequent Event of Default or impair any right or remedy consequent on such Event of Default. Section 11.2.3 Environmental Concerns. In addition to and without limitation of the foregoing, the Trustee shall not otherwise acquire possession of or take any other action with respect to the Project if, as a result of any such action, the Trustee would be considered to hold title to, to be a "mortgagee-in-possession" of, or to be an "owner" or "operator" of the Project within the meaning of CERCLA unless the Trustee has previously determined,based on a report prepared by a Person who regularly conducts environmental audits, that: (i) the Project is in compliance with applicable environmental laws or, if not, that it would be in the best interest of the owners of the Bonds to take such actions as are necessary for the Project to comply therewith; and (ii) there are not circumstances present at the Project relating to the use, management or disposal of any hazardous wastes for which investigation, testing, monitoring, containment, clean-up or remediation could be required under any federal, state or local law or regulation, or that if any such materials are present for which such action could be required, that it would be in the best economic interest of the owners of the Bonds to take such actions with respect to the Project. The environmental audit report contemplated by this Financing Agreement shall not be prepared by an employee or affiliate of the Trustee, but shall be prepared by a Person who regularly conducts environmental audits for purchasers of commercial property, as determined (and, if DOCSLA 1:296344. 40929-170 MM3 50 applicable, selected) by the Trustee, and the cost of such audit report shall be borne by the Borrower. Section 11.2.4 Enforcement of Reserved Rights. Subject to the terms of the Regulatory Agreement and Section 11.10 of this Financing Agreement, the Issuer, without the consent of the Trustee, but only after written notice to the Trustee, the Borrower, the Servicer and Fannie Mae, may take whatever action at law or in equity may appear necessary or desirable to specifically enforce the performance and observance of any Reserved Right of the Issuer, provided that, the Issuer may not, without the prior written consentof the Trustee and Fannie Mae, (a) terminate this Financing Agreement or cause the Mortgage Loan to become due and payable or (b) cause the Trustee to declare the principal of all Bonds then Outstanding and the interest accrued on the Bonds to be immediately due and payable, or cause the Trustee to accelerate, foreclose or take any other action or seek other remedies under the Bond Documents, the Mortgage Loan Documents or any other documents contemplated by this Financing Agreement or by such other documents to obtain such performance or observance. Section 11.2.5 A pReation of Proceeds. Except as required to be deposited in the Rebate Fund pursuant to the Indenture, any amounts collected pursuant to action taken under this Section 11.2 shall, after the payment of the fees and expenses of the proceedings resulting in the collection of such moneys and of the expenses, liabilities and advances incurred or made by the Trustee, the Issuer, the servicer or Fannie Mae and their respective counsel, be paid into the General Receipts and Disbursements Account of the Revenue Fund, and applied in accordance with the provisions of the Indenture; provided, however, there shall be no deduction for fees and expenses associated with the Trustee's collection of funds payable under the Credit Facility pertaining to the Mortgage Loan. No action taken pursuant to this Section shall relieve the Borrower from the Borrower's obligations pursuant to Section 7.2.19' of this Financing Agreement. Section 11.2.6 Non-Exclusivity of Remedies. No remedy conferred in this Financing Agreement upon or reserved to the Issuer or the Trustee is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy now or hereafter existing pursuant to any other agreement at law or in equity or by statute. Section 11.2.7 Limitations on Actions. Notwithstanding any other provision of this Financing Agreement or the Regulatory Agreement to the contrary, neither of the Issuer, the Trustee nor any person under the control of either shall, without the prior written consent of Fannie ?Viae, exercise any remedies or direct any proceedings under the Bond Documents or the Mortgage Loan Documents other than to: (i) enforce rights under the Credit Facility, (ii) enforce the tax covenants in the Indenture, the Regulatory Agreement and this Financing Agreement, D005i.A i:296344. 40929-170 MM3 51 (iii) enforce rights of specific performance under the Regulatory Agreement, or (iv) enforce the Issuer's Reserved Rights; provided that any enforcement under (ii), (iii) or (iv) above shall not include seeking any monetary recovery, apart from the monetary recovery associated with the enforcement of Reserved Rights, against the Borrower;provided further that the Issuer shall not be entitled to enforce any claire for monetary recovery arising out of the Reserved Rights (a) except as a claim which is subordinate to the payment obligations under the Mortgage Loan and (b) if such enforcement would cause the Borrower to file a petition seeping reorganization, arrangement, adjustment or composition of or in respect of the Borrower under any applicable liquidation, insolvency, bankruptcy, debtor's rehabilitation, conservation or other similar law now or hereafter in effect. Section 11.3 Default Under Regulator-Agreement. If the Borrower fails, at any time for any reason, to comply with the requirements of the Regulatory Agreement, then within.thirty (30) days after the earlier of the date the violation is discovered by the Issuer or the Trustee or the date the Issuer or the Trustee received notice of the violation, the Issuer or the Trustee, on behalf of the Issuer, in each case at the expense of the Borrower (if necessary to preserve the exclusion of the interest payable on the Tax-Exempt Bonds from gross income for federal income tax purposes), shall institute an action for specific performance or injunctive relief to correct the violation or for an injunction to enjoin any anticipated violation. The Borrower acknowledges and agrees that were money damages a remedy under the Regulatory Agreement, money damages alone would not be an adequate remedy at law for a default by the Borrower arising from a failure to comply with the Regulatory Agreement, and therefore the Borrower agrees that the remedy of specific performance or of injunctive relief shall be available to the Issuer and/or the Trustee in any such case. Notwithstanding the availability of the remedy of specific performance or injunctive relief provided for in this Section 11.3, promptly upon determining that a violation of the Regulatory Agreement has occurred, the Issuer shall,by notice in writing to the Servicer and to Fannie Mae, inform Fannie Mae and the Servicer that a violation of the Regulatory Agreement has occurred; notwithstanding the occurrence of such violation, neither the Issuer nor the Trustee shall have, and each of them acknowledges that they shall not have, any right to cause or direct acceleration of the Mortgage Loan, to enforce the Mortgage Note or to foreclose on the Mortgage. Section 11.4 Delay or Omission. No delay or omission to exercise any right or power occurring upon any Event of Default shall impair any such right or power or shall be construed to be a waiver of such Event of Default, but any such right and power may be exercised from time to time and as often as may be deemed appropriate. The Issuer and the Trustee agree to give only such notices as may be expressly required by this Financing Agreement. Section 11.5 Limitations on Waivers. In the event any covenant, agreement or condition contained in this Financing Agreement shall be breached by a party and thereafter waived by another party, such waiver shall not bind any party which has not waived the breach .:OCSLA1:29ti344. 40929-1701 MM3 52 and shall be limited to the particular breach so waived and shall not be deemed to waive any Cather breach under this Financing Agreement nor be a waiver of the same breach on a future occasion. By reason of the assignment and pledge of certain of the Issuer's rights and interests in this Financing Agreement to the Trustee, the Issuer shall have no power to waive or release the Borrower from: (a) any Event of Default (other than an Event of Defaultresulting from the Borrower's failure to perform its obligations with respect to the Issuer's Reserved Rights) or (b) the performance or observance of any obligation or condition of the Burrower under this Financing Agreement (other than the Borrower's obligations with respect to the Issuer's Reserved Rights) without first requesting and receiving the prior written consent of the Trustee and Fannie Mae. however, the Issuer, if requested by the Trustee and Fannie :Mae, shall waive or release the Borrower from: (i) any Event of Default (other than an Event of Default resulting from the Borrower's failure to perform its obligations with respect to the Issuer's Reserved Rights) or (ii)the performance or observance of any obligation or condition of the Borrower under this Financing Agreement (other than the Borrower's obligations with respect to the Issuer's Reserved Rights);provided that the Issuer shall not be required to grant such waiver or release unless it shall have been provided with (1) an Opinion of Counsel that such action will not result in any pecuniary liability to it and an Opinion of Bond Counsel that such waiver shall not cause interest on the Tax-Exempt Bonds to be included in gross income' for federal income tax purposes, (2) such indemnification as the Issuer shall deem necessary and (3)written notice fi-om the Trustee and Fannie Mae of the request for such waiver or release. Notwithstanding anything in the Indenture, this Financing Agreement or any other Bond Document to the contrary, neither the Trustee nor Fannie Mae shall have the right or power to waive or release the Borrower from any Event of Default resulting from: (I)the Borrower's failure to perforin its obligations with respect to the issuer's Reserved' Rights or (11) the performance or observance of any obligation or condition of the Borrower under this Financing Agreement with respect to the Issuer's Reserved Rights; it being the intent of the parties that only the Issuer may waive or release the Borrower from its obligations with respect to the Issuer's Reserved Rights. Section 11.6 notice of Default, Fannie Mae's Ri ht To Cure. The Issuer and the Trustee shall each give notice to the other and to Fannie Viae and the Servicer of the occurrence of any Event of Default by the Borrower under this Financing Agreement of which it has actual knowledge. Fannie Mae and the Servicer shall both have the right, but not the obligation, to cure any such default by the Borrower, and upon performance by Fannie Mae or the Servicer of the covenant, agreement or obligation of the Borrower with respect to which an Event of Default has occurred, the parties to this Financing Agreement shall be restored to their former respective positions, it being agreed that both Fannie Mae and the Servicer shall have the right to reimbursement from the Borrower of moneys so expended and any other appropriate redress for actions it has taken to cure any default by the Borrower; provided that the Borrower's reimbursement obligation shall be non-recourse to the same extent as the underlying obligation is non-recourse to the Borrower. Section 11.7 Ri ht to Specific Performance. The Issuer or the Trustee may, but only at the direction of Fannie Mae, apply in any court of competent jurisdiction for specific performance by the Borrower of its covenants, obligations and agreements under this Financing DOCS[..f1 i:296344. 40929-170 MM3 53 Agreement for injunctive relief to prevent or cease any violation of the covenants, obligations or agreements on the part of the Borrower to be observed or performed under this Financing Agreement, it being mutually agreed by the parties to this Financing Agreement that the injury arising from an Event of Default under this Financing Agreement would be irreparable, and that the amount of monetary damages arising as a consequence of an Event of Default would be difficult to ascertain. The Issuer shall not bring an action seeking a judgment for monetary damages except with respect to amounts specifically owed or payable to the Issuer pursuant to the Bond Documents consequent upon a breach of the Borrower's obligations to the Issuer, provided that such a remedy is not specifically prohibited by the terms of any of the Band Documents or the Mortgage Lean Documents. In the event any judgment is obtained by the Issuer, the Issuer may enforce such judgment against the Project pursuant to a judgment lien, provided that such lien shall be subordinate to the lien of the Mortgage and any other lien created by the Mortgage Loan Documents. Section 11.8 Rights Cumulative. All rights and remedies provided in this Financing Agreement are cumulative, nonexclusive and in addition to any and all rights and remedies that the Issuer, the Trustee and Fannie Mae may have or may be given by reason of any law, statute, ordinance or otherwise. Notwithstanding anything to the contrary contained in this Financing Agreement, neither the Trustee nor the Issuer may commence any action against the Borrower for specific performance or any other remedy at law or in equity, other than to enforce performance and observance of any Reserved Right of the Issuer and its rights under Section 11.3,without first obtaining the prior written consent of Fannie Mae. Section. 11.9 Assignment to Fannie Mae. The Trustee's interest in the Mortgage Loan, including the Mortgage Note, the Mortgage and the Mortgage Note Payments Interest (as defined in the Collateral Agreement) shall be subject to assignment to Fannie Mae as provided in the indenture and the Collateral Agreement. Section 11.10 Limitations. Notwithstanding any other provision of this Financing Agreement to the contrary, so long as the Collateral Agreement',or the Fannie Mae Pass-Through Certificate remains outstanding and Fannie Mae is not in default of its payment obligations under the Collateral Agreement or the Fannie Mae Pass-Through Certificate, as applicable,neither the Issuer, the Trustee, nor any person under their control shall: (a) initiate or take any action which may have the effect, directly or indirectly, of impairing the ability of the Borrower to timely pay the principal, interest and other amounts due under the Mortgage Loan, (b) interfere with or attempt to influence the exercise by Fannie Mae of any of its rights under the Mortgage Loan, including, without limitation, its remedial rights under the Mortgage Loan upon the occurrence of an event of default by the Borrower under the Mortgage Loan; or (c) upon the occurrence of an event of default under the Mortgage Loan, take any action to accelerate or otherwise enforce payment or seek other remedies with respect to the Mortgage Loan; oOC:sLA1:296344. 40929-170 MM3 54 provided that this Section 11.10 is not intended, and shall not be construed, to. (1) limit the rights of the Issuer and the Trustee to seek specific performance of, or injunctive relief to enforce, the Regulatory Agreement and/or of this Financing Agreement, or (2) preclude the Issuer from enforcing its Reserved.Rights; provided further that(A) such rights described in(1) above shall not be exercised or enforced by the Issuer or the Trustee in a manner inconsistent with the limitations set forth in this Section 11.10, and (B) under no circumstances shall the Issuer or the Trusteeseek any monetary recovery (other than attorneys' fees and expenses) under the Regulatory Agreement or under this Financing Agreement (except in respect of the enforcement of the Issuer's Reserved Rights). SECTION 12. Miscellaneous. Section 12.1 Amounts Remainin n Funds. It is agreed by the parties to this Financing Agreement that any amounts remaining in the Revenue Fund 'upon expiration or earlier termination of this Financing Agreement after payment in full of the Mortgage Loan and the Bonds(or provision therefor) shall be applied in accordance with the Indenture. Section 12.2 Notices. All notices, certificates or other communications provided for in this Financing Agreement shall be given in writing to the Issuer, the Borrower, the Trustee, Fannie Mae and the Servicer, and shall be sufficiently given and shall be deemed given if given in the manner provided in Section 12.4 of the Indenture. Copies of each notice, certificate or other communication given under this Financing Agreement by any party to this Financing Agreement shall be given to all parties to this Financing Agreement. By notice given under this Financing Agreement, any party may designate farther or different, addresses to which subsequent notices, certificates or other communications are to be sent. A duplicate copy of each notice, certificate, request or other communication given under this Financing Agreement to the Issuer, the Borrower, the Servicer or the Trustee shall also be given to Fannie Mae. Section 12.3 Amendment. This Financing Agreement and all other documents contemplated by this Financing Agreement to which the Issuer is a party may be amended or terminated only if permitted by Section 11 of the Indenture, provided that no amendment to this Financing Agreement shall be binding upon any party to this Financing Agreement until such amendment is reduced to writing and executed by the parties to this Financing Agreement, provided further that no amendment, supplement or other modification' to this Financing Agreement or any other Bond Document shall be effective without the prior written consent of Fannie Mae (subject to the provisions of Section 12.14 of this Financing Agreement). Section 12.4 Entire Agreement. Except as provided in the other Bond Documents, the Reimbursement Agreement and the Mortgage,Loan Documents, this Financing Agreement contains all agreements among the parties to this Financing Agreement, Section 12.5 Binding Effect. This Financing Agreement shall be binding upon the Issuer, the Borrower, the Servicer and the Trustee and their respective successors and assigns. _)OCQLA1:296344. 40929-170 MW 55 This Financing Agreement shall inure to the benefit of the Issuer, Fannie Mae, the Servicer, the Borrower and the Trustee and their respective successors and assigns, subject to the limitation that any obligation of the Issuer created by or arising out of this Financing Agreement shall be limited as described in Section 6.6 of the Indenture and Section 12.9', of this Financing Agreement. Section 12.6 Several}ility. If any provision of this Financing Agreement shall be invalid, 'illegal or unenforceable, the validity, legality and enforceability of the remaining portions shall not in any way be affected or impaired. In case any covenant, stipulation, obligation or agreement of the Issuer, the Trustee, the Servicer or the Borrower contained in this Financing Agreement shall for any reason be held to be in violation of law, then such covenant, stipulation, obligation or agreement shall be deemed to be the covenant, stipulation, obligation or agreement of the Issuer, the Trustee, the Servicer or the Borrower, as the case may be, to the fullest extent permitted by law. Section 12.7 Execution in Counterparts. This Financing Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 12.8 Governing Law. This Financing Agreement shall be governed by and interpreted in accordance with the internal laws of the State without regard to conflicts of laws principles. Section 12.9 Limited Liability. All obligations of the Issuer incurred under this Financing Agreement, the Regulatory Agreement and the Indenture shall be limited obligations of the Issuer, payable solely and only from Bond proceeds, Revenues and other amounts derived by the Issuer from the Trust Estate and from the Credit Facility. The Bonds shall be payable solely from. the Revenues and other funds and propertypledged under the Indenture for the payment of the Bonds, and no owner or owners of any of the Bonds shall ever have the right to compel any exercise of the taxing power of the Issuer, the State or any political subdivision or other public body of the State, nor to enforce the payment of the Bonds against any property of Issuer, the State or any such political subdivision or other public body, including the Issuer, except as provided in the Indenture. No elected or appointed official, officer, agent, director, employee or attorney of the Issuer, including any person executing this Financing Agreement on behalf of the Issuer, shall be liable personally under this Financing Agreement or for any reason relating to the issuance of the Bonds. No recourse shall be had for the payment of the principal of or the interest on the Bonds, or for any claim based on the Bonds, or otherwise in respect of the Bonds, or based on or in respect of this Financing Agreement or any amendment to this Financing Agreement, against any elected or appointed official, officer, employee, director, agent, or attorney of the Issuer or any successor whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance of this Financing Agreement and as part of the consideration for the issue of the Bonds, expressly waived and released. Section 12.10 Reliance. The Issuer, the Trustee and the Servicer and the Borrower recognize and agree that the representations, covenants, agreements and warranties set DOCK A':296344. 40925-170 MM3 56 forth in this Financing Agreement may be relied upon by Bond Counsel and all persons interested in the legality and validity of the Bonds and in the exclusion of the interest payable on the Tax-Exempt Bonds from gross income for federal income tax purposes, and in the exemption from personal income taxes imposed by the State of the interest payable on the Bonds. In performing their duties and obligations under this Financing Agreement and under the Indenture, the Issuer and the Trustee may rely upon statements and certificates of the Borrower, upon certificates of tenants believed to be genuine and to have been executed by the proper person or persons, and upon audits of the books and records of the Borrower pertaining to occupancy of the Project. In addition, the Issuer and the Trustee may consult with counsel, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by the Issuer or the Trustee under this Financing Agreement and under the Indenture in good faith and in conformity with the opinion of such counsel. It is expressly understood and agreed by the parties to this Financing Agreement other than the Issuer that: (i) the Issuer may rely conclusively on the truth and accuracy of any certificate, opinion, notice or other instrument furnished to the Issuer by the Trustee, any Bondholder or the Borrower as to the existence of a fact or state of affairs required under this Financing Agreement to be noticed by the Issuer; and (ii) none of the provisions of this Financing Agreement shall require the Issuer to expend or risk its own funds (apart from the proceeds of Bonds issued under the Indenture) or otherwise endure financial liability in the performance of any of its duties or in the exercise of any of its rights under this Financing Agreement, unless it shall first have been adequately indemnified to its satisfaction against the costs, expenses and liabilities which may be incurred by taking any such action. Section 12.11 Rights of the Trustee. The Issuer, the Servicer and the Borrower recognize that the Issuer, pursuant to the Indenture, has assigned, conveyed and transferred all of its right, title and interest in and to this Financing Agreement (except the Reserved Rights) to the Trustee to secure the payment of the principal of, premium, if any, and interest on the Bonds and the performance of the obligations, covenants and agreements of the Issuer under the Indenture, and to secure Fannie Mae. The Issuer, the Servicer and the Borrower agree that by virtue of such assignment, conveyance and transfer, the Trustee skull have all of the rights and remedies accorded to the Issuer in this Financing Agreement. The `trustee, in its name or in the name of the Issuer, may, for and on behalf of the Bondholders, subject to the provisions of the Indenture and this Financing Agreement, enforce all rights of the Issuer, except the Reserved Rights, and all obligations of the Borrower, under and pursuant'to this Financing Agreement and the Regulatory Agreement, whether or not the Issuer has pursued or attempted to enforce any of such rights and obligations. Section 12.1.2 Financing Statements. The Borrower shall cause the Trustee to file and record, at the Borrower's expense, all such financing statements and other documents as the Issuer or the Trustee shall deem necessary or desirable to perfect the lien of the Indenture with respect to the Trust Estate. Upon the request of the Issuer or the Trustee, the Borrower shall cause the Trustee to file and record, at the Borrower's expense, all instruments L OCSL.A1:296344. 40929-170 MM3 57 which the Issuer or the Trustee determines to be necessary or desirable in carder to protect and preserve the right, title and interest of the Trustee in and to the Trust Estate, and shall cause the Trustee to furnish satisfactory evidence to the Issuer and the Borrower of filing and ruling of such instruments and of every additional instrument which shall be necessary to preserve the lien of the Indenture upon the Trust Estate, Section 12.13 Terra of This Financing Agreement. This Financing Agreement shall be in full force and effect from its date to and including such date as all of the Bonds sh.alll have been fully paid or retired (or provision for such payment shall have been made as provided in the Indenture) and all amounts owing to the Issuer, Fannie Mae and the Servicer under this Financing Agreement or under the Reimbursement Agreement, as applicable, shall have been paid; provided, however, that the provisions of Sections 2.2, 4.3, 7.2.8, 7.2.3, 7.2.19 and 7.2.26(b) of this Financing Agreement shall survive the termination of this Financing Agreement. Section 12.14 Limitations on Rights of Fannieae, Notwithstanding anything contained in this Financing Agreement to the contrary, all provisions of this Financing Agreement regarding notices, consents, approvals, directions, waivers, appointments, requests or other actions by Fannie Mae shall be deemed not to require or permit such notices, consents, approvals, directions, waivers, appointments, requests or other actions and shall be read as if Fannie Mae were not mentioned in such provisions after the Credit Facility then in effect shall at any time for any reason cease to be valid and binding on Fannie Mae, or shall be declared to be null and void by final judgment of a court of competent jurisdiction, provided, however, that the payment of amounts due to Fannie Mae pursuant to the terms of the Indenture shall continue in full force and effect. The foregoing shall not affect any other rights of Fannie Mae. In addition, all provisions of the Indenture relating to the rights of Fannie Mae shall be of no force or effect if there is no Credit Facility in effect provided by Fannie Mae and if all amounts owing to Fannie Mae under the Credit Facility Agreement shall have been paid in full. Section 12.15 Capaity csf the Trustee. The Trustee is entering into this Financing Agreement solely in its capacity as Trustee and shall be entitled to the protections, limitations from liability and immunities afforded it as Trustee under the Indenture. SECTION 13. SUBORDINATION. This Financing Agreement is subordinate in all respects to the Mortgage Loan Documents. Notwithstanding any provision of this Financing Agreement to the contrary, all obligations of the Borrower under this Financing Agreement for the payment of money and all claims for damages against the Borrower occasioned by breach or alleged breach by the Borrower of its obligations under this Financing Agreement shall be subordinate in all respects to the obligations of the Borrower under the Mortgage Loan Documents. DOCSLA1:295344. 40929-170 NIM3 58 SECTION 14. NO LIMITATIONS ON ACTIONS OF ISSUER IN EXERCISE OF ITS GOVERNMENTAL POWERS. Nothing in this Financing Agreement or the Indenture is intended, nor shall it be construed, to limit in any way the actions of the Issuer in the exercise of its governmental powers. It is the express intention of the parties hereto that the Issuer shall retain the full right and ability to exercise its governmental powers with respect to the Borrower, the Project, the Servicer, Fannie Mae and the transactions contemplated by this Financing Agreement, the Indenture, the Regulatory Agreement and the Mortgage Loan Documents to the same extent as if it were not a party to this Financing Agreement, the Indenture, the Regulatory Agreement or the transactions contemplated thereby, and in no event shall the Issuer have any liability in contract arising under this Financing Agreement, the Indenture or the Regulatory Agreement by virtue of any exercise of its governmental powers. F)005LA1:296344. 40929-170 MW 59 The parties to this Financing Agreement have caused this Financing Agreement to be executed by their duly authorized representatives as of the date set forth above. COUNTY OF CONTRA COSTA, CALIFORNIA By: Deputy Director—Redevelopment rThe signatures of the'other parties appear on the pages that follow.] DOCS ,A':296344. 40929-170 MM3 60 The parties to this .Financing Agreement have caused this Financing Agreement to be executed by their duly authorized representatives as of the date set forth above. WILLOW PARTNERS, L.P., a California limited partnership By: FOL�'DATION FOR SOCIAL RESOURCES, INC., a Delaware non-profit public benefit corporation Its: Managing General Partner By: Jonathan B. Webb Its: Executive Director By: Willow Assets LLC, a California limited liability company Its: Administrative General Partner By: Mark E. Hyatt Its: Member [The signatures of the other parties appear on the pages that follow.] DOCS f..A 1:296344. 40929-170 MM3 61 The parties to this Financing Agreement have caused this Financing Agreement to be executed by their duly authorized representatives as of the date set forth above. U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee By: Authorized Officer [The signatures of the other parties appear on the pages that follow.] DOC SLA 1:296344. 40929-170 MM3 62 The parties to this Financing Agreement have caused this Financing Agreement to be executed by their duly authorized representatives as of the date set forth above. ARCS COMMERCIAL MORTGAGE CO., L.P., as Servicer By: ACMC Realty, Inc., its General Partner By: Authorized Representative DOC LAi:296344. 40929-170 MM3 63 REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS THIS REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS (as supplemented and amended from time to time, this "Regulatory Agreement") is made and entered into as of April 1, 1999,by and among the COUNTY OF CONTRA COSTA,CALIFORNIA, a political subdivision of the State of California (together with any successor to its rights, duties and obligations, the "Issuer"), U.S. BANK TRUST NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America (together with any successor in such capacity, the "Trustee"), in its capacity as trustee under the Indenture of even date herewith(as supplemented and amended from time to time, the "Indenture"),by and between the Trustee and the Issuer, and WILLOW PARTNERS, L.P., a California limited partnership (together with any successor to its rights, duties and obligations hereunder and as owner of the Project identified herein, the "Owner"). WITNESSETH: WHEREAS, the Issuer proposes to issue its County of Contra Costa, California Multifamily Housing Revenue Bonds (Willow Pass Apartments), Series 19997 (the "Tax-Exempt Bonds") and its County of Contra Costa, California Multifamily Housing Revenue Bonds (Willow Pass Apartments), Series 1999D-T (collectively, the "Bonds") pursuant to Chapter 7 of Part 5 of Division 31 of the California Health and Safety Code(the "Housing Law"), the proceeds of which will be utilized to fund a loan to the Owner pursuant to the Financing Agreement of even date herewith (as supplemented and amended from time to time, the "Financing Agreement"), among the Issuer, the Owner, the Trustee and ARCS Commercial Mortgage Co., L.P. (the "Servicer"), in order to enable the Owner to finance the acquisition, construction and rehabilitation of a 120-unit multifamily rental housing project known as Willow Pass Apartments, located on the real property site described in Exhibit A hereto(the"Project"); WHEREAS, the payment of the principal of and interest on the Loan and, therefore, indirectly on the Bonds, will be supported by a Credit Facility issued by Fannie Mae, a corporation duly organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. Section 1716 et seq., and its successors and assigns("Fannie Mae"); and WHEREAS, in order to assure the Issuer and the owners of the Tax-Exempt Bonds that interest on the Bonds will be excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the "Code"), and to satisfy the public purposes for which the Bonds are authorized to be issued under the Housing Law, and to satisfy the purposes of the Issuer in determining to issue the Bonds, certain limits on the occupancy of units in the Project need to be established and certain other requirements need to be met; NOW, THEREFORE, in consideration of the issuance of the Bonds by the Issuer and the mutual covenants and undertakings set forth herein, and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the Issuer, the Trustee and the Owner hereby agree as follows: Section 1. Definitions and Interpretation. Unless the context otherwise requires,the capitalized tears used herein shall have the respective meanings assigned to them in the recitals hereto, in this Section 1 or in Section 1.2 of the Indenture. DOCSLA i:296104. 40929-:70 WWB TABLE OF CONTENTS Page SECTION 1. DEFINITIOINTS AND INTERPRETATION.................................................... 1 SECTION 2. REPRESENTATIONS, COVENANTS AND WARRANTIES OF THEOWNER.........................i........... ............................................................ 3 SECTION 3. QUALIFIED RESIDENTIAL RENTAL PROJECT.......................................4 SECTION 4. LOW INCOME TENANTS; REPORTING REQUIREMENTS.................... 5 SECTION 5. TAX-EXEMPT STATUS OF TAX-EXEMPT BONDS.................................6 SECTION 6. ADDITIONAL REQUIREMENTS OF THE HOUSING LAW.....................6 SECTION 7. ADDITIONAL REQUIREMENTS OF THE ISSUER................................... 7 SECTION 8. MODIFICATION OF COVENANTS............................................................. 8 SECTION 9. INDEMNIFICATION; OTHER PAYMENTS................................................9 SECTION 10. CONSIDERATION............................ ...................................I....................... to SECTION I I. RELIANCE.................................................................................................... 10 SECTION 12. SALE OR TRANSFER OF THE PROJECT................................................. 10 SECTION13. TERM ............................................................................................................ I I SECTION 14. COVENANTS TO RUN WITH THE LAND............................................... 12 SECTION 15. BURDEN AND BENEFIT............................................................................ 12 SECTION 16. UNIFORMITY; COMMON PLAN .............................................................. 12 SECTION 17. DEFAULT; ENFORCEMENT...................................................................... 12 SECTION18. THE TRUSTEE... ......................................................................................... 15 SECTION 19. RECORDING AND FILING........................................................................ 15 SECTION 20. PAYMENT OF FEES.................................................................................... 16 SECTION 21. GOVERNING LAW...................................................................................... 16 SECTION 22. AMENDMENTS; WAIVERS......................... ............................................. 16 SECTION23. NOTICES....................................................................................................... 16 SECTION 24. SEVERABILITY........................................................................................... 17 SECTION 25. MULTIPLE COUNTERPARTS ................................................................... 17 SECTION-1126. LIMITATION ON LIABILITY .................................................................... 17 SECTION 27. SUBORDINATION.......................I.............. ... ................I............. 17 SECTION 28. THIRD-PARTY BENEFICIARY................................................................. 18 DOCSLAI:296104. 40929-170 WWB "Adjusted Income" means the adjusted income of a person (together with the adjusted income of all persons who intend to reside with such person in one residential unit) as calculated in the manner prescribed in Regulations Section 1.167(k)-3(b)(3)in effect as of the Closing Date. "Administrator" means any administrator or program monitor appointed by the Issuer to administer this Regulatory Agreement, and any successor so appointed. The initial Administrator shall be the Issuer. ":Area"means the Oakland Primary Metropolitan Statistical Area. "Certificate of Continuing Program Compliance" means the Certificate to be filed by the Owner with the Issuer, the Administrator and the Trustee pursuant to Section 4(e) hereof, which shall be substantially in the form attached as Exhibit C hereto or in such other comparable form as may be provided by the Issuer to the Owner. "Closing Date"means the date of the issuance and delivery of the Bonds,being April 1999. "Housing Act" means the United States Housing Act of 1937, as amended, or its successor. "Income Certification" means a Verification of Income and an Occupancy Certificate in the forth attached as Exhibit B hereto or in such other comparable form as may be provided by the Issuer to the Owner. ,'Low Income Tenant" means any tenant (i) whose Adjusted Income does not exceed limits determined in a manner consistent with determinations of Low Income families under Section 8 of the Housing Act,except that the percentage of median gross income that qualifies as Low Income shall be sixty percent(60%)of median gross income for the Area,with adjustments for family size; and(ii)whose income does not exceed the qualifying limits for Low Income families as established and amended from time to time pursuant to Section 8 of the Housing Act, or who otherwise qualify as lower income households as defined by Section 50105 of the California Health and Safety Code (as in effect on the Closing Date). If all the occupants of a unit are students(as defined under Section 15 I(e)(4)of the Code), no one of whom is entitled to file a joint return under Section 6013 of the Code, such occupants shall not qualify as Low Income Tenants. The determination of a tenant's status as a Low Income Tenant shall be made by the Owner upon initial occupancy of a unit in the Project by such Tenant, on the basis of an Income Certification executed by the Tenant. "Low Income Units" means the units in the Project required to be rented, or held available for occupancy, by Low Income Tenants pursuant to Sections 4(a) and 6(a) of this Regulatory Agreement. "Project" means the multifamily rental housing development known as Willow Pass Apartments, located on the real property site described in Exhibit A hereto, consisting of those facilities, including real property, structures, buildings, fixtures or equipment situated thereon, as may at any time exist,the acquisition of which facilities is to be financed, in whole or in part, from the proceeds of the sale of the Bonds, and any real property, structures, buildings, fixtures or equipment acquired in substitution for,as a renewal or replacement of,or a modification or improvement to,all or any part of such facilities. "Regulatory Agreement" means this Regulatory Agreement, as it may be supplemented and amended from time to time. DOCS€.A 1:96104. 40929-170 WWB 2 "Qualified Project Period"means the period beginning on the later of the Closing bate or the first day on which at least 14% of the units in the Project are first occupied, and ending on the later of the following; (A) the date which is fifteen (15) years after the date on which at least fifty percent (50%)of the units in the Project are first occupied; (B) the first date on which no Tax-Exempt private activity bonds with respect to the Project are Outstanding; or (C) the 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 of the Department of the Treasury applicable under the Code from time to time. "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 federal income tax purposes; provided, however, that such interest may be includable as an item of tax preference or otherwise includable directly or indirectly for purposes of calculating other tax liabilities, including any alternative minimum tax or environmental tax,under the Code. "Verification of Income"means a Verification of Income in the form attached as Exhibit B hereto or in such other comparable form as may be provided by the Issuer to the Owner. Unless the context clearly requires otherwise, as used in this Regulatory Agreement, words of any gender shall be construed to include each other gender when appropriate and words of the singular number shall be construed to include the plural number, and vice versa, when appropriate. This Regulatory Agreement and all the terms and provisions hereof shall be construed to effectuate the purposes set forth herein and to sustain the validity hereof. The titles and headings of the sections of this Regulatory Agreement have been inserted for convenience of reference only, and are not to be considered a part hereof and shall not in any way modify or restrict any of the tears or provisions hereof or be considered or given any effect in construing this Regulatory Agreement or any provisions hereof or in ascertaining intent, if any question of intent shall arise. The parties to this Regulatory Agreement acknowledge that each party and their respective counsel have participated in the drafting and revision of this Regulatory Agreement. Accordingly, the parties agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in the interpretation of this Regulatory Agreement or any supplement or exhibit hereto. Section 2. Representations, Covenants and Warranties of the Owner. (a) The Owner hereby incorporates herein, as if set forth in full herein, each of the representations, covenants and warranties of the Owner contained in the Tax Certificate and the Financing Agreement relating to the Project, (b) The Owner hereby represents and warrants that the Project is located entirely within the County of Contra Costa,California. DOCS I.A i:296104, 40929-170 WWB 3 (c) The Owner acknowledges, represents and warrants that it understands the nature and structure of the transactions contemplated by this Regulatory Agreement; that it is familiar with the provisions of all of the documents and instruments relating to the Bonds to which it is a party or of which it is a beneficiary; that it understands the financial and legal risks inherent in such transactions; and that it has not relied on the Issuer for any guidance or expertise in analyzing the financial or other consequences of such financing transactions or otherwise relied on the Issuer in any manner except to issue the Bonds in order to provide funds to assist the Owner in acquiring and rehabilitating the Project. Section 3. Qualified Residential Rental Project. The Owner hereby acknowledges and agrees that the Project is to be owned,managed and operated as a"qualified residential rental project" (within the meaning of Section 142(4) of the Code) for a term equal to the Qualified Project Period. To that end, and for the term of this Regulatory Agreement, the Owner hereby represents, covenants, warrants and agrees as follows: (a) The Project will be acquired and operated for the purpose of providing multifamily residential rental property. The Owner will own,manage and operate the Project as a project to provide multifamily residential rental property comprised of a building or structure or several interrelated buildings or structures, together with any functionally related and subordinate facilities, and no other facilities, in accordance with Section 142(4) of the Code, Section 1.103-8(b) of the Regulations and the provisions of the Housing Law, and in accordance with such requirements as may be imposed thereby on the Project from time to time. (b) All of the dwelling units in the Project will be similarly constructed units, and each dwelling unit in the Project will contain complete separate and distinct facilities for living, sleeping, eating, 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 rented for a period of less than 30 consecutive days, or will ever be used as a hotel, motel, dormitory, fraternity house, sorority house, rooming house, nursing home, hospital, sanitarium, rest home or trailer court or park. (d) No part of the Project will at any time during the Qualified Project Period be owned by a cooperative housing corporation, nor shall the Owner take any steps in connection with a conversion to such ownership or use, and the Owner will not take any steps in connection with a conversion of the Project to condominium ownership during the Qualified Project Period. (e) All of the dwelling units in the Project (except for not more than [two] units set aside for resident manager or other administrative use) will be available for rental during the Qualified Project Period on a continuous basis to members of the general public, on a first-crime, first-served basis, and the Owner will not give preference to any particular class or group in renting the dwelling units in the Project, except to the extent that dwelling units are required to be leased or rented to Low Income Tenants. (f) The Project consists of a parcel or parcels that are contiguous except for the interposition of a road, street or stream, and all of the facilities of the Project comprise a single geographically and functionally integrated project for residential rental property, as evidenced by the ownership,management,accounting and operation of the Project. (g) No dwelling unit in the Project shall be occupied by the Owner; provided, however, that if the Project contains five or more dwelling units, this provision shall not be construed to Doc.sLA I:296104. 40929-170 WWII 4 prohibit occupancy of not more than two dwelling units by two or more resident managers or maintenance personnel any of whom may be the Owner. Section 4. Low Income_Tenants, Reporting Requirements. Pursuant to the requirements of the Code,the Owner hereby represents,warrants and covenants as follows: (a) During the Qualified Project Period no less than 40% of the total number of completed units in the Project shall at all times be rented to and occupied by, or held available for rental to and occupancy by, Low Income Tenants. For the purposes of this paragraph (a), a vacant unit which was most recently occupied by a Low Income Tenant is treated as rented and occupied by a Low Income Tenant until reoccupied, other than for a temporary period of not more than 31 days, at which time the character of such unit shall be redetermined. (b) No tenant qualifying as a Low Income Tenant upon initial occupancy shall be denied continued occupancy of a unit in the Project because, after admission, such tenant's Adjusted Income increases to exceed the qualifying limit for Low Income Tenants. However, should a Low Income Tenant's Adjusted Income, as of the most recent determination thereof, exceed 140% (or such lesser percentage as set forth in the City Agreement) of the applicable income limit for a 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 Low Income Tenant. Until such next available unit is rented, the former Low Income Tenant who has ceased to qualify as such shall be deemed to continue to be a Low Income Tenant for purposes of the requirement of Section 4(a)hereof. (c) For the Qualified Project Period, the Owner will obtain, complete and maintain on file Income Certifications for each Low Income Tenant, including (i) an Income Certification dated, with respect to existing Low Income Tenants, within 60 days after the date that the Owner acquires the Project and, with respect to new Low Income Tenants, immediately prior to the initial occupancy of such Low Income Tenant in the Project, and(ii)thereafter, an annual Income Certification with respect to each Low Income Tenant; provided that such certification with respect to any tenant shall in no case cover a period greater than one year. The Owner will provide such additional information as may be required in the future by the Code, the State or the Issuer, as the same may be amended from time to time, or in such other form and manner as may be required by applicable rules,rulings, policies. procedures, Regulations or other official statements now or hereafter promulgated, proposed or made by the Department of the Treasury or the Internal Revenue Service with respect to Tax.-Exempt obligations. A copy of the most recent Income Certifications for Low Income Tenants commencing or continuing occupation of a Low Income Unit shall be attached to each report to be filed with the Issuer pursuant,to paragraph (e) of this Section 4. The Owner shall make a good faith effort to verify that the income information provided by an applicant in a 'Verification of Income is accurate by taking one or more of the following steps as a part of the verification process: (1)obtain a pay stub for the most recent pay period, (2)obtain an income tax return for the most recent tax year,(3)obtain a credit report or conduct a similar type credit search,(4) obtain an income verification from the applicant's current employer, (5) obtain an income verification from the Social Security Administration and/or the California Department of Social Services if the applicant receives assistance from either of such agencies, or(6) if the applicant is unemployed and does not have an income tax return, obtain another form of independent verification reasonably acceptable to the Issuer. (d) The Owner will maintain complete and accurate records pertaining to the 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 DOCS LA 1:296104. 40429-170 WWB 5 Owner pertaining to the Project, including those records pertaining to the occupancy of the Low Income Units. (e) The Owner will prepare and submit to the Issuer,the Administrator(if other than the Issuer)and the Trustee, at the end of each month until ,and thereafter at the end of each calendar quarter, until the end of the Qualified Project Period, a Certificate of Continuing Program Compliance executed by the Owner. Can or before each February 15 during the Qualified Project Period,the Owner will submit to the Issuer a draft of the completed Internal Revenue Code Form 8703 or such other annual certification as required by the Code with respect to the Project, which form shall be submitted to the Secretary of the Treasury on or before March 31 of each year(or such other date as may be required by the Code). (f) For the Qualified Project Period, all tenant leases or rental agreements shall be subordinate to this Regulatory Agreement and the Mortgage. All leases pertaining to Low Income Units shall contain clauses, among others, wherein each tenant who occupies a Low Income Unit: (i) certifies the accuracy of the statements made in the Verification of Income; (ii) agrees that the family income and other eligibility requirements shall be deemed substantial and material obligations of the tenancy of such tenant, that such tenant will comply promptly with all requests for information with respect thereto from the Owner, the Trustee, the Issuer or the Administrator on behalf of the Issuer, and that the failure to provide accurate information in the Verification of Income or refusal to comply with a request for information with respect thereto shall.be deemed a violation of a substantial obligation of the tenancy of such tenant; (iii) acknowledges that the Owner has relied on the Verification of Income and supporting information supplied by the Low Income Tenant in determining qualification for occupancy of the Low Income Unit, and that any material misstatement in such certification (whether or not intentional)will be cause for immediate termination of such lease or rental agreement; and (iv) agrees that the tenant's income is subject to annual certification in accordance with Section 4(c) and that if upon any such certification such tenant's Adjusted Income exceeds the applicable income limit under Section 4(b), such tenant may cease to qualify as a Low Income Tenant and such tenant's rent may be subject to increase. Section 5. Tax-Exempt Status of Tax-Exempt Bonds. The Owner and the Issuer, as applicable,each hereby represents, warrants and agrees as follows: (a) The Owner and the Issuer will not knowingly take or permit, or omit to take or cause to be taken, as is appropriate, any action that would adversely affect the Tax-Exempt nature of the interest on the Tax-Exempt Bonds and, if either of them should take or permit, or omit to tape or cause to be taken, any such action, it will take all lawful actions necessary to rescind or correct such actions or omissions promptly upon obtaining knowledge thereof. (b) The Owner and the Issuer will file of record such documents and take such other steps as are necessary, in the written opinion of Bond Counsel filed with the Issuer and the Trustee, in order to insure that the requirements and restrictions of this Regulatory Agreement will be binding upon all owners of the Project, including, but not limited to, the execution and recordation of this Regulatory Agreement in the real property records of the County of Contra Costa. Section b. Additional Requirements of the Housing Law. In addition to the requirements set forth above, the Owner hereby agrees that it shall comply with each of the requirements of Section 52080 of the Housing Law,including(but not limited to)the following: (a) Not less than 40%of the total number of units in the Project shall be available for occupancy on a priority basis to Low Income Tenants. The units made available to meet this requirement DOCSLA :296104. 40924-1,70 W WB 6 shall be of comparable quality and offer a range of sizes and numbers of bedrooms comparable to the units that are available to other tenants in the Project. (b) The rental payments for the Low Income Units paid by the tenants thereof (excluding any supplemental rental assistance from the State, the federal government or any other public agency to those tenants or on behalf of those units) shall not exceed 30% of an amount equal to 50% of the median adjusted grass income for the Area. (c) The Owner shall accept as tenants, on the same basis as all other prospective tenants, low-income persons who are recipients of federal certificates or vouchers for rent subsidies pursuant to the existing program under Section 8 of the Housing Act. The Owner shall not permit any selection criteria to be applied to Section 8 certificate or voucher holders that is more burdensome than the criteria applied to all other prospective tenants. (d) The units reserved for occupancy as required by subsection (a) of this Section shall remain available on a priority basis for occupancy at all times during the Qualified Project Period. (e) During the three (3) years prior to the expiration of the Qualified Project Period, the Owner shall continue to make available to eligible households reserved units that have been vacated to the same extent that nonreserved units are made available to noneligible households. (f) Following the expiration or termination of the Qualified Project Period, except in the event of foreclosure and redemption of the Bonds, deed in lieu of foreclosure, eminent domain, or action of a federal agency preventing enforcement,units reserved for occupancy as required by subsection (a) of this Section shall remain available to any eligible tenant occupying a reserved unit at the date of such expiration or termination, at the rent determined by subsection(b)of this Section,until the earliest of (1) the household's income exceeds 140% of the maximum eligible income specified above, (2) the household voluntarily moves or is evicted for good cause (as defined in the Housing Law), (3) 30 years after the date of the commencement of the Qualified Project Period, or(4) the Owner pays the relocation assistance and benefits to households as provided in Section 7264(b)of the California Government Code. (g) The covenants and conditions of this Regulatory Agreement shall be binding upon successors in interest of the Owner. (h) This Regulatory Agreement shall be recorded in the office of the county recorder of the County of Contra Costa and shall be recorded in the grantor-grantee index to the names of the Owner as grantor and to the name of the Issuer as grantee. Section 7. Additional Requirements of the Issuer. In addition to the requirements set forth above and to the extent not prohibited thereby, the Owner hereby agrees to comply with each of the requirements of the Issuer set forth in this Section 7,as follows: (a) The Owner will pay to the Issuer all of the amounts required by Section 4.3 of the Financing Agreement, and will indemnify the Issuer and the Trustee as provided in Section 7.2.19 of the Financing Agreement. (b) All tenant lists, applications and waiting lists relating to the Project shall at all times be kept separate and identifiable from any other business of the Owner and shall be maintained as required by the Issuer, in a reasonable condition for proper audit and subject to examination during business hours by representatives of the Issuer. DOC's LA 1:296104. 40929-170 WWB 7 (c) The Owner shall submit to the Issuer (i) annually, not later than July 15th, a statistical report to the Issuer in the form attached hereto as Exhibit D and, within fifteen days after receipt of a written request, any other informatiork or completed forms requested by the Issuer in order to comply with reporting requirements of the Internal Revenue Service or the State, including without limitation information necessary for the Issuer to file the annual report required by Section 8855.5. (d) The Owner shall not discriminate on the basis of race, creed., color, religion, sex, sexual orientation, marital status, national origin, source of income (e.g. SSI), ancestry or handicap in the lease, use or occupancy of the Project or in connection with the employment or application for employment of persons for the constructions, operation or management of the Project, and will not discriminate on the basis of household size as long as the tenants meet the household size standards of Section 8 of the Housing Act. Further,the Owner shall not permit occupancy in any unit in the Project by more persons than is permissible under the Section 8 household size standards. (e) The Owner acknowledges that the Issuer may appoint an Administrator other than the Issuer to administer this Regulatory Agreement and to monitor performance by the Owner of the terms, provisions and requirements hereof. In such event, the Owner shall comply with any reasonable request by the issuer to deliver to any such Administrator, in addition to or instead of the Issuer, any reports,notices or other documents required to be delivered pursuant hereto, and to,make the Project and the books and records with respect thereto available for inspection by the Administrator as an agent of the Issuer. (f) For purposes of Section 6(b), the base rents shall be adjusted for household size, to the extent permitted by law, and in making such adjustments it shall be assumed that the base rents to be paid will be as if one person will occupy a studio unit, two persons will occupy a one-bedroom unit, three persons will occupy a two-bedroom unit, four persons will occupy a three-bedroom unit, and five persons will occupy a four-bedroom unit. (g) The requirements of this Section 7 shall be in effect for the Qualified Project Period; provided that any of the foregoing requirements of the Issuer may be expressly waived by the Issuer,in its sole discretion, in writing,but(i)no waiver by the Issuer of any requirement of this Section 7 shall, or shall he deemed to, extend to or affect any other provision of this Regulatory Agreement except to the extent the Issuer has received an opinion of Bond Counsel that any such other provision is not required by the Housing Law and may be waived without adversely affecting the exclusion from gross income of interest on the Tax-Exempt Bonds for federal income tax purposes, and(ii) any requirement of this Section 7 shall be void and of no force and effect if the Issuer and the Owner receive a written opinion of Bond Counsel to the effect that compliance with any such requirement would cause interest on the Tax-Exempt Bonds to cease to be Tax-Exempt or to the effect that compliance with such requirement would be in conflict with the Housing Law or any other state or federal law. Section 8. Modification of Covenants. The Owner, the Trustee and the Issuer hereby agree as follows: (a) To the extent any amendments to the Housing Law, the Regulations or the Code shall, in the written opinion of Bond Counsel filed with the Issuer, the Trustee and the Owner, retroactively impose requirements upon the ownership or operation of the Project more restrictive than those imposed by this Regulatory Agreement, and if such requirements are applicable to the Project, this Regulatory Agreement shall be deemed to be automatically amended to impose such additional or more restrictive requirements. DOCSLAI:296104. 40929-170 wwti 8 (b) To the extent that the Housing Law, the Regulations or the Code, or any amendments thereto, shall, in the written minion of Bond Counsel filed with the Issuer, the Trustee and the Owner, impose requirements upon the ownership or operation of the Project less restrictive than imposed by this Regulatory Agreement, this Regulatory Agreement may be amended or modified to provide such less restrictive requirements but only by written amendment signed by the Issuer, at its sole discretion, the Trustee and the Owner, and only upon receipt by the Issuer of the written opinion of Bond Counsel to the effect that such amendment will not affect the Tax-Exempt status of interest on the Tax- Exempt Bonds or violate the requirements of the Housing Law, and otherwise in accordance with Section 22 hereof: (c) The Owner, the Issuer and, if applicable, the Trustee, shall execute, deliver and, if applicable, file of record any and all documents and instruments necessary to effectuate the intent of this Section 8, and each of the Owner and the Issuer hereby appoints the Trustee as its true and lawful attorney-in-fact to execute, deliver and, if applicable, file of record on behalf of the Owner or the Issuer, as is applicable, any such document or instrument(in such form as may be approved in writing by Bond Counsel) if either the Owner or the Issuer defaults in the performance of its obligations under this subsection(c); provided, however, that unless directed in writing by the Issuer or the Owner, the Trustee shall take no action under this subsection (c) without first notifying the Owner or the Issuer, or both of them, as is applicable, and without first providing the Owner or the Issuer, or both., as is applicable, an opportunity to comply with the requirements of this Section 8. Nothing in this subsection (c) shall be construed to allow the Trustee to execute an amendment to this Regulatory Agreement on behalf of the Issuer. Section 9. Indemnification, Other Pa nom. The Owner hereby covenants and agrees that it shall indemnify and hold harmless the Issuer and the Trustee and their respective officers, members, directors, officials, employees, program participants and agents as set forth in the Financing Agreement. In addition thereto,the Owner will pay upon demand all of the fees and expenses paid or incurred by the Trustee and/or the Issuer in enforcing the provisions hereof, as more fully set forth in Section 7.2(19)of the Financing Agreement. The provisions of this Section 9 shall survive the terra of the Bonds and this Regulatory Agreement;provided, however,the provisions of this Section shall, in the case of the Trustee, survive the term of this Regulatory Agreement or the resignation or removal of the Trustee, but only as to claims arising from events occurring during the term of this Regulatory Agreement or the Trustee's tenure as Trustee under the Indenture, and shall, in the case of the Issuer, survive the term of this Agreement, but only as to claims arising from events occurring during the term of this Regulatory Agreement. Inasmuch as the covenants, reservations and restrictions of this Regulatory Agreement run with the land, the indemnification obligations of the Owner contained in this .Regulatory Agreement will be deemed applicable to any successor in interest to the Owner; however, it is acknowledged and agreed, notwithstanding any other provision of this Regulatory Agreement to the contrary, that neither Fannie Mae nor any successor in interest to Fannie Mae will assume or take subject to any liability for the indemnification obligations of the Owner for acts or omissions of the Owner prior to any transfer of title to Fannie Mae, whether by foreclosure, deed in lieu of foreclosure or comparable conversion of the Mortgage Loan.; the Owner shall remain liable under the indemnification provisions for its acts and omissions prior to any transfer of title to Fannie Mae. Fannie Mae shall indemnify the Issuer following acquisition of the Project by Fannie Mae, by foreclosure, deed in lieu of foreclosure or comparable conversion of the Mortgage, during, and only during, any ensuing period that Fannie Mae owns and operates the Project; provided that Fannie Mae's liability shall be limited to acts and omissions of Fannie €OCS€,AI:295104. 40929-170 WW9 9 Mae occurring during the period of ownership and operation of the Project by Fannie Mae. The Owner shall remain liable under this Regulatory Agreement for its actions and omissions prior to any transfer of title to Fannie Mae. Section 10. Consideration. The Issuer has agreed to issue the Bonds to provide funds to lend to the Owner to finance the Project, all for the purpose, among others, of inducing the Owner to acquire and operate the Project. In consideration of the issuance of the Bonds by the Issuer, the Owner has entered into this Regulatory Agreement and has agreed to restrict the uses to which this Project can be put on the terms and conditions set forth herein. Section 11. Reliance. The Issuer and the Owner hereby recognize and agree that the representations and covenants set forth herein may be relied upon by all persons interested in the legality and validity of the Bonds, in the exemption from California personal income taxation of interest on the Bonds and in the Tax-Exempt status of the interest on the Tax-Exempt Bonds. In performing their duties and obligations hereunder, the Issuer, the Administrator and the Trustee may rely upon statements and certificates of the Low Income Tenants,and upon audits of the books and records of the Owner pertaining to the Project. In addition, the Issuer and the Trustee may consult with counsel, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by the Issuer or the Trustee hereunder in good faith and in conformity with such opinion. In determining whether any default or lack of compliance by the Owner exists under this Regulatory Agreement, the Trustee shall not be required to conduct any investigation into or review of the operations or records of the Owner and may rely solely on any written notice or certificate delivered to the Trustee by the Owner or the Issuer with respect to the occurrence or absence of a default unless it knows that the notice or certificate is erroneous or misleading. Section 12. Sale or Transfer of the Project. For the Qualified Project Period, the Owner shall not,except as provided below, sell,transfer or otherwise voluntarily dispose of the Project,in whole or in part, without the prior written consent of the Issuer and the Trustee, which consent shall not be unreasonably withheld or delayed if the following conditions are satisfied: (A) the Issuer and the Trustee have received evidence, reasonably acceptable to the Issuer and the Trustee, that (1) the Owner shall not be in default hereunder or under the Financing Agreement (which may be evidenced by a Certificate of Continuing Program Compliance) or the purchaser or assignee undertakes to cure any defaults of the Owner to the reasonable satisfaction of the Issuer; (2) the continued operation of the Project shall comply with the provisions of this Regulatory Agreement, (3) either (a) the purchaser or assignee or its property manager has at least three years' experience in the ownership, operation and management of similar size rental housing projects, and at least one year's experience in the ownership, operation and management of rental housing projects containing below-market-rate units, without any record of material violations of discrimination restrictions or other state or federal flaws or regulations or local governmental requirements applicable to such projects, or (b) the purchaser or assignee agrees to retain a property management firm with the experience and record described in subclause(a)above, or(c) the transferring Owner or its management company will continue to manage the Project for at least one year following such transfer and during such period will provide training to the transferee and its manager in the responsibilities relating to the Low Income Units; and (4) the person or entity which is to acquire the Project does not have pending against it, and does not have a history of significant and material building code violations or complaints concerning the maintenance, upkeep, operation, and regulatory agreement compliance of any of its projects as identified by any local, state or federal regulatory agencies; (B) the execution by the purchaser or assignee of any document reasonably requested by the Issuer or the Trustee with respect to the assumption of the Owner's obligations under this Regulatory Agreement and, if the Bonds are outstanding at the time of transfer, the Financing Agreement, including without limitation an instrument of assumption hereof and thereof, and delivery to the Issuer of an opinion of such purchaser or assignee's counsel to the effect that each such document and this Regulatory DOCS i.A 1:2961(34. 40929=?70 wwo 10 Agreement are valid, binding and enforceable obligations of such purchaser or assignee, subject to bankruptcy and other standard limitations affecting creditor's rights; (C) receipt by the Issuer of an opinion of Bond Counsel to the effect that any such sale, transfer or other disposition will not adversely affect the Tax-Exempt status of interest on the Tax-Exempt Bonds; and (D) receipt by the Issuer and Trustee of all fees and/or expenses then currently due and payable to the Issuer and Trustee. The written consent of the Issuer to any transfer of the Project shall constitute conclusive evidence that the transfer is not in violation of this Section 12. Notwithstanding any provision of this Section 12, the Project may be transferred without the consent of the Issuer and without compliance with the foregoing conditions,(1)to Fannie Mae or any transferee of or successor in interest to Fannie Mae pursuant to or following a foreclosure, deed in lieu of foreclosure or comparable conversion of the Mortgage Loan and (2) to the first transferee following such foreclosure or transfer by deed in lieu of foreclosure, without the consent of the Issuer, if the requirements set forth in clauses (B) through (D) above are satisfied. It is hereby expressly stipulated and agreed that any sale, transfer or other disposition of the project in violation of this Section 12 shall be null, void and without effect, shall cause a reversion of title to the Owner, and shall be ineffective to relieve the Owner of its obligations under this Regulatory Agreement. Nothing in this Section shall affect any provision of any other document or instrument between the Owner and any other party which requires the Owner to obtain the prior written consent of such ether party in order to sell, transfer or otherwise dispose of the Project or any interest(direct or indirect)therein or in the Owner or any interest (direct or indirect) therein. Upon any sale or other transfer that complies with this Regulatory Agreement,the Owner shall be fully released from its obligations hereunder to the extent such obligations have been fully assumed in writing by the transferee of the Project. Except as otherwise provided herein, any transfer of the Project to any entity, whether or not affiliated with the Owner, shall be subject to the provisions of this Section 12, except that no consent of the Issuer shall be required in the case of any transfer of the Project to a wholly-owned subsidiary or related entity of the Owner if the conditions set forth in Section 7.2.5 of the Financing Agreement are satisfied. For the Qualified Project Period, the towner shall not: (1) encumber any of the Project or grant commercial leases of any part thereof, or permit the conveyance, transfer or encumbrance of any part of the Project, except pursuant or subordinate to the provisions of this Regulatory Agreement and the Mortgage (and upon receipt by the Owner of an opinion of Bond Counsel that such action will not adversely affect the Tax.-Exempt status of interest on the Tax-Exempt Bonds; provided that such opinion will not be required with respect to any encumbrance, lease or transfer relating to a commercial operation or ancillary facility that will be available for tenant use and is customary to the operation of multifamily housing developments similar to the Project), or except upon a sale, transfer or other disposition of the Project in accordance with the terms of this Regulatory Agreement or pursuant to and in accordance with the Mortgage Loan Documents; (2) demolish any part of the Project or substantially subtract from any real or personal property of the Project, except to the extent that what is removed is replaced with comparable property; or(3)permit the use of the dwelling accommodations of the Project for any purpose except rental residences. Section 13. Term.. This Regulatory Agreement and all and several of the terms hereof shall become effective upon its execution and delivery, and shall remain in full force and effect for the period provided herein and shall terminate as to any provision not otherwise provided with a specific termination date and shall terminate in its entirety at the end of the Qualified Project Period, it being expressly agreed and understood that the provisions hereof are intended to survive the retirement of the Bonds and discharge of the Indenture and the Financing Agreement. The terms of this Regulatory Agreement to the contrary notwithstanding, the requirements of this Regulatory Agreement shall terminate and be of no further force and effect in the event of involuntary noncompliance with the provisions of this Regulatory Agreement caused by fire, scizure,requisition, change in a federal law or an action of a federal agency after the Closing Date,which DOCS LA 3:296104. 40929-370 WW3 1 prevents the Issuer and the Trustee from enforcing such provisions, or condemnation or foreclosure, transfer of title by deed in lieu of foreclosure, or a similar event, but only if, within a reasonable period, either the Bonds are retired or amounts received as a consequence of such event are used to provide a project that meets the requirements hereof; provided, however, that the preceding provisions of this sentence shall cease to apply and the restrictions contained herein shall be reinstated if, at any time subsequent to the termination of such provisions as the result of the foreclosure or the delivery of a deed in lieu of foreclosure or a similar event, the Owner or any related person (within the meaning of Section 1.103-10(e) of the Regulations) obtains an ownership interest in the Project for federal income tax purposes. The Owner hereby agrees that, following any foreclosure, transfer of title by deed in lieu of foreclosure or similar event,neither the Owner nor any such related person as described above will obtain an ownership interest in the Project for federal tax purposes. Notwithstanding any rather provision of this Regulatory Agreement, this Regulatory Agreement may be terminated upon agreement by the Issuer, the Trustee and the Owner upon receipt by the Issuer and the Trustee of an opinion of Bond Counsel to the effect that such termination will not adversely affect the exclusion from gross income of interest on the Tax-Exempt Bonds for federal income tax purposes. Upon the termination of the terms of this Regulatory Agreement, the parties hereto agree to execute, deliver and record appropriate instruments of release and discharge of the terms hereof; provided, however, that the execution and delivery of such instruments shall not be necessary or a prerequisite to the termination of this Regulatory Agreement in accordance with its terms. Section 14. Covenants to Run With the Land. Notwithstanding Section 1461 of the California Civil Code, the Owner hereby subjects the Project to the covenants, reservations and restrictions set forth in this Regulatory Agreement. The Issuer and the Owner hereby declare their express intent that the covenants,reservations and restrictions set forth herein shallbe deemed covenants running with the land and shall pass to and be binding upon the Owner's successors in title to the Project; provided,however, that on the termination of this Regulatory Agreement said covenants,reservations and restrictions shall expire without the necessity of further action. Each and every contract, deed or other instrument hereafter executed covering or conveying the Project or any portion thereof shall conclusively be held to have been executed, delivered and accepted subject to such covenants, reservations and restrictions, regardless of whether such covenants, reservations and restrictions are set forth in such contract,deed or other instruments. Section 15. Burden and Benefit. The Issuer and the Owner hereby declare their understanding and intent that the burdens of the covenants set forth herein touch and concern the land in that the Owner's legal interest in the Project is rendered less valuable thereby. The Issuer and the Owner hereby further declare their understanding and intent that the benefits of such covenants touch and concern the land by enhancing and increasing the enjoyment and use of the Project by Low Income Tenants, the intended beneficiaries of such covenants, reservations and restrictions, and by furthering the public purposes for which the Bonds were issued. Section 16. Uniformity;_Common Plan. The covenants, reservations and restrictions hereof shall apply uniformly to the entire Project in order to establish and carry out a common plan for the use of the site on which the Project is located. Section 17. Default, Enforcement. If the Owner defaults in the performance or observance of any covenant, agreement or obligation of the Owner set forth in this Regulatory Agreement, and if such default remains uncured for a period of 60 days after notice thereof shall have been given by the Issuer or the Trustee to the Owner, or for a period of 60 days from the date the Owner should,with reasonable diligence,have discovered such default,then the Issuer or the Trustee(as directed by the Issuer, subject to the provisions of the Indenture) acting on its own behalf or on behalf of the Issuer, shall declare an "Event of Default" to have occurred hereunder; provided, however, that if the IDCS LA t:296 104. 40929-111 70 WWB 12 default is of such a nature that it cannot be corrected within 60 days, such default shall not constitute an Event of Default hereunder so long as (i) the Owner institutes corrective action within said 60 days and diligently pursues such action until the default is corrected, and (ii) in the opinion of Bond Counsel, the fail-are to cure said default within 60 days will not adversely affect the Tax-Exempt status of interest on the Tax-Exempt.Bonds. The Issuer and the Trustee shall have the right to enforce the obligations of the Owner under this Regulatory Agreement within shorter periods of time than are otherwise provided herein if necessary to insure compliance with the Housing Law or the Code. Following the declaration of an Event of Default hereunder, the Issuer or the Trustee, at the direction of the Issuer, subject to the previsions of the Indenture, may take any one or more of the following steps,in addition to all other remedies provided by law or equity. (i) by mandamus or other suit, action or proceeding at law or in equity, including injunctive relief,require the Owner to perform its obligations and covenants hereunder or enjoin any acts or things that may be unlawful or in violation of the rights of the Issuer or the Trustee hereunder°, (ii) have access to and inspect, examine and make copies of all of the books and records of the Owner pertaining to the Project; 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 Owner hereunder. The Owner hereby agrees that specific enforcement of the Owner's agreements contained herein is the only means by which the Issuer may fully obtain the benefits of such agreements made by the Owner herein, and the Owner therefore agrees to the imposition of the remedy of specific performance against it in the case of any Event of Default by the Owner hereunder. The Trustee shall have the right, in accordance with this Section and the provisions of the Indenture,without the consent or approval of the Issuer, to exercise any or all of the rights or remedies of the Issuer hereunder; provided that prior to taking any such action the Trustee shall give the Issuer written notice of its intended action. After the Indenture has been discharged, the Issuer may act on its own behalf to declare an "Event of Default" to have occurred and to take any one or more of the steps specified hereinabove to the same extent and with the same effect as if taken by the Trustee. All reasonable fees, costs and expenses of the Trustee and the Issuer incurred in taking any action pursuant to this Section shall be the sole responsibility of the Owner. No breach or default under this Regulatory Agreement shall defeat or render invalid the lien of the Mortgage or any other mortgage or like encumbrance upon the Project or any portion thereof given in good faith and for value. The Trustee shall not be deemed to have knowledge of any default hereunder unless the Trustee shall have been specifically notified in writing of such default by the Issuer, the Administrator or by the Owners of at least 25%of the Bonds outstanding. Promptly upon determining that a violation of this Regulatory Agreement has occurred, the Issuer or the Trustee shall, by written notice, inform Fannie Mae and the Servicer that such violation has occurred,the nature of the violation and that the violation has been cured or has not been cured,but is curable within a reasonable period of time,or is incurable. DOCS LA t:2961 oa. 47929-170 WWB 13 Notwithstanding anything herein to the contrary; (A) the occurrence of an Event of Default under this Regulatory Agreement shall not be deemed,under any circumstances whatsoever,to be a default under the Mortgage Loan Documents, except as may be otherwise specified therein; and (B) neither the Issuer nor the Trustee may, upon the occurrence of an Event of Default under this Regulatory Agreement, seek., in any manner, to(a)cause or direct acceleration of the Mortgage Loan, (b)enforce the Mortgage Note,(c) foreclose on the Mortgage,(d)cause the Trustee to redeem the Bonds or to declare the principal of the Bonds and the interest accrued on the Bands to be immediately due and payable or (e) cause the trustee to take any other action under any of the Mortgage Loan Documents, any of the Bond Documents or any other documents, which action would or could have the effect of achieving any one or more of the actions, events or results described in the preceding clauses (a)through(d). No person other than Fannie Mae shall have the right to (a) declare the principal balance of the Mortgage Dote to be immediately due and payable or(b)commence foreclosure or other like action. The foregoing prohibitions and limitations are not intended to limit the rights of the Issuer or the Trustee to specifically enforce the Regulatory Agreement or to seek injunctive relief in order to provide for the operation of the Project in accordance with the requirements of the Code and State law. Accordingly, upon any default by the Owner, the Issuer or the Trustee may seek specific performance of this Regulatory Agreement or enjoin acts that may be in violation of this Regulatory Agreement or unlawful,but neither the Issuer nor the Trustee may seek any form of monetary recovery from the Owner, although the Issuer and the Trustee may seek to enforce a claim for indemnification; provided that no obligation of the Owner under this Regulatory Agreement, including, without limitation, any indemnification obligation, any other obligation for the payment of money, any claire and any judgment for monetary damages against the Owner, occasioned by breach or alleged breach by the Owner of its obligations under this Regulatory Agreement or otherwise, shall be secured by or in any manner constitute a lien on, or security interest in, the Project, whether in favor of the Issuer, the Trustee or any other person,and all such obligations shall be, and hereby are,subordinate in priority, in right to payment and in all other respects to the obligations,liens,rights (including without limitation the right to payment) and interests arising or created under the Mortgage Loan Documents. Accordingly,neither the Issuer nor the Trustee shall have the right to enforce any monetary obligation other than directly against the Owner, without recourse to the Project. In addition, any such enforcement must not cause the Owner to file a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Owner under any applicable liquidation, insolvency, bankruptcy, rehabilitation, composition, reorganization, conservation or other similar law in effect now or in the future. The obligations of any Owner under this Regulatory Agreement shall be personal to the person who was the Owner at the time that an event, including, without limitation, any default or breach of this Regulatory Agreement, occurred or was alleged to have occurred, and such person shall remain liable for any and all such obligations, including damages occasioned by a default or breach, even after such person ceases to be the Owner of the Project. Accordingly,no subsequent Owner of the Project shall be liable or obligated for the obligation of any prior owner (including the initial Owner), including, but not limited to, any obligation for payment, indemnification or damages, for default or breach of this Regulatory Agreement or otherwise. The Owner of the Project at the time the obligation was incurred, including any obligation arising out of a default or breach of this Regulatory Agreement, shall remain liable for any and all payments and damages occasioned by the Owner even after such person ceases to be the Owner of the Project, and no person seeking such payments or damages shall have recourse against the Project. Under no circumstances shall the Issuer or the Trustee: DOCS f.A t:296104. 40929-170 W W B 14 W initiate or take any action which may have the effect, directly or indirectly, of impairing the ability of the Owner to timely pay the principal of, interest on, or other amounts due and payable under,the Mortgage Loan; (ii) interfere with or attempt to influence the exercise by Fannie Mae of any of its rights under the Mortgage Loan, including, without limitation, Fannie Mae's remedial rights under the Mortgage Loan Documents upon the occurrence of an event of default by the Owner under the Mortgage Loan; or (iii) upon the occurrence of an event of default under the Mortgage Doan, take any action to accelerate or otherwise enforce payment or seek other remedies with respect to the Mortgage Loan. Section 18. The Trustee. The Trustee shall act as specifically provided herein and in the Indenture and may exercise such additional powers as are reasonably incidental hereto and thereto. The Trustee shall have no duty to act with respect to enforcement of the Owner's performance hereunder as described in Section 17 unless it shall have actual knowledge of any such default as provided in Section 17. The Trustee may act as the agent of and on behalf of the Issuer, and any act required to be performed by the Issuer as herein provided shall be deemed taken if such act is performed by the Trustee. In connection with any such performance, the'Trustee is acting solely as Trustee under the Indenture and not in its individual capacity, and, except as expressly provided herein, all provisions of the Indenture relating to the rights, privileges,powers and protections of the Trustee, including without limitation those set forth in Section 10 thereof, shall apply with equal force and effect to all actions taken(or omitted to be taken) by the Trustee in connection with this Agreement. Neither the Trustee nor any of its officers, directors or employees shall be liable for any action taken or omitted to be takenby it hereunder or in connection herewith except for its or their own negligence or willful misconduct. The Issuer shall be(or shall cause the Administrator to be)responsible for the monitoring of the Owner's compliance with the terms of this Regulatory Agreement. The Trustee shall not be responsible for such monitoring. After the date on which no Bonds remain Outstanding, as provided in the Indenture, the Trustee shall no longer have any rights, duties or responsibilities under this Regulatory Agreement and all references to the Trustee in this Regulatory Agreement shall be deemed references to the Issuer. Section 19. Recording and Filing. (a) The Owner shall cause this Regulatory Agreement and al 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 Owner shall pay all fees and charges incurred in connection with any such recording. (b) The Owner and the Issuer will file of record such other documents and take such other- steps as are reasonably necessary, in the opinion of Bond Counsel, in order to insure that the requirements and restrictions of this Regulatory Agreement will be binding upon all owners of the Project. (c) Except in the case of a foreclosure, deed in lieu of foreclosure or comparable involuntary conversion of the Mortgage Loan, the Owner hereby covenants to include or reference the requirements and restrictions contained in this Regulatory Agreement in any documents executed and delivered in connection with a voluntary transfer of any interest in the Project to another person to the end _7CCSLA 1:296104. 40929-170 WWB 15 that such transferee has notice of, and is bound by,such restrictions and to obtain the agreement from any transferee to abide by all requirements and restrictions of this Regulatory Agreement. Section 20. Payment of Fees. Notwithstanding any prepayment of the Mortgage Loan and notwithstanding a discharge of the Indenture, the Owner shall continue to pay to the Trustee reasonable compensation for any services rendered by it hereunder and reimbursement for all expenses reasonably incurred by it in connection therewith, and shall continue to pay (or, to the extent allowed under the Code, shall prepay) the Issuer's annual administrative fee and expenses as provided in the .Financing Agreement. Fannie Mae shall not be liable for the payment of any compensation or any accrued unpaid fees, costs, expenses or penalties otherwise owed by the Owner or any subsequent Owner of the Project prier to the date of acquisition of the Project by Fannie Mae, whether such acquisition is by foreclosure,deed-in-lieu of foreclosure or comparable conversion of the Mortgage Loan. Section 21. Governing Law. This Regulatory Agreement shall be governed by the laws of the State of California. Section 22. Amendments, Waivers. (a)Except as provided in Section 8(a) hereof, this Regulatory Agreement may be amended only by a written instrument executed by the parties hereto or their successors in title, and duly recorded in the real property records of the County of Contra Costa, and only upon receipt by the Issuer of(i) an opinion from Bond Counsel that such amendment will not adversely affect the Tax-Exempt status of interest on the Tax-Exempt Bonds and is not contrary to the provisions of the Housing Law, and (ii) so long as Fannie Mae has not failed to comply with any of its payment obligations under the Credit Facility,the prior written consent of Fannie Mae. (b) Anything to the contrary contained herein notwithstanding, the Issuer, the Trustee and the Owner hereby agree to amend this Regulatory Agreement to the extent required, in the opinion of Bond Counsel, in order that interest on the Tax-Exempt Bonds remain Tax-Exempt. The parties requesting such amendment shall notify the other parties to this Regulatory Agreement and Fannie Mae of the proposed amendment, with a copy of such requested amendment to Bond Counsel and a request that Bond Counsel render to the Issuer an opinion as to the effect of such proposed amendment upon the Tax-Exempt status of interest on the Tax-Exempt Bonds. This provision shall not be subject to any provision of any other agreement requiring any party hereto to obtain the consent of any other person in order to amend this Regulatory Agreement. (c) Any waiver of, or consent to, any condition under this Regulatory Agreement must be expressly made in writing. Section 23. Notices. Any notice required to be given hereunder shall be made in writing and shall be given by personal delivery, overnight delivery, certified or registered mail, postage prepaid, return receipt requested, or by telecopy, in each case at the respective addresses specified in the Indenture, or at such other addresses as may be specified in writing by the parties hereto. A copy of each notice sent by or to the Owner shall also be sent to (i) the Servicer, as provided in the Section 12.4 of the Indenture, and (ii) the manager of the Project at such address as provided by the Owner to the Administrator; but such copy shall not constitute notice to the Owner, nor shall any failure to send such copy constitute a breach of this Regulatory Agreement or a failure of or defect in notice to the Owner. A copy of any notice of default under this Regulatory Agreement shall be sent to Fannie Mae as provided in the Section 12.4 of the Indenture. The Issuer, the Administrator, the Trustee, the Servicer and the Owner may, by notice given hereunder, designate any further or different DOCS LA i:296:04. 40929-170 WWD 16 addresses to which subsequent notices, certificates or other communications shall be sent. Notice shall be deemed given on the date evidenced by the postal or courier receipt or other written evidence of delivery or electronic transmission; provided that any telecopy or ether electronic transmission received by any party after 4:00 p.m., local time of the receiving party, as evidenced by the time shown on such transmission, shall be deemed to have been received the fallowing Business Day. Section 24. Severability. If any provision of this Regulatory Agreement shall be invalid,illegal or unenforceable, the validity, legality and enforceability of the remaining portions hereof shall not in any way be affected or impaired thereby. Section 25. Multiple Counterparts. This Regulatory Agreement may be simultaneously executed in multiple counterparts, all of which shall constitute one and the same instrument, and each of which shall be deemed to be an original. Section 26. Limitation on Liability. Notwithstanding the foregoing or any other provision or obligation to the contrary contained in this Regulatory Agreement, (i) the liability of the Owner under this Regulatory Agreement to any person or entity, including, but not limited to,the Trustee or the Issuer and their successors and assigns, is limited to the Owner's interest in the Project, the Revenues,including the amounts held in the funds and accounts created under the Indenture, or any rights of the Owner under any guarantees relating to the Project, and such persons and entities shall look exclusively thereto, or to such other security as may from time to time be given for the payment of obligations arising out of this Regulatory Agreement or any other agreement securing the obligations of the Owner under this Regulatory Agreement; and (ii) from and after the date of this Regulatory Agreement, no deficiency or other personal judgment, nor any order or decree of specific performance (other than pertaining to this Regulatory Agreement, any agreement pertaining to any Project or any other agreement securing the Owner's obligations under this Regulatory Agreement), shall be rendered against the Owner, the assets of the Owner (other than the Owner's interest in the Project, this Regulatory Agreement, amounts held in the funds and accounts created under the Indenture, any rights of the Owner under the Indenture or any other documents relating to the Bonds or any rights of the Owner under any guarantees relating to the Project), its partners,members, successors, transferees or assigns and each their respective officers, directors, employees, partners, agents, heirs and personal representatives, as the case may be, in any action or proceeding arising out of this Regulatory Agreement and the Indenture or any agreement securing the obligations of the Owner under this Regulatory Agreement, or any judgment, order or decree rendered pursuant to any such action or proceeding. Section 27. Subordination. The terms, covenants and restrictions of this Regulatory Agreement, other than those set forth in Sections 3 through.6,are and shall at all times remain subject and subordinate, in all respects, to the liens, rights and interests created under the Mortgage Loan Documents. Upon a conveyance or other transfer of title to the Project by foreclosure, deed in lieu of foreclosure or comparable conversion of the Mortgage Loan, the Person who acquires title to the Project pursuant to such foreclosure, deed in lieu of foreclosure or comparable conversion of the Mortgage Loan(unless such person is the Owner or a person related to the Owner within the meaning of Section 1.103-10(e) of the Regulations, in which event this Regulatory Agreement shall remain in full force and effect in its entirety) shall acquire such title free and clear of the terms, covenants and restrictions of the Regulatory Agreement, other than these set forth in Sections 3 through 6 and, from and after the date on which such person acquires title to the Project, the terms, covenants and restrictions of this Regulatory Agreement, other than those set forth in Sections 3 through 6, shall automatically terminate and be of no force and effect; provided that Sections 3 through 6 shall also terminate and be of no force or effect under the circumstances set forth in Section 13 of the Regulatory Agreement. DOCSLA 1:246104. 40929-170 WWB 17 Section 28. Third-Party Beneficiary. The parties to this Regulatory Agreement recognize and agree that the terms of this Regulatory Agreement and the enforcement of such terms are essential to the security of Fannie Mae and are entered into for the benefit of various parties, including Fannie Mae. Fannie Mae shall accordingly have contractual rights in this Regulatory Agreement and shall be entitled(but not obligated)to enforce, separately or jointly tivith the Issuer and/or the Trustee, or to cause the Issuer or the Trustee to enforce, the terms of this Regulatory Agreement. In addition, Fannie Mae is intended to be and shall be a third-party beneficiary of this Regulatory Agreement. DOCS'-A 1:296104, 40929-170 W W B 18 IN WITNESS WHEREOF, the Issuer, the Trustee and the Owner have executed this Regulatory Agreement by duly authorized representatives, all as of the date first above written. COUNTY OF CONTRA COSTA,CALIFORNIA By: Deputy Director—Redevelopment U.S.BANK TRUST NATIONAL ASSOCIATION, as Trustee By: Authorized Officer WILLOW PARTNERS, L.P., a California limited partnership By: FOUNDATION FOR.SOCIA,RESOURCES, INC., a Delaware non-profit public benefit corporation Its: Managing General Partner By: Jonathan B. Webb Its: Executive Director By: WILLOW ASSETS LLC, a California limited liability company Its: Administrative General Partner By: Mark E. Byatt Its: Member DOCSLA i:296 i 04. 40929-170 WWB 19 [Attach Notary Acknowledgments] DOCSLA 1:296144. 44929-170 WWB EXHIBIT A DESCRIPTION OF REAL PROPERTY RELATING TO THE PROJECT r»cs I n 2:296 1 04. 40929-170 W W B A-1 EXHIBIT B [FORM OF INCOME CERTIFICATION] VERIFICATION OF INCOME RE: [Name of Project] [Address of Project] Apartment Number: Initial Occupancy Date: I/We, the undersigned, being first duly sworn, state that Uwe have read and answered fully, and truthfully each of the following questions for all persons who are to occupy the unit in the above apartment development for which application is made,all of whom are listed below: 1. 2. 3. 4, 5. Relationship to Name of Members Head of Household Social Security 1 Place of of the Household A e Number Employment .Head of Household Spouse 3 i i i E b. The anticipated income of all the above persons during the 12-month period beginning this date, including income described in (a) below, but excluding all income described in (b) below,is $ (a) The amount set forth above includes all of the followim income (unless such income is described in(b)below): (i) all wages and salaries, overtime pay, commissions, fees, tips and bonuses before payroll deductions; (ii) net income from the operation of a business or profession or from the rental of real or personal property (without deducting expenditures for business expansion or amortization of capital indebtedness or any allowance for depreciation of capital assets); €OCS€..Ar:296104. 40929-170 WWr3 B-1 (iii) interest and dividends(include all income from assets as set forth in item 7(b)below); (iv) the full amount of periodic payments received from social security, annuities, insurance policies, retirement funds, pensions, disability or death benefits and other similar types of periodic receipts; (v) payments in lieu of earnings, such as unemployment and disability compensation,workmen's compensation and severance pay; (vi) the maximum amount of public assistance available to the above persons; (vii) periodic and determinable allowances, such as alimony and child support payments and regular contributions and gifts received from persons not residing in the dwelling; (viii) all regular pay, special pay and allowances of a member of the Armed Forces (whether or not living in the dwelling)who is the head of the household or spouse; and (ix) any earned income tax credit to the extent it exceeds income tax liability. (b) The following income is excluded from the amount set forth above: (i) casual, sporadic or irregular gifts; (ii) amounts which are specifically for or in reimbursement of medical expenses; (iii) lump sum additions to family assets, such as inheritances, insurance payments (including payments under health and accident insurance and worker's compensation), capital gains and settlement for personal or property losses; (iv) amounts of educational scholarships paid directly to a student or an educational institution, and amounts paid by the government to a veteran for use in meeting the costs of tuition, fees, books and equipment, but in either case only to the extent used for such purposes; (v) hazardous duty to a member of the household in the armed forces who is away from home and exposed to hostile fire; (vi) relocation payments under Title H of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970; (vii) income from employment of children (including faster children) under the age of 18 years; (viii) foster child care payments; (ix) the value of coupon allotments under the Food Stamp Act of 1977; (x) payments to volunteers under the Domestic Volunteer Service Act of 1973; DOCS t_A Y:2961 04a 40929-370 WWII B-2 (xi) payments received under the Alaska Native Claims Settlement Act; (xii) income derived from certain submarginal land of the United States that is held in trust for certain Indian tribes; (xiii) payments on allowances made under the Department of Health and Human Services' Low-Income Home Energy Assistance Program.; (xiv) payments received from the Job Partnership Training Act; (xv) income derived from the disposition of funds of the Grand River Band of Ottawa Indians; and (xvi) the first $2000 of per capita shares received from judgment funds awarded by the Indian Claims Commission or the Court of Claims or from funds held in trust for an Indian tube by the Secretary of Interior. 7. If any of the persons described in column 1 above (or any person whose income or contributions were included in item 6) has any savings, stocks, bonds, equity in'real property or other form of capital investment(excluding interests in Indian trust lands),provide: (a) the total value of all such assets owned by all such persons: $ ,and (b) the amount of income expected to be derived from such assets in the 12-month period commencing this date: $ 8. (a) Will all of the persons listed in column 1 above be or have they been full-time students during five calendar months of this calendar year at an educational institution (other than a correspondence school)with regular faculty and students? Yes No (b) (Complete only if the answer to Question 8(a) is "Yes"). Is any such person (other than nonresident aliens)married and eligible to file a joint federal income tax return? Yes No DOCS LA I:296104. 40929-170 WWI3 B-3 We acknowledge that all of the foregoing information is relevant to the status under federal income tax law of the interest on bonds issued to mance the acquisition and rehabilitation of the apartment building for which application is being made. We consent to the disclosure of such information to the issuer of such bonds, the holders of such bonds, any trustee acting on their behalf and any authorized agent of the Treasury Department or Internal Revenue Service. We declare under penalty of perjury that the foregoing is true and correct. Date: Head of Household Spouse DOC'S1.,A I:295144. 40924-170 WWB B-4 FOIL COMPLETION BY PROJECT OWNER R ONLY: I. Calculation of eligible income: (A) Enter amount entered for entire household from 6 above: $ (B) If the amount entered in 7(a)above is greater than$5,000,enter: (i) the product of the amount entered in 7(a)above multiplied by the current passbook savings rate as determined by HUD: $ (ii) the amount entered in 7(b)above: $ (iii) line(i)minus line(ii)(if less than$0,enter$0): $ (C) TOTAL ELIGIBLE INCOME: $ (Line I(A)plus line I(B)(iii)) II. Qualification as individuals or a family of Low Income: (A) Is the amount entered in line I(C)less than 50%of median gross income for the Area? Yes No (B) (i) If line II(A) is "No," then the household does not qualify as individuals or a family of Low Income;go to item III. (ii) If line II(A) above is "Yes" and $(a) above is "No," thea the household qualifies as individuals or a family of Low Income; go to item III. (iii) If line II(A) above is "Yes" and 8(b) above is "Yes," then the household qualifies as individuals or a family of Low Income;go to item III. (iv) If neither (ii)nor(iii) is applicable, then the household does not,qualify as individuals or a family of Low Income. DOCS'Al:296104. 40929-170 WWB B-5 III. (Check one) The household does not qualify as individuals or a family of Low Income. The household qualifies as individuals or a family of Low Income. IV. Number of apartment unit assigned: (enter here and on page one) Owner NOTE TO PROJECT OWNER: A vacant unit previously occupied by individuals or a family of Low Income, may be treated as occupied by individuals or a family of 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. I-IOCSLA i:296104. 40924-170 WWH B-6 OCCUPANCY CERTIFICATE (To be filed with the Administrator along with a Verification of Income upon the rental of a unit in the Project.) Project: WILLOW PASS APARTMENTS The tenant identified in the attached Verification of Income has entered into a lease with respect to a unit in the above-described Project. Such tenant is/is not(circle one)a Low Income Tenant. The rental of a unit to such tenant will not result in a violation of any of the requirements of the Financing Agreement or the Regulatory Agreement to which the Owner is a party. Witness Owner Date: Date: DOCSLA i:296:04. 44929-17C WW_3 B-7 EXHIBIT C [FORM OF CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE] CERTIFICATE OFONTIi�,'I�ZNG PROGRAM COMPLIANCE Witnesseth that on this_day of , 19_, the undersigned,having borrowed certain funds from. the COUNTY OF CONTRA COSTA (the "Issuer") for the pose of financing a multifamily rental housing development(the"Project"),does hereby certify that: 1. During the preceding month (i)such Project was continually in compliance with the Regulatory Agreement executed in connection with such loan from the Issuer, (ii)®% of the units in the Project were occupied by Low Income Tenants(minimum of 40%). Set forth below are the names of Low Income Tenants who commenced or terminated occupancy during the preceding month. Commenced Occu-anc Terminated OccupancX 1. 1. 2. 2. 3. 3. The units occupied by Low Income Tenants are of similar size and quality to other units and are dispersed throughout the Project. Attached is a separate sheet listing the number of each unit and indicating which units are occupied by Low Income Tenants,the size,the number of bedrooms of such units and the number of Low Income Tenants who commenced occupancy of units during the preceding month. 2. Select appropriate certification: [No unremedied default has occurred under this Regulatory Agreement, the Financing Agreement or the Mortgage.] (A default has occurred. The nature of the default and the measures being taken to remedy such default are as follows: 3. The representations set forth herein are true and correct to the best of the undersigned's knowledge and belief. Date: Owner i)0cs LA i:296104. 40929-170 W W B C-1 t � �t � \ . � « � � ƒ \ . ƒ � \ \ 6 a Iz ! \ \ � ` § � ƒ f , @ t � � \ � \ ƒ 0 27 o / / � w q � � EXHIBIT D STATISTICAL REPORT TO ISSUER. Reporting Period: Date: As of the date hereof: 1. Of the Low Income Units occupied by Low Income Tenants: units are occupied by households with children; and units are occupied by elderly households with a member of age 62 or over. 2. The percentage of units currently occupied by white, black, Hispanic and Asian persons and American Indians are as follows (optional): white _ black Hispanic Asian American Indian 3. The number of Low Income Tenants who terminated their rental agreements during the previous twelve (12) month period is 4. The number of units rented to new Low Income Tenants during the last twelve (12) month period is 5. The family names of each household currently occupying a Low Income Unit are listed on the schedule attached hereto. 6. The number of Low Income Units of various sues is: one-bedroom: two-bedroom: three-bedroom: T The number of former Low Income Tenants whose Adjusted Income have exceeded 140% of the applicable income limit for a Low Income 'Tenant of the same family size and have therefore ceased to qualify as Low Income Tenants Is WILLOW PARTNERS, L.P. By Owner Representative DO''S iA 3:296104. 40929-370 wWB D-1 RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: Orrick,Herrington&Sutcliffe LLP 777 South Figueroa Street, Suite 3200 Los Angeles, CA 90017 Attention: William W. Bothwell,Esq. REGULATORY A,GREETMENT AND DECLARATION OF RESTRICTIVE COVENANTS By and Among COLWIY OF CONTRA COSTA,CALIFORNIA and U.S.BANK TRUST NATIONAL ASSOCIATION, as Trustee and WILLOW PARTNERS,L.P., Dated as of April 1, 1999 Relating to: COI.,YfY OF CONTRA COSTA,CALIFORNIA COUNTY OF CONTRA COSTA,CALIFORNIA MULTIFAMILY HOUSING REVENUE BONDS MULTIFAMILY HOUSING REVENUE BONDS (WILLOW PASS APARTMENTS)SERIES 1999D (WILLOW PASS APARTMENTS)SERIES 1999D-T DOCSLA I:296104. 4029-270 WWB