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HomeMy WebLinkAboutSeptember 24, 2001 RegularCITY OF COLUMBIA HEIGHTS 590 40th Avenue N.E., Columbia Heights, MN 55421-3878 (763) 706-3600 TDD (763) 706-3692 Visit Our Website at: wwmci, columbia-heights, rnn.us ADMINISTRATION September 21, 2001 Gary L Peterson CouncBmembers Marlaine Szurek Julienne Wyckoff Bruce Nawrocki Robert A. Williams CI~y Manager Walter R. Fehst The following is the agenda for the regular meeting of the City Council to be held at 7:00 p.m. on Monday, September 24, 2001 in the City Council Chambers, City Hall, 590 40th Avenue N.E., Columbia Heights, Minnesota. Thc City of Columbia Heights does not discriminate on the basis of disability in the admission or access to, or treatment or employment in, its services, programs, or activities. Upon request, accommodation will be provided to allow individuals with disabilities to participate in all City of Columbia Heights' services, programs, and activities. Auxiliary aids for disabled persons are available upon request when the request is made at least 96 hours in advance. Please call the Deputy City Clerk at 763-706-3611, to make arrangements. (TDD/706-3692 for deaf or hearing impaired only) INVOC/I TION-Rev. Keith Brutlag, St. Matthew 1. CALL TO ORDER/ROLL CALL 2. PLEDGE OF ALLEGIANCE ADDITIONS/DELETIONS TO MEETING AGENDA (The Council, upon majority vote of its members, may make additions and deletions to the agenda. These may be items brought to the attention of the Council under the Citizen Forum or items submitted after the agenda preparation deadline.) CONSENT AGENDA (These items are considered to be routine by the City Council and will be enacted as part of the Consent Agenda by one motion. Items removed f~om consent agenda approval will be taken up as the next order of business.) A) MOTION: Move to approve the Consent Agenda items as follows: 1) Minutes for Approval MOTION: Move to approve the minutes of the September 10, 2001, regular City Council meeting as presented. 2) Establish Work Session Meeting Dates for Monday, October 1, 2001 beginning at 7:00 p.m. MOTION: Move to establish Work Session meeting dates for Monday, October l, 2001 beginning at 7:00 p.m. 3) Establish a hearing date of October 8, 2001 for Revocation or Suspension of a License to Operate a Rental Property at 344 40th Ave, 5248-5250 Washington Street, 3732 3ra Street, 4943-4945 Jackson Street, 1124-1126 45th Avenue, 1266-1268 Circle Terrace, 1242-1244 Circle Terrace, 1248-1250 Circle Terrace~ and 4919-1921 Johnson Street MOTION: Move to Establish a Heating Date of October 8, 2001 for Revocation or Suspension of a License to Operate a Rental Property within the City of Columbia Heights against John T. Gondek at 344 40th Avenue NE. THE CITY OF COLUMBIA HEIGHTS DOES NOT D~SCRIMINATE ON THE BASIS OF DISABILITY IN EMPLOYMENT OR THE PROVISION OF SERVICES EQUAL OPPORTUNITY EMPLOYER City Council Agenda September 24, 2001 Page 2 of 5 MOTION: Move to Establish a Heating Date of October 8, 2001 for Revocation or Suspension of a License to Operate a Rental Property within the City of Columbia Heights against Kimberly Wegner at 5248-5250 Washington Street NE. MOTION: Move to Establish a Hearing Date of October 8, 2001 for Revocation or Suspension of a License to Operate a Rental Property within the City of Columbia Heights against Dale Frenzel at 3732 3rd Street NE. MOTION: Move to Establish a Hearing Date of October 8, 2001 for Revocation or Suspension of a License to Operate a Rental Property within the City of Columbia Heights against Scott Fakler at 4943-4945 Jackson St NE. MOTION: Move to Establish a Hearing Date of October 8, 2001 for Revocation or Suspension of a License to Operate a Rental Property within the City of Columbia Heights against Haris Saihgal at 1124-1126 45th Avenue NE. MOTION: Move to Establish a Heating Date of October 8, 2001 for Revocation or Suspension of a License to Operate a Rental Property within the City of Columbia Heights against Jerald Janson at 1266-1268 Circle Terrace Boulevard NE. MOTION: Move to Establish a Hearing Date of October 8, 2001 for Revocation or Suspension of a License to Operate a Rental Property within the City of Columbia Heights against Gerald Janson at 1244-1242, 1248-1250 Circle Terrace Blvd NE. MOTION: Move to Establish a Hearing Date of October 8, 2001 for Revocation or Suspension of a License to Operate a Rental Property within the City of Columbia Heights against Michael Johnson at 4919-4921 Jackson St NE. 4) Adopt Resolution No. 2001-55, calling for a public hearing date of October 22, 2001 for the modification of the Enabling Resolution to transfer Economic Development Authority activities to the Housing Redevelopment Authority MOTION: Move to waive the reading of Resolution No. 2001-55, there being ample copies available to the public. MOTION: Move to adopt Resolution 2001-55, being a resolution calling a Public Hearing regarding modification of the Enabling Resolution for the Columbia Heights Economic Development Authority for Monday, October 22, 2001 at approximately 7:00 p.m. 5) Adopt Resolution No. 2001-54, being a Resolution ratifying and approving a housing l>rogram, authorizing the issuance, sale, and delivery of its multifamily housing revenue bonds (GNMA Collateralized Mortgage Loan - Crest View ONDC I Proiect), Series 2001A-I and taxable series 2001-A-2; Payable solely from revenues pledged pursuant to the indenture; and authorizing the issuance, sale and delivery of its multifamily housing revenue note (Crest View ONDC I Pr0iect), Subordinate series 2001 B, payable solely from revenues ledged pursuant to a note agreement; approving the form of and authorizing the execution and delivery of the bonds and the note, and related documents; and providing for the security, fights, and remedies with respect to bonds and the note. City Council Agenda September 24, 2001 Page 3 of 5 MOTION: Move to waive the reading of Resolution No. 2001-54, there being ample copies available to the public. MOTION: Move to adopt Resolution No. 2001-54, being a Resolution ratifying and approving a housing program, authorizing the issuance, sale, and delivery of its multifamily housing revenue bonds (GNMA Collateralized Mortgage Loan - Crest View ONDC I Project), Series 200lA-1 and taxable series 2001-A-2; Payable solely from revenues pledged pursuant to the indenture; and authorizing the issuance, sale and delivery of its multifamily housing revenue note (Crest View ONDC I Project), Subordinate series 200lB, payable solely from revenues ledged pursuant to a note agreement; approving the form of and authorizing the execution and delivery of the bonds and the note, and related documents; and providing for the security, rights, and remedies with respect to bonds and the note. 6) Establish Board of Appeals MOTION: Move to approve the proposal to remove the Planning and Zoning Commission, to be replaced by a non-political Board of Appeals, having a genuine interest in the community, knowledgeable in codes, zoning issues, maintenance issues, and knowledgeable in design and construction. 7) Approve Business License Applications MOTION: Move to approve the items as listed on the business license agenda for September 24, 2001 as presented. 8) Approve Payment of Bills MOTION: Move to approve payment of the bills, as listed, out of the proper fund. 5. PROCLAMATIONS, PRESENTATIONS, RECOGNITIONS AND GUESTS A) Proclamations-none B) Presentations 1) School Based Partnership Grant program - Michelle Steichen Overby C) Introduction of New Employees -none D) Recognition 1) Richard Hubbard - Retirement from Library Board after 11 years and 8 months 6. PUBLIC HEARINGS A) Rental Housing Revocation for 4643 Pierce Street MOTION: Move to waive the reading of Resolution No. 2001- the public. , there being ample copies available to MOTION: Move to adopt Resolution No. 2001- , being a Resolution of the City Council of the City of Columbia Heights approving Revocation pursuant to Ordinance Code section 5A.408(1) of the Rental License held by Richard Meissner regarding property at 4643 Pierce Street B) Approve Reallocation of CDBG Funds used to acquire and raze property at 4645 Monroe Street MOTION: Move to approve the reallocation of Community Development Block Grant (CDBG) Funds that were used to acquire and raze property at 4656 Monroe Street NE, to be used for either commercial revitalization or housing rehabilitation activities. City Council Agenda September 24, 2001 Page 4 of 5 7. ITEMS FOR CONSIDERATION A) Other Ordinances and Resolutions 1) Second Reading of Ordinance 1440, being an Ordinance pertaining to the Rezoning of certain properties located at 1529 37th Avenue NE and 1601 37th Avenue NE MOTION: Move to waive the reading of Ordinance 1440, there being ample copies available to the public. MOTION: Move to adopt Ordinance No. 1440, being an Ordinance pertaining to the rezoning of certain properties located at 1529 37th Avenue NE and 1601 37th Avenue NE. 2) First Reading of Ordinance No. 1441, being an Ordinance amending Ordinance 853, City Code of 1977 eliminating Taxicab licensing and setting requirements for Taxicabs within the City MOTION: Move to waive the reading of Ordinance No. 1441, there being ample copies available to the public. MOTION: Move to establish the second reading of Ordinance No. 1441, being an Ordinance amending Ordinance 853, City Code of 1977 Eliminating Taxicab Licensing in Columbia Heights and Setting Requirements for Taxicabs within the City, for Monday, October 8, 2001 beginning at approximately 7:00 p.m. 3) First Reading of Ordinance No. 1442 being an Ordinance relating to the division of Economic Development, Redevelopment and Housing Powers between the Economic Development Authority and the Housing and Redevelopment Authority MOTION: Move to waive the reading of Ordinance No. 1442, there being ample copies available to the public. MOTION: Move to establish a second reading for Ordinance No. 1442, being an Ordinance relating to the division of Economic Development, Redevelopment and Housing Powers between the Economic Development Authority and the Housing and Redevelopment Authority for Monday, October 8, beginning at approximately 7:00 p.m. B) Bid Considerations C) Other Business 1) Auto World Car Show 8. ADMINISTRATIVE REPORTS A) Report of the City Manager 1) Upcoming Work Session Items B) Report of the City Attorney GENERAL COUNCIL COMMUNICATIONS A) Minutes of Boards and Commissions 1) Meeting of the August 21, 2001, Housing and Redevelopment Authority 2) Meeting of the August 21, 2001, Economic Development Authority 3) Meeting of the September 4, 2001, Library Board of Trustees City Council Agenda September 24, 2001 Page 5 of 5 10. CITIZENS FORUM (At this time, citizens have an opportunity to discuss with the Council items not on the regular agenda. Citizens are requested to limit their comments to five minutes. Please note the public may address the Council regarding specific agenda items at the time the item is being discussed.) 11. COUNCIL CORNER Mayor Peterson - Remember: don't take yourself too seriously, enjoy life, and do a random act &kindness! 12. ADJOURNMENT Walter R. Fehst, City Manager WF/pvm OFFICIAL PROCEEDINGS COLUMBIA HEIGHTS CITY COUNCIL REGULAR COUNCIL MEETING SEPTEMBER 10, 2001 The following are the minutes for the regular meeting of the City Council held at 7:00 p.m. on Monday, September 10, 2001 in the City Council Chambers, City Hall, 590 40th Avenue N.E., Columbia Heights, Minnesota. CALL TO ORDER/ROLL CALL Present: Councilmembers Williams, Szurek, Wyckoff, Nawrocki, and Mayor Peterson PLEDGE OF ALLEGIANCE ADDITIONS/DELETIONS TO MEETING AGENDA -none CONSENTAGENDA A) Motion by Nawrocki~ second by Williams, with correction to the August 27, 2001 minutes as noted, to approve the Consent Agenda items as follows: 1) Minutes for Approval Motion to approve the minutes of the August 27, 2001, regular City Council meeting, with the correction as noted by Councilmember Nawrocki that the $800,000 represents the net loss in aid to the City. 2) Authorize expenditure of funds for Police Awards dinner Motion to authorize expenditure of up to $5,000 for Police Awards dinner from the contributions account 883-42100. Walt Fehst, City Manager, indicated this event will be hosted by the Columbia Heights Police Department to present awards and commendations, and to thank our officers and emergency technicians and all the others who responded to the shooting call in Columbia Heights. Fehst stated that over $7,000 has been collected for this event and asked for authorization to approve the necessary expenditures. 3) Approve to establish a hearing date of September 24, 2001 for Revocation or Suspension of a License to Operate a Rental Property at 4643 Pierce Street NE Motion to Establish a Hearing Date of September 24, 2001 for Revocation or Suspension of a License to Operate a Rental Property within the City of Columbia Heights against Richard Meissner at 4643 Pierce Street NE. 4) Approve 2002 Business License Fees Motion to waive the reading of Resolution No. 2001-53, there being ample copies available to the public. Motion to approve Resolution No. 2001-53, being a Resolution adopting the 2002 Business License Fee Schedule as presented. RESOLUTION NO. 2001-53 BEING A RESOLUTION ADOPTING THE 2002 BUSINESS LICENSE FEE SCHEDULE WHEREAS: Ordinance No. 853, City Code of 1977, pertaining to commercial licensing regulations City Council Minutes September 10, 200 l Page 2 of 11 provides for the establishing of annual license fees; and WHEREAS: The City has participated in a survey of metropolitan municipalities regarding business license fees charged by other communities; and WHEREAS: The City is attempting to maintain business license fees which are comparable to other communities; and WHEREAS: The City annually reviews its business license fee schedule and has concluded that our fees are comparable to other communities in the metro area; NOW, THEREFORE, BE IT RESOLVED that the attached proposed license fee schedule be adopted and effective January 1, 2002. Passed this th 10 day of September, 2001 Offered by: Nawrocki Seconded by: Williams Roll call: Ayes - Peterson, Szurek, Wyckoff, Williams, and Nawrocki Mayor GaryL. Peterson Patricia Muscovitz, Deputy City Clerk 5) Authorize acceptance of proposal for service from TGS Partnership Motion to authorize acceptance of the proposal for service from TGS Parmership and authorize the Mayor and City Manager to enter into an agreement for services. 6) Approve Business License Applications Motion to approve the items as listed on the business license agenda for September 10, 2001 as presented. 7) Approve Payment of Bills Motion to approve payment of the bills, as listed, out of the proper fund. Upon vote: All ayes. Motion carried. PROCLAMATIONS, PRESENTATIONS, RECOGNITIONS AND GUESTS a) Proclamations - none b) Presentations - none c) Introduction of New Employee, Josh Overmohle, Athletic Coordinator Keith Windschitl, Recreation Director, introduced the new/tthletic Coordinator, Josh Overrnohle and gave his background. Overmohle thanked the Council for this opportunity of employment. d) Recognition - none PUBLIC HEARINGS a) Close the Public Hearing for Revocation/Suspension of Rental Housing License at 4433-4435 Main Street Mayor Peterson closed the public heating as the property has been brought into compliance with thc Housing Maintenance Code. ITEMS FOR CONSIDERATION City Council Minutes September 10, 2001 Page 3 of 11 a)Other Ordinances and Resolutions 1.First Reading for Ordinance 1440, being an Ordinance pertaining to the Rezoning of certain properties located at 1529 37th Avenue NE and 1601 37th Avenue NE Tim Johnson, City Planner, referred to the history of these properties as stated in his Council letter. This ordinance is a request to rezone 1529 37th Avenue NE and 1601 37th Avenue NE from R2 (residential) to LB (light business) to make them consistent with commercial zoning, as both parcels have long histories of commercial use. The hair salon owner, who was trying to sell the property, brought this to staff's attention because a potential buyer was not able to get a commercial loan for residentially zoned property. Johnson stated that this rezoning is not consistent with the Comprehensive Plan, but the Metropolitan Council indicated by written reply that they have no objection to the commercial rezoning. Nawrocki indicated that the property at 1601 37th is in violation of existing code, regarding storage and parking. Johnson stated that the intensity of use of the present business is too much for limited business zoning, however this business is grandfathered in. Nawrocki was concerned with outside storage. Johnson indicated that ifa complaint was received, this would be addressed, but staff was currently looking at zoning issues. Nawrocki felt it would be a good time to ask the owner to clean up the property. Williams had encouraged the owner to purchase the beauty shop property for parking. Wyckoff was concerned with parla'ng and would like to see the business relocate. Wyckoff questioned if the properties could go back to a residential zoning. Johnson stated they could not, as the lots are too small to build on. Peterson felt that if the businesses were not offensive to the neighborhood, he saw no problem. He stated that the property owner has cooperated in the past with requests from the City. Peterson stated that the Planning and Zoning Commission had no problem with this rezoning request. Motion by Wyckoff, second by Szurek, to waive the reading of Ordinance 1440, there being ample copies available to the public. Upon vote: All ayes. Motion carried. Motion by Wyckoff, second by Szurek, to establish September 24, 2001, at approximately 7:00 p.m. as the second reading of Ordinance No. 1440, being an Ordinance pertaining to the rezoning of certain properties at 1529 37th Avenue NE and 1601 37th Avenue NE. Upon vote: All ayes. Motion carried. ORDINANCE NO. 1440 BEING AN ORDINANCE PERTAINING TO THE REZONING OF CERTAIN PROPERTY LOCATED AT 1529 37TM AVENUE NE AND 1601 37TM AVENUE NE Section 1: That certain property legally described as: The east 50 feet of Lot 3, Block 16, Auditor's Subdivision, of Walton's Sunny Acres 3rtl, Anoka County, Minnesota; PIN # (36 30 24 34 0029); and That certain property legally described as: The east 26 feet of the west 56 feet of Lot 4, Block 7, Auditor's Subdivision, of Walton's Sunny Acres 3~a, Anoka County, Minnesota; PIN # (36 30 24 43 0042) Section 2: To authorize and direct staff to amend the official zoning map to reflect the change in zoning from R-2, One and Two Family Residential District, to LB, Limited Business District, upon the effective date of said ordinance. City Council Minutes September 10, 2001 Page 4 of 11 Section 3: This ordinance shall be in full force and effect from and after 30 days after its passage. First Reading: Second Reading: Date of Passage: September 10, 2001 September 24, 2001 b) Bid Considerations - none c) Other Business 1. Adopt Resolution No. 2001-52, Being a Resolution adopting a proposed budget for the year 2002, setting the proposed City Levy., approving the HRA Levy., approving a tax rate increase, and establishing a budget meeting date for property taxes payable in 2002. Motion by Williams, second by Szurek, to waive the reading of Resolution No. 2001-52, there being ample copies available to the public. Upon vote: All ayes. Motion Carried. Motion by Williams, second by Szurek, to adopt Resolution 2001-52 being a resolution adopting a proposed budget, setting the City, Library and EDA proposed local levy at $4,851,347, establishing a budget meeting date for property taxes payable in 2002 for December 3, 2001 at 7:00 p.m. in the City Council chambers, approving a tax rate increase, and approving I-IRA levy of $111,702. Nawrocki disagreed with the budget information process, and stated that the numbers presented did not match the numbers shown to Council previously. Fehst stated these figures are to set the preliminary levy and the other figures referred to represent his recommended budget cuts. Fehst explained changes in the State tax system and, as a result, the new financial responsibilities given to the City. Fehst stated that the recommended levy can not be exceeded in future meetings, but can be reduced through budget cuts and Council approval. Nawrocla' stated that past history shows the levy amount is not reduced after the preliminary approval. He felt actions taken by the State would give people an opportunity to make decisions at the local level of government, but unfortunately did not reduce state mandates. Nawrocki supported a 3. S percent increase to compensate for the increased cost of doing business and wage increases. He listed his recommended figures for what he felt was a supportable levy amount. Nawrocki questioned the remaining costs on the Sheffield project and requested this information in writing. He asked if the EDA levy was part of the total levy request. Fehst stated that it was. Motion by Nawrocki to amend the proposed general fund levy be reduced to $4,671,662, and the special levy for PERA be eliminated, and in Section D the HRA levy be reduced to $77,000. Williams defended the original motion, stating that the City may have to cut services, but that our Finance Director has given us a recommended maximum levy amount, and what Councilmember Nawrocki proposed is only two percent less than this amount. He requested citizen input, but referred to possible budget cuts. Williams wants the City to be as efficient as possible and yet give the best services possible. He believed the final budget amount could be lower than the maximum recommended levy, unless citizens do not want services cut. Upon vote: Motion died for a lack of a second. City Council Minutes September 10, 2001 Page 5 of 11 Nawrocki clarified that if the proposed levy were adopted it would be a ten percent increase over this year. Peterson asked for questions from the audience. There was no response. Upon vote: Williams, aye; Szurek, aye; Wyckoff, aye; Nawrocki, nay; Peterson, aye. Motion carried 4-1. RESOLUTION 2001-52 RESOLUTION ADOPTING A PROPOSED BUDGET FOR THE YEAR 2002, SE'I-rING THE PROPOSED CITY LEVY, APPROVING THE HRA LEVY, APPROVING A TAX RATE INCREASE, AND ESTABLISHING A BUDGET MEETING DATE FOR PROPERTY TAXES PAYABLE IN 2002 NOW, THEREFORE BE IT RESOLVED BY THE CITY COUNCIL FOR THE CITY OF COLUMBIA HEIGHTS, MINNESOTA: that the following is hereby adopted by the City of Columbia Heights. Section A. The proposed budget for the City of Columbia Heights for the year 2002 is hereby approved and adopted with appropriations for each of the funds listed below. General Fund Community Development Fund Economic Development Fund Anoka County CDBG Parkview Villa North Parkview Villa South Rental Housing HRA Administration State Aid Cable Television Library DARE Project Capital Improvement Capital Equipment Replacement Funds Central Garage Fund Liquor Water Utility Fund Sewer Utility Fund Refuse Fund Storm Sewer Fund Energy Management Data Processing Debt Service Fund Total Expense Including Interfund Transfers Expense 8,635,751 317,463 137,015 377,787 383,072 218,587 18,481 111,702 96,713 162,896 648,002 8,825 289,138 2,428,034 568,803 1,197,878 1,586,491 1,373,474 1,512,083 251,114 101,209 274,592 2,820,649 23,519,759 Section B. The estimated gross revenue to fund the budget of the City of Columbia Heights for all funds, including general ad valorem tax levies and use of fund balances, as hereinafter set forth for the year 2002: General Fund Community Development Fund Economic Development Fund Anoka County CDBG Parkview Villa North Revenue 8,635,751 317,463 137,015 377,787 383,072 City Council Minutes September 1 O, 2001 Page 6 of 11 Parkview Villa South Rental Housing HRA Administration State Aid Cable Television Library DARE Project Capital Improvement Capital Equipment Replacement Funds Central Garage Fund Liquor Water Utility Fund Sewer Utility Fund Refuse Fund Storm Sewer Fund Energy Management Data Processing Debt Service Fund Total Revenue Including Interfund Transfers 218,587 18,481 111,702 96,713 162,896 648,002 8,825 289,138 2,428,034 568,803 1,197,878 1,586,491 1,373,474 1,512,083 251,114 101,209 274,592 2,820,649 23,519,759 Section C. The following proposed sums of money are levied for the current year, collectable in 2002, upon the taxable properly in said City of Columbia Heights, for the following purposes: Estimated Area-Wide Estimated General Estimated Library Levy Estimated EDA Fund Levy Total Proposed General Levy Special Levy for PERA Increase Capital Equipment Debt Levy Total Proposed Levy 930,000 3,180,711 591,588 137,015 4,839,314 12,033 0 4,851,347 Section D. The City Council of the City of Columbia Heights hereby approves the Housing and Redevelopment Authority Tax Levy for the fiscal year 2002 in the amount of $111,702. BE It FURTHER RESOLVED BY THE CITY COUNCIL FOR THE CITY OF COLUMBIA HEIGHTS, MINNESOTA: That the budget meeting is scheduted for December 3rd at 7:00 P.M. in the City Council Chambers. BE IT FURTHER RESOLVED BY THE COUNCIL OF THE CITY OF COLUMBIA HEIGHTS, COUNTY OF ANOKA, MINNESOTA: That the county auditor is authorized to fix a property tax rate for taxes payable in the year 2002 that is higher than the tax rate calculated pursuant to Minnesota Statutes '275.078 for the city for taxes levied in 2000, collectable in 2001. The City Clerk is hereby instructed to transmit a certified copy of this resolution to the County Auditor of Anoka County, Minnesota. Approved this 10th day of September 2001 Offered By: Williams Seconded By: Szurek Roll Call: Ayes: Peterson, Szurek, Wyckoff, Williams Nays: Nawrocki City Council Minutes September 10, 2001 Page 7of 11 Mayor Gary L. Peterson Patricia Muscovitz, Deputy City Clerk Motion by Szurek, second by Williams, to schedule the budget review meeting with the Library Board and the City Council for October 2, 2001 at 7:00 p.m. in the Library Activity Room, and schedule the City Council budget review meeting with the Park and Recreation Commission for October 24, 2001 at 7:00 p.m. in the Gauvitte Room at Murzyn Hall. Nawrocki indicated he has a conflict with meetings held on the first and second Tuesdays of the month. He asked to schedule on another day, or to begin at 5:00p. m. on Tuesday. Fehst indicated this might be a problem for the Library Board Chairperson, Barb Miller, who works downtown. Williams stated he has a previous commitment at 5:00p. m. Peterson suggested a compromise of 6:OO p. m. Friendly amendment by Peterson to amend the budge review meeting with the Library Board and City Council for October 2, 2001 at 6:00 p.m. Williams and Szurek concurred with the amendment. Upon vote: All ayes. Motion carried. Fehst suggested additional budget hearing dates regarding other City departments of October 15for Public Safety, Police, Fire, and Community Development; October 29for Administration, General Government, and Public Works; November 5for Finance, Liquor, and the summary report; and November 19 for final wrap up. The mini budgets of each department will be distributed at the first Council meeting in October. NawrocM stated the City Charter indicates the budget is to be distributed in August. Motion by Szurek, second by Wyckoff, to set work session dates with the various department for budget review on October 15 and 29, and November 5 and 19, 2001. Williams encouraged citizens to come to these meetings. Peterson pleaded for citizens to attend and comment on the quality of services and what they believe the City can do without or what to keep. All meetings are open to the public. Upon vote: All ayes. Motion carried. Nawrocki handed out article from the MN Real Estate dournal on TIF and the new tax bill, discussing the impact on commercial and industrial areas. Williams reiterate the reason he supported the proposed levy and his request for resident input. Wyckoff also referred to possible budget cuts including the $10, 000 "Back to the Parks "funds, which were not utilized this year. She stated she would lobby to retain the receptionist position. Nawrocki indicated the motion, which passed, did not include any budget cuts, but rather a ten percent budget increase. Fehst stated he would have budget cut recommendations for up to $900, O00 for Council review. City Council Minutes September 10, 2001 Page 8 of 11 ADMINISTRATIVE REPORTS a) Report of the City Manager (Upcoming Work Session Items listed later in the meeting) b) Report of the City Attomey- none GENERAL COUNCIL COMMUNICATIONS a) Minutes of Boards and Commissions 1. Minutes of the September 4, 2001 Planning and Zoning Commission meeting. Mayor Peterson asked the four students present to introduce themselves. Williams asked the student to state what they had learned at this meeting. CITIZENS FORUM Linda Ballentine, 5230 4th Street, addressed Council regardingfive years of complaints of public urination across the alley from her backyard that have not been resolved. She requested to privately show Councilmembers a video of the activity behind her home, and wanted a comment from each Councilmember. Peterson stated the City is trying to work with Galaxy Auto to resolve the situation. Placement of a fenc, e at City expense, was rejected. Fehst stated that the City has installed a light in the area, added additional police patrols through the area, and have placed an officer inside the municipal liquor store. Fehst stated that work has been ongoing to look for new store locations. Peterson asked for Ballentine's suggestion to resolve the problem. Ballentine suggested closing the liquor store at 8:00p. m. every evening. Nawrocki believed she should have the right to show the video. Wyckoff agreed. Jim Hoefi, City Attorney, recommended a copy of the tape be given to the City as a public document that could be viewed by Council and requested, by the public, under the Data Privacy Act. Peterson suggested she play the tape in the conference room following the meeting. Williams stated that if the City is to remain in the liquor sales business, this must be addressed and resolved. Nick Larson, 5218 4th Street, stated the problems of urination, debris, and people coming into their yards has been an ongoing issue for 5 years. He stated that the Police are called, but the violators are gone before the Police arrive. Larson also felt the liquor store should be closed earlier in the evening. Wyckoff indicated that if this were a private business, the City would have demanded results or asked them to leave. She indicated this liquor store should be closed at 8:00p.m. Wyckoff spoke of her conversations with Mr. Larson, who stated he would be willing to share the cost of a fence on his property. Dr. Johnson DDS, whose office is adjacent to the liquor store property, has relayed to her ongoing problems he has because of liquor store patrons, and that he is willing to strike a deal with the City. Bruce Ballentine, 5228 4th Street, suggested an Officer be inside and outside of the store, but stated that his solution was to close this liquor store. Fehst stated that before doing something that hasty, it was necessary to determine what is best for all residents. Nawrocki questioned how often the public urination occurs. L. Ballentine stated that her video from one day shows nine incidents. L. Ballentine stated that the City had agreed to pick up debris behind the store, but she has only seen this happen twice. Nawrocki questioned if the activity was limited to public property. L. Ballentine stated that the activities also occur behind Galaxy Auto. City Council Minutes September I O, 2001 Page 9 of 11 Dr. Todd Johnson, 21 year property owner south of the liquor store, complained of the smell, and people urinating in the parking lot. He stated that patients have complained and employees are afraid to come out of his building after dark, and that there may be gang elements involved. Larson suggested selling his three lots to the City, with relocation fees. Szurek stated this situation was far worse than she realized and that something must be done. Peterson stated the Police Department would be told to immediately increase their activity inside and outside the store, and early closings would be discussed during budget hearings. Motion by Wyckoff, second by Szurek, that starting immediately the City liquor store on University Avenue be closed at 8:00 p.m. until we get our act together. Nawrocki felt this is a "knee jerk" reaction to a serious problem, and not a responsible way to deal with it. The City needs to look at alternatives. Peterson stated he would not vote in favor of such a motion until he has the opportunity to talk to the Liquor Store Manager and Finance Director. Fehst stated that he met with the neighbors and they asked for a fence all the way to the alley, but Dr. Johnson was not in favor of this, as it would affect the walking traffic. Peterson stated that there have been efforts to alleviate this problem, but apparently not enough. Deb Johnson, 4638 Pierce Street, suggested monitoring the store instead of closing it down. Fehst stated there is a need to separate businesses and residents. Sue Amundson, 3741 Reservoir, stated this was disgusting and should be the City's number one priority. Williams agreed with Peterson and Nawrocki, and thought something needs to be done, but to reduce the hours tonight is not the answer, and agreed to make this situation a priority. Upon vote: Williams, nay; Szurek, aye; Wyckoff, aye; Nawrocki, nay; Peterson, nay. Motion failed 3 to 2. Peterson assured residents that all Councilmembers are committed to resolve this problem. L. Ballentine questioned if this topic would be on the next work session. Fehst stated it would be. Work Session items for September 17, 2001 · School based Partnership Grant Report - Michelle Steichen Overby · Board of Appeals and Point of Sales. · Municipal Liquor Store on University Avenue COUNCIL CORNER Nawrocki attended a meeting in Blaine on Affordable Housing. A Land Trust Program was suggested, whereby the City purchase land and put it in a trust for affordable housing; the land is leased by the buyer on a 99year lease with a 99year renewable option. The first buyer would be limited to the increase they could put into that sale, so not only the ftrst owner gets a better buy, but so would future buyers. He suggested that the property on 47th Avenue and Monroe Street, bought with CDGB money, be keep in a land trust. Nawrocki stated the sale could be restricted to a resident of the community. Peterson felt this was an interesting concept, but the property on Monroe Street was agreed by Council to sell for maximum profitability. City Council Minutes September 1 O, 2001 Page 10 ofll Nawrocki stated the alley he mentioned at the last meeting has not been patched. Fehst stated the developer still needs to drop services to ground level, but he will check on the fill which needs to be cleaned up. Nawrocki questioned Auto World using an alley for their car show. Fehst asked the Police and Fire Chiefs to work with them so there is a safe venue to do this. Nawrocki stated that since the Hylander Drive In needed a petition to close the alley that Auto World should also be required to do so. Fehst stated that the understanding was to work with staff to be sure there are no safety violations. Nawrocki questioned the result of the inspection of the tiles in the old Dr. Good building. Fehst stated that the Mayor, Councilmember Wyckoff and himself were present at the inspection. Fehst referred to one other home on the ocean that has been preserved, but the tiles were on the outside of the home. Wyckoff suggested the building be used for an artist studio or cultural center. Wyckoff stated the people from California who looked at the building indicated the tile would have no value if removed from the building. Nawrocki referred to a letter from Representative Barb Goodwin, dated Augustl 6, regarding problems around the liquor store and questioned if she received a response. Fehst stated that information was ready to be sent, but additional information was received that he wanted to include. Peterson indicated that he spoke to her in person on this. Nawrocki requested she be given a written response. Nawrocki requested time be spent with our State Senator and Legislator regarding budget changes. Nawrocki again questioned recreational fire permits. Fehst stated this wouM be reviewed by the Fire Chief, with any changes to take place at the beginning of next year. Nawrocki referred to a letter from Mrs. Nelson in June regarding environmental waste management. He indicated an article in .the Circle Pines newspaper addressed this, and requested we respond to her. Fehst referred to a meeting he attended where Representative Abrahms was in attendance. Wyckoff referred to an anonymous call which stated that 4015 7th street needs clean up, as the dumpster is overflowing. She turned this over to the Housing Maintenance Clerk. Wyckoff welcomed Lenny Austin back to our police force, following his sabbatical. Wyckoff indicated that the first meeting of the Columbia Heights Historical Society wouM be Thursday, September 27, at 6:30p.m. at Murzyn Hall in the senior center. This meeting will be to set the By-laws and to set possible projects. Szurek commented on waste management and that there is a number to call for special pickups. She stated that there are organizations, like the Bridge in Bloomington, which will pick up items you would like to donate. Williams referred to the dedication ceremony of Gateway Park held on September 4th, and the efforts by former Councilmember Hunter and Mayor Peterson, and the wonderful job of planting flowers by Silvia Okerstrom and the Beautification Committee. Nawrocla' suggested sending notices to neighbors the second reading of the rezoning ordinance. Fehst City Council Minutes September 10, 2001 Page 11 ofll stated that the public hearing was hem at the Planning Commission meeting. Peterson asked that affected residents be notified of the second reading of the ordinance if they were not notified of the first reading. Mayor Peterson - Remember: don't take yourself too seriously, enjoy life, and do a random act of kindness! Ve'yckoff asked to be on the MN Cities magazine mailing list. ADJOURNMENT Pcterson adjourned thc meeting at 10:10 p.m. Nawrocki asked that everyone "Take City business very seriously". Patricia Muscovitz, Deputy City Clerk COLUMBIA HEIGHTS - CITY COUNCIL LETTER Meeting of: September 24, 2001 AGENDA SECTION: Consent ORIGINATING DEPARTMENT: CITY MANAGER'S NO: 4A2 CITY MANAGER'S APPROVAI~. ., Date for October, 2001 DATE: September 24, 2001 DATE:q//~ ~ ,~/ NO: It is recommended that Work Session meeting be scheduled for Monday, October 1, 2001 beginning at 7:00 p.m. RECOMMENDED MOTION: MOTION: Move to establish Work Session meeting dates for Monday, October 1, 2001 beginning at 7:00 p.m. COUNCIL ACTION: 2001-9-24worksessiondates CITY COUNCIL LETTER Meeting off September 24~ 2001 AGENDA ORIGINATING CITY SECTION: [4 /~ _~ DEPARTMENT: MANAGER - APPROVAL NO: Fire ,,,~,~ · ITEM: Establish Hearing Dates BY: Dana Alexon BY: ~'~, License Revocation, Rental Properties /'/ NO: DATE: September 19, 2001 DATE: Revocation or suspension of a license to operate a rental property within the City of Columbia Heights is requested against the following owners regarding their rental property for failure to meet the requirements of the Residential Maintenance Codes. 1. John T. Gondek ............................................................. 344 40th Avenue NE 2. Kimberly Wegner .......................................................... 5248-50 Washington St. NE 3. Dale Frenzel .................................................................. 3732 3~ St. NE 4. Scott Fakler ................................................................... 4943-45 Jackson St. NE 5. Hahs ' ~ Smhgal ................................................................. 1124-1126 45 Avenue NE 6. Jerald Janson ................................................................. 1266-1268 Circle Terrace 7. Gerald Janson ................................................................ 1242-44 Circle Terrace, 1248-50 Circle Terrace 8. Michael Johnson ........................................................... 4919-21 Johnson St. NE RECOMMENDED MOTION: Move to Establish a Heating Date of October 8, 2001 for Revocation or Suspension of a License to Operate a Rental Property within the City of Columbia Heights against John T. Gondek at 344 40tb Avenue NE. RECOMMENDED MOTION: Move to Establish a Heating Date of October 8, 2001 for Revocation or Suspension of a License to Operate a Rental Property within the City of Columbia Heights against Kimberly Wegner at 5248-5250 Washington Street NE. RECOMMENDED MOTION: Move to Establish a Heating Date of October 8, 2001 for Revocation or Suspension ora License to Operate a Rental Property within the City of Columbia Heights against Dale Frenzel at 3732 3rd Street NE. RECOMMENDED MOTION: Move to Establish a Hearing Date of October 8, 2001 for Revocation or Suspension of a License to Operate a Rental Property within the City of Columbia Heights against Scott Fakler at 49434945 Jackson St NE. RECOMMENDED MOTION: Move to Establish a Heating Date of October 8, 2001 for Revocation or Suspension of a License to Operate a Rental Property within the City of Columbia Heights against Haris Saihl~al at 1124-1126 45th Avenue NE. RECOMMENDED MOTION: Move to Establish a Hearing Date of October 8, 2001 for Revocation or Suspension ora License to Operate a Rental Property within the City of Columbia Heights against Jerald Janson at 1266-1268 Circle Terrace Bvld NE. RECOMMENDED MOTION: Move to Establish a Hearing Date of October 8, 2001 for Revocation or Suspension of a License to Operate a Rental Property within the City of Columbia Heights against Gerald Janson at 1244-1242~ 1248-1250 Circle Terrace Blvd NE. RECOMMENDED MOTION: Move to Establish a Hearing Date of October 8, 2001 for Revocation or Suspension of a License to Operate a Rental Property within the City of Columbia Heights against Michael Johnson at 4919-4921 Jackson St NE. COUNCIL ACTION: COLUMBIA HEIGHTS CITY COUNCIL LETTER Meetin~ off September 24, 2001 ORIGINATYNG DEPARTMENT: CITY MANAGER'S AGENDA SECTION: ~1 -/q - L/ Community Development APPROVAL NO: ITEM: Approve Resolution 2001-55, calling BY: Randy Schumacher <~ BY: ~//~//~4~ for a Public Hearing for HRA/EDA DATE: September 21, 2001 Transition BACKGROUND: At the EDA Board Meeting held in February of 2001, the Board discussed specific direction and priorities of the HRA and EDA. It was suggested that the Board consider transferring all City housing responsibilities, ownershil~, and operations to the Columbia Heights Housing and Redevelopment Authority allowing the EDA to focus on Community Development and Redevelopment Issues. This would allow greater focus to be conducted in each respective area. At a following Board meeting, President Ruettimarm requested Board authorization to obtain procedural direction from the EDA legal counsel and to layout the necessary steps to accomplish the proposed transition. I have enclosed a copy of a letter from Steve Bubul of Kennedy and Graven Chartered that summarizes these steps. RECOMMENDED MOTION: Move to waive the reading of Resolution 2001-55, there being ample copies available to the public. RECOMMENDED MOTION: Move to adopt Resolution 2001-55, a resolution calling a Public Hearing regarding modification of the enabling Resolution for the Columbia Heights Economic Development Authority for Monday, October 22, 2001 at approximately 7:00 p.m. Attachments COUNCIL ACTION: h:\CL consent200l\EDA MR3% -CL Res2001-55 9-24~2001 RESOLUTION NO. 2001-55 RESOLUTION CALLING A PUBLIC HEARING REGARDING MODIFICATION OF THE ENABLING RESOLUTION FOR THE COLUMBIA HEIGHTS ECONOMIC DEVELOPMENT AUTHORITY BE IT RESOLVED By the City Council of the City of Columbia Heights, Minnesota ("City") as follows: WHEREAS, the City Council established the Columbia Heights Economic Development Authority ("CHEDA") by Resolution No. 96-01 approved January 8, 1996 (the "Enabling Resolution"), pursuant to Minnesota Statutes, Sections 469.090 to 469.1081 (the "EDA Act"); and WHEREAS, the Council transferred to CHEDA the control, authority and operation of all projects and programs formerly owned and administered by the Housing and Redevelopment Authority in and for the City of Columbia Heights ("HRA"); and WHEREAS, the Council has determined to reallocate the respective powers of the HRA and CHEDA by ordinance, as authorized under Section 469.094, subdivision 1 of the EDA Act; and WHEREAS, the Council has on this date approved the first reading of an ordinance that generally allocates the powers related to low and moderate income housing to the HRA and powers related to economic development and redevelopment to CHEDA; and WHEREAS, the City desires to modify the Enabling Resolution in order to conform the EDA's powers to the limitations specified in the ordinance; and WHEREAS, the City is authorized to modify the Enabling Resolution after notice and public hearing as required for adoption of the original Enabling Resolution under the EDA Act; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Columbia Heights as follows: 1. The City Council will hold a public heating regarding modification of the Enabling Resolution on Monday, October 22, 2001. 2. City staff and consultants are authorized to prepare a modification to the Enabling Resolution consistent with the ordinance described in this resolution, publish a notice of hearing in accordance with the EDA Act, and take all other actions necessary to bring the modification to the Enabling Resolution before the Council a the public hearing. Passed this day of ,2001. Motion by: Second by: Roll Call: Mayor Gary L. Peterson Patricia Muscovitz, Deputy City Clerk KENNEDY & GRAVEN, CHARTERED 200 SOUTH SIXTH STREET 470 PILLSBURY CENTER MINNEAPOLIS, MINNESOTA 55402 (612) 337-9300 (612) 337-9310 (facsimile) TO: FROM: DATE: RE: MEMORANDUM Randy Schumacher Steve Bubul September 4, 2001 City of Columbia Heights - Transfer of Activities to HRA The following is the proposed timetable for the transfer of EDA activities to the I-IRA: Monday, September 24, 2001, 7:00 p.m. City Council meeting 1 st reading of ordinance Calls public hearing for modification of Enabling Resolution Friday, September 28, 2001 Notice of Hearing delivered to newspaper Thursday, October 4, 2001 Publication of Notice of Public Hearing in Focus News (to be arranged by Kennedy & Graven) Thursday, October 11, 2001 Publication of Notice of Public Hearing in Focus News (to be arranged by Kennedy & Graven) Monday, October 22, 2001, 7:00 p.m. City Council Meeting Holds Public Hearing Adopts modified Enabling Resolution 2nd reading of ordinance Approval of revised Purchase of Serv/ces Agreement between City and EDA and similar agreement between City and I-IRA Approve appointment by Mayor of additional Commissioner to I-IRA SJB-201540vl CL162-22 EDA meet after October 22nd City Council meeting OR EDA next regular meeting: November 20, 2001 Approve resolution transfen'ing housing programs and projects back to the HRA and modifying the Purchase of Services Agreement with the City Modify EDA by-laws to reflect new duties I-IRA meet after October 22nd City Council Meeting Approve resolution accepting transfer of projects property and contracts, and approving purchase of services agreement with the City Modify By-laws to reflect new duties and commissioner make-up SJB-201540vl CL162-22 June 8, 2001 Minneapolis MN 55402 /612) 33.7-9J00 reiephone (61"} 337-9310 f~ h r r p://www, ken nedy-gravem co m ~/r~-~ Dial (6{2) J17-92:~ ~nait: ~bubul~kea'medy-~rave~.ca m Randy Schumacher City of Columbia HeiSts 590 40th Avenue ~ Columbia Heights, Nk-N' 55421 Re: TransFer of Activities to Dear Randy: You asked me to describe the process needed to transfer hous/ng programs and activities fi-om the Columbia Heights Economic Development Authority ("EDA") to the Housing and Redevelopment Authority/n and for the City of Columbia HeiSts ("HRA"). Background First, I should briefly recap the actions taken at the time the EDA was created. On .ranuarv 8. the City Council adopted Resolution No. 96-01 (the "Enabl;no =~-,..--'- ,,, ... ~, :. ,' !9.96 - --o ~,-~umuon ), wmcn esramlsaea tixe EDA. On the same date, the City Cotmcil adopted the roi/owing additional resolutions: · ResolutiOn No. 96-02, wkich transferred the control, authority and operation of all projects fi-om · [h.e .HR.4. to the ED& md also approved =_ P,-n:hase of Serv/ces A~eement between the Ci.Ly and EDA. · Resolution No. 96-03, appointing the initial EDA board of commissioners. · Resolution No.96-04, reclassifying HRA employees as City employees under the Commurfity Development Department. On January 29, 1996, the HI~. passed its Resolution No. 96-0I, wb./ch formally approved the transfer of all ERA contracts, program and property fi'om the I-I~. to the EDA. The proper HRA officials were directed to execute qttit claim deeds for all real property owned by the liRA. A/so on that date, the new EDA held its organizational rneeting, at which the EDA accepted transfer of all projects and property fi-om the HRA. I understand that deeds were never executed and delivered, so title to all bIRA property remains in the name of the HRA. I also understand that HRA Commissioners have continued to be appointed, w/th ali council members serv/ng as commissioners for terms that coincide w/th their councilmember ten'ns. Randy $chumacher June 8, 2001 Page 2 of 3 Proposed Change I understand that the current proposal is to "reactivate" the H2RA for the purposes o£ hous/ng programs, but retain econom/c development and redevelopment activit/es under the jur/sdiction of tJae EDA. Th/s will permit the appointment of a public housing ms/dent to HRA board of commissioners, as required under recent HUD regulations, and a/so a/Iow the ffP,.A to focus on the issues of liRA-owned housing £aci//ties. In 1996, HRA employees were consolidated into the City Community Development Depmuuent. l assume that structure would rernakx, and that the City would provide staffand services to the HR.A on a similar basis that serv/ces are provided to the EDA. If there is a desk~ to return some employees to the direct jur/sdiction of the H]LA, additional actions would be needed to accomplish that. The HRA transfer will requ/re a number of steps to accompLish, summarized as follows: Actions by the Cily Council City ordinance dividing powers. Under Minnesota Statutes, Section 4459.094, the City may by ordinance divide the econom/c development, redevelopment and housing powers between the various development entities. I thi,k the best course is to adopt an ordinance that allocates housing powers to the HRA and all other economic development and redevelopment powers to the EDA. The ordinance may also direct the re-transfer of housing programs and property fi-om the EDA to the HR& which w/il override the transfers made under City Resolution 96-02. Modification to the Enabling Resolution. This action will clarify the EDA's powers, reflecting the limitations .;m~osed by the ordinance. The modification requires a public hearing with at least 10 day'~ published notice. Approval of revised Purchase of Services Agreement between City and EDA, and approval of similar agreement between City and HRA. · Approve appointment by mayor of additional commissioner to HRA in accordance with HUD regulations. Actions by · Approve a resolution transfening housing programs and projects back to the I-IRA, and modify/rig the Purchase of Serv/ces Agreement with the City. · Modify EDA by-laws as needed to reflect new duties. SSn-198665vl CL205-3 '~/Ro. ndy ~hurnacher Sune S., ~001 Page .~ of 3 Actions by.;-IP,.A · Approve a resolution accepting troffer of projects, property and contracts, and approving purchase of services agreement with the City. · Modify by-laws to reflect new duties and commissioner make-up. The above steps could be taken in tkis order. 1. Council adopts first reading of ordinance and calls public hearing for moditical/on of Enabling Resolution. 2. - Council holds public hearing and adopts modified Enabl/ng Resolution; and second reading of ordinance. All other C~uncil act/ons could be taken at this meeting. 3. EDA and HRA meetings co, Id be held on the same n/ght as the second Council meeting, or at a later date. If the Council and EDA with to proceed w/th th/s strategT, I suggest that you prepare a meeting schedule and r will prepare the necessary documents. If you or Council or EDA members have questions, please let me know. Very Truly Yours, cc: Walt Fehst Dan Greensweig SJB-198665vl ~..- CL2.05-3 KENNEDY & GRAVEN CHARTERED 200 South Sixth Street 470 Pillsbury Center, Minneapolis, MN 55402 612-337-9300 John Utley Voice: 612-337-9270 / Fax: (612) 337-9310 / E-mail: jutley~kennedy-graven.com MEMORANDUM TO: Walter Fehst Randy Schumacher City of Columbia Heights 590 - 40tb Avenue NE Columbia Heights, Minnesota 55421-3878 FROM: RE: DATE: John Utley City of Columbia Heights, Minnesota Multifamily Housing Revenue Bonds (Crest View ONDC I Project) Series 2001 Tuesday, September 18, 2001 Pursuant to a resolution adopted on Monday, January 22, 2001, the City Council of the City of Columbia Heights, Minnesota (the "City"), conducted a public hearing on Monday, February 26, on a proposal that the City issue revenue bonds under Minnesota Statutes, Chapter 462C, as amended (the "Act"), to finance a multifamily housing development to be known as Crest View on 42nd and described as follows: (i) a 50-unit assisted living facility for occupancy by elderly persons comprised of forty-one (41) units of conventional assisted living units and nine (9) special care units; (ii) to be housed in a single three-story building of approximately 40,000 square feet; and (iii) to be located at 916-42nd Avenue N. E. in the City (the "Project"). The Project is to be owned by Crest View ONDC I, a Minnesota nonprofit corporation (the "Borrower"). Following the public hearing, the City Council of the City adopted a preliminary resolution adopting a housing program required by the provisions of the Act, granting preliminary approval to the issuance of the revenue bonds referenced above, and authorizing the reimbursement of expenditures paid or incurred in anticipation of the issuance of the such revenue bonds. At a meeting of the City Council of the City to be held on Monday, September 24, 2001, the City Council will consider a resolution (the "Final Resolution") authorizing the following actions: (i) the issuance of revenue obligations of the City, designated as the Multifamily Housing Revenue Bonds (GNMA Collateralized Mortgage Loan - Crest View ONDC I Project), Series 200lA-1 (the "Series 200lA-1 Bonds"), and the Multifamily Housing Revenue Bonds (GNMA Collateralized Mortgage Loan - Crest View ONDC I Project), Taxable Series 2001A-2 (the "Series 2001A-2 Bonds" and, collectively with the Series 200lA-1 Bonds, the "Bonds"), in the original aggregate principal amount not to exceed approximately $5,200,000, pursuant to the terms of an Indenture of Trust, to be dated as of October 1, 2001, (the "Indenture"), between the Issuer and U.S. Bank Trust National Association, as trustee (the "Trustee"); (ii) a loan of the proceeds derived from the sale of the Bonds to Crest View ONDC I, a Minnesota nonprofit corporation (the "Borrower"), pursuant to the terms of a Financing Agreement, to be dated as of October 1, 2001 (the "Indenture"), between the City and the Borrower; (iii) the issuance of revenue obligations of the City, designated as the Multifamily Housing Revenue Note (Crest View ONDC I Project), Subordinate Series 200lB (the "Note), in the original aggregate principal amount not to exceed approximately $200,000, a loan of the proceeds of the Note to the Borrower pursuant to the terms of a Note Agreement, dated as of October 1, 2001 (the "Note Agreement"), between the City and the Borrower, and an assignment to the holders of the Note of the loan repayments to be made by the Borrower under the Note Agreement pursuant to the terms of an Assignment of Note Agreement, dated as of October 1, 2001 (the "Assignment"), between the City and the holders of the Note; (iii) the application of the proceeds of the Bonds and the Note to finance the acquisition, development, construction, and equipping by the Borrower of the Project. The Bonds and the Note are to be revenue obligations of the City. The Bonds and the Note are not general obligations of the City and are not payable from any property of the City (other than the interests of the City in the Financing Agreement and the Note Agreement which are to be pledged to the holders of the Bonds and the Note, respectively). The taxing power of the City is not pledged to the payment of the Bonds or the Note. The Bonds and the Note are payable solely from the revenues and property expressly pledged to the Bonds and the Note pursuant to the documents referenced above and in accordance with the other security referred to in the Indenture, the Financing Agreement, the Note Agreement, and the Assignment. The Borrower will covenant in the Financing Agreement and the Note Agreement to pay the administrative fees of the City (one-half percent of the principal amount of the Bonds and the Note on the date of issuance of the Bonds and the Note, one-half percent of the principal amount of the Bonds and the Note outstanding on October 1, 2002, and one4enth of one percent of the outstanding principal amount of the Bonds and the Note on each October I thereafter, or the present value of any of such fees on the date of issue of the Bonds and the Note). The Borrower will also indemnify the City against any claims made against the City as a result of its participation in this financing and will covenant to pay the City for any costs or expenses incurred or paid by the City in conjunction with its participation in this financing. The issuance of the Bonds and the Note will have no adverse impact on the ability of the City to incur general obligation indebtedness. The issuance of the Bonds and the Note will have no adverse impact on the rating maintained by any national rating agency for the City. Future financial difficulties or a default on the Bonds or the Note will have no adverse impact on the rating maintained by any national rating agency for the City. 2 If the Final Resolution is adopted by the City Council, the parties will proceed to complete the preparation of the documentation with respect to the Bonds and the Note and will close the financing transaction within approximately one month from the date on which the Final Resolution is adopted. CL1624318 (JU) 192308v.3 3 RESOLUTION NO. 2001-54 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF COLUMBIA HEIGHTS, MINNESOTA, RATIFYING AND APPROVING A HOUSING PROGRAM, AUTHORIZING THE ISSUANCE, SALE, AND DELIVERY OF ITS MULTIFAMILY HOUSING REVENUE BONDS (GNMA COLLATERALIZED MORTGAGE LOAN--CREST VIEW ONDC I PROJECT), SERIES 200lA-1 AND TAXABLE SERIES 2001A-2, PAYABLE SOLELY FROM REVENUES PLEDGED PURSUANT TO THE INDENTURE; AND AUTHORIZING THE ISSUANCE, SALE, AND DELIVERY OF ITS MULTIFAMILY HOUSING REVENUE NOTE (CREST VIEW ONDCI PROJECT), SUBORDINATE SERIES 200lB, PAYABLE SOLEY FROM REVENUES PLEDGED PURSUANT TO A NOTE AGREEMENT; APPROVING THE FORM OF AND AUTHORIZING THE EXECUTION AND DELIVERY OF THE BONDS AND THE NOTE AND RELATED DOCUMENTS; AND PROVIDING FOR THE SECURITY, RIGHTS, AND REMEDIES WITH RESPECT TO THE BONDS AND THE NOTE WHEREAS, the City of Columbia Heights, Minnesota (the "City"), is a home rule city and political subdivision duly organized and existing under its Charter and the Constitution and laws of the State of Minnesota; and WHEREAS, pursuant to the Constitution and laws of the State of Minnesota, particularly Minnesota Statutes, Chapter 462C, as amended (the "Act"), the City is authorized to carry out the public purposes described therein and contemplated thereby by issuing its revenue bonds or other obligations to make a loan to finance a multifamily housing development, including the financing of the costs of the acquisition and preparation of a site and the construction of a new multifamily housing development for rental primarily to elderly persons; and WHEREAS, a multifamily housing development may consist of a multifamily housing development and a new health care facility if: (i) the multifamily housing development is designed and intended to be used for rental occupancy; (ii) the multifamily housing development is designed and intended to be used primarily by elderly or physically handicapped persons; and (iii) nursing, medical, personal care, and other health related assisted living services are available on a 24-hour basis in the development to the residents; and WHEREAS, in the issuance of its revenue bonds or obligations and in the making of a loan to finance a multifamily housing development the City may exercise, within its corporate limits, any of the powers that the Minnesota Housing Finance Agency may exercise under Minnesota Statutes, Chapter 462A, as amended, without limitation under the provisions of Minnesota Statutes, Chapter 475, as amended; and WHEREAS, Crest View ONDC I, a Minnesota nonprofit corporation (the "Borrower"), has requested that the City issue its multifamily housing revenue bonds trader the Act and lend the proceeds thereof to the Borrower to finance a multifamily housing development to be known as Crest View on 42nd and described as follows: (i) a 50-unit assisted living facility for occupancy by elderly persons comprised of forty-one (41) units of conventional assisted living units and nine (9) special care units; (ii) to be housed in a single three-story building of approximately 40,000 square feet; and (iii) to be located at 916-42nd Avenue N. E. in the City (the "Project"); and WHEREAS, the City has prepared a housing program (the "Housing Program" or "Program"), a copy of which is on file with the City, to authorize the issuance by the City of up to $6,250,000 in revenue bonds to finance the acquisition, construction, and equipping by the Borrower of the Project; and WHEREAS, the Housing Program was prepared and submitted to the Metropolitan Council for its review on February 1, 2001; and WHEREAS, following the publication of a notice (the "Public Notice") of a public heating (in which a general, functional description of the Project was provided, as well as the maximum aggregate face amount of the obligations to be issued with respect to the Project, the identity of the initial owner, operator, or manager of the Project, and the location of the Project by street address) in a newspaper circulating generally in the City at least fifteen (15) days before the regularly-scheduled meeting of the City Council of the City on February 26, 2001, the City Council conducted a public hearing at which a reasonable opportunity was provided for interested individuals to express their views, both orally and in writing, on the Housing Program and the proposed issuance of the Bonds (as defined below), and the location and nature of the Project; and WHEREAS, the proceeds derived from the sale by the City of its Multifamily Housing Revenue Bonds (GNMA Collateralized Mortgage Loan--Crest View ONDC I Project), Series 200lA-1 (the "Series A-1 Bonds"), and Multifamily Housing Revenue Bonds (GNMA Collateralized Mortgage Loan~Crest View ONDC I Project), Taxable Series 2001A-2 (the "Series 2001A-2 Bonds", and collectively with the Series 200lA-1 Bonds, the "Bonds") to be issued to finance the Project will be loaned to the Borrower pursuant to the terms of a Financing Agreement, dated as of October 1, 2001 (the "Financing Agreement"), between the City, the Borrower, Reilly Mortgage Group, Inc. (the "Lender"), and U.S. Bank Trust National Association, as trustee (the "Trustee"), whereby the City will apply the proceeds derived from the sale of the Bonds to fund a loan (the "Mortgage Loan") by the Lender to the Borrower, to be evidenced by a promissory note (the "Mortgage Note") of the Borrower, secured by a mortgage lien (the "Mortgage") on the Project and to be insured by the Federal Housing Administration ("FHA"), and upon endorsement of the Mortgage Loan by the FHA, the Lender is to issue and deliver to the Trustee, as security for the Bonds, a security (the "GNMA Security") issued by the Lender and guaranteed as to timely payment of principal and interest by the Government National Mortgage Association ("GNMA"); and WHEREAS, the Bonds will be issued under a Trust Indenture, dated as of October 1, 2001 (the "Indenture"), between the City and the Trustee, and the Bonds and the interest on the Bonds: (i) shall be payable solely from the revenues pledged therefor; (ii) shall not constitute a debt of the City within the meaning of any constitutional or statutory limitation; (iii) shall not constitute nor give rise to a pecuniary liability of the City or a charge against its general credit or taxing powers; and (iv) shall not constitute a charge, lien, or encumbrance, legal or equitable, upon any property of the City other than the City's interest in the Project and the Financing Agreement; and WHEREAS, the proceeds derived from the sale by the City of its Multifamily Housing Revenue Note (Crest View ONDC I Project), Subordinate Series 200lB (the "Note"), to be 2 issued to finance the Project will be loaned to the Borrower pursuant to the terms of a Note Agreement, dated as of October 1, 2001 (the "Note Agreement"), between the City and the Borrower, and applied by the Borrower to the payment of certain costs of the Project; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF COLUMBIA HEIGHTS, MINNESOTA, AS FOLLOWS: 1. The City acknowledges, rinds, determines, and declares that the issuance of the Bonds and the Note is authorized by the Act and is consistent with the purposes of the Act and that the issuance of the Bonds and the Note and the other actions of the City under the Indenture, the Financing Agreement, the Note Agreement, and this resolution constitute a public purpose and are in the best interests of the City. 2. The City understands that the Borrower will pay directly or through the City any and all costs incurred by the City in connection with the Program, whether or not the Project is completed, and whether or not the Bonds are issued. 3. For the purposes set forth above, there is hereby authorized the issuance, sale, and delivery of the Bonds in one or more series in the maximum aggregate principal amount not to exceed $5,200,000. The Bonds shall bear interest at the rates, shall be designated, shall be numbered, shall be dated, shall mature, shall be subject to redemption prior to maturity, shall be in such form, and shall have such other terms, details, and provisions as are prescribed in the Indenture, in the form now on rile with the City, with the amendments referenced herein. The City hereby authorizes the Bonds to be issued, in whole or in part, as "tax-exempt bonds" the interest on which is not includable in gross income for federal and State of Minnesota income tax purposes. All of the provisions of the Bonds, when executed as authorized herein, shall be deemed to be a part of this resolution as fully and to the same extent as if incorporated verbatim herein and shall be in full rome and effect from the date of execution and delivery thereof. The Bonds shall be substantially in the forms in the Indenture on file with the City, which forms are hereby approved, with such necessary and appropriate variations, omissions and insertions (including changes to the aggregate principal amount of the Bonds, the stated maturities of the Bonds, the interest rates on the Bonds, the terms of redemption of the Bonds, and variation from City policies regarding methods of offering conduit bonds) as the Mayor and the City Manager (the "Mayor" and "City Manager"), in their discretion, shall determine. The execution of the Bonds with the manual or facsimile signatures of the Mayor and the City Manager and the delivery of the Bonds by the City shall be conclusive evidence of such determination. 4. The Bonds shall be special limited obligations of the City payable solely from the revenues provided by the Borrower pursuant to the Financing Agreement, and other funds pledged pursuant to the Indenture. The City Council of the City hereby authorizes and directs the Mayor and the City Manager to execute and deliver the Indenture, and to deliver to said Trustee the Indenture, and hereby authorizes and directs the execution of the Bonds in accordance with the terms of the Indenture, and hereby provides that the Indenture shall provide the terms and conditions, covenants, rights, obligations, duties and agreements of the owners of the Bonds, the City and the Trustee as set forth therein. All of the provisions of the Indenture, when executed as authorized herein, shall be deemed to be a part of this resolution as fully and to the same extent as if incorporated verbatim herein and shall be in full force and effect from the date of execution and delivery thereof. The Indenture shall be substantially in the form on file with the City, which is hereby approved, with such necessary and appropriate variations, omissions and insertions as do not materially change the substance thereof, or as the Mayor and the City Manager, in their discretion, shall determine, and the execution thereof by the Mayor and the City Manager shall be conclusive evidence of such determination. 5. The Mayor and City Manager are hereby authorized and directed to execute and deliver the Indenture, the Financing Agreement, and the Bond Purchase Agreement, between the City, U.S. Bancorp Piper Jaffi'ay Inc.(the "Underwriter"), and the Borrower (the "Bond Pumhase Agreement"). All of the provisions of the Indenture, Financing Agreement, and Bond Purchase Agreement, when executed and delivered as authorized herein, shall be deemed to be a part of this resolution as fully and to the same extent as if incorporated verbatim herein and shall be in full force and effect from the date of execution and delivery thereof. The Indenture, Financing Agreement, and Bond Purchase Agreement shall be substantially in the forms on file with the City which are hereby approved, with such omissions and insertions as do not materially change the substance thereof, or as the Mayor and the City Manager, in their discretion, shall determine, and the execution thereof by the Mayor and the City Manager shall be conclusive evidence of such determination. 6. The Bonds shall be revenue obligations of the City the proceeds of which shall be disbursed pursuant to the terms of the Indenture and the Financing Agreement, and the principal, premium, and interest on the Bonds shall be payable solely from the proceeds of the Bonds, the revenues derived from the Financing Agreement, and the other sources set forth in the Indenture. Bonds. The Trustee is hereby appointed as Paying Agent and Bond Registrar for the 8. The Mayor and City Manager of the City are hereby authorized to execute and deliver, on behalf of the City, such other documents as are necessary or appropriate in connection with the issuance, sale, and delivery of the Bonds and the Note, including the City Tax Certificate, the Tax Exemption Agreement, the Information Return for Tax-Exempt Private Activity Bond Issues, Form 8038, and all other documents and certificates as shall be necessary and appropriate in connection with the issuance, sale, and delivery of the Bonds and the Note. The City hereby approves the execution and delivery by the Trustee of the Indenture and all other instruments, certificates, and documents prepared in conjunction with the issuance of the Bonds and the Note that require execution by the Trustee. The City hereby authorizes Kennedy & Graven, Chartered, as bond counsel of the City, to prepare, execute, and deliver its approving legal opinions with respect to the Bonds and the Note. 9. The City has not participated in the preparation of the Official Statement relating to the offer and sale of the Bonds (the "Official Statement"), and has made no independent investigation with respect to the information contained therein, including the appendices thereto, and the City assumes no responsibility for the sufficiency, accuracy, or completeness of such information. Subject to the foregoing, the City hereby consents to the distribution and the use by the Underwriter in connection with the sale of the Bonds of the Official Statement, in the form on file with the City, and deems such Official Statement to be a "near final official statement" as of its date, as defined in Securities and Exchange Commission Rule 15c2-12. The Official Statement is the sole material consented to by the City for use in connection with the offer and sale of the Bonds. The City hereby approves the Continuing Disclosure Agreement, dated as of October 1, 2001 (the "Continuing Disclosure Agreement"), between the Borrower and the Trustee, in the form now on file with the City, and hereby authorizes the Trustee to execute and deliver the Continuing Disclosure Agreement. I0. Except as otherwise provided in this resolution, all rights, powers and privileges conferred and duties and liabilities imposed upon the City or the City Council by the provisions of this resolution or of the aforementioned documents shall be exercised or performed by the City or by such members of the City Council, or such officers, board, body or agency thereof as may be required or authorized by law to exercise such powers and to perform such duties. No covenant, stipulation, obligation or agreement herein contained or contained in the aforementioned documents shall be deemed to be a covenant, stipulation, obligation or agreement of any member of the City Council of the City, or any officer, agent or employee of the City in that person's individual capacity, and neither the City Council of the City nor any officer or employee executing the Bonds or the Note shall be liable personally on the Bonds or the Note or be subject to any personal liability or accountability by reason of the issuance thereof. No provision, covenant or agreement contained in the aforementioned documents, the Bonds, the Note, or in any other document relating to the Bonds or the Note, and no obligation therein or herein imposed upon the City or the breach thereof, shall constitute or give rise to any pecuniary liability of the City or any charge upon its general credit or taxing powers. In making the agreements, provisions, covenants, and representations set forth in such documents, the City has not obligated itself to pay or remit any funds or revenues, other than funds and revenues derived from the Financing Agreement which are to be applied to the payment of the Bonds, as provided therein and in the Indenture, and other than funds and revenues derived from the Note Agreement which are to be applied to the payment of the Note, as provided therein. 11. Except as herein otherwise expressly provided, nothing in this resolution or in the aforementioned documents expressed or implied, is intended or shall be construed to confer upon any person or firm or corporation, other than the City, any holder of the Bonds, or any holder of the Note issued under the provisions of this resolution, any right, remedy or claim, legal or equitable, under and by reason of this resolution or any provisions hereof, this resolution, the aforementioned documents, and all of their provisions being intended to be and being for the sole and exclusive benefit of the City, and any holder from time to time of the Bonds or the Note issued under the provisions of this resolution. 12. In case any one or more of the provisions of this resolution, other than the provisions contained in the first sentence of Section 4 hereof, or of the aforementioned documents, or of the Bonds or the Note issued hereunder shall for any reason be held to be illegal or invalid, such illegality or invalidity shall not affect any other provision of this resolution, or of the aforementioned documents, or of the Bonds, or of the Note, but this resolution, the aforementioned documents, and the Bonds and the Note shall be construed and endorsed as if such illegal or invalid provisions had not been contained therein. 13. The Bonds, when executed and delivered, shall contain a recital that they are issued pursuant to the Act, and such recital shall be conclusive evidence of the validity of the Bonds and the regularity of the issuance thereof, and that all acts, conditions, and things required by the laws of the State of Minnesota relating to the adoption of this resolution, to the issuance of the Bonds, and to the execution of the aforementioned documents to happen, exist, and be 5 performed precedent to the execution of the aforementioned documents have happened, exist, and have been performed as so required by law. 14. For the purpose of providing additional financing for the Project, the Note, to be dated as of October 1, 2001, is hereby authorized to be issued by the City in the original aggregate principal amount of not to exceed $200,000. The City hereby authorizes the Note to be issued, in whole or in part, as a "tax-exempt bond" the interest on which is not includable in gross income for federal and State of Minnesota income tax purposes. The Note shall be issued in one or more series, shall bear interest at such rate, shall be in such denomination, shall be numbered, shall be dated, shall mature, shall be subject to redemption prior to maturity, shall be in such form, and shall have such other details and provisions as are prescribed in the Note substantially in the form on file with the City on the date hereof, which is hereby approved, with such necessary variations, omissions, and insertions (including changes to the aggregate principal amount of the Note, the stated maturity of the Note, the interest rates on the Note, the terms of redemption of the Note, and variation from City policies regarding methods of offering conduit bonds) as the Mayor and the City Manager, in their discretion, shall determine. The execution of the Note with the manual or facsimile signatures of the Mayor and the City Manager and the delivery of the Note by the City shall be conclusive evidence of such determination. 15. The proceeds derived from the sale of the Note are to be loaned to the Borrower pursuant to the terms of the Note Agreement. The Borrower is required to make loan repayments (the "Loan Repayments") under the Note Agreement on such dates and in such amounts to provide revenues sufficient to pay the principal of and interest on the Note when due. The Loan Repayments are to be assigned to the holders of the Note pursuant to the terms of an Assignment of Note Agreement, to be dated as of October 1, 2001 (the "Assignment"). The Mayor and City Manager are hereby authorized and directed to execute and deliver the Note, the Note Agreement, and the Assignment. All of the provisions of the Note, the Note Agreement, and the Assignment, when executed and delivered as authorized herein, shall be deemed to be a part of this resolution as fully and to the same extent as if incorporated verbatim herein and shall be in full force and effect from the date of execution and delivery thereof. The Note, the Note Agreement, and the Assignment shall be substantially in the forms on file with the City which are hereby approved, with such omissions and insertions as do not materially change the substance thereof, or as the Mayor and the City Manager, in their discretion, shall determine, and the execution thereof by the Mayor and the City Manager shall be conclusive evidence of such determination. 16. The Note shall be a revenue obligation of the City the proceeds of which shall be disbursed pursuant to the terms of the Note Agreement, and the principal, premium, and interest on the Note shall be payable solely from the proceeds of the Note and the revenues derived from the Note. Payment of the Note is expressly subordinated to the payment of the Bonds and the Note is not secured by any interest in the Project. The Note, when executed and delivered, shall contain a recital that it is issued pursuant to the Act, and such recital shall be conclusive evidence of the validity of the Note and the regularity of the issuance thereof, and that all acts, conditions, and things required by the laws of the State of Minnesota relating to the adoption of this resolution, to the issuance of the Note, and to the execution of the aforementioned documents to happen, exist, and be performed precedent to the execution of the aforementioned documents have happened, exist, and have been performed as so required by law. 6 17. The officers of the City, bond counsel, other attorneys, engineers, and other agents or employees of the City are hereby authorized to do all acts and things required of them by or in connection with this resolution, the aforementioned documents, and the Bonds and the Note for the full, punctual, and complete performance of all the terms, covenants, and agreements contained in the Bonds and the Note, the aforementioned documents, and this resolution. In the event that for any reason the Mayor of the City is unable to carry out the execution of any of the documents or other acts provided herein, any other member of the City Council of the City shall be authorized to act in his capacity and undertake such execution or acts on behalf of the City with full force and effect, which execution or acts shall be valid and binding on the City. If for any reason the City Manager of the City is unable to execute and deliver the documents referred to in this Resolution, such documents may be executed by any member of the City Council or any officer of the City delegated the duties of the City Manager, with the same force and effect as if such documents were executed and delivered by the City Manager of the City. 18. This resolution shall be in full force and effect fi.om and after its passage. Adopted this day of September ,2001. Motion by: Second by: Roll Call: Mayor Gary L. Peterson Patricia Muscovitz, Deputy City Clerk PRELIMINARY OFFICIAL STATEMENT DATED OCTOBER ,2001 This Moody's: Aaa Expected Preliminary NEW ISSUE - BOOK-ENTRY ONLY Official Statement In the opinion of Bond Counsel. according to existing Minnesota ami federal laws, regulations, rulings and judicial decisions, as of their date of issuance, and the except as described under the heading "TAX MA TTERS" herein, the Bonds bear interest that is not includable in gross income for purposes of federal income information taxation and isnotincludable, to the sameextent, in taxable netincomeofindividuals, estates ortrustsforMinnesotaincometaxpurposes. [nterest on the Bonds is contained subject to the Minnesota franchise tax imposed on corporations, including financial institutions. Interest on the Bonds is not an item of tax preference for purposes herein are of the federal or Minnesota alternative minimum taxes applicable to individuals but such interest is includable in adjusted current earnings for the purpose of subj¢¢t[o determining the alternative minimum taxab~e inc~me ~f c~rp~rati~ns f~r purp~es ~f the federa~ and Minnes~ta alterna~!ve minimu~ t~ax,~es. T~e Bonds will be Cor°mplett°n designatedas "quali~edta~exempt~bligati~ns"withinthemeaning~fSecti~n265(b~(3)~fthe~nternalRevenueC~de. See T~U(M,4JTERS herem. amendment. $ securities CITY OF COLUMBIA HEIGHTS, MINNESOTA may not be sold nor may MULTIFAMILY HOUSING REVENUE BONDS offers to buy (GNMA COLLATERALIZED MORTGAGE LOAN - be accepted p~or to ;he CREST VIEW ONDC I PROJECT) time the SERIES 2001 Official Due: As shown on inside cover hereto Statement iSDated: October l, 2001 delivered in- final form. The City of Columbia Heights, Minnesota (the "Issuer") is issuing $ in aggregate principal amount of its Multifamily Under no . cireumstanc~OUsmg Revenue Bonds (GNMA Collateralized Mortgage Loan - Crest View ONDC [ Project), Series 2001 (the "Bonds"), pursuant to an $ shall this Indenture of Trust, dated as of October 1, 2001 (the "Indenture"), between the Issuer and U.S. Bank Trust National Association, Saint Paul, Preliminary Minnesota (the "Trustee"). The Bonds will bear interest from their dated date, payable semiannually on each April 20 and October 20, commencing Official April 20 2001 The Bonds are issuab e as fully registered Bonds in denominations of $5,000 or whole multiples thereof. The purchasers of the Statement . ' .... constitute av~onds w~ I not recetve certtficates represent ng the r nterests tn the Bonds. The Bonds will be registered in the name of Cede & Co., as registered offer to sell owner and nominee of The Depository Trust Company, New York, New York. Principal of, premium, if any, and interest on the Bonds are payable or ~hq . by the Trustee to Cede & Co. See "BOOK-ENTRY ONLY SYSTEM" herein. of an offer to The Bonds are special, limited obligations of the Issuer and are being issued in order to finance the acquisition, development, construction therebUy norbe shallandan eauinnin~,~ ,.,. ,0 of a 50-unit assisted-living facility consisting of 41 traditional assisted-living units and 9 memory care units' (the "Project")' .tha! is' sale ortho'located in Columbia Heights, Minnesota. The Project will be owned by Crest View ONDC I, a Minnesota nonprofit corporation and organlzatton securitiesindescribed in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Borrower"). The proceeds of the Bonds will finance a 5n~' . . mortizaee loan to the Borrower In the original principal amount of $ (the "Mortgage Loan"), which is insured by the Federal Housing in which Adm n strat on ( FHA ) of the U.S. Department of Housmg and Urban Developmant such offer, solicitation The Bonds are secured primarily by a fully-modified pass-through mortgage-backed security (the "GNMA Security") guaranteed as to or sale timely payment of principal and interest by the Govemmant National Mortgage Association ("GNMA"). The GNMA Security will be issued by would be Reilly Mortgage Group, Inc., a D strict of Columbia corporation (the "Lender") and will be held b,y,,the Trustee. The GNMA Security will bo unlawful prior to backed by the Mortgage Loan. See "THE GNMA MORTGAGE-BACKED SECURITIES PROGRAM herein. In add t on to the GNMA Security, registration and prior to their issuance, the Bonds will be secured by amounts held by the Trustee in the trust funds. qualification The Bonds are subject to optional redemption, mandatory sinking fund redemption and extraordinary mandatory redemption as described under the herein. See "THE BONDS - Redemption Prior to Maturity" herein. Any person who purchases a Bond at a price above par should consider first securities laws of any that such premium may be lost in the event the Bond is redeemed prior to maturity. See "BONDHOLDERS' RISKS" herein. such THE BONDS AND THE INTEREST THEREON ARE LIMITED OBLIGATIONS OF THE ISSUER. PAYABLE ONLY FROM THE JurisdictiOn'soURCES DESCRIBED IN THE INDENTURE. NEITHER THE ISSUER, THE STATE OF MINNESOTA (THE "STATE") NOR ANY OTHER POLITICAL SUBDIVISION OR AGENCY THEREOF SHALL BE OBLIGATED TO PAY THE PRINCIPAL OF SUCH BONDS OR THE INTEREST THEREON OR OTHER COSTS INCIDENT THERETO EXCEPT FROM THE MONEY PLEDGED THEREFOR. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE ISSUER, THE STATE, OR ANY POLITICAL SUBDIVISION OR AGENCY THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE BONDS OR OTHER COSTS INCIDENT THERETO. THE BONDS ARE NOT A DEBT OF THE UNITED STATES OF AMERICA, HUD, FHA. GNMA OR ANY OTHER AGENCY THEREOF AND ARE NOT GUARANTEED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA. This cover page contains only a brief description of the Issuer, the Bonds and the security therefor. It is not intended to be a summary of material information with respect to the Bonds. Investors should read this entire Official Statement to obtain information necessary to make an informed investment decision. The Bonds are offered when, as and if issued and subject to approval of the legality of the Bonds and the tax exempt status of the Bonds by Kennedy & Graven. Chartered, Minneapolis. Minnesota, Bond Counsel. Certain legal matters will be passed upon for the Borrower by Oppenheimer. Wolff& Donnelly LLP. Minneapolis, Minnesota. Faegre & Benson LLP. Minneapolis, Minnesota, will pass upon certain legal matters for the Underwriter. and Krooth & .4ltman LLP, Washington, D.C., will pass upon certain legal matters for the Lender. It is expected that the Bonds will be available for delivery in definitive form in New York, New York, on or about October 24. 2001. U.S. BANCORP PIPER JAFFRAY INC. The date of this Official Statement is October ~ 2001. MATURITY SCHEDULE Maturity Princioal ( ) Amount Interest Maturity Princival Interest Rate Price ( ) Amount Rate Price $ $ % Term Bonds Maturing ,20 and Priced at --% Term Bonds Maturing ,20 and Priced at % % (Plus accrued interest from October 1,2001) The information contained in this Official Statement has been obtained from the Issuer, the Borrower, the Lender and other sources which are believed to be reliable, but no representation or guarantee is made as to the accuracy or completeness of such information, and nothing contained in this Official Statement is, or will be construed or relied upon as, a promise or representation of the Issuer or the Underwriter. The Issuer makes no representation as to the accuracy or completeness of the information contained herein other than information relating to the Issuer. The information and expressions of opinion contained herein are subject to change without notice, and neither the delivery of this Official Statement nor the sale of any of the Bonds will create, under any circumstances, any implication that there has been no change in the affairs of the Issuer, the Lender or the Borrower, or imply that the information contained herein is correct as of any time subsequent to the date hereof. No dealer, salesman or any other person has been authorized to give any information regarding the Bonds other than that contained in this Official Statement, or to make any representation in connection therewith, and, if given or made, such information or representations must not be relied upon as having been authorized by the Issuer, the Borrower, the Lender or the Underwriter. This Official Statement does not constitute an offer to sell or a solicitation of an offer to buy any of the Bonds in any state to any person to whom it is unlawful to make such offer in such state. IN CONNECTION WITH TI-HS OFFERING, TI4E UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. TABLE OF CONTENTS Page INTRODUCTION ............................................................................................................................................................................ BONDHOLDERS' RISKS ............................................................................................................................................................... THE BONDS ................................................................................................................................................................................... BOOK-ENTRY ONLY SYSTEM ..................................................................................................................................... SECURITY AND SOURCES OF PAYMENT FOR THE BONDS ............................................................................................... 1 ! THE MORTGAGE NOTE AND MORTGAGE ............................................................................................................................. 12 THE GNMA MORTGAGE-BACKED SECURITIES PROGRAM ............................................................................................... 13 THE ISSUER .................................................................................................................................................................................. 16 THE PROJECT AND THE PRIVATE PARTICIPANTS .............................................................................................................. 16 SOURCES AND USES OF FUNDS .............................................................................................................................................. ~09 TAX MATTERS ............................................................................................................................................................................. ABSENCE OF LITIGATION ......................................................................................................................................................... 21 LEGAL MA ERS ........................................................................................................................................................................ UNDERWRITING .......................................................................................................................................................................... ENFORCEABILITY OF REMEDIES ............................................................................................................................................ 22 RATING ......................................................................................................................................................................................... LAT,ONS"IP' ONG THE PARTIES .................................................................................................................................. OTHER MATTERS ........................................................................................................................................................................ 22 APPENDIX A DEFINITION OF CERTAIN TERMS ............................................................................................................... A-1 APPENDIX B SUMMARY OF THE INDENTURE ................................................................................................................. B-l APPENDIX C SUMMARY OF THE FINANCING AGREEMENT ......................................................................................... C-l APPENDIX D SUMMARY OF THE CONTINUING DISCLOSURE AGREEMENT ............................................................ D-l APPENDIX E FORM OF BOND COUNSEL OPINION .......................................................................................................... E-I iii S~Y The descriptions and summaries of various documents hereinafter set forth do not purport to be comprehensive or definitive, and reference is made to each document for the complete details of all terms and conditions. All statements herein are qualified in their entirety by reference to each document and the detailed information appearing elsewhere in this Official Statement and Appendices hereto. DATED The Bonds are dated October I, 2001. RATING Moody's rating of"Aaa" - Expected. ISSUER BORROWER City of Columbia Heights, Minnesota. The Borrower is Crest View ONDC I, a Minnesota nonprofit corporation and tax- exempt organization. See "THE PROJECT AND THE PRIVATE PARTICIPANTS" herein. LENDER FINANCING STRUCTURE PROJECT THEBONDS Reilly Mortgage Group, Inc., a District of Columbia corporation. See "THE PROJECT AND THE PRIVATE PARTICIPANTS." The Bonds are being issued pursuant to the Indenture, and the proceeds will be applied to finance the acquisition, development, construction and equipping of the Project. The proceeds are deemed loaned to the Borrower pursuant to the Financing Agreement. The Bonds will be secured primarily by a fully-modified pass-through mortgage-backed security issued by the Lender, guaranteed as to principal and interest by GNMA and backed by a Mortgage Loan from the Lender to the Borrower. The Project is a 50-unit assisted-living facility consisting of 41 traditional assisted- living units and 9 memory care units that is located in Columbia Heights, Minnesota. The Bonds are issued in book-entxy only fonn. The Bonds bear interest payable semi- annually on each April 20 and October 20, commencing April 20, 2001. See "THE BONDS" herein. OPTIONAL AND MANDATORY CALLS SECURITY BONDHOLDERS' RISKS The Bonds are subject to optional, mandatory sinking fund and extraordinary mandatory call provisions. See "THE BONDS - Redemption Prior to Mamfity" herein. The Bonds are secured under the Indenture by (i) all right, title and interest of the Issuer in and to the Financing Agreement (except for certain unassigned fights) and the Tax Regulatory Agreement; (ii) all right, title and interest of the Issuer in the GNMA Security; (iii) the funds (except the Rebate Fund), held by the Trustee under the Indenture; and (iv) all funds, moneys and securities and any and all other rights and interests in property conveyed and pledged as additional security. The Bonds involve a certain degree of investment risk. Certain of the investment risks involved include, without limitation, (i) that the Bonds are limited, non-recourse obligations of the Issuer, payable solely from the revenues received by the Issuer from the Borrower, the GNMA Security and certain funds held by the Trustee; (ii) that the Bonds are subject to early redemption as set forth herein; and (iii) that the interest on the Bonds could be deternuned to be includable in gross income for purposes of federal income tax. For a more complete description of Bondholders' Risks, See "BONDHOLDERS' RISKS" herein. OFFICIAL STATEMENT $ City of Columbia Heights, Minnesota Multifamily Housing Revenue Bonds (GNMA Collateralized Mortgage Loan - Crest View ONDC I Project) Series 2001 INTRODUCTION This Official Statement sets forth certain information concerning the City of Columbia Heights, Minnesota (the "Issuer"), a duly organized and existing municipal corporation of the State of Minnesota (the "State") created and existing under its home role charter and the Constitution and laws of the State, and the issuance and sale by the Issuer of $ in aggregate principal amount of its Multifamily Housing Revenue Bonds (GNMA Collateralized Mortgage Loan - Crest View ONDC I Project), Series 2001 (the "Bonds"). The Bonds will be issued under and secured by an Indenture of Trust, dated as of October 1, 2001 (the "Indenture"), between the Issuer and U.S. Bank Trust National Association, Saint Paul, Minnesota, as trustee (the "Trustee"). The Bonds are issued for the purpose of providing funds to make a loan (the "Mortgage Loan") to Crest View ONDC I, a Minnesota nonprofit corporation (the "Borrower"), in order to finance the acquisition, development, construction and equipping of a 50-unit assisted-living facility consisting of 41 traditional assisted-living units and 9 memory care units that is located in Columbia Heights, Minnesota (the "Project"), as more fully set forth in the Financing Agreement, dated as of October 1, 2001 (the "Financing Agreement"), by and among the Issuer, the Trustee, the Borrower and Reilly Mortgage Group, Inc., a District of Columbia corporation (the "Lender"). The Mortgage Loan will be insured by the Federal Housing Administration ("FHA") within the United States Department of Housing and Urban Development. Capitalized terms used herein which are not defined herein or in Appendix A hereto will have the meanings set forth in the Indenture or the Financing Agreement. A summary of the Indenture is included herein as Appendix B, to which reference is made for provisions concerning, among other things: (i) the issuance of the Bonds and the revenues pledged as security therefor; (ii) the application of the proceeds of the Bonds; (iii) the application of moneys to be received from the Lender pursuant to the GNMA Security (herein described); (iv) events of default and the exercise of remedies for the benefit of the Bondholders; (v) the rights and obligations of the Issuer and the Trustee; and (vi) amendments and supplements to the Indenture and the Financing Agreement. A summary of the Financing Agreement is included in Appendix C. Issuer The issuer of the Bonds is the City of Columbia Heights, Minnesota. See "THE ISSUER" herein. GNMA Security The Bonds will be secured primarily by a fully-modified mortgage-backed security in the aggregate principal amount of $ (the "GNMA Security"), to be issued by the Lender, guaranteed as to principal and interest by the Government National Mortgage Association ("GNMA"), and backed by the Mortgage Loan from the Lender to the Borrower. See "THE GNMA MORTGAGE- BACKED SECURITIES PROGRAM" herein. [Prior to the acquisition of the GNMA Security, the Bonds will be secured by amounts held by the Trustee and invested under an investment agreement. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS - Investment Agreement."] In addition to the GNMA Security, the Bonds will be secured by amounts held by the Trustee as part of the trust estate. The Bonds The Bonds are available in book-entry only form. See "BOOK-ENTRY ONLY SYSTEM" herein. So long as Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"), is the registered owner of the Bonds, references herein to the Bondholders or registered owners of the Bonds means Cede & Co. and not the beneficial owners of the Bonds. The Bonds are issued as fully registered Bonds in denominations of $5,000 or any integral multiple thereof. See "THE BONDS" herein. The Bonds are subject to optional redemption prior to maturity as a whole or in part on the earliest practicable Business Day on or after ~ 20 , upon payment of the redemption prices set forth under "THE BONDS - Redemption Prior to Maturity - Optional Redemption" herein. The Bonds are also subject to extraordinary mandatory redemption and mandatory sinking fund redemption as described under "THE BONDS - Redemption Prior to Maturity - Extraordinary Mandatory Redemption" and "- Mandatory Sinking Fund Redemption" herein. Any person who purchases a Bond at a price above par should consider first that such premium may be lost in the event that the Bond is redeemed prior to maturity. See "BONDHOLDERS' RISKS" herein. Tax Exemption of Bonds In the opinion of Bond Counsel, under existing law and assuming continuous compliance with certain provisions of the Indenture and the Financing Agreement, interest on the Bonds (a) is excludable from gross income for federal income tax purposes and (b) will not be an item of tax preference for purposes of the federal alternative minimum income tax imposed on individuals and corporations. Such interest may be included in adjusted current earnings for the purpose of computing a corporation's alternative minimum tax and a holder may be subject to other federal tax consequences as described in the section "TAX MATTERS" herein. In the opinion of Bond Counsel, under existing law, interest on the Bonds will be excluded from net taxable income of individuals, trusts and estates for purposes of Minnesota income taxation (other than Minnesota franchise taxes imposed on corporations and institutions measured by income). Summary of Plan of Finance; Subordinate Bonds The Issuer is simultaneously issuing its $ Subordinate Multifamily Housing Revenue Bonds (Crest View ONDC I Project), Series 2001 (the "Subordinate Bonds"), to finance additional costs of acquisition and construction of the Project. The Subordinate Bonds are not offered hereby, and are not secured by the Indenture or the GNMA Securities. [M1LCA Discussion] Certain Legal and Other Matters The Issuer has appointed U.S. Bank Trust National Association, Saint Paul, Minnesota, to serve as the Trustee under the Indenture. Certain legal matters relating to the authorization and validity of the Bonds will be passed upon by Kennedy & Graven, Chartered, Minneapolis, Minnesota, as Bond Counsel. Certain legal matters will be passed upon for the Borrower by its counsel, Oppenheimer, Wolff & Donnelly LLP, Minneapolis, Minnesota; for the Underwriter by its counsel, Faegre & Benson LLP, Minneapolis, Minnesota; and for the Lender by its counsel, Krooth & Altman LLP, Washington, D.C. 2 Authority; Issuance and Delivery of Bonds The Bonds are being issued under authority contained in the Constitution and laws of the State of Minnesota, particularly Minnesota Statutes, Chapter 462C, as amended (the "Act"). The Bonds are offered when, as and if issued and received by the Underwriter, subject to the approving opinion of Bond Counsel. It is expected that the Bonds will be available for delivery in book- entry only form to DTC in New York, New York, on or about October 24, 2001. Continuing Disclosure Continuing disclosure regarding the Bonds will be made public by the Borrower pursuant to undertakings set forth in the Continuing Disclosure Agreement, dated as of October 1, 2001 (the "Disclosure Agreement"), by and between the Borrower and the Trustee as dissemination agent thereunder, which undertakings are designed to be substantially in compliance with Rule 15c2-12 under the Securities Exchange Act of 1934, as amended (the "Rule"). An annual disclosure report containing financial and operating data of the type disclosed in this Official Statement and notices of material events will be provided to each Nationally Recognized Municipal Securities Information Repository (the "Repositories'). A summary of the Disclosure Agreement is included herein as Appendix D. Miscellaneous The information contained herein is current as of the date of this Official Statement set forth on the cover page hereof. The information contained herein is subject to change after such date. The Issuer has not provided information regarding GNMA or the Borrower, and does not certify as to the accuracy or sufficiency of the information regarding GNMA or the Borrower, and is not responsible for such information provided herein. Additional Information Brief descriptions of the Issuer, the Bonds, the security for the Bonds, the Borrower, the Project, the Indenture, the Financing Agreement, the Disclosure Agreement, the GNMA Security, the Mortgage Note and the Mortgage are included in this Official Statement and the Appendices hereto. All references herein to the Indenture, the Financing Agreement, the GNMA Security, the Mortgage Note and the Mortgage and other documents and agreements are qualified in their entirety by reference to such documents and agreements, copies of which are, or upon their execution will become, available for inspection at the offices of the Trustee and the Issuer. BONDHOLDERS' RISKS Limited Security The Bonds are limited obligations of the Issuer payable solely from certain funds pledged to and held by the Trustee pursuant to the Indenture. The funds pledged include only the Borrower's payments on the Mortgage Loan, the payment of which is insured by FHA and guaranteed by GNMA, but no other funds or assets of the Borrower are or will be available to pay the Bonds. Early Redemption Purchasers of Bonds, including those who purchase Bonds at a price in excess of their principal amount or who hold Bonds trading at a price in excess of par, should consider the fact that the Bonds are subject to scheduled mandatory sinking fund redemption and extraordinary mandatory redemption prior to maturity at a redemption price equal to their principal amount plus accrued interest, without premium. This could occur, for example, in the event construction of the Project is not completed on a timely basis and the Project Loan Certificate (the "PLC') is not delivered on or before the PLC Delivery Date (as it may be extended as provided in the Indenture) or that the Mortgage Notc is prepaid as a result of a casualty or condemnation award payments affecting the Project or there is a default under the Mortgage. In the case of certain extraordinary mandatory redemptions as described below, the redemption price may include a premium up to the amount of original issue premium generated from the sale of the Bonds; however, such premium is payable only to the extent that there remain on deposit in the Acquisition Fund amounts available to pay such premium. No assurances can be given that at the time of such extraordinary mandatory redemption there will remain on deposit amounts in the Acquisition Fund available for the payment of such premium. In particular, purchasers of Bonds should note that the Bonds are subject to extraordinary mandatory redemption, in whole or in part, under the following circumstances: (i) if CLCs in an aggregate principal amount of at least $ are not delivered to the Trustee by , 200 (or such later date as permitted by the Indenture) then in whole on the earliest practicable date, from amounts in the Acquisition Fund and the Bond Fund and from maturing principal of the CLCs, at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest thereon to the redemption date plus a remm of premium equal to the unamortized amount of original issue premium as of the Redemption Date, such premium amortization calculated on a straight-line basis from the date of issue to 20, , but only to the extent that funds are available to pay the premium; (ii) at any time or times, as soon as practicable, in whole or in part at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest thereon to the redemption date, to the extent that the Trustee receives payments on the GNMA Security in excess of regularly scheduled payments of principal and interest thereon (other than payments representing optional prepayments of the Mortgage Loan by the Borrower) including payments resulting from (A) casualty insurance proceeds or condemnation awards applied to the prepayment of the Mortgage Loan following a partial or total destruction or condemnation of the Project, (B) mortgage insurance proceeds or other amounts received with respect to the Mortgage Loan following the acceleration thereof upon the occurrence of an event of default thereunder, (C) a prepayment of the Mortgage Loan required by the applicable rules, regulations, policies and procedures of FHA or GNMA or (D) a prepayment if HUD determines that prepayment will avoid a mortgage insurance claim and is therefore in the best interest of the federal government; (iii) at any time or times, as soon as practicable without notice, in whole or in part at a redemption price equal to 100% of the principal amount of Bonds to be redeemed plus accrued interest thereon to the redemption date, to the extent the Trustee receives payments on the GNMA Security representing prepayments on the Mortgage Loan made by the Borrower without notice or prepayment penalty while under the supervision of a bankruptcy court; (iv) in the event the PLC is not delivered to the Trustee by the PLC Delivery Date (as the same may be extended as provided in the Indenture) then in whole without notice, (a) on the earliest practicable date following the PLC Delivery Date, initially in a principal amount equal to all funds remaining in the Acquisition Fund (up to $ ) and (b) thereafter, on the CLC Maturity Date, the remaining principal amount upon receipt of the principal amount of any CLC at the CLC Maturity Date, at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest thereon to the redemption date plus a return of premium equal to the unamortized amount of original issue premium as of the Redemption Date, such premium amortization calculated on a straight-line basis from the date of issue to ,20 , but only to the extent that funds are available to pay the premium; and 4 (v) in part without notice, on any date after the PLC Delivery Date, to the extent that the principal balance of the PLC delivered to the Trustee is less than $ for any reason other than because a portion of the Mortgage Loan has been amortized in a principal amount equal to the amount remaining in the Acquisition Fund plus any prepayments on the CLCs as required by the Indenture, at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest thereon to the redemption date plus a return of premium equal to the unamortized amount of original issue premium as of the Redemption Date, such premium amortization calculated on a straight-line basis from the date of issue to ,20 , but only to the extent that funds are available to pay the premium. Loss of Premium The Bonds are being sold at a price that is in excess of their principal amount. Purchasers of Bonds should consider the fact that, under certain circumstances, the Bonds are subject to redemption at a redemption price equal to the outstanding principal amount thereof plus accrued interest. As discussed above in "BONDHOLDERS' RISKS - Early Redemption", certain instances of extraordinary mandatory redemption may result in a redemption price that also includes a premium. However, payment of such premium is limited to amounts on deposit in the Acquisition Fund that are available to pay such premium, and is equal to the unamortized amount of original issue premium as of the Redemption Date, such premium amortization calculated on a straight-line basis from the date of issue to ,20__. No assurances can be given that a premium can be paid in the event of such extraordinary mandatory redemptions. See "BONDHOLDERS' RISKS - Early Redemption" and "THE BONDS - Redemption Prior to Maturity" herein, setting forth provision under the Indenture for the redemption of Bonds. Taxability of the Bonds THE BONDS ARE NOT SUBJECT TO REDEMPTION, AND THE RATE OF INTEREST ON THE BONDS IS NOT SUBJECT TO ADJUSTMENT, BY REASON OF A DETERMINATION OF TAXABILITY. Such event could occur if the Borrower (or any subsequent owner of the Project) does not comply with the provisions of the Financing Agreement and the Tax Regulatory Agreement which require the Borrower to satisfy the continuing compliance requirements of the Code in order for the interest on the Bonds to be excludable from gross income for purposes of federal income tax. Initial Endorsement of Mortgage Note; Issuance of GNMA Security; Related Bond Redemptions It is anticipated that the Trustee will acquire the PLC on or before ,200 , subject to such acquisition date being extended pursuant to the terms of the Indenture. The purchase of the GNMA Security is subject to the following conditions, among others: (i) the submission by the Lender to GNMA of certain documents required by GNMA in form and substance satisfactory to GNMA, (ii) the Lender's continued compliance, on the date of issuance of the GNMA Security, with all of GNMA's eligibility requirements, specifically including, but not limited to, certain net worth requirements, and (iii) the Lender's continued ability to issue and deliver the GNMA Security, as such ability may be affected by the Lender's bankruptcy, insolvency or reorganization. In the event that the PLC is not purchased by the Trustee on or prior to the PLC Delivery Date as a result, among other possibilities, of a failure of any of the conditions listed above, the Bonds will be subject to early redemption in whole or in part as discussed above under "Early Redemption" and under "THE BONDS - Redemption Prior to Maturity - Extraordinary Mandatory Redemption." [Investment Agreement Prior to initial endorsement of the Mortgage Note, and during the period in which CLCs are being acquired and prior to the acquisition of the PLC, Bond proceeds held in the Acquisition Fund will be invested by the Trustee in the Investment Agreement with the Investment Agreement Provider. The Investment Agreement represents the unsecured general obligation of the Investment Agreement Provider which is guaranteed by the Guarantor to provide repayment to the Trustee of such moneys invested in the Investment Agreement pursuant to the Indenture at the rate of % per annum. The Issuer and the Underwriter make no representation as to the ability of the Investment Agreement Provider or Guarantor to make payments when and as required under the Investment Agreement. Failure of the Investment Agreement Provider or the Guarantor to make the required payments would affect the ability of the Trustee to purchase CLCs and to pay principal of and interest on the Bonds fi-om the moneys invested in the Bond Fund. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS - Investment Agreement" herein. The rating shown on the cover page of this Official Statement and the timely payment of principal of and interest on the Bonds are dependent in part on the fact that certain funds will be invested in the Investment Agreement. A downgrading of the long-term credit rating of the Investment Agreement Provider may have an adverse effect on the rating assigned to the Bonds and the timely payment of principal of and interest on the Bonds.] Secondary Markets and Prices The Underwriter will not be obligated to repurchase any of the Bonds, and no representation is made concerning the existence of any secondary market for the Bonds. No assurance can be given that any secondary market will develop following the completion of the offering of the Bonds, and no assurance can be given that the Bonds can be resold at their initial offering price for any period of time. Adequacy of Project Revenues; Related Bond Redemptions The financial condition of the Borrower depends upon the capabilities of management, economic conditions, competition from other rental facilities in the Project's competitive area and other factors. No assurances can be given that the revenues available to the Borrower fi-om the operation of the Project will be available in amounts sufficient to make the required payments on the Mortgage Note. Prospective purchasers of the Bonds should consider carefully all possible factors which may cause the Bonds to be redeemed earlier than projected, including the possibility that the Borrower may default on the Mortgage. Nonrecourse Obligation The Borrower's obligations in respect of the Bonds under the Financing Agreement and in respect of the Mortgage Loan under the FHA Documents, including the Mortgage and the Note, are nonrecourse obligations. Risks of Construction; Related Bond Redemptions Construction of the Project is expected to commence ,200 . The Borrower has made arrangements which it anticipates will be sufficient to assure the completion of construction of the Project by on or before , 200 , the required completion date to be specified in the Construction Contract between the Borrower and the Contractor (the "Construction Contract"). The Contractor and the Borrower must then complete FHA's cost certification process (construction audit), and HUD must determine that the actual costs support the original FHA Commitment amount prior to Final Endorsement. It is estimated that Final Endorsement of the Mortgage Note will be obtained within approximately two months after completion of construction. No assurance can be given, however, that the arrangements made by the Borrower are sufficient and that these steps will be completed prior to that date. If the Mortgage Note is not finally endorsed by the Lender and FHA and the PLC is not delivered to the Trustee on or before ~ 200 , the Bonds are required to be redeemed (unless such date is extended pursuant to the Indenture and only to the extent of money available in the Acquisition Fund) on ,200 (unless such date is extended pursuant to the Indenture). See "THE BONDS - Redemption Prior to Maturity - Extraordinary Mandatory Redemption." The anticipated 6 date, as reflected in this Official Statement, for completion of construction of the Project and Final Endorsement by FHA may be subject to various delays, including delays in construction, whether or not occasioned by default, and delays in cost certification. THE BONDS General The Bonds are being issued in the aggregate principal amount of $ , are dated October 1, 2001 and bear interest from such date payable on April 20 and October 20, commencing April 20, 2001 (each an "Interest Payment Date"). The Bonds mature on the dates and bear interest at the rates set forth on the inside cover page hereof. Principal of, premium, if any and interest on the Bonds is payable by the Trustee to Cede & Co. The Bonds are issuable as fully registered bonds in denominations of $5,000 or whole multiples thereof. Redemption Prior to Maturity Optional Redemption. The Bonds maturing on or after 20, 20 shall be subject to redemption by the Issuer to the extent the Bonds are refunded or the Borrower exercises any option to prepay on the Mortgage Note and amounts are paid under the GNMA Security representing such prepayments or from other Eligible Funds on hand with the Trustee, in whole or in part, on the earliest practicable Business Day on or after 20, 20 by the payment of a redemption price equal to the following percentage of principal amount of each Bond to be redeemed plus accrued interest to the date fixed for redemption: Redemption Premium 20, 20__ to 20, 20 % 20, 20__ to 20, 20 % 20, 20 and thereafter % Payment of the redemption premium, if any, must be made with Eligible Funds. Mandatory Sinking Fund Redemption. The Bonds are subject to mandatory sinking fund redemption on the respective Payment Dates set forth in the schedule below, at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date, without premium, in the following principal amounts, subject to pro rata reduction of such mandatory sinking fund redemption payments to the extent that such Bonds are redeemed prior to maturity otherwise than pursuant to such mandatory sinking fund redemption: Bonds Maturing 20, 20 Payment Principal Payment Principal Date Amount Date Amount 20, 20.~_ $ __ 20, 20 $ *Final Maturity Bonds Maturing 20, 20 Payment Priacipal Payment Priacipal Date Amount Date Amount __ 20, 20_____ $ __ 20, 20 $ *Final Maturity Extraordinary Mandatory Redemption. The Bonds are subject to extraordinary mandatory redemption, in whol~ or in part, at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest thereon to the redemption date, without premium, in accordance with the following: (i) if CLCs in an aggregate principal mount of at least $ are not delivered to the Trustee by , 200 (or such later date as permitted by the Indenture) then in whole on the earliest practicable date, from amounts in the Acquisition Fund and the Bond Fund and from maturing principal of the CLCs, at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest thereon to the redemption date plus a return of premium equal to the unamortized amount of original issue premium as of the Redemption Date, such premium amortization calculated on a straight-line basis from the date of issue to ,20 , but only to the extent that funds are available to pay the premium; (ii) at any time or times, as soon as practicable, in whole or in part at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest thereon to the redemption date, to the extent that the Trustee receives payments on the GNMA Security in excess of regularly scheduled payments of principal and interest thereon (other than payments representing optional prepayments of the Mortgage Loan by the Borrower) including payments resulting from (A) casualty insurance proceeds or condemnation awards applied to the prepayment of the Mortgage Loan following a partial or total destruction or condemnation of the Project, 03) mortgage insurance proceeds or other amounts received with respect to the Mortgage Loan following the acceleration thereof upon the occurrence of an event of default thereunder, (C) a prepayment of the Mortgage Loan required by the applicable rules, regulations, policies and procedures of FHA or GNMA or (D) a prepayment if HUD determines that prepayment will avoid a mortgage insurance claim and is therefore in the best interest of the federal government; (iii) at any time or times, as soon as practicable without notice, in whole or in part at a redemption price equal to 100% of the principal amount of Bonds to be redeemed plus accrued interest thereon to the redemption date, to the extent the Trustee receives payments on the GNMA Security representing prepayments on the Mortgage Loan made by the Borrower without notice or prepayment penalty while under the supervision of a banlamptcy court; (iv) in the event the PLC is not delivered to the Trustee by the PLC Delivery Date (as the same may be extended as provided in the Indenture), then in whole without notice, (a) on the earliest practicable date following the PLC Delivery Date, initially in a principal amount equal to all funds remaining in the Acquisition Fund (up to $ ) and (b) thereafter, on the CLC Maturity Date, the remaining principal amount upon receipt of the principal amount of any CLC at the CLC Maturity Date, at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest thereon to the redemption date plus a return of premium equal to the unamortized amount of original issue premium as of the Redemption Date, such premium amortization calculated on a straight-line basis fi'om the date of issue to ,20 , but only to the extent that funds are available to pay the premium; and (v) in part without notice, on any date after the PLC Delivery Date, to the extent that the principal balance of the PLC delivered to the Trustee is less than $ for any reason other than because a portion of the Mortgage Loan has been amortized in a principal amount equal to the amount remaining in the Acquisition Fund plus any prepayments on the CLCs as required by the Indenture, at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest thereon to the redemption date plus a return of premium equal to the unamortized amount of original issue premium as of the Redemption Date, such premium amortization calculated on a straight-line basis from the date of issue to ., 20 , but only to the extent that funds are available to pay the premium. If less than all of the Bonds are to be redeemed from funds other than those attributable to mandatory sinking fund redemption payments, the Bonds to be redeemed shall be selected on a reasonably proportionate basis among all outstanding maturities, such basis for each maturity to be determined and effectuated as nearly as practicable by the Trustee by multiplying the total amount of money available to redeem Bonds on the redemption date by the ratio which the original principal amount of all Bonds in each remaining maturity bears to the total original principal amount of Bonds within all remaining maturities. The Trustee shall select Bonds to be redeemed within a maturity by lot in such manner as the Trustee shall determine. Upon any redemption in part of the Bonds from funds other than those attributable to mandatory sinking fund redemption payments, the principal amount of the Bonds redeemed shall be credited against each remaining mandatory sinking fund redemption payment with respect to the applicable maturity pursuant to the Indenture to match, as nearly as possible, any reduction in the payments on the GNMA Security, in minimum denominations of $5,000. The Bonds are to be redeemed only in integral multiples of $5,000 principal amount. Notice of Redemption Except as provided in Section 3.1 of the Indenture and below, notice of redemption shall be given by first class mail to the Owner of each Bond to be redeemed, at the address of such Owner shown on the Bond Register, not fewer than thirty (30) days prior to the date fixed for redemption. Notwithstanding the foregoing or any other provision of the Indenture, (a) no notice of redemption is required for extraordinary mandatory redemption pursuant to clause (iii), (iv) or (v) described above, and (b) in the event of a redemption by reason of the Trustee receiving payments on the GNMA Security representing payments on the Mortgage Loan made by the Borrower without notice or prepayment penalty while under the supervision of a bankruptcy court, notice of redemption of Bonds shall not be required if the circumstances do not permit the Trustee to give such notice in accordance with the preceding paragraphs. Failure to give notice by mailing to the Owner of any Bond designated for redemption shall not affect the validity of the proceedings for the redemption of any other Bond. The Trustee shall not mail any notice of optional redemption of a Bond, unless there has been deposited with the Trustee a payment on the GNMA Security (or Eligible Funds) sufficient to redeem the Bonds so called for redemption. Notice of redemption having been given in the manner provided above and money sufficient for the redemption being held by the Trustee for that purpose, the Bonds so called for redemption shall become due and payable on the redemption date, and interest thereon shall cease to accrue; and the 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. BOOK-ENTRY ONLY SYSTEM The Bonds will be available in book-entry form only in the principal amount of $5,000 and any integral multiple thereof. Purchasers of the Bonds will not receive certificates representing their interests in the Bonds purchased. The Bonds will be held by The Depository Trust Company, New York, New York ("DTC"), as securities depository. The ownership of one fully registered Bond in the aggregate principal amount of 9 each maturity of each Series will be registered in the name of Cede & Co., as nominee for DTC. DTC is a limited-purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC was created to hold securities of its participants (the "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 the DTC Participants, thereby eliminating the need for physical movement of securities certificates. DTC Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations, 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. Ownership interests in the Bonds may be purchased by or through DTC Participants, persons for whom the DTC Participants acquire interests in the Bonds as nominees (the "Beneficial Owners") will not receive certificated bonds, but each 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 Beneficial Owner may desire to make arrangements with its 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 all notices of redemption or other communications to DTC, which may affect such persons, forwarded in writing by such DTC Participant and to have notification made of all interest payments. NEITHER THE ISSUER NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO SUCH DTC PARTICIPANTS OR THE BENEFICIAL OWNERS 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 OR REDEMPTION PRICE OF OR INTEREST ON THE BONDS; ANY NOTICE WHICH IS PERMITTED OR REQUIRED TO BE GIVEN TO BONDOWNERS UNDER THE INDENTLrRE; THE SELECTION BY DTC OR ANY DTC PARTICIPANT OF ANY PERSON TO RECEIVE PAYMENT IN THE EVENT OF A PARTIAL REDEMPTION OF THE BONDS; OR ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS A BONDOWNER. So long as Cede & Co. is the registered owner of the Bonds, as nominee of DTC, reference herein to the Bondowners or owners of the Bonds means Cede & Co., as aforesaid, and does not mean the Beneficial Owners of the Bonds. DTC will receive payments on the Bonds from the Trustee to be remitted to the DTC Participants for subsequent disbursement to the Beneficial Owners. The ownership interest of each Beneficial Owner in the Bonds will be recorded on the records of the DTC Participants, whose ownership interests will be recorded on a computerized book-entry system operated by DTC. When notices are given to Bondowners, such notices shall be sent by the Trustee to DTC only. DTC is responsible for notifying DTC Participants who are in turn responsible for notifying the Beneficial Owners. Neither the Trustee nor the Issuer is responsible for sending notices to Beneficial Owners. Transfers of ownership interests in the Bonds will be accomplished by book entries made by DTC and by the DTC Participants acting on behalf of the Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interest in the Bonds. except as described below. Interest and principal will be paid by the Trustee to DTC, then paid by DTC to the DTC Participants and thereafter paid by the DTC Participants to the Beneficial Owners when due. 10 DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving notice to the Issuer and the Trustee and discharging its responsibilities with respect thereto under applicable law. Under such cimumstances (if there is not a successor securities depository), Bond certificates are required to be delivered as described in the Indenture. The Issuer may determine that continuation of the system of book-entry transfers through DTC (or a successor securities depository) is not in the best interest of the Beneficial Owners or DTC (or a successor securities depository) may resign. In such event, Bond certificates will be required to be delivered as described in the Indenture. THE DESCRIPTION OF THE PROCEDURES AND RECORDKEEPING WITH RESPECT TO BENEFICIAL OWNERSHIP INTERESTS IN THE BONDS, PAYMENT OF INTEREST AND OTHER PAYMENTS ON THE BONDS TO DTC PARTICIPANTS OR BENEFICIAL OWNERS OF THE BONDS, CONFIRMATION AND TRANSFER OF BENEFICIAL OWNERSHIP INTERESTS IN THE BONDS AND OTHER BOND-RELATED TRANSACTIONS BY AND BETWEEN DTC, THE DTC PARTICIPANTS AND BENEFICIAL OWNERS OF THE BONDS CONTAINED IN THIS OFFICIAL STATEMENT IS BASED SOLELY ON INFORMATION FURNISHED BY DTC TO THE ISSUER FOR INCLUSION HEREIN. ACCORDINGLY, THE ISSUER, THE TRUSTEE AND THE UNDERWRITER DO NOT MAKE REPRESENTATIONS CONCERNING SUCH MATTERS. SECURITY AND SOURCES OF PAYMENT FOR THE BONDS General The Bonds will be secured under the Indenture by (a) all right, title and interest of the Issuer in the Financing Agreement and the Tax Regulatory Agreement (as such terms are defined in the Indenture), together with such documents themselves, and all amendments, modifications and renewals thereof, reserving, however, the Reserved Rights of Issuer; (b) all right, title and interest of the Issuer in and to any money held under the Indenture by the Trustee, including the proceeds of the Bonds and the interest, profits and other income derived from the investment thereof (other than the Rebate Fund, which will not be subject to the lien of the Indenture); (c) all right, title and interest of the Issuer in and to the GNMA Security, including all payments and proceeds with respect thereto and any interest, profits and other income derived from the investment thereof; and (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. [Investment Agreement Prior to the acquisition of the CLCs and the PLC, Bond proceeds held in the Acquisition Fund will be invested by the Trustee in the Investment Agreement. Monthly payments of principal of and interest on the Mortgage Note are invested in the Investment Agreement as an investment of the Bond Fund. When principal and interest payments are due on the Bonds, moneys invested in the Bond Fund pursuant to the Investment Agreement will be drawn from the Investment Agreement Provider to make such payments. The Investment Agreement represents the unsecured general obligation of (the "Investment Agreement Provider") which is guaranteed by (the "Guarantor") to provide repayment to the Trustee of moneys invested in the Investment Agreement at the rate of % per annum, from time to time. The rating shown on the cover page of this Official Statement and the timely payment of principal of and interest on the Bonds are dependent in part on the fact that certain funds will be invested in the Investment Agreement. A downgrading of the long-term credit rating of the Investment Agreement 11 Provider or the Guarantor may have an adverse effect on the rating assigned to the Bonds. See "BONDHOLDERS' RISKS" herein. For information with respect to the Investment Agreement Provider, purchasers of thc Bonds should write to .] Limited Obligations THE BONDS AND THE INTEREST THEREON ARE LIMITED OBLIGATIONS OF THE ISSUER, PAYABLE ONLY FROM THE SOURCES DESCRIBED IN THE RqDENTURE. NEITHER THE ISSUER, THE STATE NOR ANY OTHER POLITICAL SUBDMSION OR AGENCY THEREOF SHALL BE OBLIGATED TO PAY THE PRINCIPAL OF SUCH BONDS OR THE INTEREST THEREON OR OTHER COSTS INCIDENT THERETO EXCEPT FROM THE MONEY PLEDGED THEREFOR. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE, THE ISSUER, NOR ANY POLITICAL SUBDMSION OR AGENCY THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE BONDS OR OTHER COSTS INCIDENT THERETO. THE BONDS ARE NOT A DEBT OF THE UNITED STATES OF AMERICA, HUD, FHA, GNMA OR ANY OTHER AGENCY THEREOF AND ARE NOT GUARANTEED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA. TILE, MORTGAGE NOTE AND THE MORTGAGE This summary and explanation of the Mortgage Note and the Mortgage does not purport to be comprehensive and is qualified in its entirety by reference to the Mortgage Note and the Mortgage for full and complete statements of their provisions, which documents will be available for inspection following receipt of the initially endorsed Mortgage Note. The Mortgage from the Borrower to the Lender will secure the Mortgage Note. The Mortgage Loan proceeds will be disbursed by the Lender in accordance with the progress of construction. The Lender will either be reimbursed or receive payments for such advances through the purchase of CLCs and the PLC by the Trustee. The Mortgage Loan disbursements made as construction progresses will be insured by FHA under Section 232 of the National Housing Act, as amended (the "National Housing Act"), and the regulations thereunder. Upon the purchase of CLCs, the Lender will make payments thereon equal to the Mortgage Note interest payments less servicing and guarantee fees. Upon the purchase of the PLC from the Lender by the Trustee, on behalf of the Issuer, monthly scheduled installments of principal of and interest on the Mortgage Note (less the GNMA guaranty fee and the Lender's servicing fee) will be passed through to the Trustee as scheduled payments of principal of and interest on the GNMA Security. The Mortgage Loan, as evidenced by the Mortgage Note and the Mortgage, (i) will be insured by FHA pursuant to and in accordance with the provisions of Section 232 of the National Housing Act and applicable regulations thereunder, as evidenced by the endorsement by FHA of the Mortgage Note evidencing the Mortgage Loan; (ii) will be in the original principal amount of $ ; (iii) will bear interest at the rate of % per annum; (iv) will have a final maturity of ,20 ; (v) will be payable in equal monthly installments of principal and interest commencing ,200 ; (vi) will be secured on a nonrecourse basis; and (vii) will not be subject to prepayment prior to ., 20 except that (A) the Mortgage Note will be subject to mandatory prepayment in whole or in part at any time without premium or penalty, from the proceeds of any casualty insurance or condemnation awards received following a partial or total destruction or condemnation of the Project, in the event and to the extent that such casualty proceeds or condemnation awards are not applied to the repair or restoration of the Project in accordance with the FHA Loan Documents, (B) the Mortgage Note will be subject to prepayment in whole or in an amount equal to one or more monthly payments of 12 principal next due at the option of the Borrower, on and after ,20 , on the last day of any month, upon at least 30 days' advance written notice to the Lender, together with the premium, if any, attributable to the principal of the Mortgage Loan being prepaid in such manner acceptable to the holder of the Mortgage Note plus accrued interest to the date of prepayment, and (C) the Mortgage Note will be subject to mandatory prepayment in whole or in part without the consent of the mortgagee and without prepayment penalty if HUD determines that prepayment will avoid an FHA insurance claim and therefore is in the best interest of the Federal government, notwithstanding any prepayment prohibition imposed and/or penalty required by the Mortgage Note. In the event of a partial prepayment described in subparagraph (A) or (C) above, the Mortgage Note may be reamortized to reflect its reduced principal amount. If the Borrower makes any such prepayment on the Mortgage Note, the amount prepaid will be paid to the Lender and passed through to the Trustee, as a prepayment on the GNMA Security, and applied to the redemption of Bonds, as described under "THE BONDS - Redemption Prior to Maturity." TH ~: GNMA MORTGAGE-BACKED SECURITIES PROGRAM The summary and explanation of the GNMA Mortgage-Backed Securities Program and the other documents referred to herein do not purport to be complete, and reference is made to the GNMA Mortgage-Backed Securities Guide (GNMA Handbook 5500.3, as amended) and to said documents for full and complete statements of their provisions, The Government National Mortgage Association ("GNMA") is a non-stock corporate instrumentality of the United States within the Department of Housing and Urban Development ("HUD") with its principal office in Washington, D.C. Two types of GNMA Security are intended to be issued by the Lender in connection with the financing of the Project: (i) CLCs which are to be issued with respect to each construction loan advance under the Mortgage Loan and (ii) the PLC which is to be issued with respect to the permanent Mortgage Loan with payment provisions which correspond to the monthly scheduled installments of principal of and interest on the Mortgage Note. CLCs are expected to be dated not later than the first day of the month following the month in which a construction advance is made under the Mortgage Loan and will provide that accrued interest for 30 days is payable by the Lender to the Trustee as holder of the CLCs commencing 45 days after the issue date, and continuing on the 15~ day of each successive month thereafter until maturity of the CLCs (as such may be extended with the approval of GNMA). The GNMA Security will be a "fully-modified pass-through" mortgage-backed security issued and serviced by the Lender. The total face amount of the GNMA Security is in the same amount as the Mortgage Note. The Lender is required to pass through to the Trustee, as the holder of the GNMA Security, by the 15~ day of each month the monthly scheduled installments of principal of and interest on the Mortgage Note (less the GNMA guarantee fee and the Lender's servicing fee), whether or not the Lender receives such payment from the Borrower, plus any unscheduled prepayments of principal of the Mortgage Note received by the Lender. GNMA guarantees the timely payment of the principal of and interest on the GNMA Security. GNMA Guaranty GNMA is authorized by Section 306(g) of Title III of the National Housing Act to guarantee the timely payment of the principal of, and interest on, securities which are based on and backed by mortgage pools consisting of a single mortgage insured by the Federal Housing Adminish'ation ("FHA") under Section 232 of the National Housing Act. Section 306(g) of the National Housing Act further provides that "IT]he full faith and credit of the United States is pledged to the payment of all amounts which may be required to be paid under any guaranty under this subsection." An opinion, dated December 12, 1969, of the then Assistant Attorney General of the United States, states that such 13 guaranties under Section 306(g) of mortgage-backed securities of the type being delivered to the Trustee on behalf of the Issuer are authorized to be made by GNMA and "would constitute general obligations of the United States backed by its full faith and credit. Pursuant to such authority, GNMA, upon delivery of a GNMA Security in accordance with the related GNMA Guaranty Agreement, will have guaranteed the timely payment of the principal of and interest on such GNMA Security. GNMA Borrowing Authority In order to meet its obligations under such guaranty, GNMA, in its corporate capacity under Section 306(d) of Title II~ of the National Housing Act, may issue its general obligations to the United States Treasury Department (the "Treasury") in an amount outstanding at any one time sufficient to enable GNMA, with no limitations as to amount, to perform its obligations under its guaranty of the timely payment of the principal of and interest on the GNMA Security. The Treasury is authorized to purchase any obligations so issued by GNMA and has indicated in a letter dated June 13, 1970, from the then Secretary of the Treasury to the then Secretary of HUD that the Treasury will make loans to GNMA, if needed, to implement the aforementioned guaranty. GNMA warrants to the holder of the GNMA Security in the related GNMA Guaranty Agreement (as hereinafter defined), that, in the event it is called upon at any time to make good its guaranty of the payment of principal of and interest on the GNMA Security, it will, if necessary, in accordance with Section 306(d) of the National Housing Act, apply to the Treasury for a loan or loans in amounts sufficient to make payments of principal of and interest on the GNMA Security. Servicing of Mortgage Loans The Lender is responsible for servicing and otherwise administering the Mortgage Loan in accordance with generally accepted practices of the mortgage banking industry and the GNMA Servicer's Guide. The monthly remuneration of the Lender, for its servicing and administrative functions, and the guaranty fee charged by GNMA, are based on the unpaid principal amount of the GNMA Security outstanding. The total of the servicing and guaranty fees with respect to the GNMA Security is 0.25 % per annum, payable monthly, calculated on the principal balance of the GNMA Security outstanding on the last day of the month preceding such date of calculation. Of the 0.25% total fee, 0.13% is paid to GNMA as a guaranty fee, and the remainder is retained by the Lender as a servicing fee. The GNMA Sectmty bears an interest rate that is 0.25% per annum less than the interest rate on the Mortgage Note because the servicing and guaranty fee is deducted from payments on the Mortgage Note. It is expected that interest and principal payments on the Mortgage Note will be the source of moneys for payments on the GNMA Security. If such payments are less than what is due, the Lender may advance its own funds to ensure timely payment of scheduled installments of principal and interest due on the GNMA Security. GNMA guarantees such timely payment in the event of the failure of the Lender to pass through such scheduled principal and interest payments when due. The Lender is required to advise GNMA in advance of any impending default on scheduled payments on the GNMA Security so that GNMA as guarantor will be able to continue such payments as scheduled on the 15th day of each month, If, however, such payments are not received as scheduled, the Trustee, on behalf of the Issuer, has recourse directly to GNMA. The agreement entered into by GNMA and the Lender in connection with the issuance of the GNMA Security (the "GNMA Guaranty Agreement") provides that, in the event of a default by the Lender, including (i) a request to GNMA to make a payment of principal of or interest on the GNMA Security when the Borrower is not in default under the Mortgage Note, (ii) insolvency of the Lender, or 14 (iii) default by the Lender under any other guaranty agreement with GNMA, GNMA will have the fight, by letter to the Lender, to effect and complete the extinguishment of the Lender's interest in the Mortgage Note, and the Mortgage Note will thereupon become the absolute property of GNMA, subject only to the unsatisfied rights of the holder of the GNMA Security. In such event, the GNMA Guaranty Agreement will provide that on and after the time GNMA directs such a letter of extinguishment to the Lender, GNMA will be the successor in all respects to the Lender in its capacity under the GNMA Guaranty Agreement and the transaction and arrangements set forth or arranged for therein, and will be subject to all responsibilities, duties, and liabilities (except the Lender's indemnification of GNMA), theretofore placed on the Lender by the terms and provisions of the GNMA Guaranty Agreement, provided that at any time, GNMA may enter into an agreement with any other eligible issuer of GNMA Security under which the latter undertakes and agrees to assume any part or all such responsibilities, duties or liabilities theretofore placed on the Lender, and provided that, no such agreement will detract from or diminish the responsibilities, duties or liabilities of GNMA in its capacity as guarantor of the GNMA Security, or otherwise adversely affect the fights of the holders thereof. Payment of Principal and Interest on the GNMA Security Payment of interest on the GNMA Security is required to be made in monthly installments on or before the 15' day of each month commencing the month next following the date of issue of the GNMA Security. Upon the issuance of the GNMA Security and commencement of the payment of principal thereon, the GNMA Security will be payable in monthly installments of principal and interest, subject to prepayment, assignment for insurance benefits or acceleration of the Mortgage Note. Each installment on the GNMA Security is applied first to interest and then in reduction of the principal balance then outstanding on the GNMA Security. The amount of principal due on the GNMA Security is the scheduled principal amortization due on the Mortgage Note. During construction, CLCs will be issued which will provide for monthly payments of interest only, such monthly payment of interest being payable to the Trustee on behalf of the Issuer on the day of the month following thc month of issue of each CLC and on the 15' day of each month thereafter. After Final Endorsement by FHA, the Lender shall issue the PLC to the Trustee in exchange for the CLCs and the Trustee's payment of any difference between the total face amount of the CLCs and the PLC plus accrued interest on such difference. Payment of interest on the PLC shall be made in monthly installments commencing with the 15t~ day of the month following the date of issue of the PLC. Payment of principal on the PLC will commence 15 days after the commencement of amortization of principal on thc Mortgage Note, which, pursuant to the Mortgage Note, will occur no later than ., 200 unless extended. On the date of delivery of the PLC, the Trustee is required by the Indenture under certain circumstances to apply remaining moneys in the Acquisition Fund to the redemption of the Bonds. In the event the amount of retained principal exceeds the amount remaining in the Acquisition Fund, the GNMA issuer will pay to the Trustee the amount of such difference in the form of a CLC prepayment. The monthly installments are subject to adjustment by reason of any prepayments or other early or unscheduled recoveries of principal on the Mortgage Note. The Lender is required to pay to the Trustee, as holder of the GNMA Security, monthly installments of not less than the interest due on the GNMA Security at the rate specified in the GNMA Security, together with any scheduled installments of principal, whether or not collected from the Borrower, and any prepayments or early recoveries of principal. Liability of Lender The GNMA Security does not constitute a liability of nor evidence any recourse against the Lender. The GNMA Security is based on and backed by the Mortgage on the real property securing the 15 Mortgage Note. Recourse may be had by the Trustee only to GNMA in the event of any failure of timely payment as provided for in the GNMA Guaranty Agreement appended to the GNMA Security. THE ISSUER The Issuer is a municipal corporation of the State duly organized and validly existing under its home rule char~er and the Constitution and laws of the State. The Issuer is empowered to issue its bonds to provide funds for the f'mancing of the costs of the acquisition, constructinn and equipping of a "project," as defined in the Act, including the Project. Under the financing contemplated hereby, the Issuer has no obligations with respect to this financing after the issuance of the Bonds. All payments made pursuant to the Financing Agreement will be made directly from the GNMA Security to the Trustee for disbursement to the Bondholders. The Issuer neither has nor assumes responsibility for any information in this Official Statement, except for the information under this caption and the caption "ABSENCE OF LITIGATION" as it relates to the Issuer. THE PROJECT AND THE PRIVATE PARTICIPANTS The Project The Project is a 50-unit assisted-living facility to be constructed at 900 42nd Avenue NE in Columbia Heights, Minnesota. The Project's units consist of 41 traditional assisted-living units and 9 memory care units for persons with Alzheimer's and/or dementia. The Project will have three floors and is expected to have total gross square feet of 39,850; of this total, program footage is estimated at 23,910 square feet. In addition to program footage, there is approximately 15,940 square feet of common area, including [OTHER AREAS/AMENITIES], bringing the total square feet to 39,850. The following table shows the unit breakdown and rents for both the assisted-living and memory care components of the Project: Assisted-Living Units: Unit Type Number of Units Unit Square Feet Gross Area Standard Studio 8 338 2,704 Deluxe Studio 6 392 2,352 One-Bedroom 12 460 5,520 Two-Bedroom 4 720 2,880 Suite 11 598 6,578 Total Assisted-Living Footage 41 2,508 20,034 Memory-Care Units: Unit Type Number of Units Unit Square Feet Gross Area Standard Studio 5 338 1,690 Deluxe Studio 1 575 392 Suite _3 59.8. 1,794 Total Memory-Loss Footage 9 1.511 3.876 16 Total Program Footage 50 4,019 23,910 Initial monthly rents for the Assisted-Living units are expected to be as follows: Unit Type Monthly Rent Standard Studio 1,750 Deluxe Studio 1,900 One-Bedroom 2,050 Two-Bedroom 2,250 Suite $2,250 Initial monthly rents for the Memory-Care units are expected to be as follows: Unit Type Monthly Rent Standard Studio 2,750 Deluxe Studio 2,900 Suite $4,250 The following services are included in the monthly rent: [two meals per day (third meal available at additional cost), nurse available 24 hours per day, housekeeping and laundry services, all utilities (including cable) and surface lot parking]. In addition to board and lodging revenue, the Borrower expects the Project to produce additional revenues from [Personal Care Services, which include ]. The Borrower has entered into a guaranteed maximum price construction contract for construction of the Project with Watson-Forsberg. Construction is expected to commence in ,200 and to be completed by ,200 The Borrower The Borrower, Crest View ONDC I, was organized as a nonprofit corporation in , [2000] under the laws of the State of Minnesota for the purpose of owning and operating the Project. The Borrower was determined by letter of the Internal Revenue Service, dated ,2001, to be an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code") whose income is exempt from federal taxation under Section 501(a) of the Code (a "Tax- Exempt Organization"). The Borrower has two members: Crest View Advanced Mission I LLC and Opportunity Neighborhood Development Corporation. The members share equally the right to control the management and operation the Borrower. Crest View Advanced Mission I LLC is a Colorado limited liability company whose sole member is Crest View Corporation, a nonprofit corporation and a Tax-Exempt Organization. Opportunity Neighborhood Development Corporation is a nonprofit corporation and a Tax-Exempt Organization. The obligations and liabilities of the Borrower under the Mortgage Note and the Mortgage are of a nonrecourse nature and are limited to the Project and moneys derived from the operation of the Project. None of the Borrower, Crest View Advanced Mission I LLC, Opportunity Neighborhood Development Corporation, or any of their affiliates, has any personal liability for payments on the Mortgage Note. Furthermore, no representation is made that the Borrower has substantial funds available for the Project. Accordingly, the financial statements of the Borrower are not included in this Official Statement. 17 There is no pending litigation nor is the Borr'-wer aware of any threatened litigation with respect to the Borrower or the Project, which could materially adversely affect the operations of the Project or the revenues therefrom. Management The Project will be managed by Crest View Management Services, LLC, a Colorado limited liability company (the "Manager") whose sole member is Crest View Corporation. The Manager currently [owns and/or manages] long-term care facilities in the Minneapolis-St. Paul metropolitan area. The Manager also [owns and/or manages] __ senior housing facilities and assisted-living facilities in the Minneapolis-St. Paul metropolitan area. The table below sets forth information regarding the long-term care facilities, senior housing and owned and/or managed by the Manager. Senior Housing Facilities Location Long-Term Care Facilities Location Assisted-Living Facilities Location Under the Management Agreement, the Manager' is responsible for the day-m-day maintenance, operation, leasing and financial reporting with respect to the Project. The Management Agreement is for a term of years and [Discuss Renewal/Termination Provisions]. [Discuss Compensation]. The Lender and GNMA Servicer Reilly Mortgage Group, Inc. is approved as a GNMA issuer of mortgage-backed securities and an FHA mortgagee for the Section 232 program. The Lender is the servicer for over 3000 mortgage loans with an aggregate principal balance of approximately $9 billion. The Trustee U.S. Bank Trust National Association, Saint Paul, Minnesota, will serve as Trustee under the Indenture. The Trustee is a national banking association organized under the laws of the United States of America, having all of the powers of a bank, including fiduciary powers and is a member of the Federal Deposit Insurance Corporation and the Federal Reserve System. The Trustee currently serves as trustee or escrowee for other tax-exempt financings, including those backed by FHA-insured multifamily mortgage loans. 18 SOL~RCES AND USES OF FUNDS The following table sets forth the estimated sources and uses of funds: Sources Bond Proceeds Bond Premium MILCA Funds Subordinate Bond Proceeds TOTAL Uses Project Costs Land Design/Engineering/Fees FHA Financing Costs Capitalized Interest Reserves Issuance Costs (including Underwriter's Discount) Development Fees TOTAL TAX MATTERS Tax Exemption of Bonds In the opinion of Bond Counsel, Kennedy & Graven, Chartered, in Minneapolis, Minnesota, under present laws, regulations, rulings and judicial decisions, assuming continuing compliance with the applicable covenants set forth in the Tax Regulatory Agreement, the Financing Agreement and the Indenture, interest on the Bonds (a) is excluded from gross income for purposes of federal income taxation, (b) is excluded from gross income or net taxable income of individuals, trusts and estates for purposes of Minnesota state income taxation (but the interest is subject to Minnesota franchise taxes imposed on corporations and financial institutions measured by income), and (c) is not a separate item of tax preference for purposes of the federal and State of Minnesota alternative minimum tax provision. Holders of the Bonds should be aware, however, that interest on any Bond held by a corporation will be included in the corporation's "adjusted current earnings" in calculating the corporation's alternative minimum taxable income. Original Issue Premium An amount equal to the excess of the purchase price ora Bond over its stated redemption price at maturity constitutes premium on such Bond. A purchaser of a Bond must amortize any premium over such Bond's term using constant yield principles, based on the purchaser's yield to maturity. As premium is amortized, the purchaser's basis in such Bond is reduced by a corresponding amount, resulting in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes upon a sale or disposition of such Bond prior to its maturity. Even though the purchaser's basis is reduced, no federal income tax deduction is allowed. Purchasers of any Bonds at a premium, whether at the time of initial issuance or subsequent thereto, should consult with their own tax advisors with respect to the determination and treatment of premium for federal income tax purposes and with respect to state and local tax consequences of owning such Bonds. Bank-Qualified Tax-Exempt Obligations The Issuer has designated the Bonds as "qualified tax-exempt obligations" for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended, relating to the ability of financial 19 institutions to deduct from income for federal income tax purposes, interest expense that is allocable to carrying and acquiring tax-exempt obligations. Other Tax Considerations Interest on the Bonds is includable in the calculation of modified adjusted gross income in determining whether Social Security or railroad retirement payments are to be included in taxable income of individuals. Under the Code, the deduction available to property and casualty insurance companies for losses incurred would be reduced by a percentage of such insurance company's tax-exempt interest from thc Bonds. The Code contains an alternative minimum tax provision applicable to corporations. For purposes of computing the amount of the alternative minimum taxable income for any taxable year to which this tax would be applied in the case of corporations (other than any regulated investment company, real estate investment trust, S corporation or REMIC), the "earnings and profits" of such corporation are required to be included in such computation. The term "earnings and profits" includes all tax-exempt interest, including interest on the Bonds. Interest on the Bonds may also be subjected to federal taxation in connection with the branch profits tax applicable to foreign corporations and the environmental tax applicable to corporations under Section 59A of the Code. Passive investment income, including interest on the Bonds, may be subject to federal taxation under Section 1375 of the Internal Revenue Code for Subchapter S corporations that have Subchapter C earnings and profits at the close of the taxable year ifa certain percentage of the gross receipts of such S Corporation consists of passive investment income. ABSENCE OF LITIGATION It is a condition of the Underwriter's acceptance of the Bonds that, on the date of delivery of the Bonds, the Issuer deliver a certificate to the effect that, to the best of the Issuer's knowledge, there is no litigation pending directly against or threatened directly against the Issuer or any of its officers in their capacities as such to restrain or enjoin the issuance or sale of the Bonds or the execution and delivery of the Bonds or related documents, or in any way affecting or questioning the authority for or the validity of the Bonds or the related documents, or the existence or power of the Issuer to use the proceeds from the sale of the Bonds to finance the costs of the Project described in the Financing Agreement or the exclusion of the interest on the Bonds from gross income for purposes of federal income taxation. It is a condition of the Underwhter's acceptance &the Bonds that, on the date of delivery of the Bonds, the Borrower deliver a certificate to the effect that there is no litigation pending directly against or threatened directly against the Borrower or to restrain or enjoin the issuance or sale of the Bonds or the execution and delivery of the Bonds or related documents, or in any way affecting or questioning the authority for or the validity of the Bonds or the related documents, or the existence or power of the Borrower to use the proceeds from the sale of the Bonds to finance the costs of the Project described in the Financing Agreement, or the exclusion of the interest on the Bonds from gross income for purposes of federal income taxation. LEGAL MATTERS Legal matters incident to the authorization, issuance, sale and delivery of the Bonds by the Issuer are subject to the approving opinion of Kennedy & Graven, Chartered, Minneapolis, Minnesota, Bond 20 Counsel. Copies of the approving opinion of Bond Counsel will be available at the time of delivery of the Bonds in substantially the form set forth heroin in Appendix E. Certain legal matters will be passed upon for the Borrower by its counsel, Oppenheimer, Wolff & Donnelly LLP, Minneapolis, Minnesota, for the UnderWriter by its counsel, Faegre & Benson LLP, Minneapolis, Minnesota, and for the Lender by its counsel, Krooth &Altman LLP, Washington, D.C. UNDERWRITING U.S. Bancorp Piper Jaffray Inc. (the "Underwriter") is offering the Bonds at the prices set forth on the inside cover page hereof. The initial offering price may be changed from time to time and concessions from the offering price may be allowed to dealers, banks and others. The Underwriter has purchased the Bonds at a price equal to the reoffering price set forth on the inside cover page hereof. For its services as such, the Underwriter will be paid a fee equal to __% of the aggregate principal amount of the Bonds, to be paid upon initial endorsement of the Mortgage Note. ENFORCEABILITY OF REMEDIES The remedies available to the Trustee and the owners of the Bonds upon an event of default under the Indenture, the GNMA Security, the Financing Agreement, the Mortgage Note or any other document described herein are in many respects dependent upon regulatory and judicial actions which are often subject to discretion and delay. Under existing law and judicial decisions, the remedies provided for under such documents may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified to the extent that the enforceability of certain legal rights related to the Bonds is subject to limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally and by equitable remedies and proceedings generally. RATING It is expected that Moody's Investors Service, Inc. will assign the Bonds the rating shown on the cover of this Official Statement. A rating is not a recommendation to buy or hold securities. An explanation of the significance of such rating may be obtained only from the rating agency furnishing the same. The Borrower furnished to the rating agency certain information and materials respecting the Bonds and itself. Generally, rating agencies base their ratings on such information and materials, and also on investigations, studies and assumptions by the rating agencies. There is no assurance that the ratings will remain for any given period of time or that they may not be lowered or withdrawn by the rating agencies, if in their judgment circumstances so warrant. Any such downward change in or withdrawal of such rating could adversely affect the market price of the Bonds. RELATIONSHIP AMONG Tlttg PARTIES In connection with the issuance of the Bonds, the Issuer, the Borrower and the Underwriter are being represented by the attorneys or law ftrms identified above under the heading "LEGAL MATTERS", and Kennedy & Graven, Chartered, is acting as Bond Counsel. In other transactions not related to the Bonds each of these attorneys or law firms may have acted as Bond Counsel or represented the Issuer, the Borrower or the Unden~riter or their affiliates, in capacities different from those described under "LEGAL MATTERS," and there will be no limitations imposed as a result of the issuance of the Bonds on the ability of any of these firms or attorneys to act as Bond Counsel or represent any of these parties in any future transactions. Furthermore, the Borrower, the Underwriter and their affiliates, are not limited in engaging in future business transactions together or in any combination with each other. Potential purchasers of the Bonds should not assume that the Issuer, the Borrower and the UnderWriter or their respective counsel or Bond Counsel have not previously engaged in, or will not after the issuance of 21 the Bonds engage in, other transactions with each other or with any affiliates of any of them, and no assurance can be given that there are or will be no past or future relationships or transactions between or among any of these parties or these attorneys or law finns. OTHER MATTERS So far as any statements are made m this Official Statement involving matters of opinion, whether or not expressly so stated, they are intended merely as such and not as representations of fact. OTHER THAN WITH RESPECT TO INFORMATION CONCERNING THE ISSUER CONTAINED UNDER THE CAPTIONS "THE ISSUER" AND "ABSENCE OF LITIGATION," AS IT RELATES TO THE ISSUER, NONE OF THE INFORMATION IN THIS OFFICIAL STATEMENT HAS BEEN SUPPLIED OR VERIFIED BY THE ISSUER, AND THE ISSUER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO (i) THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION; (ii) THE VALIDITY OF THE BONDS; OR (iii) THE TAX STATUS OF THE INTEREST ON THE BONDS. The Issuer and the Borrower have authorized the distribution of this Official Statement. M 1:704952.02 22 APPENDIX A DEFINITION OF CERTAIN TERMS A-1 APPENDIX B SUMMARY OF THE INDENTURE B-1 APPENDIX C SUMMARY OF THE FINANCING AGREEMENT C-1 APPENDIX D SUMMARY OF THE CONTINUING DISCLOSURE AGREEMENT D-1 APPENDIX E FORM OF BOND COUNSEL OPINION M1:704952.02 Eol Fifth Draft Wednesday, September 19, 2001 FINANCING AGREEMENT by and between CITY OF COLUMBIA HEIGHTS, MINNESOTA, CREST VIEW ONDC I, REILLY MORTGAGE GROUP, INC., and U.S. BANK TRUST NATIONAL ASSOCIATION Relating To: $ Multifamily Housing Revenue Bonds (GNMA Collateralized Mortgage Loan - Crest View ONDC I Project) Series 200lA-1 and $ Multifamily Housing Revenue Bonds (GNMA Collateralized Mortgage Loan - Crest View ONDC I Project) Taxable Series 2001A-2 Dated as of October 1, 2001 Pursuant to the Indenture (defined herein), the Issuer has txansferred in trust, granted a security interest in and assigned to the Trustee for the benefit of the Bondowners, ail right, title, and interest of the Issuer in this Financing Agreement, except for any deposits to the Rebate Fund, and all rights of the Issuer to (a) inspect books and records, (b) give or receive notices, approvals, consents, requests, and other communications, (c) receive payment or reimbursement for expenses, (d) receive payment of its Issuer's Fee, (e) immunity and limitation from liability, (f) indemnification from liability by the Borrower, and (g) security for the Borrower's indemnification obligation. TABLE OF CONTENTS Page ARTICLE I - DEFINITIONS .................................................................................................................... 3 Section I. 1. General ................................................................................................................................ 3 Section 1.2. Definitions ........................................................................................................................... 3 Section 1.3. Interpretation ....................................................................................................................... 4 Section 1.4. Intentions of the Parties ....................................................................................................... 4 ARTICLE H - PROJECT FINANCING .................................................................................................. 6 Section 2.1. General Terms of the Financing .......................................................................................... 6 Section 2.2. Acquisition of the GNMA Securities .................................................................................. 6 Section 2.3. Advance of Disbursed Amounts; Obligation to Repay Amounts Advanced ............................................................................................................. 7 Section 2.4. Sufficiency of Funds ........................................................................................................... 7 Section 2.5. Additional Payments by Borrower ...................................................................................... 8 Section 2.6. Default by Borrower Under Building Loan Agreement, Mortgage Note, Mortgage or FHA Regulatory Agreement ................................................ 8 Section 2.7. Lender Pass Through Payments .......................................................................................... 8 Section 2.8 Extensions of PLC Delivery Date ....................................................................................... 8 ARTICLE III - MAINTENANCE AND INSURANCE OF THE PROJECT ....................................... 9 Section 3.1. Maintenance ........................................................................................................................ 9 Section 3.2. Insurance ............................................................................................................................. 9 ARTICLE IV - REPRESENTATIONS, WARRANTIES AND SPECIAL COVENANTS ............................................................................................... 10 Section 4.1. Representations, Warranties and Covenants of the Issuer ................................................ 10 Section 4.2. Representations, Warranties and Covenants of the Borrower ........................................... 10 Section 4.3. Representations of the Lender ........................................................................................... 13 Section 4.4. Tax-Exempt Status of the Bonds ....................................................................................... 15 ARTICLE V- ADDITIONAL COVENANTS AND AGREEMENTS ................................................ 16 Section 5.1. Inspections ......................................................................................................................... 16 Section 5.2. Section 5.3. Section 5.4. Section 5.5. Section 5.6. Section 5.7. Section 5.8. Section 5.9. Reports and Information .................................................................................................... 16 Assignment ........................................................................................................................ 16 Fees Under Indenture ........................................................................................................ 16 Mortgage Loan Documents ............................................................................................... 16 Warranty of Truth ............................................................................................................. 16 Public Purpose ................................................................................................................... 17 Information to Rating Agent ............................................................................................. 17 Continuing Disclosure ....................................................................................................... 17 ARTICLE VI - EVENTS OF DEFAULT; REMEDIES ....................................................................... 18 Section 6.1. Events of Default; Remedies ............................................................................................. 18 Section 6.2. No Remedy Exclusive ....................................................................................................... 18 Section 6.3. No Additional Waiver Implied by One Waiver ................................................................ 18 Section 6.4. Agreement to Pay Fees and Expenses Upon Default ........................................................ 18 Section 6.5. Lender's Right to Perform ................................................................................................. 19 ARTICLE VII - TERMINATION AND PREPAYMENT ...................................................................20 Section 7.1. Option to Terminate .......................................................................................................... 20 Section 7.2. Section 7.3. Section 7.4. Section 7.5. Section 7.6. Option to Prepay Loan ...................................................................................................... 20 Prepayment of CLC's and PLC ......................................................................................... 20 Optional Prepayment ......................................................................................................... 20 Mandatory Prepayment .................................................................................................... 20 Timing of Prepayment; Notice of Prepayment .................................................................. 21 ARTICLE Section 8.1. Section 8.2. Section 8.3. Section 8.4. Section 8.5. Section 8.6. Section 8.7. Section 8.8. Section 8.9. Section 8.10. Section 8.11. VIH - MISCELLANEOUS ................................................................................................... 22 Term of Agreement ........................................................................................................... 22 Notices ............................................................................................................................... 22 Binding Effect ................................................................................................................... 23 Limited Liability of Borrower ........................................................................................... 23 Amendments, Changes and Modifications ........................................................................ 23 Counterparts ...................................................................................................................... 23 Severability ....................................................................................................................... 23 Captions ............................................................................................................................. 23 Limited Liability ............................................................................................................... 23 Indemnification ................................................................................................................. 24 Conflict with Mortgage and HUD Regulations; Supremacy of Mortgage and HUD Insurance ...................................................................................... 25 EXHIBIT A - PROJECT DESCRIPTION .............................................................................................. A - 1 EXHIBIT B - FORM OF DISBURSEMENT REQUEST ...................................................................... B - 1 EXHIBIT C - APPLICATION OF ADMINISTRATIVE FLrND ..........................................................C - 1 SCHEDULE I - ITEMIZATION OF REQUESTED DISBURSEMENT ................................................ I - 1 ii FINANCING AGREEMENT THIS FINANCING AGREEMENT ("Agreement"), dated as of October 1, 2001, by and between the CITY OF COLUMBIA HEIGHTS, MINNESOTA, a home rule city and political subdivision of the State of Minnesota (the "Issuer"), U.S. BANK TRUST NATIONAL ASSOCIATION, a national banking association, as trustee under the Indenture (as defined below) (the "Trustee"), CREST VIEW ONDC I, a Minnesota nonprofit corporation, as owner of the project referred to herein (the "Borrower"), Reilly Mortgage Group, Inc., a District of Columbia corporation (the "Lender"). RECITALS WHEREAS, the Issuer is authorized pursuant to Minnesota Statutes, Chapters 462C, as amended (the "Act") to issue its revenue bonds to finance multifamily housing developments within its jurisdiction; and WHEREAS, Crest View ONDC I, a Minnesota nonprofit corporation, has asked that the Issuer issue revenue bonds under the Act to finance the acquisition, development, construction, and equipping by the Borrower of a fifty-unit multifamily housing development to be located at 900 - 42nd Avenue N.E., in the City of Columbia Heights, Minnesota, to be operated as an assisted-living facility for seniors (the "Project"); and WHEREAS, the Issuer has now determined to issue its Multifamily Housing Revenue Bonds (GNMA Collateralized Mortgage Loan - Crest View ONDC I Project), Series 200lA-1 (the "Series 200lA-1 Bonds"), in the original aggregate principal amount of $ , and its Multifamily Housing Revenue Bonds (GNMA Collateralized Mortgage Loan - Crest View ONDC I Project), Taxable Series 2001A-2 (the "Series 2001A-2 Bonds" and, collectively with the Series 200lA-1 Bonds, the "Bonds"), in the original aggregate principal amount of $ , to be secured by an Indenture of Trust, dated as of October 1, 2001, (the "Indenture"), between the Issuer and the Trustee, to finance a construction and permanent mortgage loan (the "Mortgage Loan"), insured by the Federal Housing Administration ("FHA") of the Department of Housing and Urban Development under Section 232 of the National Housing Act of 1937, as amended (the "National Housing Act"), in connection with the acquisition, development, construction and equipping of the Project, through the acquisition by the Trustee for the account of the Issuer of fully-modified pass-through mortgage-backed construction loan certificates (the "CLCs"), issued by the Lender, as construction of the Project progresses, which are guaranteed as to the timely payment of principal and interest by the Government National Mortgage Association ("GNMA") pursuant to Section 306(g) of the National Housing Act, and, upon the completion of construction of the Project and the satisfaction of certain other conditions, of the exchange by the Trustee of the CLCs for a fully-modified, pass-through mortgage-backed project loan certificate (the "PLC"), issued by the Lender, guaranteed as to the timely payment of principal and interest by GNMA pursuant to Section 306(g) of the National Housing Act (hereinafter the CLCs and the PLC are sometimes collectively referred to as the "GNMA Securities"); and WHEREAS, the Issuer desires to assist in providing construction and permanent financing for the Mortgage Loan to be made to finance the Project; and WHEREAS, the Lender will use the proceeds of the Bonds paid to it by the Trustee to acquire the CLCs and the PLC to make the Mortgage Loan to the Borrower, which Mortgage Loan will be used to finance the acquisition, development, construction and equipping of the Project; and WHEREAS, the Borrower wishes to develop and construct the Project and finance a portion of such acquisition, development, construction and equipping of the Project with the Mortgage Loan from the Lender, which Mortgage Loan is evidenced by a mortgage note (the "Mortgage Note") and secured by a non-recourse mortgage (the "Mortgage") on the Project; and WHEREAS, the Issuer, the Borrower, the Lender and the Trustee each have full right and lawful authority to enter into this Agreement. WHEREAS, accordingly, in consideration of the mutual covenants hereinafter contained, the parties agree as follows: (The remainder of this page is intentionally left blank.) 2 ARTICLE I DEFINITIONS Section 1.1. General. In addition to the words and terms elsewhere defined in this Agreement, certain words and terms as used in this Agreement shall have the meanings given to them in the Recitals above and by the definitions and descriptions in this Article I. Those words and terms not specifically defined herein defined words or terms shall have the meanings set forth in Section 1.1 of the Indenture. Section 1.2. Agreement: Definitions. The following words and terms are defined terms under this Agreement: this Financing Agreement and all supplements and amendments hereto. Authorized Representative: a representative of the Borrower, authorized to perform an act or discharge a duty under this Agreement. Bond Documents: the Bonds, the Indenture, this Agreement, the Continuing Disclosure Agreement, and the Tax Regulatory Agreement. Bond Purchase Agreement: the Bond Purchase Agreement, dated October ,2001 between the Issuer, the Borrower and the Underwriter providing for the initial offer and sale of the Bonds by the Issuer to the Underwriter. Bonds: the Issuer's Multifamily Housing Revenue Bonds (GNMA Collateralized Mortgage Loan- Crest View ONDC I Project), Series 200lA-1 (the "Series 2001A-I Bonds"), in the original aggregate principal amount of $ , and its Multifamily Housing Revenue Bonds (GNMA Collateralized Mortgage Loan - Crest View ONDC I Project), Taxable Series 2001A-2 (the "Series 2001A-2 Bonds" and, collectively with the Series 200lA-1 Bonds, the "Bonds"), in the original aggregate principal amount of $ , Borrower: Crest View ONDC I, a Minnesota nonprofit corporation, its successors and assigns; Computation Date: has the meaning set forth in the Tax Regulatory Agreement. Exempt Person: (i) any organization described in section 501(c)(3) of the Code and exempt fi.om tax under section 501(a) of the Code, (ii) the State of Minnesota, any state of the United States of America, any possession of the United States of America, and any political subdivision of any such State or possession if such political subdivision has more than an insubstantial amount of any of the power to tax, the power of eminent domain, or the police power; or (iii) any organization which is a limited liability company whose sole member is an organization described in (i) or (ii), operating to fulfill the charitable purpose of its sole member. Investment: has the meaning set forth in the Tax Regulatory Agreement. Issuer Fee: the administrative fee of the Issuer payable by the Borrower on the dates and in the amounts as follows: (i) on the Closing Date, one-half of one percent of the original aggregate principal amount of the Outstanding Bonds and the outstanding principal amount of the Note; (ii) on October 1, 2002, one-half of one percent of the sum of the aggregate principal amount of the Bonds Outstanding on such date and the outstanding principal amount of the Note (after payment of any Bonds or any principal of the Note maturing or redeemed on such date) provided that, at the election of the Borrower, the fee due on October l, 2002, may be paid on the Closing Date in an amount equal to the present value of such fee as of the Closing Date based on a discount rate selected by the Issuer; and (iii) on each October 1 thereafter as long as any Bonds are Outstanding or the Note is outstanding, one-tenth of one percent of the aggregate principal amount of the Bonds Outstanding and the outstanding principal amount of the Note on each such date (after payment of any Bonds or any principal of the Note maturing or redeemed on such date); and if not paid when due, the unpaid amount shall continue as an obligation from the date originally due until the amount in default shall have been fully paid by the Borrower with interest thereon at the Issuer Fee Default Rate. For purposes of the determination of the Issuer Fee, "Outstanding Bonds" shall include all Bonds for the payment or redemption of which moneys or obligations shall have been deposited with the Trustee in accordance with Axticle IX of the Indenture. Issuer Fee Default Rate: interest at a per annum rate equal to two percent (2%) over the "prime rate" or "reference rate" of U.S. Bank National Association as it may change from time to time. Loan Documents or FHA Loan Documents: the Mortgage, the FHA Regulatory Agreement, the Mortgage Note, the Building Loan Agreement, and all other documents entered into by the Lender and the Borrower in eounection with the making of the Mortgage Loan by the Lender. Notice Address: with respect to each of the persons listed in Section 8.2 hereof, the address listed in such Section. Rebate Amount: has the meaning set forth in the Tax Regulatory Agreement. Regulations: any proposed, temporary, or final Income Tax Regulations issued pursuant to sections 103 and 141 through 150 of the Code, which are applicable to the Bonds. Any reference to any specific Regulation shall also mean any proposed, temporary or final Income Tax Regulation designed to supplement or replace the specific Regulation referenced. Resolution: the resolution of the Issuer adopted September 24, 2001, authorizing the issuance of the Bonds. Section 1.3. Interpretation. Words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders. Words importing the singular number shall include the plural number and vice versa, unless the context shall otherwise indicate. References to Articles, Sections and other subdivisions of this Agreement are to the Articles, Sections and other subdivisions of this Agreement as originally executed. The headings of this Agreement are for convenience and shall not define or limit the provisions hereof. Words importing persons include governmental entities, firms, associations, partnerships and corporations. Section 1.4. Intentions of the Parties. The parties hereto will use their best efforts to finance the Project in accordance with the terms herein as set forth below. The proceeds of the Bonds shall be applied pursuant to the provisions of this Agreement and the Indenture, to make a Mortgage Loan to the Borrower to provide construction and permanent financing of the costs of the Project and to pay certain costs incidental thereto. The Mortgage Loan will be effectuated through the making of the Initial Advance from the Lender to the Borrower, pursuant to the Building Loan Agreement. This financing will permit the acquisition by the Trustee of the Initial CLC from the Lender in exchange for the Initial Disbursement relating to such Advance and the Lender's application of the proceeds so derived to the reimbursement of its costs in making such Advance. ThereaRer, the Lender shall make interim Advances based upon insured construction draws approved by HUD and the Trustee shall make Disbursements and acquire the respective CLC when issued by the Lender. The principal of and interest on the CLCs will be 4 guaranteed as to timely payment by GNMA pursuant to the GNMA Guaranty Agreement between the Lender and GNMA, in accordance with Section 306(g) of the National Housing Act. The funds for the final Disbursement will be provided by the Lender and will be reimbursed by the Trustee by a Disbursement made in exchange for the release of the CLCs and the acquisition by the Trustee of the PLC from the Lender. The PLC so issued will be in the amount oftbe Lender's Final Advance when added to the sum of all CLCs then outstanding (and may be issued net of amounts of the Mortgage Note amortized prior to delivery of the PLC); provided that, the PLC will be in a principal amount not greater than the principal amount of the Mortgage Note as of Final Endorsement. The principal of and interest on the PLC will be guaranteed as to timely payment by GNMA pursuant to the GNMA Guaranty Agreement between the Lender and GNMA, in accordance with Section 306(g) of the National Housing Act. The Lender shall apply the Borrower's payments on the Mortgage Note to payments due under the CLCs and PLC. [End of Article I] 5 ARTICLE H PROJECT FINANCING Section 2.1. General Terms of the Financing. (a) In order to finance the acquisition, development, construction, and equipping of the Project and payment of Costs of Issuance (in an amount not exceeding two pement (2%) of the principal amount of the Bonds) and other costs associated with the Mortgage Loan in connection therewith, the Issuer will issue, sell and deliver the Bonds pursuant to the Indenture and the Bond Purchase Agreement and will deposit the proceeds of the Bonds and other moneys provided for such purpose with the Trustee, as provided in thc Indenture. (b) The Borrower promises (i) to repay the principal of the Mortgage Loan with interest thereon as provided in the Mortgage Note subject to the conditions contained therein, (ii) to comply with the provisions of this Agreement and the Loan Documents as provided therein, provided that such promise is subject to the provisions of Section 8.4 hereof; and (iii) in addition to any requirements of HUD and the Lender with respect to draws fi.om the Mortgage Loan, deliver requisitions to the Lender in the form set forth in Exhibit B hereto for disbursements under the Mortgage Loan. (c) The Lender agrees to meet all its obligations under the GNMA Guide. (d) The Borrower and the Lender agree to use their best efforts to deliver to the Trustee the PLC on or before the PLC Delivery Date (as such date may be extended pursuant to the Indenture). Neither the Borrower nor the Lender has any reason to believe that the PLC will not be delivered to the Trustee on or before the last date for acquisition. Section 2.2. Acquisition of the GNMA Securities. (a) Conditions to Acquisition. The Trustee hereby agrees to acquire the GNMA Securities on behalf of the Issuer; provided, however, that the Trustee's obligation in such respect shall be limited to the moneys available for such purpose in the Acquisition Fund of the Indenture (and to the extent that such moneys are not available in the Acquisition Fund, the Bond Fund), and provided further that the Trustee shall not disburse moneys fi.om the Acquisition Fund or the Bond Fund to acquire the GNMA Securities unless the conditions set forth in Section 4.4 of the Indenture have been met. Notwithstanding the occurrence of an event of default hereunder, the Trustee shall continue to purchase the GNMA Securities in accordance with this Agreement and the Indenture, provided the Lender is not in default hereunder and no default exists under the GNMA Securities or the GNMA Guaranty Agreement. (b) Obligations of the Lender. The Lender covenants and represents that in making any such request for funds, the Lender shall be deemed to represent and warrant to the Trustee as of that time that the Lender is not in default of its obligations under the Financing Agreement or other obligations pertaining to the Mortgage, and such request is in accordance with the FHA Commitment for the Project and has been submitted with a duly executed and completed HUD Form 92403. Following each interim Advance by the Lender, the Lender shall be required to deliver to the Trustee as soon as possible after the date of issue thereof, but in no event later than the last day of the month in which it is issued, a CLC in a principal amount equal to the amount of such interim Advance. The Trustee shall make a Disbursement to the Lender to acquire the CLC pursuant to Section 4.4 of the Indenture. The Lender shall also use its best efforts to deliver the PLC to the Trustee as soon as practicable after (A) Final Endorsement of the Mortgage Note, (B) release of the CLCs by the Trustee for conversion to the PLC, (C) pa>ment by the Trustee of the purchase price for the PLC, and (D) the date of issue oftbe PLC. (c) Issuance and Terms of CLCs. Each CLC shall be issued in book entry form in the name of the Trustee or its nominee, shall be dated as of the first day of the month in which it is issued, shall mature not later than the CLC Maturity Date, shall be payable upon maturity, and shall bear interest fi.om its issue date at a pass-through rate of % per annum, payable in arrears in monthly installments on the fifteenth day of each month, commencing not later than forty-five (45) days from the date thereof, in any coin or currency of the United States which is legal tender for the payment of public and private debts. The CLCs shall be subject to prepayment prior to maturity as described in Article VII hereof. If amounts in the Acquisition Fund have not been disbursed in an amount at least equal to $ on or before , 200 , the Borrower shall no longer be eligible to draw moneys fi.om the Acquisition Fund, the obligations of the Trustee to make disbursements from the Acquisition Fund and to accept CLCs and the PLC shall terminate, and the Trustee shall apply all amounts held under the Indenture in accordance with the provisions of the Indenture. Each CLC shall have the terms that are stated in the Indenture. The CLC Maturity Date may be extended from time to time as provided in Section 4.12 of the Indenture. (d) Issuance and Terms of the PLC. The funds for the £mal Disbursement will be provided by the Trustee in exchange for the PLC which PLC shall be valid, legal and binding, and will be in exchange for the CLCs then outstanding. The PLC shall be in a principal amount no greater than the principal amount of the Mortgage Note approved at Final Endorsement. The PLC shall have the terms stated in the Indenture, shall be dated as of the first day of the month in which the PLC is issued, shall mature no later than ,20._, shall bear interest at a pass-through rate of % per annum from and after its date of issue, shall be payable in monthly installments of interest only until the Commencement of Amortization and principal and interest from and after such date (which date shall not be later than 1, 20__, or such later date established pursuant to Section 4.12 of the Indenture), and shall be payable on or before the fifteenth day of eae. h month, commencing not later than forty-five (45) days from such issue date, in any coin or currency of the United States which is legal tender for the payment of public and private debts, each such installment to be applied for to the payment of interest on the unpaid principal balance of the PLC at the aforesaid rate, and then in reduction of principal. Prepayment penalties paid by the Borrower under the terms of the Mortgage Note, if any, shall be passed through to the Trustee as holder of the PLC. Section 2.3. Advance of Disbursed Amounts; Obligation to Repay Amounts Advanced. (a) On the date of closing of the Mortgage Loan, the Lender shall make the Initial Advance and shall disburse certain of the proceeds thereof to pay costs associated with the Mortgage Loan. Additional Advances shall be made by the Lender to finance the acquisition, development, construction, and equipping of the Project pursuant to the Building Loan Agreement and procedures established by the Lender. (b) In connection with the Initial Advance, funds deposited to the Administrative Fund shall be applied by the Trustee to pay the Costs of Issuance listed on Exhibit C attached hereto. Also in connection with the Initial Advance, the Lender shall disburse proceeds of the Mortgage Loan in an amount not exceeding $ to pay other Costs of Issuance. (c) The Borrower shall be obligated to pay all amounts from time to time advanced in accordance with the provisions of the Mortgage Note, which shall be in the amount, bear interest at the rate and be subject to prepayment as set forth in, and shall contain such other terms and provisions as may 7 be required by, the Loan Documents, and which shall be satisfactory in form and substance to the Issuer and the Lender. Section 2.4. Sufficiency of Funds. The Issuer does not make any warranty, either express or implied, that the moneys deposited under the Indenture and available for payment of the costs of acquiring the GNMA Securities will be sufficient to pay all the costs thereof. The Borrower agrees that if the Borrower should pay any costs relating to the acquisition of the GNMA Securities or any other costs related to the acquisition, development, construction, and equipping of the Project, the Borrower shall not be entitled to any reimbursement therefor from the Lender, the Issuer, the Trustee or the Bondowners. Section 2.5. Additional Payments by Borrower. The Borrower agrees to pay, whether out of the proceeds of the Mortgage Loan, payments on the Mortgage Note or other funds: (i) the Issuer Fee; (ii) the reasonable otu-of-pocket costs of the Issuer, now or hereinafter incurred (including the reasonable fees and expenses of its counsel) in connection with the issuance of the Bonds and the performance of its duties in connection with the transaction contemplated hereby, including, without limitation, all out-of- pocket costs of recording and filing (fees and taxes) and all out-of-pocket costs of printing the Bonds not otherwise paid from funds held by the Trustee pursuant to the Indenture; (iii) the fees and expenses of the Rebate Analyst in connection with calculations of the Rebate Amount; (iv) all reasonable fees and disbursements of the Trustee and its agents, including attorneys' fees and expenses (except to the extent such fees and expenses are paid from moneys available therefor under the Indenture); (v) all indemnity payments; and (vi) to the Trustee, Eligible Funds required to be deposited (if any) under the Indenture in order to extend the CLC Maturity Date or PLC Delivery Date pursuant to Section 4.12 of the Indenture. Section2.6. Default by Borrower Under Building Loan Agreement, Mortgage Note, Mortgage or FHA Regulatory Agreement. The Lender shall promptly give the Issuer and the Trustee notice in writing of any default by the Borrower under the Building Loan Agreement, the Mortgage Note, the Mortgage or the FHA Regulatory Agreement of which it has notice or actual knowledge. Section 2.7. Lender Pass Through Payments. Pursuant to the GNMA Guide, the Lender agrees to make all payments on the GNMA Securities in accordance with their terms; provided, that, this agreement is not to be construed as the Lender's guaranty. In the event Commencement of Amortization occurs prior to the PLC Delivery Date, under no circumstances will the Lender pass through to the Trustee principal payments on the Mortgage Note prior to the PLC Delivery Date; such principal payments shall be paid by the Lender only pursuant to the terms of the PLC. Section 2.8 Extensions of the PLC Delivery Date. The Borrower, the Lender, the Issuer and the Trustee agree to comply with the requirements of the Indenture in the event it is necessary to extend the PLC Delivery Date, and the Borrower agrees to pay all expenses in connection therewith. If the Borrower fails to make payment of such expenses, the Lender may do so at the expense of the Borrower. [End of Article II] ARTICLE IH MAINTENANCE AND INSURANCE OF TH E PROJECT Section 3.1. Maintenance. So long as any of the Bonds are Outstanding, the Borrower shall, as required under the Loan Documents, keep and maintain the Project, including all appurtenances thereto and any personal property therein or thereon, in good repair and good operating condition. Section 3.2. Insurance. The Borrower agrees to insure the Project as required by the Loan Documents. [End of Article III] 9 ARTICLE IV REPRESENTATIONS, WARRANTIES AND SPECIAL COVENANTS Section 4.1. Representations, Warranties and Covenants of the Issuer. The Issuer represents, warrants and covenants as follows: (a) The Issuer is a home role city and political subdivision of the State duly organized and existing under the Constitution and laws of the State. The Issuer has the full legal right, power and authority to execute and deliver this Agreement and the Indenture, and to carry out its obligations hereunder and thereunder. The execution, delivery and performance of this Agreement and the Indenture (including the issuance of the Bonds) have been duly authorized by the Issuer by adoption of the Resolution and each of the foregoing have been duly executed and delivered by the Issuer. The Issuer will do or cause to be done all things necessary, so far as lawful, to preserve and keep in full force and effect its existence. (b) The Issuer has issued the Bonds to finance the acquisition, development, construction, and equipping of the Project and certain Costs of Issuance, thereby financing the acquisition, development, construction, and equipping of the Project on favorable terms. (c) To the best of its knowledge, none of the execution and delivery of the Bonds, this Agreement or the Indenture, the consummation of the transactions contemplated hereby and thereby, or the fulfillment of or compliance with the terms, conditions or provisions of the Bonds, this Agreement or the Indenture conflict with or result in a material breach of any of the terms, conditions or provisions of any constitutional provisions or statute of the State, the Charter, laws, ordinance and resolutions of the Issuer, or of any agreement, instrument, judgment, order or decree to which the Issuer is now a party or by which it is bound, or constitute a material default under any of the foregoing. (d) The Issuer will, in reliance upon information furnished by the Borrower, duly execute and cooperate in the timely filing of an Information Return on Tax-Exempt Private Activity Bond Issues, Internal Revenue Service Form 8038 (Rev. December 2000). (e) Except as otherwise provided or contemplated in the Indenture, the Issuer will not make any pledge or assignment of the Trust Estate, other than the pledge and assignment thereof under the Indenture. (f) The Trustee, in its name or in the name of the Issuer, for and on behalf of the Bondowners, may enforce all rights of the Issuer and all obligations of the Borrower or the Lender under and pursuant to this Agreement, whether or not the Issuer has pursued or attempted to enforce any of such rights and obligations; provided that the Issuer may, but is not required to, enforce such rights and obligations. Section 4.2. Representations Warranties and Covenants of the Borrower. The Borrower makes the following representations and warranties to induce the Issuer, the Lender and the Trustee to enter into this Agreement and further covenants and agrees as follows: (a) As of the date of this Agreement and so long as this Agreement shall remain in force and effect, that (i) the Borrower is and will continue its existence and qualifications as an organization described in section 501(c)(3) of the Code which is not a private foundation as defined in section 509 of the Code; (ii) the Borrower is and shall continue to be exempt from 10 federal income taxation under section 501(a) of the Code; (iii) the Borrower shall not perform any act or enter into any agreement which shall adversely affect such federal income tax status; (iv) the Borrower shall not perform any act, enter into any agreement or use or permit the Project to be used in any manner (including any excessive unrelated trade or business) that would cause interest on the Bonds to become includable in gross income for federal income tax purposes pursuant to the Code; (v) the Borrower shall not carry on or permit to be carried on in the Project or permit the Project to be used in or for any trade or business the conduct of which is not substantially related to the exercise or performance by the Borrower of the purposes or functions constituting the basis for its exemption from federal income taxation under section 501 of the Code to the extent that such use of the Project would cause interest on the Bonds to become includable in gross income for federal income tax purposes; (vi) the Borrower is duly organized and existing as a nonprofit corporation under the laws of the State of Minnesota and is duly authorized to do business in the State of Minnesota; and (vii) the Borrower will maintain its existence under the laws of the State of Minnesota, and will not do, suffer or permit any act or thing to be done whereby its right to transact its functions might or could be terminated or its activities restricted; (b) That (i) as of the date of this Agreement, the Borrower is an organization that is organized and operated (A) exclusively for religious, charitable and educational purposes within the meaning of Section 501(c)(3) of the Code, (B) not for pecuniary profit and (C) no part of the net earnings of which inures to the benefit of any person, private stockholder or individual, all within the meaning, respectively, of 15 U.S.C. Section 77(c)(a)(4), Section 3(a)(4) of the Securities Act of 1933, as amended, and of 15 U.S.C. Section 781(g)(2)(D), Section 12(g)(2)(D) of the Securities Exchange Act of 1934, as amended, and (ii) it shall not perform any act or enter into any agreement xvhich shall adversely affect such status as set forth in this Section. (c) The Borrower (i) is a Minnesota nonprofit corporation, qualified to transact business under the laws of the State and is in good standing under the laws of the State, (ii) has the full legal right, power and authority to own its properties and assets and to carry on its business as now being conducted by it, and as contemplated by this Agreement, the Bond Documents and the Loan Documents, and (iii) has the full legal right, power and authority to execute and deliver this Agreement, the Bond Documents to which it is a party and the Loan Documents and to perform all the undertakings of the Borrower thereunder. (d) The execution, performance and delivery of this Agreement, the Bond Documents to which it is a party and the Loan Documents have been duly authorized by the Borrower and each of the foregoing have been duly executed and delivered by the Borrower. (e) The execution and delivery by the Borrower of this Agreement, the Bond Documents to which it is a party and the Loan Documents, and the performance by the Borrower of its obligations hereunder and thereunder, and the consummation of the transactions contemplated hereby and thereby, will not violate any provision of law, rule or regulation applicable to the Borrower, or any order or decree of any court or other agency or government or governmental instrumentality, or any provision of mortgage, indenture, contract, agreement, document, instrument or other undertaking to which the Borrower is a party or which are binding upon the Borrower or upon any of its assets, other than violations of any of the foregoing that do not materially adversely affect the ability of the Borrower to meet its obligations hereunder. (0 The Borrower has obtained, or will obtain in a timely manner when required, and will submit to the Issuer and the Lender, as appropriate, all consents, approvals, permits, authorizations and orders of any governmental or regulatory agency that are required to be 11 obtained by the Borrower as a condition precedent to the issuance of the Bonds, the execution and delivery of this Agreement, the Bond Documents to which it is a party, the Loan Documents or the performance by the Borrower of its obligations hereunder and thereunder, or that are required for the acquisition, development, construction, equipping and operation of the Project, other than consents, approvals, permits, authorizations and orders which the failure to obtain would not materially adversely affect the ability of the Borrower to meet its obligations hereunder. (g) No litigation at law or in equity or proceeding before any governmental agency involving the Borrower is pending or, to the best of its knowledge, threatened, in which any liability of the Borrower is not adequately covered by insurance or in which any judgment or order would have a material adverse effect upon the business or assets of the Borrower or that would affect its existence or authority to do business, the operation of the Project, the validity of this Agreement, the Bond Documents, the Loan Documents or the performance of its obligations hereunder and thereunder. (h) The Borrower does not have, and never has had any indebtedness for borrowed money, except as represented by the Mortgage Loan. (i) The information concerning the Project submitted by the Borrower to the Lender or the Issuer is true and correct in all material respects as of the date of delivery of the Bonds and does not make any untrue statement of a material fact or to the best of Borrower's knowledge omit to state a material fact necessary in order to make the statements made, in the light of circumstances under which they were made, not misleading. (j) The Indenture has been submitted to the Borrower for examination, and the Borrower acknowledges, by execution of this Agreement, that it has reviewed and approved the Indenture. (k) The Borrower shall at all times during the term of this Agreement comply in all material respects with the terms and conditions of the Bond Documents to which it is a party and the Loan Documents. (1) The Borrower shall comply in all material respects with the terms of the Tax Regulatory Agreement throughout the term thereof. (m) The Borrower shall deliver to the Trustee, simultaneously with the notice of its election to optionally prepay the Mortgage Note at a time when a premium is due with respect to such prepayment, an opinion of counsel acceptable to the Trustee that the amounts to be used to prepay the Bonds will be Eligible Funds. (n) The Borrower acknowledges, represents and warrants that it understands the nature and structure of the transactions relating to the financing of the Project; that it is familiar with the provisions of all of the documents and instruments relating to such financing to which it is a party or of which it is a beneficiary; that it understands the risks inherent in such transactions, including without limitation the risk of loss of the Project; and that it has not relied on the Issuer or the Trustee for any guidance or expertise in analyzing the financial or other consequences of such financing transactions or otherwise relied on the Issuer or the Trustee in any manner except to issue the Bonds. (o) Final endorsement of the Mortgage Note for FHA Mortgage Insurance is expected to occur no tater than the PLC Delivery Date. 12 (p) The construction period for the Project for purposes of FHA Mortgage Insurance is expected to be ( ) months. (q) There does not presently exist any pending dispute relating to the issuance of the Bonds or the application of the proceeds thereof to the acquisition, development, construction or equipping of the Project, and to the best of the Borrower's knowledge, there are no potential disputes concerning such matters which could affect the ability of the Borrower to complete the acquisition, development, construction or equipping of the Project, the issuance of the CLCs and the PLC, or the payment of principal of and interest on the Bonds as the same becomes due. Section 4.3. Representations of the Lender. In addition to the other representations and covenants of the Lender contained herein, the Lender hereby represents, warrants and covenants as follows: (a) The Lender (i) is a duly and lawfully organized District of Columbia corporation, (ii) is organized and operated for the purposes, among others, of making mortgage loans to provide financing for the acquisition, development, construction and equipping of multifamily rental residential developments and/or health facilities and of issuing mortgage-backed securities guaranteed by GNMA, (iii) has full lawful power and authority under its organizational documents and applicable laws to execute and deliver this Agreement and the Loan Documents to which it is a party, and to issue, execute and deliver the GNMA Securities and to perform its obligations hereunder and thereunder, and (iv) by proper action has duly authorized the execution and delivery of this Agreement and the Loan Documents to which it is a party, the issuance, execution and delivery of the GNMA Securities to the Trustee. (b) In accordance with the terms of this Agreement, the Lender shall: (i) issue and deliver the Initial CLC and issue and deliver the other CLCs to the Trustee as promptly as possible, but no later than the last day of the month in which the CLC is dated; (ii) cause to be delivered the PLC to the Trustee or its nominee as promptly as possible after (A) Final Endorsement, or (B) the date of issue of the PLC; (iii) observe and perform all covenants, agreements and obligations to be observed and performed by it pursuant to prudent mortgage banking standards, the GNMA Guaranty Agreement and any applicable GNMA and FHA rules and regulations, the GNMA Guide, the Building Loan Agreement, and any other documents relating to this financing and undertakings; and (iv) obtain extensions, from time to time as necessary, of the maturity date for the CLCs in accordance with Lender's responsibilities under Section 4.4 of the Indenture if the PLC has not been issued prior to the maturity date of the CLCs or any extension of such maturity date, unless prior to any maturity date or extension of such maturity date the CLCs have been redeemed, and to use its best efforts to obtain such extension(s) of such maturity date at least fifteen days prior to any such maturity date. (c) This Agreement and the Loan Documents to which it is a party constitute, and the GNMA Securities, upon the issuance, execution and delivery thereof, will constitute, legal valid and binding obligations of the Lender enforceable in accordance with their terms, except as 13 limited by bankruptcy, insolvency, reorganization, moratorium and other laws for the relief of debtors. (d) The execution and delivery of this Agreement and the Loan Documents to which it is a party, the issuance, execution and delivery of the GNMA Securities, and the consummation of the transactions contemplated hereby and thereby, do not conflict with or constitute a breach of or a default under the Lender's organizational documents and applicable laws and regulations, or under the terms and conditions of any agreement or commitment to which the Lender is a party and by which the Lender is bound. (e) There is no action, suit, proceeding, inquiry or investigation by or before any court, governmental agency, public board or body pending against Lender or, to the knowledge of the Lender, threatened against the Lender, which questions or affects the power or authority of the Lender to carry out the transactions contemplated by, or to be performed under, this Agreement, the Loan Documents or the GNMA Securities. (t) The Lender is (i) approved by FHA to originate and service mortgage loans insured by FHA under Section 232 of the National Housing Act of 1937, as amended and applicable regulations thereunder, and (ii) meets all the issuer eligibility requirements of (including net worth requirements), and is approved by GNMA to issue mortgage-backed securities guaranteed by GNMA pursuant to Section 306(g) of Title III of the National Housing Act and applicable regulations thereunder. (g) The Lender has no reason to believe that the Mortgage on the Project will not meet the eligibility requirements set forth in the GNMA Guide as of the date of Final Endorsement. (h) The Indenture has been submitted to the Lender for examination, and the Lender acknowledges, by execution of this Agreement, that it has reviewed and approved the Indenture and understands the Indenture with respect to the payment to the Lender for the GNMA Securities and the funding of the Mortgage Loan. (i) The Lender shall not knowingly take any action that would cause interest on the Bonds to become includable in gross income for federal income tax purposes and to that end will, among other things, enforce the terms and conditions of this Agreement and the Loan Documents. This covenant shall not restrict the exercise of the Lender's rights and remedies under the Loan Documents in the event of a Borrower default. (j) The Lender covenants that the certifications in the Lender Certificate dated as of the Closing Date, are true and correct as of the date thereof, and agrees that they shall be incorporated herein by reference. (k) The Lender by proper action has duly authorized the execution and delivery of the Loan Commitment. (1) To the extent permitted by the Loan Documents and applicable HUD regulations and related administrative requirements, the Lender will not unreasonably withhold any consent required of it under the Indenture and this Agreement. (m) The Lender's fees are reasonable and customary for mortgage loans such as the Mortgage Loan and do not exceed the fees that would be charged by the Lender in making the 14 Mortgage Loan if the funds for financing had been provided other than from the Bondc or from any other obligation the interest on which is excluded from gross income tax for Federal income tax purposes. Neither the Issuer nor the Trustee shall be liable for any such fees and expenses nor shall the imposition or collection of any such fees and expenses have the effect of reducing the interest, principal or premium payable under and by the express terms of the GNMA Securities. (n) To the best of the Lender's knowledge, there are no potential disputes concerning such matters which could affect the ability of the Lender to issue the CLCs and the PLC or to finance the Project under the Mortgage Loan. Section 4.4. Tax-Exempt Status of the Bonds. The Borrower hereby represents, warrants and agrees that: (a) The Borrower has not and shall not take any action or omit to take any action which, if taken or omitted, respectively, would cause interest on the Bonds to become includable in gross income for federal income tax purposes. (b) All representations, warranties, and certifications made by the Borrower in connection with the delivery of the Bonds on the closing date, including, but not limited to, those representations, warranties, and certifications made by the Borrower and contained in the Tax Regulatory Agreement, which are hereby incorporated by reference as if fully set forth herein, and any certificate concerning tax-exempt status of the Bonds executed by the Borrower, are and shall be tree, correct, and complete in all material respects. (c) If the Borrower becomes aware of any situation, event or condition which could cause interest on the Bonds to become includable in gross income for federal income tax purposes, the Borrower shall promptly give written notice thereof to the Issuer and the Trustee. (d) Anything in this Agreement to the contrary notwithstanding, it is expressly understood and agreed by the parties hereto that the Issuer and the Trustee may rely conclusively on the troth and accuracy of any certificate, opinion, notice, representation or instrument made or provided by the Borrower in order to establish the existence of any fact or statement of affairs solely within the knowledge of the Borrower, and which is required to be noticed, represented or certified by the Borrower hereunder or in connection with any filings, representations or certifications required to be made by the Borrower in connection with the issuance and delivery of the Bonds. [End of Article IV] 15 ARTICLE V ADDITIONAL cOVENANTS AND AGREEMENTS Section 5.1. Inspections. The Borrower agrees that all equipment, buildings, apartments, plans, offices, apparatus, devices, books, contracts, records, documents, and other papers relating to the Project shall at all times be maintained in reasonable condition for proper audit, and shall, upon prior written notice and during regular business hours, be subject to examination and inspection at any reasonable time by the Issuer, the Trustee, the Lender or their authorized agents. Section 5.2. Reports and Information. At the written request of the Issuer or the Trustee, their agents, employees or attorneys, the Borrower shall furnish to the Issuer and the Trustee, concurrenfly with delivery to the Lender or HUD, copies of any reports and information furnished to the Lender or HLrD pursuant to the Loan Documents. In addition, the Borrower shall furnish to the Issuer and the Trustee, if so requested, such information as may be reasonably requested in writing from time to time relative to compliance by the Borrower with the provisions of this Agreement and the Tax Regulatory Agreement. Section 5.3. Assignment. Subject to Section 5.8 hereof and the termination provisions of Section 7.1 hereof, no assignment or transfer of tide to the Project shall be made unless: (a) the Lender and HLrD consent to such assignment or transfer; (b) the transferee or assignee, as the case may be, assumes all the duties of the Borrower under this Agreement, the Bond Documents to which the Borrower is a party and the Loan Documents, provided that such assumption may, if consented to as aforesaid, contain an exculpation of the assignee from personal liability with respect to any obligation hereunder or thereunder; and (c) the Trustee receives an opinion of Bond Counsel that such assignment or transfer will not cause interest on the Bonds to become includable in gross income for federal income tax purposes. Upon the assumption of the duties of the Borrower by an assignee as provided herein, the Borrower shall be released from all executory obligations so assumed. Nothing contained in this Section shall be construed to supersede any provisions regarding assignment and transfer of the Project contained in the Loan Documents, specifically the FHA Regulatory Agreement. Section 5.4. Fees Under Indenture. The Borrower agrees to pay the Rebate Analyst Fee and to compensate and reimburse the Trustee for its reasonable fees, costs and expenses incurred in connection with the performance of the Trustee's duties pursuant to the provisions of the Indenture and this Agreement, including without limitation the Trustee Fee as set forth in the Indenture. Section 5.5. Mortgage Loan Documents. In connection with the making of the Mortgage Loan, the Lender and the Borrower shall execute and deliver such documents as may be customarily utilized for mortgage loans to be insured under Section 232 of the Housing Act, with such omissions, insertions and variations as may be permitted by such regulations and as may be consistent with the terms and provisions of this Agreement. Section 5.6. Warranty of Truth. The Borrower covenants that no information, certificate, statement in writing or report required of the Borrower by this Agreement or otherwise furnished by the Borrower to the Issuer or the Trustee contains or will contain any untrue statement of a material fact or, to the best of its knowledge, omit or will omit a material fact necessary to make such information, certificate, statement or report not misleading. 16 The Lender covenants that, to the best of its knowledge, no :nformation, certificate, statement in writing or report required of the Lender by this Agreement or otherwise furnished by the Lender to the Issuer or the Trustee contains or will contain any untrue statement of a material fact or, to the best of its knowledge omit or will omit a material fact necessary to make such information, certificate, statement or report not misleading. Section 5.7. Public Purpose. The public purpose under the Constitution and laws of the State for which the Issuer has determined to issue the Bonds and enter into this Agreement is to assist in the provision of decent, safe and sanitary housing for elderly persons within its charitable purposes. The Issuer finds and determines that the covenants contained in this Agreement reasonably assure the carrying out of such public purpose, and further finds and determines that the accomplishment of such public purpose is the primary reason for the transactions contemplated by this Agreement. Section 5.8. Information to Ratine A~,ent. The Borrower and Lender agree to provide, from time to time, such information relating to the Bonds or the GNMA Securities to the Rating Agent as it may request in connection with the maintenance of the rating on the Bonds. Section 5.9. Continuing Disclosure. The Borrower covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Agreement. Notwithstanding any other provision of this Agreement, failure of the Borrower to comply with the Continuing Disclosure Agreement shall not be considered an Event of Default; however, the Trustee may (and, at the request of any Participating Underwriter or the Holders of at least twenty-five percent (25%) in aggregate principal amount of the outstanding Bonds, shall, or any Bondholder or Beneficial Owner may, take such actions as may be necessary and appropriate, including seeking specific performance by court order, to cause the Borrower to comply with its obligations under this Section. For purposes of this Section, "Beneficial Owner"' means any person who: (i) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries); or (ii) is treated as the owner of any Bonds for federal income tax purposes. [End of Article V] 17 ARTICI. E VI EVENTS OF DEFAULT; REMEDIES Section 6.1. Events of Default; Remedies. Upon violation by the Borrower of any of the provisions of this Agreement, the Bond Documents to which it is a party, or the Loan Documents, the Issuer, the Lender or the Trustee shall give written notice thereof to the parties hereto by registered or certified mail, postage prepaid, rem-receipt requested. If such violation is not corrected to the satisfaction of the Issuer, the Lender and the Trustee within thirty (30) days after the date such notice is mailed, or within such further time as the Issuer, the Lender and the Trustee permits, without further notice the Issuer, the Lender or the Trustee may declare a default under this Agreement (an "Event of Default") effective on the date of such declaration of default, and upon such default the Issuer, the Lender or the Trustee may apply to any state or federal court having jurisdiction for specific performance of this Agreement, for an injunction against any violation of this Agreement, or for such other relief in law or equity as may be appropriate, since the injury to the Issuer, the Lender and the Trustee arising from a default under any of the terms of this Agreement would be irreparable, and the amount of damage would be difficult to ascertain. Nothing included herein shall preclude the Issuer from pursuing any other legal remedy against the Borrower upon the occurrence of an Event of Default hereunder. Specifically, nothing in this Financing Agreement shall prohibit the Issuer from taking any action to collect its Issuer Fees or other payments then due and payable and thereafter to become due and payable, or to enforce the performance of any provision, agreements or covenants of the Borrower under certain specified sections hereto, without the consent of the Lender. Further, nothing herein shall be deemed to limit the rights of Borrower to equitable relief or monetary damages should any other party to this Agreement default hereunder, except no such rights shall exist as to the Issuer. Notwithstanding the foregoing, remedies for any Event of Default hereunder, which is not an automatic default under the Loan Documents, do not include acceleration of the Mortgage Loan or foreclosure of the Mortgage. Section 6.2. No Remedy Exclusive. No remedy conferred upon or reserved to the Issuer, the Lender or the Trustee by this Agreement is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Issuer, the Lender or the Trustee to exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice, other than such notice as may be expressly required herein. No remedy contained herein is intended to diminish or contravene any remedy under the Loan Documents. Section 6.3. No Additional Waiver Implied by One Waiver. In the event any agreement contained in this Agreement should be reached by any party and thereafter waived by the other parties, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. Section 6.4. Agreement to Pay Fees and Expenses Upon Default. In the event the Borrower is in default under any provision of this Agreement, the Bond Documents to which it is a party or the Loan Documents, the Borrower shall be liable to and shall pay to the Issuer, the Trustee and the Lender upon demand all reasonable fees, expenses and disbursements of such persons and their agents (including reasonable attorneys fees and expenses) which arise from the Borrower's default hereunder. 18 Section 6.5. Lender's Right ;o Perform. If the Borrower shall fail to make any payment or fail to perform, observe or comply with any of the conditions, covenants and provisions herein contained, the Lender, following reasonable notice to the Borrower, and without waiving or releasing any obligation or default by the Borrower, may (but shall be under no obligation to) at any time thereafter make such payment or perform such act for the account and at the expense of the Borrower, and may enter upon the Project or any part thereof for that purpose and take all such action thereon as the Lender may consider necessary or appropriate for such purpose, and in such event the Borrower hereby irrevocably appoints the Lender its agent and attorney-in-fact and for the purposes hereinabove set forth, said power being coupled with an interest. [End of Article VI] 19 ARTICLE VH TERMINATION AND PREPAYMENT Section 7.1. Option to Terminate. The Borrower shall have the option to terminate this Agreement at any time when (a) the Indenture shall have been defeased pursuant to its provisions, (b) sufficient moneys are on deposit with the Trustee or the Issuer to meet all additional payments due or to become due through the date on which the last of the Bonds are then scheduled to be retired or redeemed, or, with respect to additional payments to become due, provisions satisfactory to the Trustee and the Issuer are made for paying such amounts as they come due, and (c) any and all amounts payable to the Issuer pursuant to this Agreement have been paid in full. Section 7.2. Option to Prenav Mortgaee Loan. The Borrower shall have, and is hereby granted the option to prepay the Mortgage Loan in accordance with the terms of the Mortgage Note. Section 7.3. Prepayment of CLCs and PLC. The CLCs and PLC shall be subject to prepayment prior to maturity, as provided in Sections 7.4 and 7.5 hereof. Except for prepayments as a result of a default on the Mortgage Note and the payment of a claim for FHA Mortgage Insurance, prepayment of the PLC may be made only in the event, and to the extent, that there has been a corresponding prepayment of the Mortgage Note by the Borrower pursuant to the terms thereof. Except as otherwise provided in Section 7.4 hereof, all prepayments of CLCs or the PLC shall be made at a prepayment price of one hundred percent (100%) of the principal amount, plus accrued interest through the last day of the month in which the prepayment of the Mortgage Note occurs. In the event of a default, notwithstanding any prepayment prohibition imposed and/or penalty required by the Mortgage Note with respect to prepayments made prior to 20, 20__, the indebtedness may be prepaid in part or in full without the consent of the Lender and without prepayment penalty if HUD determines that prepayment will avoid a mortgage insurance claim and is therefore in the best interest of the Federal Government. Section 7.4. Optional Prepayment. The PLC shall be subject to prepayment on or after October 20, 2011 from (i) proceeds of refunding bonds, (ii) optional prepayments by the Borrower under the Mortgage Note, or (iii) other Eligible Funds, at the applicable prepayment prices set forth below (expressed as a percentage of the principal amount to be prepaid), in each case plus accrued interest through the last day of the month in which the prepayment of the Mortgage Note occurs, such prepayment of the PLC to occur not later than the fifteenth day of the month following the month in which such Mortgage Note prepayment occurs: Redemption Period Redemption (dates inclusive) Price 20, 2011 to 19, 2012 105% 20, 2012 to 19, 2013 104% 20, 2013 to ,19, 2014 103% 20, 2014 to ,19, 2015 102% 20, 2015 to ,19, 2016 101% ,20, 2016 and thereafter 100% 20 Section 7.5. Mandatory Prepayment. (a) The PLC shall be subject to prepayment in whole or in part, fi.om payments made under the Mortgage Note as of the fifteenth day of any month following Final Endorsement and from prepayments under the Mortgage Note fi.om such proceeds of insurance or condemnation as are not applied to the rebuilding or restoration of the Project; provided that the Lender will use its best efforts to give thirty (30) days' prior written notice of the making of such prepayment on the PLC. (b) The CLCs and the PLC shall be subject to prepayment, in whole or in part at any time without notice, as a result of a default by the Borrower under the Mortgage Loan fi.om the proceeds of the FHA Mortgage Insurance and/or funds of the Lender. Section 7.6. Timing of Prepayment; Notice of Prepayment. Prepayments (including premium, if any) made on the Mortgage Note by the Borrower shall be paid to the Lender and passed through to the Trustee, on the first payment date that such prepayment may be passed through under the GNMA program as prepayments on the CLCs or on the PLC, for the redemption of the Bonds in a like principal amount on any date set for the redemption of the Bonds. The Lender covenants and agrees that it shall promptly give the Trustee written notice of any expected prepayment and the date of the expected pass through of the prepayments to the Trustee. [End of Article VII] 21 ARTICLE VIH MISCELLANEOUS Section 8.1. Term of Agreement. This Agreement shall remain in full force and effect from the date hereof to and including the earliest to occur of the maturity date of the GNMA Securities, the final maturity of the Bonds, or until such time as all of the Bonds shall have been fully paid (or provision made for such payment pursuant to the Indenture). Section 8.2. Notices. All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed given when mailed by registered, certified or first class mail, postage prepaid, return-receipt requested, addressed as follows: If to the Issuer: City of Columbia Heights 590 -40* Avenue N.E. Columbia Heights, MN 55421-3878 Attn: City Manager If to the Trustee: U.S. Bank Trust National Association 180 East Fifth Street St. Paul, MN 55102 Atto: Corporate Trust If to the Lender: Reilly Mortgage Group, Inc. 2000 Corporate Ridge, Suite 925 McLean, VA 22102-7805 Atto: Michael Aquilino If to the Borrower: Crest View ONDC I Crestview Corporation 4444 Reservoir Boulevard N.E. Columbia Heights, MN 55421 Attn: Shirley Barnes If to GNMA: Government National Mortgage Association 451 Seventh Street SW Washington, DC 20410 Atto: Financial Management Division Office of Mortgage-Backed Securities If to the Underwriter: U.S. Bancorp Piper Jaffray Inc. 800 Nicollet Mall, Suite 800 Mail Station J1012019 Minneapolis, MN 55402 Attn: Trading If to the Rating Agent: Moody's Investors Service 99 Church Street New York, NY 10007 Arm: Mortgage Finance Group 22 Copies of each notice, certificate or other communication given hereunder by any party hereto shall be given to all parties hereto. By notice given hereunder, any party may designate further or different addresses to which subsequent notices, certificates or other communications are to be sent. A duplicate copy of each notice, certificate, request or other communication given hereunder to the Issuer, the Lender or the Borrower shall also be given to the Trustee. Section 8.3. Binding Effect. This Agreement shall inure to the benefit of and shall be binding upon the Issuer, the Lender, the Borrower and the Trustee and their respective successors and assigns, and subject to the limitation that any obligation of the Issuer created by or arising out of this Agreement shall not be a general debt of the Issuer or the State or any political subdivision or taxing district thereof, but shall be payable solely out of the revenues pledged under the Indenture. Section 8.4. Limited Liability of Borrower. The obligations of the Borrower contained in this Agreement (except for payment of the fees and expenses of the Issuer under Section 2.5 and indemnification of the Issuer under Section 8.10 hereo0 shall be non-recourse obligations of the Borrower, and neither the Borrower nor any member of the Borrower shall have personal liability for the satisfaction of any obligation of the Borrower or claim arising out of this Agreement against the Borrower (except for payment of the fees and expenses of the Issuer under Section 2.5 and indemnification of the Issuer under Section 8.10 hereof which shall be recourse obligations of the Borrower). Any payments, debts, obligations, covenants, representations or warranties resulting in monetary liability on the part of the Borrower shall be payable solely from Residual Receipts (as defined in the FHA Regulatory Agreement) available for distribution to the Borrower. Section 8.5. Amendments, Changes and Modifications. This Agreement may not be amended, changed, modified, altered or terminated without the prior written consent of the parties and only as set forth in Section 8.3 of the Indenture. Section 8.6. Counterparts. This Agreement may be executed in several counterparts, each of which shall be regarded as an original and all of which shall constitute but one and the same Agreement. Section 8.7. Severability. In case any provision of this Agreement is for any reason held to be illegal, invalid or inoperable, such illegality, invalidity, or inoperahility shall not affect the remainder hereof, which shall at the time be construed and enforced as if such illegal or invalid or inoperable portion were not contained herein. Section 8.8. Captions. The captions or headings in this Agreement are for convenience only and in no way define, limit or describe the scope or intent of any provisions or sections of this Agreement. Section 8.9. Limited Liability. All obligations of the Issuer incurred hereunder and under the Indenture, shall be limited obligations of the Issuer, payable solely and only from Bond proceeds, revenues and other amounts derived by the Issuer from the Trust Estate. The Issuer shall have no liability or obligation with respect to the payment of the purchase price of the Bonds. None of the provisions of this Agreement shall require the Issuer to expend or risk its own funds or to otherwise incur financial liability in the performance of any of its duties or in the exercise of any of its rights or powers hereunder, unless payable from the revenues pledged under the Indenture, or the Issuer shall first have been adequately indemnified to its satisfaction against the cost, expense, and liability which may be incurred thereby. The Issuer shall not be under any obligation hereunder to perform any record keeping or to provide any legal services, it being understood that such services shall be performed or provided by the Trustee or the Borrower. The Issuer covenants that it will faithfully perform at all times any and all covenants, undertakings, stipulations, and provisions expressly contained 23 in this Agreement, the Indenture, in any and every Bond executed, authenticated, and delivered under the Indenture; provided, however, that (a) the Issuer shall not be obligated to take any action or execute any instrument pursuant to any provision hereof until it shall have been requested to do so by the Borrower or the Trustee, and (b) the Issuer shall have received the instrument to be executed. Anything in this Agreement to the contrary notwithstanding, it is expressly understood and agreed that the Issuer may rely conclusively on the troth and accuracy of any certificate, opinion, notice or other instrument furnished to it by the Trustee or the Borrower as to the existence of any fact or state of affairs required hereunder to be noticed by the Issuer. Section 8.10. Indemnification. (a) The Borrower will indemnify and hold harmless the Lender, the Issuer and each of their officers, commissioners, employees and agents, including the Trustee, from and against any and all claims by or on behalf of any person, firm, corporation or other legal entity arising from the conduct, operation or management of, or from, any work or thing done on the Project during the term of this Financing Agreement, including, without limitation, (i) any condition of the Project; (ii) any breach or default on the part of the Borrower in the performance of any of its obligations under this Financing Agreement; (iii) any act of negligence of the Borrower or of any of its agents, contractors, servants, employees or licensees or (iv) any act of negligence of any assignee or lessee of the Borrower, or of any agents, contractors, servants, employees or licensees of any assignee or lessee of the Borrower. The Borrower shall indemnify and save the Lender, Issuer and Trustee harmless from any such claim arising as aforesaid, or in connection with any action or proceeding brought thereon, and upon notice from the Lender, Issuer or Trustee, the Borrower shall defend them or any of them in any such action or proceeding. (b) The Borrower agrees to indemnify and hold harmless the Issuer, Lender and Trustee and their respective employees, commissioners, officers and agents ("Indemnified Parties") against any and all losses, claims, damages or liability to which the Indemnified Parties may become subject under any law in connection with the issuance and sale of the Bonds, the carrying out of the transactions contemplated by the Financing Agreement or the Indenture, and the conduct of any activity in connection with the Project, including, as to the Issuer, claims for which the Indemnified Parties may be or may be claimed to be liable (and exclusive of any losses, claims, damages or liability of the Lender or Trustee resulting from or based upon the negligence or malfeasance of the Lender or Trustee), and to reimburse the Indemnified Parties for any out-of-pocket legal and other expenses (including reasonable counsel fees) incurred by the Indemnified Parties in connection with investigating any such losses, claims, damages or liabilities, or in connection with defending any actions relating thereto. The Indemnified Parties agree, at the request and expense of the Borrower, to cooperate in the making of any investigation in defense of any such claim and promptly to assert any or all of the rights and privileges and defenses identified in writing by the Borrower which may be available to the Indemnified Parties. The Borrower releases and agrees to hold harmless the Issuer and its employees, commissioners, officers and agents from any liability to the Borrower arising out of any covenant, representation, undertaking, resolution or any other document executed by or on behalf of the Issuer. These provisions shall survive payment of the Bonds and termination of this Financing Agreement and the Indenture. Promptly upon written notice received by the Borrower fi'om any Indenmified Party or parties of any claim or the commencement of any action or proceeding specified in the preceding paragraph, the Borrower will at the request of such Indemnified Party or parties, assume the investigation and defense of such action or proceeding including the employment of counsel reasonably satisfactory to such Indemnified Parties and the payment of the fees and disbursements of such counsel. In the event that any Indemnified Party or parties shall determine, in the exercise of their reasonable judgment, that there exists 24 a conflict of interest by reason of having a common counsel with the Borrower or with any other Indemnified Party, or if the Borrower elects not to defend the action with respect to any or all Indemnified Parties, then each such Indemnified Party may employ separate counsel satisfactory to the Borrower to represent or defend it in any such action or proceeding in which it may become involved or is named as defendant and the Borrower will pay as incurred the reasonable fees and disbursements of such counsel. The Borrower also agrees to notify all Indemnified Parties promptly of the assertion against it or against any of its officers, directors, employees or agents of which it has knowledge, as the case may be, of any claim or the commencement of any action or proceeding arising fi.om any act or omission of the Borrower or any of its agents, servants or employees in connection with this Financing Agreement, the Indenture or the Project. (c) If the Issuer incurs any expense or suffers any losses, claims or damages or incurs any liabilities in connection with the transaction contemplated by this Agreement, the Borrower will indemnify and hold harmless the Issuer fi.om the same and will reimburse the Issuer for any reasonable legal or other expenses incurred by the Issuer in relation thereto. The Borrower shall also reimburse the Issuer for all other costs and expenses, including without limitation, reasonable attorney's fees paid or incurred by the Issuer in connection with: (i) the discussion, negotiation, preparation, approval, execution and delivery of this Agreement and the documents and instruments related hereto; (ii) any amendments or modifications thereto or the Indenture and any document, instrument or agreement related hereto and the discussion, negotiation, preparation, approval, execution and delivery of any and all documents necessary or desirable to effect such amendments or modification; and (iii) the enforcement by the Issuer during the term of this Agreement or thereafier of any of the rights or remedies of the Issuer under this Agreement or under the Indenture or any document, instrument or agreement related thereto, including, without limitation, costs and expenses of collection in the event of default, whether or not suit is filed with respect thereto. (d) The Borrower acknowledges and agrees that the Issuer shall not be liable to the Borrower, and releases and discharges the Issuer fi.om any liability, for any and all losses, costs, expenses (including reasonable attorney's fees), damages, judgments, claims and causes of action, paid, incurred or sustained by the Borrower as a result of or relating to any'hction, or failure or refusal to act, on the part of the Issuer with respect to this Agreement or the documents and transaction related hereto, including, without limitation, the exemise by the Issuer of any of its rights or remedies pursuant to this Agreement, the Indenture or any related document and instrument. Section 8.11. Conflict with Mortgage and HUD Regulations; Supremacy of Mortgage and HUD Insurance. Notwithstanding anything in this Agreement to the contrary: (a) The provisions hereof are subordinate and subject to the National Housing Act, HUD and GNMA regulations, related administrative requirements and the FHA Loan Documents. In the event of any conflict between the provisions of this Agreement and the provisions of any applicable HUD regulations, related FHA administrative requirements, or the FHA Loan Documents, the HUD regulations, related administrative requirements or FHA Loan Documents shall control. Any ambiguity or inconsistency will be resolved in favor of, and pursuant to, the HUD mortgage insurance, HUD and GNMA statutory, regulatory and administrative requirements and the terms of the FHA Loan Documents. (b) An event of default under this Agreement cannot be nor will be deemed to be the basis of a default under the FHA Loan Documents; (c) Enforcement of this Agreement will not result in any claim against the Project, the proceeds of the Mortgage, any reserve or deposit required by HUD in connection with the 25 Mortgage Loan, or the rents or income from the Project (other than available "Residual Receipts", as such term is defined in the FHA Regulatory Agreement or as otherwise permitted by HUD); provided, however, that the foregoing shall not restrict any fights of the Issuer, Trustee or any of the Bondholders against any guarantor of the obligations of the Borrower, if any, with respect to this Agreement; (d) Any amendment to this Agreement shall be contingent upon the prior written approval of the Lender and HUD; (e) Neither the Borrower nor the Lender shall be deemed to be in violation of this Agreement if it shall take (or refrain from taking) any actions required (or prohibited) by HUD pursuant to the National Housing Act, applicable HUD (and Section 8, if applicable) Regulations and related administrative requirements or the FHA Loan Documents. (0 Any Project funds held by the Lender for or on behalf of the Borrower under the Contract of Mortgage Insurance shall be maintained separate and apart from the funds established and held by the Trustee for the Owners of the Bonds and the various escrows and funds, if any, under the Indenture. (g) No amendment to this Agreement shall conflict with the provisions of the National Housing Act, any applicable HUD regulations, related administrative requirements, the FHA Loan Documents, any applicable GNMA Regulations and related administrative requirements. (h) This Agreement shall not be construed to restrict or adversely affect the duties and obligations of the Lender under the contract of mortgage insurance between the FHA and the Lender with respect to the Mortgage Loan. (i) Neither the Issuer, the Trustee nor any Bondholder has or shall be entitled to assert any claim against the Project, the mortgage proceeds, any reserves or deposits required by HUD in connection with the mortgage transaction or the rents or deposits or other income of the property other than "Residual Receipts" as defined in the FHA Regulatory Agreement. [End of Article VIII] 26 IN WITNESS WHEREOF, the Issuer, the Borrower, the Lender and the Trustee have caused this Agreement to be executed in their respective names, individually or by their duly authorized officers, all as of the day and year first above written. CITY OF COLUMBIA HEIGHTS, MINNESOTA Issuer By Its Mayor By Its City Manager S-1 Execution page of the Borrower for the Financing Agreement. CREST VIEW ONDC I as BoITower By Its President S-2 Execution page of the Trustee for the Financing Agreement. U.S. BANK TRUST NATIONAL ASSOCIATION Trustee By Its S-3 Execution page of the Lender for the Financing Agreement as Lender By Its S-4 EXmBIT A PRO~ECT DESCRIPTION The Project consists of a 50-unit assisted-living and memory-loss multifamily senior rental housing development to be owned and operated by the Borrower and located in the City of Coltunbia Heights, and the furniture, goods, equipment (exclusive of motor vehicles), machinery, inventory and other tangible personal property owned by the Borrower and used at or in connection with such facilities, which are to be acquired with the proceeds of the Bonds, or which are in substitution or replacement therefor, and any proceeds of the same. A-1 EXHIBIT B FORM OF DISBURSEMENT REQUEST Reference is made to that certain Financing Agreement (the "Financing Agreement") dated as of , 20__, by and among Crest View ONDC I, a Minnesota nonprofit corporation (the "Borrower"), the City of Columbia Heights, Minnesota (the "Issuer"), (the "Lender"), and U.S. Bank Trust National Association (the "Trustee"). Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Financing Agreement. The undersigned represents, warrants and certifies to the Lender and the Trustee that: (a) each obligation to which the amount specified on the attached Schedule I relates has been properly incurred in connection with the Project being financed with the proceeds of the Mortgage Loan, is a reimbursable Project Cost properly chargeable against the Mortgage Loan, and has not been the basis of any previous disbursement; (b) the expenditure of the amount specified above, when added to all previous disbursements under the Mortgage Loan will result in (i) not more than $ of Bond proceeds having been used to pay or reimburse the Borrower for amounts which are other than Qualified Project Costs and (ii) by the date of the final disbursement, not less than $ of Bond proceeds having been disbursed to pay for Project Costs; (c) no proceeds of the Bonds have been used to pay or reimburse the Borrower for the cost of acquiring land; (d) no disbursements from proceeds of the Bonds in excess of $ have been used to pay Costs of Issuance. CREST VIEW ONDC I By Its President B-1 SCHEDULE I ITEMIZATION OF REQUESTED DISBURSEMENT EXI~IBIT C APPLICATION OF ADMINISTRATIVE FUND Costs Of Issuance: U.S. Bancorp Piper Jaffray Inc.: CLI62-018 (JU) 191955v.5 B-I- 1 Fifth Draft Friday, September 19, 2001 INDENTURE OF TRUST between CITY OF COLUMBIA HEIGHTS, MINNESOTA and U.S. BANK TRUST NATIONAL ASSOCIATION Securing $6,250,000 Multifamily Housing Revenue Bonds (GNMA Collateralized Mortgage Loan - Crest View ONDC I Project) Series 2001 Dated as of October 1, 2001 This Instrument Drafted by: Kennedy & Graven, Chartered (JU) 200 South Sixth Street 470 Pillsbury Center Minneapolis, Minnesota 55402-1458 TABLE OF CONTENTS Page GRANTING CLAUSES .................................................................................................................. . 2 ARTICLE I - DEFINITIONS .................................................................................................................... 3 Section 1.1. Definitions ........................................................................................................................... 3 Section 1.2. Interpretation ..................................................................................................................... 14 ARTICLE II - THE BONDS ................................................................................................................... 15 Section 2.1. Authorized Amount of Bonds ........................................................................................... 15 Section 2.2. Form and Terms of Bonds ................................................................................................. 15 Section 2.3. Authorization of bonds; Sale and Delivery of the Bonds .................................................. 16 Section 2.4. Limited Obligations .......................................................................................................... 17 Section 2.5. Execution ........................................................................................................................... 17 Section 2.6. Authentication ................................................................................................................... 17 Section 2.7. Mutilated, Lost, Stolen or Destroyed Bonds ..................................................................... 17 Section 2.8. Transfer of Registration and Exchange &Bonds; Persons Treated as Owners ............................................................................................................. 18 Section 2.9. Temporary Bonds .............................................................................................................. 18 Section 2.10. Book-Entry Only System .................................................................................................. 19 Section 2.11. Termination of Book-Entry Only System ......................................................................... 19 Section 2.12. Additional Bonds .............................................................................................................. 20 ARTICLE HI - REDEMPTION OF BONDS ........................................................................................ 22 Section 3.1. Redemption &Bonds ........................................................................................................ 22 Section 3.2. Notice of Redemption of All Bonds .................................................................................. 25 Section 3.3. Cancellation ....................................................................................................................... 27 ARTICLE IV - Section 4.1. Section 4.2. Section 4.3. Section 4.4. Section 4.5. Section 4.6. Section 4.7. Section 4.8. Section 4.9. Section 4.10. Section 4.11. Section 4.12. FUNDS; INVESTMENTS ............................................................................................. 28 Establishment of Funds ..................................................................................................... 28 Application of Bond Proceeds and Other Amounts .......................................................... 28 Administrative Fund .......................................................................................................... 28 Acquisition Fund ............................................................................................................... 28 Bond Fund ......................................................................................................................... 30 [Reserved'] ........................................................................................................................ 30 Use of Moneys in the Bond Fund ...................................................................................... 30 Nonpresentmant of Bunds ................................................................................................. 32 Investment of Funds .......................................................................................................... 33 Final Balances ................................................................................................................... 33 Rebate Fund ...................................................................................................................... 33 Extension of Certain Dates ................................................................................................ 33 ARTICLE V - GENERAL COVENANTS AND REPRESENTATIONS ........................................... 35 Section 5.1. Payment of Principal or Redemption Price of and Interest on Bonds ............................... 35 Section 5.2. Covenants and Representations of Issuer .......................................................................... 35 Section 5.3. Inst~unents of Further Assurance ..................................................................................... 35 Section 5.4. Recordation and Filing ...................................................................................................... 36 Section 5.5. No Modification of Security; Additional Indebtedness .................................................... 36 Sechon 5.6. Section 5.7. Section 5.8. Section 5.9. Section 5.10. Section 5.11. [Intentionally Omitted] ...................................................................................................... 36 Existence of Issuer ............................................................................................................ 36 Tax Covenants ................................................................................................................... 36 No Disposition of GNMA Securities ................................................................................ 36 Reports by Trustee; Information to Rating Agent ............................................................. 37 Rights Under the Financing Agreement and the GNMA Securities ................................. 37 ARTICLE VI Section 6.1. Section 6.2. Section 6.3. Section 6.4. Section 6.5. Section 6.6. Section 6.7. Section 6.8. Section 6.9. Section 6.10. - DEFAULT PROVISIONS AND REMEDIES OF TRUSTEE AND BONDOWNERS .................................................................................................... 38 Events of Default ............................................................................................................... 38 Acceleration ...................................................................................................................... 38 Remedies ........................................................................................................................... 39 Rights of Bondowners ....................................................................................................... 39 Waiver by Issuer ............................................................................................................... 39 Application of Moneys ...................................................................................................... 40 Remedies Vested in Trustee .............................................................................................. 40 Remedies of Bondowners .................................................................................................. 40 Termination of Proceedings .............................................................................................. 41 Waivers of Events of Default ............................................................................................ 41 ARTICLE Section 7.1. Section 7.2. Section 7.3. Section 7.4. Section 7.5. Section 7.6. Section 7.7. Section 7.8. Section 7.9. Section 7.10. Section 7.11. Section 7.12. Section 7.13. VII - THE TRUSTEE ............................................................................................................ 42 Certain Duties and Responsibilities .................................................................................. 42 Notice of Default ............................................................................................................... 43 Certain Rights of Trustee .................................................................................................. 43 Not Responsible for Recitals or Issuance of Bonds .......................................................... 44 Trustee May Hold Bonds .................................................................................................. 44 Compensation and Reimbursement ................................................................................... 44 Successor Trustee .............................................................................................................. 44 Resignation by the Trustee ................................................................................................ 45 Removal of the Trustee ..................................................................................................... 45 Appointment of Successor Trustee by the Bondowners ................................................... 45 Concerning any Successor Trustee ................................................................................... 45 Reports to Borrower .......................................................................................................... 46 Continuing Disclosure of Information .............................................................................. 46 ARTICLE VIII - SUPPLEMENTAL INDENTURES .......................................................................... 47 Section 8.1. Supplemental Indentures Not Requiring Consent of Bondowners .................................... 47 Section 8.2. Supplemental Indentures Requiring Consent of Bondowners .......................................... 47 Section 8.3. Amendment of Certain Documents ................................................................................... 49 ARTICLE IX - SATISFACTION AND DISCHARGE OF INDENTURE ......................................... 50 Section 9.1. Discharge of Lien .............................................................................................................. 50 ARTICL~ ,x - ~v,,,~r.,~,~, ~,~,~,, ........................................... Section 10.1. Consents and Other InsUuments of Bondowner ................................................................ 51 Section 10.2. Limitation of Rights .......................................................................................................... 51 Section 10.3. Severability ....................................................................................................................... 51 52 Section 10.4. Notices ............................................................................................................................... Section 10.5. Trustee as Paying Agent and Bond Regis~'ar .................................................................... 52 Section 10.6. Payments Due on Saturdays, Sundays and Holidays ...................................................... 52 Section 10.7. Counterparts ...................................................................................................................... 52 ii Section 10.8. Section 10.9. Section 10.10. Section 10.11. No Recourse ...................................................................................................................... 52 Successors and Assigns ..................................................................................................... 52 Books, Records and Accounts ........................................................................................... 52 Conflict with Housing Act ................................................................................................ 52 EXHIBIT A - FORM OF BOND .............................................................................................................. A-1 EXHIBIT B - CERTIFICATE OF TRUSTEE .......................................................................................... B-1 iii INDENTURE OF TRUST THIS INDENTURE OF TRUST, dated as of October 1, 2001, between the CITY OF COLUMBIA HEIGHTS, MINNESOTA, a home rule city and political subdivision of the State of Minnesota (the "Issuer"), and U.S. BANK TRUST NATIONAL ASSOCIATION, a national banking association duly organized and existing and authorized to accept and execute trusts of the character herein set forth under and by virtue of the laws of the United States, as trustee, together with any successor, as trustee (the "Trustee"). RECITALS WHEREAS, the Issuer is authorized pursuant to Minnesota Statutes, Chapter 462C (the "Act"), to issue its revenue bonds to finance multi family housing developments within its jurisdiction; and WHEREAS, Crest View ONDC I, a Minnesota nonprofit corporation (the "Borrower"), has requested that the Issuer authorize the issuance of revenue bonds under the Act to finance the acquisition, development, construction, and equipping by the Borrower of a fifty-unit multifamily housing development to be located at 900 - 42nd Avenue N.E., in the City of Columbia Heights, Minnesota, to be operated as an assisted-living and memory-loss facility for seniors (the "Project"); and WHEREAS, in order to finance the Project, including the payment of certain costs of the financing, the Issuer has authorized the issuance and sale of its Multifamily Housing Revenue Bonds (GNMA Collateralized Mortgage Loan - Crest View ONDC I Project), Series 200lA-1 (the "Series 200lA-1 Bonds"), in the original aggregate principal amount of $ , and its Multifamily Housing Revenue Bonds (GNMA Collateralized Mortgage Loan - Crest View ONDC I Project), Taxable Series 2001A-2 (the "Series 2001A-2 Bonds" and, collectively with the Series 200lA-1 Bonds, the "Bonds"), in the original aggregate principal amount of $ , pursuant to the terms of this Indenture. The proceeds of the Bonds will finance a Mortgage Loan (as hereinafter defined) secured by the Project pursuant to a Financing Agreement, of even date herewith (the "Financing Agreement"), by and between the Issuer, the Borrower, the Trustee, and Reilly Mortgage Group, Inc. (the "Lender"). WHEREAS, the Issuer has agreed to issue the Bonds to finance a construction and permanent mortgage loan (the "Mortgage Loan"), insured by the Federal Housing Administration ("FHA") of the DeparVment of Housing and Urban Development under Section 232 of the National Housing Act of 1937, as amended (the "National Housing Act"), in connection with the acquisition, development, construction and equipping of the Project, through the acquisition by the Trustee for the account of the Issuer of fully- modified pass-through mortgage-backed construction loan certificates (the "CLCs"), issued by the Lender, as construction of the Project progresses, which are guaranteed as to the timely payment of principal and interest by the Government National Mortgage Association ("GNMA") pursuant to Section 306(g) of the National Housing Act, and, upon the completion of construction of the Project and the satisfaction of certain other conditions, of the exchange by the Trustee of the CLCs for a fully-modified, pass-through mortgage-backed project loan certificate (the "PLC"), issued by the Lender, guaranteed as to the timely payment of principal and interest by GNMA pursuant to Section 306(g) of the National Housing Act (hereinafter the CLCs and the PLC are sometimes collectively referred to as the "GNMA Securities"); and WHEREAS, the Issuer desires to assist in providing construction and permanent financing for the Mortgage Loan to be made to finance the Project; and WHEREAS, the Lender will use the proceeds of the Bonds paid to it by the Trustee to acquire the CLCs and the PLC to make the Mortgage Loan to the Borrower, which Loan will be used to finance the acquisition, development, conslruction and equipping of the Project; and WHEREAS, the Borrower wishes to develop and construct the Project and wishes to finance such acquisition, development, construction and equipping of the Project with a Loan from the Lender, which Mortgage Loan will be evidenced by a mortgage note (the "Mortgage Note") and secured by a mortgage (the "Mortgage") on the Project; and WHEREAS, the Bonds will be special, limited obligations of the Issuer, payable solely from the Trust Estate (as defined herein) and will be secured under this Indenture and by an assignment to the Trustee of the Financing Agreement (except for the Reserved Rights of the Issuer, as defined herein), and all amounts payable by the Borrower thereunder; and WHEREAS, the execution and delivery of this Indenture and the issuance and sale of the Bonds have been in all respects duly and validly authorized by a resolution duly adopted by the Issuer; and WHEREAS, all things necessary to make the Bonds, when authenticated by the Trustee and issued as in this Indenture provided, the valid, binding and legal special, limited obligations of the Issuer according to the import thereof, and to constitute this Indenture a valid lien on the properties, interests, revenues and payments herein pledged to the payment of the Bonds, have been done and performed, and the creation, execution and delivery of this Indenture, and the execution and issuance of the Bonds, subject to the terms hereof, have in all respects been duly authorized; NOW, THEREFORE, the Issuer, in consideration of the premises and the acceptance by the Trustee of the trusts hereby created and of the purchase and acceptance of the Bonds by the owners thereof, and for other good and valuable consideration, the receipt of which is hereby acknowledged, in order to secure the payment of the principal of, premium, if any, and interest on the Bonds according to their tenor and effect and the performance and observance by the Issuer of all the covenants expressed or implied herein and in the Bonds, does hereby bargain, sell, convey, pledge, assign and grant a security interest unto the Trustee in and to the following, subject only to the provisions of this Indenture permitting the application thereof or to the purposes and on the terms and conditions set forth herein (said property being herein referred to as the "Trust Estate"), to wit: GRANTING CLAUSES All right, title and interest of the Issuer in the Financing Agreement and the Tax Regulatory Agreement (as such i~tms are hereafter defined), together with such documents themselves, and all amendments, modifications and renewals thereof, reserving, however, the Reserved Rights of the Issuer. II. All right, title and interest of the Issuer in and to any money held under this Indenture by the Trustee, including the proceeds of the Bonds and the interest, profits and other income derived from the investment thereof (other than the Rebate Fund, which shall not be subject to the lien of this Indenture). All right, title and interest of the Issuer in and to the GNMA Securities, including all payments and proceeds with respect thereto and any interest, profits and other income derived from the investment thereof. All funds, moneys and securities and any and all other rights and interests in property, whether tangible or intangible fi'om time to time hereafter by delivery or by writing of any kind, conveyed, mortgaged, pledged, assigned or transferred as and for additional security hereunder for the Bonds by the Issuer or by anyone on its behalf or with its written consent to the Trustee, which is hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms hereof. TO HAVE AND TO HOLD all the same with all privileges and appurtenances hereby conveyed and assigned, or agreed or intended so to be, to the Trustee and its successors in said trust and to them and their assigns forever; IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth for the equal and proportionate benefit, security and protection of all owners of the Bonds issued under and secured by this Indenture without privilege, priority or distinction as to the lien or otherwise of any of the Bonds over any of the others of the Bonds, except as specifically herein provided; PROVIDED, HOWEVER, that if the Issuer or its successors or assigns shall pay or cause to be paid to the owners of the Bonds the principal, interest and premium, if any, to become due thereon at the times and in the manner provided in Article IX hereof and if the Issuer shall keep, perform and observe, or cause to be kept, performed and observed all its covenants, warranties and agreements contained herein, and if all Rebate Amounts are paid in full, this Indenture and the estate and rights hereby granted shall, at the option of the Issuer, cease and be void, and thereupon the Trustee shall cancel and discharge the lien of this Indenture and execute and deliver to the Issuer such instruments in writing as shall be requisite to satisfy the lien hereof, and reconvey to the Issuer any property at the time subject to the lien of this Indenture which may then be in its possession, except funds held by the Trustee for the payment of interest on, premium, if any, and principal of the Bonds; otherwise this Indenture shall be and remain in full force and effect, and upon the trusts and subject to the covenants and conditions hereinafter set forth. Provided, further that, the Project and all income and assets derived therefrom or related thereto shall not be included as a part of the Trust Estate. (The remainder of this page is intentionally left blank.) ARTICLE I Definitions Section 1.1 Definitions. The terms defined in this Section 1.1 or in the Recitals hereto (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.1 or in the Recitals hereto. Terms not defined herein shall have the meanings specified in the Financing Agreement. Acquisition Fund: the fund by that name established pursuant to Section 4.1 hereof; Act: the laws pursuant to which the Bonds are issued and the Project is implemented, including the applica-'--ble provisions of Minnesota Statutes, Chapter 462C, as amended, all as the same may be amended or be supplemented from time to time; Act of Bankruptcy: the filing ora Petition in Bankruptcy, provided that if an involuntary Petition in Bankruptcy was filed the petition was not dismissed within sixty (60) days of such filing; .Additional Bonds: additional bonds issued from time to time pursuant to Section 2.12 of this Indenture; Administrative Fund: the fund by that name established pursuant to Section 4.1 hereof; Advance or Advances: any one or more advances under the Mortgage Loan made by the Lender to the Borrower, the repayment of which is insured by FHA Mortgage Insurance; Authorized Borrower Representative: an officer of the Borrower, or any other person designated to act in such capacity by a resolution of the Borrower; Authorized Denominatio~n: $5,000 and any integral multiple thereof; Beneficial Owner: the Person for which a DTC Participant holds an interest in the Bonds as shown on the books and records of the DTC Participant; Bond Counsel: Kennedy & Graven, Chartered, or any other attorney at law or finn of attorneys, of nationally recognized standing in matters pertaining to the federal tax exemption of interest on the bonds issued by states and political subdivisions, duly admitted to practice law before the highest court of any state of the United States of America and selected by the Issuer; Bond Fund: the fund by that name established pursuant to Section 4.1 hereof; Bond Obli~,ation: as of any date of calculation, the aggregate principal amount of all Outstanding Obligations, or with respect to any Series, all Outstanding Bonds of such Series, as applicable; Bond Register and Bond Registrar: have the respective meanings specified in Section 2.8 hereof; Bond Year: the period beginning on the Closing Date and ending on October 1, 2002, and each twelve (12) month period thereafter. The last Bond Year will end on the date of final payment of the Bonds; 4 Bondowner or Owner: when used with respect to any Bond, means the person or persons in whose name such Bond is registered; Bonds: the Issuer's Multifamily Housing Revenue Bonds (GNMA Collateralized Mortgage Loan - Crest View ONDC I Projec0, Series 200lA-1 (the "Series 200lA-1 Bonds"), in the original aggregate principal amount of $ , and its Multifamily Housing Revenue Bonds (GNMA Collateralized Mortgage Loan - Crest View ONDC I Projec0, Taxable Series 2001A-2 (the "Series 2001A-2 Bonds" and, collectively with the Series 200lA-1 Bonds, the "Bonds"), in the original aggregate principal amount of $ ; Borrower: Crest View ONDC I, a Minnesota nonprofit corporation; Buildin Loag_[_~_~eement: the Building Loan Agreement to be entered into between the Lender and the Borrower relating to the Project; Business Day: any day other than Saturday, Sunday or other day on which (a) banks located in New York, New York or in the city in which the principal corporate trust office of the Trustee are required or authorized by law or executive order to close for business, and Co) the New York Stock Exchange is closed; Cede & Co.: initially, Cede & Co., as nominee of DTC and any successor or subsequent such nominee designated by DTC respecting DTC's functions as book-entry depository for the Bonds; Certificate of the Issuer, Statement of the Issuer, Request of the Issuer and Requisition of the Issuer: respectively, a written certificate, statement, request or requisition, signed in the name of the Issuer by such person as may be designated and authorized to sign for the Issuer. Any such instrument and supporting opinions or representations, if any, may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument; CLC: a construction loan certificate which is a GNMA Security issued in an amount advanced under the Mortgage Loan and insured by FHA and which bears interest at the pass-through rate of % per annum; CLC Maturity Date: a date no later than ,200__, or such later date as may be permitted in connection with the extension of the PLC Delivery Date pursuant to Section 4.12; Closing Date: the date on which there is delivery by the Issuer of, and payment for, the Bonds; Code: the Internal Revenue Code of 1986, as amended, and with respect to a specific section thereof such reference shall be deemed to include (i) the regulations and rulings promulgated under such section, (ii) any successor provision of similar import hereafter enacted, (iii) any corresponding provisions of any subsequent Internal Revenue Code and (iv) the regulations promulgated under the provisions described in (ii) and (iii); Commencement of Amortization: 1,200__, which is the date on which the Borrower will begin to repay principal of the Mortgage Loan, subject to extension as provided in Section 4.12 hereof; Continuing Disclosure A~reement: the Continuing Disclosure Agreement dated as of October 1, 2001 between the Trustee and the Borrower; Costs of Issuance: all fees, costs and expenses payable or reimbursable directly or indirectly by the Issuer or the Borrower and related to the authorization, issuance and sale of the Bonds; Disbursements: the disbursements by the Trustee to the Lender in payment for the CLCs or the PLC; DTC: The Depository Trust Company, New York, New York, a limited purpose trust company organized under the laws of the State of New York, or any successor book-entry securities depository for the Bonds appointed pursuant to Section 2.11; DTC Participant: those broker-dealers, banks and other £mancial institutions from time to time for which DTC holds Bonds or securities as depository; Eligible Funds: (i) any payment of principal, interest or premium on the GNMA Securities, (ii) proceeds of the Bonds, (iii) any amounts deposited with the Trustee at least one hundred twenty-three (123) days (or if the Person providing the deposit is an insider, 366 days) prior to their application during which time no Act of Bankruptcy of the Borrower or any member of the Borrower (as demonstrated by a Certificate of the Borrower that no Act of Bankruptcy has occurred) shall have occurred, which funds shall be accompanied by an unqualified opinion of nationally recognized bankruptcy counsel acceptable to the Trustee to the effect that such sums are not subject to the provisions of Section 362(a) of the Federal Bankruptcy Code, (iv) funds drawn on a bank letter of credit, or (v) any funds accompanied by an unqualified opinion of nationally recognized bankruptcy counsel acceptable to the Trustee to the effect that such sums are not subject to the provisions of Sections 362(a), 541 and 547(b) of the Federal Bankruptcy Code; FHA: the Federal Housing Administration, an organizational unit within HUD, or any successor entity; FHA Commitment: the FHA Commitment for Insurance of Advances to be issued by FHA concerning the insurance of construction and permanent financing for the Project; FHA Loan Documents or Loan Documents: the FHA Commitment, the Mortgage Note, the Mortgage, the FHA Regulatory Agreement, the Building Loan Agreement and all other documents required in connection with the endorsement of the Mortgage Loan by FHA; FHA Mortgage Insurance: has the same meaning as Mortgage Insurance, defined below; FHA Regulatory Agreement: the Regulatory Agreement for the Elderly, Nursing Home, Intermediate Care Facilities, and/or Board and Care Homes (Nonprofit Only), to be entered into by the Borrower and HUD in connection with the Project, together with all supplements thereto; Final Advance: the £mal construction loan advance made under the Mortgage Loan by the Lender to the Borrower at the time of Final Endorsement; Final Endorsement: the date on which the construction loan is converted to a permanent loan and the Mortgage Note is finally endorsed for Mortgage Insurance by FHA, following completion of the Project; Financing Agreement: the Financing Agreement, dated as of the date hereof, by and between the Issuer, the Lender, the Trustee and the Borrower, together with all supplements thereto; Financin D~ments: the Indenture, Financing Agreement, FHA Loan Documents, Tax Regulatory Agreement, GNMA Guaranty Agreement and GNMA Securities; GNMA: Government National Mortgage Association, an organizational unit within HUD, or any successor entity and any authorized representatives or agents thereof, including the Secretary of HErD and his or her representatives or agents; GNMA Commitment: the commitment authority issued to the Lender by GNMA relating to GNMA's obligation to guarantee the GNMA Securities; GNMA Guaranty Agreement: the agreement by and between the Lender and GNMA (which becomes effective in the form provided in the GNMA Guide, but is not physically executed or delivered), providing for the guaranty by GNMA of the timely payment of principal and interest on the GNMA Secufihes; GNMA Guide: the GNMA Mortgage-Backed Securities Guide, GNMA Handbook 5500.3, as amended from time to time, with respect to GNMA I mortgage-backed securities and GNMA II mortgage-backed securities; GNMA Securities: a CLC or a PLC, as the case may be, each being a fully-modified pass-through mortgage backed security issued by the Lender, registered in the name of the Trustee or its nominee, guaranteed by GNMA as to timely payment of principal and interest on the PLC and as to timely payment of interest only until maturity and timely payment of principal at maturity on a CLC, pursuant to Section 306(g) of the National Housing Act of 1937 and the regulations promulgated thereunder and in accordance with the GNMA Guide, maturing, in the case ofa CLC, on the CLC Maturity Date, and in the case of the PLC no later than 1, 20._, in Authorized Denominations, and backed by the Mortgage Loan made by the Lender to finance the Project in accordance with the Financing Agreement, which Mortgage Loan is insured by FHA. The GNMA Securities may be held by the Participants Trust Company ("PTC") in a limited purpose account if certain conditions set forth in this Indenture are met; GNMA Securities Purchase Price: one hundred percent (100%) of the face amount of each GNMA Security plus accrued interest, if any, from the dated date thereof to, but not including, the date of delivery; Government Obligations: bonds, notes and other evidences of indebtedness of the United States of America or of any agency or instrumentality thereof backed by the full faith and credit of the United States of America; Hon~in~ Act or National Housing Act: the National Housing Act of 1937, as amended, and the regulations promulgated thereunder; HUD: the United States Department of Housing and Urban Development, any authorized representative thereof, or any successor thereto; .Indenture: this Indenture of Trust and all indentures supplemental hereto; Independent Accountant: a certified public accountant who is not an employee of the Borrower, or a firm of certified public accountants; Initial Advance: the first advance under the Mortgage Loan by the Lender to the Borrower; Initial CLC: the CLC delivered by the Lender to the Trustee with respect to the Initial Disbursement, with interest payable at a pass-through rate of % per annum and a maturity date no later than the CLC Maturity Date, except as may be extended pursuant to Section 4.12 hereof; Initial Disbursement: Initial CLC; Initial Endorsement: Insurance; the first Disbursement by the Trustee to the Lender in payment for the the initial endorsement of the Mortgage Note by FHA for Mortgage Investment Agreement: the Investment Agreement, dated as of ,2001, between the Trustee and , or any successor investment agreement with an investment agreement provider rated "Aaa" by the Rating Agent, which successor investment agreement will not adversely affect the rating then assigned to the Bonds; Issuer: the City of Columbia Heights, Minnesota, its successors and assigns; Issuer Fee: the administrative fee of the Issuer payable by the Borrower on the dates and in the amounts as follows: (i) on the Closing Date, one-half of one percent of the original aggregate principal amount of the Outstanding Bonds and the outstanding principal amount of the Note; (ii) on October 1, 2002, one-half of one percent of the sum of the aggregate principal amount of the Bonds Outstanding on such date and the outstanding principal amoun~ of the Note (after payment of any Bonds or any principal of the Note maturing or redeemed on such date) provided that, at the election of the Borrower, the fee due on October 1, 2002, may be paid on the Closing Date in an amount equal to the present value of such fee as of the Closing Date based on a discount rate selected by the Issuer; and (iii) on each October 1 thereafter as long as any Bonds are Outstanding or the Note is outstanding, one-tenth of one percent of the aggregate principal amount of the Bonds Outstanding and the outstanding principal amount of the Note on each such date (after payment of any Bonds or any principal of the Note maturing or redeemed on such date); and if not paid when due, the unpaid amount shall continue as an obligation fi.om the date originally due until the amount in default shall have been fully paid by the Borrower with interest thereon at the Issuer Fee Default Rate. For purposes of the determination of the Issuer Fee, "Outstanding Bonds" shall include all Bonds for the payment or redemption of which moneys or obligations shall have been deposited with the Trustee in accordance with Article IX of the Indenture; Issuer Fee Default Rate: interest at a per annum rate equal to two percent (2%) over the "prime rate" or "reference rate" of U.S. Bank National Association as it may change from time to time; Lender: Reilly Mortgage Group, Inc., a District of Columbia corporation, or any other GNMA Security issuer approved by GNMA, and its respective successors or assigns; Managing Agent: Crest View Management Services, LLC, a Colorado limited liability company, its successors and assigns; Mortgage: that certain mortgage and security agreement, granting a first priority mortgage on and security interest in the buildings and equipment constituting the Project and in all other property described therein and the accompanying collateral assignment of rents and leases, granted by the Borrower to the Lender securing the repayment of all amounts due under the Mortgage Note; Mortgage Insurance or FHA Mortgage Insurance: the insurance against certain losses under the Mortgage Loan to be provided by the FHA under Section 232 of the National Housing Act to the Lender, as evidenced by the endorsed Mortgage Note; 8 Mortgage Loan: the FHA insured mortgage loan made by the Lender to the Borrower with respect to the Project; Mortgage Note: the non-recourse promissory note to be executed and delivered by the Borrower to the Lender, evidencing the Mortgage Loan, bearing interest at the rate of %, commencing amortization on the Commencement of Amortization, finally maturing on I, 20._, having prepayment terms consistent with Section 7.4 of the Financing Agreement, and initially endorsed by FHA for Mortgage Insurance in the amount of $6,250,000; Notice Address: with respect to each of the persons listed below the address set forth below until such time as such person shall have notified each of the other persons listed below of a new Notice Address; If to the Issuer: City of Columbia Heights 590 - 40th Avenue N.E. Columbia Heights, MN 55421-3878 Arm: City Manager If to the Trustee: U.S. Bank Trust National Association 180 East Fifth Street Saint Paul, MN 55102 Arm: Corporate Trust Department Ifto the Lender: Reilly Mortgage Group, Inc. 2000 Corporate Ridge, Suite 925 McLean, VA 22102-7805 Arm: Michael Aquilino If to the Borrower: Crest View ONDC I Crestview Corporation 4444 Reservoir Boulevard N.E. Columbia Heights, MN 55421 Arm: President If to GNMA: Government National Mortgage Association 451 Seventh Street SW Washington, DC 20410 Arm: Financial Management Division Office of Mortgage-Backed Securities If to the Underwriter: U.S. Bancorp Piper Jaffray Inc. 800 Nicollet Mall, Suite 800 Mail Station J1012019 Minneapolis, MN 55402 Attn: underwriting If to the Rating Agent: Moody's Investors Service 99 Church Street New York, NY 10007 Arm: Fully Supported Group 9 Obligations: the Bonds and any Additional Bonds; Optional Prepayment: the optional prepayment of the Mortgage Note pursuant to the provisions thereof; Outstanding: when used with respect to the Bonds means all Bonds theretofore authenticated and delivered under this Indenture, except: (a) Bonds theretofore canceled by the Trustee or theretofore delivered to the Trustee for cancellation; (b) Bonds for the payment or redemption of which moneys or obligations shall have been theretofore deposited with the Trustee in accordance with Article IX hereof; and (c) Bonds in exchange for or in lieu of which other Bonds have been authenticated and delivered under this Indenture; Payment Date: with respect to the Bonds, April 20 and October 20 of each year, commencing April 20, 2002; Person: any natural person, corporation, joint venture, cooperative, partnership, trust or unincorporated organization, govemment or governmental body or agency, political subdivision or other legal entity, as in the context may be appropriate; Petition in Bankruptcy: any petition filed to initiate a proceeding under the Bankruptcy Code, whether such petition is filed by or against the Borrower as debtor, or any other commencement of a proceeding by or against the Borrower under any other applicable law concerning insolvency, reorganization or bankruptcy as now or hereafter in effect; PLC: the project loan certificate which is the GNMA Security issued after Final Endorsement which will bear interest at the pass-through rate of % per annum and which will be in a principal amount equal to $6,250,000 (as reduced in accordance with its schedule of amortization), unless reduced at Final Endorsement; PLC Dated Date: (a) the earlier of(i) the 1st day of the month in which the PLC is delivered to the Trustee or (ii) ; or (b) such later date as may be permitted by the provisions of Section 4.12; PLC Delivery Date: the earlier of(i) the date on which the PLC is delivered to the Trustee or (ii) ,200._ or such later date as may be permitted by the provisions of Section 4.12; Program Expenses: the Trustee Fee, the Issuer Fee and the Rebate Analyst Fee; Project: the fifty-unit multifamily housing development to be located at 900 - 42nd Avenue N.E., in the City of Columbia Heights, Minnesota, to be operated as an assisted-living and memory-loss facility for seniors, as more fully described in Exhibit A to the Financing Agreement; Project Costs: with respect to the Project, shall be deemed to include all items permitted to be financed under the provisions of the Act, which may include, but are not limited to: 10 (a) the cost of the acquisition of all land, fights-of-way, options to purchase land, easements, leasehold estates in land, and interests of all kinds in land related to the Project; Co) the cost of the acquisition, development, construction, repair, renovation, remodeling or improvement of all buildings and structures to be used as or in conjunction with the Project; (c) the cost of site preparation, including the cost of demolishing or removing any buildings or structures, the removal of which is necessary or incident to providing the Project; (d) the cost of architectural, engineering, legal and related services; the cost of the preparation of plans, specifications, studies, surveys and estimates of cost and of revenue; and all other expenses necessary or incident to planning, providing or determining the feasibility and practicability of the Project including development fees; (e) the cost of all machinery, equipment, furnishings and facilities necessary or incident to the equipping of the Project so that it may be placed in operation; (0 the cost of financing charges and interest prior to and during construction and for a maximum of six months after completion of construction and the marketing and start-up costs of the Project prior to and during construction; provided that not more than five percent (5%) of the proceeds of the Series 200lA Bonds shall be used to pay costs which constitute "working capital expenditures" as defined in Section 1.150-1Co) of the Regulations; (g) any and all costs paid or incurred in connection with the financing of the Project, including out-of-pocket expenses and costs in connection with the issuance, sale and delivery of the Bonds and further including without limitation the cost of financing, legal, accounting, financial advisory and appraisal fees, expenses and disbursements; the cost of any policy or policies of title insurance; the cost of printing, engraving and reproduction services; and the cost of the initial or acceptance fee of any trustee or paying agent; and (h) all direct and indirect costs of the Borrower incurred in connection with providing the Project, including without limitation, reasonable sums to reimburse the Borrower for time spent by its agents or employees with respect to providing the Project and the financing thereof. Qualified Investments: such of the following which are at the time legal investments for fiduciaries under the law of the State for moneys held under this Indenture which are then proposed to be invested therein and which shall mature or shall be subject to redemption by the owner thereof at the option of such owner, not later than the earlier of(i) thirty (30) days, or (ii) the respective dates when the moneys will be required for the purposes intended: (a) Government Obligations; Co) Federal Housing Administration's debentures; (c) Federal Home Loan Mortgage Corporation's (FHLMC) participation certificates (excluding stripped mortgage securities which are purchased at prices exceeding their principal amounts and interest only strips) which guarantee full and timely payment of principal and interest and senior debt obligations; 11 (d) Farm Credit Banks' (Federal Land Banks, Federal Intermediate Credit Banks and Banks for Cooperatives) consolidated systemwide bonds and notes; (e) Federal Home Loan Banks consolidated debt obligations; (f) Federal National Mortgage Association's (FNMA) mortgage-backed securities (excluding stripped mortgage securities which are purchased at prices exceeding their principal amounts and interest only strips) and senior debt obligations; (g) Student Loan Marketing Association's (Sallie Mae) senior debt obligations (excluding securities that do not have a fixed par value and/or whose terms do not promise a fixed dollar amount at maturity or call date) and letter of credit backed issues; (h) Resolution Funding Corp.'s (REFCORP) debt obligations; (i) Certificates of deposit, time deposits and bankers acceptances (having original maturities of not more than 365 days) of any bank, the unsecured short term obligations of which are rated "P-1" by the Rating Agent; (j) Deposits at any bank, the unsecured short term obligations of which are rated "P- 1" by the Rating Agent and which are fully insured by the Federal Deposit Insurance Corp. (FDIC); (k) Debt obligations rated "Aaa" by the Rating Agent (excluding securities that do not have a fixed par value and/or whose terms do not promise a fixed dollar amount at maturity or call date); (1) Commercial paper (having original maturities of not more than 270 days) rated "P-1" by the Rating Agent; (m) Shares in an investment company registered under the Federal Investment Company Act of 1940 whose shares are registered under the Federal Securities Act of 1933 and whose only investments are comprised of obligations issued or guaranteed as to principal and interest by the U.S. Government and thus constitute direct obligations of the U.S.A. and repurchase agreements fully secured by general obligations and such fund is rated "Aaa" by the Rating Agent; (n) Repurchase agreements with any institution the unsecured, uninsured and unguaranteed debt obligations of which are rated "Aaa" by the Rating Agent; and (o) An Investment Agreement. Notwithstanding the foregoing, if a Qualified Investment is rated, it shall not have a "r" highlighter affixed to its rating; Ratin~ Aeent or Ratin~, A~,encv: Moody's Investors Service or its successors and assigns, or if Moody's Investors Serv/ce is no longer maintaining a rating with respect to any series of Bonds, then any other nationally recognized rating agency then maintaining a rating with respect to any series of Bonds; Rebate Amount: any amount required to be rebated to the United States of America pursuant to Section 148 of the Code and applicable treasury regulations; 12 Rebate Analyst: any qualified and independent person acceptable to the Issuer and retained by the Borrower to calculate the Rebate Amount or, in the event that the Borrower fails to so retain a Rebate Analyst one month prior to any date on which calculations are required to be made under the Tax Regulatory Agreement, any qualified person retained by the Trustee to calculate the Rebate Amount; Rebate Analyst Fee: the annual fee payable to the Rebate Analyst, which shall not exceed $500, which amount shall be ratably reduced upon any partial prepayment of the GNMA Securities, payable semiannually on each Payment Date, unless the Trustee receives an opinion of Bond Counsel to the effect that the Bonds are eligible for an exemption from Rebate; Rebate Fund: the fund created pursuant to Section 4.1 hereof; Rede~ount: the account of the Bond Fund so designated, established under Section 4.1 ~cord Date: with respect to a Payment Date, the close of business on the date which is fifteen (15) days next preceding such Payment Date, whether or not a Business Day; Representation Letter: the Blanket Letter of Representations from the Issuer to DTC or other documentation required by DTC as a condition to its acting as book-entry depository for the Bonds together with any replacement thereof or amendment or supplement thereto (and including any standard procedures or policies referenced therein or applicable thereto) respecting the procedures and other matters relating to DTC's role as book-entry depository for the Bonds; Reserved Rights of the Issuer: (a) all rights which the Issuer or its officers, officials, agents or employees may have under this Indenture and the Financing Agreement to indemnification by the Borrower and by any other persons and to payments for its Issuer Fees and all expenses incurred by the Issuer itself, or its officers, officials, agents or employees; (b) the right of the Issuer to receive notices, reports or other information, make determinations and grant approvals hereunder and under the other Financing Documents; (c) all rights of the Issuer to enforce the representations, warranties, covenants and agreements of the Borrower pertaining in any manner or way, directly or indirectly to the requirements of the Act or any requirements imposed by the Issuer with respect to the Project, or necessary to assure that interest on the Bonds is excluded from gross income for federal income tax purposes, as are set forth in any of the Financing Documents or in any other certificate or documents delivered in connection therewith; and (d) all enforcement remedies with respect to the foregoing; Series: any series of Bonds issued under this Indenture; State: the State of Miunesota; Tax Regulatory Agreement: the Tax Regulatory Agreement, dated as of October 1, 2001, between the Issuer, the Borrower and the Trustee, as the same may be amended from time to time according to its terms; Trust Estate: the property rights, money, securities and other amounts pledged and assigned pursuant to the Granting Clauses of this Indenture; Trustee: U.S. Bank Trust National Association, and any successor trustee; Trustee Fee: the annual fee of the Trustee which shall not exceed ( ) basis points of the Outstanding principal amount of Bonds Outstanding from time to time, but in an annual amount not 13 less than $ , which amount shall be ratably reduced upon any partial prepayment of the GNMA Securities, payable semiannually on each Payment Date; Underwriter: U.S. Bancorp Piper Jaffray Inc.; and Yield: the yield on the Bonds, determined in accordance with the requirements of Section 148 of the Code, as described in the Tax Regulatory Agreement. Section 1.2 Interpretation. Reference to Articles, Sections, and other subdivisions are to the designated Articles, Sections, and other subdivisions of this Indenture. The headings of this Indenture are for convenience only and do not define or limit the provisions hereof. Words of any gender shall be deemed and construed to include correlative words of the other genders. Words importing the singular number shall include the plural number and vice versa unless the context shall otherwise indicate. [End of Article I] 14 ARTICLE H The Bonds Section 2.1 Authorized Amount of Bonds. Bonds may not be issued under this Indenture except in accordance with this Article. The total principal amount of Bonds that may be issued hereunder is expressly limited to $6,250,000 (except for Bonds issued to replace Bonds as provided in Section 2.7 hereof or Additional Bonds in accordance with Section 2.12 hereof). Section 2.2 Form and Terms of Bonds. (a) The Bonds shall be issued as fully registered bonds, without coupons, and shall be issued in Authorized Denominations. The Bonds shall mature in the years and in the principal amounts, and shall bear interest payable semiannually on each Payment Date at the rates set forth in the following tables, computed on the basis of a 360-day year of twelve 30-day months: Maturity Date Principal Amount Interest Rate (b) Each Bond shall be nominally dated as of October 1, 2001 and, except as otherwise provided in this Section, shall bear interest from such date, or from the most recent Payment Date to which interest has been paid or duly provided for, as the case may be. Interest on the Bonds shall be payable on each Payment Date. Notwithstanding the foregoing, if the date of authentication of a Bond is between the appropriate Regular Record Date and the next Payment Date, and if the Issuer shall not default in the payment of interest due on such Payment Date, then the Outstanding Bonds shall bear interest from such Payment Date. (c) The person in whose name any Bond is registered at the Regular Record Date with respect to a Payment Date shall be entitled to receive the interest payable on such Payment Date (unless such Bond has been called for redemption on a redemption date which is prior to such Payment Date) notwithstanding the cancellation of such Bond upon any registration of transfer or exchange thereof subsequent to such Regular Record Date and prior to such Payment Date; provided, however that if and to the extent the Issuer shall default in the payment of the interest due on any Payment Date, such defaulted interest shall be paid as provided in the next paragraph. (d) Any interest on any Bond which is payable, but is not punctually paid or duly provided for, on any Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Bondowner on the relevant Regular Record Date and shall be payable at the election of the Trustee to the persons in whose names the Bond (or its predecessor Bond) are registered at the close of business on a Special Record Date (as defined below) for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Trustee shall determine the amount of Defaulted Interest proposed to be paid on each Bond and the date of the proposed payment (the "Special Record Date"), shall fix a date for the payment of such Defaulted Interest which shall be not more than fifteen (15) nor less than ten (10) days prior to the date of 15 the proposed payment (the "Special Record Date") and shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first class, postage prepaid, to each Bondowner at his address as it appears in the Bond Register not less than ten (10) days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the persons in whose names the Bonds (or its respective predecessor Bond) are registered on such Special Record Date. (e) Payment of principal, premium, if any, and interest shall be made in such coin or currency of the United States as at the time of payment is legal tender for payment of private and public debts. Principal of and premium, if any, on the Bonds shall be paid only upon presentation and surrender thereof for cancellation at the principal office of the Trustee. Payment of interest on each Bond shall be made by check or draft mailed to the person entitled thereto at his address as it appears on the Bond Register on the applicable Regular Record Date or Special Record Date. The Trustee will, upon the written request of any Owner of $1,000,000 or more in aggregate principal amount of Bonds, or, if less, all of the principal amount of the applicable Series of Bonds, make payments of principal of, redemption price of, or interest on such Series of Bonds by wire transfer in immediately available funds to the account of such Owner designated by such Owner to the Trustee in writing at least five (5) days before the record date for such payment. (f) The Bonds shall be subject to redemption as provided in Article III hereof. (g) The Bonds and the Trustee's Certificate of Authentication to be endorsed thereon are to be in substantially the form attached as Exhibit A hereto with necessary and appropriate variations, omissions and insertions as permitted or required by this Indenture. Section 2.3 Authorization of Bonds; Sale and Delivery of the Bonds. Upon execution and delivery of this Indenture, the Trustee shall authenticate and deliver the Bonds to, or at the direction of, the Underwriter, but only upon the receipt of the following: (a) An order of the Issuer directing the Trustee to authenticate and deliver the Bonds against receipt of the purchase price therefor; (b) A copy, duly certified on behalf of the Issuer, of a resolution of the Issuer authorizing the issuance and delivery of the Bonds; (c) An approving opinion of Bond Counsel regarding the validity of the Bonds and the exclusion fi.om gross income of interest on the Bonds; (d) Original executed counterparts of this Indenture and of the Financing Agreement; (e) An opinion of counsel for the Borrower in form and content acceptable to Bond Counsel and the Underwriter; (f) A copy of final cash flow statements prepared by the Underwriter; (g) An original executed counterpart of the Continuing Disclosure Agreement; and (la) The Rating Agency letter stating, in effect, that the Bonds have been granted the rating set forth in the Official Statement; and 16 (i) Such other documents or certificates as the Trustee or Bond Counsel may reasonably request. Section 2.4 ~tions. The Bonds are limited obligations of the Issuer payable solely from payments on the GNMA Securities and any other revenues, funds and assets pledged to payment of the Bonds under this Indenture and not fi.om any other revenues, funds or assets of the Issuer. The Bonds together with interest thereon, do not constitute an indebtedness to which the faith and credit or any taxing power of the Issuer are pledged but are limited obligations of the Issuer payable fi.om the Bond Fund, and any other moneys made available to the Issuer for such purpose, and shall be a valid claim of the respective Bondowners thereof only against the Trust Estate which is hereby assigned for payment of the Bonds and the interest thereon as provided herein and shall be used for no other purpose than to pay the principal of, interest and premium (if any) on the Bonds, except as may be otherwise expressly authorized in this Indenture. The Bonds and the interest thereon are limited obligations of the Issuer, the principal of, premium, if any, and interest on which are payable solely by revenues to be received in connection with the Project and from any other moneys made available to the Issuer for such purpose, and further provided that neither the Bonds nor the interest thereon shall ever constitute an indebtedness or a charge against the general credit or taxing power, if any, of the Issuer within the meaning of any constitutional or charter provision or statutory limitation and shall never constitute or give rise to any pecuniary liability of the Issuer. The Bonds are not a debt of the United States of America, HIYD, FHA, GNMA or any other agency thereof and are not guaranteed by the full faith and credit of the United States of America. The Bonds are neither a moral nor an annual appropriation obligation of the Issuer, the State or any political subdivision thereof. Section 2.5 Execution. The Bonds shall be executed on behalf of the Issuer by the manual or facsimile signatures of the officers of the Issuer designated to sign the Bonds in a resolution of the Issuer. Any facsimile signatures shall have the same force and effect as if said officers had manually signed the Bonds. In case any officer whose signature or facsimile of whose signature shall appear on any Bonds shall cease to be such officer before the delivery of such Bonds, such signature or such facsimile shall nevertheless be valid and sufficient for all purposes as if he had remained in office until delivery. Any Bond may bear the facsimile signature of, or be signed by, such persons who at the actual time of the execution thereof shall be the proper officers to sign the Bonds, although at the date of such Bond such persons may not have been such officers. Section 2.6 Authentication. Only such Bonds as shall have endorsed thereon a certificate of authentication substantially in the form set forth in Exhibit A, duly executed by the Trustee shall be entitled to any right or benefit under this Indenture. No Bond shall be valid or obligatory for any purpose unless and until such certificate of authentication shall have been duly executed by the Trustee; and such executed certificate upon any such Bond shall be conclusive evidence that such Bond has been authenticated and delivered under this Indenture. The Trustee's certificate of authentication on any Bond shall be deemed to have been executed by it if signed by an authorized representative of the Trustee, but it shall not be necessary that the same person sign the certificate of authentication on all the Bonds. Section 2.7 Mutilated, Lost. Stolen or Destroyed Bonds. In the event any Bond is mutilated, lost, stolen or destroyed, the Issuer may execute and the Trustee may authenticate and deliver a new Bond in lieu of such mutilated, lost, stolen or destroyed Bond, of like Series, maturity and denomination as that mutilated, lost, stolen or destroyed. Any mutilated Bond shall first be surrendered to the Trustee; and in 17 the case of any lost, stolen or destroyed Bond, there shall first be fumished to the Trustee evidence of such loss, theft or destruction satisfactory to it together with indemnity satisfactory to it. In the event any such Bond shall have matured, instead of issuing a duplicate Bond the Trustee may pay the same without surrender thereof. The Trustee may charge the Owner or Owners of such Bond with its reasonable fees and expenses. Section 2.8 Transfer of Registration and Exchange of Bonds; Persons Treated as Owners. The Trustee is hereby appointed Bond Registrar and shall cause the Bond Register to be kept for the registration of the Bonds and the registration of transfers of Bonds. The registrar/on of any Bond may be transferred only upon an assignment duly executed by the Owner or his duly authorized representative in such form as shall be satisfactory to the Trustee, and upon surrender of such Bond to the Trustee for cancellation. Whenever any Bond or Bonds shall be surrendered for registration of transfer, the Issuer shall execute and the Trustee shall authenticate and deliver to the transferee a new Bond or Bonds of the same series, of like maturity of authorized denomination of denominations and for the amount of such Bond or Bonds so surrendered. Any Bond may be exchanged at the office of the Trustee, for a new Bond or Bonds, of the same series, of any authorized denomination or denominations and for the aggregate amount of such Bond then remaining Outstanding. In all cases in which the registration of Bonds shall be transferred or Bonds shall be exchanged hereunder, the Trustee may make a charge sufficient to reimburse it for any tax, fee or other governmental charge required to be paid with respect to such transfer or exchange. The Trustee shall not be required to make any such registration of transfer or exchange of Bonds during the period between a Regular Record Date and the next succeeding Payment Date on the Bonds. The Trustee shall not be required to transfer any Bond after the mailing of notice calling such Bond for redemption has been made, or during the period of fifteen (15) days next preceding mailing of a notice of redemption of any Bonds. The person in whose name any Bond shall be registered shall be deemed and regarded as the absolute Owner thereof for all purposes and payment of or on account of the principal of and premium, if any, and interest on any such Bond shall be made only to or upon the order of the Owner thereof, or his legal representative, and neither the Issuer nor the Trustee shall be affected by any notice to the contrary. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums to be paid. Section 2.9 Temporar~ Bonds. Until def'mitive Bonds of a Series are ready for delivery, there may be executed, and upon the request of the Issuer the Trustee shall authenticate and deliver, in lieu of definitive Bonds for each such Series, one or more temporary typewritten, printed, engraved, or lithographed Bonds, in any appropriate denomination, in fully registered form, and of substantially the tenor hereinabove set forth and with such appropriate omissions, insertions, and variations as may be required. If temporary Bonds shall be issued, the Issuer shall cause the definitive Bonds to be prepared and to be executed and delivered to the Trustee, and the Trustee, upon presentation to it at its principal corporate trust office of any tempmary Bond, shall cancel the same and authenticate and deliver in exchange therefor, without charge to the Owner thereof, a definitive Bond or Bonds of the same Series, of an equal aggregate principal amount, of the same maturity and bearing interest at the same rate as the temporary Bond surrendered. Until so exchanged, the temporary Bonds shall in all respects be entitled to the same benefit and security of this Indenture as the definitive respective Series of Bonds to be issued and authenticated hereunder. Interest on temporary Bonds, when due and payable, if the definitive Bonds 18 shall not be ready for exchange, shall be paid on presentation of such temporary Bonds for notation of such payment thereon by the Trustee. Section 2.10 Book-Eh Onl S stem. DTC will act as securities depository for the Bonds. Each Series of the Bonds shall be issued in the form of a separate single fully registered bond for each separate maturity of the respective Series of Bonds. Upon initial issuance, the ownership of the Bonds shall be registered in the Bond Register in the name of Cede & Co., as the nominee of DTC. With respect to Bonds registered in the Bond Register in the name of Cede & Co., as nominee of DTC, neither the Issuer, the Borrower, the Partners nor the Trustee shall have any responsibility or obligation to any DTC Participant or to any Beneficial Owner. Without limiting the immediately preceding sentence, neither the Issuer, the Borrower, nor the Trustee shall have any responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co., or any DTC Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any DTC Participant, any Beneficial Owner or any other Person, other than DTC, of any notice with respect to the Bonds, including any notice of redemption, (iii) the payment to any DTC Participant, any Beneficial Owner or any other Person, other than DTC, of any amount with respect to the principal of or premium, if any, or interest on the Bonds, or (iv) the failure of DTC to provide any information or notification on behalf of any DTC Participant or Beneficial Owner. The Issuer, the Borrower, the Partners and the Trustee may treat as and deem DTC to be the absolute owner of each Bond for the purpose of payment of the principal of and premium and interest on such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bonds, and for all other purposes whatsoever (except for the giving of certain Bondowner consents). The Trustee shall pay all principal of and premium, if any, and interest on the Bonds to the Bondowners as shown on the Bond Register, and all such payments shall be valid and effective to fully satisfy and discharge the Issuer's obligations with respect to the principal of and premium, if any, and interest on the Bonds to the extent of the sum or sums so paid. Upon delivery by DTC to the Trustee of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the transfer provisions in Section 2.8, references to "Cede & Co." in this Section shall refer to such new nominee of DTC. Notwithstanding the provisions of this Indenture to the contrary (including without limitation surrender of Bonds, registration thereof, and Authorized Denominations), as long as the Bonds are in book-entry form, full effect shall be given to the Representation Letter and the procedures and practices of DTC thereunder. So long as any Bond is registered in the name of Cede & Co., as nominee of DTC, all payments with respect to the principal of and premium, if any, and interest on such Bond and all notices with respect to such Bond shall be made and given, respectively, to DTC as provided in the Representation Letter. Section 2.11 Termination of Book-Entry Only System. DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving written notice to the Borrower and the Issuer and discharging its responsibilities with respect thereto under applicable law. The Borrower may terminate the services of DTC with respect to the Bonds, with the prior written consent of the Issuer, if it determines that DTC is no longer able to carry out its functions as security depository as contemplated herein. Upon the termination of the services of DTC as provided in the preceding paragraph, the Borrower shall take ail reasonable and diligent steps as may be necessary to find an alternate book-entry 19 depository, but if (and only if) no such substitute securities depository willing to undertake the functions of DTC hereunder can be found which, in the opinion of the Borrower, is willing and able to undertake such functions upon reasonable or customary terms, then the Bonds shall no longer be restricted to being registered in the Bond Register in the name of Cede & Co., as nominee of DTC, but may be registered in whatever name or names the Bondowners shall designate at that time, in accordance with Section 2.8. To the extent that the Beneficial Owners are designated as the transferee by the Bondowners, in accordance with Section 2.8 the Bonds will be delivered in appropriate form, content and Authorized Denomination to the Beneficial Owners. Section 2.12 Additional Bonds. (a) Additional Bonds may be issued under this Indenture, at any time and from time to time, at the discretion of the Issuer upon compliance with the conditions hereinafter provided in this Section, as well as compliance with the procedures of the Issuer then in effect for the issuance of its bonds, for the purposes of providing funds to pay or repay the costs of completing the Project, the total such costs to be evidenced by a certificate signed by the Borrower, or providing funds to pay or repay all or any part of the costs of acquisition, development, construction and equipping of additions to the Project as the Borrower may deem necessary or desirable subject to the'conditions in this Section 2.12. (b) Before any Additional Bonds shall be issued under the provisions of this Section, the Issuer shall adopt a resolution (i) authorizing the issuance of such bonds, fixing the amount and terms thereof and describing the purpose or purposes.for which such bonds are being issued, (ii) authorizing the Issuer to enter into a Supplemental Indenture for the purpose of issuing such Additional Bonds and, if required, (iii) authorizing the Issuer to enter into an amendment to the Financing Agreement with the Borrower, the Trustee and the Lender to provide for (1) payments sufficient to pay the principal of, premium, if any, and interest on the obligations then to be outstanding (including the Additional Bonds to be issued) as the same become due, (2) the acquisition, development, construction and equipping of the additions to the Project, (3) the inclusion of any such additions to the Project as a part of the Project, and (4) such other matters as are appropriate because of the issuance of the Additional Bonds proposed to be issued. (c) Each series of Additional Bonds shall have the same designation as the Bonds, except for an identifying series letter or date and any additional delineations deemed applicable (such as "Taxable"), shall be dated, shall be stated to mature in such year or years, shall bear interest at such rate or rates and shall be redeemable at such times and prices, all as may be provided by the Supplemental Indenture authorizing the issuance of such Additional Bonds. (d) Each Series of Additional Bonds shall be executed substantially in the form and manner set forth in this Article II and shall be deposited with the Trustee for authentication, but prior to or simultaneously with the authentication and delivery of the Additional Bonds by thc Trustee, there shall be filed with thc Trustee thc following: (i) a certified copy of the resolution adopted by the Issuer authorizing the issuance of such Additional Bonds and the execution of such Supplemental Indenture and amendment to the Financing Agreement; (ii) an original executed counterpart of the Supplemental Indenture providing for the issuance of the Additional Bonds; (iii) an original executed counterpart of the amendment to the Financing Agreement; 2O (iv) in the case of Additional Bonds, an original executed counterpart of the amendment to the Loan Documents required by the Lender in connection with an increase in principal and interest payable by the Borrower under the Mortgage Note; (v) in the case of Additional Bonds, a commitment of HUD to provide mortgage insurance and the Lender to issue a GNMA Security in an amount equal to the principal of the Additional Bonds; provided that the Lender should provide evidence of sufficient GNMA authority to issue such security; (vi) an opinion of Bond Counsel to the effect that the issuance of such Additional Bonds will not result in the interest on any Bonds then Outstanding, which were issued as tax- exempt bonds, becoming includable in gross income for federal income tax purposes; (vii) evidence that the issuance of such Additional Bonds will not adversely affect or cause the withdrawal of the rating of the Bonds then Outstanding by the Rating Agent then rating the Bonds; (viii) an opinion of counsel for the Borrower in form and content acceptable to the Trustee and the Issuer; and (ix) such other certifications, statements, receipts and documents as the Trustee or the Issuer shall reasonably require for the delivery of such Additional Bonds. (e) When the documents mentioned in subsection (d) of this Section shall have been filed with the Trustee, and when such Additional Bonds shall have been executed and authenticated as required by this Indenture, the Trustee shall deliver such Additional Bonds to or upon the order of the purchasers thereof, but only upon payment to the Trustee of the purchase price of such Additional Bonds, which shall be immediately deposited and administered by the Trustee in accordance with the Supplemental Indenture authorizing such Additional Bonds. [End of Article II] 21 ARTICLE IH Redemption of Bonds Section 3.1 Redemption of Bonds. (a) The Bonds are subject to redemption prior to maturity as provided below. (b) Optional Redemption. The Bonds are subject to redemption in whole or in part on the earliest practicable Business Day on or after October 20, 2011, from prepayments on the GNMA Securities representing Optional Prepayments on the Mortgage Loan by the Borrower or from other Eligible Funds on hand with the Trustee, and as to any premium, solely from Eligible Funds, at the redemption prices set forth in the table below, expressed as a percentage of the principal amount to be redeemed, plus accrued interest to the redemption date: Redemption Period (dates inclusive) Redemption Price 20, 2011to 19, 2012 105% 20, 2012 to 19, 2013 104% 20, 2013 to ,19, 2014 103% 20,2014to ,19,2015 102% 20,2015 to ,19,2016 101% .,20,2016 and thereafter 100% (c) Extraordinary Mandatory Redemption. The Bonds are subject to mandatory redemption in Authorized Denominations at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date, except as otherwise provided below, at the earliest practical date for which timely notice can be given as required by Section 3.2 (except as expressly stated below), as follows: (i) in whole on the earliest practicable date if CLCs in an aggregate principal amount of at least $. are not delivered to the Trustee by ., 200 (or such later date as permitted by Section 4.12 hereof) from amounts in the Acquisition Fund and Bond Fund and fi'om maturing principal of the CLCs, at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest thereon to the redemption date plus a remm of premium equal to the unamortized amount of original issue premium as of the Redemption Date, such premium amortization calculated on a straight-line basis from the date of issue to 20, 20 , but only to the extent that any proceeds of such original issue premium remain in the Acquisition Fund and are available to pay the premium. (ii) in whole or in part, at any time, at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest thereon to the redemption date, without premium, to the extent that any payment on the GNMA Securities received by the Trustee exceeds a level payment of principal and interest thereon as a result of payments representing (A) casualty insurance proceeds or 22 condemnation awards applied to the prepayment of the Mortgage Loan following a partial or total destruction or condemnation of the Project, (B) Mortgage Insurance proceeds or other amounts received with respect to the Mortgage Loan upon the occurrence of an event of default and an assignment of the Mortgage Loan to HUD thereunder, (C) a prepayment of the Mortgage Loan required by the applicable rules, regulations, policies and procedures of HUD or GNMA, or (D) a prepayment if HUD determines that prepayment will avoid a Mortgage Insurance claim and is therefore in the best interest of the Federal Government; (iii) in whole or in part, at any time, at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest thereon to the redemption date, without premium, to the extent that the Trustee receives payments on the GNMA Securities representing prepayments on the Mortgage Loan made by the Borrower without notice or prepayment penalty while under the supervision of a trustee in bankruptcy; (iv) in whole, in the event the PLC is not delivered to the Trustee by the PLC Delivery Date (as the same may be extended as provided in Section 4.10)(a) hereof on the earliest practicable date following the PLC Delivery Date, initially in a principal amount equal to all funds remaining in the Acquisition Fund (up to $19,500,000) and (b) thereafter, on the CLC Maturity Date, the remaining principal amount upon receipt of the principal amount of any CLC at the CLC Maturity Date, at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest-thereon to the redemption date plus a return of premium equal to the unamortized amount of original issue premium as of the Redemption Date, such premium amortization calculated on a straight-line basis from the date of issue to 20, 20 , but only to the extent that any proceeds of such original issue premium remain in the Acquisition Fund and are available to pay the premium; and (v) in part, on the earliest practicable date for which timely notice of redemption can be given following the PLC Delivery Date, at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed, plus accrued interest thereon to the redemption date, to the extent that the principal balance of the PLC delivered to the Trustee is less than the principal amount of the Mortgage Loan identified in the FHA Commitment, in a principal amount equal to the amount of funds remaining in the Acquisition Fond (other than amounts in the Capitalized Interest Account), plus any prepayments on the CLCs as required by Section 4.3(e) hereof at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest thereon to the redemption date plus a return of premium equal to the unamortized amount of original issue premium as of the Redemption Date, such premium amortization calculated on a straight-line basis from the date of issue to 20, 20 , but only to the extent that any proceeds of such original issue premium remain in the Acquisition Fund and are available to pay the premium. (d) Mandatory Sinking Fund Redemption. The Bonds are subject to mandatory sinking fund redemption on the following respective Payment Dates and in the following principal amounts at a redemption price equal to the principal amount of the Bonds to be so redeemed plus accrued interest to the redemption date, as set forth below, subject to pro rata reduction (as further described in Section 3.1(0 below) on each such date to the extent that such Bonds have been redeemed other than pursuant to this Section 3.1(d): 23 Payment Date Bonds Maturing 20, 20__ Principal Payment Principal Amount Date Amount *Final Maturity Payment Date Bonds Maturing 20, 20__ Principal Payment Principal Amount Date Amount *Final Maturity (e) [Reserved] (f) Selection of Bonds for Redemption. If less than all of the Bonds are to be redeemed from funds other than those attributable to mandatory sinking fund redemption payments pursuant to Section 3.1(d) hereof, the Bonds to be redeemed shall be selected on a reasonably proportionate basis among all Outstanding maturities, such basis for each maturity to be determined and effectuated as nearly as practicable by the Trustee by multiplying the total amount of money available to redeem Bonds on the redemption date by the ratio which the original principal amount of all Bonds in each remaining maturity bears to the total original principal amount of Bonds within all remaining maturities. The Trustee shall select Bonds to be redeemed within a maturity by lot in such manner as the Trustee shall determine. (g) In the event the Trustee receives notice of a prepayment of the Mortgage Note, the Trustee shall request that the Lender, pursuant to Section 7.6 of the Financing Agreement, inform the Trustee of (A) the date such prepayment will pass through the GNMA Securities and (B) the nature of the prepayment and the effect, if any, such prepayment will have on future regularly scheduled payments on the GNMA Securities. The Trustee shall notify the Rating 24 Agent of any prepayment of the Mortgage Note within fit~een (15) days after the Trustee receives notice thereof. (h) amount. The Bonds are to be redeemed only in integral multiples of $5,000 principal Section 3.2 Notice of Redemption of Bonds. (a) Except as provided in Section 3.1 and below, notice of redemption shall be given by first class mail to the Owner of each Bond to be redeemed, at the address of such Owner shown on the Bond Register, thirty (30) days prior to the date fixed for redemption. Each notice shall specify the full name of the issue of Bonds, including the Series designation, and (i) the numbers of the Bonds to be redeemed by giving the individual certificate number of each Bond to be redeemed (or equivalent information), (ii) the CUSIP numbers of the Bonds to be redeemed, (iii) in the case of a partial redemption of Bonds, the principal amount of each Bond being redeemed, (iv) the date of issue of the Bond as originally issued, (v) the rate or rates of interest borne by each Bond being redeemed, (vi)the maturity date of each Bond being redeemed, (vii) any other descriptive information needed to accurately identify the Bonds being redeemed, (viii) the name, address, telephone number and contact person at the office of the Trustee with respect to such redemption, (ix) the redemption date, (x) the redemption price, (xi) the place or places where amounts due upon such redemption will be payable, and (xii) the date of the redemption notice. Such notice shall further state that payment of the applicable redemption price plus accrued interest to the date fixed for redemption will be made upon presentation and surrender of the Bonds at the principal corporate trust office of the Trustee. CUSIP number identification with appropriate dollar amounts for each CUSIP number also shall accompany all redemption payments. (b) Notwithstanding the foregoing or any other provision of this Indenture: (i) no notice of redemption is required for redemption pursuant to Section 3.1(c)(iii), (iv) and (v); and (ii) in the event of a redemption by reason of the Trustee receiving payments on the GNMA Securities representing payments on the Mortgage Loan made by the Borrower without notice or prepayment penalty while under the supervision of a trustee in bankruptcy, notice of redemption of Bonds shall not be required if the cimumstances do not permit the Trustee to give such notice in accordance with the preceding paragraph. Anything to the conlrary herein notwithstanding, in the case of a redemption of the Bonds due to an optional prepayment of the Mortgage Loan, the Trustee shall not give notice of redemption of the Bonds unless the Trustee has received moneys sufficient to pay principal of, premium, if any and interest on the Bonds to be redeemed from such Mortgage Loan prepayment. (c) Notice of such redemption also shall be sent by certified mail, overnight delivery service or other secure means, postage prepaid, to the Rating Agent and to certain municipal registered Securities Depositories (described below) which are known to the Trustee to be holding Bonds on behalf of a registered Bondowner and to at least two of the national Information Services (described below) that disseminate securities redemption notices, when possible, at least five (5) days prior to the mailing of notices required by subsection (a) above; provided further that neither failure to receive such notice nor any defect in any notice so mailed shall affect the sufficiency of the proceedings for the redemption of such Bonds. Securities Depositories ~nclude. 25 The Depository Trust Company 55 Water Street 50th Floor New York, New York 10041-0099 Fax: (516) 227-4039 or 4190 or, in accordance with the then current guidelines of the Securities and Exchange Commission, to such other addresses and/or such other securities depositories or any such other depositories as the Issuer may designate in writing to the Trustee. "Information Services" include: Financial Information, Inc. "Daily Called Bond Service" 30 Montgomery Street 10th Floor Jersey City, New Jersey 07302 Attention: Editor Kenny Information Services "Called Bond Service" 55 Broad Street 28th Floor New York, New York 10004 Moody's Investors Service "Municipal and Government" 99 Church Street 8th Floor New York, New York 10007 Attention: Municipal News Reports Standard & 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 Exchange Commission, to such other addresses and/or such other services providing information with respect to called bonds, or any other such services as the Issuer may designate in writing to the Trustee. (d) Failure to give notice by mailing to the Owner of any Bond designated for redemption shall not affect the validity of the proceedings for the redemption of any other Bond. (e) Notice of redemption having been given in the manner provided above, and money sufficient for the redemption being held by the Trustee for that purpose, the Bonds so called for redemption shall become due and payable on the redemption date, and interest thereon shall cease to accrue; and the Owners of the Bonds so called fur redemption shall thereafter no longer have any security or benefit under this Indenture except to receive payment of the redemption price for such Bonds. 26 Section 3.3 Cancellation. All Bonds which shall have been redeemed shall be canceled and destroyed by the Trustee and shall not be reissued. A counterpart of the certificate of destruction evidencing such destruction shall be furnished by the Trustee to the Issuer. [End of Article III] 27 ARTICLE IV Funds; Investments Section 4.1 Establishment of Funds. The following funds shall be established, maintained and held in trust by the Trustee under this Indenture for the benefit of the Bonds: (a) Acquisition Fund; Co) Bond Fund (including a segregated Redemption Account); (c) Administrative Fund; and (d) Rebate Fund. References herein to the Bond Fund, and not specifically thc Redemption Account established therein, shall refer to such fund exclusive of such account. Section 4.2 Application of Bond Proceeds and Other Amounts. On the Closing Date, the Trustee shall deposit $ received from the sale of the Bonds in the following funds which are hereby created, and in the following amounts: (i) Acquisition Fund - $6,250,000 representing the principal amount of the Bonds; and (ii) Bond Fund - $ Bonds. , representing accrued interest on the Section 4.3 Administrative Fund. Immediately following the deposit of funds in the Administrative Fund pursuant to Section 4.2, the Trustee shall disburse from the Administrative Fund to the Underwriter the entire amount so deposited to pay a portion of the Underwriter's fee and close the Administrative Fund. Section 4.4 Acquisition Fund. (a) Deposits to Acquisition Fun& General The Trustee shall deposit into the Acquisition Fund the amount required by Section 4.2 and any amounts paid to the Trustee for deposit into the Acquisition Fund in accordance with Section 4.12 and will invest such proceeds in the Investment Agreement. Any earnings from the Investment Agreement will be deposited to the Bond Fund. (i) The Trustee shall request funds in the Acquisition Fund and invested under the Investment Agreement in accordance with the terms thereof such that funds will be timely available in advance of when funds are needed to fund disbursements under this Section 4.4. (ii) Subject to the provisions of this Section 4.4, amounts in the Acquisition Fund shall be disbursed as requested by the Lender on behalf of the Borrower. (iii) Upon acquisition by the Trustee of the Initial CLC and the PLC, the Trustee shall give notice thereof to the Rating Agency. 28 (iv) Prior to receiving any GNMA Security, the Trustee shall determine that the GNMA Security meets the requirements set forth in this Section 4.4 and will be purchased in accordance with the Financing Agreement. (b) Initial Disbursement from Acquisition Fund. The Trustee shall disburse from the Acquisition Fund the principal component of the GNMA Securities Purchase Price (and from the Bond Fund, the interest component of such price) to the Lender in connection with the delivery to the Trustee of the Initial CLC; provided that the Trustee has received the following: (i) a copy of the FHA endorsed Mortgage Note evidencing FHA's insurance of advances under the provisions of the National Housing Act; (ii) a copy of the Application for Insurance Advance of Mortgage Proceeds, executed by the Lender and approved for FHA Mortgage Insurance by FHA; (iii) an opinion of counsel to the Lender to the effect that such GNMA Security has been duly authorized and upon its delivery to the Trustee will be fully guaranteed by GNMA and enforceable in accordance with its terms; (iv) evidence that the Issuer has issued subordinate bonds in an aggregate principal amount sufficient, together with the proceeds of the endorsed Mortgage and proceeds of any cash or letter of credit provided by the Borrower, to equal the total Project Costs of $ And at the time of delivery of the Initial CLC, the following: (v) the Initial CLC with a maturity on the CLC Maturity Date; (vi) a copy of the GNMA Prospectus relating to such GNMA Security, certified by the Lender; (vii) If the CLCs in an aggregate principal amount of at least $. are not delivered to the Trustee on or before the Initial CLC Delivery Date (or such later date as may be established in this Section 4.12), the Trustee shall, on the Business Day immediately after the Initial CLC Delivery Date, transfer to the Bond Fund all amounts on deposit in the Acquisition Fund for application to the mandatory redemption of Bonds in accordance with Section 3.1(c)(i) hereof; and (c) Interim Disbursements from the Acquisition Fund. Following the delivery to the Trustee of the Initial CLC, the Trustee shall remit to the Lender from time to time, to the extent of funds on deposit in the Acquisition Fund, as to principal, and the Bond Fund, as to interest, a Disbursement in an amount equal to the GNMA Securities Purchase Price in exchange for a CLC, dated the first day of the month in which the GNMA Security is purchased. Notwithstanding the foregoing, the Trustee shall not make any interim Disbursements unless: (i) it receives the CLC; (ii) the rate and t~-. of all CLCs held by the Trustee equal the rate and term required under the Financing Agreement and hereunder; 29 (iii) the Trustee will never purchase CLCs in an aggregate principal amount more than $6,250,000. :;~.~ :ot~ ~'t,~',r~, In connection with an interim Disbursement under this .l~mll~l~:'.tJ~e Trustee s~all determine that the aggregate of the GNMA Securities purchased't;y, , u .sthe CLC purchased, together with any amounts remaining in the Acquisition,~ gt~east equals [he original principal amount of the Bonds. ~:~ ~,~ ;1~.~, :, ~ . (d) Final Disbursement from the Acquisition Fu~d~..~h~ .ection with~ ~e Final Endorsement of the Mortgage Note, the Trustee shall remit ~q..~ ~er, as the fi~, Disbursement and to the extent of available funds on deposit in the Acquisition Fund, as fo the principal, and the Bond Fund, as to the interest, an amount equal to th~.~ce between file aggregate principal amount of all CLCs theretofore acquired by the- Tr~,,tl~ad the princil~[ amount of the PLC, plus, fi.om the Bond Fund, accrued interest on S!,~h ~e at the ra~e~f .% per annum fi.om its dated date to (but not including) the date of its acquisition by the Trustee, provided the Trustee has received the PLC, in a face amount ~t~i~,~ ~.~ ,tl~e. r: .: (i) the principal amount of the Mortgage Note at final endorse~'~.el~~ p~ .:: :% (ii) the amount identified in (i) above, less the principal amount of~e Mortgage Loan, ~f any, which has been paid prior to such date. ~r'->.nl~ :uo~ , In the event of delivery of the PLC in the amount described in (ii) hBove~e Trustee sl~ transfer fi.om the Acquisition Fund to the Bond Fund an amount equ~j.~eul~nCipal amou~i:'~f - the Mortgage Loan which has been amortized. For purposes of this ~e~ ~'~stee ma~'r~.. on representations of the Lender as to the principal amount of the M~rtg~g~l~o~an which has .I~.;~ amortized. Following Final Endorsement the Trustee shall comply wi~ ~1~ ~'able requirements of GNMA and GNMA's transfer agent with respect to t~.~0f all CLCs by it in connection with acquiring the PLC; provided, however tha~.th~s~l~lus amou'rit~ the Acquisition Fund, shall not be so released or cancelled if .'amount of, Mortgage Note upon Final Endorsement is less than the aggregate principal ~imo~unt of such CL(~s '" unless the Lender has caused to be paid to the Trustee an amount e~q ,u~. ~ partial redemption of such CLCs. Any amounts so received shall be~d _~si~ i~ the Redempt'.m&- Account and applied to the redemption of the Bonds as set forth in -Sectj~.~l(c)(iv) h~[i' Notwithstanding such release, cancellation or delivery by the Truste~tl~tt~r of the CL~, all such CLCs shall remain registered in the name of the Trust .~e~qo~>;~..~. todial continue to be enforceable by the Trustee until such time as the Tn~f~.h~ ~. 'veal deliver.2 6f the PLC in accordance with the GNMA Guide. If, on the first Business Day following the PLC Delivery Date, 'as t~ie same may be extended pursuant to Section 4.12 hereof, the Trustee has not yet ~~J~C, the shall Iransfer to the Redemption Account all amounts on deposit d~-tl~e.~,~, ifion Fund:~nd principal amounts of the CLC upon the CLC Maturity Date for ~appti~h~.%o. the redemption of Bonds in accordance with Section 3.1 (c)(iv) hereof. (¢) On the PLC Delivery Date, the Trustee shall appl~ an~_~r~l~t:r,¢maining.in the Acquisition Fund in the following order of priority: .~-~ 30 (i) First, to pay to the Lender for the PLC the final Disbursement equal to the difference between the aggregate principal amount of all CLCs theretofore acquired by the Trustee and the principal amount of the PLC, plus accrued interest, if any; (ii) Second, to transfer to the Redemption Account from the Acquisition Fund the amount by which the principal amount of the PLC as delivered to the Trustee is less than $6,250,000, for any reason other than amortization of the Mortgage Note, to the redemption of the Bonds in such amount pursuant to Section 3.1(c)(v); (iii) Third, any remainder, if the Trustee receives written confirmation from the Rating Agency that the rating on the Bonds will not be reduced or withdrawn as a result thereof, may be transferred to the Borrower to be used to pay principal of the Subordinate Bonds; otherwise the remainder shall be transferred to the Bond Fund. (0 The Trustee or its custodial agent shall have actual physical possession of the GNMA Securities unless such GNMA Securities are in book entry form. If the GNMA Securities are in book entry form, they must be registered in the name of the Trustee at the depository of such book entry designation and the Trustee must have a first perfected security interest in the GNMA Securities. For all GNMA Securities in book entry form: (i) the Trustee should itself be a participant in the Participants Trust Co. ("PTC") or should have entered into a custody agreement with respect to the GNMA Securities with a participant of PTC; (ii) the participant acting on behalf of the Trustee called the "Receiving Participant" should establish a limited purpose account with PTC for this Indenture called the "Limited Purpose Account"; (iii) the Receiving Participant should deliver an irrevocable instruction to PTC to the effect that all fees arising in connection with the Limited Purpose Account are to be charged to another account maintained by PTC for the Receiving Participant; (iv) PTC should deliver a certificate to the Receiving Participant acknowledging that PTC will not charge the specified Limited Purpose Account until such time that the instruction no longer remains in effect (with exceptions only for mistake or to secure and repay any advance of principal and interest made by PTC); (v) there must be written evidence that PTC has made an appropriate entry in its records of the transfer of such book entry securities to the Receiving Participant's account; and (vi) the GNMA Securities must be transferred and received into the Limited Purpose Account free of any payment obligation. (g) In the event Commencement of Amortization occurs prior to the PLC Delivery Date, under no circumstances shall the Lender pass through to the Trustee principal payments on the Mortgage Note prior to the PLC Delivery Date and the Trustee shall not accept any payment of principal without receiving satisfactory evidence that such payments of principal will be guaranteed by GNMA under the GNMA Guaranty Agreement. 31 Section 4.5 Bond Fund. The Trustee shall deposit into the Bond Fund (i) the amounts required by Sections 4.2 and 4.4, (ii) all income, revenues, proceeds and other amounts received from or in connection with the GNMA Securities, (iii) all earnings and gains from the investment of moneys held in the Acquisition Fund or Bond Fund, (iv) any amounts to be used to redeem the Bonds (which shall be deposited in the Redemption Account), and (v)any other amounts received by the Trustee which am subject to the lien and pledge of this Indenture, and which are not otherwise designated for deposit to any other fund or account created hereunder. Section 4.6 [Reserved]. Section 4.7 Use of Moneys in the Bond Fund. (a) Moneys in the Bond Fund shall be used by the Trustee on each Payment Date, on any other date on which Bonds are to be redeemed (other than to the extent of any principal component of the redemption price payable from the Redemption Account), and on any date to the extent necessary to pay the interest component of the GNMA Security Purchase Price, in the following priority: (i) for the payment of the portion of the GNMA Security Purchase Price representing accrued interest; (ii) for the payment of the principal of, premium, if any, and interest on the Bonds becoming due and payable, whether at maturity or upon prior redemption, on such date; (iii) for the payment of the Trustee's Fee for the Bonds on each Payment Date as provided in Section 7.6 hereof; (iv) for transfer to the Rebate Fund, the Rebate Amount, if any, determined in accordance with the Tax Regulatory Agreement; (v) for the payment of the Issuer's Fee for the Bonds on each Payment Date; and (vi) to pay any Rebate Analyst Fee then due. (b) Any moneys remaining in the Bond Fund on any Payment Date following the PLC Delivery Date in excess of $15,000 shall be paid to the Borrower. Except as described in this clause, no funds may be released to the Borrower from the Bond Fund unless no Bonds remain Outstanding. (c) Upon acquisition, the GNMA Securities shall be held at all times for the benefit of the Bond Fund. At the earliest practicable time, the Trustee will give immediate telephonic notice (followed by written notice) on the 16th day of any month or, if the GNMA Security is held by PTC the 18th day of any month, to GNMA of the failure of the Lender to make any payment on the GNMA Security on the fifteenth day of any such month or, if the GNMA Security is held by PTC, on the seventeenth day of such month (or the next succeeding Business Day if the fifteenth (or seventeenth day, if the GNMA is held by PTC) day is not a Business Day) and demand payment in immediately available funds under the terms of GNMA's guaranty thereof. 32 (d) The Trustee shall deposit into the Redemption Account of the Bond Fund the amounts required by Section 4.4 hereof. The Trustee shall take all action required by Article HI of this Indenture to effect the timely redemption of Bonds fi.om funds in the Redemption Account in accordance with Section 3.1(c) hereof. Amounts deposited in the Bond Fund attributable to the receipt by the Trustee of payments under the GNMA Securities exceeding regularly scheduled payments of principal and interest on the Mortgage Loan (other than Optional Prepayments of the Mortgage Loan), shall be deposited in the Redemption Account of the Bond Fund and used by the Trustee solely to redeem Bonds pursuant to Section 3.1(c) hereof. Section 4.8 Nonpresentment of Bonds. In the event any Bonds shall not be presented for payment when the principal thereof becomes due, either at maturity or at the date fuxed for redemption thereof or otherwise, if funds sufficient to pay such Bonds shall have been made available to or for the benefit of the Owner thereof and shall have remained unclaimed for two (2) years and eleven (11) months after such principal or interest has become due and payable, such funds shall be paid to the Borrower; and all liability of the Issuer to the Owner thereof for the payment of such Bond shall forthwith cease, determine and be completely discharged; provided, however, that the Trustee, before being required to make any such payment to the Borrower, may cause to be published once in a financial newspaper or journal of general circulation in New York, New York, notice that such moneys remain unclaimed and that, after a date specified therein, 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 the Borrower. The cost of such publication shall be paid fi'om the unclaimed funds so held by the Trustee. The obligation of the Trustee under this Section 4.8 to pay any such funds to the Borrower shall be subject to any provisions of law applicable to the Trustee or to such funds providing other requirements for disposition of unclaimed property. Section 4.9 Investment of Funds. Any moneys held as part of any fund created by this Article shall be invested or reinvested, at the written direction of the Borrower, fi.om time to time, by the Trustee in an Investment Agreement or in other Qualified Investments which have a maturity (at the date of acquisition) that does not exceed the lesser of (i) thirty (30) days or (ii) the date on which such funds will be required hereunder. The Trustee shall invest moneys in the Acquisition Fund in the Investment Agreement. The investments so made shall be held by the Trustee and shall be deemed at all times to be a part of the fund in which such moneys were held; provided that for purpose of investment, moneys held in any of the funds established hereunder may be commingled (except for moneys which are or intended to become Eligible Funds which shall be segregated). The Trustee is directed to sell and reduce to cash a sufficient amount of such investments whenever the cash balance in any fund shall be insufficient to cover a proper disbursement therefrom. For the purpose of determining the amount on deposit to the credit of any such fund or account, obligations purchased as an investment of moneys therein shall be valued at the cost thereof, exclusive of accrued interest. The Trustee may purchase investments permitted by this Section 4.9 for or sell to itself or through or fi.om any affiliated company as principal or agent. Moneys credited to any account or fund maintained hereunder which are uninvested pending disbursement or receipt of proper investment directions or as directed herein, may be deposited to and held in a non-interest bearing demand deposit account established with the Commercial Banking Department of the Trustee or with any bank affiliated with the Trustee, without the pledge of securities to or other collateralization of such deposit accounts. The Trustee shall not be responsible for any loss resulting from the investment of moneys pursuant to this Section. Section 4.10 Final Balances. Upon £mal payment of all principal of, premium, if any, and interest on the Bonds, and upon satisfaction of all claims against the Issuer hereunder, including the payment of all fees, charges and expenses of the Trustee, the Issuer and the Lender which are properly due and payable hereunder or under the Financing Agreement, or upon the making of adequate provision 33 for the payment of such amounts, as permitted hereby, al! moneys remaining in all funds other than the Rebate Fund shall be remitted to the Borrower. Section 4.11 Rebate Fund. There is hereby created by the Issuer and established with the Trustee a non-mt fund to be designated the "Rebate Fund". Deposits to the Rebate Fund shall be made by the Trustee from "Rebate Amounts" on all funds and accounts held under this Indenture, determined in accordance with the provisions of the Tax Regulatory Agreement. The Trustee shall disburse funds from the Rebate Fund to the United States Treasury at the times and in the mounts required pursuant to the Tax Regulatory Agreement. Investment earnings on all amounts held in the Rebate Fund shall be retained in the Rebate Fund Section 4.12 Extension of Certain Dates. The PLC Delivery Date, CLC Maturity Date and/or Commencement of Amortization, may be extended to a date identified in the cash flow analysis described below, but only if the Trustee shall have received, at least three Business Days prior to the then-established PLC Delivery Date, a request from either the Lender or the Borrower for such extension (whether or not a conflicting request is received from the other such party) accompanied by: (i) in the case of extension of the PLC Delivery Date, evidence from the Lender that the CLC Maturity Date is on or after the proposed PLC Delivery Date or that the CLC Maturity Date will be extended to such extension date, (ii) a cash flow analysis from a firm with nationally recognized expertise in such matters together with a verification thereof (if required by the Rating Agency) by a firm of independent certified public accountants or a firm acceptable to the Rating Agency, demonstrating that the payments to be received on the GNMA Securities and the Investment Agreement, together with other amounts available for such purpose under the Indenture, including any deposit of Eligible Funds by or on behalf of the Borrower, will be sufficient to pay the debt service requirement on the Bonds when due, plus the Trustee Fee, Issuer's Fee and the Rebate Analyst Fee, (iii) evidence satisfactory to the Trustee that any amount deposited with the Trustee by or on behalf of the Borrower in connection with such extension constitutes Eligible Funds or an opinion of nationally recognized bankruptcy counsel to the effect that any such amount would not be subject to Section 547 or 362(a) of the Bankruptcy Code in the event of an Act of Bankruptcy; (iv) an opinion of Bond Counsel to the effect that such extension will not adversely affect the tax-exempt status of interest on the Bonds; and (v) written confirmation from the Rating Agency that the then current rating on the Bonds will not be adversely affected as a result of such extension. Based upon the receipt of the foregoing items from the Lender or applicable parties, the Trustee shall deliver to the Lender and GNMA, or its agent, written confn'mation of the Trustee's approval of such extension of PLC Delivery Date, the CLC Maturity Date and/or the Commencement of Amortization. [End of Article IV] 34 ARTICLE V General Covenants and Representations Section 5.1 Payment of Principal or Redemption Price of and Interest on Bonds. The Issuer shall promptly pay or cause to be paid the principal or redemption price of, and the interest on, every Bond issued hereunder according to the terms thereof, but shall be required to make such payment or cause such payment to be made only out of revenues available therefor under this Indenture. The Issuer hereby designates the principal corporate trust office of the Trustee as the principal place of payment for the Bonds, and the Trustee as principal paying agent for the Bonds, such appointment and designation to remain in effect until notice of change is filed with the Trustee. The Bonds are limited obligations of the Issuer, and the principal and interest thereon are payable solely and only from Bond proceeds and other assets of the Issuer constituting the Trust Estate hereunder. The Bonds shall not be a debt of the Issuer, the State or any political subdivision thereof, and neither the Issuer, the State nor any political subdivision thereof nor any person executing the Bonds shall be liable thereon; nor in any event shall such Bonds or obligations be payable out of any funds or properties other than those of the Issuer, and then only to the extent herein provided. Neither the United States of America, HUD, FHA, GNMA, any other agency of the United States of America, nor any political subdivision thereof shall in any event be liable for the payment of the principal of, premium (if any) or interest on the Bonds or for the performance of any pledge, obligation or agreement of any kind whatsoever of the Issuer, and none of the Bonds or any of the Issuer's agreements or obligations shall be construed to constitute an indebtedness of or a pledge of the faith and credit of or a loan of the credit of any of the foregoing within the meaning of any constitutional or statutory provision whatsoever. The Bonds are not guaranteed by the full faith and credit of the United States. Section 5.2 Covenants and Representations of Issuer. The Issuer shall observe and perform all covenants, conditions and agreements on its part contained in this Indenture, in every Bond executed, authenticated and delivered hereunder and in all proceedings of its members pertaining thereto; provided, however, that the liability of the Issuer under any such covenant, condition or agreement for any breach or default by the Issuer thereof or thereunder shall be limited solely to the revenues and receipts held hereunder or derived from the GNMA Securities. The Issuer represents that it is duly authorized under the laws of the United States of America and of the State, including particularly and without limitation the Act, to issue the Bonds authorized hereby, to execute this Indenture and to make the assignment and pledge provided for herein; that all action on its part for the issuance of the Bonds and the execution and delivery of this Indenture have been duly and effectively taken and that the Bonds in the hands of the Owners thereof are and will be valid and enforceable obligations of the Issuer according to the terms thereof. Section 5.3 Instruments of Further Assurance. The Trustee shall maintain possession of and defend the Issuer's title to the GNMA Securities for the benefit of the Owners of the Bonds and the Issuer's title to the other assets in the Trust Estate with respect to all Bonds against the claims and demands of all persons whomsoever and shall do, execute, acknowledge and deliver, such indentures supplemental hereto, and such further acts, instruments and transfers as the Trustee may reasonably require for the better assuring, transferring, conveying, pledging, assigning and confn'ming unto the Trustee all its interest in the property herein described and the revenues, receipts and other amounts pledged hereby to the payment of the principal of, premium, if any, and interest on the Bonds paid solely from the Trust Estate. Any and all interest in property hereafter acquired which is of any kind or nature herein provided to be and become subject to the lien hereof shall and without any further conveyance, assignment or act on the part of the Issuer or the Trustee, become and be subject to the lien of this 35 Indenture as fully and complet,.ly as though specifically described herein, but nothing contained in this sentence shall be deemed to modify or change the obligations of the Issuer under this Section 5.3. Section 5.4 Recordation and Filine. The Trustee will cause financing statements (other than the initial statement filed at the Closing Date by the Borrower) with respect to the Trust Estate described in this Indenture to be at all times continued in such manner and in such places if required by law in order to fully preserve and protect the rights of the Trustee hereunder and to perfect the security interest created by this Indenture in the Trust Estate described herein. To the extent possible under applicable law, as in effect in the jurisdiction(s) in xvhich the Trust Estate is located, the Issuer will maintain the priority of the security interest herein created in the Trust Estate as a first lien thereon, and warrant, protect, preserve and defend its interest in the Trust Estate and the security interest of the Trustee therein and all rights of the Trustee under this Indenture against all actions, proceedings, claims and demands of all persons, all paid for solely from the Trust Estate. Section 5.5 No Modification of Security; Additional Indebtedness. The Issuer shall not, without the written consent of the Trustee, alter, modify or cancel, or agree to consent to alter, modify or cancel any agreement which relates to or affects the security for the Bonds. The Issuer shall not incur any additional indebtedness secured by the Trust Estate prior to or on a parity with the Bonds except Additional Bonds authorized in the manner provided by Section 2.12 hereof. Section 5.6 [Intentionally Omitted.] Section 5.7 Existence of Issuer. The Issuer is validly existing under the laws of the State, and the Issuer has all necessary power and authority to execute and deliver this Indenture, to execute, deliver and issue the Bonds and to perform its duties and discharge its obligations hereunder and thereunder. So long as any of the Bonds shall be Outstanding, the Issuer shall do or cause to be done all things necessary to preserve and keep in full force and effect its existence. Section 5.8 Tax Covenants. The Issuer covenants with the Owners of the Bonds that notwithstanding any other provisions hereof or of any 0~her instxurnent, it will not knowingly make or cause to be made any investment or other use of the proceeds of the Bonds that would cause the Bonds to be determined to be "arbitrage bonds" pursuant to Section 148 of the Code and the regulations thereunder, or that would cause the Bonds to be determined to be "hedge bonds" pursuant to Section 149(g) of the Code and the regulations thereunder, or otherwise cause or permit the interest on the Bonds to become includable in gross income for federal income tax purposes under the Code, and the Trustee agrees it will invest funds held under the Indenture in accordance with the terms of this Indenture and the Tax Regulatory Agreement or otherwise in accordance with the provisions of this paragraph. The Issuer will take all actions necessary to enfome the Tax Regulatory Agreement, except those actions prohibited by the FHA Loan Documents. This covenant shall extend, throughout the term of the Bonds, to all funds created hereunder and all moneys on deposit to the credit of any such fund. Section 5.9 No Disposition of GNMA Securities. The Trustee shall not, without the prior written consent of the owners of one hundred percent (100%) of the Bond Obligation, sell or otherwise dispose of any GNMA Securities at~er their acquisition, except in the circumstance that the Lender is required to cause to be prepaid certain amounts if the principal amount of the Mortgage Note upon Final Endorsement is less than the aggregate principal amount of CLCs held by the Trustee, for an amount less than an amount sufficient, together with other amounts then held under this Indenture and available for the payment of principal of and interest on the Bonds, to provide for the payment in full of Bonds in accordance with Article IX. Upon the redemption or payment of all the Outstanding Bonds in accordance with the terms of this Indenture, the Issuer and the Trustee shall take whatever steps may be necessary to release the lien of this Indenture with respect to the GNMA Securities, which GNMA Securities shall then 36 be disposed of i~ accordance with Section 9.1 hereof. The provisions of this Section 5.9 shall not be amended without the prior written consent of the owners of one hundred percent (100%) of the Bond Obligation. Section 5.10 Reports bt' Trustee; Information to Ratimz A~,ent. (a) On or before the fifteenth day of each month and at such other times as the Issuer may reasonably request, the Trustee shall prepare and file with the Issuer (with a copy to the Borrower) a report setting forth for and as of the end of the preceding month or other period for which such report is prepared: (i) amounts withdrawn from and deposited in each fund under this Indenture; (ii) the balance on deposit in each fund; (iii) a brief description of all obligations held as investments in each fund; and (iv) the amount applied to the payment or redemption of the Bonds and a description of the Bonds or portions thereof so paid or redeemed. (b) The Trustee shall provide to the Rating Agent such reports or information relating to the Bonds or the GNMA Securities from time to time requested by the Rating Agent and shall in any event give written notice to the Rating Agent of any disposition of the GNMA Securities and notice of the occurrence of any of the following: (i) defeasance of the Bonds, (ii) sale of the GNMA Securities, (iii) appointment of a successor Trustee, and (iv) any supplement or amendment to this Indenture, the Financing Agreement or the Tax Regulatory Agreement. Section 5.11 Rights Under the Financing A~reement and the GNMA Securities. The Trustee shall in its own name maintain and enforce all rights of the Issuer and all obligations of the Borrower and the Lender under and pursuant to the GNMA Securities and the Financing Agreement, for and on behalf of the Bondowners, whether or not the Issuer is in default hereunder. Nothing herein shall be construed to require the Trustee to provide funds or pay principal of or interest on the Bonds except from the revenues and receipts derived from the GNMA Securities and the other security therefor. Anything in this Indenture to the contrary notwithstanding, no Owner of any Bond shall have or be deemed to have any right to proceed to obtain the benefits of the GNMA Securities or the Mortgage Insurance individually, such rights to be exercised solely by the Trustee. [End of Article V] 37 ARTICLE VI Default Provisions and Remedies of Trustee and Bondowners Section 6.1 Events of Default. Each of the following shall be an "event of default:" (a) default in the due and punctual payment of any interest on any Bond; or (b) default in the due and punctual payment of the principal of or premium, if any, on any Bond whether at the stated maturity thereof, or on proceedings for redemption thereof; or (c) default, and the continuation thereof for a period of thirty (30) days following notice by the Trustee, in the performance or observance of any other of the covenants, agreements or conditions on the part of the Issuer in this Indenture or in the Bonds; provided that the Borrower, within such thirty (30) day period, may cure the default by the Issuer; or (d) an event of default occurs under the Financing Agreement. Notwithstanding the foregoing provisions of this Section 6.1, no event of default hereunder shall constitute a default under the FHA Loan Documents and the Trustee shall continue to purchase GNMA Securities meeting the requirements of this Indenture and the Financing Agreement if delivered on or before the PLC Delivery Date (as the same may be extended), notwithstanding that an "event of default" shall have occurred or be continuing hereunder. The Trustee will give written notice to the Rating Agent of the occurrence of any event of default under Section 6.1 within fifteen (15) days after a Responsible Officer of the Trustee has notice or knowledge thereof. Section 6.2 Acceleration. (a) Upon the occurrence of an event of default under Section 6. l(a) or (b) which has occurred and is continuing, the Trustee may, and upon the written request of the Owners of at least twenty-five pement (25%) of the outstanding principal amount of the Bond Obligations, the Trustee will, by notice in writing delivered to the Issuer and the Borrower, declare the principal of the Bonds then outstanding and the interest accrued thereon immediately due and payable without premium, and such principal and interest will thereupon become and be immediately due and payable. (b) Upon the occurrence of an event of default under Section 6.1 (c) or (d) which has occurred and is continuing, the Trustee will, upon the written request of the Owners of one hundred percent (100%) of the Bond Obligation, by notice in writing delivered to the Issuer and the Borrower, declare the principal of the Obligations then outstanding and the interest accrued thereon immediately due and payable without premium, and such principal and interest will thereupon become and be immediately due and payable. (c) The provisions of subparagraphs (a) and Co) of this Section 6.2, however, are subject to the condition that if at any time after the principal of the Bonds will have been so declared due and payable, and before any judgment or decree for the payment of the money due will have been obtained or entered as hereinafter provided, there will be paid or deposited with the Trustee a sum sufficient to pay all principal of the Bonds matured (or due upon mandatory redemption) prior to such declaration and all matured installments of interest (if any) upon all 38 such Bonds, with interest at the rate borne by the Bonds or principal and premium, if any, and (to the extent legally enforceable) on such overdue installments of interest (other than in the payment of principal of and interest on the Bonds due and payable solely by reason of such declaration), and the reasonable expenses of the Trustee will have been made good or cured or adequate provisions will have been made therefor, then and in every case, the Owners of at least a majority of the Outstanding principal mount of the Bonds, by written notice to the Trustee and the Issuer, may direct the Trustee on behalf of the owners of all the respective Series of Bonds to rescind and annul such declaration and its consequences; but no such rescission and annulment will extend to or will affect any subsequent default, nor will it impair or exhaust any fight or power consequent thereon. Nothing in the Indenture will be construed to obligate the Issuer to make a payment or deposit referred to herein from any revenues other than the revenues derived from the Trust Estate. Section 6.3 Remedies. Upon the occurrence of an event of default, the Trustee shall have the power to proceed with any fight or remedy granted by the constitution and laws of the State, as it may deem best, including any suit, action or special proceeding in equity or at law for the specific performance of any covenant or agreement contained herein, in the GNMA Securities, or in the other Financing Documents for the enforcement of any proper legal or equitable remedy as the Trustee shall deem most effectual to protect the fights aforesaid, insofar as such may be authorized by law. No remedy by the terms of this Indenture conferred upon or reserved to the Trustee or to the Bondowners is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given to the Trustee or to the Bondowners hereunder or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any fight or power accruing upon any default or event of default shall impair any such fight or power or shall be construed to be a waiver of any such default or event of default or acquiescence therein, and every such fight and power may be exercised from time to time and as often as may be deemed expedient. No waiver of any default or event of default hereunder, whether by the Trustee or by the Bondowners, shall extend to or shall affect any subsequent default or event of default or shall impair any fights or remedies consequent thereto. Section 6.4 Rights of Bondowners. If any event of default shall have occurred and if requested so to do by the Owners of not less than twenty-five pement (25%) of the Bond Obligation, and if indemnified as provided herein, the Trustee shall be obliged to exercise such one or more of the fights and powers conferred by this Article as the Trustee, being advised by counsel, shall deem most expedient in the interest of the Bondowners. Subject to the provisions of Section 6.8 hereof, the Owners of a majority of the Bond Obligation shall have the fight at any time, by an instrument in writing executed and delivered to the Trustee, to direct the time, method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of this Indenture, or for the appointment of a receiver or any other proceedings hereunder, in accordance with the provisions of law and of this Indenture. Section 6.5 Waiver by Issuer. Upon the occurrence of an event of default, to the extent that such fight may then lawfully be waived, neither the Issuer nor anyone claiming through or under it shall set up, claim or seek to take advantage of any appraisal, valuation, stay, extension or redemption laws now or hereinafter in force, in order to prevent or hinder the enfomement of this Indenture; and the Issuer, for itself and all who may claim through or under it, hereby waives, to the extent that it lawfully may do so, the benefit of all such laws and all fight of appraisement and redemption to which it may be entitled under the laws of the State. 39 Section 6.6 Ao~lication of Moneys. Any moneys received by the Trustee in the case of an event of default described in Section 6.1(a) or (b) hereof, shall be applied in the following order to the Obligations, at the date or dates fixed by the Trustee and, in the case of the distribution of such money on account of principal, or premium, if any, or interest, upon presentation of Obligations, and notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: (a) to the payment of all amounts due the Trustee as a result of costs and expenses incurred by the Trustee in connection with the default; (b) to the payment of all amounts due the Issuer; and (c) to the payment of all amounts then due on the Obligations for interest, principal and premium, if any, in that order, in respect of which or for the benefit of which, money has been collected (other than Obligations which have matured or otherwise become payable pfior to such event of default and money for the payment of which is held in the Bond Fund), ratably without preference or priority of any kind, according to the amounts due and payable on the Obligations. Whenever moneys are to be applied pursuant to the provisions of this Section, such moneys will be applied at such times, and from time to time, as the Trustee will determine, having due regard to the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. Whenever the Trustee will apply such funds, it will fix the date (which will be a Payment Date unless it will deem another date more suitable) upon which such application is to be made and upon such date interest on the amounts of principal to be paid on such dates will cease to accrue. The Trustee will 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 will not be required to make payment to the owner of any Obligations until such Obligations will be presented to the Trustee for appropriate endorsement or for cancellation if fully paid. Section 6.7 Remedies Vested in Trustee. All fights of action, including the right to file proof of claims, under this Indenture or under any of the Obligations may be enforced by the Trustee without the possession of any of the Obligations or the production thereof in any trial or other proceedings relating thereto and any such suit or proceeding instituted by the Trustee shall be brought in its name as Trustee without the necessity of joining as plaintiffs or defendants any Owners of the Bonds, and any recovery of judgment shall be for the benefit as provided herein of the Owners of the Outstanding Obligations. Section 6.8 Remedies of Bondowners. No Owner of any Obligations shall have any right to institute any suit, action or proceeding in equity or at law for the enforcement of this Indenture or for the execution of any trust hereunder or for the appointment of a receiver or any other remedy hereunder, unless: (a) a default shall have occurred of which the Trustee shall have been notified as provided herein; (b) such default shall have become an event of default; (c) the Owners of at least twenty-five percent (25%) of the Bond Obligation shall have made written request to the Trustee and shall have offered reasonable opportunity either to proceed to exercise the powers hereinbefore granted or to institute such action, suit or proceeding in its own name; 40 (d) such Owners shall have offered to the Trustee indemnity as provided herein; and (e) the Trustee shall within sixty (60) days thereafter fail or refuse to exercise the powers hereinbefore granted, or to institute such action, suit or proceeding; it being understood and intended that no one or more Owners of the Obligations shall have any right in any manner whatsoever to affect, disturb or prejudice the lien of this Indenture or the rights of any other Owners of Obligations or to obtain priority or preference over any other Owners or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ramble benefit of all Owners of Obligations with respect to which there is a default. Nothing contained in this Indenture shall, however, affect or impair the right of any Bondowner to enforce the payment of the principal of, the premium, if any, and interest on any Obligation at the maturity thereof or the obligation of the Issuer to pay the principal of, premium, if any, and interest on the Obligations issued hereunder to the respective Owners thereof, at the time, in the place, from the sources and in the manner expressed in said Obligations. Section 6.9 Termination of Proceedings. In case the Trustee shall have proceeded to enforce any right under this Indenture by the appointment of a receiver, by entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely, then and in every such case the Issuer, Trustee and Owners shall be restored to their former positions and rights hereunder with respect to the Trust Estate herein conveyed, and all rights, remedies and powers of the Trustee and Owners shall continue as if no such proceedings had been taken. Section 6.10 Waivers of Events of Default. The Trustee shall waive any event of default hereunder and its consequences and rescind any declaration of maturity of principal, upon the written request of the Owners of a majority of the Obligations; provided, however, that there shall not be waived (a) any event of default in the payment of the principal of any Obligations at the date of maturity specified therein, or upon proceedings for mandatory redemption, or (b) any default in the payment when due of the interest or premium, if any, on any Obligations, unless prior to such waiver or rescission all arrears of interest, with interest (to the extent permitted by law) at the rate borne by the Obligations on overdue installments of interest or all arrears of payments of principal or premium, if any, when due (whether at the stated maturity thereof or upon proceedings for mandatory redemption) as the case may be, and all expenses of the Trustee and Issuer, in connection with such default shall have been paid or provided for, and in case of any such waiver or rescission, or in case any proceeding taken by the Trustee on account of any such default shall have been discontinued or abandoned or determined adversely, then and in every such case the Issuer, the Trustee and the Bondowners shall be restored to their former positions and rights hereunder, respectively, but no such waiver or rescission shall extend to any subsequent or other default, or impair any right consequent thereto. [End of Article VI] 41 ARTICLE VH The Trustee Section 7.1 Certain Duties and Responsibilities. (a) Except during the continuance of an event of default: (i) The Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the troth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (b) In case an event of default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, negligent failure to act, bad faith or breach of fiduciary duty, or its own willful misconduct, except that: (i) This subsection (c) shall not be construed to limit the effect of subsection (a) of this Section; (ii) The Trustee shall not be liable for any error of judgrnent made in good faith by a responsible officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with directions received pursuant hereto or the direction of the Owners ora majority of the Bond Obligation relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture. (d) No provisions of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers. (e) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 7.1. 42 Section 7.2 Notice of Default. Within ninety (90) days after the occurrence of any default hereunder of which the Trustee has actual notice hereunder, the Trustee shall transmit by registered, certified or first class mail, to the Owners of all Bonds then Outstanding, notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (or premium, if any) or interest on any Bond when due, the Trustee shall be protected in withholding such notice if and so long as the Trustee in good faith determines that the withholding of such notice is in the interests of the Owners of the Bonds. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an event of default. Section 7.3 Certain Rights of Trustee. Except as otherwise provided in Section 10. I hereofi (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction. consent, order or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any Request of the Issuer or order of the Issuer mentioned herein shall be sufficiently evidenced by an order signed by an authorized representative of the Issuer and any resolution of the Board of Commissioners of the Issuer may be sufficiently evidenced by a certificate of the Secretary or any deputy Secretary of the Issuer; (c) any notice, request, direction, election, order or demand of the Borrower mentioned herein shall be sufficiently evidenced by an instrument purporting to be signed in the name of the Borrower by the president or other authorized officer of the Borrower (unless other evidence in respect thereof be herein specifically prescribed); (d) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon a Certificate of the Issuer; (e) the Trustee may consult with counsel and other experts and the written advice of such counsel and other experts shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (0 the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Owners of the Bonds pursuant to this Indenture, unless such Owners shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (g) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises oftbe Issuer, personally or by agent or attorney; (h) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be 43 responsible for any misconduct or negligence on the part of any agent or attorney ~ppointed with due care by it hereunder; (i) the Trustee shall not be required to take notice or be deemed to have notice of any default hereunder except failure in any of the payments to the Trustee required to be made by the terms bereof or the terms of the Financing Agreement, unless the Trustee shall be specifically notified in writing of such default by the Issuer or the Owners of at least twenty-five percent (25%) in aggregate principal amount of the affected Bonds; (j) all notices or other instruments required by this Indenture to be delivered to the Trustee must, in order to be effective, be delivered at the principal corporate trust office of the Trustee at the Notice Address; and (k) the Trustee and its affiliates in its or their individual or any other capacity may become the Owner or pledgee of Bonds and may otherwise deal with the Issuer with the same fights it or they would have if it were not Trustee. Section 7.4 Not Responsible for Recitals or Issuance of Bonds. The recitals contained herein and in the Bonds, except the certificates of authentication, shall be taken as the statements of the Issuer, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Bonds. The Trustee shall make no representation as to the validity or adequacy of this Indenture or the Bonds, it shall not be accountable for the Borrower's use of the proceeds of the Bonds or any money paid to the Borrower or upon the Borrower's direction under any provision hereof, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee and it shall not be responsible for any statement or recital herein or any statement in the Bonds or any other document in connection with the sale of the Bonds or pursuant to this Indenture other than its certificate of authentication. Section 7.5 Trustee May Hold Bonds. The Trustee in its individual or any other capacity may become the Owner or pledgee of Bonds and may otherwise deal with the Issuer with the same fights it would have if it were not the Trustee. Section 7.6 Compensation and Reimbursement. The Issuer agrees, but only out of amounts on deposit in the Bond Fund, to pay to the Trustee fi.om time to time the Trustee Fee. In the event that there are not sufficient funds in the Bond Fund for payment of Trustee's fees and expenses, the Trustee shall continue to perform its duties hereunder and seek payment for such fees and expenses fi.om the Borrower pursuant to Section 5.4 of the Financing Agreement. The Trustee shall not have, and hereby expressly waives, any lien against the GNMA Securities or the proceeds thereof for the payment of its fees and expenses hereunder. Section 7.7 Successor Trustee. Any corporation or association into which the Trustee may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer its corporate trust business and assets as a whole or substantially as a whole, or any corporation or association resulting fi.om any such conversion, sale, merger, consolidation or transfer to which it is a party shall, ipso facto, be and become successor Trustee hereunder and vested with all the title to the whole property or Trust Estate and all the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any instruments or any further act, deed or conveyance on the part of any of the parties hereto, anything herein to the contrary notwithstanding. Section 7.8 Resignation by the Trustee. The Trustee and any successor Trustee may at any time resign fi.om the trusts hereby created by giving thirty (30) days' written notice by registered, certified or first class mail to the Issuer and to each Owner of the Bonds then Outstanding; provided that no such resignation shall take effect until a successor Trustee shall have been appointed and shall have accepted such appointment as provided in Section 7.11 hereof. If no successor Trustee shall have been appointed and have accepted appointment within thirty (30) days following the giving of all required notices of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. Section 7.9 Removal of the Trustee. The Trustee may be removed at any time, by an instrument or concurrent instruments in writing delivered to the Trustee and the Issuer, and signed by the Owners of a majority of the Bond Obligation; provided that no such removal shall take effect until a successor Trustee shall have been appointed and shall have accepted such appointment as provided in Section 7.11 hereof. In addition, as long as an Event of Default has occurred and is continuing, the Trustee may be removed at any time by written notice to the Trustee, designating a date for such removal and a successor Trustee pursuant to this Article VII. Section 7.10 Appointment of Successor Trustee by the Bondowners. In case the Trustee hereunder shall resign or be removed, or be dissolved, or shall be in course of dissolution or liquidation, or otherwise become incapable of acting hereunder, or in case it shall be taken under the control of any public officer or officers, or of a receiver appointed by a court, a successor may be appointed by the Owners of a majority of the Bond Obligation by an instrument or concurrent instruments in writing signed by such Owners, or by their duly authorized attorneys; provided, nevertheless, that in case of vacancy the Issuer may, by an instrument executed and signed by its Chair and attested by its Secretary under its official seal, appoint a temporary Trustee to fill such vacancy until a successor Trustee shall be appointed by such Bondowners in the manner above provided; and any such temporary Trustee so appointed by the Issuer shall immediately and without further act be superseded by the Trustee so appointed by such Bondowners. Every such Trustee appointed pursuant to the provisions of this Section 7.10 shall be a trust company or bank organized under the laws of the United States of America or any state thereof and which is in good standing, within or outside the State, having a reported capital and surplus of not less than $25,000,000 and at least $50,000,000 in trust assets under management if there be such an institution willing, qualified and able to accept the trust upon reasonable or customary terms. Section7.11 Concerning an,/ Successor Trustee. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to its predecessor and also to the Issuer an instrument in writing accepting such appointment hereunder, and thereupon such successor, without any further act, deed or conveyance, shall become fully vested with all the estates, properties, fights, powers, trusts, duties, and obligations of its predecessor; but such predecessor shall, nevertheless, on the written request of the Issuer, or of its successor, and upon payment of all amounts due such predecessor, execute and deliver an instrument transferring to such successor Trustee all the estates, properties, rights, powers and trusts of such predecessor hereunder; and every predecessor Trustee shall deliver all securities and moneys held by it as Trustee hereunder to its successor. Should any instrument in writing fi.om the Issuer be required by a successor Trustee for more fully and certainly vesting in such successor the estate, rights, powers and duties hereby vested or intended to be vested in the predecessor, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the Issuer. The resignation of any Trustee and the instrument or instruments removing any Trustee and appointing a successor hereunder, together with all other instruments provided for in this Article, shall be filed and/or recorded by the successor Trustee in each recording office where the Indenture shall have been filed and/or recorded. 45 Section 7.12 Reports to Borrower. The Trustee sh~ll deliver to the Borrower, semiannually within forty-five days of April 1 and October 1 of each year in which Bonds are Outstanding, a report (which may be its customary statements) setting forth the balance in each fund held by it hereunder as of such date. Section 7.13 Continuing Disclosure of Information. The Borrower has undertaken in the Continuing Disclosure Agreement to provide ongoing disclosure for the benefit of the Owners pursuant to Section (b)(5)(i) of Securities and Exchange Commission Rule 15c2-12 under the Securities Exchange Act of 1934, as amended (17 CFR Part 240 § 240.15c2-12). The Trustee hereby agrees to fulfill its obligations under the Continuing Disclosure Agreement. The Continuing Disclosure Agreement shall be enforceable by an Owner. However, neither the Issuer nor the Trustee shall have any power or duty to enforce such Continuing Disclosure Agreement. [End of Article VII] 46 ART!CLE VIH Supplemental Indentures Section 8.1 Supplemental Indentures Not Requiting Consent of Bondowners. The Issuer and the Trustee may, with the consent of the Lender and without the consent of or notice to any of the Bondowners, enter into an indenture or indentures supplemental to this Indenture as shall not be inconsistent with the terms and provisions hereof or matetially adverse to the interests of any Owners of the Bonds for any one or more of the following purposes: (a) to cure any ambiguity or formal defect or omission in this Indenture; (b) to change or modify any provisions of this Indenture so as to harmonize to the maximum extent practicable to the provisions hereof with existing rules, regulations and procedures of the FHA, HUD and GNMA; (c) to subject to the lien and pledge of this Indenture additional revenues, properties or collateral; (d) to grant or confer upon the Trustee for the benefit of the Bondowners any additional tights, remedies, powers or authotity that may lawfully be granted to or conferred upon the Bondowners or the Trustee or any of them; (e) to modify any of the provisions hereof relating to the use of the book-entry system for registration of the Bonds; (0 to modify, amend or supplement this Indenture or any indenture supplemental hereto in such manner as to permit the qualification hereof and thereof under the Trust Indenture Act of 1939 or any similar federal statute hereafter in effect or under any state securities laws; (g) to make changes necessary or convenient to provide for the extension of any date permitted to be changed pursuant to Section 4.12 hereof (not including any changes to the terms of the Bonds); (h) to make any other change, amendment or supplement which, in the opinion of the Trustee, will not prejudice in any material respect the tights of the Owners of Obligations Outstanding, excluding for this purpose, any Owners who have expressly consented to such supplemental indenture; or (i) to make any change necessary in order to maintain the exclusion from gross income for federal income tax purposes of interest on the Bonds; provided that the Trustee shall be entitled to rely on an opinion of Bond Counsel to the effect that the proposed amendments are permitted under this Section and will not cause interest on the Bonds to become includable in gross income for federal income tax purposes, and provided further that any amendment affecting the purchase of the GNMA Securities shall require the consent of the Lender. Section 8.2 Supplemental Indentures Requiting Consent of Bondowners. With the consent of the Lender and, except as noted below, the Owners of not less a majotity of the Bond Obligation and, if the amendment affects the purchase of GNMA Securities, the consent of the Lender, the Trustee may, 47 from time to time, enter into suppLmental indentures for the purpose of modifying, altering, amending, adding to or rescinding any of the terms or provisions contained in this Indenture or in any supplemental indenture; provided, however, that nothing in this Section contained shall permit, or be construed as permitting any of the following: (a) an extension of the stated maturity or a reduction in the principal amount mandatory sinking fund payment or reduction in the rate, or extension of time of payment of interest on, or reduction of any premium payable on the redemption of, any Bonds, without the consent of the Owners of one hundred percent (100%) of the Outstanding principal amount of the Obligation so affected; (b) the creation of any lien prior to or on a parity with the lien of this Indenture without the consent of the owners of one hundred percent (100%) of the Bond Obligation; (c) a reduction in the aggregate principal amount of the Bond Obligation required to approve any such supplemental indenture, without the consent of the Owners of all the Obligations at the time Outstanding which would be affected by the action to be taken; (d) the modification of the rights, duties or immunities of the Trustee without the consent of the Trustee and without the consent of the owners of one hundred percent (100%) of the Obligations; (e) a privilege or priority of any Bond over any other Bonds without the consent of the owners of one hundred percent (100%) of the Outstanding principal amount of the Obligations so affected; (f) any action which may result in the loss of the exclusion from gross income of interest on the Bonds from federal income taxation without the consent of the owners of one hundred percent (100%) of the Bonds; or (g) any amendment providing for the sale or disposition of the GNMA Securities for an amount less than an amount sufficient, together with other amounts then held under this Indenture and available for the payment of the Obligations, to defease the Obligations in accordance with this Indenture, without the consent of the Owners of one hundred percent (100%) of the Outstanding principal amount of the Bond Obligation. If at any time the Issuer shall request the Trustee to enter into any such supplemental indenture for any of the purposes of this Section, the Trustee shall, upon being satisfactorily indemnified with respect to expenses, cause notice of the proposed execution of such supplemental indenture to be mailed, postage prepaid, to all Bondowners. Such notice shall briefly set forth the nature of the proposed supplemental indenture and shall state that copies thereof are on file at the corporate trust office of the Trustee for inspection by all Bondowners. If, within sixty (60) days or such longer period as shall be prescribed by the Issuer following the mailing of such notice, the Owners of not less than a majority of the principal amount of the Bond Obligation at the time of the execution of any such supplemental indenture shall have consented to and approved the execution thereof as herein provided, no Owner of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or the Issuer from executing the same or from taking any action pursuant to the provisions thereof. Upon the execution of any such supplemental indenture as is in this Section permitted and provided, this Indenture shall be and be deemed to be modified and amended in accordance therewith. 48 The Trustee may rely upon an opinion of counsel as conclusive evidence that execution and delivery of a supplemental indenture has been effected in compliance with the provisions of this Article. Anything herein to the contrary notwithstanding, a supplemental indenture under this Article which affects any fights of the Borrower shall not become effective unless and until the Borrower shall have consented to the execution and delivery of such supplemental indenture. In this regard, the Trustee shall cause notice of the proposed execution and delivery of any such supplemental indenture to be mailed by certified, registered or first class mail to the Borrower at least fifteen (15) days prior to the proposed date of execution and delivery of any supplemental indenture. The Borrower shall be deemed to have consented to the execution and delivery of any such supplemental indenture if the Trustee does not receive a letter of protest or objection thereto signed by or on behalf of the Borrower on or before the close of business of the Trustee on the fifteenth day after the mailing of said notice and a copy of the proposed supplemental indenture. Section 8.3 Amendment of Certain Documents. With the written consent of the Lender, and subject to the rights of the Borrower, the Issuer and the Trustee may make or consent to any amendment, change or modification of the GNMA Securities, the Financing Agreement or any other Financing Documents for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective or inconsistent provision contained therein, or in regard to matters or questions arising under said documents, as the Issuer and the Trustee may deem necessary or desirable and not inconsistent with said documents or this Indenture and which shall not adversely affect the interests of the Owners of the Obligations, excluding for this purpose, any Owners who have expressly consented to such amendment, change or modification. [End of Article VIII] 49 ARTICLE IX Satisfaction and Discharge of Indenture Section 9.1 Discharge of Lien. If the Issuer shall pay or cause to be paid to the Owners of the Bonds the principal, interest and premium, if any, to become due thereon at the times and in the manner stipulated therein and herein, and shall have paid all fees and expenses of the Trustee, and if the Issuer shall keep, perform and observe all and singular the covenants and promises in the Bonds and in this Indenture expressed as to be kept, performed and observed by it or on its part, then these presents and the estate and rights hereby granted shall cease, determine and be void, and thereupon the Trustee shall cancel and discharge the lien of this Indenture and execute and deliver to the Issuer such insmaments in writing as shall be requisite to satisfy the lien hereof, shall reconvey to the Issuer the estate hereby conveyed, and shall assign and deliver to the Issuer any interest in property at the time subject to the lien of this Indenture which may then be in its possession, except mounts held by the Trustee for the payment of principal of and interest and premium, if any, on the Bonds. The Bonds shall, prior to the maturity or redemption date thereof, be deemed to have been paid within the meaning and with the effect expressed in the first paragraph of this Article IX iftbe following conditions shall have been fulfilled: (a) in case any of the Bonds are to be redeemed on any date prior to their maturity, the Borrower shall have given to the Trustee, in form satisfactory to it, irrevocable instructions to mail, as provided in Article III hereof, notice of redemption of such affected Bonds on said date; (b) there shall be on deposit with the Trustee either Eligible Funds or direct obligations of, or obligations guaranteed by, the United States of America, purchased with Eligible Funds, in an amount sufficient, together with earnings thereon, to pay when due the principal or redemption price, if applicable, and interest due and to become due on the affected Bonds on and prior to the redemption date or maturity date thereof, as the case may be, and to pay to the Trustee its reasonable fees and expenses, and to the Issuer the Issuer's Fee, and any other fees and expenses for canceling and discharging this Indenture; (c) the Trustee shall have received verification from a certified public accountant or firm of certified public accountants that the amount deposited pursuant to (b) above, together with earnings thereon, will be sufficient to pay all principal of and interest on the affected Bonds to become due and payable on and before the redemption date or maturity date thereof, as the case may be; (d) the Trustee shall have received an opinion of Bond Counsel to the effect that the actions to be taken pursuant to the terms of this Article IX will not render interest on the Bonds subject to federal income taxation; and (e) the Trustee shall notify the Rating Agent of such discharge. [End of Article IX] 5O ARTICLE X Miscellaneous Section 10.1 Consents and Other Instruments of Bondowner. Any consent, request, direction, approval, waiver, objection, appointment or other instrument required by this Indenture to be signed and executed by the Bondowners may be signed and executed in any number of concurrent writings of similar tenor and may be signed or executed by such Bondowners in person or by agent appointed in writing. Proof of the execution of any such instrument, if made in the following manner, shall be sufficient for any of the purposes of this Indenture and shall be conclusive in favor of the Trustee with regard to any action taken under such instrument, namely; (a) The fact and date of the execution by any person of any such instrument may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer of any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying that the person signing such instrument acknowledged to him the execution thereof. Where such execution is by an officer of a corporation or association or a member of a parmership on behalf of such corporation, association or partnership, such affidavit or certificate shall also constitute sufficient proof of his authority. (b) The ownership of Obligations shall be provided by the Bond Register. (c) Any request, consent or vote of the Owner of any Obligation shall bind every future Owner of the same Obligation and the Owner of every Obligation issued in exchange therefor or in lieu thereof, in respect of anything done or permitted to be done by the Trustee or the Issuer pursuant to such request, consent or vote. (d) In determining whether the Owners of the requisite amount of the Bond Obligation have concurred in any demand, request, direction, consent or waiver under this Indenture, Obligations which are owned by the Issuer or the Borrower or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer or the Borrower shall be disregarded and deemed not to be Outstanding for the purpose of determining whether the Trustee shall be protected in relying on any such demand, request, direction, consent or waiver. Only Obligations which the Trustee knows to be so owned shall be disregarded. Obligations so owned which have been pledged in good faith may be regarded as Outstanding for the purposes of this Section if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right to vote such Obligations. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. Section 10.2 Limitation of Rights. With the exception of rights herein expressly conferred, nothing expressed or to be implied from this Indenture or the Obligations is intended or shall be construed to give to any person other than the parties hereto, the Borrower and the Owners of the Obligations, any legal or equitable right, remedy or claim under or in respect to this Indenture or any covenants, conditions and provisions hereof. Section 10.3 Severability. If any provision of this Indenture shall be held or deemed to be or shall in fact be inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions or in all jurisdictions, or in all cases because it conflicts with any other provision or provisions hereof or any constitution, statute, rule of law or public policy, or for any other reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable 51 in any other case or circumstances, or of rendering any other provision or provisions herein contained invalid, inoperative, or unenforceable to any extent whatever. The invalidity of any one or more phrases, sentences, clauses or sections in this Indenture contained shall not affect the remaining portions of this Indenture or any part thereof. Section 10.4 Notices. All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed given when mailed postage prepaid, or dispatched by electronic transmission subsequently confirmed in writing or by telegram, addressed, to the Notice Address of the person to whom such notices, certificates or other communications are given. Section 10.5 Trustee as Paving Agent and Bond Registrar. The Trustee is hereby designated and agrees to act as the paying agent with respect to the Bonds, separate and apart from its duties as Trustee hereunder, and as Bond Regish'ar for and in respect to the Bonds. Section 10.6 Payments Due on Saturdays, Sundays and Holidays. In any case where the date of maturity of interest on or principal of the Bonds, or the date fixed for redemption of any Bonds, shall be a Saturday, Sunday, legal holiday or a day on which banking institutions located in the State or the State of New York are authorized by law to close, then payment of interest or principal need not be made on such date but may be made on the next succeeding business day with the same fome and effect as if made on the date of maturity or the date fixed for redemption, and no interest shall accrue for the period after such date. Section 10.7 Counterparts. This Indenture may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 10.8 No Recourse. No recourse shall be had for the payment of the principal of (or premium, if any) or the interest on the Bonds, or for any claim based thereon, or otherwise in respect thereof, or based on or in respect of the Indenture or any indenture supplemental hereto, against any elected official or against any officer, employee, agent, or counsel 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 thereof and as part of the consideration for the issue thereof, expressly waived and released. Section 10.9 Successors and Assigns. All the covenants and representations contained in this Indenture, by or on behalf of the Issuer, shall bind and inure to the benefit of its successors and assigns, whether so expressed or not. Section 10.10 Books, Records and Accounts. The Trustee agrees to keep proper books, records and accounts in which complete and correct entries shall be made of all transactions relating to the receipt, disbursements, investment, allocation and application of the proceeds received from the sale of the Bonds, the revenues received fi'om the GNMA Security, the funds and accounts created pursuant to this Indenture and all other moneys held by the Trustee hereunder. The Trustee shall make such books, records and accounts available for inspection by the Issuer or the Owner of any Bond during reasonable hours and under reasonable conditions. Section 10.11 Conflict with Housing Act. Notwithstanding anything in this Indenture to the contrary: (a) In the event of a conflict between the provisions of this Indenture and the Housing Act and the FHA Loan Documents, the Housing Act and the FHA Loan Documents 52 shall control. The Trustee shall be entitled to rely upon an opinion of counsel as to the content of the provisions of the Housing Act. (b) The Bonds are not a debt of the United States of America or HUD or any other agency of the federal government, and are not guaranteed by the full faith and credit of the United States. (c) No amendment to this Indenture will conflict with any FHA regulations or the FHA Loan Documents. (d) The Lender will hold the escrow funds required under the Mortgage in trust for the benefit of the Borrower outside the terms of this Indenture and any project funds held by the Lender will not be deposited in any of the funds or accounts created by this Indenture. (e) A default under this Indenture shall not constitute a default under the Mortgage. (f) Nothing contained herein or in the Financing Agreement shall inhibit or impair the right of the Lender to require or agree to any amendment, change or modification of the FHA Loan Documents for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective or inconsistent provision contained therein, or in regard to matters or questions arising under said FHA Loan Documents so long as any such amendment, change or modification shall not adversely affect the payment terms of the Bonds. (g) It is understood and agreed that any default under this Indenture shall not constitute a default under the FHA Loan Documents or the GNMA Documents. (h) This Indenture shall not be construed to restrict or adversely affect the duties and obligations of the Lender under the contract of mortgage insurance between FHA and the Lender with respect to the Mortgage Loan. (i) Neither the Issuer, the Trustee or any of the Bondowners has or shall be entitled to assert any claim against the Project, the mortgage proceeds, any reserves or deposits required by HUD in connection with the mortgage transaction or the rents or deposits or other income of the property other than "Surplus Cash" as defined in the FHA Regulatory Agreement. (j) No amendment shall be made to this Indenture with respect to HUD requirements without the prior written consent of HUD. [End of Article X] 53 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed and their respective corporate seals to be hereunto affixed and attested, all as of the date and year first above written. CITY OF COLUMBIA I4~,IGHTS, MINNESOTA By: Its:Mayor By: Its: City Manager S-1 Execution page of the Trustee for the Indenture of Trust, dated as of October 1, 2001, between the City of Columbia Heights, Minnesota, and the Trustee. U.S. BANK TRUST NATIONAL ASSOCIATION Trustee By: Its: S-2 EXHIBIT A FORM OF BOND STATE OF MINNESOTA COUNTY OF ANOKA City of Columbia Heights, Minnesota Multifamily Housing Revenue Bonds (GNMA Collateral[zed Mortgage Loan - Crest View ONDC I Project) Series 2001 Nominal Date of Maturity Interest Rate Original Issue CUSIP October 1, 2001 REGISTERED OWNER: PRINCIPAL AMOUNT: CITY OF COLUMBIA HEIGHTS, MINNESOTA, a home rule city and political subdivision of the State of Minnesota (the "Issuer"), for value received, hereby promises to pay (but only out of the revenues and other assets hereinafter referred to) to the Registered Owner specified above, or registered assigns (subject to any right of prior redemption provided for in the Indenture referred to below), on the maturity date set forth above, the principal amount set forth above and to pay interest thereon from the Nominal Date of Original Issue set forth above or from the most recent Payment Date to which interest has been paid or duly provided for, on each __ 20 and 20, commencing 20, 2001 (each, a "Payment Date"), at the interest rate per annum set forth above until the principal hereof is duly paid or provided for. Notwithstanding the foregoing, if the date of authentication hereof is between the Regular Record Date for such interest (which shall be fifteen (15) days next preceding each Payment Date) and the next following Payment Date, and if the Issuer shall not default in the payment of interest due on such Payment Date, this Bond shall bear interest from such Payment Date. The interest so payable on any Payment Date will, subject to certain exceptions provided in the Indenture referred to below, be paid to the person in whose name this Bond (or one or more predecessor Bonds) is registered at the close of business on the Regular Record Date next preceding such Payment Date. Interest, principal, premium, if any and redemption price are payable in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. This Bond is one of a duly authorized issue of bonds of the Issuer designated as its Multifamily Housing Revenue Bonds (GNMA Collateralized Mortgage Loan - Crest View ONDC I Project), Series 200 l, limited in aggregate principal amount to $6,250,000 (the "Bonds"), all issued pursuant to the laws of the State of Minnesota, including particularly, the provisions of Minnesota Statutes, Chapter 462C, as amended (the "Act"), and a resolution of the Issuer adopted on September 24, 2001, authorizing the issuance of the Bonds. The Bonds are issued under and are equally and ratably secured as to principal, premium, if any, and interest by an Indenture of Trust, dated as of October 1, 2001 (the A-1 "Indenture"), between the Issuer and U.S. Bank Trust National Association, as trustee (the "Trustee"), to which Indenture and all indentures supplemental thereto (copies of which are on file at the 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, the terms and conditions upon which the Bonds are issued and secured, and the rights of the Owners thereof. Subject to contrary provisions required by the immobilization of the Bonds pursuant to the book- entry system described below, principal of and premium, if any, on this Bond shall be paid only upon presentation and surrender hereof for cancellation at the principal office of the Trustee. Payment of interest on this Bond shall be made by check or draft mailed to the person entitled thereto at his address as it appears on the Bond Register maintained by the Trustee on the applicable Regular Record Date or Special Record Date (established as provided in the Indenture). The Trustee will, upon the written request of any Owner of $1,000,000 or more in aggregate principal amount of Bonds, make payments of principal of, redemption price of, or interest on this Bond by wire transfer in immediately available funds to the account of such Owner designated by such Owner to the Trustee in writing at least five (5) days before the record date for such payment. So long as this Bond is immobilized in global book-entry form registered in the name of the nominee of The Depository Trust Company ("DTC"), payments of principal of premium, if any, and interest on this Bond shall be made as provided in the Representation Letter (as defined in the Indenture) and surrender of this Bond shall not be required for payment of the redemption price upon a partial redemption of this Bond. Until termination of the book-entry only system pursuant to the Indenture, Bonds may be registered only in the name of DTC or its nominee, and notwithstanding express provisions of this Bond providing other or contrary results, the Representation letter (which includes the applicable practices and procedures of DTC) shall apply to this Bond. THE BONDS ARE LIMITED OBLIGATIONS OF THE ISSUER. THE BONDS AND THE INTEREST THEREON DO NOT CONSTITUTE NOR GIVE RISE TO A PECUNIARY LIABILITY, GENERAL OR MORAL OBLIGATION OR A PLEDGE OF THE FULL FAITH AND CREDIT OR TAXING POWER OF THE ISSUER, THE STATE OF MINNESOTA, OR ANY POLITICAL SUBDIVISION OF THE STATE OF MINNESOTA WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATIONS. NEITHER THE STATE OF MINNESOTA NOR ANY POLITICAL SUBDIVISION OF THE STATE OF MINNESOTA NOR THE ISSUER SHALL BE OBLIGATED TO PAY THE PRINCIPAL OF THE BONDS, THE INTEREST THEREON OR OTHER COSTS INCIDENT THERETO EXCEPT FROM REVENUES PLEDGED THEREFOR UNDER THE INDENTURE, ALL AS MORE FULLY SET FORTH IN THE INDENTURE. NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER, IF ANY, OF THE ISSUER, THE STATE OF MINNESOTA, NOR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF THE BONDS OR THE INTEREST THEREON OR OTHER COSTS INCIDENT THERETO. THE BONDS ARE NOT A DEBT OF THE UNITED STATES OF AMERICA, HUD, FHA, GNMA OR ANY OTHER AGENCY THEREOF AND ARE NOT GUARANTEED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA. THE BONDS ARE NEITHER A MORAL NOR AN ANNUAL APPROPRIATION OBLIGATION OF THE ISSUER, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF. The Bonds are being issued by the Issuer for the purpose of providing funds to purchase a series of fully modified, mortgage-backed pass through securities (the "GNMA Securities") to be issued by Reilly Mortgage Group, Inc., a District of Columbia corporation (the "Lender"), which GNMA Securities will be guaranteed as to timely payment of principal and interest by the Government National Mortgage Association ("GNMA"), and to pay certain costs of issuance in connection with the issuance of the Bonds. The GNMA Securities are to be issued by the Lender with respect to a mortgage loan (the A-2 "Mortgage Loan") to be made by the Lender to Crest View ONDC I, a Minnesota nonprofit corporation (the "Borrower"), to finance the acquisition, development, construction and equipping by the Borrower of an assisted living and memory-loss project for elderly persons (the "Project") to be located at 900 - 42nd Avenue N.E. in the City of Columbia Heights, Minnesota. Extraordinary Mandatory Redemption The Bonds are subject to mandatory redemption in Authorized Denominations at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date, except as otherwise provided below, at the earliest practical date for which timely notice can be given as required by the notice requirements of the Indenture, as follows: (i) in whole on the earliest practicable date if CLCs in an aggregate principal amount of at least $ are not delivered to the Trustee by , 200 (or such later date as p~mdtted by Section 4.12 hereof) from amounts in the Acquisition Fund and Bond Fund and from maturing principal of the CLCs, at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest thereon to the redemption date plus a return of premium equal to the unamortized amount of original issue premium as of the Redemption Date, such premium amortization calculated on a straight-line basis from the date of issue to 20, 20 , but only to the extent that any proceeds of such original issue premium remain in the Acquisition Fund and are available to pay the premium. (ii) in whole or in part, at any time, at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest thereon to the redemption date, without premium, to the extent that any payment on the GNMA Securities received by the Trustee exceeds a level payment of principal and interest thereon as a result of payments representing (A) casualty insurance proceeds or condemnation awards applied to the prepayment of the Mortgage Loan following a partial or total destruction or condemnation of the Project, (B) Mortgage Insurance proceeds or other amounts received with respect to the Mortgage Loan upon the occurrence of an event of default and an assignment of the Mortgage Loan to HUD thereunder, (C) a prepayment of the Mortgage Loan required by the applicable rules, regulations, policies and procedures of HUD or GNMA, or (D) a prepayment if HUD determines that prepayment will avoid a Mortgage Insurance claim and is therefore in the best interest of the Federal Government; (iii) in whole or in part, at any time, at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest thereon to the redemption date, without premium, to the extent that the Trustee receives payments on the GNMA Securities representing prepayments on the Mortgage Loan made by the Borrower without notice or prepayment penalty while under the supervision of a trustee in bankruptcy; (iv) in whole, in the event the PLC is not delivered to the Trustee by the PLC Delivery Date (as the same may be extended as provided in Section 4.10)(a) hereof on the earliest practicable date following the PLC Delivery Date, initially in a principal amount equal to all funds remaining in the Acquisition Fund (up to $19,500,000) and (b) thereafter, on the CLC Maturity Date, the remaining principal amount upon receipt of the principal amount of any CLC at the CLC Maturity Date, at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest-thereon A-3 to the redemption date plus a rerun, of premium equal to the unamortized amount of original issue premium as of the Redemption Date, such premium amortization calculated on a straight-line basis from the date of issue to 20, 20 , but only to the extent that any proceeds of such original issue premium remain in the Acquisition Fund and are available to pay the premium; and (v) in part, on the earliest practicable date for which timely notice of redemption can be given following the PLC Delivery Date, at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed, plus accrued interest thereon to the redemption date, to the extent that the principal balance of the PLC delivered to the Trustee is less than the principal amount of the Mortgage Loan identified in the FHA Commitment, in a principal amount equal to the amount of funds remaining in the Acquisition Fund (other than amounts in the Capitalized Interest Accoun0, plus any prepayments on the CLCs as required by Section 4.3(e) hereof at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest thereon to the redemption date plus a return of premium equal to the unamortized amount of original issue premium as of the Redemption Date, such premium amortization calculated on a straight-line basis from the date of issue to 20, 20 , but only to the extent that any proceeds of such original issue premium remain in the Acquisition Fund and are available to pay the premium. Optional Redemption The Bonds are subject to optional redemption in whole or in part on the earliest practicable Business Day on or after October 20, 2011 from prepayments on the GNMA Securities representing optional prepayments on the Mortgage Loan by the Borrower or fi.om other Eligible Funds on hand with the Trustee, and as to any premium, solely fi'om Eligible Funds, at the redemption prices set forth in the table below, expressed as percentages of their principal amount to be redeemed, plus accrued interest to the redemption date: Redemption Period (dates inclusive) Redemption Price 20, 2011to 19, 2012 105% 20, 2012 to I9, 2013 104% 20,2013 to ,19,2014 103% 20, 2014to ,19, 2015 102% 20, 2015to ,19, 2016 101% ,20, 2016and thereafter 100% Mandatory Sinking Fund Redemption The Bonds are subject to mandatory sinking fund redemption on the Payment Dates and in the principal amounts set forth in the Indenture at a redemption price equal to the principal amount of the Bonds to be so redeemed plus accrued interest to the redemption date, subject to pro rata reduction on each such Payment Date pursuant to the Indenture to the extent that such Bonds have been redeemed in part other than pursuant to this paragraph. A-4 Selection of Bonds for Redemption If less than all of the Bonds are to be redeemed from funds other than those attributable to mandatory sinking fund redemption payments, the Bonds to be redeemed shall be selected on a reasonably proportionate basis among all Outstanding maturities, such basis for each maturity to be determined and effectuated as nearly as practicable by the Trustee by multiplying the total amount of money available to redeem Bonds on the redemption date by the ratio which the original principal mount of all Bonds in each remaining maturity bears to the total original principal amount of Bonds within all remaining maturities. The Trustee shall select Bonds to be redeemed within a maturity by lot in such manner as the Trustee shall determine. Notice of Redemption Except as described below and otherwise as provided in the Indenture, notice of redemption is required to be given by first class mail thirty (30) days prior to the redemption date to the Owner of each Bond to be redeemed at the address of such Owner as shown on the Bond Register. Notwithstanding the foregoing or any other provision of the Indenture, (i)no notice of redemption is required for redemption pursuant to Section 3.1 (c)(iii) and (iv) of the Indenture (relating to nondelivery or partial delivery of the PLC); and (ii) in the event of a redemption by reason of the Trustee receiving payments on the GNMA Securities representing payments on the Mortgage Loan made by the Borrower without notice or prepayment penalty while under the supervision of a trustee in bankruptcy, notice of redemption of Bonds shall not be required if the circumstances do not permit the Trustee to give such notice in accordance with the preceding paragraph. Notice of redemption having been given in the manner provided in the Indenture, and money sufficient for the redemption being held by the Trustee for that purpose, the Bonds so called for redemption shall become due and payable on the redemption date, and interest thereon shall cease to accrue; and the Owners of the Bonds so called for redemption shall thereat~er no longer have any security or benefit under the Indenture except to receive payment of the redemption price for such Bonds. Other Provisions The Owner of this Bond shall have no right to enforce the provisions of the Indenture or to institute action to enforce the covenants therein, or to take any action with respect to any event or default thereunder, or to institute, appear in or defend any suit or other proceeding with respect thereto, except as provided in the Indenture. Modifications or alterations of the Indenture or of any indenture supplemental thereto may be made only to the extent and in the circumstances permitted by the Indenture. This Bond may be exchanged, and its transfer may be registered, by the Owner hereof in person or by his attorney duly authorized in writing at the principal corporate trust office of the Trustee, but only in the manner, subject to the limitations and upon payment of a charge to reimburse the Trustee for any tax, fee or other governmental charge required to be paid with respect to such transfer or exchange, and upon surrender and cancellation of this Bond. Upon exchange or registration of such transfer a new registered Bond or Bonds of the same Series, maturity and interest rate and of authorized denomination or denominations for the same aggregate principal amount will be issued in exchange therefor. A-5 The Issuer and the Trustee may deem and treat the Owner hereof as the absolute owner hereof for the purpose of receiving payment of or on account of principal hereof and interest due hereon and for all other purposes and neither the Issuer nor the Trustee shall be affected by any notice to the contrary. The Bonds are issuable solely as fully registered Bonds in denominations of $5,000 and integral multiples thereof of a single maturity and will be exchangeable for fully registered Bonds of other Authorized Denominations in equal aggregate principal amounts at the principal office of the Trustee, but only in the manner and subject m the limitations provided in the Indenture. The principal hereof may be declared or may become due on the conditions and in the manner and at the time set forth in the Indenture upon the occurrence of any event of default as provided in the Indenture. No recourse shall be had for the payment of the principal of, premium, if any, or interest on this Bond, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture or any indenture supplemental thereto, against any trustee, member, officer, agent, counsel or director, as such, past, present or future, of the Issuer or any successor, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released. It is hereby certified, recited and declared that all acts, conditions and things required to exist, happen and be performed precedent to and in the execution and delivery of the Indenture and the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law and that the issuance of this Bond, together with all other obligations of the Issuer, does not exceed or violate any constitutional or statutory limitation. This Bond shall not be entitled to any benefit under the Indenture or become valid or obligatory for any purpose until such Bond shall have been authenticated by the certificate of the Trustee endorsed hereon. (The remainder of this page is intentionally left blank.) A-6 IN WITNESS WHEREOF, the Issuer has caused this Bond to be duly executed in its name by the manual or facsimile signature of its Chair and its Secretary, and to be duly sealed by the impressing hereon of the manual or facsimile seal of the Issuer, all as of the Date of Original Issue set forth above. CITY OF COLUMBIA I-EEIGI-ITS, MINNESOTA By Its Mayor By Its City Manager DATE OF AUTHENTICATION: This Bond is one of the Bonds described in the within mentioned Indenture. U.S. BANK TRUST NATIONAL ASSOCIATION By Authorized Signature A-7 FORM OF ASSIGNMENT ASSIGNMENT FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto the within-mentioned Bond and all fights thereunder and hereby irrevocably constitutes and appoints to transfer the within-mentioned Bond on the books kept for registration thereof with full power of substitution in the premises. Dated: Signature Guaranteed: NOTICE: Signature(s) must be guaranteed by a member firm of the Medallion Signature Program. Please insert social security or other identifying number of assignee NOTICE: The signature to this Assignment must correspond with the name as it appears upon the face of the within Bond in every particular, without alteration or enlargement or any change whatever. A-8 FORM OF ABBREVIATIONS ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this Bond, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM TEN ENT as tenants in common as tenants by the entireties JT TEN- as joint tenants with right of survivorship and not as tenants in common Custodian (Cust) (Minor) UNIF GIFT MIN ACT under Uniform Gifts to Minors Act (State) (State) Additional abbreviations may also be used though not in the above list. EXHIBIT B CERTIFICATE OF TRUSTEE ,200 Moody's Investors Service 99 Church Street New York, New York 10007 Re: $6,250,000 CITY OF COLUMBIA HEIGHTS, MINNESOTA, Multifamily Housing Revenue Bonds (GNMA Collateralized Mortgage Loan - Crest View ONDC I Project), Series 2001 (the "Bonds") Ladies and Gentlemen: U.S. BANK TRUST NATIONAL ASSOCIATION (the "Trustee") is Trustee under that certain Indenture of Trust dated as of October 1, 2001 between the Trustee and CITY OF COLUMBIA HEIGHTS, MINNESOTA (the "Issuer") pursuant to which the above-captioned Bonds are issued and secured. This certificate is given pursuant to Section 4.7 of the Indenture. Please be advised that on the date hereof $ was released to the Borrower from funds in the Bond Fund created under the Indenture. The PLC was delivered on or before , 2001, in a principal amount of $6,250,000. The Investment Agreement remains in place. Following such release (and after payment of all other obligations payable from the Bond Fund on ), not less than $ A-9 remained in the Bond Fund on , which amount is not less than $15,000. [OR--The PLC was delivered before or after the original PLC Delivery Date of , 2001, the amount of $ was released to the Borrower and $ remains in the Bond Fund as required to maintain the ruling on the Bonds. It is our understanding that such release has not adversely impacted your rating of the Bonds.] Sincerely, U.S. BANK TRUST NATIONAL ASSOCIATION By Its Vice President CLI62-018 (JU) 191954v.5 First Draft Wednesday, September 19, 2001 NOTE AGREEMENT By and Between CITY OF COLUMBIA HEIGHTS, MINNESOTA and CREST VIEW ONDC I Dated as of October 1, 2001 $ City of Columbia Heights, Minnesota Multifamily Housing Revenue Note (Crest View ONDC I Project) Subordinate Series 200 lB TABLE OF CONTENTS Page PARTIES ...................................................................................................................................................... 1 RECITALS ................................................................................................................................................... 1 ARTICLE I Definitions ARTICLE H The Loan Section 2.01. Section 2.02. Section 2.03. Loan ................................................................................................................................... 4 Loan Repayments and Additional Payments .................................................................... 4 Loan Documents ............... .4 ARTICLE HI Representations, Warranties, Covenants and Agreements Section 3.01. Section 3.02. Section 3.03. Section 3.04. Section 3.05. Section 3.06. Section 3.07. Section 3.08. Section 3.09. Section 3.10. Section 3.11. Section 3.12. Section 3.13. Section 3.14. Section 3.15. Section 3.16. Section 3.17. Section 3.18. Section 3.19. Section 3.20. Section 3.21. Section 3.22. Section 3.23. No Consent Required ........................................................................................................ 5 No Conflicting Law or Agreement .................................................................................... 5 Binding Obligations .............................................................................................. : ........... 5 Filing Fees .......................................................................................................................... 5 Further Assurances ............................................................................................................. 5 Name ................................................................................................................................. 5 Chief Executive Office ....................................................................................................... 5 Notice of Certain Events .................................................................................................... 6 Full and Faithful Disclosure ............................................................................................... 6 Financial Statements, Reports and Financial Covenants .................................................... 6 Impairment of Business or Property .................................................................................... 7 Maintenance of the Personal Property and the Project ........................................................ 7 Utilities ............................................................................................................................... 7 No Defaults ........................................................................................................................ 7 Disclosure of Litigation ....................................................................................................... 7 Payment of Obligations ...................................................................................................... 7 Certifications by the Borrower ........................................................................................... 7 Use of Issuer's or Holder's Name ...................................................................................... 8 Notice to Holder Upon Perceived Breach ........................................................................... 8 Prohibition Against Removal or Material Alteration .......................................................... 8 Americans With Disabilities Act ......................................................................................... 8 Indemnity ............................................................................................................................ 8 Tax Exemption ................................................................................................................... 8 Section 4.01. Section 4.02. ARTICLE IV Taxes and Insurance Taxes; Governmental Charges 10 Taxes and Other Encumbrances 10 Section 5.01. ARTICLE V Damage or Destruction; Insurance Proceeds Notice ............................................................. .. 11 ARTICLE VI Eminent Domain; Condemnation Awards Section 6.01· Notice ................................................................................................................................ 12 ARTICLE VII Defaults and Remedies Section 7.01. Section 7.02. Section 7.03. Section 7.04. Events of Default ............................................................................................................... 13 13 Remedies ........................................................................................................................... Remedies Not Exclusive ................................................................................................... 13 Subordination .................................................................................................................... 13 ARTICLE VIII Miscellaneous Provisions Section 8.01. Section 8.02. Section 8.03. Section 8.04. Section 8.05. Section 8.06. Section 8.07. Section 8.08. Section 8.09. Section 8.10. Section 8.11. Section 8.12. Section 8.13. Section 8.14. Section 8.15. Section 8.16. Section 8.17. Section 8.18. Section 8.19. Section 8.20. Section 8.21. Section 8.22. Section 8.23. Section 8.24. Section 8.25. Section 8.26. Section 8.27. Right to Inspect; Right to Require Management Agent .................................................... 14 No Effect on Liability ....................................................................................................... 11~ Renewal, Extension or Rearrangement ............................................................................. No Marshalling of Assets ................................................................. : ................................ !4. Participations ................................................................................ : ..................... Notices ............................................................................................................................... 15 S everability ....................................................................................................................... 15 Binding Effect; No Assigmnent ........................................................................................ 15 Entire Agreement .............................................................................................................. 15 Counterparts ...................................................................................................................... 15 Negotiated Document ........................................................................................................ Not Parmers; No Third Party Beneficiaries ...................................................................... 15 Governing Law .................................................................................... 16 · ' ........ 16 Modificatton Procedure ..................................................................................................... · I O Captions .......................................................... ................... '."'. ............. 16 Incorporation of Exhibits .................................................................................................. Time of Essence ................................................................................................................ }~ Gender and Number .......................................................................................................... Maximum Interest Payable ................................................................................................ ~ Payment by any Party ...................................................................... ..... ~ ........ 16 Fee for Services Rendere ........................................................................................... , 17 Holder s Expenses .. . . .......................................................... ...................... 17 Jurisdiction ........................................................................................................................ Waiver ofT. al by, y ..................................................................................................... Limitations on Issuer's Liability ....................................................................................... Limitations on Liability of the Borrower and its Parmers ................................................. t7 SIGNATURES ......................................................................................................................................... S- 1 ii NOTE AGREEMENT THIS NOTE AGREEMENT (the "Note Agreement") is entered into as of October 1, 2001, by and between CREST VIEW ONDC I, a Minnesota nonprofit corporation (the "Borrower"), and the CITY OF COLUMBIA HEIGHTS, MINNESOTA (the "Issuer"), a home rule city and political subdivision of the State of Minnesota. RECITALS The Borrower has requested that the Issuer issue its Multifamily Housing Revenue Note (Crest View ONDC I Project), Subordinate Series 200lB (the "Note"), under the provisions of Minnesota Statutes, Chapter 462C, as amended, and loan the proceeds derived from the sale of the Note to the Borrower under the terms of this Note Agreement (the "Loan"). Pursuant to a resolution of the governing body of the Issuer, adopted on September 24, 2001 (the "Resolution"), the Issuer has authorized the issuance and delivery of the Note. The proceeds of the Loan will be applied to finance a portion of the costs of the Project (as defined herein). The Borrower will be absolutely and unconditionally obligated to repay the Loan, together with interest thereon, at times and in amounts sufficient to pay when due the principal of and interest on the Note. To induce the Holder to purchase the Note and to secure the payment of the principal of, premium, if any, and interest on the Note when due, the Issuer will assign its rights under this Note Agreement to the registered owner or owners of the Note (the "Holders"), (except for its rights to indemnification and payment of certain fees and costs of the Issuer and other rights of the Issuer as set forth in Sections 2.02(c) and (d), 3.16, 3.18, 3.22, and 8.26 of this Note Agreement) under the terms of the Assignment of Note Agreement, dated as of October 1, 2001 (the "Assignment of Note Agreement"), among the Issuer, the Holder, and the Borrower. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements in this Note Agreement, the parties to this Note Agreement do hereby agree as follows: (The remainder of this page is intentionally left blank.) ARTICLE I Definitions As used in this Note Agreement, or in the Assignment of Note Agreement, the following capitalized terms shall have the following meanings, unless the context expressly requires otherwise: "Act" means Minnesota Statutes, Sections 469.152 to 469.165, as amended. "Assignment of Note Agreement" means the Assignment of Note Agreement, dated as of February I, 2001, by and among the Issuer, the Holder, and the Borrower. "Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as it may be amended from time to time. "Borrower" means Crest View ONDC I, a Minnesota nonprofit corporation, its successors and assigns. "Code" means the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. "Date of Taxability" means the date as of which interest on the Note becomes includable in gross income for purposes of federal income taxation. "Debt" means, with respect to any Person, all liabilities and obligations, contingent or otherwise, of that Person including, but not limited to, any nonrecourse obligations secured by Property of that Person. "Default" means the occurrence of any of the events specified in Section 7.01 hereof, as to which any requirement for notice or lapse of time (or both) has been satisfied. "Determination of Taxability" means the issuance of a statutory notice of deficiency by the Internal Revenue Service, a ruling from the Internal Revenue Service, or a decision of a court of competent jurisdiction, which holds, in effect, that interest on the Note is includable in gross income for purposes of federal income taxation, after the period, if any, for contest or appeal of such action, ruling, or decision has expired without any such contest or appeal having been properly instituted or after the final adjudication of any such contest or appeal. "Financial Statements" means all balance sheets, income statements, and statements of cash flow for the Borrower, delivered by the Borrower to the Issuer or the Holder prior to the date hereof or pursuant to the requirements hereof. "Holder" means the registered owner of the Note. "Indenture" means the Trust Indenture, dated as of October 1, 2001, between the Issuer and the Trustee. "Issuer" means the City of Columbia Heights, Minnesota, a home rule city and political subdivision of the State of Minnesota, and any successor to its functions. "Loan" means the loan to be made by the Issuer to the Borrower under the terms of this Note Agreement from the proceeds derived from the sale of the Note to the Holder. "Loan Repayments" means the payments required to be made by the Borrower under Section 2.02(a) of this Note Agreement. "Note" means the Issuer's Multifamily Housing Revenue Note (Crest View ONDC I Project), Subordinate Series 200 lB, issued by the Issuer in the original aggregate principal amount of $ "Note Agreement" means this Note Agreement as it may be amended from time to time. "Noteholder" means any registered owner of the Note, including the Holder and the Holder. "Obligations" means the obligations of the Borrower to the Holder under this Note Agreement to perform the covenants and agreements contained herein and in any modification, extension or amendment thereof. "Person" means any individual, corporation, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated organization, government, or any agency or political subdivision thereof, or any other form of entity. "Project" means the 50-umt assisted living facility for occupancy by elderly persons, comprised of forty-one (41) units of conventional assisted-living units and nine (9) special care units, located in the City of Columbia Heights to be financed in part with proceeds of the Loan. "Property" or "Properties" means any interest in any kind of property, whether real, personal, or mixed, or tangible or intangible. "Series 200lA Bonds" means the Multifamily Housing Revenue Bonds (GNMA Collateralized Mortgage Loan -- Crest View ONDC I Project), Series 200lA-, issued by the Issuer in the original aggregate principal amount of $ , and the Multifamily Housing Revenue Bonds (GNMA Collateralized Mortgage Loan -- Crest View ONDC I Project), Taxable Series 2001A-2, issued by the Issuer in the original aggregate principal amount of $ "Trustee" means U.S. Bank Trust National Association, as trustee under the Indenture. (The remainder of this page is intentionally left blank.) 3 ARTICLE H The Loan Section 2.01. Loan. Concurrently with the execution of this Note Agreement, the Issuer will loan to the Borrower, and the Borrower will borrow from the Issuer, the proceeds derived from the sale of the Note to the initial Holder of the Note. The Issuer shall cause the proceeds of the Loan to be transferred to the Borrower to be applied to payment of a portion of the costs of the Project to be financed with the proceeds of the Loan. To facilitate the appropriate application of the proceeds of the Note, the initial Holder of the Note is hereby authorized to disburse the proceeds of the Note directly to the Borrower to be applied to payment of a portion of the costs of the Project to be financed with the proceeds of the Loan. Section 2.02. Loan Repa~aents and Additional Payments. (a) The Borrower agrees to repay the Loan, together with interest on the Loan, by making Loan Repayments on such dates and in such amounts sufficient to provide for the timely payment of the principal of, premium, if any, and interest on the Note when due, whether on an installment payment date, at the stated maturity of any principal of the Note, on an earlier optional or mandatory redemption date, upon acceleration, or otherwise. Al1 Loan Repayments shall be made directly to the Holder in accordance with the terms of the Note, this Note Agreement, and the Assignment of Note Agreement. (b) In the event the Borrower should fail to make any Loan Repayment pursuant to subsection (a) above within five (5) days of the date such payment is due, the Loan Repayment so in default shall continue as an obligation of the Borrower until the Loan Repayment in default shall have been fully paid, and the Borrower agrees to pay the same with a late charge equal to four percent of the amount due but unpaid. (c) In addition to the Loan Repayments and interest and penalties, if any, pursuant to subsection Co) above, the Borrower shall pay to the Issuer and the Holder, when due and at the times requested by the Issuer and the Holder, amounts sufficient to pay in full all reasonable out-of-pocket costs and expenses of the Issuer and the Holder incurred in the issuance and payment of the Note and the making and collection of the Loan, including: (i) all costs incurred in connection with the purchase, transfer, registration, exchange, or redemption of the Note; (ii) the fees and other costs incurred for services of such engineers, architects, attorneys, management consultants, accountants, and other consultants as are employed by the Issuer or the Holder to make examinations or reports, provide services, or render opinions required or permitted by this Note Agreement; (iii)all costs reasonably incurred by the Issuer or the Holder in the enforcement of the Note or this Note Agreement; and (iv) all costs of issuing the Note. (d) In addition to the Loan Repayments, and interest and penalties, and the costs and expenses referred to in subsection (c), the Borrower shall pay to the Issuer the Issuer Fee, as defined in the Financing Agreement, dated as of October 1, 2001 (the "Financing Agreement"), between the Issuer and the Borrower, in accordance with the terms of Section 2.5 of the Financing Agreement. Section 2.03. Loan Documents. Concurrently with the execution hereof, and as a condition to this Loan, the Borrower shall deliver to the Holder the following documents, all fully executed by the appropriate parties and in form and substance acceptable to the Holder: (i) this Note Agreement; (ii) the Assignment of Note Agreement; (iii) such other documents, assignments, certificates, agreements, opinions, title insurance policies, environmental assessments, and indemnities as are reasonably required by the Holder. ARTICLE IH Representations, Warranties, Covenants and Agreements The Borrower represents and warrants that, as of the date hereof, and the Borrower covenants and agrees that during the term of this Note Agreement while any portion of the Note or the Obligations remain unpaid or unsatisfied (and thereafter where expressly stated herein): Section 3.01. No Consent Required. The Borrower represents and warrants that the Borrower's execution, delivery, and performance of this Note Agreement does not require the consent or approval of or the giving of notice to any Person which approval has not been duly obtained or which notice has not been duly given. Section 3.02. No Conflicting Law or Agreement. The Borrower represents and warrants that the Borrower's execution, delivery, and performance of this Note Agreement does not constitute a breach of or default under, and will not violate or conflict with, any provisions of the organizational or governing documents of the Borrower; any contract, financing agreement, lease, or other agreement to which the Borrower is a party or by which its Properties may be affected; or any law, regulation, order, injunction, judgment, decree, or writ to which the Borrower is subject or by which its Properties may be affected; nor will the same result in the creation or imposition of any encumbrance upon any Properties of the Borrower, other than those contemplated by this Note Agreement. The Borrower covenants and agrees that during the term of this Note Agreement while any portion of the Note and the other Obligations remain unpaid or unsatisfied, the Borrower shall not enter into any agreement which would be violated or breached by the performance by the Borrower of its Obligations. Section 3.03. Binding Obligations. The Borrower represents and warrants that this Note Agreement, when executed and delivered to the Issuer, will be the legal, valid and binding obligations of the Borrower, enforceable in accordance with its terms. Section 3.04. Filing Fees. The Borrower covenants and agrees to pay all expenses incident to the execution and acknowledgment of this Note Agreement and any extension, amendment or renewal thereof. Section 3.05. Further Assurances. The Borrower covenants and agrees to promptly cure, and ratify the cure off any defects in the creation, issuance, and delivery of this Note Agreement. The Borrower covenants and agrees, at its expense, to execute (or cause to be executed) and deliver to the Holder upon request all such other and further documents, agreements, and instruments in compliance with the covenants and agreements of the Borrower in this Note Agreement, or to correct any omissions in this Note Agreement, or to state more fully the Obligations and agreements set out in this Note Agreement, or to make any recordings, to file any notices, or to obtain any consents, all as may be reasonably necessary or appropriate in connection therewith. Section 3.06. Name. The Borrower represents and warrants that, as of the date hereof, the Borrower has not registered or applied for registration, nor shall the Borrower register under, any fictitious name statute of any state. Section 3.07. Chief Executive Office. The Borrower represents and warrants that, as of the date hereof, the Borrower's offices are located at the address listed in Section 8.06 hereof. The Borrower covenants and agrees that such offices shall not be transferred to any other location without prior written notice to the Holder. 6 Section 3.08. Notice of Certain Events. The Borrower covenants and agrees that the Borrower shall promptly notify the Issuer and the Holder if the Borrower becomes aware of the occurrence of: (i) any event that constitutes a Default together with a detailed statement of the steps being taken as a result thereof; (ii) any material change in the management of the Borrower; (iii) any material adverse changes, either individually or in the aggregate, in the assets, liabilities, financial condition, business, operations, affairs, or circumstances of the Borrower fi.om those reflected in the Financial Statements of the Borrower; or (iv) any material Default by the Borrower under Debt to any party other than the Holder. Section 3.09. Full and Faithful Disclosure. The Borrower represents that the Borrower has fully advised the initial Holder, of all matters involving the Borrower's financial condition, operations, Properties or industry that would be reasonably expected to have a material adverse effect on the financial condition, operations, Properties or prospects of the Borrower. The Borrower represents and warrants that no information, exhibit, or report furnished or to be furnished by the Borrower to the initial Holder, in connection with this Note Agreement contains, as of the date thereof, any misrepresentation of fact or fails to state any material fact, the omission of which would render the statements therein materially false or misleading. Section 3.10. Financial Statements, Reports and Financial Covenants. (a) The Borrower represents and warrants that the Financial Statements are complete and correct, have been prepared in accordance with generally-recognized financial accounting standards which are consistently applied, and present fairly the financial condition and results of operations of the Borrower, as of the date and for the period stated therein. The Borrower represents and warrants that no material adverse change in the financial condition of the Borrower has occurred since the date of the Financial Statements. The Borrower acknowledges that the Holder has purchased the Note and shall advance the Loan in reliance upon the Financial Statements. (b) Upon written request, the Borrower covenants and agrees to furnish to the Holder or cause the Holder to receive any or ali of the following, ali of which must be in form and substance satisfactory to the Holder: (i) Annual Reports. Within one hundred fifty (150) days after the end of each fiscal year, the Borrower shall furnish to the Holder an annual financial and operating statement of the Borrower in such detail as may be required by the Holder, such statements to be audited by a qualified accountant acceptable to the Holder, including therein (i) a current rent roll, (ii) gross income received, (iii) operating expenses (taxes, assessments, insurance premiums, repairs and maintenance, salaries and wages), and (iv) the net operating income and depreciation for federal income tax purposes. (ii) Quarterly Reports. Within forty-five (45) days after the end of each month, the Borrower shall furnish to the Holder a monthly unaudited financial and operating statement in such detail as may be required by the Holder. (iii) Other Reports. From time to time, as may be reasonably requested by the Holder, the Borrower shall, with reasonable promptness, deliver to the Holder interim rent rolls certified as true and correct by an officer or other authorized party of the Borrower, together with other pertinent information and data regarding the Borrower, its business operations and Properties. (c) The Borrower covenants and agrees to maintain a debt service coverage ratio not less than 1.I0:I, as evidenced by the annual Financial Statements of the Borrower described in Section 3.10(b)(i). The debt service coverage ratio shall be determined by subtracting operating expenses (other than interest on the Note, depreciation and depletion) from gross revenues. Section 3.11. Impairment of Business or Property. The Borrower represents and warrants that neither the business nor the Property of the Borrower is impaired as a result of any fire, explosion, earthquake, flood, drought, windstorm, accident, strike or other labor disturbance, embargo, requisition or taking of property, cancellation of contracts, permits, concessions by any domestic or foreign government or any agency thereof, riot, activities of armed forces or acts of God or of any public enemy. Section 3.12. Maintenance of Proiect. The Borrower covenants and agrees to maintain the Project in good and workable condition at all times and make all repairs, replacements, additions, and improvements to the Project reasonably necessary and proper to ensure that the business carried on in connection with the Project may be conducted properly and efficiently at all times, including, without limitation, repairing, restoring, replacing or rebuilding any part of the Project which may be damaged or destroyed by any casualty whatsoever or which may be affected by any eminent domain or similar proceeding. The Borrower covenants and agrees not to commit or suffer any waste of the Project in any manner. The Borrower further covenants and agrees to complete and pay, within a reasonable time, for any structure at any time in the process of construction with respect to the Project. Section 3.13. Utilities. The Borrower agrees to pay, or cause to be paid, when due all utility charges which are incurred for the benefit of the Project or which may become a charge or lien against the Project for energy, fuel, gas, electricity, water, or sewer services furnished to the Project and all other assessments or charges of a similar nature, whether public or private, affecting the Project or any portion thereof, whether or not such assessments or charges are liens thereon. Section 3.14. No Defaults. The Borrower represents and warrants that the Borrower is not in default in any respect that affects its business, Properties, operations, or condition, financial or otherwise, under any indenture, mortgage, deed of trust, credit agreement, note, agreement, lease, sale agreement or other instrument to which the Borrower is a party or by which its Properties are bound. To the best of the Borrower's knowledge, information and belief, no other party to any contract with the Borrower is in default or breach thereof and no circumstances exist which, with the giving of notice and/or the passing of time would constitute such default or breach. As of the date hereof, no Default exists under this Note Agreement. Section 3.15. Disclosure of Litigation. The Borrower represents and warrants that there is no litigation, arbitration, legal or administrative proceeding, tax audit, investigation, or other action of any nature pending or, to the knowledge of the Borrower, threatened against, likely to be instituted against or affecting the Borrower or any of its Properties which would have a material adverse effect on its financial condition. The Borrower is not subject to any outstanding court or administrative order, writ or injunction which would have a material adverse effect on its financial condition. To the best of the Borrower's knowledge, information and belief, no facts exist that give material adverse claims to third parties against the Borrower, except as disclosed in the Financial Statements. Section 3.16. Payment of Obligations. The Borrower covenants and agrees to pay, in lawful money of the United States, all sums due the Issuer and the Holder at the time and in the manner as set forth in this Note Agreement and the Note. Section 3.17. Certifications by the Borrower. The Borrower, within ten (10) days of request, made either personally or by mail, shall certify, by a writing duly acknowledged, to the Holder, or to any 8 proposed assignee of this Note Agreement: (i) the balance of the Loan and the Obligations, including a breakdown of the principal and interest then owing on the Loan; (ii) any offsets or defenses to payment of the Obligations; and (iii) a then current list of lessees of the Project with the terms and status of each lease. Section 3.18. Use of Issuer's or Holder's Name. The Borrower shall not, without the prior written consent of the Issuer or the Holder, use the name of the Issuer or the Holder, or the name of any affiliates of the Holder, in connection with any of the Borrower's business or activities, except in connection with internal business matters, as required in making required securities law disclosure, in dealings with governmental agencies and financial institutions and to trade creditors of the Borrower solely for credit reference purposes. Section 3.19. Notice to Holder Upon Perceived Breach. The Borrower agrees to give the Issuer and the Holder prompt written notice of any action or inaction by the Issuer or the Holder in connection with this Note Agreement or the Obligations that the Borrower believes may be actionable against the Issuer or the Holder or a defense to payment of Obligations for any reason, including, but not limited to, commission of a tort or violation of any contractual duty or duty implied by law. Section 3.20. Proh/bition Against Removal or Material Alteration. No portion of the Project shall be removed, demolished or materially altered or enlarged, nor shall any new Improvements be constructed thereon, without the prior written consent of the Holder. Section 3.21. Americans With Disabilities Act. The Borrower represents and warrants that the Project complies with the Americans with Disabilities Act of 1990 (the "ADA") to the extent the ADA applies thereto. Section 3.22. Indemnity. The Borrower will pay, and will protect, indemnify, and save the Issuer and the Holder (and any subsequent owner or owners of the Note) from and against all liabilities, losses, damages, costs and expenses (including attorneys' fees and expenses), causes of action, suits, claims, demands, and judgments of any nature arising from: (i) any injury to or death of any person or damage to property in or upon the the Project, or growing out of or connected with the use, condition, or occupancy of the Project or a part thereof; (ii) violation of any agreement, warranty, covenant, or condition of this Note Agreement, except by the Issuer or the Holder; (iii) violation of any contract, agreement, or restriction by the Borrower relating to the Project; and (iv) violation of any law, ordinance, regulation, or court order affecting the Project or a part thereof or the ownership, occupancy, or use thereof, other than liabilities, losses, damages, costs, and expenses occasioned by the negligence, default, or willful misconduct of the Issuer or the Holder. The Borrower will further pay, and will protect, indemnify, and save the Issuer and the Holder (and any subsequent owner or owners of the Note) harmless from and against all liabilities, losses, damages, costs and expenses (including attorneys' fees and expenses), causes of action, suits, claims, demands, and judgments of any nature arising from the issuance or sale of the Note and the performance of their duties and obligations hereunder, other than liabilities, losses, damages, costs, and expenses occasioned by the negligence, default, or willful misconduct of the Issuer or the Holder. Section 3.23. Tax Exemption. (a) The Borrower and the Issuer covenant with each other for the benefit of the Holder and any subsequent Noteholders that, with respect to the proceeds of the Note and the earnings thereon and with respect to money or obligations which are treated as "gross proceeds" under the provisions of Section 148 of the Code, no use thereof or of any other money of the Borrower or the Issuer will be made which will cause the Note to be deemed to be an "arbitrage bond" within the meaning of Section 148 of 9 the Code or a "hedge bond" within the meaning of Section 149 (g) of the Code. For purposes of the preceding sentence, the provisions of Section 148 of the Code shall be deemed to include any rules or regulations (whether proposed, temporary, or final) which, due to retroactive application or for other reasons, are applicable to the Note. The Issuer and the Borrower hereby agree to take any reasonable actions which the Holder deems necessary to ensure compliance with Section 148 of the Code, including amending this Note Agreement. The covenant of the Issuer in this subsection is made on the basis of representations of the Borrower as to the application of the proceeds of the Note, the sources and uses of other "gross proceeds," and the security for the Note. (b) The Borrower covenants with the Issuer and the Holder that it will take no action, and it will not fail to take an action, if the effect would be to cause, permit, or othenvise result in: (i) the interest on the Note becoming includable in gross income for purposes of federal income taxation; or (ii) a Determination of Taxability with respect to the Note. (c) At the request of the Holder, the Borrower shall obtain (at its own cost) and deliver to the Holder an opinion of nationally-recognized bond counsel to the effect that interest on the Note is not includable in gross income for purposes of federal income taxation. (d) The Borrower makes the following representations with respect to the proceeds of the Note: (i) The Borrower will not use the proceeds of the Note or the Project in any manner which would cause the Note to be a "private activity bond" other than a "qualified 501(c)(3) bond" within the meaning of the Code. (ii) The Borrower agrees that, throughout the term of this Agreement, it will employ and operate the Project in such a manner as is necessary to conform to the policies and purposes of the Code and the requirements of Sections 145, 147, and 149 of the Code in effect on the date of issuance of the Note. Specifically, and without limitation, the Borrower covenants that it will not use any part of the Project for any unlawful purpose. (iii) The average maturity of the Note does not exceed one hundred twenty percent (120%) of the average reasonably expected economic life of the Project, within the meaning of Section 147(b) of the Code. The Borrower represents and covenants that the foregoing representations are true and will remain true and that the foregoing covenants will be performed and complied with in all respects. The Borrower makes no representation or covenant that the foregoing establish or maintain the exemption from federal income taxation of interest on the Note and is relying on the opinion of bond counsel as to such tax exemption. (The remainder of this page is intentionally left blank.) I0 ARTICLE IV Taxes and Insurance Section 4.01. Taxes; Governmental Charges. The Borrower has filed or caused to be filed all tax returns and reports required to be filed. The Borrower has paid, or made adequate provision for the payment of, all taxes that have or may have become due pursuant to such returns or otherwise, or pursuant to any assessment received by the Borrower, except such taxes, if any, as are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided. The Borrower knows of no proposed material tax assessment against it and no extension of time for the assessment of federal, state, or local taxes of the Borrower that is in effect or has been requested, except as disclosed in the Financial Statements. The Borrower has made all required withholding deposits. Section 4.02. Taxes and Other Encumbrances. The Borrower shall make due and timely payment or deposit of all federal, state, and local taxes (including but not limited to payments in lieu of taxes, FICA payments, and withholding taxes), impositions, assessments (general or special) or contributions required of it by law, or levied on or assessed against the Project, this Note Agreement, the Obligations, or any interest of the Holder therein and execute and deliver to the Holder, on demand, appropriate certificates attesting to the payment or deposit thereofi (The remainder of this page is intentionally left blank.) 11 ARTICLE V Damage or Destruction; Insurance Proceeds Section 5.01. Notice. In case of casualty to the Project resulting in damage or destruction, the Borrower shall promptly give written notice thereof to the Issuer and the Holder. (The remainder of this page is intentionally left blank.) 12 ARTICLE VI Eminent Domain; Condemnation Awards Section 6.01. Notice. In the event that the Project, or any part thereof, shall be taken in condemnation proceedings or by exercise of any fight of eminent domain or by conveyance(s) in lieu of condemnation (hereinafter called collectively, "condemnation proceedings"), or should the Borrower receive any notice or information regarding any such proceeding, the Borrower shall give prompt written notice thereof to the Issuer and the Holder. (The remainder of this page is intentionally left blank.) 13 ARTICLE VII Defaults and Remedies Section 7.01. Events of Default. The occurrence of any one or more of the following events shall be considered a Default under this Note Agreement: (a) Payment Default. The failure by the Borrower to pay any Loan Repayment or any other payments under this Note Agreement when due. (b) Breach of Warranty or Covenant. The determination by the Issuer or the Holder that any representation or warranty made in this Note Agreement was incorrect in any material respect as of the date thereof or the failure of the Borrower punctually and properly to perform any covenant or agreement contained in this Note Agreement. Section 7.02. Remedies. Upon the happening of any Default: (a) Acceleration. At its option, the Holder may declare immediately due and payable all Loan Repayments and all other payments under this Note Agreement and the Note, including interest accrued thereon, without presentment, demand, protest, notice of protest, or dishonor or other notice of Default of any kind, all of which are hereby expressly waived. (b) Exercise of Remedies. At its option, the Holder may exercise all other remedies afforded the Holder under this Note Agreement and the Note, and all other rights afforded a creditor under applicable law or principles of equity. Section 7.03. Remedies Not Exclusive. The rights and remedies of the Holder arising under this Note Agreement and the Note shall be separate, distinct and cumulative and no such right or remedy shall be exclusive of any other right or remedy under any of such documents or at law or equity. Section 7.04. Subordination. Notwithstanding any provision to the contrary in this Note Agreement or the Note, this Note Agreement and the Note are hereby expressly made subordinate to the Series 200lA Bonds and the Indenture and rights of the Trustee and the owners of the Series 200lA Bonds thereunder. No remedy may be pursued by the Holder hereunder or under the Note as long as any of the Series 200 lA Bonds are outstanding. (The remainder of this page is intentionally left blank.) 14 ARTICLE ¥~ti Miscellaneous Provisions Section 8.01. Right to Inspect; Right to Require Management Agent. The Holder, its officers, employees, and agents, shall have the right to visit and inspect the Project upon reasonable advance notice at all reasonable times and as often as the Holder may reasonably desire. Without limiting the foregoing, the Holder and its agents and consultants shall have the right to enter upon Project fi.om time to time to examine the Borrower's books of record and accounts, to take copies and extracts fi.om such books of record and accounts, and to discuss the affairs, finances, and accounts of the Borrower with the Borrower's respective officers, accountants, and auditors. The rights granted the Holder in this Section may be enforced by injunctive relief. Section 8.02. No Effect on Liability. No sale of any item of the Project shall in any way affect the liability of any party to this Note Agreement, or any Person liable or to become liable with respect to the Obligations. The defenses of impairment of collateral and impairment of recourse and any requirement of diligence on the Holder's part in collecting the Obligations are hereby waived. Section 8.03. Renewal, Extension or Rearrangement. All provisions of this Note Agreement relating to the Obligations shall apply with equal force and effect to any renewal, extension for any period, increase, or rearrangement of any part of the Obligations originally represented by any part of such other Obligations. Section 8.04. No Marshalling of Assets. The Borrower shall not be entitled to require the Holder to marshal assets. The benefit of any rule of law or equity to the contrary is hereby expressly waived. Section 8.05. Participations. The Holder may, from time to time, in its sole discretion, and without notice to the Borrower, sell participations in the Note or any Obligations to such other investors or f'mancial institutions as it may elect. The Holder may from time to time disclose to any participant or prospective participant such information as the Holder may have regarding the financial condition, operations, and prospects of the Borrower and the Borrower hereby consents to such disclosures. Section 8.06. Notices. Whenever the Issuer, the Holder, or the Borrower desires to give or serve any notice, demand, request or other communication with respect to this Note Agreement, each such notice, demand, request, or other communication shall be in writing and shall be effective only if and when the same is: (i) delivered by personal service; (ii) mailed by first-class mail, postage prepaid; or (iii) delivered by nationwide overnight delivery service (with charges prepaid). For the purposes hereof, the date a notice shall be deemed to be given shall be: (i) the date of delivery if given by personal service; (ii) the third day after the date of mailing if given by certified mail; and (iii) the date of delivery if given by overnight delivery service. All notices must be addressed to the following addresses: Issuer: City of Columbia Heights, Minnesota 590 40th Avenue N. E. Columbia Heights, Minnesota 55421 Attention: City Manager 15 Holder: Crest View ONDC I Crest View Corporation 4444 Reservoir Boulevard N.E. Columbia Heights, Minnesota 55421 Attention: Any party may at any time change its address for such notices by delivering or mailing to the other parties hereto, as aforesaid, a notice of such change. However, nothing in this section shall be construed to require the Holder to give any notice of Default or notice of intent to accelerate. Section 8.07. SeverabiliW. In case any one or more of the covenants, agreements, terms or provisions in this Note Agreement shall be invalid, illegal, or unenforceable in any respect, the validity of the remaining covenants, agreements, terms, or provisions shall in no way be affected, prejudiced, or disturbed thereby, and to this end the provisions of this Note Agreement are declared to be severable. Section 8.08. Binding Effect; No Assignment. This Note Agreement shall be binding upon and inure to the benefit of the respective heirs, successors, and assigns of the Issuer, the Borrower, and the Holder, except that the Borrower shall not assign any rights or delegate any obligations arising hereunder without the prior whtten consent of the Holder, which may be withheld in the Holder's sole discretion. Any attempted assignment or delegation by the Borrower without such required prior consent shall be void. Section 8.09. Entire Agreement. This Note Agreement represents the entire agreement between the parties concerning the subject matter hereof, and all oral discussions and prior agreements are merged herein and therein. If there is a conflict among any documents executed contemporaneously herewith with respect to the Obligations, the provision most favorable to the Holder shall control. Section 8.10. Counterparts. This Note Agreement may be executed by counterpart signature pages, and it shall not be necessary that the signatures of all parties be contained on any one counterpart. Each counterpart shall be deemed an original, but all of them together shall constitute one and the same instrument. Section 8.11. Negotiated Document. This Note Agreement has been negotiated by the parties with full benefit of counsel and should not be construed against either party as author. Section 8.12. Not Partners; No Third Party Beneficiaries. Nothing contained herein or in any related document shall be deemed to render the Holder a partner of the Borrower for any purpose. This Note Agreement has been executed for the sole benefit of the Issuer and the Holder, and no third party is authorized to rely upon the Issuer's or the Holder's rights hereunder or to rely upon an assumption that either the Issuer or the Holder has or will exercise its rights under this Note Agreement or under any document referred to herein. Section 8.13. Governing Law. The validity, construction and enforcement of this Note Agreement shall be determined according to the laws of Minnesota, applicable to contracts executed and performed entirely within that state. 16 Section 8.14. Modification Procedure. This Note Agreement may not be modified except by an instrument in writing executed by the party against whom enforcement of the change is sought. No requirement of this Note Agreement may be waived at any time except by a writing signed by both parties, nor shall any waiver be deemed a waiver of any subsequent breach or Default of the Borrower. Section 8.15. No Waiver. Failure to accelerate the maturity of the Obligations, or any portion thereof, upon the occurrence of any Default, or acceptance of any sum after the same is due, or acceptance of any sum less than the mount then due, or failure to demand strict performance by the Borrower of the provisions of this Note Agreement or any forbearance by the Holder in exercising any right or remedy hereunder or otherwise afforded by law shall not constitute a waiver by the Holder of any provision of this Note Agreement nor nullify the effect of any previous exercise of any such option to accelerate or other right or remedy. Section 8.16. Captions. The headings or captions of the articles, sections, paragraphs, and subdivisions of this Note Agreement are for convenience of reference only, are not to be construed a part hereof or thereof, and shall not be construed as affecting the content of any such Article, section, paragraph or subdivision. Section 8.17. Incorporation of Exhibits. All Exhibits, if any, referred to in this Note Agreement are incorporated herein by this reference. Section 8.18. Time of Essence. Time is of the essence of this Note Agreement and all dates and time periods specified herein or therein shall be strictly observed. Section 8.19. Gender and Number. Words used in this Note Agreement indicating gender or number shall be read as the context may require. Section 8.21. Maximum Interest Payable. None of the provisions of this Note Agreement shall have the effect of, or be construed as, requiring or permitting the Borrower to pay interest in excess of the highest rate per annum allowed by applicable law. If, under any circumstances, the Holder shall ever receive as interest an amount which would exceed the highest lawful rate, such amount which would be excessive interest shall, ipso facto, be applied to the reduction of the unpaid principal balance due hereunder and not to the payment of interest. Section 8.21. Payment by any Party. Any payment made in accordance with the terms of this Note Agreement by any Person at any time liable for the payment of the whole or any part of the Loan or the Note, or by any stockholder, officer or director of a corporation which at any time may be liable for such payment, or by any partner, limited parmer, or an affiliate of any partnership which at any time may be liable for such payment shall be deemed, as between the Holder and all Persons who at any time may be liable as aforesaid to have been made on behalf of all such Persons. Section 8.22. Fee for Services Rendered. The Holder further reserves the right to assess the Borrower (and the latter agrees to pay) a reasonable fee for services rendered in connection with the Loan, including, but not limited to, the modification of any documents, matters undertaken by the Holder at the request of the Borrower, collection efforts regarding payments, reasonable attorneys' fees, as well as record-keeping costs resulting therefrom, and attorneys' fees and court costs in connection with any remedies under this Note Agreement. After notice to the Borrower, the fees for services rendered shall become immediately due and payable to the Holder. 17 Section 8.23. Holder's Expenses. If the Holder shall incur or expend any sums including but not limited to reasonable attorneys' fees in order to: (i) protect or enforce any of its fights under this Note Agreement; (ii) recover amounts due under this Note Agreement; (iii) recover any of the Obligations; or (iv) appear in connection with any action, suit, proceeding, hearing, motion or application before any court or administrative body in which the Holder may be or become a party by reason of this Note Agreement, including but not limited to condemnation, bankruptcy and administrative proceedings, as well as any of the foregoing where a proof of claim is by law required to be filed, then all such sums shall on notice and demand be paid by the Borrower, together with interest thereon at the interest rate per annum of the Note. Section 8.24. Jurisdiction. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER HEREBY SUBMITS TO PERSONAL JURISDICTION IN MINNESOTA FOR THE ENFORCEMENT OF THE BORROWER'S OBLIGATIONS HEREUNDER UNDER THIS NOTE AGREEMENT, AND WAIVES ANY AND ALL PERSONAL RIGHTS UNDER THE LAW OF ANY OTHER STATE TO OBJECT TO JURISDICTION WITHIN SUCH STATE FOR THE PURPOSES OF LITIGATION TO ENFORCE SUCH OBLIGATIONS. Section 8.25. Waiver of Trial by Jury. TO THE EXTENT PERIVIITIED BY APPLICABLE LAW, THE BORROWER HEREBY WAPqES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE, IN ANY COURT IN WHICH AN ACTION MAY BE COMMENCED, ARISING OUT OF OR IN CONNECTION WITH THIS NOTE AGREEMENT, OR ANY OTHER MA'ITERS RELATING THERETO. Section 8.26. Limitations on Issuer's Liability. No provision, covenant, or agreement contained in this Note Agreement, or any obligation herein imposed or deemed to be imposed upon the Issuer or the breach thereof, shall constitute or give rise to or impose upon the Issuer a pecuniary liability or a charge upon its general credit, assets or taxing powers. In making the agreements, provisions, and covenants set forth in this Note Agreement, the Issuer has not obligated itself except with respect to the revenues pledged to the payment of the Note as provided in this Note Agreement and the Assignment of Note Agreement. The Issuer has not pledged to the payment of the Note and has not assigned to the Holder: (i) the Issuer Fee to be paid by the Borrower to the Issuer pursuant to Section 2.02(d) of this Note Agreement; (ii) reasonable out-of-pocket costs and expenses of the Issuer to be paid by the Borrower pursuant to Section 2.02(c) of this Note Agreement; or (iii) the Issuer's rights to indemnification from the Borrower pursuant to Section 3.22 of this Note Agreement. The obligations of the Issuer are limited as set forth in Section 8.26 of this Note Agreement. Section 8.27. Limitations on Liability of the Borrower and its Partners. Neither the Borrower, nor any officer, director, shareholder, or employee of the Borrower, shall have any personal liability for the Borrower's obligations hereunder, it being recognized that the obligations of the Borrower hereunder are nonrecourse to the Borrower, and its officers, directors, shareholders, and employees. (The remainder of this page is intentionally left blank.) 18 IN WITNESS WHEREOF, the parties hereto have caused this Note Agreement to be executed and delivered under seal as of the day and year first above written. CITY OF COLUMBIA HEIGHTS, MINNESOTA By Its Mayor By Its City Manager S-1 THE UNDERSIGNED ACKNOWLEDGES A THOROUGH UNDERSTANDING OF THE TERMS OF THIS NOTE AGREEMENT AND AGREES TO BE BOUND HEREBY. CREST VIEW ONDC I, a Minnesota nonprofit corporation By: Its CL162-18 (JU) 203097v. 1 So2 First Draft Wednesday, September 19, 2001 ASSIGNMENT OF NOTE AGREEMENT by and among CITY OF COLUMBIA H v;{GHTS, MINNESOTA, and as Holder and Crest View ONDC I, as Borrower Dated as of October 1, 2001 $ City Of Columbia Heights, Minnesota Multifamily Housing Revenue Note (Crest View ONDC I Project) Subordinate Series 200 lB ASSIGNMENT OF NOTE AGREEN[ENT THIS ASSIGNMENT OF NOTE AGREEMENT is made and entered to as of October 1, 2001, among the CITY OF COLUMBIA HEIGHTS, MINNESOTA (the "Issuer"), , (the "Holder"), and CREST VIEW ONDC I (the "Borrower"). RECITALS The Issuer has authorized the issuance and sale to the Holder of the Multifamily Housing Revenue Note (Crest View ONDC I Project), Subordinate Series 200lB, in the original aggregate principal amount of $ (the "Note"). The Issuer and the B~rrower have entered into a Note Agreement, dated as of October 1, 2001 (the "Note Agreement"), whereby the Issuer will loan the proceeds derived from the sale of the Note to the Borrower upon the terms and conditions set forth in the Note Agreement. The Issuer is willing to provide further security for the prompt payment of the principal, premium, if any, and interest due on the Note in order to induce the Holder to purchase the Note and to advance funds under the Note. NOW, THEREFORE, in order to induce the initial Holder to purchase the Note and to secure the due and punctual payment of the Note and all other sums due the Holder under any document securing or executed in connection with the Note, the Issuer, the Holder, and the Borrower hereby agree as follows: 1. Assi_~gnment. The Issuer does hereby assign to and grant to the Holder a security interest in all of the Issuer's right, title and interest in and to the Note Agreement (except the Issuer's rights to indemnification and the payment of the Issuer Fee (as defined in the Note Agreement), costs, and expenses of the Issuer provided in Sections 2.02 (c) and (d), 3.16, 3.18, 3.22, and 8.26 of the Note Agreement). 2. Issuer Representation and Warrant3'. The Issuer hereby represents and warrants to the Holder that the Issuer is the owner of the Note Agreement and all rights incident thereto, free and clear of any lien, security interest or other encumbrance other than the security interest arising under this Assignment of Note Agreement. 3. Exercise of Rights and Remedies. Whether or not a Default has occurred under the Note Agreement, the Issuer hereby authorizes the Holder to exercise, either in the Issuer s name or the Holder s name, any and all rights or remedies available to the Issuer under the Note Agreement, including the rights of the Issuer to grant consents or approvals thereunder. The Issuer agrees, on request of the Holder, to execute and deliver to the Holder such other documents or instruments as shall be deemed necessary or appropriate by the Holder at any time to confirm or perfect the security interest hereby granted. The Issuer hereby authorizes the Holder to execute on behalf of the Issuer, and in its name, any and all such assignments, financing statements or other documents or instruments which the Holder may deem necessary or appropriate to perfect, protect or enforce the security interest hereby granted. The authorizations in this paragraph are granted without recourse to the Issuer. 4. Issuer Actions. The Issuer will not, without the Holder's prior written consent, which the Holder may grant or withhold in its sole discretion: (a) exercise or attempt to exercise any remedies or give any consent or approval under the Note Agreement, or terminate, modify or accept a surrender of, or offer or agree to any termination, modification or surrender of the same, or by affirmative act, consent to the creation or existence of any security interest or other lien in the Note Agreement to secure payment of any other indebtedness, except for payments received by the Issuer pursuant to Sections 2.02 (c) and (d), 3.16, 3.18, 3.22, and 8.26 of the Note Agreement; or (b) receive or collect or permit the receipt or collection of any payments, receipts, rentals, profits, or other money under the Note Agreement or assign, transfer or hypothecate (other than to the Holder hereunder) any of the same then due or to accrue in the future, except for payments received by the Issuer pursuant to Sections 2.02 (c) and (d), 3.16, 3.18, 3.22, and 8.26 of the Note Agreement. 5. Parties. Whenever any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all the covenants, promises and agreements in this Assignment of Note Agreement contained by or on behalf of the Issuer or the Holder shall bind and inure to the benefit of the respective successors and assigns of such parties whether so expressed or not. 6. Conti~. The unenforceability or invalidity of any provision or provisions of this Assignment of Note Agreement shall not render any other provision or provisions herein contained unenforceable or invalid. 7. Governing Law. This Assignment of Note Agreement shall in all respects be construed in accordance with and governed by the laws of the State of Minnesota. This Assignment of Note Agreement may not be amended or modified except in writing signed by the Issuer and the Holder. 8. ~. This Assignment of Note Agreement may be executed, acknowledged, and delivered in any number of counterparts and each of such counterparts shall constitute an original but all of which together shall constitute one agreement. 9. Defined Terms. The terms used in this Assignment of Note Agreement which are defined in the Note Agreement shall have the meanings specified therein, unless the context of this Assignment of Note Agreement otherwise requires, or unless such terms are otherwise defined herein. 10. Liability of the Issuer. No obligation of the Issuer hereunder shall constitute or give rise to a pecuniary liability of the Issuer or a charge against its general credit, assets, or taxing powers, but shall be payable solely out of the proceeds and the revenues derived under the Note Agreement other than payments received by the Issuer pursuant to Sections 2.02 (c) and (d), 3.16, 3.18, 3.22, and 8.26 of the Note Agreement. If, notwithstanding the provisions of the immediately preceding sentence, the Issuer incurs any expense or suffers any losses, claims or damages or incurs any liabilities, the Borrower will indemnify and hold harmless the Issuer from the same and will reimburse the Issuer for any legal or other expenses incurred by the Issuer relating thereto, and this covenant to indemnify, hold harmless and reimburse the Issuer shall survive payment of the Note. 11. Consent to Assignment. The Issuer agrees to and consents that any and all fights of the Holder under this Assignment of Note Agreement may and will be assigned to any subsequent holder or holders of the Note. 2 1N WITNESS WHEREOF, the Issuer, the Borrower, and the Holder have hereunto executed this instrument as of October 1, 2001. CITY OF COLUMBIA tt]glGHTS, MINNESOTA By Its Mayor By Its City Manager Execution page of Issuer for Assignment of Note Agreement S-1 as Holder By:. Its By: Its Execution page of Holder for Assignment of Note Agreement 8-2 CREST VIEW ONDC I, a Minnesota nonprofit corporation, as Borrower By: Its By: Its Execution page of Borrower for Assignment of Note Agreement CL162-18 (JU) 203098v. 1 S-3 First Draft Wednesday, September 19, 2001 This Note has not been registered under the Securities Act of 1933, as amended and has not been registered under the securities laws of the State of Minnesota or under the securities laws of any other state. This Note may not be offered for sale, sold, pledged, or otherwise disposed of except pursuant to an effective registration under the Securities Act, or pursuant to an exemption from registration under the Securities Act or applicable regulations promulgated thereunder. This Note may not be offered for sale, sold, pledged, or otherwise disposed of except pursuant to an effective registration under applicable state securities laws, or pursuant to an exemption from registration thereunder. The transfer of this Note is restricted to holders who are "accredited investors" as that terms is defined in the Securities Act and applicable regulations promulgated thereunder. United States of America State of Minnesota Counties of Anoka City of Columbia Heights, Minnesota Multifamily Housing Revenue Note (Crest View ONDC I Project) Subordinate Series 200lB No. R-1 The City of Columbia Heights, Minnesota, a home role city and political subdivision of the State of Minnesota (hereinafter called the "Issuer"), for value received, hereby promises to pay to , or its registered assigns (the owner of this Note being hereinafter referred to as the "Holder"), by such means and manner as the Holder may designate in writing, solely from the source and in the manner hereinafter provided, the unpaid principal balance of the principal sum of Thousand Dollars on October 1, 20 , subject to optional prepayment and to prepayment in installments as set forth herein. This Multifamily Housing Revenue Note (Crest View ONDC I Project), Subordinate Series 200lB (the "Note"), shall bear interest on the unpaid principal amount theretofore advanced by the Lender at a fixed rate equal to percent per annum. Payment of the principal of and interest on this Note shall be made in coin or currency of the United States of America which at the time of payment is legal tender for payment of public and private debts. Accrued but unpaid interest on the unpaid principal amount of this Note shall be paid on each April 1 and October 1, commencing on April 1, 2002, until this Note is fully paid. On October 1, 20 , all accrued and unpaid interest and the unpaid principal balance of this Note shall be paid in full. In the event interest on this Note shall become subject to federal income taxation pursuant to a Determination of Taxability (as defined in the Note Agreement, dated as of October 1, 2001 (the "Note Agreement"), between Crest View ONDC I, a Minnesota nonprofit corporation (the "Borrower") and the Issuer), the interest rate on this Note shall be increased to percent per annum (the "Taxable Rate"), retroactively effective from and after the Date of Taxability (as defined in the Note Agreement). If an annual installment is not paid within five (5) days of the date such payment is due, a late charge equal to four percent of the amount due but not paid shall be payable to cover the expenses in handling delinquent payments. Late charges shall not be payable on installments which would have fallen due after acceleration upon default, unless the Holder later waives such acceleration and accepts payment of all principal then due with accrued interest at the Default Rate. Late charges shall be added to and become a part of the next succeeding semiannual payment. This Note is subject to mandatory redemption at the election of the Holder, or optional redemption at the election of the Borrower, as follows: (a) In whole, at the option of the Holder, following a Determination of Taxability, on any date upon thirty days' notice to the Issuer and the Borrower. (b) In whole, at the option of the Holder, following a "Default" under the Note Agreement, the Assignment of Note Agreement, dated as of October 1,2001 (the "Assignment"), or on this Note. (c) At the option of the Borrower, in whole or in part (but, if in part, in a minimum amount of $5,000), on the first day of any month upon thirty days written notice from the Borrower to the Holder, on or after April 1, 2002, at the option of the Borrower. This Note is issued under a resolution of the Issuer adopted on September 24, 2001 (the "Resolution"). The Note is issued by the Issuer in the aggregate principal sum of $ for the purpose of making a loan of the proceeds thereof to the Borrower under the provisions of the Note Agreement (the "Loan"). Under the provisions of the Note Agreement, the Borrower has agreed to use the proceeds of the Loan to finance a portion of the costs of the acquisition and rehabilitation of a 50-unit assisted living facility for occupancy by elderly persons comprised of forty-one (41) units of conventional assisted living units and nine (9) special care units rental housing development (the "Project") located in the City of Columbia Heights. Under the Note Agreement, the Borrower has agreed to repay the Loan, together with interest thereon, in installments scheduled to be sufficient to pay the principal of and interest on the Note when due. As security for the obligations of the Borrower under the Note Agreement, the Borrower has assigned and pledged to the Lender the Issuer's interest in the Note Agreement pursuant to the terms of the Assignment. Reference is hereby made to the Note Agreement for a description of the agreements and covenants of the Borrower contained therein. This Note is issued pursuant to and in full compliance with the Constitution and laws of the State of Minnesota, particularly Minnesota Statutes, Chapter 462C, as amended, and pursuant to the Resolution. This Note is not a general obligation of the Issuer, and the taxing power or general assets or revenues of the Issuer are not pledged to the payment of this Note or the interest thereon. This Note is a special limited obligation of the Issuer. Principal of and interest on this Note is payable solely out of the revenues derived from the Note Agreement or from security provided by the Borrower. The State of Minnesota and the County of Anoka shall not in any event be liable for the payment of the principal of or interest on this Note or for the performance of any pledge, obligation or agreement of any kind whatsoever that may be undertaken by the Issuer. Neither this Note nor any of the agreements or obligations of the Issuer shall be construed to constitute an indebtedness of the State of Minnesota, the County of Anoka, or the Issuer within the meaning of any constitutional or statutory provisions whatsoever, nor constitute or give rise to a pecuniary liability or be a charge against the general credit or taxing powers of the State of Minnesota, the County of Anoka, or the Issuer. This Note shall be registered and shall be transferable upon the books of the Issuer at the office of the Lender by the Holder hereof in person or by the Holder's attorney duly authorized in writing, upon surrender hereof together with a written instrument of transfer satisfactory to the Lender, duly executed by the Holder or the Holder's duly authorized attorney. Upon such transfer the Lender will note the date 2 of registration and the name and address of the new Holder upon the books of the Issuer and in the registration blank appearing below. Alternatively, the Issuer will at the request and expense of the Holder issue a new bond or bonds in an aggregate principal amount equal to the unpaid principal balance of this Note, and of like tenor except as to number, principal amount and the number and amount of the installments payable thereunder, and registered in the name of the Holder or such transferee as may be designated by the Holder. The Issuer may deem and treat the person in whose name this Note is last registered upon the books of the Issuer with such registration also noted on the Note, as the absolute owner hereof, whether or not overdue, for the purpose of receiving payment of or on account of the principal balance, prepayment price, or interest and for all other purposes, and all such payments so made to the Holder or upon its order shall be valid and effectual to satisfy and discharge the liability upon this Note to the extent of the sum or sums so paid, and the Issuer shall not be affected by any notice to the contrary. Time is of the essence under this Note. If a "Default" occurs under the Note Agreement or the Assignment, or if any other event occurs which entities the Holder to accelerate payment under the Note Agreement or the Assignment, then the Holder may at its right and option (subject, however, to such notice as may be required under the Note Agreement or the Assignment) declare immediately due and payable the principal balance of this Note, the premium, if any, due thereon, and interest accrued thereon to the date of declaration of such default, together with any attorneys' fees incurred by the Holder in collecting or enforcing payment thereof, whether suit be brought or not, and all other sums due hereunder, in which event this Note shall be prepaid in accordance with the provisions hereof. The Holder shall not be deemed, by any act of omission or commission, to have waived any of its rights or remedies hereunder unless such waiver is in writing and signed by the Holder and then only to the extent specifically set forth in the writing. A waiver with reference to one event shall not be construed as continuing or as a bar to or waiver of any right or remedy as to subsequent event. It is intended that this Note is made with reference to and shall be construed as a Minnesota contract and governed by the laws thereof. IT IS HEREBY CERTIFIED AND RECITED that all conditions, acts and things required to exist, happen, and be performed precedent to or in the issuance of this Note do exist, have happened and have been performed in regular and due form as required by law. (The remainder of this page is intentionally left blank.) 3 1N WITNESS WHEREOF, the Issuer has caused the Note to be duly executed by its duly authorized officers as of October __, 2001. CITY OF COLUMBIA HEIGHTS, MINNESOTA By Its Mayor By Its City Manager S-1 PROVISIONS AS TO REGISTRATION The ownership of the unpaid principal balance of this Note and the interest accruing thereon is registered on the books of the City of Columbia Heights, Minnesota, in the name of the registered holder last noted below. Date of Registration Name and Address of Registered Holder Signature of Issuer as Note Registrar October __., 2001 CL162-18 (JU) 203096v.1 CITY COUNCIL LETTER Meeting off September 24, 2001 ORIGINATING DEPT.: CITY MANAGER AGENDA SECTION: Consent t-I -/k ' ~a Community Development APPP>9.VAL NO: ITEM: Establish Board of Appeals BY: Me l C o 11 ova BY: NO: DATE: September 19, 2001 Background: Various Model Codes such as the Uniform Building Code, the Uniform Code for the Abatement of Hazardous Buildings, the One and Two Family Dwelling Code, and the Uniform Housing Code mention the assembly and use of a qualified Board of Appeals. The Board would be used in the situation where a member of the public is entitled to a hearing to determine the validity of the action of the Building Official, Fire Official, or other staff enforcing various codes. The board has no authority to modi~j specific requirements of the codes and cannot grant exceptions to the Codes. When elected officials act as a Board of Appeals, the position of the Board is precarious from two points of view: Even though the current legislative bodies of the City of Columbia Heights are proficient in the area of codes, there is no guarantee that the trend to have a pool of candidates with the qualifications of the current legislative bodies will continue. Very seldom, if ever, will the legislative body be composed of a majority of members who are technically proficient in the field of construction. As elected officials, they are particularly vulnerable to political pressures that tend to influence their decisions. Those wise in political matters, as our current City Council, would probably encourage the development of independent appeals boards and support the suggestion that all appeals board actions should be final except those referred to the courts. Analysis: The board should consist of members that are familiar with building construction and codes. It is recommended that the members are as follows: an architect, an engineer, a general contractor, a specialty contractor, and a lay person to represent the layman point of view. The Building Official is a nonvoting, ex-officio member. The City Attorney should be present at all hearings. This is desirable from at least four points of view. 1. Any legal questions by a Board member could be resolved immediately. The Attorney could act as a legal referee and ensure that the proceedings are conducted in a manner that precludes a court reversal. 3. If the appellant is represented by legal counsel and the Board is not, the appellants legal superiority could dominate the proceedings. 4. The legal counsel fortifies the self-assurance of the Board, leaving them to concentrate on technical issues. The formation of this Board could eliminate the accusations that Elected and appointed officials conduct business favoring certain elements of the community. The Planning and Zoning Commission will still serve as the Board of Zoning Adjustments and Appeals regarding any lawful appeals of decisions made by the Zoning Administrator.. Recommendation: Approve this proposal to remove the Planning and Zoning Commission to be replaced by a non-political Board of Appeals, having a genuine interest in the community, knowledgeable in codes, zoning issues, maintenance issues, and knowledgeable in design and construction. Recommended Motion: Move to authorize the Building Official to solicit applications to form a formal Board of Appeals to be appointed by the City Council using the guidelines as listed in the Building Department Administration publication supplied by the International Conference of Building Officials. Attachment-Guidelines COUNCIL ACTION: 14/490 Building Department Administration selecting qualified persons for recommendation to the legislative body for appointment. Such persons should then be interviewed and be made cognizant of the true nature of the appeals board. When the interviews are completed, the names should be submitted to the legislative body for formal appointment by resolution. What ia Appealable? Section 204 (a) of the Uniform Building Code states: In order to hear and decide appeals of orders, decisions or determina- tions made by the building official relative to the application and interpre- tation of this code, there shall be and is hereby created a board of appeals consisting of members who are qualified by experience and training to pass upon matters pertaining to building construction... Section 204 (b) states: The board of appeals shall have no authority relative to interpretation of the administrative provisions oftbe code nor shall the board be empowered to waive requirements of this code. This means that the board of appeals can consider the use of materials or methods of construction which are somewhat different from those specified in the U.B.C. It is also empowered to render "reasonable" interpretations of the code. Unfortunately, the word "reasonable" is vague and leaves open the question of how far the board of appeals can go in granting relief from code requirements. In the absence of specifics to the contrary, it is necessary to do a certain amount of rationalizing to arrive at some sensible answer to the question, what can be appealed? For the simple reason that the code, after being properly adopted, is a legal instrument governing the construction, use and maintenance of buildings and structures. It contains certain provisions which are somewhat flexible and in which discretion is given or implied. It naturally follows then that in the absence of such discretion, the code must be fol/owed to the letter· In other words, items which are subject to appeal are those which are not code mandated. For example, in a situation where the building official, in exercising his or her discretion, has imposed a requirement, but which the permit applicant feels is unwarranted, he may ask for the matter to be referred to the appeals board for adjudication. Those code requirements which are rigid and fixed are not subject to appeal. Granting relief from their requirements would constitute a variance or exception, neither of which is within the scope of power of the board of appeals. A board may superimpose its judgment over that of the building official only in a limited number of ways. For example, Section 303 (a), paragraph 3, states: The building official may issue a permit for the construction of part ora building or structure before the entire plans and specifications for the whole building or structure have been submitted or approved. In refusing to issue a permit under the provisions of this section is very good cause, the building official is subject to a reversal of the decision t the board of appeals, if the matter is appealed. Such a situation is a very S example of an appealable item. However, where there is no discretion or otherwise, the question of appeal is radicnll~ 506 (a) 1 of the U.B.C. states as follows: 1. Separation on two sides. Where public ways or yard Appeals Board 14/491 feet in width extend along and adjoin two sides of the building, floor areas may be increased at a rate of 11/4 percent for each foot by which the minimum width exceeds 20 feet, but the increase shall not exceed 50 percent. An appeals board has no authority to modify this section because it is a specific requirement of the code. Court Actions When a decision of a board of appeals is t~en into court, it is usually on a point of law. The charge may be discrirrfination, interference with constitutional rights, or some other legal maneuver rather than an attack on a technical decision. Very few members of the judiciary would take exception to a technical decision rendered by a properly composed board of appeals. How Much Authority is Necessary? The caption above is provocative but requires an answer. Each municipality must decide its own answer based on some of the factors mentioned in this chapter and examine its own code in depth to clearly understand its full implica- tions. It is the author's contention that: 1. A board of appeals is a vital necessity. 2. Separate boards should be appointed to pass on each of the various codes administered by the building department. 3. The board be composed of professionals; never the legislative body. 4. It be granted power to superimpose its judgment upon the building offi- cial. 5. Its duties be clearly delineated by resolution. 6. All its hearings and deliberations be public and conducted in a quasi- judicial manner. 7. Its decisions be final and not subject to further hearings or actions by the legislative body. Rules of Procedure The board should establish its own rules, regulations, procedures and by- laws. Since the building official wi1! actually provide the administrative ass]s- tance to the board, it would naturally fall upon him or her to develop written procedures and forms for their consideration. Exhibit No. 14-1 is a suggested format for bylaws and rules and regulations. Building Official's Responsibility Irrespective of the true attitude of the building official on an item which has been appealed, it will always be mom favorable to remain unprejudiced. Upon receipt of an appeal request, the building official should prepare a written statement to be sent to each board member in advance of the hearing, giving both sides of the question clearly and objectively. A copy of this letter should also be directed to the appellant. (There are numerous cases in which an appellant has withdrawn his request for a hearing after seeing in writing an objective represen- tation of both sides of the question.) ~nts ~ing ;upplies =orms, Public i of iraphy 3h$, 14/492 Building Department Administration Forms As with any other public heating, certain forms are required as a matter of course. These forms can be as simple or as complex as desired. Separate forms should be provided for the following subjects: Appeals Board Hearing Request See Exhibit 14-2 Notice of Hearing See Exhibit 14-3 Action of Board See Exhibit 14-4 The titles of these forms are self-explanatory and the contents on the forms should be intimately related to such titles. What Items Can Be Appealed? Exceptions to the codes cannot be granted either by the board of appeals or by the legislative body. Items which can be appealed must lie within the limits of professional discretion and in which the item being appealed is not a specific code mandate. In order to verify that such an item can be appealed, it is always advisable to discuss the matter with the legal department. Appeals Board Composed of Elected Political Officials Some jurisdictions do not appoint appeals boards, but instead the legislative body acts in this further capacity. This arrangement is precarious from two points of view: · Very seldom, if ever, will the legislative body be composed of a majority of members who are technically proficient in the field of construction. · As elected officials, they are particularly vulnerable to political pressures that could tend to influence their decisions. There may be many other reasons why a political body should not act as a technical appeals board, but these two reasons should be sufficient to point out the inadvisability involved. Those wise in political matters would probably encourage the development of independent appeals boards and support the suggestion that all appeals board actions should be final except those referred to the courts. Developing Rapport Most building departments exercise discretion very effectively and seldom find themselves in a position that requires convening the appeals board. As a result, board membem and building department representatives seldom have '~ close acquaintance. It is advisable to develop and maintain good rapport be- tween the building official and board members. An occasional informal get- together is highly recommended. This can be a meeting to discuss the current codes, problems, suggestions, or just to visit. In any event, such meetings tends.. to improve and solidify relationships. , Additional Duties Increasing use of housing codes has increased activities of a The appeals board can be adapted to this additional role. A suggestion with the legal department and concurrence of board ~ precede any action to impose this additional duty. An independent housing J advisory appeals board is recommended. Appeals Board 14/493 Liability Board members at times will express concern over the possibility that their actions could expose them to personal legal suits. Such fear could tend to affect decisions or at least to inhibit them to some extent. The liability insurance coverage of political subdivisions usually includes all public officers and mem- bers of appointed boards, but it is suggested that this question be explored with the legal department. Board members should be free to exercise professional judgments which at times will have no precedent. They are entitled to reassurance that their deci- sions will have no undesirable legal repercussions for them as individuals. Conduct of Hearings The board of appcals is a "quasi-judicial" body. It is legally empowered to hold hearings and to conduct investigations into disputes between the building official and any member of the public, and to pass judgments on matters in which the exercise of discretion is legal. Hearings must be public and should take place in the room normally utilized by the legislative body or the Planning Commission. Appellants, or their representatives, and representatives of the municipality must be given the opportunity to be heard. Records Since this is a qua~i-judicial hearing and could conceivably end up in court, it is necessary that an accurate record of the proceedings be kept. This can be accomplished by simple minutes, a court reporter or a tape recorder. It is not necessary to transcribe the tape unless it is demanded for a court trial. The appellant should be required to pay for any costs of txanscription. Prohibitions There are times when a visit to the site of a dispute can help the board members arrive at sensible and logical conclusions. Such a visit must always have the concurrence of the appellant. If such permission has not been secured and the board goes to the site, any resulting evidence or conclusions would lack legal credibility if challenged in court. In cases where an action by the board cannot be concluded in one day, requiring a continuance, discussions between board members or between any board member and a witness outside the hearing room must be avoided. Legal Representation If at all possible, an attorney representing the municipality should be present at hearings. This presence is desirable from at least four points of view. 1. Any questions of a legal nature by a member of the board of appeals usually can be resolved immediately. 2. The attorney can act as a legal referee and ensure that the proceedings are conducted in a manner that precludes a court reversal. 3. Il' the appellant is represented by legal counsel and the board is not, his legal superiority could dominate the proceedings. 4. The presence of legal counsel fortifies the self-assurance of the board, leaving them to concentrate on the technical issues. word ~lex h ph 14/494 Building Department Administration Testimony Each witness should be sworn, giving bis or her name, address, position,, or affiliation. For example: "John Jones, 1234 Main street, I am a building inspector for the city." Evidence Any material, photos, drawings, etc., submitted as supporting evidence should be tagged and assigned a number which is recorded in the hearing record. Recording Seldom is a court recorder used in an appeals hearing, but the type of case should dictate that necessity. In any event, the heating should be recorded. The recording secretary should make references to pertinent events, such as the presentation by a witness, or relevant data, by taking note of the digital counter on the recorder. (This is for ease of future reference.) If minutes are to be the only record, they must be as complete as possible. Concluding Hearing When all evidence has been presented and all testimony taken, the chairman should close the hearing to further testimony and the matter should be given to the board for discussion and resolution. There are times when such discussions raise additional points in the minds of appellants who wish to respond. The chairman may reopen the heating, with the concurrence of the board, providing no one involved in the proceedings has left the room. Findings A necessary instrument of law is that referred to as "findings" which ar? usually the closing remarks on the record of the proceedings, worded approxi- mately as follows: "It is the express finding of this board based on the evidence presented and thee sworn testimony given that ' The final words could be "the appeal is sustained" or "the appeal is denied" or "the appeal is granted subject to the following.' Signature When the record is typed, it should be mmsrmtted to the chart-man for s~gmng so that there is no question that the accuracy of the record is being attested. A copy should then be sent to all concerned. These procedures may be excessive of those "suc,ce~sfully."oused.by ~Y. unici al~t~es,but an increasing awareness ofpeople snghts~s ~ocusmg..,,~., tion o~Pt~e activities of many public servants who, m ~e.namfi o[~Xe.pe~c~urt~ have taken calculated risks by flaunting the law ana tnereny naY= ,- personal liability suits. .. . · of better government, fab' play ann justice, ana not umy o~auo ~,- may carry a personal legal liability. Appeals Board 14/495 Conclusion Appeals boards are a vital element in the judicial process. If they are properly composed and confine their actions within their discretionary limits, it is higkly unlikely that any decision that they have rendered will later be reversed by a court. In fact, if a properly handled case is taken into a civil court, the intent of · ,, th,, ,,.ann nf the anveals board's technical decision is ~,~.ldom the issue, ~,v, er s~n,~ I~.~ ~s~ be~use of faulty procedure, including Yallure to follow ~uU~C~a;~cSe~; ~;e~d presentation to ~e board of appeals, or ev, en failure to inform the appellant of his right to be represented by legal counsel The building official should not look upon the appeals board as an adversary but rather as a valuable source of quasi-judicial relief for those who mav have cause to appeal to such boards, even though the appeal may be against a d~cision of the building official. Exhibit No. 14-1 Board of Appeals Bylaws The following bylaws are hereby adopted by the Board of Appeals created pursuant to of the (City, County) of I. The Board of Appeals shall meet at call of the chairman or when requested by the building official. 2. A chairman of the Board of Appeals shall be elected by a majority of the entire regular membership at the fkst meeting of each calendar year, to serve for a term of one ealeedar year. A vice-chairman shall be elected in the same manner at the same time for a term of one calendar year. 3. The chairman of the Board of Appeals shall preside at all meetings, shall conduct all hearings, and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Appeals or prescribed by ~he bylaws. In presiding at meetings and heatings, the cha/rman shall rule on procedure and on order of presentation. 4. The Board shall be the judge of the qualifications of persons appearing as expert witnesses and shall be empowered to refuse to receive the testimony of any purported expert not so qualified. 5. In the absence or the disability of the chairman, the vice-chub'man shall perform all the dudes of the chairman and when so acting shall have all the powers of, and be subject to ail the restrictions upon, thc chairman. 6. In the absence of both the chairman and the vice-chairman of the Board of Appeals, a chairman pro tempore shall be elected from among those regular members present by a majority vo~ of all the Board present. 7. Should any member have knowledge of any facts which may c°nsiltute a c°nflict of interest in his consideration of any appeal, he shall ferthwith notify the building official of said facts. g. The secretary shall keep, or cause to be kept, minutes of the proceedings of the Board of Appeals and shall prepare an agenda for each meeting which shall be furnished to members prior to the actual hour of the meeting. The secretary shall, in addition, be custodian of the records of the Board of Appeals and shall, upon the ruing of an appeal, furnish each regular member with a copy of the letter of appeal. 14/496 Building Department Administration 9. Appeals from decisions of the building official shall be in writing, shall be directed to a specific decision of the building official and consideration of said appeal by the Board of Appeals shall be limited to the said specific decision. 10. Appealswill be hanrd at special meetings called pursuant t° law by the presiding officer or by a majority of the members. Requests for hearings must be scheduled at least, days prior to such hearing. If a partv of any appealintends to submit evidence, or a legal argument, outside of 11. the ex~rtise of the Board of Appeals, said party shall so inform the secretary of the Board of Appeals in writing at the time of the filing of the appeal. Failure to 9rovide such information shall be cause for the prohibition of the presentation of ~uch evidence or argument. 12. The decision of the Board of Appeals on an appeal shall be final. 13. These bylaws may be amended by a vote of four of the regular members of the Board of Appeals. Adopted this .. day of , 19 , by the following vote: AYES: NAYS: Cha~m~,Bo~dofAp~s MEMBER MEMBER MEMBER MEMBER Exhibit No. 14-2 DEPARTMENT OF BUILDING AND SAFETY BOARD OF APPEALS Add~ess of property Location APPLICATION FOR HEARING Date Owner Address of owner Location Phone: _ ~ TATEMENT: It s requested that the Building and Safety Board of Appeals schedu!e a ~earing on an appeal from the decision of the Department of Building and Safety~.~ Appeals Board This appeal is based on thc following factors: 14/497 Signatm'e of Appellam Exhibit No. 14-3 DEPARTMENT OF BUILDING AND SAFETY BOARD OF APPEALS NOTICE OF HEARING Date Case No, Re; Having received an application for a heating before the hoard of appeals, notice is hereby given that a heating has been scheduled for o'clock m., at which time on . at you may appear in person or be represented by an authorized agent, legal, technical or both, and present reasons which you may have to the granting or denying of this petition. You are advised to prepare your case, in detail, and present all evidence relating to this petition at the time of the scheduled heating. Very truly yours, Secretary, Board of Appeals Exhibit No. 14-4 DEPARTMENT OF BUILDING AND SAFETY BOARD OF APPEALS NOTICE OF DECISION Date Case No. Re: At a public hearing held on regarding your above-numbered appeal, the board of appeals rendered thc following decision: antrols ~tion 3fficial andards , the Code ,ffiliates quirements nd Training unter 'tment Suppiie~ bilitation :1, Table of ement$. )tograph$, maps. Chairman, Board of Appeals 14/498 Building Department Administration Summary If it appears to the reader that this book car~es excessive admonitions on the hazards inherent in the position of the building official, one of the major objectives of the author has been accomplished---for there was a deliberate attempt to alarm and alert those who do not comprehend the full ramifications of this function. There will be some who will maintain that the author has overem- phasized the position's importance and responsibilities. But there will be others who, perhaps for the first time, will see building regulation in a new perspective and develop a deeper and more comprehensive understanding of the true nature and scope of this relatively obscure work. Hopefully some enlightenment will occur to persons who hold sway over building officials, and through such revelations of the true importance of building regulation, give recognition and support to the concepts and propositions recited herein. Construction occupies a tremendously important position in the economic struct~e of the United States. In the year 1985, it accounted for 20 percent of the Gross National Product. (That amounts to approximately $200 billion~the G.N.P. accounting for over $ ! ~illion.) This important and vital industry should not be subject to capricious or irresponsible treatment by those vested with legal authority over it. The manner in which codes are promulgated, amended, administered, and enforced has a profound impact on all aspects of the construc- tion industry. This book attempts in one small way to provide guidance in the administration of a building department which will assist building officials in developing and maintaining an objective relationship with those involved in c~nstruction, directly and indirectly, while at the same time providing protec- uon to the citi 'ens of our communities in consonance with the intent of the enabling statutes. CITY COUNCIL LETTER Meeting of: September 24, 2001 AGENDA SECTION: M - A -~ ORIGINATING DEPT.: CITY MANAGER NO: License Department APPROVAL ITEM: License Agenda BY: Shelley Hanson~_-~ DATE:~/~.~ NO: DATE: September ~0, 2001 BY: )f//~//~ BACKGROUND/ANALYSIS Attached is the business license agenda for the September 24, 2001 City Council meeting. This agenda consists of applications for various contractor licenses and a license for Tobacco/Cigarette Sales for the new person operating at 4901 University Ave. At the top of the license agenda you will notice a phrase stating *@Signed Waiver Form Accompanied Application~. This means that the data privacy form has been submitted as required. If not submitted, certain information cannot be released to the public. RECOMMENDED MOTION: Move to approve the items as listed on the business license agenda for September 24, 2001 as presented. COUNCIL ACTION: TO CITY COUNCIL September 24, 2001 *Signed Waiver Form Accompanied Application 2001 BUSINESS LICENSE AGENDA APPROVED BY CONTRACTORS LICENSED AT FEES BUILDING OFFICIAL Dave Wagner Plumbing *All Seasons Comfort Inc. *Northland Builders & Construct 137 E. Golden Lk Ln, Cir Pines 1417 18* St NW, New Brighton 600 Montgomery St, St Paul $50.00 $5O.OO $50.00 TOBACCO/CIGARETTE SALES POLICE DEPT. AlawiA1Hamed 4901 University Ave $200 license agenda (.:HIE ( :i.(T i,i[i :() :[ ~i) i.:~ Li F;: ~ii;!ii: i~1 E] i'-.i "i" 94159 74!6:; 94;~ 63 'P4:!. 64 74i65 5.:'4:L 66 '?4].67 '? 4 :i 6 94:169 945~ '70 '.74 :} 7 9,q.:~. 94 :L 7 94:L74 945} 25 94].76 "? 4 :~ 7'7 94 ;L 78 9',::~ ;~ 79 94 J 5'4]82 94 :I. 84 94185 94 :i. 86 5;'4 :i 94 :L 9O ':J;'4 :L ':? ] 5.:'45L 95 94:{96 94]?7 94 :L .:;c, 5'4]99 94200 94202 9420~3 ?4204 94205 k.'h:'~ ii::' L.. ]]1'~!i~:,'""..)}..'"'~....{.".. ~ irk '.' ~' ."~' '.~:: ::' ::'("i~;:' ~' 943'-.]-7 :I. 70 ,, ,?:0 "?'q- :':~; 52 ':? '~:~- :;:'~ t .:, *.J.:, ,F' z~. :'~ '..:.~ ~:. ::.?, 5:'z~.:;:~;6 q. :::':::; ? ,, 67 74:::? 0 570 ,, O0 ? ,q. :.':~; 7 :i :i. O?. ?4:.372 ':? 4 :::; 7:3 ?4:':?4 :'.:;00 ,, O0 74;:~75 500 ,, O0 '¥',:~.;'?.6 :.%i, ? ,. 50 ~hoo~ ~cced Partner~hi..p ?rant Proj e~.. Caring SCHOOL BASED PARTNERSHIP GRANT PROJECT INTRODUCTION Throughout the 2000-2001 school year, the Columbia Heights Police Department and the Columbia Heights High School have been involved in a grant funded endeavor to analyze the physica~ violence occurring et the school (specifically the 'assault" incidents). Although fighting incidents comprise only a small fraction of the disciplinary incidents occurring in the school~, when they cio occur their impact can be felt throughout the school and even community. Violence in the schools can cause fear and anxiety not only for those stu(~ants directly involved, but a~so the students and staff in general. This fear can lead to an array of consequences, which can interrupt the learning process. The purpose of the School Based Partnership Grant ProJect was to analyze the assaults or physical violence occurring at or near the school in order to develop an Action Plan. In order to get a more complete picture of the physical violence occurring at the school, the definition of 'assault" that was used for the proioct was expanded from the traditional statutory (~efinition. For this project an 'assauff' was defined as any incident not involving the use of a weapon where an individual inflicts, attempts to inflict, or threatens to inflict bodily harm on another, and or where an individual commits an act, having reasonable knowledge that it will anger or disturb others to provoke an assault, with the intent to cause fear of immediate bodily harm. This definition of assault allowed incidents such as threats of physical violence, acts of intimidation or bullying, and invitations to engage in physica~ violence to be considered in the ProJects analysis. This was very important in the development of an Action Plan as these types of minor incidents can oftentimes escalate into more serious physical violence. The Action Plan would be designa(J to reduce the number of these types of incidents occurring on and around the school grounds, to prevent their occurrence in general, and also to improve the student's perceptions of schoo~ safety. In order to meet the goals and purpose of the proJect, a Proiect Committee= consisting of representatives from the police department, the school faculty, and the student body was organized. Throughout the course of the school year the Project Committee gathered a great deal of information about the physical violence occurring in the school. INFORMATION GATHERING AND ANALYSIS The information gathering was done primarily through two student surveys, a staff survey, and by taking an in-depth look at the incidents themselves. The information that was collected and analyzed by the Project Committee has highlighted several key characteristics about the physical violence occurring at the High School. The following is a brief description of those 'information gathering methods' and the key information highlighted by each. STUDENT SURVEYS At the beginning of the school year the project committee surveyed approximately one half of the student body to gather information about their perceived levels of fear and the students' self reported victimization3. At the end of the school year approximately one-quarter of the student body was surveyed again using the same format to track any changes which may have occurred. Both survey samples were found to be very representative of the student population in general. Overall, those students surveyed reported feeling 'safe' (see Figure.1 in the APPENDIX). These results are consistent with the findings of the Attorney General, in that overall students in Minnesota report feeling 'safe". Although the students at the C.H.H.S. report a lower percentage of victimization on average than those represented in the Attorney General's Survey (see Figure. 2 in the APPENDIX), the survey results clearly show that there is some incivility and minor physical intimidation occurring between the students. The students at the C.H.H.S. are somewhat more likely to report their victimization than students in Minnesota in general (see Figure. 3 in the APPENDIX). However, the survey results clearly show that there are still a large number of incidents going unreported. Having gathered information from the student's, the Project Committee turned their attention towards the staff. STAFF SURVEY The Project Committee distributed a survey, similar in content to the student survey, to the High School staff in an attempt to gather their thoughts on the subject. This survey also found that the behaviors considered to be a 'problem' by the staff were not acts of serious physical violence (see Figure. 4 in the APPENDIX). Instead, the staff identified issues of respect, insults and name-calling and some acts of minor physical violence as the 'major problems' the school is facing. 2 THE "ASSAULT" INCIDENTS Throughout the school year information was being collected by the Crime Analyst on all of the incidents which met the project's definition of "assault" which occurred in or around the High School. The information included such variables as time, place, gender, race and grade of the parties involved, their family status and city of residence, their previous delinquent behaviors at school and in the community, as well as the amount of previous police contact at their household. The data from the 2000-2001 school year incidents have shown that the acts of physical violence which occur at the Columbia Heights High School have several notable characteristics. Most of the incidents occurred in the classrooms during the first seven minutes of class time (specifically the periods towards the end of the day), or in the hallways during passing times4. The presence of either students or staff does not appear to deter the involved parties from acting. However, their presence may at least somewhat prevent the further escalation of these incidentss. The disputes occurring are usually personal in nature, rather than disputes over property, which originate in school oftentimes over minor verbal or physical acts6. These disputes generally occur between parties of the same race and gender but whom are in different grade levels?. The parties who become involved in these types of incidents come primarily from the lower grade levels8. However, it does appear that the more serious the physicality of the incident became, the older the parties became. The students involved are somewhat more likely to live outside the district and with only a single parent~, These individuals are no strangers to this type of behavior. Most of them will come from a home environment that may exhibit similar behaviors and several of them will have previously been involved in disruptive, insubordinate and delinquent or illegal behaviors themselvesTM. ACTION PLANS After collecting and analyzing the vas amounts of data collected on the levels of physical violence and the 'assault' incidents occurring at the school, the Project Committee was able to suggest several plans of action. Each Action Plan addressed one or more of the particular area(s) of emphasis highlighted by the information that was gathered. One of the Action Plans that the Project Committee was able to implement during the school year was Non-Violence week, which was a great success at the school. The idea behind Non-Violence week was to promote respect and non-violence on a school wide level and to specifically 3ddress some of the problem areas discovered by the Project Committee. The central theme for the week was "A safe school is a puzzle built from everyday pieces". Each day of the week addressed a particular topic or problem area as it related to the central theme of violence prevention in the schools~. All of the displays throughout the school and the student and staff contests held during the week were designed to address these areas as well (see Fig. 5 in the APPENDIX). The staff members were provided with an information packet which explained the theme, displays, and gave some supplemental worksheets which could be used to initiate classroom discussion on the individual topics. Approximately two weeks after the week ended, both the students and the staff were given non-violence week evaluation surveys. The positive response from students and staff towards non-violence week was overwhelming. Many of the students indicated in the evaluation survey not only that they participated in the activities for the week, but that they had also remembered some of the important ideas (such as respect and alternative ways to handle disputes without resorting to violence) that were promoted. One hundred percent of the staff surveyed indicated that they felt that non-violence week effectively promoted some key ideas about school safety to the student body and 100% also indicated that they would like to see non-violence week become a yearly event at the high school. CONCLUSION Overall, this project has proved to be an invaluable source of information about the many types of behaviors occurring at the school that can lead to physical violence. It has also provided the school and police department with some very insightful suggestions specifically targeted at the areas of emphasis highlighted by the grant project. This information can be used to help both the school and the police department more effectively and creatively use their resources to help reduce the occurrence of these behaviors and to prevent these incidents from occurring at all. For the 2000-2001 school year there were a total of 216 disciplinary incidents which led to the suspension of one or more students. Only 6% of the suspensions were for "fighting incidents". : The Project Committee members were Michelin Steicben- Crime Analyst, Mike McGee- School Liaison Officer, Katie McAvoy- C.H.H.S. Faculty member, and Tou Vang- C.H.H.S. sophomore. s The student survey followed the format of the Minnesota Attorney General's "Safe Schools Survey" an annual report based upon the survey results of 1,222 randomly sampled secondary students in Minnesota which reflects their perceptions of violence and safety at the learning institutions they attend. 4 4 Twenty-nine percent of the total incidents occurred in classrooms and 33% occurred in the hallways. Of those incidents which occurred in the classrooms, 61% occun'ed within the first seven minutes of class. 5 On average there were 6 witnesses (either students or staff ) present at the time of the incident. Only 8% of the total incidents occurred where no witnesses were present, and 21% of those incidents were actual physical fights. 6 Ninety-eight percent of the total incidents were described by the parties involved as "personal disputes". Ninety percent of the incidents were found to have originated in school. A majority of the incidents originated over a minor verbal or physical act, for example; 50% of the fights originated from a minor verbal act, and 98% of the punch/hit incidents originated over a minor physical act such as a push or a shove. ? Sixty-six percent of the incidents occurred between parties of the same race, and 80% were of the same gender. In 29% of the incidents, the offender was in a higher grade level than the victim. s Thirty-four percent of the victims were freshmen, 36% were sophomores, and 32% of the offenders were freshman, 30% were sophomores. 9 Approximately 11% of the high school's general population lives outside the district (or has an open enrollment contract on file). However, 27% of the victims and 37% of the offenders in the project incidents were found to live outside the district. The initial student survey found that approxima~ly 23% of the student population lives with a single parent, and 6% live with a guardian. However, 40% of the offenders and 44% of the victims in the project incidents were found to live with a single parent, and 17% of the victims were found to live with a guardian. ~0 Approximately 38% of the offenders and 33% of the victims had at least one police call for service to their residence for a call with a violent or disorderly nature prior to the incidents occurrence in school. Thirty-five percent of the offenders and 17% of the victims had prior contact with the police themselves as either a suspect or offender. Eighty-two percent of the offenders and 49% of the victims had a history of prior discipline problems at the school. ~ The daily topics were as follows; Monday- RESPECT, Tuesday- EMPATHY, Wednesday- EVERYDAY ACTIONS, Thursday- COMMUNICATE, Friday- RESPONSIBLIITY. 5 APPENDIX FIG.l- STUDENT'S LEVEL OF FEAR: A COMPARISON BY SURVEY. NOT AT ALL SAFE NOT VERY SAFE SOMEWHAT SAFE SAFE VERY SAFE 51% 53% 0% 10% 20% 30% 40% 50% 60% ATTORNEY GENERAL'S SURVEY 2000' ·STUDENT SURVEY** I"IFOLLOW.UP STUDENT SURVEY*** *Safe Schools: Secondary Survey Compilation Report 1994-2000, prepared by the Office of the Minnesota Attorney General, November 2000. A report based upon the survey results of 1,200 randomly sampled secondary students in Minnesota which reflects their pemeptions of violence and safety at the learning institutions they attend. **The initial student survey distributed in October of 2000. Approximately 50% of the student body was surveyed, and the survey sample was found to be very representative of the High School population. ***The second student survey distributed in May of 2001. Approximately 25% of the student body was surveyed, and the survey sample was again found to be very representative of the High School population. A-1 PROVOKED PUNCH. IT PUSH. HOVE THREAT INSULT FIG.2- STUDENT'S SELF REPORTED VICTIMIZATION: A COMPARISON BY SURVEY. 0% 10% 20% 30% 40% 50% 60% 70% IIATTORNEYGENERAL'SSURVEY IBSTUDENTSURVEY DFOLLOW-UPSTUDENTSURVEYI The surveys asked the students to: Mark any of the following incidents that you have personally been a victim of in this another student verbally insulted them (INSULT) another student verbally threatened to injure or harm them (THREAT) they were pushed, shoved, or grabbed by another student (PUSH/SHOVE) they were punched, hit, or kicked by another student (PUNCI-VHtT) another student attempted to provoke them into fighting (PROVOKED) For each incident type, the students were also asked to indicate if they reported the incident to any of the school faculty or administration., FIG. 3- STUDENT'S REPORTING HABITS: A COMPARISON BY SURVEY. REPORTED 0% 2% 4% 6% 8% 10% 12% 14% 16% ii, ATTORNEY GENERAL'S SURVEY IISTUDENT SURVEY EIFOLLOW-UP STUDENT SURVEY J A-2 The staff survey asked: How many times during this school year (2000-2001) has a student verbally Insulted you? FIG.4-STAFF'S SELF REPORTED VICTIMIZATION: INSULTS. THREE+ 41% NEVER 12% ONCE 27% TWICE 20% The staff survey gave a list of student behaviors that could be a potential problem. The staff were then asked to indicate whether they felt that each was either; not a problem, was a minor problem, or was a major problem that occurs in this school. The following is a list of the Major Problems indentified by the staff in the survey. 63% identified Truancy (skipping class and/or school) as a major problem 56% identified Tardiness as a major problem 56% identified Insulting and/or Name-calling among students as a major problem 54% identified a Lsck of Respect for one another among students as a major problem 43% identified a Lack of Respect for administration end staff among students as a major probler 34% identified Pushing, Shoving, and Grabbing among students as a major problem Non~ of the staff surveyed indicated that Fighting was a major problem A-3 FIG. 5- PICTURES FROM NON-VIOLENCE WEEK. NON-VIOLENCE WEEK D:~SPLAY ZN MAIN LOBBY OF SCHOOL INSULTS AND VIOLENCE GROUP PRO.1ECT WZNNERS A-4 Evaluation of the Columbia Heights School-Based Partnership Grant Project by Richard Lawrence, Ph.D. Department of Criminal Justice St. Cloud State University Submitted to Chief Tom Johnson Sergeant John Rogers and Michelle Steichen, Crime Analyst Columbia Heights Police Department August, 2001 ST. CLOUD STATE U N I V E R $ I T Y Richard A. Lawrence, (Ph.D.) Protcssor Department of Criminal Justices Office: (320) 255-397-; 245 Stewart Hail FAX: (320) 255-2993 720 Fourth Avenue South Home: [2!8) 829-7346 St. Cloud, MN 56301-4498 E-mall: lawrence@stc[oudstate cdu Ceiumbia Heights Sc~ Project Evaluation - L~wmnce Evaluation of the Columbia Heights School-Based Partnership Grant Project School cdme and violent behavior continue to disrupt schools and affect students and teachers in their attempts to engage in a safe and productive learning environment. Virtually all schools are affected in some way by disruptive and violent behavior. All school administrators and teachers also spend a portion of every school day in responding to and preventing student disruptions from escalating into more sadous confrontations. The Columbia Heights Police Department has taken a very proactive response in initiating a collaborative project with the Columbia Heights High School to prevent school violence. Michelle Steichen, Cdme Analyst for the project dudng the 2000-2001 school year has done an excellent job in assessing the level and nature of school violence at the high school; and of surveying students and school staff as to their perceptions of the problem and what strategies may be effective in reducing school violence. The Action Plans that have been proposed do take a positive initial step in offedng strategies that may be taken by the school and police department to address the problems of school violence in proactive ways. The Action Plan #~ that was implemented as 'Non-Violence Week' at the high school proved to be well-accepted by students and school staff and was a very constructive first step toward getting all involved persons informed about the problem and offedng ideas and incentives toward active involvement in reducing the problem. The School-Based Partnership Grant Project of the Columbia Heights Police Department and High School is an excellent example of what can be accomplished with additional resources and Federal assistance. The police administrators, Michelle Steichen, and school administrators and staff can be proud of their efforts. Continued efforts and further implementation of the action plan proposals will certainly make a significant impact on reducing school violence at Columbia Heights High School. CITY COUNCIL LETTER Meeting of September 24~ 2001 AGENDA SECTION: ORIGINATING DEPARTMENT: CITY MANAGER NO: /.o- ~ Fire APPROVAL ITEM: Close Heating/Adopt Resolution For BY: Dana Alexon BY: Revocation DATE: September 19, 2001 DATE.'~/(~/f NO: 2001- Revocation of the license to operate a rental unit within the City of Columbia Heights is requested against Richard Meissner regarding rental property at 4643 Pierce Street for failure to meet the requirements of the Residential Maintenance Codes. RECOMMENDED MOTION: Move to close the public hearing RECOMMENDED MOTION: Move to waive the reading of Resolution No.2001- , there being ample copies available to the public. RECOMMENDED MOTION: Move to adopt Resolution No. 2001- , Resolution of the City Council of the City of Columbia Heights Approving Revocation Pursuant to Ordinance Code Section 5A.408(1) of the Rental License held by Richard Meissner Regarding Rental Property at 4643 Pierce Street. COUNCIL ACTION: CITY COUNCIL LETTER Meeting of: September 24, 2001 AGENDA SECTION: Public Hearing ORIGINATING DEPT.: CITY MANAGER NO: (o ~ ~ Community Development APPROVAL ITEM: Reuse of CDBG funds BY: Tim Johnson ff'~' BY:~f~ NO: DATE: September 18, 2001 Issue Statement: A request for reallocation of Community Development Block Grant (CDBG) Funds that were formerly used to acquire and raze property at 4656 Monroe Street NE in August 1995. Background: The City of Columbia Heights acquired and demolished a substandard home at 4656 Monroe Street NE in August 1995 using CDBG Funds totaling $38,527.75. This property has been vacant since 1995, and was proposed to be used to benefit a low to moderate income household. The City Council rejected a private bid in December 2000 for the purchase of this property for $16,000, at which time staffwas directed to put the property up for bids. Since this time, it was discovered that the property was purchased with CDBG Funds. Anoka County has indicated that the City of Columbia Heights after consultation with affected citizens with reasonable notice and comment period, may retain or dispose of this property for the changed use if the County is reimbursed in the amount of the fair market value of the property, less any portion of the value attributable to the expenditures of non-CDBG funds for acquisition of, and improvements to, the property. Analysis: In order to sell this property on the open market, the City of Columbia Heights will pay back Anoka County the fair market value of the property, after which the City will be able to reprogram this money into commercial revitalization, housing rehabilitation, or any other CDBG eligible activity that benefits low to moderate income households. The City asked for written comments to be submitted by September 14, which was advertised in the Focus News. Based on discussion at the August 20 work session, Council directed staff to continue the public hearing for the reallocation of CDBG Funds to September 24, 2001, to allow for written comments to be submitted regarding this issue. As of this date, no comments have been submitted. The City Council has the option to reuse the fair market value determination of this property (estimated at approximately $30,000 - $40,000) for any CDBG related activity, including housing rehabilitation. The reuse of the determined fair market value would probably amount in 2-3 additional grant applications if used for housing rehabilitation activities. However, staffbelieves that this additional amount would be most beneficial to Commercial Revitalization efforts and could be used to acquire an additional property in the future. Recommendation: Staffrecommends to reuse the CDBG monies from the Monroe property for commercial revitalization activities. Move to approve the reallocation of Community Development Block Grant (CDBG) Funds that were used to acquire and raze property at 4656 Monroe Street NE, to be used for commercial revitalization activities. Attachments:; Email from Anoka County; Council letter,?om 1995; and Notice qf Public Hearin~ COUNCIL ACTION: Randy Schumacher - Monroe Lot Page From: To: Date: Subject: "Jennifer Bergman" <Jennifer. Bergman@co.anoka.mn.us> <Randy. Schumacher@ci.columbia-heights.mn.us> 5/31/01 1:55PM Monroe Lot This e-mail is in response to your question regarding the lot on Monroe which was purchased with CDBG funds. According to the CDBG regulations you have two choices for the re-use of the lot: (1) The city of Columbia Heights, after consulation with affected citizens with reasonable notice and comment period, may retain or dispose of this property for the changed use if the CDBG program is reimbursed in the amount of the current fair market value of the property, less any portion of the value attributable to the expenditures of non-CDBG funds for acquisition of, and improvements to, the property; or, (2) The city of Columbia Heights could, after consulation with affected citizens with reasonable notice and comment period, reuse the property for a CDBG eligible activity. The reuse of the property must meet a National Objective by benefitting Iow- to moderate-income people. If the city of Columbia Heights is planning on reusing the lot to construct a single-family, owner-occupied unit, the unit must be occupied by a Iow to moderate income family. If you have any other questions, please feel free to contact me. Jennifer Bergman Community Development Manager (763) 323-5709 Jennifer. Bergman@co.anoka.mn.us cITY OF COLUMBIA HEIGHTS Meeting of: September 11, 1995 ~T~T~a~?N~ ~PTo= CITY MANAGER NO: Five quotea for the removal of the itructures at 4501 Madison Street and 4656 Monroe street o tries are dilapidated end deemed hazardoue. 4501 wet, obtained in ~uqu,t, 1995. ~o~? pr ~..~ ~--e we, aranted by th, ~urt, ~n ~uqu,t o~ Madison Street was oondemned aha =ne or~ 1995. 4656 Monroe Street was acquired through the CDBG Neighborhood Revitalization Program. K.A. stark aubmitted the lowest responsible bid of $9,250 for the total demolition co~t of both structures ($4,500 for 4501 Madison and ~4,750 for 4656 Monroe). Following is a summary of bide received: K.A. Stark R-P Excavating Thomas Contracting Drobnik's Demo. Disposal Systems 4501 4656 ~ ~onroe T°tel 4,500 4,750 9,250 5,600 5,600 11,200 5,128 6,349 11,477 6,150 5,350 11,500 6~850 6,850 13,700 RECOMMENDED MOTION: Move to award the contract for demolition of 4501 Madison street and 4656 Monroe Street to K.A. Stark Contracting based upon their low, qualified responsible quote in the amount of $9,250 with funds to be appropriated from Fund 415-59408-3050 for 4501 Madison Street N.E. and from Fund 202-36240.3050 for 4656 Monroe Street N.E., and furthermore, to authorize the Mayor and City Manager to enter into an agreement for the same. ~77. ?J CITY COUNCIL LETTER Meeting of: September 24, 2001 AGENDA SECTION: Items for Consideration ORIGINATING DEPT.: CITY MANAGER NO: -7 '/q' I Community Development APPROVAL.. ITEM: Ordinance # 1440, 2nd Reading BY: Tim Johnson 7'~ NO: Rezonmg request DATE: September 18, 2001 Issue Statement: This is a request to rezone the properties at I529 37t~ Avenue NE, and 1601 37t~ Avenue NE, fi.om R-2 (single and two-family residential) to LB, (Limited Business) for the purpose of making both commercial properties consistent w/th zoning. Background: Both of these properties have housed commercial businesses since their inception, but have according to zoning records always been zoned for residential purposes. The 37th & Johnson Hair building was formerly a grocery store, but has been a hair salon since the late 1970's. Dave's Heating and Air Conditioning at 1601 37~ Avenue formerly housed a water softener business and a floral shop but Dave's has been in operation since the early 1980's. Analysis: According to the City of Columbia Heights requirements, a rezoning requires the City Council adopt an ordinance identifying the proposed rezoning. The rezonmg of the parcels described above requires two readings by the City Council before adoption. Ordinance # 1440 is an Ordinance to allow for the rezoning of 1529 37th Avenue NE and 1601 37t~ Avenue NE ftom R-2 (single and two-family residential) to LB, (Limited Business). This rezoning is necessary in order to be consistent with the commercial uses that have always existed on both parcels. Rezoning to LB would allow for the future sale of these buildings to be used for legitimate light commercial opportunities, such as medical or dental clinic, office space, professional service or professional studio. There are also a number of other uses identified in the LB District in the attached information. An issue that was addressed at the Planning Commission level was the lack of off-street parking for the 1601 37t~ Avenue building. There is currently no off-street parking for this parcel. Obviously any future use of ttds building would need to be looked at for its intensity and required number of parking spaces. The 1601 37t~ Avenue parcel can reasonably accommodate approximately 12-15 vehicles, which is currently more than what is required by ordinance ~'or a hair salon. It should also be noted that the Metropolitan Council has reviewed the request submitted for a simple Comprehensive Plan amendment to allow for the furore use of these two parcels as commercial rather than low density residential. The Met Council indicated in writing that they have no objection to the rezoning and would support this Comprehensive Plan amendment. Recommendations: The Planning and Zoinng Commission held a public hea~ing and unanimously recommended approval of this rezoning request. Staff also recommends approval of Ordinance # 1440 (attached), which is an ordinance rezoning the subject properties at 1529 37t~ Avenue NE, and 160I 37t~ Avenue NE, fi.om R-2 (single and two-family residential) to LB, Limited Business. Recommended Motions: Move to waive the reading of Ordinance # 1440, there being ample copies available to the public. Move to approve Ordinance # 1440, being an Ordinance pertaining to the rezoning of certain properties at 1529 37t~ Avenue NE and 1601 37th Avenue NE. Attachments: Ordinance # 1440; Applicant narrative; LB provisions; Site Plan; Rezoning Map Area; Public Notices; StaffReport Zoning Amendment~ndings; Application,forms; Met Council letter COUNCIL ACTION: CITY OF CC)LUMBIA HEIGHTS 590 40th Avenue N.E., Columbia Heights, MN 55421-3878 (763) 706-3600 TDD (763) 706-3692 Visit Our Website at: ww~ci, columbia-heights, mn.us CITY COUNCIL Mayor Gary L. Peterson Coun¢ilmember$ Bruce Nawrocki Marlaine Szurek Julienn¢ Wyckoff Bobby Williams City Manager Walter R. Fchst NOTICE OF 2NI~ READING Notice is hereby given that the City Council will conduct a 2nd reading of ordinance # 1440, in · ' ' 4 th the C~ty Councd Chambers of City Hall, 590 NE 0 Avenue, at approximately 7:00 p.m. on Monday September 24, 2001. The order of business is as follows: A request to rezone properties at 1529 and 1601 37th Avenue from R-2 (Single and Two-Family Residential) to LB (Limited Business). The properties are currently being used for commercial purposes, but are zoned as residential. Notice is hereby given that all persons having an interest will be given an opportunity to be heard. For questions, you may contact Tim Johnson, City Planner, at (763) 706-3673. City Council CITY OF COLUMBIA HEIGHTS Walt Fehst City Manager The City of Columbia Heights does not discriminate on the basis of disability in the admission or access to, or treatment or emp]oyment in, its services, programs or activities. Upon request, accommodation will be provided to allow individuals with disabilities to participate in all City of Columbia Heights' services, programs and activities. Auxiliary aids for handicapped persons are available upon request when the request is made at least 96 hours in advance. Please call the City Council Secretary at 706-3611, to make arrangements. (TDD/706-3692 for deaf or hearing impaired only.) ThE CiTY OF COLUMBIA HEIGHTS DOES NOT DISCRIMINATE ON THE BASIS OF DISABILITY IN EMPLOYMENT OR THE PROVISION OF SERVICES EQUAL OPPORTUNITY EMPLOYER Tamara ~c~on PLANNING AND ZONING COMMISSION NOTICE OF PUBLIC HEARING Notice is hereby given that the Planning and Zoning Commission will conduct a public hearing in the City Council Chambers of City Hall, 590 N.E. 40th Avenue, at 7:00 p.m. on Tuesday, September 4, 2001. The order of business is as follows: A request to rezone properties located at 1529 and 1601 37m Avenue NE, from R-2 (single and two-family residential) to LB (Limited Business). The properties are currently being used for commercial purposes, but are zoned as residential. You are being sent this notice as your property is within 350 feet of this rezoning request. Notice is hereby given that ali persons having an interest will be given an opportunity to be heard. For questions, you may contact Tim Johnson, City Planner, at 763-706-3673. Planning and Zoning Commission CITY OF COLUMBIA HEIGHTS Walt Fehst City Manager kp The City of Columbia Heights does not discriminate on the basis of disability in the admission or access to, or treatment or employment in, its services, programs or activities. Upon request, accommodation will be provided to allow individuals with disabilities to participate in all City of Columbia Heights' services, programs and activities. Auxiliary aids for handicapped persons are available upon request when the request is made at least 96 hours in advance. Please call the City Council Secretary at 706.3611, to make arrangements. (TDDI706-3§92 for deaf or hearing impaired only.) ORDINANCE NO. 1440 BEING AN ORDINANCE PERTAINING TO THE REZONING OF CERTAIN PROPERTY LOCATED AT 1529 37TM AVENUE NE AND 1601 37TM AVENUE NE Section 1: Section 2: Section 3: That certain property legally described as: The east 50 feet of Lot 3, Block 16, Auditor's Subdivision, of Walton's Sunny Acres 3rd, Anoka County, Minnesota; PZN- # (36 30 24 34 0029); and That certain property legally described as: The east 26 feet of the west 56 feet of Lot 4, Block 7, Auditor's Subdivision, of Walton's Sunny Acres rd · 3 , Anoka County, Minnesota; P/N # (36 30 24 43 0042) To authorize and direct staff to amend the official zoning map to reflect the change in zoning from R-2, One and Two Family Residential District, to LB, Limited Business District, upon the effective date of said ordinance. Tkis ordinance shall be in full force and effect from and after 30 days after its passage. First Reading: September I0, 2001 Second Reading: Date of Passage: Offered by: Seconded by: Roll Call: Mayor Gary L. Peterson Patricia Muscovitz, Deputy City Clerk ~ Metropolitan Council Improve regional competitiveness in a global economp September 4, 2001 Tim Johnson City Planner City of Columbia Heights 590 40th Avenue NE Columbia Heights, MN 55421-3878 City of Columbia Heights Comprehensive Plan Amendment Re-designation of Two Parcels from Low Density Residential to Commercial Metropolitan Council District 10 Metropolitan Council Referral File No. 18181-4 Dear Mr. Johnson: Metropolitan Council staff has completed its review of the City of Columbia Heights Comprehensive Plan Amendment, received August 28, 2001, to re-designate two parcels from low density residential to commercial. The two parcels were originally zoned and classified as residential in error, and this action corrects that error. Council staff finds that the comprehensive plan amendment is in conformity with metropolitan system plans, consistent with the Regional Blueprint, and has no impact on the plans of other units of local govemment. Therefore, the Council will waive further review and the city may place this amendment into effect. The amendment and explanatory materials supplied will be appended to the city's plan in the Council's files. If you have any questions regarding this review, please contact Greg Pates, Principal Reviewer, at 651-602-1410. Phyllig/Hanson, Supervisor Planning/Technical Assistance CC: James W. Nelson, Metropolitan Council District 10 Eli Cooper, Director, Planning and Growth Management Sandra Pinel, Sector Representative Cheryl Olson, Referrals Coordinator Greg Pates, Principal Reviewer www. metrocouncll.org Metro Info Line 602-1888 230 East Fifth Street * St. Paul, Minnesota 55101-1626 * (651) 602o1000 * Fax 602-1550 * ~291-0904 Case: 2001-09 l 5 Page: I STAFF REPORT TO THE PL.4aNNING AND ZONING COMMISSION FOR Tm~. SEPTEMBER 4, 2001 PUBLIC HEARING Case#: 2001-0915 GENERAL INFORMATION Owners: Addresses: Phone: Diane Neeb, Dave Roberts 1529 & 1601 37th Avenue NE Columbia Heights, ~ (651) 483-4135; (763) 781-6901 Applicants: same Parcel Addresses: 1529 & 1601 37~h Avenue NE Zoning: R-2, Single and Two-Family Residential Comprehensive Plan: LDR - Low Density Residential Surrounding Zoning and Land Uses: Zoning North: R-2 South: City of Mpls East: R-2 Er'est: R-2 Laud Use North: Residential South: Residential East: Residential Pest: Residential BACKGROUND Explanation of Request: The applicants have applied for the rezoning of property at 1529 and 1601 37th Avenue NE from R-2, Single and Two-Family Residential District, to LB, Limited Business District. Case History: There are no prior Planning or Zoning cases on either of these two parcels. However, the history of these two properties are such: The structure at 1529 37th Ave that currently houses the 37th and Johnson Hair Company was built in the 1950's and was initially used as a small grocery store. Following the grocery store, Commer's Water Softener used the space. Since the late 1970's, the structure has been a hair salon. The structure at 1601 th 37 Ave currently occupied by Dave's Refrigeration and Appliance, was previously a floral shop, but has been occupied by Dave's since the early 1980's. Both structures have always functioned as commercial businesses, but according to Zoning records, have always been zoned Residential. Case: 2001-0915 Page: 2 ~NALYSIS Surrounding Property: The property to the north is zoned R-2, and is used residentially. The property to the west of 1529 37th Ave is zoned R-2 and is used residentially. The property to the east of 1601 37th Ave is zoned as R-2 and is used residentially, The properties to the south are in the City of Minneapolis. Technical Review: Rezoning The properties are currently zoned R-2, Single and Two-Family Residential, and the uses of the property are commercial. When evaluating a rezoning request it is important to consider how the proposed zorfing change fits in with the surrounding area. Although the surrounding area is entirely residential, these two comer properties have always maintained some commercial purpose over the years. But for some reason, the properties were never correctly zoned for commercial purposes. Both businesses are currently considered non-conforming uses. The Planning Commission at their August meeting briefly addressed this issue and seemed somewhat favorable to consideration of rezoning these properties from R-2 (Residential) to some type of commercial. As mentioned above, the property is currently used for commercial purposes but is zoned residential, as well as designated for future low density residential in the City Comprehensive Plan. Staffhas submitted a simple Comp Plan amendment to the Metropolitan Council and has spoken with several Met Council staff about changing the land use designation from low density residential to commercial. The Metropolitan Council indicated that they are open to consideration of this minor change as long as the City decides to rezone the properties. Staff is waiting to hear back from the Metropolitan Council for an official approval on this issue. The 37th and Johnson Hair Salon ifrezoned, would be a permitted use in the LB (Limited Business District), as it is considered a professional service and would be an appropriate use in the Limited Business District. Dave's Refrigeration could also be considered a permitted use in the LB District, as the business is also considered a professional service, but is a questionable use in this district because of its intensity. This particular business is a more intensive use than would typically be allowed in the Limited Business District. The business provides service repair on-site and utilizes a number of delivery trucks, which is more than the parcel can handle. The 1601 37t~ Ave parcel is 26 feet wide, which is almost entirely occupied by the structure, and has no on-site parking for employees, customers, or delivery trucks. Furthermore, passerby can typically view discarded appliances adjacent to the fenced dumpster along Johnson Street. This business would be a more appropriate use at this location if the parcel had parking and provided some sort of screening from residential property. Currently the delivery trucks park up on the curb which creates a dangerous situation at this comer for pedestrians as well as general traffic. This use seems most compatible in the commercial districts on University or Central Avenues. However, the business is considered 'grandfathered'. Case: 2001-0915 Page: 3 Minimum Yard and Density Requirements of the LB (Limited Business District) are as follows: Minimum Lot Area shall be at least 6,000 square feet - subject parcels do not meet this requirement; However, these are previously platted lots. Minimum Lot Width shall be 40 feet - subject parcel at 1529 37th Avenue meets this requirement with 50 feet of lot width, but 1601 37~ Avenue does not meet this requirement with a lot width of 26 feet. However both structures are 'grandfathered' Front Yard Setback shall be 12 feet - both structures were built a number of years ago and both structures are within a few feet of the fi'ont property line, but are considered 'grand fathered'. Side yard shall be 15 feet and comer side yard shall be 10 feet; Both structures are approximately a few feet from the comer side yard property line. Required Findings: As indicated in the new Zoning and Development Ordinance, the Planning Commission and the City Council shall make each of the following findings before rezoning property: · The amendment is consistent with the City Comprehensive Plan - The Comprehensive Plan currently designates these parcels for future low-density residential use. However, the City is waiting for the Metropolitan Council to determine if they will recommend for a future land use change from low density residential to commercial. · The amendment is in the public interest and is not solely for the benefit of a single property owner - The rezoning is being requested from two business owners. The two owners are requesting that they be rezoned so that appropriate future commercial uses in these structures can be considered legal conforming businesses. · Where the amendment is to change the zoning classification of a particular property, the existing use of the property and the zoning classification of property within the general area of the property in question are compatible with the proposed zoning classification - Staff believes that a rezoning to LB (Limited Business) zoning will not adversely effect the neighborhood. The parcels have always been and are currently being used for commercial purposes, and a rezoning to LB would be a practical solution to legitimize the future of these commercial structures. The Planning Commission had asked for a list of permitted and conditional uses for the LB District (see attached or Page 10-2 in ordinance). As indicated in the ordinance, the purpose of the LB District is to provide appropriate locations for limited retail sales and services for the convenience of adjacent residential neighborhoods. · Multi-family dwellings are allowed in the LB, but neither of these parcels would be large enough to accommodate high density housing. · Government offices are allowed in the LB, but neither of these parcels would be large enough to accommodate this use. · Public park and/or playgrounds are allowed; This could be an appropriate future use of the 1601 37th Avenue parcel if the building was ever demolished. · Medical, dental, veterinary clinics are allowed. However, neither site could support a Case: 2001-0915 Page: 4 large clinic of any kind. · Office space would be ideal for both of these buildings, but the parking would still be an issue for 1601 37th Ave. A small office of some sort would seem to be an appropriate reuse for 1529 37th Avenue. · Professional service or professional studio would also be an ideal reuse for these buildings. Dave's space would be ideal for a studio of some sort because it wouldn't generate the traffic that currently exists. But it would depend upon the type of business and its needs, especially parking. · Retail Sales and a Coffee shop/deli (subject to CUP) would also be an appropriate reuse for the 1529 37th Avenue location ifrezoned to LB, but these uses would need to be evaluated for parking needs as well. An issue that should be addressed is the off-street parking requirements for these parcels. Obviously both businesses are considered 'grandfathered' even without the zoning change, but future uses will need to be analyzed in relation to intensity and need for off-street parking. The 37th and Johnson Hair Salon parcel has more than the required number of parking spaces for its use. However, Dave's Refrigeration and Appliance has zero (0) off-street parking spaces, and any future use of this space would not have any either unless another site were used or a shared parking arrangement could be made. It is possible that the 1529 property could be used to achieve some off-street parking for the 1601 property. It should also be mentioned that several adjacent residential property owners have contacted staff regarding this issue and have expressed their concerns about this rezoning issue. The neighbors expressed their frustration mostly with Dave's Refrigeration business, including outside storage, and vehicle parking and unloading. Several neighbors were also concerned about any future business oppommities in these structures and their potential impact on the neighborhood. The Zoning Ordinance requires that all off-street commercial uses shall provide appropriate screening fi.om adjacent residential properties. Required screening shall consist of a fence, wall, or earthen berming and/or vegetation no less than six (6) feet in height and no less than 80% opaque. Compliance with City Comprehensive Plan: The City Comprehensive Plan designates t/tis area for future low density residential development. However, staff has submitted a simple Comprehensive Plan amendment to the Metropolitan Council addressing this request for future land use change, and should be receiving a response shortly. It should also be noted that these structures have always maintained some form of commercial use so a change in the future use of this land to allow for commercial would seem to be consistent with prior uses. Summary: The positive aspects of this proposal are as follows: 1. Rezoning these properties to LB, (Limited Business) will allow for the properties to be Case: 2001-0915 Page: 5 sold in the future for legitimate limited commercial opportunities. Rezoning these properties to LB will allow for the zoning to be consistent with future land uses. The negative aspects of this proposal are as follows: 1. The proposal does not comply with the recently adopted City Comprehensive Plan. 2. The issue of spot zoning could be argued, but staff does not believe that the rezoning of these two parcels would necessarily constitute spot zoning. Conclusion Staff Recommendation: Staff recommends approval of the rezoning of 1529 and 1601 37th Avenue NE, from R-2 (Single and Two-Family Residential) to LB, Limited Business, as the proposal is in the best interests of the public, and these buildings cannot reasonably be put to use under current residential zoning. Recommended Motion: Move to recommend City Council approval to rezone 1529 37th Avenue NE and 1601 37th Avenue NE from R-2, Single and Two-Family Residential District, to LB, Limited Business District, as the rezoning is consistent with the commercial land use, and these buildings cannot reasonably be put to use under current residential zoning. Attachments: Completed Application Form; Applicant narrative; Liraited Business District provisions; Zoning Amendment findings; Revised Site Plan; Rezoning Area Map; and, Public Notice 9.1003 Lot Dimension, Height, and Bulk Requirements. Lot area, setback, height and lot coverage requirements for uses in the Commercial Districts shall be as specified in the following table. t LB GB CBD Minimum Lot Area 6,000 sq. ft. 6,000 sq. ft. Mimmum Lot Width 50 feet 40 feet 20 feet Miinmum Lot Depth Lot Area Per Dwelling Unit Single Family Dwelling 6,500 sq. ft. Multiple Family Dwelling Efficiency 1,200 sq. ft. 1,200 sq. ft. One bedroom 1.$00 sq. ft. 1,800 sq. ff. Two bedroom 2,000 sq. ff. 2,000 sq. ft. Three bedroom 2,500 sq. ff. 2,500 sq. ff. Additional bedroom 400 sq. ff. 400 sq. ft. Congregate Living Units 400 sq. ff. 400 sq. ff. Hotel or motel 400 sq. ff. Hospital 600 sq. ff. Building Setback Requirements Front Yard 12 feet I5 feet 1 foot Side Yard 15 feet None None Comer Side Yard t0 feet 15 feet I foot Rear Yard 20 feet 20 feet 10 feet Parking Setback Requirements Front Yard 12 feet I5 feet 1 foot Side Yard 5 feet 5 feet None Comer Side Yard 12 feet 15 feet 1 foot Rear Yard 5 feet 5 feet 5 feet Maximum Height 35 feet 35 feet Maximum Lot Coverage Floor Area Ratio 1.0 6.0 9.1004 LB, Limited Business District. 1) Purpose. The purpose of the LB, Limited Business District is to provide appropriate locations for limited retail sales and services for the convenience of adjacent residential neighborhoods. These areas are located along collector or arterial roadways in close proximity to residential neighborhoods, arranged and designed to be a functional and harmonious part of the neighborhood, and accessible by public sidewalks or trails as well as by roadways. 2) Permitted Uses. Except as specifically limited herein, the following uses are permitted within the LB, Limited Business District. a) b) c) d) City of Columbia Heights Multiple family dwelling. Government office. Government protective service facility. Public park and/or playground. Zoning and Development Ordinance - Section 10 Page 10-2 e) g) h) i) J) Clinic, medical or dental. Clinic, veterinary. Funeral home. Office, not exceeding 4,000 square feet in area. Studio, professional. Service, pm fessional. 3) Conditional Uses. Except as specifically limited herein, the following uses may be allowed in the LB, Limited Business District, subject to the regulations set forth for conditional uses in Section 4, Administration and Enforcement, and the regulations for specific uses set forth in Section 7, Specific Development Standards: a) b) c) d) e) g) h) i) J) k) l) m) n) o) P) q) r) s) Religious facility/place ofworskip. Convent or monastery, when accessory to a religious facility. School, public or private, K-12. School, vocational or business. School, performing/visual/martial arts. Licensed day care facility, child or adult. Government maintenance facility. State licensed residential care facility. Congregate living facility, including rooming houses, group living quarters, nursing homes, senior housing, assisted living facility, traditional housing and emergency housing. Bed and breakfast home, when accessory to a single-family dwelling. Community center. Recreational faciliiy, indoor. Recreational facility, outdoor. Single family dwelling, when accessory to a commercial use. Food service, limited (coffee shop/deli). Hospital. Museum/gallery. Retail sales, not exceeding 2,500 square feet in area. Hotel or motel. 4) Permitted Accessory Uses. Except as specifically limited herein, the following accessory uses shall be permitted in the LB, Limited Business District: a) b) c) Private garages, parking spaces and loading areas. Accessory buildings. Private swimming pools, tennis courts and other recreational facilities operated for the sole use and convenience of the residents of the principal use and their guests. Landscaping and other horticultural uses. City of Columbia Heights Zoning and Development Ordinance - Section 10 Page I0-3 August 20, 2001 TO: City o f Cohsmbia Heights Planning and Zoning Commision RE: Re-zoning request My name is Diane Neeb and I the owner/proprietor of 37th and Johnson Hair & Tanning Company located at the intersection of 37th Avenue NE a~d Johnson Street in Columbia Heights. I have operated my salon fi'om this location for over 20 years. Prior to this, another salon occupied this building for a number of years. Prior a water sot~aner business was located here. This building was initially constructed for a small grocery store. Earlier this year, I made a personal decision to sell my business. I contacted a local realtor and listed the property. A small 2-person print shop made an offer, however upon checking into zoning it was discovered that my building is located in a residentially zoned area. A~ a result, ! am having extreme difficulty listing and selling my property as a commercial building due the the existing zoning requirements. I believe that my property as well as the parcel across the street now occupied by Dave's Refrigeration and Appliance can never be converted to residences. They were constructed to be used commercially. The buiMing occupied by Dave's Refrigeration was previously used as a flower shop. I am appealing to have these two parcels re-zoned as commercial/light business so that I am able to sell my property. Dave Roberts, owner of Dave's Refrigeration, has expressed his concern about this zoning problem and feels it needs to be cha~ged. Under the current zoning, I am only able to sell this building to another barber/beauty sa~on, a tanning salon or a nails salon. This limits my ability to sell my propeay. Approximately 5 years ago, I first attempted to sell my building but received no firm offers at that time. Neither then nor now have I received any offers fi-om the salon, tanning or nails industries. I am requesting zonin_.~ of these two properfias mentioned because over the course of the hiatoq~ of these two properties, they were designed and used only as commercial/light business. Over the 20+ years that I have operated my business at this location, I have continued to maintain and upgrade its appearance. I am in the process of replacing the roof at the present time. I feel a respomibil/ty to keep the appearance of this corner in Co!,,mhia Hcights as attra~ve as possible and compatible with the surroundin~ residential prope~ns. However, with the existing zo~fing requiremeir~s, I feel as though I am being extremely limited in my choices to sell. I hope you will consider this request to re-zone for my well-being as weil as for all Thank you for your attention to this request. Sincerely, Diane Neeb, owner 37th & lohnson Hair Co. Application For: CiTY OF COLUMBIA HEIGHTS Rezoning Variance Privacy Fence Conditional Use Permit Subdivision Approval Site Plan Approval Other Case No: Fee: Da=e Paid Receipt No: str..t A dr.ss Sub, eot Prop.try: 39<;,- Oescription oS Re~.est,~e~.~>~ir\o -~C-~or~ ~'e%'~cLev~%ia I 6. Zoning: Applicable City Ordinance Number Present Zon~g ~e~ewt Section Proposed zon~gdO~QC~/c~[ . 9. Ac~owled~ment and Si~ature: ~e ~dersi~ed hereby represents upon all of the penalties of law, for the pu~ose of ~duch~ the City of Col~bia Heights action herein requested, that all statements herein are t~e ~d that all work herein mentioned rill be done ~ accordance vith the 0rd~ces of the City of Col~bia ~ei~h=s ~d the lays of the S:~ Taken Application For: CITY OF COLUMBIA HEIGHTS Rezoning Variance Privacy Fence Conditional Use Permit Subdivision Approval Site Plan Approval Other Application Date: Case No: Fee: Receipt No= Date Paid Applicant: Address.. Phone: Description Of Request: ~ ('~'~_ Zoning: Applicable City Ordinance Number Present Zoning Present Use 7. Reason for Request: Section Proposed Zoning. Proposed Use 8. Exhibits Submitted (maps, diagrams, etc.) Acknovledtment and Si~nature: The undersigned hereby represents upon all of the penalties of lay, for the purpose of inducing the City of Columbia ~eights to take the action herein requested, that all statements herein are true and that a!I work herein mentioned will be done in accordance with the Ordinances of the City of Columbia Heights and the laws of the State of Minnesota. Taken B y: _7"_,,1" 9.405 Appeals (1) ~p. peal. At any time within 30 days after a wrkten~d~er, req~ement, de. term(n_a .~'t~..~or. final decision has been made by the ~,olfing Administrator or .other offic!al in"Sm~reting or applying this ©rdin~, except for actions taken in corme~c~on .w. ith pr.~a~tions for violations~'~eof, the applicant or any other persTn affected by such acti~ decision. (2) Appli~be made by filing a written notice of a~~ Adminis~'a~ and Planning Commission, and statin*~e speci~ounds upon which the appeal (3) ~on, s!tting as th~ Bo~"d-~Appeals and ^dju the appea ac?ord "e, th the re~d~ements of this Section. ARer the close of the hearing, the P1 'ng ..-~ommission shall render its findings. 9.406 Zoning Amendments (2) Right of Application. Amendments to the text of this Ordinance or to the district boundaries on the official zoning map may be initiated by the City Council, the Planning Commission, or by application of any person with a legal interest in the affected property. Application for Amendment: An application for an amendment to change the district boundaries on the official zoning map or the text of this Ordinance shall be filed with the Zoning Admirfistrator on the approved form and shall be accompanied by a map or plat showing the lands proposed to be changed, a concept development plan and any other information determined by the Zoning Administrator to be necessary. (3) Public Hearing. The Planning Commission shall hold a public hearing on the complete application for a zoning amendment and all amendments initiated by the City Council or Planing Commission in accordance with the requirements of this Section. After the close of the hearing, the Plarm/ng Commission shall make findings and submit its recommendation to the City Council. City Council Action. The City Council shall make the final decision regarding an application for a zoning amendment. Amendments of this Ordinance or the district boundaries on the official zoning map shall require a four fifths (4/5) majority vote of the City Council. (5) Required Findings. The City Council shall make each of the following findings before granting approval of a request to amend this Ordinance or to change the district boundaries on the official zoning map: City of Columbia Heights Zoning and Development Ordinance - Section 4 Page 4-6 &. The amendment is consistent with the Comprehensive Plan. The amendment is in the public interest and is not solely for the benefit of a single property owner. Where the amendment is to change the zoning classification of a particular property, the existing use of the property and the zoning classification of property within the general area of the property in question are compatible with the proposed zoning classification. Where the amendment is to change the zoning classification ora particular property, there has been a change in the character or trend of development in the general area of the property in question, Milch has taken place since such property was placed in its current zoning classification. 9.407 Variances (1) (2) (3) (4) (5) (6) The purpose of a variance is to provide · ' of this Ordinance where strict because of circumstances unique to the this secti to allow a variance for a use that is not zoning ;- Of departure from the would cause undue It is not the intent of a particular Right ~ Any person witl application for one s. the property may file an Application for Variance. Zoning plan and any other necessary. a variance shall be filed with the and shall be accompanied by a site by the Zon/ng Administrator to be Public Hearing. The sitting as the Board of Appeals and Adjustments, shall hold a hearfin the complete application for a variance in acc Section. After the close of the hearing, the Commission shall findings and submit its recommendation to the ~ r Council. City Council Action. application for a var~ the provisions · vote of the City regarding an Approval of a Required Findi The Council shall make each of the findings before provisions of this Ordinance: City of Columbia Heights Zoning and Development Ordinance - Section 4 Page 4-7 CITY COUNCIL LETTER Meeting of September 24, 2001 ORIGiNATING DEPARTMENT CITY MANAGER AGENDA SECTION: Ordinance ~ - A - ~- POLICE - APPROVAl,i,/_,,/ NO. Thomas M. Johns~ I BY: ITEM: Ordinance No. 1441, eliminating taxicab licensing BY: in Columbia Heights and setting requirements for DATE: September 13,2001 \' DATE: taxicabs within the city. NO, /--/ BACKGROUND In May 2000 the Chief of Police was designated as the liaison to the Technical and Policy Committees of the Metropolitan Council Taxi and Passenger Services Task Force. This committee was charged with trying to find a way to license taxicabs and taxi drivers regionally instead of by each individual city or entity. During my year and a half on this committee, I found there could be agreement between the major cities such as Minneapolis, St. Paul, Bloomington and the Minneapolis-St. Paul International Airport on how to go about this process, but this left ve~ little interaction or impute from the smaller cities such as Columbia Heights, St. Louis Park, and Golden Valley. We were listened to, but the main focus was on the big three or four entities. At this point it appears that the four main entities named will be entering into a joint powers agreement for the lic~sing of taxicabs and taxi drivers. They will be inspecting cars, training cab drivers and licensing cab drivers together. This leaves the other cities to be associate members of the joint powers agreement if they desire. ANALYSIS/CONCLUSION The City Manager and Police Chief have discussed our options in this process and we are proposing we amend our current taxicab ordinance in order to open up the number of possible vendors to our community. It is being suggested that we amend the current ordinance to allow any taxicab and taxicab driver that is licensed by any other political subdivision or the Minneapolis-St. Paul International Airport to be allowed to pick up and drop off passengers in our community. By doing this we can let the consumer be the controlling entity. If they receive poor service from one cab company, they will be allowed to go to another rather than being restricted to the few that are currently licensed in our city. RECOMMENDED MOTION: Move to waive the reading of Ordinance No. 1441, there being ample copies available to the public. RECOMMENDED MOTION: Move to establish the second reading of Ordinance No. 1441, being an Ordinance amending Ordinance 853, City Code of 1977, eliminating taxicab licensing in Columbia Heights and setting requirements for taxicabs within the city, for Monday, October 8,2001, beginning at approximately 7:00 p.m. TMJ:mld 01-154 COUNCIL ACTION: Section 3 5.603 (1) 5.603 (2) a) b) c) ORDINANCE NO. 1441 TAXICABS No person shall engage in or operate a taxicab business and pick up persons for hire in the course of such business within the City limits, without a liccn:: for ~.~1~ ..~U:~l~ .~ 1.~ ...m~; ..... u ~...~: .... : ..... ~ ............. ~ ...... :~: .... r ,~4~ ~. ..... t~icab d~ver and taxicab license to operate in ~other political subdivision in ~is state, including the Mi~eapolis-St. Paul htemational Ai~og. A ~vg ~d cab so licensed may ca~ passengers to any place or point within the city and may solicit or pick up business within the city. For purposes of this section, the following words shall have the meanings ascribed to them: "Taxicab" shall mean any motor vehicle engaged in the carrying of persons for hire, either over a fixed route, operated from a street stand, subject to calls from a garage, or otherwise operated for him; but the term shall not include vehicles subject to control and regulation by the State Railroad and Warehouse Commission, the Metropolitan Transit Commission, or vehicles regularly used by undertakers. "Street" shall mean and include any street, alley, avenue, court, bridge, lane or public place in the City. Operator" shall mean any person who drives a taxicab, whether such person be the owner of such taxicab or an employee of said owner. d) e) b) d) "1 5.60. "Owner" shall mean any person owning or having control of the use of one or more taxicabs for use in a taxicab business that i: rzqu]rcd tc be !:.zcnz:~ under t~iz zzzd~n, whether or not said owner is a taxicab operator. "Taxicab Stand" shall mean any public place which is exclusively reserved by authority of the City for the use of taxicabs. "Taximeter" shall mean any mechanical instrument or device by which the charge for hire of a taxicab is mechanically calculated, either by distance traveled or waiting time or both, and upon which such charge shall be indicated by figures. a) tc conduct ~uch in:pccdon. 5.603 (3) a) b) c) d) e) Every taxicab ~ under this section shall have some designation of the character of the vehicle painted in plain visible letters on each side thereof. A card printed in plain legible letters shall be displayed inside each taxicab and shall indicate ~ CL%' ligenge number, the maximum rates that are to be charged, the name of the operator; together with a statement that articles lost in the taxicab will be forwarded to the City Clerk': office, Police Department, where they may be identified and claimed, and the statement "Ask the Driver for Bill and Receipt" in bold type. th ..... *,t- ...... J .............Each taximeter Every taxicab shall be equipped with a taximeter. ~,: ......... ,~ ~..,,~.~ r, ..... . shall be sealed with case and gear intact, and shall be semi-annually certified and checked for accuracy and working condition by an agency qualified to perform such service.~.~'~ ~w.~..~ ~ ~ .... '~ ~"'~j Each taximeter shall be kept in plain view of the passenger and shall be maintained in good and accurate working order at all times. Rates charged by taxicabs ........................... for conveyance ~n th~s City shall be .5xzd by .,,,s..sl ..vov....~..O ~1,,*;~-- ~.~C .1~,,,~ t~..~..;1 the same as the rates set by the political subdivision the taxi is licensed out of. Upon request therefore, every passenger shall be given a receipt upon payment of his fare. When in operation !itch:ed taxicabs not carrying passengers shall be parked at stands designated for that purpose from time to time by Resolution of the Council. Said Resolution shall also designate the number of taxicabs which may be stationed at any such stand. maintain proof to tk: Cl:~l: of an insurance policy with an insurance company duly licensed to transact such business in this State; insuring against loss from the liability imposed by law for damages on account of bodily injuries or death, or for damages to property resulting from the ownership, maintenance or use of any taxicab ~ in the taxicab at all times. The limit in such insurance policy of such taxicab shall not be less than One Hundred Thousand Dollars for bodily injuries to or death of one person and Three Hundred Thousand Dollars on account of any one accident resulting in injuries and/or death to more than one person, and a total ofTen Thousand Dollars liability for damages to property of others, arising out of any one accident. This policy shall be presented to any police officer upon request. .6o3 (4) a) b) c) d) e) Every taxicab operator liczngc: shall be subject to the below named regulations. The operator and the vehicle licensee owner shall jointly insure enforcement of such regulations. All operators shall be clean and courteous at all times. No operator shall carry any person other than the passenger first employing a taxicab without the consent of such passenger. No operator shall charge or attempt to charge any passenger a greater rate of fare than that established by Regcluticn cf tko Cc::ncil. the political subdivision that licensed the taxicab. No operator shall knowingly deceive with the intent to defraud any passenger who may ride with him, or who may desire to ride in his vehicle, as to his destination or distance to be traveled. No operator shall solicit passengers as fares except when traveling around the streets or at a regularly designated stand. No operator shall alight from his taxicab at any time for the purpose of soliciting passengers, provided that this shall not prohibit any driver from alighting from his taxicab to assist a passenger entering or alighting from his taxicab. f) Each operator shall forward lost articles found in his taxicab to the Clerk Police Department. COLUMBIA HEIGHTS CITY COUNCIL LETTER Meeting off September 24, 2001 AGENDA SECTION: ORIGiNATING DEPARTMENT: CITY MANAGER'S NO: '7 - ~ Community Development APPROVAL ITEM:FirstReadingofOrdinance1442, BY: RandySchumacher</~ BY:~/~~ being an Ordinance relating to the division of DATE: September 21, 2001 ~ Economic Development, Redevelopment and Housing Powers between the Economic Development Authority and the Housing and Redevelopment Authority BACKGROUND: At the EDA Board Meeting held in February of 2001, the Board discussed specific direction and priorities of the HRA and EDA. It was suggested that the Board consider transferring all City housing responsibilities, ownership, and operations to the Columbia Heights Housing and Redevelopment Authority thus allowing the EDA to focus on Community Development and Redevelopment Issues. This would allow greater focus to be conducted in each respective area. At a following Board meeting, President Ruetfimann requested Board authorization to obtain procedural direction from the EDA legal counsel and to layout the necessary steps to accomplish the proposed transition. I have enclosed a copy of a letter from Steve Bubul of Kennedy and Graven Chartered that summarizes these steps. RECOMMENDATION: If the City Council wishes to proceed based on the schedule outlined in Mr. Bubul's letter of June 8, 2001, then staffrecommends the City Council conduct a first reading, and set a second reading of Ordinance Number 1442 at the regular session on October 8, 2001 at approximately 7:00 p.m. RECOMMENDED MOTION: Move to waive the reading of Ordinance 1442, there being ample copies available to the public. RECOMMENDED MOTION: Move to establish a second reading for Ordinance 1442, being an Ordinance relating to the division of Economic Development, Redevelopment and Housing Powers between the Economic Development Authority and the Housing and Redevelopment Authority for Monday, October 8, 2001 beginning at approximately 7:00 p.m. Attachments COUNCIL ACTION: h:\CL consent2001~EDA HRA Transition-Council 9-24-2001 ORDINANCE NO. 1442 ORDINANCE RELATING TO THE DIVISION OF ECONOMIC DEVELOPMENT, REDEVELOPMENT AND HOUSING POWERS BETWEEN THE ECONOMIC DEVELOPMENT AUTHORITY AND THE HOUSING AND REDEVELOPMENT AUTHORITY. THE CITY OF COLUMBIA HEIGHTS DOES ORDAIN: Section 1. Recitals. It is hereby determined that: (a) pursuant to Minnesota Statutes, Sections 469.001 to 469.047 and predecessor statutes ("I-IRA Act"), the City previously established the Housing and Redevelopment Authority in and for the City of Columbia Heights ("HRA") for the purpose of carrying out housing and redevelopment activities in the City. (b) pursuant to Minnesota Statutes, Sections 469.090 to 469.1081 ("EDA Act"), the City Council established the Columbia Heights Economic Development Authority ("CHEDA") by resolution approved January 8, 1996 (the "Enabling Resolution"), for the propose of coordinating and administering the housing, economic development and redevelopment programs for the City. (c) by resolution approved January 8, 1996, the City transferred the control, authority and operation of all HRA projects to the CHEDA. (d) by resolution approved JanuaO' 29, 1996, the HRA approved the transfer of all HRA contracts, programs and property fi.om the HRA to the CHEDA and CHEDA officials were directed to execute and deliver quit claim deeds for all real property owned by the HR& to the CHEDA. (e) quit claim deeds for all real property owned by the HRA were never executed and delivered to the CHEDA and, therefore, title to those properties remains in the HRA. (f) the City is authorized by Minnesota Statutes, Section 469.094, subdivision 1 to divide the economic development, redevelopment, and housing powers between CHEDA and the I-IRA. (g) the City Council has found and determined that the City's overall housing and redevelopment objectives will be best served if certain housing powers are allocated to the HRA and redevelopment and economic development powers are allocated to the EDA, as further described in this ordinance. Section 2. HRA Powers. (a) Except as limited by this ordinance as it may be amended fi:om time to time, the I-IRA may exercise all the powers under the I-IRA Act needed in order to car~ out programs and projects for low and moderate income housing including, but not limited to, the following powers: (i) to own, manage and operate all housing facilities that are operated by CHEDA as of the effective date of this ordinance. (ii) to establish and operate housing development projects and housing projects (as such terms are defined in the HRA Act). (iii) to accept control and authority over any housing program for low and moderate income persons that the City or CHEDA delegates to the I-IRA. (iv) to levy special benefit taxes in accordance with Section 469.033, subdivision 6 of the I-IRA Act in order to pay or finance the cost of housing projects and programs for low and moderate income persons, subject to approval by the City Council in accordance with Section 469.033, subdivision 6. (v) to acquire and convey real or personal property or any interest therein by gift, grant, purchase, exchange, lease, transfer, bequest, devise, or otherwise, and by the exercise of the power of eminent domain. (vi) operation. to determine the level of low and moderate incomes within its area of (vii) to issue bonds for any of its corporate purposes and to secure those bonds by mortgages upon property held or to be held by it or by pledge of its revenues, including grants or contributions. (b) The HRA may not exercise any powers under Minnesota Statutes, Sections 469.174 to 459.179, or any powers under the HRA Act that relate solely to redevelopment; provided, however, that nothing in this ordinance will be construed to limit the I-IRA's powers to carry out any housing project or housing development project that requires or includes redevelopment or that requires or includes land uses or facilities reasonably necessary to serve or facilitate the development of housing for low and moderate persons. 3. EDA Powers (a) Except as limited by this ordinance or the Enabling Resolution, as either may be amended fi:om time to time, the EDA may exercise all the powers under the EDA Act, including, but not limited to, the following: (i) all powers under the HRA Act other than those allocated to the HRA under this ordinance. (ii) all powers of a city under Minnesota Statutes, Section 469.124 to 469.134. (iii) all powers and duties of a redevelopment agency under Minnesota Statutes, Sections 469.152 to 469.165 for a purpose in the I-IRA Act or the EDA Act, and all powers and duties in the HRA Act and the EDA Act for a purpose in Minnesota Statutes, Sections 469.152 to 469.165. (iv) the authority to acquire property, exercise the right of eminent domain; make contracts for the propose of redevelopment and economic development; serve as a limited partner in a partnership whose purpose is consistent with the CHEDA's purpose; buy 2 supplies and materials needed to carry out development within the EDA Act; and operate and maintain public parking facilities. (v) the authority to issue bonds in accordance with the EDA Act and the I-IRA Act. (vi) the authority to levy special benefit taxes in accordance with Section 469.033, subdivision 6 of the HRA Act in order to pay or finance public redevelopment costs (as defined in the HRA Act), subject to approval by the City Council in accordance with Section 469.033, subdivision 6. (vii) all powers under Minnesota Statutes, Sections 469.474 to 469.179, including without limitation the power to establish a housing district as defined in Section 469.174, subdivision 11. (b) CHEDA may not exercise powers under the HRA Act that are allocated to the I-IRA under this ordinance; provided, however, that nothing in this ordinance will be construed to limit CHEDA's powers to carry out any redevelopment project that includes housing for low and moderate income persons that is owned and operated by non-govermnental parties. 3. Amendment. Nothing in this ordinance is intended to limit or prevent the City f~om (a) modifying this ordinance to revise the respective powers of the I-IRA and the CHEDA, or (b) modifying the Enabling Resolution to impose new or different limitations on CHEDA as authorized by the EDA Act. passage. Effective Date. This ordinance is in effect from and after thirty (30) days after its First Reading: Second Reading: Date of Passage: Offered By: SecondedBy: Roll Call: September 24, 2001 Mayor Gary L. Peterson Patricia Mnscovitz, Deputy City Clerk HOUSING & REDEVELOPMENT AUTHORITY REGULAR MEETING MINUTES OF AUGUST 21, 2001 CALL TO ORDER - The Regular Meeting of the Columbia Heights Housing & Redevelopment Authority (HRA) was called to order by Vice Chair, Julienne Wyckoff at 8:41 p.m., August 21, 2001, in Conference Room 1, City Hall, 590 40e Avenue NE, Columbia Heights, Minnesota. ROLL CALL Commission Members Present: Gary Peterson, Julienne Wyckoff, Bruce Nawrocki, and Bobby Williams Commission Members Absent: Marlaine Szurek Staff Present: Randy Schumacher, Acting Community Development Director Cher Bakken, Community Development Secretary Bill Elrite, Finance Director CONSENT AGENDA Approval of Minutes of Special Meeting of March 20, 2001. MOTION by Peterson, seconded by Williams, to adopt the minutes of March 20, 2001 regular meeting as presented in writing. All Ayes. Motion Carried. pRF. I.IMINARY 2002 HOUSING AND REDEVELOPMENT AUTHORITY BUDGET AND PROPOSED 2002 LEVY. MOTION by Peterson, second by Williams, to waive the reading of HRA Resolution 2001-02, there being ample copies available to the public. All Ayes. Motion Carried. MOTION by Williams, second by Peterson, to adopt HRA Resolution 2001-02, being a Resolution of the Housing and Redevelopment Authority in and for the City of Columbia Heights adopting the Preliminary 2002 Budget and recommending setting the HRA local levy at $111,702. Nawrocki asked to see a spreadsheet on the Sheffield Project balances including what the costs are, were they are and when will it be paid oJf Elrite stated he would have his staff prepare a report and provide it to the Board. AMENDED MOTION by Nawrocki, to set the HRA Local Levy at $77,000 for the debt reduction of Sheffield development. Motion died for lack of a second. Upon Vote for the original Motion: Williams- Aye, Peterson- Aye, Nawrocki- Nay, Wycko£f- Aye. Motion Carried. AD JOiNT The Meeting was adjourned by Vice Chair, Wyckoffat 8:52 p.m. Respectfully submitted, Cheryl Bakken Recording Secretary H:LHRA-2001 \8-21-2001 Budget Mtg COLUMBIA HEIGHTS ECONOMIC DEVELOPMENT AUTHORITY (EDA) REGULAR MEETING MINUTES OF AUGUST 21, 2001 CALL TO ORDER - The Regular Meeting of the Columbia Heights Economic Development Authority (EDA) was called to order by President Ruettimarm at 6:00 p.m., Tuesday, August 21, 2001, in the City Hall, Conference Room 1,590 40th Avenue NE, Columbia Heights, Minnesota. ROLL CALL Commission Members Present: Robert Ruettimann, Patricia Jindra,, Gary Peterson, Julienne Wyckoff, Bruce Nawrocki, and Bobby Williams Commission Members Absent: Marlaine Szurek Staff Present: Randy Schumacher, Acting Community Development Director Anita Kottsick, parkview Villa Housing Adminislxator Shirley Barnes, CEO, Crest View Corporation Cher Bakken, Community Development Secretary Mark Nagel, Community Development Staff CONSENT AGENDA (These items are considered to be routine by the EDA Board of Commissioners and will be enacted as part of the Consent Agenda by one motion). 1) Approval of Minutes - regular meeting of July 17, 2001 Move to adopt the minutes of the July 17, 2001 regular meeting as presented in writing. 2) Financial Report and Payment of Bills a. Financial Statement - July, 2001 b. Payment of Bills - July, 2001 Move to approve Resolution 2001-11, Resolution of the Columbia Heights Economic Development Authority (EDA) approving the financial statements for July, 2001 and approving payment of bills for July, 2001. MOTION by Peterson, second by Jindra, to adopt the consent agenda items as listed. All ayes. MOTION CARRIED. REPORT OF TH]~ MANAGEMENT COMPANY Kottsick reported that three apartments in the north building had leaks near the windows and the two apartments in the south building that had water problems last month have been repaired. The bids for replacement of the air conditioning unit have been submitted to the insurance company to check for possible coverage, from last month's power surge. The morning of August 1st, a monitoring panel on the fire monitoring system received a surge from a lightening strike. Rrepairs were completed within a week. The insurance company was notified. Joe Goodman, a resident of Parkview Villa South since 1991, was hired for the part time caretaker position. Joe is very active in the community, a volunteer, and familiar with the building and tenants at Parkview. All residents with recertifications due this year have been sent notices to set up appointments to do the paperwork. At this time, 29 appointments have been made for August and several for September. HUD has a new system for reporting family information on Form 50058 called PIC, which the [.S. Department will be installing. The reconciliation reports from the MTCS and PIC systems have been completed. Economic Development Authority Minutes August 21, 2001 Page 2 of 5 During the next couple months Kottsick will be devoting her time to annual re-certifications, a community service program for residents living in the North building, working with residents to promote a floor checking system, checking into the background for minimum rent requirements and fee schedules. Kottsick has checked into the costs of adding a surge protector to the building's electrical system and found it to be very expensive. NSP protects to the box and Parkview Villa insurance protects from the box to the building. Insurance has a $1000 deductible and staff is checking for coverage at this time. Nawrocki suggested staff contact the PCA and Insurance Company to see what options we have in regards to paying for replacement units or surge protectors. Kottsick indicated she will be out of the ojfice on August 24 and 27th. She will be available for emergency paging if necessary. Kottsick asked for volunteers to serve, clean up and set up for the Parh, iew Villa Annual Picnic on Thursday, August 30~ from 5.'30 - 7:30p.m. Nawrocki, Peterson, Ruettimann, and Schumacher volunteered. ITEMS FOR CONSIDERATION. Other Resolutions. Review 2002 Budget and Approve Resolution 2001-12, Setting the EDA Local Lew Ruettimann requested Board members look over the Budget and contact him with any questions or comments prior to the next EDA meeting on September 18th. He will research the questions and provide answers to the Board at the September meeting. MOTION by Peterson, second by Williams, to waive the reading of EDA Resolution 2001-12, there being ample copies available to the public. All Ayes. Motion Carried. MOTION by Peterson, second by Williams, to adopt EDA Resolution 2001-12, being a Resolution of the Columbia Heights EDA adopting a Budget and recommending setting the EDA Local Levy. Upon Vote: Peterson- Aye, Williams- Aye, Nawrocki- Nay, Wyckoff- Aye, Jindra- Aye. Motion Carried. Bid Considerations. Physical Condition Audit for Parkine Ramps Schumacher stated on February 17, 2001, the EDA Board requested Clark Engineering be contacted to submit an amended proposal to perform a Physical Condition Audit on the Columbia Park Medical Group Parking Ramp, with the same issues as outlined by Vedi and Associates, Inc. Vedi's bid to conduct both parking ramp audits was $6,000 each, for a total of $12,000, plus $620 for concrete testing allowance. Clark 's proposal for the evaluation of both ramps was based on a similar work scope, and came in at $3,000, which included Chloride Ion testing. Kevin Hansen, City Engineer, reviewed both proposals and verbally recommended Clark Engineering to perform the audits. $chumacher stated that the last page of Clark 's proposal lists five issues that are not covered in the audit and he felt the only thing missing in the proposal was the study. Ruettimann felt we should get an eight year contract with Clark, so the ramps can be reviewed every two years. Nawrocki questioned the ability of Clark's employees to do the work. Schumacher stated Gordon Awsumb has used Clark in the past and highly recommended them for the job. MOTION by Peterson, second by Jindra, to approve the bid proposal from Clark Engineering to perform a Physical Condition Audit on the City owned Parking Ramps located at 4011 Van Buren Street and 3989 Central Avenue in the amount of $3,000; and furthermore, to authorize the President and Executive Director to enter into an agreement for the same. All Ayes. Motion Carried. Economic Development Authority Minutes August 21,2001 Page 3 of 5 Other Business. Roger Flick Hearing. Nagel reported that on January 26, 2001, Mr. Flick, 4622 Tyler Street NE, Apt. 6, applied for housing at Parkview Villa North under the disability/handicapped requirement. On the application he stated he had never convicted of a crime other than traffic violations. However, when Kottsick did the required background check, the records said he plead guilty and was convicted of a felony, for which he received 20 years probation. To date, he has served nine years of the probation without incident. On May 10, Kottsick informed him that his application for housing was denied due to his history of criminal activity involving a crime of physical violence to persons orproperty, or a record of other criminal acts, which would adversely affect the health, safety, or welfare of other residents (Part II, B-5 of the Parkview Villa Occupancy Policy). On Tuesday, June 19th an informal hearing was held before Community Development Staff at which time Flick presented letters from Anoka County Human Services Division, Family Life Center, and his Counselor, Sari Halabi from Sils, indicating his employment, that he is a responsible tenant, and had no violations ofhis parole. On June 27th, staff upheld the decision of the Housing Manager. Flick requested a hearing before the EDA Board. Halabi provided the following information on Mr. Flick: Flick is an adult receiving disability assistance from Anoka County, he was married with Mo children, is divorced and stated that during the divorce proceedings his ex-wife accused him of sexually abusing his daughter, which he was convicted. But, there was never any physical evidence proving this happened, and he was put on probation for 20 years. Halabi assists Flick with his financies, visitations with his son, and housing. Currently he is living in a unit that has been sited with over 27 violations and is raising the rent $100 a month on September 1. Halabi indicated, there was no reason to deny Flick residency at Parkview Villa North. Nawrocla' questioned if Flick 's Section 8 Voucher would be accepted in the unit where he is currently living and if he applied at the ACCAP Group Home on 47tn and Central. Halabi stated the owners of the apartment complex do not except residents on the Section 8program, and Flick does not qualify under ACCAP's regulations. Nawrocki then questioned if the Anoka County Shelter would take his Section 8 Voucher. Halabi responded that would not apply as that would only be temporary housing. Flick spoke for himself and stated he did not touch his daughte, r and did his best to provide for his family. Ruettimann and Nawrocki indicated they understood the situation Mr. Flick was in, but felt as a governing board for the EDA they would have to comply with Parkview Villa policies. Williams asked why Flick filled in on his application that he did not have a criminal background. Halabi stated it was a mistake on his part, as he helped Flick fill out the form. Williams then offered to assist Flick and Halabi in clearing Flick's record though the court system. MOTION by Jindra, second by Nawrocki, to deny Mr. Flick's application for housing at Parkview Villa North upon the application being incorrectly submitted. This is based on Section 2, Paragraph 2-B, number 5, states "A history of criminal activity involving crimes of physical violence to persons or property or a record of other criminal acts which would adversely affect the health, safety or welfare of other residents". All Ayes. Motion Carried. Building Plans for Habitat for Humanity at 3915 Polk Street NE and 4401 Quincy Street Schumacher explained at the August 2001 meeting, the EDA Board requested that Habitat for Humanity provide color pictures, detailed dimensions, etc. on the building plans for 3915 Polk Street NE and 4401 Quincy Street NE. Mr. Powell, Habitat for Humanity Representative, was present to ask for a preferred design and to answer any questions about the designs. Ruettimann picked a recommended Twin Home design for 4401 Quincy Street. Jindra indicated she looked at a few Habitat homes and highly approved of their design and construction. Economic Development Authority Minutes August 21, 2001 Page 4 of 5 Nawrocki indicated that at a previous EDA meeting it was discussed that Habitat shouM consider taking the existing garage off3915 Polk Street or design a different entrance to the garage as it would be very hard to enter the garage where it is positioned on the property. Plans for the property still show no difference in the garage entrance. Powell stated that Habitat had intentions to re-roof andplace siding on the garage, however, after reviewing the plans agreed that a different entrance to the garage would be necessary. Powell will follow up on this with Habitat staff to make the design changes. Wyckoff felt the plans were not allowed to be reviewed by the public, therefore, the Board should not make any decisions on the designs. Schumacher stated that the plans were reviewed at the Public Hearing in August, the Legal notices for the sale and Public hearing were in the Focus Newspaper, and on the local cable channel; and therefore, all necessary publicity and steps have been followed. It was by Board request that better designs be submitted at this meeting for approval before the structures were actually started. Wyckoff requested Habitat contact the neighbor regarding a fence issue. MOTION by Peterson, second by Williams, to approve Model 2SE3 building plan for 3915 Polk Street N.E. and the Twin Home building plan for 4401 Quincy Street N.E. bom Habitat for Humanity. Upon Vote: Peterson- Aye, Williams- Aye, Jindra- Aye, Nawrocki- Nay, Wyckoff- Aye. Motion Carried. Exoending Parkview Villa North Funds for 2001 Capital Improvement Proiects Nagel indicated the boiler, header, and HVA C need approximately $30,000 in repairs prior to the cold weather season. The Capital Improvement Projects funds for this project will not be approved until October and available until next year. He proposed using existing revenue funds from Parkview Villa North at this time, and replacing the funds when the CIdP funds are approved for 2002. MOTION by Pet~rson, second by Wyckoff, to authorize the expenditure of up to $30,000 from Parkview Villa North reserve funds for repairs to the boiler/header/valve and HVAC pending confirmation of availability of funds by the Finance Department; and furthermore, authorize staffto solicit bids for the work and bring back for Board review and approval. All Ayes. Motion Carried. Home Morteaee Loan and Business Loan Repayments. Nagel indicated that at the July 2001 EDA meeting the Board requested staff obtain background as to where the funds from repayment of the Home Mortgage and Business Revolving Loans were deposited over the years. In reviewing the budget these repayments were placed into the HRA administration 299 account, along with HIM levy dollars and used to repay development costs incurred with the Sheffield Redevelopment Project. Therefore, no funds have been set aside for futare business loans. Staff recommended an account be established for the Business Revolving Loan Fund with the approximate amount of $34,0OO from the sale of the two home mortgage loans and all future business loan repayments be placed in this account; and to direct staff to determine the total amount of past repayments and place them into the new Business Revolving Loan Fund. MOTION by Peterson, second by Williams, to establish an account for the Business Revolving Loan Fund, which will include the revenue from the sale of the Neilsen and Chartraw Home Mortgage Loans, and all future loan repayments from outstanding business loans. All Ayes. Motion Carried. ADMINISTRATIVE REPORTS. Report of the Acting Deoutv Executive Director. Hoeft Opinion Schumacher explained that at the July EDA meeting the Board requested a written letter from the City Attorney be obtained stating that Crest View is not required to obtain a Broker's License to manage the facility for the EDA. Economic Development Authority Minutes August 21,2001 Page 5 of 5 Angela Tomala Lawsuit Schumacher presented a letter from Attorney, Martha K. Sieber, of Candlin & Heck, for Angela Tomala, stating that the lawsuit was settled with St. Paul Mercury Insurance Company on behalf of the City of Columbia Heights, agreeing to pay $2,500 and the insurer for Lagerquist Elevator Co. paying an additional $2,500, for a total settlement of $5,000. Other Committee Reports Resident Council Minutes Jindra presented the report of the Resident Council meeting of August ]3, 200]. There were no questions or comments on the report. Attachments. Housing, Uodate Nagel explained some of the Housing Projects that he was currently worlffng on: 1) A purchase agreement for 3718 Central Avenue has been executed, and negotiations are under, ray for the purchase of 3722 Central Avenue; 2) Documentation was sent to Community Reinvestment Fund to buy the EDA 's Home Mortgage Loans for approximately $34,000; 3) The PHA Plan draft is complete and will be sent to all Commissioners next week for review before the Public Hearing, which is scheduled for the September EDA meeting; 4) The Section 8 repayment agreement with Mr. Hagen has been declared uncollectible and written-off' 5) As of July 31~t approximately 2/3 of Anoka County's allocation remained in the MHFA First Time Homebuyer Program. The interest rate dropped from 6.05%to5.95%, effective July l8th; 6) The median rent nationwide for a 2 room apartment (efficiency) is $446, a 4 room apartment (1 bedroom) is $549, a 6 room apartment (2 bedroom) is $656, and anything larger is $801. In the Minneapolis-St. Paul area figures average almost $150 a month higher; 7) A letter was sent to Millar Elevator to acquire Davis Bacon in formation for the elevator modernization project that was performed at Parkview Villa last year; 8) A tentative closing date for the purchase of 4401 Quincy Street NE and the sale of both Quincy and 3915 Polk Street properties is set for Friday, September 14th,· 9) As of the end of July, the amount of closed loans totaled over $1 million for the Home Improvement Program. A total of 85 loans have been closed with 18 loans still in process; 10) The EDA needs to show activity, any changes, and funds that will be generated on each of the 56parcels in the scattered site district P3, or they will be dropped on September 8, 2002. Ehlers and Associates is working with staff to make the projections for the remaining 21 years in the district; and lO MHFA has provided staff with copies of a video entitled"Discover Homeownership" which is available for reviewing to residents. MEETINGS The next EDA meeting is scheduled for 6:30 p.m., Tuesday, September 18, 2001 in Community Room B at Parkview Villa. .ADJOURNMENT The meeting was adjourned at 8:41 p.m. by President Ruettimann. Respectfully submitted, Cheryl Bakken Recording Secretary H:\EDAminutes2001 \8-21-2001 COLUMBIA HEIGHTS PUBLIC LIBRARY BOARD OF TRUSTEES MINUTES September 4, 2001 The meeting was called to order by Chair, Barbara Miller at 7:00 p.m. Those present were Nancy Hoium, Patricia Sowada, Catherine Vesley, Barbara Miller, and Becky Loader. It was moved, seconded, and passed to approve the minutes of the August 7, meeting as mailed. The C.H.A.S.E. bill list was reviewed. It was moved, seconded, and passed that they be paid. The bill list of August 27, 2001, was reviewed. It was moved, seconded, and passed that they be paid. The accounting was reviewed. Old Business: 1. 2002 proposed budget was discussed. The City Council is having a work session tonight to discuss several items including the proposed budget. Paperwork for the detailed budget is to be distributed tomorrow. A preliminary levy will be set at the next regular Council Meeting. The Board decided that they would like the budget meeting with the City Council to be held on the previously discussed evening of October 2nd, at 7:00 p.m. A short business meeting by the Board will be held that same evening at 6:30 p.m. 2. There are no local elections to be held in Columbia Heights this year. This allows the Board to meet on their regularly scheduled evening, November 6. 3. Catherine Vesley attended the volunteer recognition luncheon. Both teen and adult volunteers were honored that day. 4. Three new pages have passed their tests and are working regular shifts beginning today. Applications will be taken Sept. 4th through the 21st for additional openings. Richard Hubbard's letter of resignation was acknowledged. He will be honored by the City Council for his 12 years of service. The Board will be informed when this will take place in order to be present. Dave Holmgren, from the Heights Theater, has expressed an interest in applying for the vacant Board position and has been mailed an application. The report from Patrick Jones concerning Young Adult services in the Twin Cities was reviewed. The Board was impressed with how often Columbia Heights was mentioned, and the programs that have been implemented here. The Board commended Marsha for all of her ideas and hard work. 7. The pictures from the American Girl Tea Party were shared with the Board. The booklists that were prepared for the public school open houses were distributed to the Board. Central Middle School Open House was attended last week and the Children's Department will have representatives at the Elementary and High School Open Houses later this month. 9. The Board reviewed the no contact order against John George Minea. New Business: 1. The Automated Circulation System was down all day on Saturday, August 18. A wire was accidentally severed during maintenance work being done near Library Support Services in Blaine. The system was back up on Sunday and Rachel, who was doing bookdrnp that day, managed to discharge and shelve all materials from Saturday and the book drop. 2. This Saturday September 8, the library will change its Saturday hours to 10:00 to 4:00. 3. Crossover statistics were reviewed. The statewide campaign sponsored by MELSA called "Leave a Legacy Minnesota" was discussed. This campaign encourages people to leave money to their library or other charitable non-profit organization. The library has received brochures and bookmarks with this theme for distribution. The Library Board was very enthused about this program and would like to get this information out to the community. They discussed once again pursuing the establishment ora Foundation. They would like to have an open house during National Library Week. They requested the Friends of the Library be approached to also distribute information about this campaign. There being no further business the meeting was adjourned at 8:00 p.m. Respectfully submitted, J~(anine M. Schmidt Secretary to the Library Board of Trustees. The City of Columbia Heights does not discriminate on the basis of disability in the admission or access to, or treatment or employment in, its services, programs, or activities. Upon request, accommodation will beprovided to allow individuals with disabilities to participate in all City of Columbia Heights services, programs, and activities. 2