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Home My WebLink About1999-05-18; City Council; 15209 Exhibit 4; Poinsettia Station Affordable Apartment Project13061-09 JH:TAD:SFtF 4/01/99 4/15/99 5/03/99 CITY OF CARLSBAD as ISSUER and BANK ONE TRUST COMPANY, N.A. as TRUSTEE INDENTWE OF TRUST Dated as of June 1,1999 Relating to $4,450,000 City of Carlsbad Multifamily Housing Mortgage Revenue Bonds (Poinsettia Station Apartments ) Series 1999A $1,075,000 City of Carlsbad Multifamily Housing Mortgage Revenue Bonds (Poinsettia Station Apartments) Series 1999B and $800,000 City of Carlsbad Taxable Multifamily Housing Mortgage Revenue Bonds (Poinsettia Station Apartments) Series 1999B-T TABLE OF CONTENTS ARTICLE 1 DEFINITIONS, EXHIBITS AND GENERAL PROVISIONS Section 1 .l . Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Section 1.2. Rules of Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE 2 THE BONDS Section 2.1. Authorized Amount and Form of Bonds.. ....................................................................... 16 Section 2.2. issuance of Bonds ....................................................................................................... 17 Section 2.3. Execution. ................................................................................................................ 19 Section 2.4. Authentication ........................................................................................................... 19 Section 2.5. Conditions Precedent to the Delivery of Bonds ................................................................ 19 Section 2.6. [Reserved]. ................................................................................................................ 20 Section 2.7. Mutilated, Lost or Destroyed Bonds. ............................................................................. 20 Section 2.8. [Reserved]. ................................................................................................................ 20 Section 2.9. Ownership of Bonds.. ................................................................................................. 20 Section 2.10. [Reserved]. .............................................................................................................. 20 Section 2.11. Registration, Transfer and Exchange of Registered Bonds ............................................... 21 Section 2.12. Nonpresentment of Bonds .......................................................................................... 22 Section 2.13. [Reserved]. ............................................................................................................... 22 Section 2.14. Destruction of Bonds. ............................................................................................... 22 Section 2.15 Restrictions on Transfer.. ........................................................................................... 22 ARTICLE 3 REDEMPTION AND PURCHASE OF BONDS BEFORE MATURITY Section 3.1. Redemption and Purchase. ,.....................................,................,......,..........,................ 23 Section 3.2. Notice of Redemption or Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 3.3. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 3.4. Method of Redemption or Purchase. . . . . . . . . . . , . . . . . . . . . . . . . . . . . . . . . . . . , , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 ARTICLE 4 GENERAL COVENANTS Section 4.1. Payment of Principal, Premium and Interest .................................................................. 26 Section 4.2. Performance of Covenants. .......................................................................................... 26 Section 4.3. instruments of Further Assurance.. .............................................................................. 27 Section 4.4. Recording and Filing. ................................................................................................ 27 Section 4.5. Books and Records., .................................................................................................... 27 Section 4.6. Bondholders’ Access to Bond Register.. .......................................................................... 27 Section 4.7. Rights Under Loan Agreement. ................................................................................... 28 Section 4.8. Rights Under Mortgage. ............................................................................................. 28 ARTICLE 5 FUNDS AND ACCOUNTS Section 5.1. Trust Funds P/edged and Assigned to the Trustee. ......................................................... 28 Section 5.2. Project Fund; Disbursement of Project Funds ................................................................ 28 Section 5.3. Revenue Fund.. ................................................................................................... 29 Section 5.4 Bond Fund. ............................................................................................................... 31 Section 5.5. Reserved.. .............................................................................................................. 32 Section 5.6. Deposit of Funds With Paying Agent.. .......................................................................... 32 Section 5.7. Rebate Fund ............................................................................................................. 32 Section 5.8. Mortgage Recovery Fund ............................................................................................ 33 Section 5.9. Servicing Fund.. ....................................................................................................... 34 Section 5.10. Costs of issuance Fund, ............................................................................................ 35 -i- Section 5.11. [Reserved]. .............................................................................................................. 35 Section 5.12. Interest Earned on Funds.. ........................................................................................ 35 Section 5.13. Final Balances . ........................................................................................................ 35 ARTICLE 6 INVESTMENTS Section 6.1. Investments by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 6.2. Computation of Balances in Funds. . , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , . . . . . . , . . . . . . . . . . . . . . . . 36 Section 6.3. Downgrade of Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , . . . . . . , . , . . . 36 ARTICLE 7 DISCHARGE OF LIEN Section 7.1. Payment of Bonds; Satisfaction, Defeasance and Discharge of Bonds and Obligation to Bondholders.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 7.2. Cancellation of Surrendered Bonds. . . . . ,... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , . . . . . . . . . . , . . . . . . . . . . . . . . . . , . , . . 38 Section 7.3. Payment of Bonds. . . . . . . . . . . . . . . ..,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 7.4. Application of Deposited Money. . . , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , . . . . . . . . . . , . . . . . . . . . . . . . . . . . , . , 38 Section 7.5. Survival of Certain Provisions. . . . . . . . . . ., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 ARTICLE 8 DEFAULT PROVISIONS AND REMEDIES Section 8.1. Events of Default. ...................................................................................................... 38 Section 8.2. Acceleration. ............................................................................................................. 39 Section 8.3. Remedies.. ................................................................................................................ 39 Section 8.4. Direction of Proceedings by Bondowner Representative .................................................... 40 Section 8.5. Waiver of Stay or Extension Laws.. ............................................................................... 40 Section 8.6. Priority of Payment and Application of Moneys. ............................................................. 40 Section 8.7. Remedies Vested in Trustee.. ....................................................................................... 42 Section 8.8. Rights and Remedies of Holders.. ................................................................................. 42 Section 8.9. Termination of Proceedings. ........................................................................................ 42 Section 8.10. Waiver of an Event of Default. ................................................................................... 43 ARTICLE 9 THE TRUSTEE Section 9.1. Acceptance of the Trustee. ........................................................................................... 46 Section 9.2. Trustee’s Fees, Charges and Expenses ........................................................................... 46 Section 9.3. Notice to Holders of Default.. ....................................................................................... 46 Section 9.4. intervention by Trustee. ............................................................................................. 46 Section 9.5. Successor Trustee. ..................................................................................................... 46 Section 9.6. Resignation by Trustee,. ............................................................................................. 46 Section 9.7. Removal of Trustee.. ................................................................................................... 47 Section 9.8. Appointment of Successor Trustee ................................................................................ 47 Section 9.9. Acceptance by Successor Trustees ................................................................................. 47 Section 9.10. Right of Trustee To Pay Taxes and Other Charges.. ....................................................... 47 Section 9.11. Trustee Protected in Relying Upon Resolutions ............................................................ 48 Section 9.12. Successor Trustee as Custodian of Funds and Paying Agent.. ......................................... 48 Section 9.13. Co-Trustee. ............................................................................................................. 48 Section 9.14. Obligations as to Reporting ........................................................................................ 49 Section 9.15. Appointment of Bond Registrar and Paying Agent. ....................................................... 49 Section 9.16. Successor Paying Agent or Bond Registrar ................................................................... 49 Section 9.17. Confirmation of the Trustee. ...................................................................................... 49 Section 9.18. Certain Representations of Trustee .............................................................................. 50 ARTICLE 10 SUPPLEMENTAL INDENTURES Section 10.1. Supplemental indentures Not Requiring Consent of Bondholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 10.2. Supplemental Indentures Requiring Consent of Bondholders... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 -ii- - Section 10.3. Rights of Trustee ...................................................................................................... 52 Section 10.4. Opinion of Bond Counsel.. ........................................................................................ 52 ARTICLE 11 AMENDMENTS TO LOAN DOCUMENTS Section 11.1. Amendments Not Requiring Bondholder Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 11.2. Amendments Requiring Bondholder Consent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 11.3. Opinion of Bond Counsel. . . . . . . . . . . . . . . . . . . . . . , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , . .,. , . . . . . . , . . . . . , . . . . . . . . . . . . . 53 Section 11.4. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 ARTICLE 12 MISCELLANEOUS PROVISIONS Section 12.1. Consent of Holders.. ................................................................................................. 54 Section 12.2. Rights Under Indenture.. .......................................................................................... 54 Section 12.3. Severability ............................................................................................................. 54 Section 12.4. Notices. .................................................................................................................. 54 Section 12.5. Required Approvals.. ................................................................................................ 56 Section 12.6. Counterparts. .......................................................................................................... 56 Section 12.7. Limitation of Liability of issuer and Its Officers, Employees and Agents ........................... 56 Section 12.8. Reserved.. ............................................................................................................... 57 Section 12.9. Complete Agreement ................................................................................................. 57 EXHIBIT A (FORM OF REQUISITION CERTIFICATE) PROJECT FUND EXHIBIT B (FORM OF REQUISITION CERTIFICATE) MORTGAGE RECOVERY FUND EXHIBIT C FORM OF BOND EXHIBIT D INVESTOR’S LETTER EXHIBIT E MANDATORY SINKING FUND REDEMPTION SCHEDULE . . . -lll- INDENTURE OF TRUST THIS INDENTURE OF TRUST (this “Indenture”) dated as of June 1, 1999 by and between the City of Carlsbad, a municipal corporation organized and existing under the laws of the State of California (the “Issuer”), and Bank One Trust Company, N.A., a national banking association established, existing and authorized to accept and execute trusts of the character herein set out, with its principal corporate trust office in Phoenix, Arizona, as trustee (the “Trustee”): WITNESSETH: WHEREAS, the Issuer is authorized by Chapter 7 of Part 5 of Division 31 (commencing with Section 52075) of the California Health and Safety Code (the “Act”) and a resolution of the City Council adopted on May 18, 1999 (the “Resolution”) to issue revenue bonds and apply the net proceeds thereof to make mortgage loans and to provide financial assistance to developers of housing for the purpose of financing the construction, development, rehabilitation or purchase of residential housing for persons of low and moderate income; and WHEREAS, the Issuer deems it desirable and in keeping with its purposes to issue its multifamily housing mortgage revenue bonds in three series designated, respectively, City of Carlsbad Multifamily Housing Mortgage Revenue Bonds (Poinsettia Station Apartments) Series 1999A (the “Series A Bonds”), City of Carlsbad Multifamily Housing Mortgage Revenue Bonds (Poinsettia Station Apartments) Series 1999B (the “Series B Bonds”) and City of Carlsbad Taxable Multifamily Housing Mortgage Revenue Bonds (Poinsettia Station Apartments) Series 1999B-T (the “Series B-T Bonds” and, together with the Series A Bonds and the Series B Bonds, the “Bonds”) to fund a loan (the “Loan”) to Poinsettia Housing Associates, a California limited partnership (the “Borrower”), to acquire, construct and develop the Poinsettia Station Apartments (the “Project”), a 92-unit residential housing complex to be constructed and located near the northwest corner of Poinsettia Lane and Avenida Encinas, in Carlsbad, California; and WHEREAS, under the terms of a Loan Agreement dated as of June 1, 1999, the Issuer has agreed to make the Loan to the Borrower; and the Borrower has agreed to the repayment of the sums borrowed pursuant thereto and has executed or caused to be executed the Mortgage and the Loan Documents (as such terms are hereinafter defined) with respect to the Project to secure, among other things, its payment and other obligations under the Loan Agreement; and WHEREAS, the execution and delivery of this Indenture and the issuance of the Bonds have been in all respects duly and validly authorized by the Issuer; and WHEREAS, terms not otherwise defined in the recitals or granting clauses hereof shall have the meanings as hereinafter defined; and WHEREAS, all things necessary to make the Bonds, when issued as provided in this Indenture and authenticated by the Trustee, valid, binding and legal limited obligations of the Issuer according to the import thereof, and to constitute this Indenture a valid contract for the security of the Bonds, have been done and performed: and the execution and delivery of this Indenture, and the execution, delivery and issuance of the Bonds, subject to the terms hereof, have in all respects been duly authorized: NOW THEREFORE, KNOW ALL PERSONS BY THESE PRESENTS, THIS INDENTURE WITNESSETH: GRANTING CLAUSES The Issuer, in consideration of the premises and the acceptance by the Trustee of the trusts hereby created and of the purchase and acceptance of the Bonds by the Holders thereof, in order to secure the payment of the principal and premium, if any, of 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 presently grant, assign, transfer in trust, and pledge to the Trustee, and to its successors in trust, and to them and their assigns, the following: GRANTING CLAUSE FIRST All right, title and interest of the Issuer (excluding Unassigned Rights) in and to the Loan Agreement and the Notes, including, but not limited to, all sums (including Project Revenues) which the Issuer is entitled to receive from the Borrower pursuant to the Loan Agreement and the Notes (but excluding Unassigned Rights), all moneys and investments held in Funds and accounts held by the Trustee under this Indenture (excluding moneys and investments held in the Rebate Fund and rebatable arbitrage required to be deposited in the Rebate Fund), and all other sums required to be deposited in the Funds and accounts in accordance with Article 5 of this Indenture: GRANTING CLAUSE SECOND All the Issuer’s right, title and interest in all property mortgaged, pledged and assigned under the Mortgage and the Loan Documents to secure the Bonds, all rights, remedies and amounts payable under the Guaranty and any and all other property of every name and nature which may from time to time hereafter by delivery or by writing of any kind be subjected to the lien hereof by the Issuer or by anyone on its behalf or with its written consent, and the Trustee is hereby authorized to receive any and all such property at any and all times and to hold and apply the same as additional security hereunder subject to the terms hereof; and GRANTING CLAUSE THIRD The earnings derived from the investment of any of the foregoing sums (excluding moneys and investments held in the Rebate Fund and rebatable arbitrage required to be deposited in the Rebate Fund) as provided herein. TO HAVE AND TO HOLD all the same (herein called the “Trust Estate”) with all privileges and appurtenances hereby granted and assigned, or agreed or intended so to be, to the Trustee and its successors in trust and to them and their assigns forever: IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth, for the equal and proportionate benefit, security and protection of all Holders from time to time of the Bonds issued under and secured by this Indenture, without privilege, priority or distinction as to the lien or otherwise of any of the Bonds over any of the others except as otherwise provided herein, all for the uses and purposes and upon the terms, agreements and conditions set forth herein; PROVIDED, HOWEVER, that if the Issuer, its successors or assigns, shall well and truly pay, or cause to be paid, or provide fully for payment as herein provided of the principal of the Bonds and the interest due or to become due thereon (together with premium, if any), at the time and in the manner set forth in the Bonds according to the true intent and meaning thereof, and shall make the payments into the Bond Fund as required hereby or shall provide, as permitted hereby, for the payment thereof by depositing with the Trustee sums sufficient for -2- payment of the entire amount due or to become due thereon as herein provided, and shall well and truly keep, perform and observe all the covenants and conditions pursuant to the terms of this Indenture to be kept, performed and observed by it, and shall pay to the Trustee all sums of money due or to become due to it in accordance with the terms and provisions hereof, then this Indenture and the rights hereby granted shall cease and terminate, except as otherwise provided herein. THIS INDENTURE FURTHER WITNESSETH, and it is expressly declared, that all Bonds issued and secured hereunder are to be issued, authenticated and delivered and all payments, revenues, income and funds hereby pledged and assigned, are subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes hereinafter expressed, and the Issuer has agreed and covenanted, and does hereby agree and covenant, with the Trustee and with the respective holders and owners of the Bonds, as follows: ARTICLE 1 DEFINITIONS, EXHIBITS AND GENERAL PROVISIONS Section 1.1. Definitions. In this Indenture the following terms have the following meanings unless the context hereof clearly requires otherwise, and any other terms defined in the Loan Documents shall have the same meanings when used herein as assigned them in the Loan Documents unless the context or use thereof indicates another or different meaning or intent: “Act” means Chapter 7, Part 5 of Division 31 of the Health and Safety Code of State of California. “Act of Bankruptcy” means any of the following events: (4 The Borrower or the Issuer shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of the Borrower or the Issuer or of all or a substantial part of the property of the Borrower or the Issuer, (ii) commence a voluntary case under the Bankruptcy Code (as now or hereafter in effect) or (iii) file a petition with respect to itself seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding- up or composition or adjustment of debts: or 04 A proceeding or case shall be commenced without the application or consent of the Borrower or the Issuer, as the case may be, in any court of competent jurisdiction, seeking (i) the liquidation, reorganization, dissolution, winding-up or the composition or adjustment of debts of the Borrower or the Issuer, (ii) the appointment of a trustee, receiver, custodian or liquidator of the Borrower or the Issuer or of all or any substantial part of the assets of the Borrower or the Issuer, or (iii) similar relief in respect of the Borrower or the Issuer under any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts and such proceeding or case shall not be dismissed within 60 days of such filing. For purposes of this Indenture and the Loan Agreement, an Act of Bankruptcy shall be deemed dismissed only if (i) the petition is dismissed by order of a court of competent jurisdiction and no further rights exist from such order and (ii) the Borrower or the Issuer, as the case may be, notifies the Trustee that such a dismissal has occurred. “Additional Charges” means payments required to be paid by the Borrower pursuant to Section 4.3 of the Loan Agreement. -3- “Arbitrage Consultant” or “Rebate Consultant” means any accountant, law firm or consultant experienced in the calculation of arbitrage rebate selected by the Borrower and approved by the Issuer. “Architect” means Studio E or any other architect for the Project selected by the Borrower and approved by the Bondowner Representative. “Architectural Contract” means that certain contract executed between the Architect and the Borrower and dated as of April 9, 1999, as that contract may be amended from time to time after receipt of the written consent of the Bondowner Representative. “Authorized Denominations” means minimum denominations of $100,000 or any integral multiples of $1,000 in excess of $100,000. “Bank” means Bank of America, FSB, a federal savings bank or its successors and assigns. “Bankruptcy Code” means the United States Bankruptcy Reform Act of 1978, as amended, or any similar or succeeding federal bankruptcy law. “Basic Payments” means the payments required to be made by the Borrower pursuant to Section 4.2 of the Loan Agreement. “Bond Closing” means the delivery by the Issuer of, and an initial advance of the purchase price of, the Bonds. “Bond Counsel” means any bond counsel firm experienced in tax exempt private activity bond financing selected by the Issuer. “Bond Documents” means this Indenture, the Loan Agreement, the Regulatory Agreement and the Tax Certificates. “Bond Fund” means the Fund created by Section 5.4 of this Indenture. “Bondholder” or “Holder” means the person in whose name a Bond is registered in the Bond Register. ” Bondowner Representative” means (i) the Bank or any affiliate of BankAmerica Corporation (or any successor to BankAmerica Corporation, whether by merger, acquisition of assets or otherwise), so long as the Bank or such affiliate owns any of the Bonds; (ii) if neither the Bank nor any affiliate of BankAmerica Corporation (or any such successor) owns any of the Bonds, then (a) if and so long as one Bondholder holds a majority in principal amount of all Outstanding Bonds, such Bondholder or a person appointed to be the Bondowner’s Representative by such Bondholder: and (b) if and so long as no one Bondholder owns a majority in principal amount of all Outstanding Bonds, the Bondholder who holds the greatest principal amount of all Outstanding Bonds. “Bond Register” means the bond register maintained by the Bond Registrar pursuant to Section 2.11 of this Indenture. “Bond Registrar” means the Trustee and any successor thereto appointed, qualified and then acting as such under the provisions of this Indenture. -4 “Bonds” means the Series A Bonds, the Series B Bonds and the Series B-T Bonds. “Bond Year” means the one-year period beginning on June 2 and ending on the next succeeding June 1 provided that the first Bond Year shall begin on the date of the Bond Closing and end on June 1,200O. “Borrower” means Poinsettia Housing Associates, a California limited partnership, authorized to do business in the State, its successors and assigns, and any surviving, resulting or transferee entity which may assume its obligations under the Loan Documents. “Business Day” means any day other than a Saturday, Sunday, legal holiday or a day on which banking institutions in New York City and in the city where the principal corporate trust office of the Trustee and the Bond Registrar are located are authorized by law or executive order to close. “Code” or “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended, and, with respect to a specific section thereof, such reference shall be deemed to include (a) the regulations promulgated by the United States Department of the Treasury under such section, (b) any successor provision of similar import hereafter enacted, (c) any corresponding provision of any subsequent Internal Revenue Code and (d) the regulations promulgated under the provisions described in (b) and (c). “Completion Date” means the date shown as the Completion Date in Schedule E to the Loan Agreement, or such later date as the Bondowner Representative approves. “Computation Year” means each one year period ending on June 1, 2000 and each anniversary thereof. “Condemnation” or the phrase “eminent domain” as used herein shall include the taking or requisition by Governmental Authority or by a person, firm or corporation acting under governmental authority and a conveyance made under threat of such taking or requisition, and “Condemnation Award” shall mean payment for property condemned or conveyed under threat of Condemnation. “Construction Contract” means that certain construction contract executed between Algire General Contractors, a California corporation, and Borrower and dated as of May 25, 1999, as that contract may be amended from time to time with the consent of the Bondowner Representative. “Conversion” means the satisfaction of the conditions set forth in Schedule I to the Loan Agreement with respect to a series of Bonds, which shall occur, if at all, not later than December 1, 2000. “Conversion Date” means, as applicable, the date on which the Conversion with respect to the Series A Bonds occurs or date on which the Conversion with respect to the Series B Bonds and the Series B-T Bond occurs (or, if not a Business Day, the immediately following Business Day). “Costs of Issuance” means, with respect to any Bonds, all expenses incurred in connection with the authorization, sale, issuance and delivery of the Bonds, including, without limitation, counsel fees (including Bond Counsel, Trustee’s Counsel and Issuer’s counsel, as well as any other specialized counsel fees incurred in connection with the issuance of the Bonds), Issuer’s costs, financial advisory fees and accountant fees related to issuance of the Bonds, initial Trustee, Registrar and Paying Agent fees, title insurance fees, survey fees and recording and -5 filing fees, including any applicable documentary stamp taxes, intangible tax and the mortgage registration tax. “Costs of issuance Fund’ means the fund created by Section 5.10 of this Indenture. “Current Expenses” means all operating expenses of the Borrower which are not otherwise specifically described in Section 5.9(2) of this Indenture, including administrative expenses and property management fees with respect to the Project incurred in its ordinary operations. “Dated Date”means the date upon which the Bond Closing occurs. “Debt Service on the Bonds” means, for any period, the interest amounts and principal amounts payable by the Borrower during such period pursuant to Section 4.2 of the Loan Agreement sufficient to pay all principal of, and interest as and when due on, the Bonds. “ Debt Service Coverage Ratio” or “ DSCR” means the ratio of NOI, as calculated on any date of determination for a given period, to Debt Service on the Bonds, as calculated on the same date of determination for the same period. “Default Rate” means the interest rate equal to four percent (4.0%) in excess of the Reference Rate: provided, however, such rate shall not exceed the maximum interest rate permitted by applicable law. ” Defeasance Collateral” shall have the meaning set forth in Section 7.1 of this Indenture. “Determination of Taxability” means a final judgment or order of a court of original jurisdiction, a final order of any other court of competent jurisdiction, or a final ruling or decision of the Internal Revenue Service, in any such case to the effect that the interest on any of the Tax-Exempt Bonds (other than interest on any Tax-Exempt Bond for a period during which such Tax-Exempt Bond is held by a “substantial user” of any facility financed with the proceeds of the Bonds or a “related person,” as such terms are used in Section 147(a) of the Code) is not excludable from the gross income of the owners thereof for federal income tax purposes. With respect to the foregoing, a judgment or order of a court or a ruling or decision of the Internal Revenue Service shall be considered final only if no appeal or action for judicial review has been filed and the time for filing such appeal or action has expired. “Discharge Date” means the date on which all Outstanding Bonds are discharged under Article 7 of this Indenture. “Event of Default” means any of the events set forth in Section 8.1 of this Indenture. “Extraordinary Fees and Expenses” means all fees and expenses charged or incurred by the Trustee under this Indenture or Section 4.3 of the Loan Agreement, other than Ordinary Fees and Expenses. “Extraordinary Revenues” means Proceeds, but such term shall not include business interruption insurance proceeds and rental loss insurance proceeds. “Facility” means the buildings and improvements located on the Project Premises as they may now or from time to time exist. “FHLB-C/P Advance index Rate” means the rate at which the Federal Home Loan Bank advances funds to its members for its Community Investment Program with a stated maturity date nearest in time to the month (or to the nearest month thereafter if unavailable) in which the -6- Maturity Date occurs for the applicable Series of Bonds. If such a rate ceases to exist or is no longer available or quoted by the Federal Home Loan Bank, then the “FHLB-CIP Advance Index Rate” shall be the rate announced from time to time by the source most comparable to the Federal Home Loan Bank Community Investment Program rate, as published in a periodic publication of general circulation, and as determined by the Bondowner Representative. “Funds” means, collectively, the Revenue Fund, the Bond Fund, the Project Fund, the Rebate Fund, the Mortgage Recovery Fund, the Servicing Fund and the Costs of Issuance Fund. “Genera/ Partner” means BRIDGE Housing - Southern California, a California nonprofit public benefit corporation, or any successor as general partner of the Borrower. “Governmental Authority” means any government, municipality or political subdivision thereof; any governmental or quasi-governmental agency, authority, board, bureau, commission, department, instrumentality or public body: any court, administrative tribunal or public utility; or any central bank or comparable authority. “Guaranty” means the Payment Guaranty executed as of even date herewith by Guarantor in favor of the Trustee, with respect to the Bonds. “Guarantor” means BRIDGE Housing Corporation, a California nonprofit public benefit corporation, “Hazardous Substances” has the meaning set forth for that term in Section 9.1 of the Loan Agreement. “Holder” or “Bondholder” means the person in whose name a Bond is registered in the Bond Register. “Indenture” means this Indenture of Trust by and between the Issuer and the Trustee, as the same may from time to time be amended or supplemented as herein provided. “Independent Accountant” means a certified public accountant or firm of certified public accountants registered and qualified to practice as such under the laws of the State, and not employed by the Issuer or the Borrower, except to perform independent audits of the books and records of either or both of them or other similar periodic reviews and to perform other independent services. “independent Counsel” means any attorney acceptable to the Trustee, duly admitted to practice law before the highest court of any state or of the District of Columbia, who may be counsel to the Issuer but who may not be an officer or an employee of the Issuer. “initial interest Rate” means the respective per annum rates of interest borne by the Bonds until the Series A Conversion Date or the Series B Conversion Date, as applicable, which shall be equal to (a) for the Series A Bonds and the Series B Bonds, the tax-exempt equivalent of the Reference Rate plus 0.5%, and (b) for the Series B-T Bonds, the Reference Rate plus 0.5%. For purposes hereof, the “tax-exempt equivalent” shall mean as determined by the Bondowner Representative. “initial Limited Partner” means BRIDGE Housing Corporation, a [California nonprofit public benefit corporation]. “Investor Limited Partner Admission Date” means the date on which the Investor Limited Partner is admitted as limited partner of the Borrower. -7- “investor Limited Partner” means Edison Capital Housing Investments, a “Investor’s Letter” means a letter in the form of Exhibit D to this Indenture executed by the initial Bondowner and any subsequent transferee of any of the Bonds pursuant to Sections 2.11 and 2.15 of this Indenture. “issuer” means the City of Carlsbad, a municipal corporation organized and existing under the laws of the State, and its successors and assigns. “Limited Partner Equity Payments” means all payments received by the Trustee from or at the direction of the Borrower pursuant to the Loan Agreement representing equity contributions made to the Borrower by the Investor Limited Partner. “Loan” means the loan of sale proceeds of the Bonds by the Issuer to the Borrower described in the Loan Agreement. “Loan Agreement” means the Loan Agreement dated as of June 1, 1999 among the Issuer, Bank of America, FSB and the Borrower, as the same may from time to time be amended or supplemented as provided therein and in this Indenture. “Loan Documents” means the Loan Agreement, the Notes, the Mortgage, the Security Agreement, the assignments by the Borrower of the Construction Contract, the Architecture Contract and the Plans and Specifications, the consents by the contracting parties to such assignments and the Regulatory Agreement. “Maturity Date” means (1) for the Series A Bonds, the 30th anniversary of the Series A Conversion Date, but in no event later than December 1, 2030, (2) for the Series B Bonds, the third anniversary of the Series B Conversion Date, but in no event later than December 1, 2003, and (3) for the Series B-T Bonds, the second anniversary of the Series B Conversion Date, but in no event later than December 1, 2002; provided, however, that if any such date is not a Business Day, then the applicable Maturity Date shall be the immediately preceding Business Day. “Money Market” means one or more wholesale funding markets available to the Bank, including domestic negotiable certificates of deposit, eurodollar deposits, bank deposit notes or other appropriate money market instruments selected by the Bank. “Mortgage” means the Construction and Permanent Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing of even date herewith, from the Borrower and BRIDGE Housing Corporation, as trustor, to Equitable Deed Company, as trustee, and the Issuer, as beneficiary, with respect to the Project and the Project Premises, as the same may from time to time be replaced, amended or supplemented as provided therein and in this Indenture. The Issuer has assigned its interest as beneficiary in and to the Mortgage to the Trustee under this Indenture. “Mortgaged Property” means the properties, real, personal or mixed, described in the Granting Clauses of the Mortgage, as they may at any time exist. “Mortgagee” means, collectively, the Trustee and any co-trustee or successor trustee appointed, qualified and acting as such under this Indenture, as successor beneficiaries under the Mortgage pursuant to this Indenture. -8- “Mortgage Recovery Funs’ means the Fund created by Section 5.8 of this Indenture. ‘Net Proceeds” shall have the meaning set forth in the Mortgage. ” NOI” means the following: (1) the lesser of (a) Project Revenues received from the Project during the period in question or (b) the Project Revenues which would be generated if ninety-five percent (95%) of the residential units in the Project were leased at rents in compliance with the Regulatory Agreement; minus (2) the sum of (a) operating expenses incurred by the Borrower for the Project during the period in question (provided that management fees for the Project will be the management fee actually paid), with an appropriate adjustment to include in such period an allocable share of property taxes, utility costs, insurance premiums and recurring maintenance expenses which cover a period of time greater than the period in question (except to the extent such items are funded from the Reserve Account), p&s (b) the amounts required to be deposited into the Reserve Account pursuant to the fifth subparagraph of Section 5.3(2) (B) of this Indenture. “Notes” means the Promissory Notes executed by the Borrower in favor of the Issuer. “Ordinary Fees and Expenses” means the fees and expenses charged or incurred by the Trustee in the fulfillment of its obligations hereunder which are reimbursable to the Trustee upon demand from the Trust Estate in an aggregate annual amount equal to $ per year. “Outstanding Bonds” or “Bonds Outstanding” means, as of the date of determination, all Bonds theretofore issued and delivered under this Indenture except: (A) Bonds theretofore canceled by the Trustee or Paying Agent or delivered to the Trustee or Paying Agent for cancellation; @I Bonds for which payment or redemption moneys or securities (as provided in Article 7) shall have been theretofore deposited with the Trustee or Paying Agent in trust for the Holders of such Bonds: provided, however, that if such Bonds are to be redeemed, notice of such redemption shall have been duly given pursuant to this Indenture or irrevocable action shall have been taken to call such Bonds for redemption at a stated redemption date: and (C) Bonds in exchange for or in lieu of which other Bonds shall have been issued and delivered pursuant to Section 2.7 or other provisions of this Indenture; provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Bonds have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Bonds owned by the Borrower shall be disregarded and shall not to be considered as Outstanding Bonds (unless the Borrower owns all the Bonds otherwise Outstanding, in which case such Bonds shall be deemed Outstanding), except that in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Bonds which the Trustee knows to be so owned shall be disregarded. “Owner Tax Certificates” means, collectively, the Certificate as to Arbitrage and the Certificate Regarding Use of Proceeds, both delivered by the Borrower in connection with the Bonds. -9- “Partnership Agreement” means that certain Agreement of Limited Partnership of Borrower executed as of Partner, as it may be amended from time to 199- by the General Partner and the Initial Limited time. “Paying Agent” means the Bond Registrar, the Trustee or any other entity designated pursuant to this Indenture as the agent of the Issuer to receive and disburse the principal of and premium, if any, and interest on the Bonds. “Payment Date” means (a) on and before the applicable Conversion Date for the Series A Bonds, the Series B Bonds and the Series B-T Bonds, the first Business Day of each month, commencing July 1, 1999, and (b) from and after the applicable Conversion Date, (i) for the Series A Bonds, the six-month and one-year anniversaries of the Series A Conversion Date, and the anniversary of each such date (or, if any such date is not a Business Day, the immediately preceding Business Day), (ii) for the Series B Bonds, the first, second and third anniversaries of the Series B Conversion Date (or, if any such date is not a Business Day, the immediately preceding Business Day), and (iii) for the Series B-T Bonds, the first and second anniversaries of the Series B Conversion Date (or, if any such date is not a Business Day, the immediately preceding Business Day). “Permanent interest Rate” means the respective per annum rates of interest to be borne by the Bonds on and after the applicable Conversion Date, which shall be equal to (a) for the Series A Bonds, the tax-exempt equivalent of the 30-year FHLB-CIP Advance Index Rate plus 2% as determined by the Bondowner Representative as of the Dated Date , (b) for the Series B Bonds, the tax-exempt equivalent of the 3-year FHLB-CIP Advance Index Rate plus 2% as determined by the Bondowner Representative as of the applicable Conversion Date, and (c) for the Series B-T Bonds, the 2-year FHLB-CIP Advance Index Rate plus 2% as determined by the Bondowner Representative as of the applicable Conversion Date. For purposes hereof, the “tax-exempt equivalent” shall mean as determined by the Bondowner Representative. “Permitted Encumbrances” means the Permitted Encumbrances defined in the Loan Agreement. “Permitted Investments” means: (4 any of the following investments, provided that, except for investment agreements, investments permitted under Article 6 hereof and investments approved by the Bondowner Representative, none shall have a term in excess of one year: (i) certificates or interest-bearing notes or obligations of the United States, or those for which the full faith and credit of the United States are pledged for the payment of principal and interest: (ii) investments in any of the following obligations, provided such obligations are backed by the full faith and credit of the United States: (a) direct obligations or fully guaranteed certificates of beneficial interest of the Export- Import Bank of the United States, (b) debentures of the Federal Housing Administration, (c) guaranteed mortgage-backed bonds of the Government National Mortgage Association, (d) certificates of beneficial interest of the Farmers Home Administration, (e) obligations of the Federal Financing Bank, (f) -lO- project notes and local authority bonds of the United States Department of Housing and Urban Development, (g) obligations of the Private Export Funding Corp.; (iii) investments in (a) senior obligations of the Federal Home Loan Bank System, (b) participation certificates or senior debt obligations of the Federal Home Loan Mortgage Corporation, (c) mortgage-backed securities and senior debt obligations (excluding stripped mortgage securities that are valued greater than par on the portion of the unpaid principal) of the Federal National Mortgage Association or (d) senior debt obligations of the Student Loan Marketing Association; (iv) repurchase agreements with primary dealers and/or banks rated “A” or better by the Rating Agency collateralized with the obligations described in (i) or (ii) above held by a third-party custodian, at levels set forth in Section (b) below; (v) money market mutual funds that invest primarily in direct obligations issued by the U.S. Treasury and repurchase agreements backed by those obligations, including funds for which the Trustee or an affiliate of the Trustee acts as an advisor, and rated in the highest category by the Rating Agency; (vi> certificates of deposit of any bank (including the Trustee and its affiliates), trust company or savings and loan association whose short-term obligations are rated “A-l” or better by the Rating Agency provided that such certificates of deposit are fully secured by the obligations described in (i) or (ii) above, at the levels set forth in Section (b) below, the Trustee has a perfected first security interest in the obligations securing the certificates and the Trustee holds (or shall have the option to appoint a bank, trust company or savings and loan association as its agent to hold) the obligations securing the certificates; (vii) certificates of deposit of any bank (including the Trustee and its affiliates), trust company or savings and loan association which certificates are fully insured by the Federal Deposit Insurance Corporation; (viii) commercial paper rated “A- I+” or better by the Rating Agency: (ix) obligations of, or obligations fully guaranteed by, any state of the United States of America or any political subdivision thereof which obligations are rated by the Rating Agency in the highest rating categories (without regard to any refinement or gradation of rating category by numerical modifier or otherwise and without regard to credit enhancement) assigned by such rating agency to obligations of that nature; and (4 investment agreements approved in writing by the Bondowner Representative. 04 Collateral Percentage Levels of United States Government Securities for Repurchase Agreements and Bank Certificates of Deposit. Remaining Maturity Frequency of 1 year 1 5 years 1 10 years 1 15 years 1 30 years -ll- Valuation or less or less or less less or or less Daily 102 105 106 107 113 Weekly 103 110 111 113 118 Monthly 106 116 119 123 130 Quarterly 106 118 128 130 135 (4 Further Requirements: (9 on each valuation date, the market value of the collateral shall be in an amount equal to the indicated collateral percentage of the obligation (including unpaid accrued interest) that is being secured: (ii) in the event the collateral level is below its required collateral percentage on a valuation date, such percentage shall be restored by the provider of the collateral by the delivery of additional collateral within the following restoration periods: one Business Day for daily valuations, two Business Days for weekly valuations and one month for monthly and quarterly valuations. The use of different restoration periods affects the requisite collateral percentage; (iii) the Trustee is hereby required to terminate the repurchase agreement upon a failure to maintain the requisite collateral percentage after the restoration period and, if not paid by the counterparty in federal funds against transfer of the repurchase agreement, to liquidate the collateral; and 04 collateral for all repurchase agreements must be held by third parties. “Plans and Specifications” means the plans and specifications for the Facility approved in writing by Bondowner Representative, together with such amendments thereto as are made from time to time in accordance with Section 5.12 of the Loan Agreement. “Prepayment Premium” shall have the meaning set forth in Section 10.1 of the Loan Agreement. “Proceeds” means the proceeds of any insurance recovery or condemnation award (or payment in lieu of condemnation) less amounts reimbursed to the Trustee and the Issuer for expenses incurred in connection therewith. “Proforma Schedule” means the Proforma Schedule attached to the Loan Agreement as Schedule E, together with such amendments to that Schedule as are made from time to time in accordance with Article 8 of the Loan Agreement. “Project” means, collectively, the Facility, Borrower’s leasehold interest in the Project Premises, and any and all Project Equipment located on or used in connection with the Project Premises. ‘Project Debt Service” means all scheduled debt service on the Bonds during the period in question, including all interest and scheduled principal payments (including mandatory sinking fund payments). “Project Engineer” means an engineer retained by the Bondowner Representative to provide consulting services to the Bondowner Representative with respect to the Project. -12- “Project Equipment” means the property described as “Personal Property” in the Mortgage. “Project fund’ means the fund created under Section 5.2 of this Indenture. “Project hsurance Premiums” means the aggregate amount of the annual (or other periodic installments) premiums payable in respect of the policies of insurance required to be maintained pursuant to Section 5.5 of the Loan Agreement. “Project Premises” means the real property described in Schedule A to the Loan Agreement, together with the other property and interests in real property described in the Mortgage as the “Real Property.” “Project Revenues” means all gross revenues and receipts derived by the Borrower from the operation of the Project during the period in question, including tenant rents and all other moneys as may be paid to or on behalf of the Borrower or to which the Borrower may be entitled with respect to this Project, including earnings on the foregoing but excluding security deposits and earnings thereon. Such term shall not include Extraordinary Revenues. “Purchase Date” means the date on which any Outstanding Bonds are purchased pursuant to Article 3 of this Indenture. “Qualified Project Costs” means costs and expenses of the Project which constitute land costs or costs for property of a character subject to the allowance for depreciation excluding specifically working capital and inventory costs; provided, however, that (i) costs or expenses paid or incurred prior to [ 1998,] shall not be deemed to be Qualified Project Costs unless such costs constitute preliminary expenditures which do not exceed 20% of the issue price of the Bonds and which expenditures were incurred for architectural, engineering, surveying or soil testing or similar costs: (ii) issuance costs incurred relating to the Bonds may not be treated as Qualified Project Costs; (iii) interest during the construction period shall be allocated between Qualified Project Costs and other nonqualified costs and expenses paid from the proceeds of the Bonds; (iv) interest following the construction period shall not constitute a Qualified Project Cost, and (v) expenditures paid to the Borrower or a related party (as defined in the Code and applicable regulations) for work performed or as a profit in connection with the construction of the Project shall not constitute Qualified Project Costs. “Qualified Project Period” shall have the meaning set forth in the Regulatory Agreement. “Rating Agency” means Standard & Poor’s Ratings Services, a division of the McGraw- Hill Companies, Inc. “Rebate Fund’ means the fund so designated in Section 5.7 of this Indenture. “Rebate Requirement” or “Rebate Amount” shall mean the amount of rebatable arbitrage computed for payment as of the last day of every fifth Computation Year pursuant to Treasury Regulation Section 1.148-2 or any successor regulation as may be applicable thereto; provided, however, that an opinion of Bond Counsel to the effect that no money held under the Indenture is subject to rebate shall be accepted by the Issuer and the Trustee as a substitute for such calculation. “Record Date” means with respect to any Payment Date, (a) the fifteenth day of the month (whether or not a Business Day) next preceding such Payment Date or (b) if there is a default in payment of interest due on such Payment Date, a special Record Date for the payment of such defaulted interest shall be established by the Trustee by notice mailed by the -13- Trustee (such notice shall be mailed not less than 15 days preceding the applicable special Record Date to the Holder as set forth on the Bond Register at the close of business on the fifth Business Day preceding the date of mailing). “Reference Rate” means the rate of interest publicly announced from time to time by the Bank of America National Trust and Savings Association, or any successor to Bank of America National Trust and Savings Association, whether by merger, acquisition of assets or otherwise (“BofA”) at San Francisco, California, as its Reference Rate. The Reference Rate is set by BofA based on various factors, including BofA’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing loans. BofA may price loans at, above or below the Reference Rate. Any change in the Reference Rate shall take effect on the day specified in the public announcement of such change. If for any reason BofA no longer announces a Reference Rate, then the Reference Rate shall mean the average “prime lending rate” of large commercial banks as listed in the Wall Street Journal. “Regulatory Agreement” means the Regulatory Agreement and Declaration of Restrictive Covenants dated as of June 1, 1999 among the Borrower, the Issuer and the Trustee, together with any amendments and supplements thereto. “Related Person” means a “related person” within the meaning of Section 147 (a) (2) of the Code. “Representative” means any officer of the Issuer or the Borrower, or any other person at any time designated to act on behalf of the Issuer or the Borrower, as the case may be, as evidenced by a written certificate furnished to such party and the Trustee containing the specimen signature of such person and signed for the Issuer by its [Mayor, City Manager or Housing Manager,] or for the Borrower by the President or Vice President of the General Partner. “Requirements” shall have the meaning set forth in the Loan Agreement. “Reserve Account” means the Reserve Account of the Servicing Fund, established pursuant to Section 5.9(2)(b) of this Indenture. “Reserve Deposit Requirement” means the amounts shown as the Reserve Deposit Requirement in Schedule F of the Loan Agreement. “Resolution -I’ means the Resolution No . - of the City Council of the Issuer adopted on May 18, 1999 authorizing the issuance of the Bonds. “Responsible Agent” means any person duly authorized and designated by the Trustee, the Bond Registrar and the Paying Agent to act on its behalf in carrying out the applicable duties and powers of such entity as set forth in this Indenture; any action required by the Trustee, the Bond Registrar and the Paying Agent under this Indenture may be taken by a Responsible Agent. “Security Agreement” means that certain Security Agreement (Assignment of Partnership Interests) executed by Borrower, General Partner and Investor Limited Partner in favor of Trustee and dated as of even date herewith. “Series A Bonds” means the Issuer’s Multifamily Housing Mortgage Revenue Bonds (Poinsettia Station Apartments) Series 1999A, issued pursuant to this Indenture. -14- “Series B Bonds” means the Issuer’s Multifamily Housing Mortgage Revenue Bonds (Poinsettia Station Apartments) Series 1999B, issued pursuant to this Indenture. “Series B-T Bonds” means the Issuer’s Taxable Multifamily Housing Mortgage Revenue Bonds (Poinsettia Station Apartments) Series 1999B-T, issued pursuant to this Indenture. “Series A Conversion Date” means the date on which the Conversion occurs with respect to the Series A Bonds (or, if not a Business Day, the immediately following Business Day). “Series B Conversion Date” means the date on which the Conversion occurs with respect to the Series B Bonds and the Series B-T Bonds (or, if not a Business Day, the immediately following Business Day). “Servicing Fund” means the Fund created by Section 5.9 of this Indenture. “Sinking fund /nstallment” means the amount designated for a particular due date in Section 3.1(3) of this Indenture for the redemption of Bonds on an unconditional basis, less any amounts credited pursuant to Section 3.1(3) of this Indenture. “State” means the State of California. “ Tax Certificates” means, collectively, the Owner Tax Certificates and the Agency’s Certificate as to Arbitrage delivered in connection with the Bonds. “Tax Credits” means the low income housing tax credits allocated to the Project pursuant to Section 42 of the Code. “Tax-Exempt Bonds” means, collectively, the Series A Bonds and the Series B Bonds. ” Tit/e Company” means Chicago Title Company, its successors and assigns. “Title Policy” means the title insurance policy required pursuant to Section 3.5 and Schedule A-l of the Loan Agreement. “Treasury” means the United States Department of the Treasury, and any successor to its functions. “Treasury Regulations” means all proposed, temporary or final federal income tax regulations issued or amended with respect to the Code by the Treasury or Internal Revenue Service. “Trustee” means Bank One Trust Company, N.A., and any co-trustee or successor trustee appointed, qualified and then acting as such under the provisions of this Indenture. “Trust Estate” means the Trust Estate as defined and set forth in the Granting Clauses hereof. “Unassigned Rights” means the Issuer’s rights to enforce and receive payments of money directly and for its own purposes under Sections 4.3(Z), 7.4 and 11.5 (as it relates to the Issuer) of the Loan Agreement, the Issuer’s rights to indemnification, to receive notices and reports and its rights to consent as set forth in the Loan Agreement, and the Issuer’s rights under and relating to the enforcement of the Regulatory Agreement and the tax credit extended use agreement relating to the Project. -15 Section 1.2. Rules of Interpretation. (1) This Indenture shall be governed by and construed in accordance with the laws and judicial decisions of the State, except as they may be preempted by Federal rules, regulations and laws applicable to the Issuer. (2) The words “herein” and “hereof’ and “hereunder” and words of similar import, without reference to any particular section or subdivision, refer to this Indenture as a whole rather than to any particular section or subdivision of this Indenture. (3) References in this Indenture to any particular article, section or subdivision hereof are to the designated article, section or subdivision of this Indenture as originally executed. (4) All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles; and all computations provided for herein shall be made in accordance with generally accepted accounting principles consistently applied and applied on the same basis as in prior years. (5) The Table of Contents and titles of articles and sections herein are for convenience of reference only and are not a part of this Indenture and shall not deny or limit the provisions hereof, (6) Unless the context hereof clearly requires otherwise, the singular shall include the plural and vice versa and the masculine shall include the feminine and vice versa. (7) Articles, sections, subsections and clauses mentioned by number only are those so numbered which are contained in this Indenture. (8) counsel. Any opinion of counsel called for herein shall be a written opinion of such (9) References to the Bonds as “tax-exempt” or to the “tax-exempt status of the Tax- Exempt Bonds” are to the exclusion of interest on the Tax-Exempt Bonds from gross income for federal income tax purposes pursuant to Section 103(a) of the Code. ARTICLE 2 THEBONDS Section 2.1. Authorized Amount and Form of Bonds. Bonds secured by this Indenture shall be issued in fully registered form without coupons and in substantially the form set forth herein with such appropriate variations, omissions and insertions as are permitted or required by this Indenture, and in accordance with the further provisions of this Article 2. The aggregate face amount (maximum principal amount) of the Series A Bonds shall be $4,450,000, the aggregate face amount (maximum principal amount) of the Series B Bonds shall be $1,075,000, and the aggregate face amount (maximum principal amount) of the Series B-T Bonds shall be $800,000. The principal on the Bonds will be payable and mature as provided herein. The Outstanding principal amount of the Bonds as of any given date shall be (i) the total amount advanced by the Bondholders to the Trustee and deposited in the Project Fund under Section 5.2 hereof as the principal amount of the Loan and advanced or constructively advanced to the Borrower (to the extent that the Trustee receives written notice of all amounts constructively advanced to the Borrower), and with respect to which the Borrower is obligated to pay on the Loan, less (ii) any payments of principal previously received by the Bondholders on the Bonds. Amounts advanced by the Bondholder to the Trustee as provided herein shall be allocated first -16- \2\ to the Series A Bonds up to the aggregate face amount (maximum principal amount) thereof, then to the Series B Bonds up to the aggregate face amount (maximum principal amount) thereof, and then to the Series B-T bonds up to the aggregate face amount (maximum principal amount) thereof. The Bonds, together with the Certificate of Authentication, the form of Assignment and the registration information thereon, shall be in substantially the forms found at Exhibit C. Section 2.2. issuance of Bonds. The Bonds shall: (1) Date”); be dated as of the date of original delivery of the Bonds (the “Dated (2) be issued and delivered as fully registered bonds without coupons, in Authorized Denominations; except that a Bond may be exchanged after redemption or purchase for a Bond in the denomination of less than $100,000 to the extent necessary to represent the unredeemed or unpurchased portion of such Bond; (3) be initially issued in three series designated as the Series 1999A Bonds, the Series 1999B Bonds and the Series 1999B-T Bonds: (4) be numbered from 1 upwards in chronological order of delivery for each respective series of Bonds with such number being preceded by such designation as the Trustee shall determine; (5) mature on the dates set forth below: , Series A B Maturitv Date 30th anniversary of the Series A Conversion Date (but no later than December 1, 2030) 3rd anniversary of the Series B Conversion Date (but no later than December 1, 2003) 2nd anniversary of the Series B Conversion Date (but no later than December 1. 2002) ’ $[1,075,000] $ [800,000] 1 (6) prior to the applicable Conversion Date, bear interest on the Outstanding principal amount thereof at their respective Initial Interest Rates, computed on the basis of a 360-day year and the actual number of days elapsed, from the Dated Date to and until the applicable Conversion Date, payable on each Payment Date, such interest to accrue from the Dated Date, or, in the case of transfer or exchange, from the most recent Payment Date to which interest has been paid or provided for under this Indenture; if a payment of defaulted interest is to be made, the Trustee shall establish the time of such payment and shall establish the associated special Record Date therefor as provided in the definition of “Record Date”; -17- 122 (7) be payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts, at the principal corporate trust office of the Trustee or Paying Agent, except that interest on the Bonds will be payable by check or draft mailed by the Trustee to the Holders of such Bonds on the applicable Record Date (the “Record Date Holders” as defined in the form of Bond set forth in Exhibit C hereto) at the last addresses thereof as shown in the Bond Register on the applicable Record Date, and principal of and any premium on any Bonds shall be payable at the principal corporate trust office of the Trustee; (8) be subject to redemption upon the terms and conditions and at the redemption prices specified in Article 3 hereof; and (9) from and after the applicable Conversion Date, bear interest at their respective Permanent Interest Rates, computed on the basis of a 360-day year consisting of twelve 30-day months, from the applicable Conversion Date to and until their respective Maturity Dates, payable on their respective Payment Dates, such interest to accrue from the applicable Conversion Date or, in the case of transfer or exchange, from the most recent Payment Date to which interest has been paid or provided for under this Indenture, and, in the case of the Series B Bonds and the Series B-T Bonds, such interest to compound monthly; if a payment of defaulted interest is to be made, the Trustee shall establish the time of such payment and shall establish the associated special Record Date therefor as provided in the definition of “Record Date”. The Initial Interest Rate shall be adjusted as of any date on which the Reference Rate changes, and the [Bondowner Representative] shall provide written notice to the Borrower and the Trustee of the adjusted Initial Interest Rate, if and when adjusted, that shall apply on the next succeeding Payment Date no later than _ days prior to the next succeeding Payment Date. Notwithstanding anything contained herein to the contrary, during any period of time that the Notes bear interest at the Default Rate, the Bonds shall also bear interest at the Default Rate. Except as set forth in the immediately preceding paragraph, during any period of time that the Notes bear interest at the after-tax equivalent rate described in Section 7.16 of the Loan Agreement, the Tax-Exempt Bonds shall also bear interest at such after-tax equivalent rate. Notwithstanding the foregoing, if the date for payment of the principal of, premium, if any, or interest on the Bonds shall be a day which is not a Business Day, then the date for such payment shall be the next succeeding day which is a Business Day, and payment on such later date shall have the same force and effect as if made on the nominal date of payment. Notwithstanding the foregoing, any Holder of at least $l,OOO,OOO principal amount of any Bonds (or a lesser amount of such Bonds if such Bonds constitute all the Outstanding Bonds at the time), upon payment by the Holder of the cost of a wire transfer as an Ordinary Fee or Expense, may file with the Trustee an instrument satisfactory to the Trustee requesting the amounts payable by the Trustee to such Holder be paid by transferring by wire transfer in immediately available funds, on the day such payment is due, the amount to be distributed to such Holder to a designated account maintained by such Holder at any bank in the United States. The Trustee shall pay all amounts payable by the Trustee hereunder to such Holder by transfer directly to said designated bank in accordance with the provisions of any such instrument, provided that if such amount represents a payment of the principal of any Bond, such Bond shall have been presented to the Trustee. All payments so made shall be valid and -18- effective to satisfy and discharge the liability upon such Bonds. Notwithstanding the foregoing, all payments of principal of and interest on the Bonds payable on the Maturity Date, a Purchase Date or any date of redemption shall only be payable upon presentation of the Bonds maturing, being purchased or being redeemed at the principal corporate trust office of the Trustee. Section 2.3. Execution. Bonds shall be executed with the manual or facsimile signature of the Mayor, Vice Mayor, City Manager or Finance Director of the Issuer and attested by the facsimile or manual signature of the City Clerk of the Issuer or her designee. In case any officer of the Issuer whose signature or whose facsimile 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, the same as if he had remained in office until such delivery, and also any Bond may be signed by such persons as at the actual time of execution of such Bond shall be the proper officers to sign such Bond although at the date of delivery of such Bond such persons may not have been such officers. Section 2.4. Authentication. No Bond shall be valid or obligatory for any purpose or be entitled to any security or benefit under this Indenture unless a certificate of authentication on such Bond, substantially in the form set forth in Exhibit C hereto, shall have been manually executed by a Responsible Agent of the Bond Registrar. Certificates of authentication on different Bonds need not be signed by the same person. The Bond Registrar shall authenticate the signatures of officers of the Issuer on each Bond by execution of the certificate of authentication on the Bond: and the certificate of authentication so executed on each Bond shall be conclusive evidence that it has been authenticated and delivered under this Indenture. Section 2.5. Conditions Precedent to the Delivery of Bonds. Upon the execution and delivery of this Indenture, the Issuer shall execute and deliver to the Bond Registrar, and the Bond Registrar shall authenticate, the Bonds and shall deliver the Bonds to or upon the order of the initial purchaser thereof at such time or times as may be directed by the Issuer after the Trustee has received the following: 0) original executed counterparts of the Loan Agreement and this Indenture; (2) copies of original executed counterparts of the Mortgage, the Regulatory Agreement and UCC financing statements; (3) original executed counterparts of the Guaranty: (4) copies of original executed counterparts of all Loan Documents not specifically referred to in paragraphs (1) and (2) above: (5) a copy of the resolutions adopted by the governing body of the Issuer, authorizing the execution and delivery of this Indenture, the Regulatory Agreement and the Loan Agreement and issuance of the Bonds; (6) a request and authorization to the Trustee on behalf of the Issuer to deliver the Bonds to the purchaser identified upon payment to the Trustee for the account of the Issuer of a specified sum; (7) the opinion of counsel to the Borrower and the Guarantors in the form required by the Issuer and counsel to the Bondowner Representative, addressed to the Issuer, the Trustee and the Bondowner Representative; -19- - (8) the opinion of counsel to the Issuer, in the form required by the Issuer, addressed to the Issuer, the Trustee and the Bondowner Representative: (9) the opinion of Bond Counsel, addressed to the Issuer with a reliance letter addressed to the Trustee and the Bondowner Representative, to the effect that (a) the Bonds are valid obligations of the Issuer, and (b) interest on the Bonds is excludable from gross income of the owner thereof for federal income tax purposes and is exempt from personal income taxes of the State; (10) a commitment by the Title Company, in form and content approved by the Bondowner Representative, to issue the Title Insurance Policy specified in the Loan Agreement; (11) a copy of the instruction letter delivered to and accepted by the Title Company in connection with the closing of the Bonds by the Borrower and consented to by the Bondowner Representative; (12) an original of an Investor’s Letter executed by the Bondowner Representative and addressed to the Trustee and the Issuer in the form of Exhibit D; (13) confirmation by the Bondowner Representative of its receipt of payment of a fee in the amount of Dollars ($2; and (14) any other documents or opinions which the Trustee, the Issuer or Bond Counsel may reasonably require. Section 2.6. [Reserved]. Section 2.7. Mutilated, Lost or Destroyed Bonds. In case any Bond issued hereunder shall become mutilated or be destroyed or lost, the Issuer shall, if not then prohibited by law, cause to be executed, and the Bond Registrar shall authenticate and deliver, a new Bond of like amount, series, Maturity Date and tenor, but bearing a number not contemporaneously Outstanding, in exchange and substitution for and upon cancellation of any such mutilated Bond, or in lieu of and in substitution for any such Bond destroyed or lost, upon the Holder’s paying the reasonable expenses and charges of the Bond Registrar and the Issuer and, in the case of a Bond destroyed or lost, the Holder’s filing with the Bond Registrar of evidence satisfactory to the Bond Registrar and the Trustee that such Bond was destroyed or lost, and of the Holder’s ownership thereof, and furnishing the Issuer, the Trustee and the Bond Registrar with indemnity satisfactory to them. If the mutilated, destroyed or lost Bond has already matured or been called for redemption in accordance with its terms, it shall not be necessary to issue a new Bond prior to payment. Section 2.8. [Reserved]. Section 2.9. Ownership of Bonds. The Issuer, the Trustee, the Bond Registrar and Paying Agent may deem and treat the Holder of any Bond, whether or not such Bond shall be overdue, as the absolute owner of such Bond for the purpose of receiving payment thereof and for all other purposes whatsoever, and the Issuer (or any agent thereof), the Trustee, the Bond Registrar and the Paying Agent shall not be affected by any notice to the contrary. Section 2.10. [Reserved]. -2o- Section 2.11. Registration, Transfer and Exchange of Registered Bonds. (1) The Trustee shall, at the expense of the Borrower, prepare, execute and authenticate fully registered Bonds, shall cause to be kept at the principal corporate trust office of the Bond Registrar a Bond Register in which, subject to such reasonable regulations as the Bond Registrar may prescribe, the Trustee shall provide for the registration of Bonds and the registration of transfers of Bonds. The Bond Register shall contain a record of every Bond, including bond number and principal amount at any time authenticated hereunder, together with the name and address of the Holder thereof, the date of authentication, the date of transfer or payment, and such other matters as are appropriate for the Bond Register in the estimation of the Bond Registrar and the Trustee. (2) The transfer of each Bond is subject to registration by the Holder thereof only upon compliance with the conditions for registration of transfer imposed on the Holder under this Section 2.11 and under Section 2.15 hereof. Upon surrender of any Bond at the principal corporate trust office of the Bond Registrar, the Issuer shall execute (if necessary), and the Bond Registrar shall authenticate and deliver, in the name of the designated transferee or transferees (but not registered in blank or to “bearer” or a similar designation), one or more new Bonds of any Authorized Denomination or Denominations of a like aggregate principal amount and series, having the same stated maturity, tenor and interest rate. (3) At the option of the Holder, Bonds may be exchanged for other Bonds of any Authorized Denomination or Denominations of a like aggregate principal amount, tenor, series and stated maturity, upon surrender of the Bonds to be exchanged at the principal corporate trust office of the Bond Registrar, and upon payment, if the Issuer shall so require, of the taxes, if any, hereinafter referred to. Whenever any Bonds are so surrendered for exchange, the Issuer shall execute (if necessary), and the Bond Registrar shall authenticate and deliver, the Bonds which the Holder making the exchange is entitled to receive. (4) All Bonds delivered in exchange for or upon transfer of Bonds shall be valid special obligations of the Issuer evidencing the same debt, and entitled to the same benefits under this Indenture, as the Bonds surrendered for such exchange or transfer. (5) Registration of the transfer of a Bond may be made on the Bond Register by the Holder in person or by the Holder’s attorney duly authorized in writing. Every Bond presented or surrendered for registration of transfer or exchange shall (i) be accompanied by evidence of compliance with the provisions of Section 2.15 of this Indenture, (ii) be duly endorsed or be accompanied by a written instrument or instruments of transfer, in the form printed on the Bond or in another form satisfactory to the Bond Registrar, duly executed and with guaranty of signature of the Holder thereof or his, her or its attorney duly authorized in writing, and (iii) include written instructions as to the details of the transfer of the Bond. (6) No service charge shall be made to the Holder for any registration, transfer or exchange, but the Bond Registrar and Issuer may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in connection with any transfer or exchange of Bonds, other than exchanges expressly provided in this Indenture to be made without expense or without charge to Bondholders, and any legal or unusual costs of transfers and lost bonds. (7) Subject to the provisions of subsection (8) below, the Bond Registrar shall endeavor to comply with rules applicable to transfer agents registered with the Securities and Exchange Commission as to the 72-hour “turnaround standard established for the transfer of registered corporate securities. 03) The Bond Registrar shall not be required (a) to transfer or exchange any Bond during a period beginning at the opening of business 15 days before the day of the mailing of a -21- notice of redemption or purchase of Bonds under this Indenture and ending at the close of business on the day of such publication or mailing or (b) to transfer or exchange any Bond so selected for redemption or purchase in whole or in part. Section 2.12. Nonpresentment of Bonds. In the event any Bond shall not be presented for payment when the principal hereof becomes due, if funds sufficient to pay such Bonds shall have been paid to the Trustee (or the Paying Agent (if any)) for the benefit of the registered owner thereof, all liability of the Issuer to the registered owner thereof for the payment of such Bond shall forthwith cease, terminate and be completely discharged, and thereupon it shall be the duty of the Trustee or other Paying Agent to hold such fund or funds, without liability for interest thereon, for the benefit of the Holder of such Bond, who shall thereafter be restricted exclusively to such fund or funds, for any claim of whatever nature on his part under this Indenture or on, or with respect to, said Bond. Any moneys still held by the Trustee (or other Paying Agent, if any) after three years from the date on which the Bond with respect to such amount was paid to the Trustee or other Paying Agent, shall, if and to the extent permitted by law, be paid to the Issuer, shall be discharged from the trust, and all liability of the Paying Agent or Trustee with respect to such funds shall thereupon cease; and the owner of such Bond shall thereafter have only the right to demand payment of such obligation from the Issuer, and the Issuer shall not be liable for any interest thereon. Section 2.13. [Reserved]. Section 2.14. Destruction of Bonds. Whenever any Outstanding Bond shall be delivered to the Bond Registrar or the Trustee for cancellation pursuant to this Indenture, upon payment of the principal amount and interest represented thereby or for replacement pursuant to Section 2.7 or transfer pursuant to Section 2.11, such Bond shall be canceled and destroyed by the Bond Registrar or the Trustee, as the case may be, and counterparts of a certificate of cancellation evidencing such cancellation shall be furnished by the Bond Registrar, or the Trustee, as the case may be, to the Issuer, the Bond Registrar and, if appropriate, the Trustee. Section 2.15. Restrictions on Transfer. Except for the transfer of Bonds to any subsidiary of BankAmerica Corporation (or any successor to BankAmerica Corporation, whether by merger, acquisition of assets or otherwise), Bonds may be transferred, as a whole or in part, to one or more Bondholders only upon receipt by the Bond Registrar, the Issuer and the Trustee of evidence that such Bonds are being transferred to an “accredited investor” (as defined in Rule 501 (a) (1), (Z), (3)) (4), (7) or (8) of Regulation D promulgated under the Securities Act of 1933). The Bond Registrar shall not register any transfer or exchange of any Bonds unless such Bondholder’s prospective transferee delivers to the Trustee an investor’s letter substantially in the form set forth in Exhibit D to this Indenture. The Trustee shall be entitled to conclusively rely, without any further inquiry, on any investor’s letter delivered to it and shall be fully protected in registering any transfer or exchange of any Bonds in reliance on any such investor’s letter which appears on its face to be correct and of which the Trustee has no actual knowledge otherwise. Any such Holder desiring to effect such transfer shall agree to indemnify the Issuer and Trustee from and against any and all liability, cost or expense (including attorneys’ fees) that may result if the transfer is not so exempt or is not made in accordance with such federal and state laws. -22- ARTICLE 3 REDEMPTION AND PURCHASE OF BONDS BEFORE MATURITY Section 3.1. Redemption and Purchase. Subject to the provisions of Sections 3.2 and 3.4, the Bonds are subject to purchase or redemption as follows: (1) Extraordinary Redemption or Purchase. (a) The Bonds are subject to mandatory redemption, in whole or in part, on any Business Day, in the event of damage to or destruction or Condemnation of the Project or any part thereof in accordance with Section 5.8 hereof, the Loan Agreement and the Mortgage, at a redemption price equal to the principal amount thereof plus accrued interest and plus a Prepayment Premium as provided in Section 10.1 of the Loan Agreement. (t-4 The Bonds are subject to mandatory purchase in whole by the Borrower on December 15, 2000, or as soon as practicable thereafter on any Business Day (or such later date for purchase as the Bondowner Representative approves), from funds provided by the Borrower, if both the Series A Conversion and the Series B Conversion have not occurred on or before December 1, 2000, at a purchase price equal to the principal amount thereof plus accrued interest and plus a Prepayment Premium as provided in Section 10.1 of the Loan Agreement. (4 The Bonds are subject to mandatory redemption in part on the later to occur of the Series A Conversion Date or the Series B Conversion Date, or as soon as practicable thereafter on any Business Day, from Bond proceeds remaining on deposit in the Project Fund on the such Conversion Date and, with respect to the Prepayment Premium, from Borrower moneys, at a redemption price equal to the principal amount thereof plus accrued interest and plus a Prepayment Premium as provided in Section 10.1 of the Loan Agreement. (2) Optional Redemption. The Bonds are subject to redemption at the option of the Borrower, in whole or in part on any date on which the Loan may be prepaid pursuant to Section 10.1(b) of the Loan Agreement, at a redemption price equal to the principal amount thereof, plus accrued interest to the redemption date and plus a Prepayment Premium as provided in Section 10.1 of the Loan Agreement. (3) Mandatory Sinking fund Redemption. (4 The Series A Bonds shall be subject to mandatory sinking fund redemption at a redemption price equal to the principal amount thereof, without premium, plus accrued interest thereon to such redemption date, on the dates and in the principal amounts as determined by the Bondowner Representative as follows. Not less than two Business Days prior to the Series A Conversion Date, the Bondowner Representative shall prepare and provide to the Trustee and the Borrower an amortization schedule for the Series A Bonds showing substantially level monthly debt service on the Series A Bonds, based on the principal amount of the Series A Bonds outstanding on the Series A Conversion Date and the Permanent Interest Rate then applicable to the Series A Bonds, for the period from the Series A Conversion Date until the Maturity Date of the Series A Bonds. Based on the amortization schedule so provided, the Bondowner Representative shall provide to the Trustee and the Borrower -23- a schedule showing the Sinking Fund Installments for the Bonds payable on each Payment Date, commencing on the Payment Date immediately following the Series A Conversion Date and ending on the Maturity Date of the Series A Bonds. The amortization schedule shall become effective on the Series A Conversion Date and shall be binding on the Trustee, the Issuer, the Borrower, and the holders of the Bonds, absent manifest error in the amortization schedule. 09 The Series B Bonds shall be subject to mandatory sinking fund redemption on the second and third anniversaries of the Series B Conversion Date (but in no event later than December 1, 2002 and December 1, 2003) from amounts on deposit in the Series B Account of the Bond Fund on such dates not applied to (i) the payment of interest on the Series B Bonds and the Series B-T Bonds due and payable on such dates, if any, and (ii) the payment of principal of the Series B-T Bonds set forth below. The Sinking Fund Installment for the Series B Bonds on each such redemption date shall be equal to the principal amount thereof, without premium, plus accrued interest thereon to such redemption date, in a principal amount equal to the amounts so remaining on deposit in the Series B Account of the Bond Fund on such dates after the payments set forth above, but not less than the principal amounts for each redemption date set forth in Exhibit E to this Indenture. Cc) The Series B-T Bonds shall be subject to mandatory sinking fund redemption on the first and second anniversaries of the Series B Conversion Date (but in no event later than December 1, 200 1 and December 1, 2002) from amounts on deposit in the Series B Account of the Bond Fund on such dates not applied to the payment of interest on the Series B Bonds and the Series B-T Bonds due and payable on such dates. The Sinking Fund Installment for the Series B-T Bonds on each such redemption date shall be equal to the principal amount thereof, without premium, plus accrued interest thereon to such redemption date, in a principal amount equal to the amounts so remaining on deposit in the Series B Account of the Bond Fund on such dates after the payments set forth above, but not less than the principal amounts for each redemption date set forth in Exhibit E to this Indenture. If any Bonds are redeemed (other than pursuant to the above mandatory sinking fund redemption schedule) or purchased and canceled by the Trustee and not theretofore applied as a credit against any redemption of Bonds pursuant to the above mandatory sinking fund redemption schedule, the Trustee shall apply the principal amount of the Bonds redeemed or purchased and canceled for credit against the principal installments to be paid pursuant to the mandatory sinking fund redemption schedule in such manner as the Trustee determines so as to as nearly as possible maintain level principal and interest payments on the Bonds to their respective Maturity Dates. (4) [Reserved]. (5) [Reserved]. (6) Mandatory Redemption Upon Loan Agreement or Mortgage Default. The Bonds are subject to mandatory redemption in whole, on any Business Day following the occurrence of an event of default under the Loan Agreement or any other Loan Document (beyond any applicable notice and cure periods), at the direction of the Bondowner Representative, at a redemption price equal to the principal amount of the Bonds then Outstanding, plus accrued interest and plus a Prepayment Premium as provided in Section 10.1 of the Loan Agreement. (7) [Reserved.] -24- 03) Optional Purchase By Borrower to Meet DSCR. The Series A Bonds are subject to purchase in part at the written direction of the Borrower from funds provided by the Borrower on the first to occur of the Series A Conversion Date or the Series B Conversion Date, or within 45 days prior to the such Conversion Date, in an aggregate amount sufficient to allow the remaining Bonds not so purchased to meet the Conversion Condition shown in Schedule I to the Loan Agreement, at a purchase price equal to the aggregate principal amount thereof plus accrued interest to such Conversion Date plus a Prepayment Premium as provided in Section 10.1 of the Loan Agreement (computed without regard to the amount described in Section 10.1 (b) (6) (B) (i) of the Loan Agreement). Section 3.2. Notice of Redemption or Purchase. (1) To effect the redemption or purchase of the Bonds under Section 3.1, the Trustee shall promptly give notice within the time, in the manner and with the effect provided by this Section 3.2. Other than for a redemption pursuant to Section 3.1(3), for which no notice need be given, notice of redemption or purchase shall be mailed by first class mail not less than 30 days prior to the redemption or purchase date by the Trustee to the Paying Agent and the Holders of Bonds to be redeemed or purchased. No defect in or failure to give notice shall affect the validity of the proceedings for redemption or purchase of any Bond not affected by such defect. Such notice, which shall be prepared by the Trustee at the expense of the Borrower, shall state the subsection under Section 3.1 pursuant to which the Bonds are being called for redemption or purchase, and unless all Outstanding Bonds are to be redeemed or purchased, each such notice shall refer to the Bonds to be redeemed or purchased by their numbers and maturities and the date on which and the place where they shall be presented for redemption or purchase. Except as specifically provided in this Indenture, and provided sufficient funds are on deposit with the Trustee with respect to such redemption or purchase, the Bonds thus called for redemption or purchase shall cease to bear interest from and after the specified redemption or purchase date and the Holder of such Bonds shall have no further rights with respect to the Bonds or under this Indenture except to receive the redemption or purchase price of such Bonds. (2) Not less than forty (40) days prior to each redemption date or purchase date, the Bond Registrar shall furnish the names and addresses of the Holders of the Bonds as of the Record Date immediately preceding such redemption date or purchase date to the Trustee. Section 3.3. Cancellation. Subject to the provisions of Section 2.12, all Bonds which have been redeemed shall be canceled by the Trustee as provided in Section 2.14 and shall not be reissued. Section 3.4. Method of Redemption or Purchase. (1) The Trustee shall redeem or purchase Bonds under subsections (l), (2) or (6) of Section 3.1 only if it has received written notice and instructions from the Bondowner Representative to so redeem or purchase at least forty (40) days before the redemption date or purchase date, and the Trustee has been provided with immediately available funds sufficient for such purpose, at least four Business Days prior to the redemption or purchase date. The Trustee shall purchase Bonds under subsections (2) and (8) of Section 3.1 in accordance with the Borrower’s instructions. (2) [Reserved]. (3) To effect the partial redemption or purchase of Bonds under Section 3.1, the Trustee, prior to giving notice of redemption or purchase, shall assign to each Bond then outstanding a distinctive number for each $1,000 of the principal amount of such Bond. The Trustee shall then select such Bonds for redemption or purchase as instructed by the Bondowner Representative or the Borrower. If the Bondowner Representative or Borrower fails to instruct the Trustee with regard to the selection of Bonds for redemption or purchase, the Trustee shall select first, Series B-T Bonds for redemption or purchase by lot, using such method -25 of selection as it shall deem proper in its discretion, from the numbers so assigned to such Bonds, as many numbers as, at $1,000 for each number, shall equal the principal amount of such Bonds to be redeemed or purchased until no Series B-T Bonds are Outstanding; provided that, in all cases, amounts on deposit in the Project Fund representing proceeds of the Tax- Exempt Bonds, and interest earnings thereon, shall be used to redeem Tax-Exempt Bonds. The Trustee shall then follow the same procedures for selecting Series B Bonds for redemption until no Series B Bonds are Outstanding, and then follow the same procedures for selecting Series A Bonds for redemption. The Bonds to be redeemed or purchased shall be the Bonds to which were assigned numbers so selected: provided, however, that only so much of the principal amount of each such Bond of a denomination of more than $1,000 shall be redeemed or purchased as shall equal $1,000 for each number assigned to it and so selected. If a Bond may be redeemed or purchased only in part, it shall be surrendered to the Trustee (with, if the Issuer or Trustee so requires, a written instrument of transfer in form satisfactory to the Issuer and Trustee duly executed by the Holder thereof or his, her or its attorney duly authorized in writing) and the Issuer shall execute (if necessary) and the Bond Registrar shall authenticate and deliver to the Holder of such Bond, without service charge, a new Bond or Bonds of the same series and tenor, of any Authorized Denomination or Denominations, as requested by such Holder, having the same stated maturity and interest rate in aggregate principal amount equal to and in exchange for the unredeemed or unpurchased portion of the principal of the Bond so surrendered. ARTICLE 4 GENERAL COVENANTS Section 4.1. Payment of Principal, Premium and Interest. Solely from the moneys derived from the Loan Agreement (other than to the extent payable from proceeds of the Bonds, temporary investments, or amounts recovered by the Trustee under the Mortgage), the Issuer will duly and punctually pay the principal of, premium, if any, and interest on the Bonds in accordance with the terms of the Bonds and this Indenture. Moneys derived from the Loan Agreement include all moneys derived from the Granting Clauses set forth herein, including, but not limited to, the Project Revenues, any payments under the Guaranty and trust funds deposited in the Funds (excluding funds held in Rebate Fund and rebatable arbitrage whether or not deposited in the Rebate Fund) to the extent hereof and in the manner provided in Article 5 hereof. Nothing in the Bonds or in this Indenture shall be considered as assigning or pledging funds or assets of the Issuer other than those covered by the Granting Clauses set forth herein. Section 4.2. Performance of Covenants. (a) The Issuer covenants that it will faithfully perform at all times any and all of its covenants, undertakings, stipulations and provisions contained in this Indenture, in any and every Bond executed, authenticated and delivered hereunder and in all proceedings of its governing body pertaining thereto; that it is duly authorized under the Constitution and laws of the State, including particularly and without limitation the Act, to issue the Bonds authorized hereby, to execute this Indenture, to loan the proceeds of the Bonds to the Borrower and to assign and pledge the payments from the Loan Agreement in the manner and to the extent herein set forth: that all action on its part for the issuance of the Bonds and the execution and delivery of this Indenture has been duly and effectively taken; and that the Bonds in the hands of the Holders thereof are and will be valid and enforceable obligations of the Issuer according to the terms thereof. (b) The Trustee covenants that it will in good faith perform at all times all of its express covenants, undertakings, stipulations and provisions contained in this Indenture, and in every Bond executed, authenticated and delivered hereunder; that it is duly organized, validly -26- existing, in good standing and possesses all applicable licenses and authorizations necessary to enter into this Indenture; that it has full power and authority to enter into this Indenture and the transactions contemplated hereby: that this Indenture has been duly executed and delivered by it: that this Indenture constitutes the legal, valid, binding and enforceable obligation of the Trustee (subject to bankruptcy, insolvency or creditor rights laws generally and principles of equity generally) without offset, defense or counterclaim; that the execution, delivery and performance of this Indenture by the Trustee will not cause or constitute, including with due notice or lapse of time or both, a material default under or material conflict with organizational documents or other agreements or otherwise materially or adversely affect performance of duties; that the execution of this Indenture by the Trustee will not violate any law, regulation, order or decree of any governmental authority: that all consents, approvals, authorizations, orders or filings of or with any court or governmental agency or body, if any, required for the execution, delivery and performance of this Indenture by the Trustee have been obtained or made; and that there is no pending action, suit, proceeding, arbitration or governmental investigation challenging the authority of the Trustee to perform its obligations under this Indenture. Section 4.3. Instruments of Further Assurance. The Issuer covenants that it has not made, done, executed or suffered, and will not make, do, execute or suffer, any act or thing whereby its interest in the Loan Agreement or any part thereof is now or at any time hereafter will be impaired, changed or encumbered in any manner whatsoever, except as may be expressly permitted herein or in the Loan Agreement or as required by law; and that it will do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, such instruments supplemental hereto and such further acts, instruments and transfers as the Trustee may be reasonably required for the better assuring, transferring, pledging, assigning and confirming unto the Trustee all and singular the sums assigned and pledged hereby to the payment of the principal of, premium, if any, and interest on the Bonds. Section 4.4. Recording and Filing. (1) Reserved. (2) On or before June 1 of each fifth calendar year, commencing on June 1, 2004, the Borrower has covenanted in the Loan Agreement to take such action with respect to the recording, filing, rerecording and refiling of the Mortgage, any supplements thereto, any UCC-1 financing statements and any other requisite documents and to take such actions with respect to the execution and filing of any financing statements and continuation statements as are necessary to perfect and maintain the perfection of the liens granted thereunder and to preserve and protect fully the security of the Holders of the Bonds and the rights of the Trustee hereunder and under any of the other aforesaid instruments for the next five-year period. Within 30 days after June 1 of each year Borrower shall provide to the Trustee a written certification that all such filings have been made and are current. Section 4.5. Books and Records. The Trustee covenants that so long as any Outstanding Bonds issued hereunder and secured by this Indenture shall be unpaid, the Trustee will keep books or records and accounts consistent with its maintenance program for such records, in which full, true and correct entries will be made of all its financial dealings or transactions in relation to the Project and the payments derived from the Loan Agreement, this Indenture and the Mortgage. At reasonable times and under reasonable regulations established by the Trustee, such books shall be open to the inspection of the Holders or the Issuer, and such accountants or other agencies as the Holders or the Issuer may from time to time designate in writing to the Trustee. Section 4.6. Bondholders’ Access to Bond Register. At reasonable times and under reasonable regulations established by the Bond Registrar, the Bond Register or a copy thereof may be inspected and copied by the Issuer, the Trustee or the Holders (or a designated -27- representative thereof) of ten percent (10%) or more in principal amount of the then Outstanding Bonds, such authority of any such designated representative to be evidenced to the reasonable satisfaction of the Bond Registrar. Except as otherwise may be provided by law, the Bond Register shall not be deemed a public record, and shall not be made available for inspection by the public unless and until notice to the contrary is given to the Bond Registrar by the Issuer. Section 4.7. Rights Under Loan Agreement. The Loan Agreement sets forth covenants and obligations of the Borrower, and reference is hereby made to the same for a detailed statement of said covenants and obligations. The Issuer agrees to cooperate in the enforcement of all covenants and obligations of the Borrower under the Loan Agreement and agrees that the Trustee and the Bondowner Representative may enforce all rights of the Issuer (other than Unassigned Rights) and all obligations of the Borrower under and pursuant to the Loan Agreement in their respective names and on behalf of the Holders, whether or not the Issuer has undertaken to enforce such rights and obligations. Section 4.8. Rights Under Mortgage. (1) The Issuer acknowledges that it has assigned its interest in and to the Mortgage to the Trustee under this Indenture and that such instrument further secures payment of the Loan, interest thereon and amounts due under certain other Loan Documents, and reference is hereby made to the same for a detailed statement of the obligations of the parties thereto. (2) Subject to the terms of this Indenture and of the Mortgage and the Regulatory Agreement, until the occurrence of an permitted to possess, use and enjoy the and profits of the Mortgaged Property. - - Event of Default hereunder, the Borrower shall be Mortgaged Property and to receive and use the issues ARTICLE 5 FUNDS AND ACCOUNTS Section 5.1. Trust Funds Pledged and Assigned to the Trustee. Under all circumstances, all payments, revenues and income receivable by the Issuer under the Loan Agreement and pledged and assigned by this Indenture to the Trustee, together with the balance of the Trust Estate, are to be paid directly to the Trustee and, subject to the provisions of Section 8.6, deposited by it in the Funds and Accounts described in this Article 5 and held in trust for the purposes set forth herein. Moneys on deposit in the Funds and Accounts described in this Article 5 shall be held by the Trustee in trust, and pending application in accordance with the provisions of this Article 5 shall be subject to a lien and charge in favor of the Bondholders until applied as hereinafter provided. The Trustee shall at all times maintain accurate records of deposits into such funds and the sources and timing of such deposits. Each Fund shall constitute a segregated trust account or accounts maintained with the corporate trust department of the Trustee, shall be established in the name of the Trustee, bearing the designation provided below with a qualifier indicating such fund is held with respect to the Bonds. The Trustee shall not deposit into such Funds any moneys other than as provided in this Indenture or the Loan Agreement. Section 5.2. Project Fund; Disbursement of Project Funds. (1) A special trust fund is hereby created and designated the Project Fund. The initial proceeds of the Bonds in the amount of $50,000 shall be deposited with the Trustee on the date of the Bond Closing for deposit in the Project Fund, and additional amounts of Bond proceeds in an aggregate principal amount not to exceed $6,325,000 (including such initial amount) shall be deposited with the -28- Trustee from time to time upon the Borrower’s satisfaction of the conditions set forth on Schedule D to the Loan Agreement. All such additional Bond proceeds shall be deposited into the Project Fund as and when advanced by Bondholders and received by the Trustee. Additional amounts required to be deposited by the Borrower pursuant to the Loan Agreement may be delivered to Trustee from time to time for deposit in the Project Fund. (2) No moneys shall be disbursed from the Project Fund until the Trustee shall have received evidence of the recordation of the Mortgage and the Regulatory Agreement in the Recorder’s Office of the County of San Diego, California. The Trustee may conclusively rely upon telephonic notice from the Title Company responsible for recording the Mortgage as evidence of such recordation. (3) The Trustee shall immediately disburse to the Borrower (or the persons designated by the Borrower), from funds in the Project Fund, all amounts requested by the Borrower pursuant to a written requisition upon satisfaction of the following conditions: (a) satisfaction of the requirements of subsection (2) of this Section 5.2, (b) receipt from the Borrower of a written requisition in the form of Exhibit A hereto, which requisition shall include Borrower’s certification that not less than ninety-five percent (95%) of the funds relating to the Tax-Exempt Bonds requisitioned will be expended for Qualified Project Costs which have not previously been paid or reimbursed, and (c) receipt of written consent to such disbursement by the Bondowner Representative. (4) Neither the Trustee nor the Issuer shall be responsible or liable for the application by the Borrower of moneys disbursed to the Borrower or its designees (if any money is disbursed thereto) in accordance with this Section 5.2. (5) All requisitions in the form provided by this Indenture and all other statements, orders, certifications and approvals received by the Trustee, as required by this Article as conditions of payment from the Project Fund, may be conclusively relied upon by the Trustee, and shall be retained by the Trustee, subject at all reasonable times to examination by the Borrower (so long as the Loan Agreement shall remain in force and effect), the Issuer, the Bondowner Representative and the agents and representatives thereof. (6) All costs incurred in connection with the requisition and disbursement of funds from the Project Fund, including but not limited to the cost of the Project Engineer and updates to the Title Policy, shall be paid by the Borrower. (7) Amounts on deposit in the Project Fund representing proceeds of the Tax- Exempt Bonds disbursed as set forth above are hereby deemed allocated to the payment of, or to the reimbursement for the payment of, Qualified Project Costs. Section 5.3. Revenue Fund. A special trust fund is hereby created and designated the Revenue Fund, which shall contain (i) a Series A Account and (ii) and Series B Account. (1) Deposits to the Revenue Fund. (4 Deposits to the Series A Account. All Basic Payments under the Loan Agreement (except Limited Partner Equity Payments) and any payments under the Guaranty are assigned by the Issuer to the Trustee pursuant to this Indenture for monthly deposit to the Series A Account of the Revenue Fund. 04 Deposits to the Series B Account. All Limited Partner Equity Payments under the Loan Agreement are assigned by the Issuer to the Trustee pursuant to the Indenture for deposit to the Series B Account of the Revenue Fund. -29- (2) Uses of Revenue Fund. (a> Uses of the Series A Account. Provided no Event of Default has occurred and is continuing, funds on deposit in the Series A Account of the Revenue Fund shall be distributed at least monthly by the Trustee as follows: (0 Prior to the Series A Conversion Date: FIRST: to the Bond Fund for deposit into the Series A Principal Account and the Series A Interest Account, an amount equal to the principal of and interest to become due on the Series A Bonds on the next Payment Date; SECOND: to the Bond Fund for deposit into the Series B Account, an amount equal to the interest to become due on the Series B Bonds and the Series B-T Bonds on the next Payment Date; THIRD: to the Rebate Fund, the amount calculated by the Arbitrage Consultant as arbitrage rebate due to the United States Department of the Treasury with respect to the Series A Bonds for a particular Bond Year; and FOURTH: to the Trustee, the amount of its Ordinary Fees and Expenses then due, if any, and then to the Arbitrage Consultant, the reasonable fees and expenses, if any, as billed and due to it for services hereunder. (ii) After the Series A Conversion Date: FIRST: to the Bond Fund for deposit into the Series A Principal Account and the Series A Interest Account, an amount equal to one-sixth of the principal of and interest, including Sinking Fund Installments, to become due on the Series A Bonds on the next Payment Date: provided that in the month preceding each Payment Date, sufficient amounts shall be transferred to the Bond Fund pursuant to Section 5.4 hereof on the Business Day preceding such Payment Date so that the aggregate amount on deposit in the Series A Principal Account and the Series A Interest Account is equal to, but not in excess of, the next required payment of principal of and interest, including Sinking Fund Installments, on the Series A Bonds; and provided, further, that when the amount in the Series A Principal Account and the Series A Interest Account of the Bond Fund is equal to the next required payment of principal of and interest, including Sinking Fund Installments, on the Series A Bonds no further transfers shall be required until the monthly distribution date following the next Payment Date: SECOND: to the Rebate Fund, the amount calculated by the Arbitrage Consultant as arbitrage rebate due to the United States Department of the Treasury with respect to the Series A Bonds for a particular Bond Year; THIRD: to the Trustee, the amount of its Ordinary Fees and Expenses then due, if any, and then to the Arbitrage Consultant, the reasonable fees and expenses, if any, as billed and due to it for services hereunder: FOURTH: [reserved]; and FIFTH: to the Reserve Account of the Servicing Fund, the Reserve Deposit Requirement multiplied by the number of units in the Project. -3o- (b) Uses of the Series B Account. Provided no Event of Default has occurred and is continuing, funds on deposit in the Series B Account of the Revenue Fund shall be distributed by the Trustee on each Payment Date following the Series B Conversion Date as follows: FIRST: to the Bond Fund for deposit into the Series B Account, an amount equal to the interest to become due on the Series B Bonds and the Series B-T Bonds on the next Payment Date; SECOND: to the Bond Fund for deposit into the Series B Account, an amount equal to the principal, including Sinking Fund Installments, to become due on the Series B-T Bonds on the next Payment Date; THIRD: to the Bond Fund for deposit into the Series B Account, an amount equal to the principal, including Sinking Fund Installments, to become due on the Series B Bonds on the next Payment Date; and FOURTH: to the Rebate Fund, the amount calculated by the Arbitrage Consultant as arbitrage rebate due to the United States Department of the Treasury with respect to the Series B Bonds for a particular Bond Year. (4 On July 1 of each year and provided that sufficient amounts have been deposited in the Revenue Fund to enable the Trustee to make all deposits (or arrears in deposits) required above, amounts on deposit in the Revenue Fund shall be disbursed by the Trustee to the Borrower or at the Borrower’s request may be used as a credit against its payment obligations under the Notes. Section 5.4. Bond Fund. A special trust fund is hereby created and designated the Bond Fund, which shall contain (i) the Series A Interest Account, (ii) the Series A Principal Account, (iii) the Redemption or Purchase Account and (iv) the Series B Account. (1) Series A interest Account. The Trustee shall deposit to the Series A Interest Account moneys transferred from the Revenue Fund as provided in Section 5.3 of this Indenture. Moneys in the Series A Interest Account shall be used to pay interest on the Series A Bonds when due. The Trustee shall also deposit to the Series A Interest Account the proceeds, if any, from the Bonds to be used for capitalized interest. (2) Series A Principal Account. The Trustee shall deposit to the Series A Principal Account moneys transferred from the Revenue Fund as provided in Section 5.3 of this Indenture. Moneys in the Series A Principal Account shall be used to pay principal of and Sinking Fund Installment on the Series A Bonds when due. (3) Redemption or Purchase Account. The Trustee shall deposit to the Redemption or Purchase Account any amounts to be transferred from (i) the Mortgage Recovery Fund pursuant to Section 5.8 hereof, (ii) the Servicing Fund and (iii) any amounts of funds transferred or deposited to effect a redemption or purchase of Bonds pursuant to Article 3 hereof. Moneys on deposit in the Redemption or Purchase Account shall be used for redemption or purchase (other than Mandatory Sinking Fund Redemption) of Bonds pursuant to the provisions of Article 3 hereof. (4) Series B Account. The Trustee shall deposit to the Series B Account moneys transferred from the Revenue Fund as provided in Section 5.3 of this Indenture. Moneys in the Series B Account shall be used to pay principal of, interest on and Sinking Fund Installment on the Series B Bonds and the Series B-T Bonds when due. -3i- Section 5.5. Reserved. Section 5.6. Deposit of Funds With Paying Agent. (1) If the Trustee is not the Paying Agent, the Trustee shall transfer and remit sums from the Bond Fund to the Paying Agent on or before the Business Day prior to each Payment Date, from the balance then on hand in the Bond Fund, sufficient to pay all principal, interest and redemption premiums then due on the Bonds. The Paying Agent shall hold in trust for the Holders of such Bonds all sums so transferred to it until paid to such Holders or otherwise disposed of as herein provided. (2) The Trustee will cause any Paying Agent which is not the Trustee to execute and deliver to it an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section 5.6, that such Paying Agent will: (4 hold all sums held by it for the payment of principal of (and premium, if any) or interest on Bonds in trust for the benefit of the Holders of such Bonds until such sums shall be paid to such Holders or otherwise disposed of as herein provided; and M at any time during the continuance of any default in the making of any such payment of principal (and premium, if any) or interest, upon the written request of the Trustee forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Trustee, acting as Paying Agent, shall also be bound by the terms of the foregoing requirements. Section 5.7. Rebate Fund. (1) The Trustee shall establish and maintain a fund separate from any other fund established and maintained hereunder, designated as the Rebate Fund. There shall be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to the Tax Certificates and at the direction of the Arbitrage Consultant. Subject to the transfer provisions provided in subsection (3) below, all amounts on deposit in the Rebate Fund shall be held by the Trustee in trust, to the extent required to pay rebatable arbitrage to the United States of America, and neither the Issuer, the Borrower nor the Holders of any Bonds shall have any rights in or claim to such money. All amounts held in the Rebate Fund shall be governed by this Section and by the Tax Certificates (which are incorporated herein by reference). (2) The Trustee shall unconditionally be entitled to accept and rely upon the recommendations, advice, calculations and opinions of the Arbitrage Consultant as to actions required or not required to be taken by the Trustee to comply with the provisions of Section 148(f) of the Code. The Trustee agrees to act in accordance with the recommendations, advice and opinions of the Arbitrage Consultant for the purpose of complying with any applicable provision of Section 148(f) of the Code. (3) Pursuant to the Tax Certificates and upon written direction of the Rebate Consultant, the Trustee shall remit all rebate installments and a final rebate payment to the United States of America pursuant to the final report of the Arbitrage Consultant. The Trustee shall have no obligation to pay any amounts required to be rebated pursuant to this Section and the Tax Certificates, other than from moneys held in the Funds created under this Indenture or from other moneys provided to it by the Borrower. Any moneys remaining in the Rebate Fund after redemption and payment of all of the Bonds and payment and satisfaction of any rebatable arbitrage shall be withdrawn and remitted to the Borrower. (4) Notwithstanding any other provision of this Indenture, including in particular Article 7 hereof, the obligation to pay rebatable arbitrage to the United States of America and to comply with all other requirements of this Section and the Tax Certificates shall survive the defeasance or payment in full of the Bonds. -32- Section 5.8. Mortgage Recovery Fund. (1) The Trustee shall establish and maintain a special trust fund separate from any other fund established and maintained hereunder designated as the Mortgage Recovery Fund. (2) In the event there is damage, destruction or Condemnation of the Project, the Proceeds shall be deposited in the Mortgage Recovery Fund and shall be disbursed in the following order of priority: (a) to pay or reimburse the Borrower for the costs of repairing or replacing the Project subject to the requirements provided in paragraph (6) below; (b) to the extent required or permitted by the Loan Agreement, or if the Borrower fails to comply with the requirements of paragraph (6) below, to redeem Bonds in whole or in part, or to pay the principal of and interest on the Bonds upon the acceleration of the maturity thereof; (c) to make payments of principal and interest on the Bonds; and (d) to pay Additional Charges and Prepayment Premium. The Trustee’s use of Proceeds is further subject to the provisions of paragraph (4) below. (3) In the event of a foreclosure of the Mortgage, the Net Proceeds realized from the foreclosure sale shall be deposited in the Mortgage Recovery Fund and shall be disbursed by the Trustee upon the direction of the Bondowner Representative to (a) redeem Bonds, in whole; (b) make payments of principal and interest on the Bonds or other amounts due under the Loan Documents; or (c) pay Additional Charges and Prepayment Premium. The Trustee’s use of Net Proceeds pursuant to clause (c) is subject to the provisions of paragraph (4) below. (4) Subject to the priorities set forth in paragraph (2) above, moneys in the Mortgage Recovery Fund shall be transferred by the Trustee to the Bond Fund to pay principal of and interest on the Bonds when due to the extent funds are not otherwise available to make payment on the Bonds when due. (5) In the event moneys are deposited in the Mortgage Recovery Fund pursuant to the Mortgage, such moneys shall be disbursed in the manner set forth in paragraph (3) above. (6) (a) Amounts in the Mortgage Recovery Fund shall be applied to pay or reimburse the Borrower for the costs of repairing or replacing the Project only if the following conditions are satisfied: (1) The Trustee shall have been furnished a written confirmation (upon which the Trustee may conclusively rely) from the Bondowner Representative that the conditions contained in Section 6.4 of the Loan Agreement have been satisfied: (2) The Borrower shall have provided to the Trustee and the Bondowner Representative a construction statement itemizing the full cost of the repair or restoration (the “Construction Statement”): (3) The Proceeds to be deposited in the Mortgage Recovery Fund to pay for such repair or restoration must be sufficient to complete such repair or restoration, or the Borrower must deposit in the Mortgage Recovery Fund the net difference prior to commencing repair or restoration; (4) Disbursements from the Mortgage Recovery Fund to pay the cost of such repair or restoration shall be made not more frequently than twice a month for restoration work completed and in place pursuant to the construction lending procedures and conditions contained in Sections 6.4 and 6.5 of the Loan Agreement; -33- 138 (5) The Borrower submits to the Trustee a written requisition in the form of Exhibit B hereto and the Bondowner Representative gives the Trustee its written approval of such requisition. 04 All requisitions in the form attached as Exhibit B to this Indenture and all other statements, orders, certifications and approvals received by the Trustee, as required by this Article as conditions of payment from the Mortgage Recovery Fund, may be conclusively relied upon by the Trustee, and shall be retained by the Trustee, subject at all reasonable times to examination by the Borrower (so long as the Loan Agreement shall remain in force and effect), the Issuer and the agents and representatives of each of them. The Trustee shall have no obligation to monitor the application of any amounts paid hereunder. (4 In the event that the Borrower does not complete the repair or replacement of the Project in accordance with the terms and schedule set forth above, the Trustee shall, after receipt of written notice of such failure to complete the repair or replacement of the Project and after 30 days’ written notice from the Trustee to the Borrower and the Investor Limited Partner of such failure and continuance of such failure at the end of such period, either (i) disburse moneys in the Mortgage Recovery Fund, including retainage for the payment of costs of repairing or replacing the Project pursuant to the Construction Statement (“Retainage”), or (ii) disburse moneys in the Mortgage Recovery Fund for any other purpose described in paragraph (2) above in the priority set forth in paragraph (2) above. (4 Upon the completion of the repair or replacement of the Project (as evidenced by a certificate of a Project Engineer), the accumulated Retainage shall be disbursed to the Borrower and the balance in the Mortgage Recovery Fund shall be deposited by the Trustee into the Repair and Replacement Account of the Servicing Fund or if directed in writing by the Borrower, to the redemption of Bonds pursuant to Section 3.1(l). Section 5.9. Servicing Fund. (1) The Trustee shall establish and maintain a special trust fund separate from any other fund established and maintained hereunder designated as the Servicing Fund. (2) The Trustee shall deposit amounts provided in Section 5.3 hereof into the Servicing Fund. The following account shall be established and maintained in the Servicing Fund: (a> [Reserved.] 09 The Reserve Account. There shall be deposited to the credit of the Reserve Account on the first to occur of the Series A Conversion Date or the Series B Conversion Date $ from the Borrower. Thereafter, the Trustee shall transfer from the Revenue Fund amounts required by Section 5.3 hereof for deposit to the Reserve Account and shall maintain separate accounting thereof. The Trustee shall disburse amounts from such funds accounted for as the Reserve Account to pay or reimburse the Borrower for the payment of capital expenditures and replacements to the Project, exclusive of ordinary or routine maintenance upon receipt by the Trustee of evidence satisfactory to the Trustee that the Borrower has incurred capital expenditures, repairs or replacements, such evidence to include invoices therefor indicating payment to be made and such other evidence as the Trustee deems necessary. For expenditures in excess of $20,000, the Trustee shall require written certification of the Borrower of lien-free completion of such work and consent of the Bondowner Representative. The Bondowner Representative or an agent thereof shall monitor the Borrower’s requests to ensure no duplication of disbursements. Interest accrued on the Reserve Account shall become a part of this account and may be utilized for the purposes of this account. In no event shall the -34 Trustee be obligated to consider requests for more than one disbursement from the Reserve Account each calendar month. Moneys in the Reserve Account shall be transferred by the Trustee to the Bond Fund to pay principal of and interest on the Bonds when due to the extent funds are not otherwise available to make payment on the Bonds when due. Section 5.10. Costs of issuance Fund. A special trust fund is hereby created and designated the Costs of Issuance Fund. There shall be deposited to the credit of the Costs of Issuance Fund on the date of the Bond Closing [$50,000] of Bond proceeds and] [CONFIRM THAT $50,000 WILL BE USED FOR COSTS OF ISSUANCE RATHER THAN DEPOSITED IN PROJECT FUND] $ from the Borrower. The Trustee shall disburse amounts in such Fund upon written request of the Issuer and receipt of written approval by the Bondowner Representative to pay or reimburse the Borrower for Costs of Issuance. Any amounts in the Costs of Issuance Fund on the ninetieth day following the Bond Closing shall be transferred to the Project Fund, and any balance of the Borrower’s equity contribution shall be returned to the Borrower free and clear of any lien thereon or pledge thereof created by this indenture upon receipt by the Trustee of a certification from the Bondowner Representative, following completion of construction of the Facility, that such funds are not required for payment of costs of the Project, Section 5.11. [Reserved]. Section 5.12. interest Earned on funds. (1) The interest earned from the investment of money held by the Trustee in each of the Funds and Accounts created under this Article 5 (other than the Rebate Fund) shall inure to the benefit of the Borrower and, except as provided in paragraph (2) below, shall be retained in such separate Fund or Account and applied as a credit against the payment, if any, next due into such separate Fund or Account. (2) During the continuance of an event of default or an event which, with notice or lapse of time or both, would become an event of default under the Loan Agreement or any other Loan Document, interest earned from the investment of money in the Funds created under this Article 5 shall be held in each such Fund and shall not be credited against the payments next due to or from such separate Funds. Section 5.13. final Balances. Upon the deposit with the Trustee of moneys sufficient to pay all principal of, premium, if any, and interest on the Bonds, and upon satisfaction of all claims against the Issuer hereunder and under the Loan Documents, including any rebate obligation, all fees, charges and expenses of the Trustee, the Bond Registrar, the Issuer and any Paying Agent which are properly due and payable hereunder, or upon the making of adequate provisions for the payment of such amounts as permitted hereby, all moneys remaining in all Funds, except: (1) moneys necessary to pay principal of, premium, if any, and interest on the Bonds, which moneys shall be held by the Trustee to be paid to the Bondholders: and (2) moneys, if any, set aside pursuant to Section 5.7 hereof, shall be remitted to the Borrower. ARTICLE 6 Section 6.1. investments by Trustee. (1) Moneys held hereunder by the Trustee in the Funds, if permitted by law, shall, as nearly as may be practicable, be invested by the Trustee: (a) unless an event of default has occurred and is continuing under the Loan Agreement or other Loan Documents, upon the written direction of the Borrower to the Trustee (which direction shall specify the amount thereof to be so invested), in Permitted Investments maturing on or before the Business Day prior to the day such amounts are required and in the amounts required, to enable the Trustee to make payments due hereunder on the Bonds or otherwise, but in no event longer than 180 days (unless approved by the Bondowner Representative) or (b) if an event of default has occurred and is continuing under the Loan Agreement or the other Loan Documents, the Trustee shall hold money in the Funds in Permitted Investments of the type described in clause (a) (v) of the definition of Permitted Investments. (2) The Trustee shall sell and reduce to cash a sufficient portion of investments under the provisions of this Section whenever the cash balance in the Fund for which the investment was made is insufficient for its current requirements. Securities so purchased as an investment of money shall be held by the Trustee, shall be registered in the name of the Trustee or its nominee if registration is required, and shall be deemed at all times a part of the applicable Fund, and the interest accruing thereon and any profit realized from such investments shall be credited to the Fund from which the investment was made, subject to any transfer to another Fund as herein provided. Any loss resulting from such investment shall be charged to the Fund from which the investment was made, and in the event such loss reduces the amount held in such Fund below the amount required to be deposited in such Fund, the Trustee shall request the Borrower to transfer to the Trustee for deposit into such Fund the amount required to restore amounts in such Fund to the required amount. The Trustee shall not be liable for any loss incurred from the purchase or sale of any investment (except for any such loss resulting from the gross negligence or willful misconduct of the Trustee or its employees). (3) The Trustee may purchase from or sell to itself, or through any affiliated company, as principal or agent, securities herein authorized so long as such purchase or sale is at fair market value. Section 6.2. Computation of Balances in Funds. In computing the assets of any Fund established hereunder, investments and accrued but unpaid interest thereon shall be deemed a part thereof, and, except as otherwise provided in the Tax Certificates, such investments shall be valued at par value, or at the redemption price thereof, if then redeemable at the option of the obligor, whichever is lower. Section 6.3. Downgrade of Investments. If any rating of a Permitted Investment during the term of this Indenture falls below such rating that is required pursuant to the definition of “Permitted Investments,” then the trust officer responsible for the administration of the trust created under this Indenture for the Trustee shall within two Business Days after receiving actual knowledge of the downgrade of the rating of an investment notify in writing the Borrower of such downgrade. The Borrower shall within five Business Days of the receipt of the downgrade notice from the Trustee, direct the Trustee to sell the downgraded investment and reinvest the proceeds thereof in other Permitted Investments. ARTICLE 7 DISCHARGE OF LIEN Section 7.1. Payment of Bonds; Satisfaction, Defeasance and Discharge of Bonds and Obligation to Bondholders. Whenever the conditions specified in either clause (A) or clause (B) of the following subsection (1) and the conditions specified in the following subsections (2), (3)) (4) and (5) to the extent applicable, shall exist, namely: (1) either: -36- - A (A) all Bonds have become due and payable and all principal or premium, if any, and interest on the Bonds shall have been paid in full, or all Bonds have been cancelled by the Trustee or delivered to the Trustee for cancellation, except for: (i) Bonds for which funds have theretofore been deposited in trust or segregated and held in trust by the Paying Agent or Trustee and thereafter repaid to the Issuer or discharged from such trust, as provided in Section 2.12; and (ii) Bonds alleged to have been destroyed, lost or stolen which have been replaced or paid as provided in Section 2.7, and (1) which, prior to the satisfaction and discharge of this Indenture as hereinafter provided, have not been presented to the Paying Agent or Trustee with a claim of ownership and enforceability by the Holder hereof, or (2) whose enforceability by the Holder thereof has been determined adversely to the Holder by a court of competent jurisdiction or other competent tribunal; or @I the Issuer or the Borrower has deposited or caused to be deposited with the Trustee, as trust funds, cash and/or Permitted Investments of the type described in clause (a)(i) of the definition of that term which do not permit the redemption thereof at the option of the issuer thereof, the principal of, premium, if any, and interest on which when due (or upon the redemption thereof at the option of the holder), will, without reinvestment, provide cash which together with the cash, if any, deposited with the Trustee at the same time, shall be sufficient, to pay and discharge the entire indebtedness on Bonds not theretofore cancelled by the Trustee or delivered to the Trustee for cancellation by the payment of interest on and principal (and premium, if any) of the Bonds which have become due and payable or which shall become due at their stated maturity or redemption date, as the case may be (the “Defeasance Collateral”), and which are to be discharged under the provisions hereof, and has made arrangements satisfactory to the Trustee for the giving of notice of redemption, if any, by the Trustee in the name, and at the expense, of the Borrower in the same manner as is provided by Section 3.2; (2) the Issuer or Borrower has paid, caused to be paid or made arrangements satisfactory to the Trustee for the payment of all other sums due and payable hereunder, including any rebate obligation, and under the Loan Documents; (3) the Borrower has delivered to the Trustee and the Issuer a report of an Independent Accountant stating that the payments to be made on any securities, together with the cash, if any, deposited pursuant to clause (B) of subsection (1) above will be sufficient to pay when due the principal of, premium, if any, and interest on the Bonds to be defeased; (4) if discharge is to be effected under clause (B) of subsection (l), an opinion of Bond Counsel is delivered to the Trustee and the Issuer stating in effect that such discharge will not impair the exclusion of interest on the Bonds from gross income for federal income tax purposes; (5) the Borrower has delivered to the Trustee and the Issuer an opinion of Independent Counsel to the effect that (i) the Defeasance Collateral has been duly and validly assigned and delivered to the Trustee, (ii) the security interest of the Trustee for -37- h the ratable benefit of the Bondholders, with respect to Defeasance Collateral, is a first priority perfected security interest as security for payment of the Bonds, which opinion may contain, and be subject to, conditions, exceptions or qualifications as are then customarily included in such opinions, (iii) making the payment which accompanies such opinion would not constitute an avoidable preference under Section 547 of the Bankruptcy Code or under applicable state law in the event of a filing of a petition for relief under the Bankruptcy Code or such applicable state law by or against the Borrower and (iv) the Defeasance Collateral would not be part of the bankrupt estate under Section 541 of the Bankruptcy Code or be subject to the automatic stay under Section 362 of the Bankruptcy Code in the event of a filing of a petition for relief under the Bankruptcy Code by or against the Borrower; then, except as otherwise provided in Section 7.5, the rights of the Bondholders shall be limited to the cash or cash and securities deposited as provided in clause (1) (A) or (1) (B) above, and upon the Borrower’s request the rights and interest hereby granted or granted by the Loan Documents to or for the benefit of the Trustee or the Bondholders shall cease and terminate, and the Issuer and the Trustee shall, at the expense of the Borrower, execute and deliver such instruments of satisfaction and transfer as may be necessary, and forthwith the estate, right, title and interest of the Trustee in and to all of the Project and in and to all rights under this Indenture and the Loan Documents (except the moneys or securities or both deposited as required above, rebatable arbitrage and except as may otherwise be provided in Section 7.5) shall thereupon be discharged and satisfied: except that in any event the obligations of the Borrower under Sections 4.3 and 7.4 of the Loan Agreement shall survive. Section 7.2. Cancellation of Surrendered Bonds. The Issuer or the Borrower may at any time surrender to the Trustee for cancellation by the Trustee any Bonds previously authenticated and delivered hereunder which the Issuer or Borrower acquired in any manner whatsoever, and such Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired. Section 7.3. Payment of Bonds. Any Bonds shall be deemed paid if the conditions set forth in Section 7.1 hereof have been satisfied with respect thereto, even though other Bonds may remain Outstanding. Section 7.4. Application of Deposited Money. All money, securities and income thereon deposited with the Trustee pursuant to Section 7.1 for the purpose of paying the principal, premium, if any, and interest on Bonds shall be applied by the Trustee solely for such purpose. Section 7.5. Survival of Certain Provisions. Notwithstanding satisfaction of the conditions set forth in Section 7.1(B) hereof, the provisions contained in Sections 4.7, 4.8 and 5.7 shall survive the discharge of the Indenture pursuant to Section 7.1(B). ARTICLE 8 DEFAULT PROVISIONS AND REMEDIES Section 8.1. Events of Default. Subject to the provisions of Section 8.10, each of the following events is hereby defined as and declared to be and to constitute an Event of Default (whatever the reason for such an Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) Failure to make payment of any interest on any Outstanding Bond on the due date thereof; or (2) Failure to make payment of the principal of any Outstanding Bond, on the stated maturity thereof, on the date fixed for redemption or purchase thereof or upon acceleration, or failure to timely pay any redemption premium, if any on the Bonds, or (3) Failure to pay any other moneys required to be paid to the Trustee under the provisions of this Indenture and such default shall have continued for a period of five days after written notice thereof, specifying such default, shall have been given by the Trustee to the Issuer and the Borrower, or to the Issuer, the Borrower and the Trustee by the Holders of not less than 25% in aggregate principal amount of the Bonds then Outstanding; or (4) Failure by Issuer to perform or observe of any other of the covenants, agreements or conditions on the part of the Issuer contained in this Indenture or in the Bonds, and such default shall have continued for a period of 30 days after written notice thereof given in the manner provided in clause (3) above. The Trustee shall provide Bondholders, the Borrower and the Issuer notice of any Event of Default as provided in Section 9.3 hereof. Section 8.2. Acceleration. The Trustee shall upon written direction of the Bondowner Representative, following the occurrence of an Event of Default, and by notice in writing delivered to the Issuer and the Borrower, declare the principal of all of the Bonds Outstanding and the interest accrued thereon immediately due and payable. The Trustee shall give notice of acceleration to Bondholders in the same manner as notice of redemption is given under Section 3.2 (except as to the timing thereof) stating the accelerated date upon which the Bonds are due and payable, provided that the Trustee shall not be required to delay the effective date of acceleration until such notice is given. Section 8.3. Remedies. (1) Upon the occurrence of an Event of Default or an event which, with notice or lapse of time or both, would become an Event of Default, the Trustee shall take such actions as the Bondowner Representative shall direct (subject to receipt of indemnity acceptable to it pursuant to Section 9.1 hereof) to enforce any and all rights available to the Issuer or Bondholders under this Indenture, the Loan Agreement, the Regulatory Agreement and the Mortgage or otherwise, and, in this regard, is specifically authorized to transfer funds from any fund created pursuant to Article 5 (except rebatable arbitrage whether or not deposited in the Rebate Fund and moneys held in trust for the payment of Bonds or interest thereon which have matured or otherwise become payable prior to such Event of Default) to the Bond Fund for its use in paying principal and interest on the Bonds. (2) No remedy by the terms of this Indenture conferred upon or reserved to the Trustee (or the Bondholders) is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy (i) given to the Trustee or to the Holders hereunder or (ii) now or hereafter existing at law or in equity or by statute. (3)’ No delay or omission to exercise any right or power accruing upon any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default, or acquiescence therein; and every such right and power may be exercised from time to time and as often as may be deemed expedient. -39- - h (4) No waiver of any Event of Default hereunder, whether by the Trustee or the Holders, shall extend to or shall affect any subsequent Event of Default or impair any rights or remedies consequent thereon. Section 8.4. Direction of Proceedings by Bondowner Representative. Anything in this Indenture to the contrary notwithstanding but subject to the Issuer’s Unassigned Rights, the Bondowner Representative shall have the right, at any time, by an instrument or instruments in writing executed and delivered to the Trustee and subject to receipt by the Trustee of indemnity acceptable to it pursuant to Section 9.1 hereof, to direct the method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of this Indenture, the Loan Agreement, the Regulatory Agreement and the Mortgage or for the appointment of a receiver or any other proceedings hereunder, provided that such direction shall not be otherwise than in accordance with the provisions of law and of this Indenture, the Loan Agreement, the Regulatory Agreement and the Mortgage. In no event shall counsel to the Trustee be deemed to be counsel to the Bondowner Representative or any Bondholder, and all communications between the Trustee and its counsel shall be deemed confidential and privileged. Section 8.5. Waiver of Stay or Extension Laws. Upon the occurrence of an Event of Default, to the extent that such rights may then lawfully be waived, neither the Issuer nor anyone claiming through it or under it shall or will set up, claim, or seek to take advantage of any appraisement, valuation, stay, extension or redemption laws now or hereafter in force, in order to prevent or hinder the enforcement of this Indenture, but the Issuer, for itself and all who may claim through or under it, hereby waives to the extent that it lawfully may do so the benefit of all such laws and all right of appraisement and redemption to which it may be entitled under the laws of the State. Section 8.6. Priority of Payment and Application of Moneys. All Bonds issued hereunder and secured hereby shall be equally and ratably secured by and payable from the Bond Fund, without priority of one Bond over any other, except as otherwise expressly provided herein. Upon the occurrence of an Event of Default, all moneys collected pursuant to action taken under the Loan Agreement, the Regulatory Agreement or the Mortgage (other than sums payable directly to the Issuer in connection with its Unassigned Rights), after payment of the costs and expenses (including court costs and reasonable attorneys’ fees) of the proceedings resulting in the collection of such moneys (including any such costs and expenses incurred by the Issuer) and of the expenses, liabilities and advances (provided that the Trustee shall not be required to make any advances, as set forth in Section 9.1(12) hereof) incurred or made by the Trustee, and any amounts needed to be deposited into the Rebate Fund, and after any other prior application of such moneys has been made as is required by law, or required or permitted by the Loan Documents, shall be deposited in such fund or funds described in Article 5 of this Indenture as the Trustee deems appropriate; and all moneys in the Bond Fund and, at the discretion of the Trustee except when otherwise required hereunder, any other Fund described in Article 5 (excluding, however, rebatable arbitrage, whether or not deposited in the Rebate Fund and any moneys held in trust for the payment of Bonds or premium or interest thereon which have matured or otherwise become payable prior to such Event of Default) shall be applied as follows: (1) Unless the principal of all the Bonds shall have become or shall have been declared due and payable, all such moneys shall be applied: FIRST: To the payment to the persons entitled thereto of first all installments of interest then due on the Bonds, in the order of the maturity of the installments of such interest and, if the amount available shall not be sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the persons entitled thereto, without any discrimination or privilege, second unpaid principal on the Bonds then due, and m redemption premium, if any, on the Bonds which shall have become due (other than Bonds which have matured or have otherwise become payable prior to such Event of Default and moneys for the payment of which are held in trust pursuant to the provisions of this Indenture) in the order of their due dates and, if the amount available shall not be sufficient to pay in full the unpaid principal and redemption premium, if any, on such Bonds due on any particular due date, then to the payment ratably, according to the amount of principal and premium, if any, due on such date, to the persons entitled thereto: SECOND: To reimburse and/or pay to the Issuer in full for costs, expenses or fees (including without limitation, all amounts payable as Additional Charges pursuant to the Loan Agreement) not described in the first unnumbered paragraph of this Section 8.6; and THIRD: To reimburse and/or pay to the Trustee in full for costs, expenses or fees (including, without limitation, all amounts payable as Additional Charges pursuant to the Loan Agreement) not described in the first unnumbered paragraph of this Section 8.6. (2) If the principal of all Bonds shall have become due or shall have been declared due and payable, all such moneys shall be applied first to the payment of the principal and interest then due and unpaid and any redemption premium on the Series B-T Bonds, then to the payment of the principal and interest then due and unpaid and any redemption premium on the Series B Bonds, then to the payment of the principal and interest then due and unpaid and any redemption premium on the Series A Bonds, without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Bond over any other Bond of the same Series, ratably, according to the amounts due respectively for principal and interest, to the persons entitled thereto, without any discrimination or privilege; second, to reimburse the Issuer for any costs and expenses not described in the first unnumbered paragraph of this Section 8.6: and third, to reimburse and/or pay to the Trustee in full for costs, expenses or fees (including, without limitation, all amounts payable as Additional Charges pursuant to the Loan Agreement) not described in the first unnumbered paragraph of this Section 8.6. (3) If the principal of all the Bonds shall have been declared due and payable, and if such declaration shall thereafter have been rescinded and annulled under the provisions of this Article, then, subject to the provisions of paragraph (2) of this Section in the event that the principal of all the Bonds shall later become due or be declared due and payable, the moneys shall be applied in accordance with the provisions of paragraph (1) of this Section. Whenever moneys are to be applied by the Trustee pursuant to the provisions of this Section, such moneys shall be applied by it at such times, and from time to time, as the Trustee shall 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 shall apply such funds, it shall (i) fix the date (which shall be a Payment Date unless it shall deem another date more suitable) upon which such application is to be made and upon such date interest on the amounts of principal to be paid on such dates shall cease to accrue and (ii) on or before such date set aside the moneys necessary to effect such application. The Trustee, at the expense of the Borrower, shall give to the Bondholders mailed notice of the deposit with it of any such moneys and of the fixing of any such date. Neither the -41- Trustee nor any Paying Agent shall be required to make payment of principal or redemption premium to the Holder of any Bond until such Bond shall be presented to the Trustee for appropriate endorsement or for cancellation if fully paid. Whenever all Bonds and premium and interest thereon have been paid or provided for under the provisions of this Section 8.6, all expenses and charges of the Trustee and the Issuer have been paid and rebatable arbitrage has been paid or provided for, any balance remaining shall be paid to the person entitled to receive the same pursuant to Section 5.13. Section 8.7. Remedies Vested in Trustee. All rights of action (including the right to file proof of claims) under this Indenture or under any of the Bonds may be enforced by the Trustee without the possession of any of the Bonds or the production thereof in any trial or other proceedings relating thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its name as Trustee without the necessity of joining as plaintiffs or defendants any Holders of the Bonds, and any recovery or judgment shall be for the equal benefit of the Holders of the Outstanding Bonds to the extent and in the manner provided herein. The Issuer and Trustee hereby agree, without in any way limiting the effect and scope thereof, that the pledge and assignment hereunder to the Trustee of all rights included within the Trust Estate shall constitute an agency appointment coupled with an interest on the part of the Trustee which, for all purposes of this Indenture, shall be irrevocable and shall survive and continue in full force and effect notwithstanding the bankruptcy or insolvency of the Issuer or its default hereunder or on the Bonds. Section 8.8. Rights and Remedies of Holders. No Holder of any Bond shall have any right to institute any suit, action or proceeding in equity or at law for the enforcement of this Indenture or any Loan Document or for the execution of any trust hereof or any remedy hereunder or thereunder or for the appointment of a receiver, unless (i) a default thereunder shall have become an Event of Default and the Bondowner Representative shall have made written request to the Trustee and shall have offered it reasonable opportunity either to proceed to exercise the powers hereunder granted or to institute such action, suit or proceeding in its own name: (ii) the Bondowner Representative shall have offered to indemnify the Trustee as provided in Section 9.1; and (iii) the Trustee shall thereafter fail or refuse to exercise within a reasonable period of time the remedies hereunder granted, or to institute such action, suit or proceeding in its own name. Such notification, request and offer of indemnity are hereby declared in every such case at the option of the Trustee to be conditions precedent to the execution of the powers and trusts of this Indenture, and to any action or cause of action for the enforcement of this Indenture or any Loan Document, or for the appointment of a receiver or for any other remedy hereunder; it being understood and intended that no one or more Holders shall have any right in any manner whatsoever to affect, disturb or prejudice the lien of this Indenture or any Loan Document, by its, his, her or their action or to enforce any right thereunder except in the manner herein provided, and that all proceedings at law or in equity shall be instituted, had and maintained in the manner herein provided and for the equal benefit of the Holders of all Bonds then Outstanding; provided, however, that nothing herein shall be construed to preclude any Bondholder from enforcing, or impair the right of any Bondholder to enforce, the payment by the Trustee of principal of, and interest and premium, if any, on any Bond of such Bondholder at or after its date of maturity, if and to the extent that such payment is required to be made to such Bondholder by the Trustee from available funds in accordance with the terms hereof. Section 8.9. Termination of Proceedings. In case the Trustee shall have proceeded to enforce any right under this Indenture or any Loan Document by the appointment of a receiver, by entry and possession or otherwise, and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee, then and in every such case the Issuer and Trustee shall be restored to their former positions and rights -42- hereunder with respect to the property herein conveyed, and all rights, remedies and powers of the Trustee shall continue as if no such proceedings had been taken. Section 8.10. Waiver of an Event of Default. The Trustee shall waive any Event of Default hereunder and its consequences and rescind any declaration of acceleration of maturity or principal, upon written request of the Bondowner Representative. ARTICLE 9 Section 9.1. Acceptance of the Trustee. The Trustee, prior to the occurrence of an Event of Default, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture; and no implied covenants or obligations should be read into this Indenture against the Trustee. In case an Event of Default has occurred (which has not been cured or waived) 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 reasonable person would exercise or use under the circumstances in the conduct of his or her own affairs, but in any event, only upon and subject to the following express terms and conditions: (1) The Trustee may execute any of the trusts or powers hereof and perform any of its duties by or through attorneys, agents, receivers or employees, including, but not limited to, the duties set forth in Section 5.8 hereof, and shall not be liable for any misconduct or negligence on the part of any agent or attorney appointed with due care, and shall be entitled to advice of counsel concerning all matters of trusts hereof and duties hereunder, and may in all cases pay such reasonable compensation to any attorney, agent, receiver or employee retained or employed by it in connection herewith and shall be entitled to reimbursement from the Borrower for such payment. The Trustee may act upon the written opinion or written advice of any attorney, surveyor, engineer or accountant selected by it or by the Issuer, provided that the only legal advice or opinion that the Trustee may rely upon for purposes of securing advice or an opinion relating to the tax exempt status of the Bonds is given by Bond Counsel. The Trustee shall not be responsible for any loss or damage whatsoever resulting from any action or in good faith in reliance upon such opinion or advice. (2) The Trustee shall not be responsible for any recital herein, or in the Bonds or for the investment of moneys as herein provided (except as provided in Article 6 hereof), or for collecting any property insurance proceeds, or for the validity of the execution by the Issuer of this Indenture, or of any supplemental indentures or instruments of further assurance, or for the validity or sufficiency of any security for the Bonds, or for the value of title of the property herein conveyed, if any, or otherwise as to the maintenance of the security hereof; except as otherwise provided in Section 4.4 and except that in the event the Trustee enters into possession of a part or all of the property conveyed pursuant to any provisions of this Indenture or the Mortgage, it shall use due diligence in preserving such property. The Trustee may, but shall be under no duty to, require of the Borrower full information and advice as to the performance of the covenants, conditions and agreements in the Loan Agreement, the Regulatory Agreement and the Mortgage as to the condition of any Mortgaged Property and the performance of all other obligations thereunder and shall use reasonable efforts, but without any obligation, to advise the Issuer and the Borrower of any impending Event of Default known to the Trustee. Under no circumstances shall the duties of the Trustee be deemed expanded by any such inquiry. The Trustee shall have no responsibility or liability with -4% respect to any statements or recitals in any offering memorandum or other disclosure document or material prepared or distributed with respect to the issuance of the Bonds. (3) The Trustee shall not be accountable or liable in any respect whatsoever for the use or application of any of the Bonds or the proceeds thereof (except as herein expressly provided) or for the use or application of any money paid over by the Trustee in accordance with the provisions of this Indenture or for the use and application of money received by any Paying Agent. The Trustee may become the owner of Bonds secured hereby with the same rights it would have if not Trustee. (4) The Trustee shall be protected in acting in accordance with the standard of care otherwise required hereunder upon any written notice, order, requisition, request, consent, certificate, opinion (including an opinion of Independent Counsel or Bond Counsel), affidavit, letter, telegram or other paper or document reasonably believed in good faith by the Trustee to be genuine and correct and to have been signed or sent by the proper person or persons, and the Trustee shall be under no duty to make an investigation or inquiry into any statement contained therein. Any action taken by the Trustee pursuant to this Indenture upon the request or authority or consent of any person who at the time of making such request or giving such authority or consent is the Holder of any Bond, shall be conclusive and binding upon all future Holders of the same Bond and upon Bonds issued in exchange therefor, upon transfer thereof, or in place thereof. (5) As to the existence or non-existence of any fact or as to the sufficiency or authenticity of any instrument, paper or proceeding, the Trustee shall be entitled to conclusively rely upon a certificate of the Issuer signed by its Representative as sufficient evidence of the facts stated therein as the same appear from the books and records under the City Clerk’s custody or control or are otherwise known to such officer. The Trustee may accept a certificate of the City Clerk of the Issuer to the effect that a motion, resolution or ordinance in the form therein set forth has been adopted by the governing body of the Issuer as conclusive evidence that such motion or resolution has been duly adopted, and is in full force and effect, and may accept such motion, resolution or ordinance as sufficient evidence of the facts stated therein and the necessity or expediency of any particular dealing, transaction or action authorized or approved thereby, but may at its discretion secure such further evidence deemed necessary or advisable, but shall in no case be bound to secure the same. (‘3 The Trustee shall not be personally liable for any debts contracted or for damages to persons or to personal property injured or damaged, or for salaries or nonfulfillment of contracts during any period in which it may be in possession of or managing the real and tangible personal property as in this Indenture provided. (7) Upon the occurrence and continuance of an Event of Default at any and all reasonable times, the Trustee, and its duly authorized agents, attorneys, experts, engineers, accountants and representatives, shall have the right fully to inspect any and all of the property comprising the Mortgaged Property, including all books, papers and records of the Issuer pertaining to the Mortgaged Property and the Bonds, and to take such memoranda from and with regard thereto as may be desired. (8) The Trustee shall not be required to give any bond or surety with respect to the execution of said trusts and powers or otherwise with respect to the premises. (9) Notwithstanding anything contained elsewhere in this Indenture, the Trustee shall have the right, but shall not be required, to demand, with respect to the -44- authentication of any Bonds, the withdrawal of any cash except for withdrawals required by the express terms of this Indenture, the release of any property or any action whatsoever within the purview of this Indenture, any showings, certificates, opinions (including opinions of Independent Counsel), appraisals or other information, or corporate action or evidence thereof, in addition to that by the terms hereof required as a condition of such action by the Trustee, deemed desirable for the purpose of establishing the right of the Issuer to the authentication of any Bonds, the withdrawal of any cash, the release of any property, or the taking of any other action by the Trustee. (10) The Issuer shall not be liable for the payment of such sums or for providing for the indemnification of the Trustee. (11) Notwithstanding any provision of this Indenture to the contrary, before taking any action hereunder, the Trustee may require that it be furnished indemnity satisfactory to it for the reimbursement of all expenses to which it may be put and to protect it against all liability (except liability which is adjudicated to have resulted from the negligence or willful misconduct of the Trustee) by reason of any action so taken by the Trustee. (12) No provision of this Indenture or any loan document shall require the Trustee to expend or risk its own funds, make advances or otherwise incur any financial liability in the performance of any of its duties, or the exercise of its rights and powers hereunder: provided, however, that upon any such advance, the Trustee shall be entitled to receive interest at the maximum rate permitted by law. (13) Notwithstanding anything to the contrary contained in this Indenture, in the event the Trustee is entitled or required to commence an action or otherwise exercise remedies to acquire control or possession of any or all of the Project under this Indenture or the Loan Documents (including, but not limited to, the provisions of the Mortgage), the Trustee shall not be required to commence any such action or exercise any such remedy if the Trustee has determined in good faith that it may incur liability under an Environmental Law (as defined below) as the result of the presence at, or release on or from the Project of any Hazardous Substances unless the Trustee has received security or indemnity, from a person, in an amount and in a form all satisfactory to the Trustee in its sole discretion, protecting the Trustee from all such liability. The term “Environmental Laws” shall mean all federal, state and local environmental, land use, zoning, health, chemical use, safety and sanitation laws, statutes, ordinances and codes relating to the protection of the environment or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal of Hazardous Substances and the rules, regulations, policies, guidelines, interpretations, decisions, orders and directives of federal, state and local governmental agencies and authorities with respect thereto. (14) The Trustee is under no obligation to monitor the receipt of rents by the Borrower. (15) The Trustee shall not be deemed to have notice of any Event of Default under Section 8.1(4) unless the Trustee shall be specifically notified in writing of such Event of Default by the Issuer, the Bondowner Representative, the Borrower or the Holders of at least fifty-one percent (5 1%) in aggregate principal amount of Bonds Outstanding, and 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, and, in the absence of such notice so delivered, the Trustee may conclusively assume there is no such Event of Default, except as aforesaid. -45- Section 9.2. Trustee’s Fees, Charges and Expenses. (1) The Trustee and any Paying Agent shall be entitled to payment and/or reimbursement for Ordinary Fees and Expenses and, following the occurrence of an Event of Default, all advances, counsel fees and other expenses reasonably made or incurred by the Trustee in and about the execution of the trusts created by this Indenture in connection with the Event of Default and in and about the exercise and performance of the powers and duties of the Trustee hereunder in connection with the Event of Default and for the reasonable and necessary costs and expenses incurred in defending any liability in the premises of any character whatsoever (unless such liability is adjudicated to have resulted from the negligence or willful misconduct of the Trustee) in connection with the Event of Default. In this regard provisions have been made in Section 4.3 of the Loan Agreement for the payment of said fees, advances, counsel fees, costs and expenses, and reference is hereby made to the Loan Agreement for the provisions so made; and the Issuer shall not otherwise be liable for the payment of such sums. The fees and costs of the Trustee shall be deemed to have arisen out of the Trustee’s substantial and material contribution to the preservation of the trust estate. (2) The compensation of the Trustee shall not be limited by any provision of law which limits the compensation of a trustee of an express trust. Section 9.3. Notice to Holders of Default. The Trustee shall give to the Bondholders and the Issuer (and, on and after the Investor Limited Partner Admission Date, to the Investor Limited Partner) written notice of all Events of Default known to the Trustee, within five (5) days after the Trustee has actual knowledge or receives written notice of such Event of Default. Section 9.4. Intervention by Trustee. In any judicial proceeding to which the Issuer is a party and which in the opinion of the Trustee and its counsel has a substantial bearing on the interests of Bondholders, the Trustee may intervene on behalf of Holders and shall do so if requested in writing by the Bondowner Representative. The rights and obligations of the Trustee under this Section are subject to the approval of a court of competent jurisdiction in the premises. Section 9.5. Successor Trustee. Any corporation, association or agency into which the Trustee may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer its trust business and assets as a whole or substantially as a whole, or any corporation or association resulting from any such conversion, sale, merger, consolidation or transfer to which it is a party, shall, with the consent of the Issuer and the Bondowner Representative, be and become successor trustee and paying agent under this Indenture and vested with all of the title to the 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 instrument or any further act, deed or conveyance on the part of any of the parties hereto, anything herein to the contrary notwithstanding. If the Issuer’s and Bondowner Representative’s consent is not obtained, the Trustee shall be deemed to have been removed as set forth in Section 9.7 hereof. If no appointment of a successor Trustee shall have been made pursuant to the foregoing provisions of this Section within 45 days after the Trustee shall have given to the Issuer written notice of its resignation or after the occurrence of any other event requiring or authorizing such appointment, the Trustee or any Bondholder may apply to any court of competent jurisdiction to appoint a successor Trustee. The court may thereupon, after such notice, if any, as such court may deem proper and prescribe, appoint a successor Trustee. Section 9.6. Resignation by Trustee. The Trustee and any successor trustee may at any time resign from the trusts hereby created by giving 30 days’ written notice to the Issuer, the Bondowner Representative and the Borrower and by first-class mail to each Bondholder as shown on the Bond Register, and such resignation shall take effect upon the appointment of a successor trustee as provided in Section 9.8. Such notice to the Issuer, the Bondowner -46- Representative or the Borrower may be served personally or sent by registered or certified mail, or overnight courier. Section 9.7. Removal of Trustee, The Trustee may be removed at any time by an instrument or concurrent instruments in writing delivered to the Trustee, Borrower and Issuer, and signed by the Issuer or by the Bondowner Representative. Section 9.8. Appointment of Successor Trustee. In case the Trustee hereunder shall resign or be removed, or be dissolved or shall be in course of dissolution or liquidation, or otherwise become incapable of acting hereunder, or in case it shall be taken under the control of any public officer or officers, or of a receiver appointed by a court, a successor may be appointed by the Issuer, with the consent of the Bondowner Representative, by an instrument or concurrent instruments in writing signed by the Issuer. Every such Trustee appointed pursuant to the provisions of this Section 9.8 must be a trust company or bank having trust powers and having a reported capital and surplus not less than $50,000,000. Section 9.9. Acceptance by Successor Trustees. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to its predecessor, to the Borrower, the Bondowner Representative and 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, rights, powers, trusts, duties and obligations of its predecessors as Trustee and Paying Agent; but such predecessor shall, nevertheless, on the written request of the Issuer, or of its successor Trustee, execute and deliver an instrument transferring to such successor Trustee all the estates, properties, rights, powers and trusts of such predecessor hereunder, and every predecessor Trustee shall deliver all securities and moneys held by it as Trustee hereunder to its successor. Should any instrument in writing from the Issuer be required by any successor Trustee for more fully and certainly vesting in such successor the estates, rights, powers and duties hereby vested or intended to be vested in the predecessor trustee, 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 forthwith filed or recorded or both by the successor Trustee in each recording office where this Indenture or the Mortgage shall have been filed or recorded or both. Section 9.10. Right of Trustee To Pay Taxes and Other Charges. In case any tax, assessment or governmental or other charge upon any part of the Project is not paid, to the extent, if any, that the same is legally payable, the Trustee may, but shall be under no duty to, pay such tax, assessment or governmental or other charge, without prejudice, however, to any rights of the Trustee or Bondholders hereunder arising as a consequence of such failure; and any amount at any time so paid under this Section, Section 5.3 of the Loan Agreement, or under the Mortgage, with interest thereon as provided in Section 5.3 of the Loan Agreement at the Default Rate, shall be repaid to the Trustee upon demand out of Additional Charges under the Loan Agreement, and shall become so much additional indebtedness secured by the Indenture, and the same shall be given a preference in payment over any of the Bonds, except with respect to the payment of any principal, interest or premium on the Bonds which is then due but not paid, but the Trustee shall be under no obligation to make such payment of taxes, assessments or governmental charges unless it shall have been requested to do so by the Bondowner Representative and shall have been provided with adequate indemnity for the purpose of such payment. Any such payment shall be made upon five days’ prior written notice to the Borrower unless the delay occasioned by any such written notice could result in the forfeiture or termination of any right. -47- Section 9.11. Trustee Protected in Relying Upon Resolutions. The resolutions, orders, requisitions, opinions, certificates and other instruments provided for in this Indenture may be accepted by the Trustee as conclusive evidence of the facts and conclusions stated therein and shall be full warrant, protection and authority to the Trustee. Section 9.12. Successor Trustee as Custodian of Funds and Paying Agent. In the event of a change in the office of the Trustee, the predecessor Trustee that has resigned or been removed shall cease to be custodian of the Funds described in Article 5 and shall cease to act as a Paying Agent for principal and interest on the Bonds, and the successor Trustee shall be and become such custodian and a Paying Agent. Section 9.13. Co-Trustee. (1) At any time or times upon the consent of the Issuer and the Bondowner Representative, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Estate may at the time be located, the Trustee shall have the power to appoint one or more persons either to act as co-trustee or co-trustees, jointly with the Trustee, of all or any part of the Trust Estate, or to act as separate trustee or separate trustees of all or any part of the Trust Estate, and to vest in such person or persons, in such capacity, such right to the Trust Estate or any part thereof, and such rights, powers, duties, trusts or obligations as the Trustee may consider necessary or desirable, subject to the remaining provisions of this Section 9.13. Every such co-trustee or separate trustee appointed pursuant to the provisions of this Section 9.13 must be a trust company or bank having trust powers and having a reported capital and surplus not less than $50,000,000, if there be such an institution willing, qualified and able to accept the trust upon reasonable or customary terms. (2) Reserved. (3) Every co-trustee or separate trustee shall, to the extent permitted by law but to such extent only, be appointed subject to the following terms, namely: (4 All rights, powers, trusts, duties and obligations conferred or imposed by this Indenture upon the Trustee with respect to the custody, control or management of moneys, papers, securities and other personal property shall be exercised solely by the Trustee. 04 All rights, powers, trusts, duties and obligations conferred or imposed upon the trustees shall be conferred or imposed upon and exercised or performed by the Trustee, or by the Trustee and such co-trustee or co-trustees or separate trustee or separate trustees jointly, as shall be provided in the instrument appointing such co- trustee or co-trustees or separate trustee or separate trustees: provided, however, the Trustee shall remain responsible for exercising all rights and powers, maintaining all trusts and performing all duties and obligations conferred or imposed upon the trustees, except to the extent that, under the law of any jurisdiction in which any particular act or acts are to be performed, the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such act or acts shall be performed by such co-trustee or co-trustees or separate trustee or separate trustees. (4 Any request in writing by the Trustee to any co-trustee or separate trustee to take or to refrain from taking any action hereunder shall be sufficient warrant for the taking, or the refraining from taking, of such action by such co-trustee or separate trustee. (4 Any co-trustee or separate trustee may delegate to the Trustee the exercise of any right, power, trust, duty or obligation, discretionary or otherwise. -48- (4 The Trustee at any time, by an instrument in writing, may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section 9.13. A successor to any co-trustee or separate trustee so resigned or removed may be appointed in the manner provided in this Section 9.13. (f-l No co-trustee hereunder shall be personally liable by reason of any act or omission of any other co-trustee hereunder. 0 Any demand, request, direction, appointment, removal, notice, consent, waiver or other action in writing delivered to the Trustee shall be deemed to have been delivered to each co-trustee or separate trustee. 0-d Any moneys, papers, securities or other items of personal property received by any such co-trustee or separate trustee hereunder shall forthwith, so far as may be permitted by law, be turned over to the Trustee. (4) Upon the acceptance in writing of such appointment by any such co-trustee or separate trustee, such co-trustee or separate trustee shall be vested with such interest in and to the Trust Estate or any part thereof, and with such rights, powers, duties or obligations, as shall be specified in the instrument of appointment jointly with the Trustee (except insofar as local law makes it necessary for any such co-trustee or separate trustee to act alone) subject to all the terms of this Indenture. Every such acceptance shall be filed with the Trustee. Any co-trustee or separate trustee may, at any time by an instrument in writing, constitute the Trustee its or his or her attorney-in-fact and agent, with full power and authority to do all acts and things and to exercise all discretion on its or his or her behalf and in its or his or her name. (5) In case any co-trustee or separate trustee shall die, become incapable of acting, resign or be removed, the title to the Trust Estate and all rights, powers, trusts, duties and obligations of said co-trustee or separate trustee shall, so far as permitted by law, vest in and be exercised by the Trustee unless and until a successor co-trustee or separate trustee shall be appointed in the manner herein provided. Section 9.14. Obligations as to Reporting. The Trustee shall provide to the Issuer, upon request, monthly reports of the balances in the Funds held under Article 5 of this Indenture. Section 9.15. Appointment of Bond Registrar and Paying Agent. The Issuer hereby appoints the Trustee as Bond Registrar and Paying Agent under this Indenture. Section 9.16. Successor Paying Agent or Bond Registrar. The provisions of Sections 9.5 through 9.9 with respect to removal, resignation and appointment of a successor trustee shall be equally applicable to the removal, resignation and appointment of a successor to the Paying Agent and the Bond Registrar. If permissible under applicable law, the Trustee shall be eligible for appointment as successor to the Paying Agent if the Trustee is not then already serving in such capacity. Section 9.17. Confirmation of the Trustee. (1) At any time while Bonds remain outstanding under this Indenture, if the Trustee reasonably questions whether it has proper authority to take action hereunder, the Trustee may, and upon request of the Issuer, the Borrower or the Holders of 25% or more of the aggregate principal amount of Outstanding Bonds shall, proceed in accordance with an opinion of Bond Counsel. (2) In construing and interpreting this Indenture and any other Loan Document, the objective shall always be to ascertain and effectuate the intention of the parties. -49- (3) The Trustee or successor Trustee shall not be answerable for actions taken in compliance with any final order of the court. The Trustee or successor Trustee shall not be entitled to require an indemnity bond pursuant to Section 9.1, Subdivision (11) , prior to taking any action directed by final order of the court. Section 9.18. Certain Representations of Trustee. The Trustee represents that: (1) The Trustee will take possession of the Notes in accordance with the terms of the Indenture in the ordinary course of its business and without knowledge that the Notes are subject to a security interest (except the security interest of the Trustee under the Indenture). (2) The Trustee or a nominee within the control of the Trustee is and will at all relevant times be a “Member Bank” (as such term is used in 31 C.F.R. Section 115(g)) of the Federal Reserve Bank of New York and maintains a book-entry securities account with the Federal Reserve Bank of New York and is a participant in each clearing corporation (as defined in § 8- 102(3) of the Uniform Commercial Code) in which securities are held or will be held hereunder and any book-entry securities and physical securities in the custody of a clearing corporation credited to the accounts hereunder will be represented in accounts at the book-entry system maintained at the Federal Reserve Bank of New York and the appropriate clearing corporation in the name of the Trustee or its nominee which include only assets held by the Trustee for customers, including, but not limited to, accounts in which the Trustee acts in a fiduciary or agency capacity. (3) The Trustee is a bank which in the ordinary course of its business maintains security accounts for its customers and is acting in that capacity pursuant to the terms of the Indenture and it will maintain the accounts hereunder as custody accounts and shall administer such accounts in the same manner it administers similar accounts established for the same purpose. (4) To the best of the Trustee’s knowledge, the Federal Reserve Bank of New York and each applicable clearing corporation will make appropriate notations in its records that any book-entry securities or physical securities, respectively, credited to the accounts hereunder have been transferred to such account of the Trustee or its nominee and any nominee of the Trustee will make appropriate entries in its books and records that it is holding such book-entry securities or physical securities, as the case may be, in its name in a representative capacity as agent for the Trustee and will deliver a written confirmation to the Trustee that it holds such book-entry securities or physical securities, as the case may be, and has made such entries. ARTICLE 10 SUPPLEMENTALINDENTURES Section 10.1. Supplemental indentures Not Requiring Consent of Bondholders. The Issuer and Trustee may, from time to time and at any time with the prior written consent of the Bondowner Representative, but without the consent of, or notice to, any of the other Holders, and when so required by this Indenture shall, enter into an indenture or indentures supplemental to this Indenture as shall not be inconsistent with the terms and provisions hereof (which supplemental indenture or indentures shall thereafter form a part hereof), so as to thereby (1) cure any ambiguity or formal defect or omission in this Indenture or in any supplemental indenture, (2) grant to or confer upon the Trustee for the benefit of the Holders any additional rights, remedies, powers, authority or security that may lawfully be granted to or conferred upon the Holders or Trustee, (3) more precisely identify the Trust Estate, or any other property -5o- which may become a part of the Trust Estate, (4) subject to the lien and pledge of this Indenture additional revenues, properties or collateral, (5) evidence the appointment of a separate trustee or a co-trustee or the succession of a new Trustee or Paying Agent or both hereunder, (6) modify, eliminate and/or add to the provisions of this Indenture to such extent as shall be necessary to prevent any interest on the Bonds from becoming includible in gross income for federal income tax purposes or to effect the qualification of this Indenture under the Trust Indenture Act of 1939, as then amended, or under any similar federal statute hereafter enacted, and to add to this Indenture such other provisions as may be expressly permitted by said Trust Indenture Act of 1939, excluding however the provisions referred to in Section 3 16(a) (2) of said Trust Indenture Act of 1939, (7) make any other change which is required by any provision of this Indenture or which is deemed by the Trustee necessary to reconcile the Indenture with the Loan Documents, or any amendments thereto, or (8) make any other change which in the judgment of the Trustee is necessary or desirable and will not materially prejudice any non- consenting Bondholder. Section 10.2. Supplemental indentures Requiring Consent of Bondholders. Exclusive of supplemental indentures covered by Section 10.1 and subject to the terms and provisions contained in this Section, and not otherwise, the Trustee, upon receipt of an instrument evidencing the consent to the below-mentioned supplemental indenture by the Bondowner Representative or the Holders of not less than 51% of the aggregate principal amount of Bonds Outstanding, shall join with the Issuer in the execution of such other indenture or indentures supplemental hereto as shall be deemed necessary and desirable for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Indenture or in any supplemental indenture: provided, however, that nothing herein contained shall permit or be construed as permitting (1) an extension of the maturity of the principal or of the interest on any Bond, (2) a reduction in the principal amount of any Bond or the rate of interest thereon, (3) a privilege or priority of any Bond or Bonds over any other Bond or Bonds except as may be otherwise expressly provided herein, (4) a reduction in the aggregate principal amount of the Bonds required for consent to such supplemental indenture or (5) the modification of any of the provisions of this Section without the consent of the Holders of 100% of the principal amount of all Bonds adversely affected thereby (“100% Bondholders’ Consent”). 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 by first class mail, postage prepaid, to the Bondholders at the addresses shown on the Bond Register. Such notice shall briefly set forth the nature of the proposed supplemental indenture and shall state that copies thereof are on file at the principal office of the Trustee for inspection by all Bondholders. The Trustee shall not, however, be subject to any liability to any Bondholder by reason of its failure to mail such notice to any particular Bondholder if notice was generally mailed to Bondholders, and any such failure shall not affect the validity of such supplemental indenture when consented to and approved as provided in this Section. If the Bondowner Representative or the Holders of not less than the applicable percentage (as referenced above) in aggregate principal amount of the Bonds then outstanding at the time of the execution of any such supplemental indenture shall have consented to and approved the execution thereof as herein provided, no Bondholder shall have any right to object to any of the terms and provisions contained herein or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or Issuer from executing the same or from taking any action pursuant to the provisions thereof. Upon the execution of any such supplemental indenture as in this Section permitted and provided, this Indenture shall be and is deemed to be modified and amended in accordance herewith. -51- Anything herein to the contrary notwithstanding, a supplemental indenture under this Article 10 which adversely affects the right of the Borrower under this Indenture, the Loan Agreement, the Note, the Regulatory Agreement or the Mortgage shall not become effective unless and until the Borrower shall have consented (either in writing or by inaction as provided below) 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, together with a copy of the proposed supplemental indenture, to be mailed by certified or registered mail to the Borrower at least 15 days prior to the proposed date of execution and delivery of any such 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 signed by a Representative of the Borrower of protest or objection thereto on or before 5:30 p.m., Eastern Standard or Eastern Daylight time, whichever is then in effect in New York, New York, of the fifteenth day after the mailing of said notice and a copy of the proposed supplemental indenture to the Borrower unless such fifteenth day falls on a day which is not a Business Day, in which event the letter of objection must be received not later than the next succeeding Business Day. Section 10.3. Rights of Trustee. The Trustee shall not be required to consent to any Supplemental Indenture referred to in this Article unless it has first received an opinion of Independent Counsel that such Supplemental Indenture is allowed by this Indenture. Section 10.4. Opinion of Bond Counsel. Any supplemental indentures governed by this Article shall be accompanied by an opinion of Bond Counsel that such supplemental indentures does not impair the exclusion of interest on the Bonds from gross income for federal income tax purposes nor permit the taking of action which when taken will impair the exclusion of interest on the Bonds from gross income for federal income tax purposes. ARTICLE 11 AMENDMENTS TO LOAN DOCUMENTS Section 11.1. Amendments Not Requiring Bondholder Consent. The Issuer or the Trustee or both may, with the prior written consent of the Bondowner Representative, but without the consent of or notice to the Bondholders, consent to any amendment, change or modification of any of the Loan Documents: (1) which may be required or permitted with the consent of the Bondowner Representative, but without Bondholder consent by the provisions of the Loan Documents or this Indenture; (2) for the purpose of curing any ambiguity or formal defect or omission: (3) in connection with additional land, equipment or improvements which may be acquired and which constitute a part of the Mortgaged Property, so as to (A) more precisely identify the same, (B) substitute or add additional land or additional equipment or (C) sellsor remove such land or equipment, all as provided in the Mortgage; provided, however, that any such amendment, change or modification of any of the Loan Documents as provided in this Section 11.1(3) shall not be effective until notice of such action is given to the Holders of the Bonds; (4) to reconcile any Loan Documents with any amendment or supplement to the Indenture; or -52- (5) to effect any other change in a Loan Document which, in the judgment of the Trustee, will not materially prejudice any nonconsenting Bondholder. Section 11.2. Amendments Requiring Bondholder Consent. Except for (1) amendments, changes or modifications as provided in Section 11.1 and (2) amendments, changes or modifications permitted by any Loan Document, neither the Issuer nor Trustee shall consent to any other amendment, change or modification of any Loan Document without the giving of notice and the written approval or consent of the Bondowner Representative or the Holders of not less than a majority in aggregate principal amount of the Bonds then Outstanding given and procured as provided in this Section; provided that in no event shall such amendment, change or modification relieve the Borrower of the obligation under any Loan Documents to make when and as due any payments required for the payment of principal, interest and any premium due or to become due on the Bonds unless the consent of the Holders of all Bonds adversely affected thereby is first secured. If at any time the Issuer and the Borrower shall request the consent of the Trustee to any such proposed amendment, change or modification of any Loan Documents to which the Issuer is a party or the Borrower shall request consent of the Trustee to any such proposed amendment, change or modification of any other Loan Document to which the Issuer is not a party, the Trustee shall, upon being satisfactorily indemnified with respect to expenses, cause notice of such proposed amendment, change or modification to be given in the same manner as provided in Section 10.2 with respect to supplemental indentures. Such notice shall briefly set forth the nature of such proposed amendment, change or modification and shall state that copies of the instrument embodying the same are on file at the principal office of the Trustee for inspection by all Holders. The Trustee shall not, however, be subject to any liability to any Holder by reason of its failure to mail such notice to any particular Bondholder if notice was generally mailed to Bondholders, and any such failure shall not affect the validity of such amendment, change or modification when consented as provided in this Section. If the Bondowner Representative or the Holders of not less than a majority in aggregate principal amount of the Bonds then outstanding at the time of the execution of any such amendment shall consent to the execution thereof as herein provided, no Holder of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or Issuer from executing the same or from taking any action pursuant to the provisions thereof. Upon the execution of any such amendment, the applicable Loan Document thereby amended shall be deemed to be modified and amended in accordance therewith. Nothing in this Section contained shall permit or be construed as permitting any reduction in the payments required to be made by Sections 4.2 or 4.3 of the Loan Agreement or a reduction or change in the stated maturity of the Bonds. If the requisite Bondholder consents are obtained, if the Borrower consents and if arrangements satisfactory to the Issuer are made for the payment of all costs of the Issuer in connection therewith, Issuer will not object to such supplemental indentures and modifications to the Loan Documents as may be required in order to provide for credit enhancement of the Bonds, availability of variable and term interest rate modes, a demand purchase of Bonds while in the variable rate mode, and other related changes. Section 11.3. Opinion of Bond Counsel. Any amendment governed by this Article shall be accompanied by an opinion of Bond Counsel that such amendment does not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes nor permit the taking of action which when taken will adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes. Section 11.4. Rights of Trustee. The Trustee shall not be required to consent to any amendment referred to in this Article unless it has first received an opinion of Independent Counsel that such amendment is allowed by this Indenture. -53- ARTICLE 12 MISCELLANEOUS PROVISIONS Section 12.1. Consent of Holders. Any consent, request, direction, approval, objection or other instrument required by this Indenture to be signed and executed by the Holders may be in any number of concurrent writings of similar tenor and must be signed or executed by such Holders in person or by agent appointed in writing. Proof of the execution of any such consent, request, direction, approval, objection or other instrument or of the writing appointing any such agent and of the ownership of Bonds, if made in the following manner, shall be sufficient for any of the purposes of this Indenture, and shall be conclusive in favor of the Trustee with regard to any action taken by it under such request or other instrument, namely: (1) The fact and date of the execution by any person of any such writing may be proved by the certificate of any officer in any jurisdiction who by law has power to take acknowledgments within such jurisdiction that the person signing such writing acknowledged before him the execution thereof, or by an affidavit of any witness to such execution; and (2) The fact of the ownership by any person of Bonds and the amounts and numbers of such Bonds, and the date of the holding of the same, may be proved only by reference to the Bond Register. Section 12.2. Rights Under Indenture. Nothing expressed or mentioned in or to be implied from this Indenture or the Bonds is intended or shall be construed to give any person or company other than the parties hereto, and the Bondholders, any legal or equitable right, remedy, or claim under or with respect to this Indenture or any covenants, conditions and provisions herein contained; this Indenture and all of the covenants, conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of the parties hereto and the Holders of the Bonds hereby secured as herein provided. Section 12.3. 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 provisions of any constitution or statute or rule of public policy, or for any other reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance, or of rendering any other provisions herein contained invalid, inoperative or unenforceable to any extent whatever. Section 12.4. Notices. All notices, certificates or other communications hereunder shall be given to all parties identified below, shall be in writing (except as otherwise expressly provided herein) and shall be sufficiently given and shall be deemed given when delivered by hand delivery, telegram or facsimile or served by depositing the same with the United States Postal Service, or any official successor thereto, designated as Registered or Certified Mail, Return Receipt Requested, bearing adequate postage, or delivery by reputable private courier such as Federal Express, Airborne, DHL or similar overnight delivery service, and addressed as hereinafter provided. Notices, except to the Trustee, shall be deemed given when mailed as provided herein. Notices to the Trustee shall be deemed given only when received by the Trustee. All parties identified below may, by written notice given by each to the others, designate any address or addresses to which notices, certificates or other communications to them shall be sent when required as contemplated by this Indenture. Any notice, certificate, report, financial statement or other communication properly provided by legal counsel on behalf -54- C of any party hereunder shall be deemed properly provided by the party represented by such counsel. Until otherwise provided by the respective parties, all notices, certificates and communications to each of them shall be addressed as follows: To the Issuer: City of Carlsbad 2965 Roosevelt Street, Suite B Carlsbad, California 92008 Attention: Fax No.: (760) 720-2037 To the Borrower: Poinsettia Housing Associates c/o BRIDGE Housing Corporation , California 9 Attention: Fax No.: with a copy to: Edison Capital Housing Investments 18101 Von Karman Avenue, Suite 1700 Irvine, California 926 12- 1046 Attention: Asset Manager-Poinsettia Gardens Fax No.: (949) 757-0141 To the Trustee, Bond Registrar and Paying Agent: Bank One Trust Company, N.A. 241 North Central Avenue, 25th Floor Phoenix, AZ 85004 Attention: Corporate Trust Department A-804 Fax No.: (602) 221-1711 to the initial Bondowner Representative: Bank of America, FSB Community Development Banking 485 California Street, Unit 15838 San Francisco, CA 94104 Attention: Loan Administration Confirmation: ( Fax No.: (J with a copy to: -55 Bank of America, FSB 450 “B” Street, Suite 450 San Diego, California 92101 Attention: Fax No.: ( Section 12.5. Required Approvals. Consents and approvals required by this Indenture to be obtained from the Borrower, the Issuer or the Trustee shall be in writing and shall not be unreasonably withheld or delayed. Section 12.6. Counterparts. This Indenture may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 12.7. Limitation of Liability of issuer and Its Officers, Employees and Agents. (1) No covenant, agreement or obligation contained herein shall be deemed to be a covenant, agreement or obligation of any present or future member, officer, employee or agent of the Issuer in his individual capacity, and neither the members of the Issuer nor any officer thereof executing the Bonds shall be liable personally on the Bonds or be subject to any personal liability or accountability by reason of the issuance thereof. No member, officer, employee or agent of the Issuer shall incur any personal liability with respect to any other action taken by him pursuant to this Indenture or the Act, provided such member, officer, employee or agent acts in good faith. (2) No agreements or provisions contained in this Indenture nor any agreement, covenant or undertaking by the Issuer contained in any document executed by the Issuer in connection with the Project, or the issuance, sale and delivery of the Bonds shall give rise to any pecuniary liability of the Issuer or a charge against its general credit, or shall obligate the Issuer financially in any way except as may be payable from the repayments by the Borrower under the Loan Agreement and the proceeds of the Bonds. No failure of the Issuer to comply with any term, condition, covenant or agreement herein or in any document executed by the Issuer in connection with the issuance and sale of the Bonds shall subject the Issuer to liability for any claim for damages, costs or other financial or pecuniary charge except to the extent that the same can be paid or recovered from the repayments by the Borrower under the Loan Agreement or proceeds of the Bonds. Nothing herein shall preclude a proper party in interest from seeking and obtaining, to the extent permitted by law, specific performance against the Issuer for any failure to comply with any term, condition, covenant or agreement herein, provided that no costs, expenses or other monetary relief shall be recoverable from the Issuer except as may be payable from the repayments by the trust estate or from the proceeds of the Bonds. (3) No recourse shall be had for the payment of the principal of or premium or interest on any of the Bonds or for any claim based thereon or upon any obligation, covenant or agreement contained in this Indenture against any past, present or future officer, director, member, employee or agent of the Issuer, or of any successor public corporation, as such, either directly or through the Issuer or any successor public corporation, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such officers, directors, members, employees or agents, as such, is hereby expressly waived and released as a condition of, and consideration for, the execution of this Indenture and the issuance of such Bonds. (4) Anything in this Indenture to the contrary notwithstanding, it is expressly understood and agreed by the parties hereto that (a) the Issuer may rely conclusively on the truth and accuracy of any certificate, opinion, notice, or other instrument furnished to the Issuer -56- 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; (b) the Issuer shall not be under any obligation hereunder to perform any record keeping or to provide any legal services: and (c) none of the provisions of this Indenture shall require the Issuer to expend or risk its own funds or 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 it shall first have been adequately indemnified to its satisfaction against the cost, expenses, and liability which may be incurred thereby. (5) Neither the members of the Issuer nor any person executing the Bonds shall be liable personally on the Bonds by reason of the issuance thereof. The Bonds are issued pursuant to the Act, and the Bonds shall so state on their face, and shall state that the Bonds shall not be a debt of the Issuer or the State, or any political subdivision thereof; and neither the Issuer nor the State or political subdivision thereof, 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. Section 12.8. Reserved. Section 12.9. Complete Agreement. The Issuer and the Trustee understand that oral agreements or commitments to loan money, extend credit or to forbear from enforcing repayment of a debt, including promises to extend or renew such debt, are not enforceable. To protect the Issuer and the Trustee from misunderstandings, any agreements the Issuer and the Trustee reach covering such matters are contained in this Indenture, which is the complete and exclusive statement of the agreement between the Issuer and the Trustee, except as the Issuer and the Trustee may later agree in writing to modify this Indenture as more particularly provided herein. IN WITNESS WHEREOF, the Issuer has caused this Indenture to be signed in its name and behalf and attested by its duly authorized officers, and to evidence its acceptance of the trusts hereby created, the Trustee has caused this Indenture to be signed in its name and behalf by its duly authorized officer, all as of the date first above written. CITY OF CARLSBAD BY ltitlel ATTEST: City Clerk BANK ONE TRUST COMPANY, N.A., as Trustee Authorized Signatory -57- EXHIBlTA (FORM OF REQUISITION CERTIFICATE) PROJECTFUND Date: 9- REOUISITION CERTIFICATE TO: BANK ONE TRUST COMPANY, N.A., AS TRUSTEE UNDER THE INDENTURE OF TRUST DATED AS OF JUNE 1, 1999 BETWEEN THE CITY OF CARLSBAD AND THE TRUSTEE. Poinsettia Housing Associates, a California limited partnership (the “Borrower”), hereby requests that the following amounts be paid from the Project Fund to the following payees for the following purposes: Amount Payee and Address Purpose Less Retainage $ The Borrower hereby certifies that: (1) obligations in the stated amounts have been incurred and performed at the Project and are presently due and payable and that each item thereof is a proper charge against the Project Fund and has not been the subject of a previous withdrawal from the Project Fund, (2) to the best of the undersigned’s knowledge there has not been filed with or served upon the Issuer or the Borrower notice of any lien, right or attachment upon, or claim affecting the right of any such persons, firms or corporations to receive payment of, the respective amounts stated in such requisition which has not been released or will not be released simultaneously with the payment of such obligation, (3)(A) obligations as stated on the requisition have been properly incurred, (B) such work was actually performed or such materials or supplies were actually furnished or installed in or about the Project, (C) if contested, bond has been made by the Borrower and (D) either such materials or supplies are not subject to any lien or security interest or any such lien or security interest will be released or discharged upon payment of the requisition, (4) all rights, title and interest to any and all personal property acquired with the proceeds of the requisition is vested in the Borrower. (5) the Borrower is in compliance with all of the Borrower’s covenants contained in the Loan Agreement, (6) such disbursement when added to all other disbursements made to date results in at least ninety-five (95%) of the proceeds of the Tax-Exempt Bonds, including investment earnings, having been used for Qualified Project Costs, and Exhibit A Page 1 of 2 (7) all representations and warranties of the Borrower contained in the Loan Agreement are on the date hereof true and accurate. Requested this - day of , -. BY Authorized Borrower Representative Approved this - day of -9 -* Approved this - day of , . “Bondowner Representative” BY Title Exhibit A Page 2 of 2 -. EXHIBITB (FORM OF REQUISITION CERTIFICATE) MORTGAGE RECOVERY FUND Requisition No. Date: REOUISITION CERTIFICATE TO: BANK ONE TRUST COMPANY, N.A., AS TRUSTEE UNDER THE INDENTURE OF TRUST DATED AS OF JUNE 1, 1999 BETWEEN THE CITY OF CARLSBAD AND THE TRUSTEE. Poinsettia Housing Associates, a California limited partnership (the “Borrower”), hereby requests that the following amounts be paid from the Mortgage Recovery Fund to the following payees for the following purposes: Amount Pavee and Address Puroose Less Retainage $ The Borrower hereby certifies that: (1) obligations in the stated amounts have been incurred and performed at the Project and are presently due and payable and that each item thereof is a proper charge against the Mortgage Recovery Fund and has not been the subject of a previous withdrawal from the Mortgage Recovery Fund, (2) to the best of the undersigned’s knowledge there has not been filed with or served upon the Issuer or the Borrower notice of any lien, right or attachment upon, or claim affecting the right of any such persons, firms or corporations to receive payment of, the respective amounts stated in such requisition which has not been released or will not be released simultaneously with the payment of such obligation, (3)(A) obligations as stated on the requisition have been properly incurred, (B) such work was actually performed or such materials or supplies were actually furnished or installed in or about the Project, (C) if contested, bond has been made by the Borrower and (D) either such materials or supplies are not subject to any lien or security interest or any such lien or security interest will be released or discharged upon payment of the requisition, (4) all rights, title and interest to any and all personal property acquired with the proceeds of the requisition is vested in the Borrower, (5) the Borrower is in compliance with all of the Borrower’s covenants contained in the Loan Agreement, (6) such disbursement when added to all other disbursements made to date results in at least ninety-five (95%) of the proceeds of the Bonds, including investment earnings, having been used for Qualified Project Costs, and (7) all representations and warranties of the Borrower contained in the Loan Agreement are on the date hereof true and accurate. Requested this __ day of , -. BY Authorized Borrower Representative Approved this - day of , . Approved this - day of , . “Bondowner Representative” BY Title EXHIBIT C FORM OF BONDS No. R-l CITY OF CARLSBAD [TAXABLE] MULTIFAMILY HOUSING MORTGAGE REVENUE BONDS (POINSETTIA STATION APARTMENTS) SERIES 1999A, 1999B AND 1999B-T THIS BOND IS A RESTRICTED SECURITY AND MAY BE TRANSFERRED ONLY AS PROVIDED HEREIN AND IN THE HEREIN DESCRIBED INDENTURE. Interest Rate Maturity Date Dated Date CUSIP % Date of Delivery REGISTERED HOLDER: Bank of America, FSB PRINCIPAL AMOUNT: CITY OF CARLSBAD (the “Issuer”), a municipal corporation acting pursuant to Chapter 7 of Part 5 of Division 31 as amended (the “Act”), and by a resolution adopted by the City Council of the Issuer on Mafl, 1999 (the “Resolution”), and empowered to issue revenue bonds pursuant to the provisions of the Act, for value received, promises to pay to the Registered Holder specified above, or registered assigns, but only from the Bond Fund established under the Indenture described below (the “Bond Fund”), and upon presentation and surrender hereof at the principal corporate trust office of the Trustee named below, the Principal Amount specified above, on the Maturity date specified above, or, if this Bond is redeemable as stated below, on a prior date on which it shall have been duly called for redemption, and to pay interest on said Principal Amount to the Record Date Holder hereof as defined below, solely from the Bond Fund, until the Principal Amount is paid or discharged, at the rate set forth in the Indenture (hereinafter defined). Interest hereon shall be calculated on the basis of a m-day year and the actual number of davs elaosed. Interest shall be payable as follows (each a “Payment Date”): (a) on and before the [Series A] [Series B] Conversion Date, on the first Business Day of each month, commencing July 1, 1999, and (b) from and after the [Series A] [Series B] Conversion Date, [on the six-month and one-year anniversaries of the Series A Conversion Date, and the anniversary of each such date (or, if any such date is not a Business Day, the immediately preceding Business Day)] [the first, second and third anniversaries of the Series B Conversion Date (or, if any such date is not a Business Day, the immediately preceding Business Day)] [the first and second anniversaries of the Series B Conversion Date (or, if any such date is not a Business Day, the immediately preceding Business Day)]. This Bond shall bear interest from the Dated Date specified above or (in the case of transfer or exchange) from the most recent Payment Date to which interest has been paid or provided for. The “Record Date Holder” is the person in whose name this Bond is registered (the “Holder” hereof) in the Bond Register maintained by Bank One Trust Comnanv, N.A., as Bond Registrar, or its successor either (i) on the fifteenth day of the month (whether or not a Business Day) next preceding each Payment Date (the “Record Date”), irrespective of any Exhibit C Page 1 of 9 transfer or exchange of such Bond subsequent to such Record Date and prior to such Payment Date, or (ii) if there shall be a default in payment of principal and interest due on such Payment Date, at the close of business on a date (the “special Record Date”) for the payment of such defaulted principal and interest established by notice mailed on behalf of the Issuer. Notice of the special Record Date shall be mailed not less than 15 days before the special Record Date, to the Holder at the close of business on the fifth Business Day preceding the date of mailing. Interest shall be payable by check or draft mailed to the holder at his, her, or its address as it appears on the Bond Register on the Record Date or the special Record Date, as the case may be, except as otherwise provided in the Indenture. Notwithstanding the foregoing, any Holder of at least $l,OOO,OOO principal amount of any Bonds (or a lesser amount of such Bonds if such Bonds constitute all the Bonds at the time outstanding), upon payment by the Holder of the cost of such wire transfer, may file with the Trustee an instrument satisfactory to the Trustee requesting the amounts payable by the ‘Trustee to such Holder be paid by transferring by wire transfer in immediately available funds, on the day such payment is due, the amount to be distributed to such Holder to a designated account maintained by such Holder at any other bank in the United States. Notwithstanding the foregoing, all payments of principal of and interest on the Bonds payable on the Maturity Date, the Purchase Date or the Discharge Date (each as defined in the Indenture) shall only be payable upon presentation of the Bonds, at the principal corporate office of the Trustee. The principal of and interest and premium, if any, on this Bond are payable in lawful money of the United States of America. The Bonds (as hereinafter defined) are issued under the provisions of and in full compliance with the Act, and a resolution duly adopted by the Issuer pursuant to which this Bond is issued and which authorizes the execution and delivery of the Agreement (as herein defined) and the Indenture. This Bond and the issue of which it is a part are limited obligations of the Issuer, and the principal and premium, if any, and interest thereon are payable solely and only from revenues, and other amounts derived by the Issuer from the Agreement pledged and assigned by the Issuer to the Trustee under the Indenture to secure payment of the principal of, premium, if any, and interest on this Bond. THE BONDS AND THE INTEREST THEREON ARE LIMITED OBLIGATIONS OF THE ISSUER PAYABLE EXCLUSIVELY FROM REVENUES AND RECEIPTS UNDER THE AGREEMENT. THE BONDS DO NOT CONSTITUTE A DEBT OF THE ISSUER, OR OF THE STATE OF CALIFORNIA, OR OF ANY POLITICAL SUBDIVISION THEREOF, WITHIN THE MEANING OF ANY STATE CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION AND SHALL NEVER CONSTITUTE NOR GIVE RISE TO A PECUNIARY LIABILITY OF THE ISSUER, OR OF THE STATE OF CALIFORNIA. THE BONDS SHALL NOT CONSTITUTE A GENERAL OBLIGATION OF OR A CHARGE AGAINST THE GENERAL CREDIT OF THE ISSUER, BUT SHALL BE A SPECIAL, LIMITED OBLIGATION OF THE ISSUER PAYABLE SOLELY FROM THE SOURCES HEREIN AND IN THE INDENTURE, BUT NOT OTHERWISE. THE ISSUER HAS NO TAXING POWER. NO RECOURSE SHALL BE HAD FOR THE PAYMENT OF THE PRINCIPAL OF OR PREMIUM OR INTEREST ON THIS BOND AGAINST ANY PAST, PRESENT OR FUTURE OFFICER, DIRECTOR, MEMBER, EMPLOYEE OR AGENT OF THE ISSUER AS SUCH, EITHER DIRECTLY OR THROUGH THE ISSUER OR ANY SUCCESSOR TO THE ISSUER UNDER ANY RULE OF LAW OR EQUITY, STATUTE OR CONSTITUTION, OR BY THE ENFORCEMENT OF ANY ASSESSMENT OR PENALTY OR OTHERWISE, AND ALL SUCH LIABILITY OF ANY SUCH OFFICERS, DIRECTORS, MEMBERS, EMPLOYEES OR AGENTS, AS SUCH, IS HEREBY EXPRESSLY WAIVED AND RELEASED AS A CONDITION OF, AND CONSIDERATION FOR, THE EXECUTION AND ISSUANCE OF THIS BOND. Exhibit C Page 2 of 9 C This Bond shall not be valid or become obligatory for any purpose or be entitled to any benefit or security under the Indenture until it shall have been authenticated by the execution by the Bond Registrar on the certificate of authentication endorsed hereon. All capitalized terms used in this Bond and not defined herein shall have the meaning ascribed thereto in the Indenture. ADDITIONAL PROVISIONS OF THIS BOND ARE SET FORTH ON THE REVERSE HEREOF AND SUCH PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH IN THIS PLACE. IT IS HEREBY CERTIFIED 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. IN WITNESS WHEREOF, THE CITY OF CARLSBAD has caused this Bond to be executed with the facsimile or manual signature of its and attested by facsimile or manual signature of its , and has caused Bond to be dated as of the Dated Date shown above. CITY OF CARLSBAD BY [title] CERTIFICATE OF AUTHENTICATION This is one of the Bonds described in the within mentioned Indenture. Date of Authentication: t- BANK ONE TRUST COMPANY, N.A., as Bond Registrar By: Authorized Signature Exhibit C Page 3 of 9 REVERSE OF BOND This Bond is one of a duly authorized issue of bonds of the Issuer, issued in the initial aggregate principal amount of known as the [Taxable] Multifamily Housing Mortgage Revenue Bonds Series ]1999Al il999Bl 11999B-Tl (the “Bonds”), issued in accordance with an Indenture of Trust dated as of June 1,1999 (the “Indenture”), by and between the Issuer and Bank One Trust Companv. N.A., as trustee (the “Trustee”), setting forth the terms upon which such Bonds are issued. The Bonds are issued by the Issuer for the purpose of making a loan of the proceeds thereof (the “Loan”) to Poinsettia Housing Associates, a California limited partnership (the “Borrower”), under the provisions of a Loan Agreement dated as of June 1, 1999 (the “Loan Agreement”), by and between the Issuer and the Borrower, issued to finance the acquisition, construction and development of Poinsettia Station Apartments consisting of 92 units of residential rental housing located near the northwest corner of Poinsettia Lane and Avenida Encinas in the City of Carlsbad, California, constituting “residential rental housing” within the meaning of the Act (the “Project”). The loan made pursuant to the Loan Agreement (the “Loan”) is evidenced by three promissory notes from the Borrower to the Issuer and endorsed without recourse by the Issuer to the Trustee. The Borrower has agreed under the Agreement to repay the Loan, together with interest thereon in amounts and at times sufficient to pay the principal of, premium, if any, and interest on the Bonds as the same shall become due and payable. Pursuant to the Indenture, the Issuer has assigned and pledged to the Trustee, for the equal and ratable benefit of the Holders of the Bonds, all revenues and receipts derived by the Borrower from the operation of the Project. Pursuant to a Construction and Permanent Deed of Trust with Assignment of Rents, Security Agreement and Fixture filed with respect to the Project (the “Mortgage”), dated as of June 1, 1999, and executed by the Borrower for the benefit of the Trustee, the Borrower and the General Partner have granted to the Trustee, for the equal and ratable benefit of the Holders of the Bonds, a first priority mortgage lien on and a security interest in the Project and the Project Premises and the rents and leases thereof. The Mortgage may be released or modified in any respect upon compliance with certain conditions in the Mortgage and the Indenture. After the initial delivery of the Bonds, the Issuer and the Borrower may from time to time, and upon the conditions stated in the Indenture, agree upon and approve the issuance and delivery of additional bonds secured by the Indenture and the Mortgage. Reference is hereby also made to the Agreement, the Indenture and the Mortgage, including all supplements thereto, for a description of the property encumbered and assigned, the provisions, among others, with respect to the nature and extent of the security, the rights of the Issuer, and the rights, duties and obligations of the Borrower, the Trustee, and the Holders of the Bonds, and the terms upon which the Bonds are issued and secured. REDEMPTION AND PURCHASE PROVISIONS The Bonds are subject to redemption or purchase prior to maturity as follows: (1) Extraordinary Redemption or Purchase. (a) The Bonds are subject to mandatory redemption in whole or in part, on any Business Day, in the event of damage to or destruction or Condemnation of the Project or any part thereof as provided in Section 5.8 of the Indenture, the Loan Agreement and the Mortgage, at a redemption price equal to the principal amount thereof plus accrued interest and plus a Prepayment Premium as provided in Section 10.1 of the Loan Agreement. Exhibit C Page 4 of 9 (b) The Bonds are subject to mandatory purchase in whole by the Borrower on December 15, 2000, or as soon as practicable thereafter on any Business Day (or such later date for purchase as the Bondowner Representative approves), from funds provided by the Borrower, if both the Series A Conversion and the Series B Conversion have not occurred on or before December 1, 2000, at a purchase price equal to the principal amount thereof plus accrued interest and plus a Prepayment Premium as provided in Section 10.1 of the Loan Agreement. (4 The Bonds are subject to mandatory redemption in part on the later to occur of the Series A Conversion Date or the Series B Conversion Date, or as soon as practicable thereafter on any Business Day, from Bond proceeds remaining on deposit in the Project Fund on the such Conversion Date and, with respect to the Prepayment Premium, from Borrower moneys, at a redemption price equal to the principal amount thereof plus accrued interest and plus a Prepayment Premium as provided in Section 10.1 of the Loan Agreement. (2) Optional Redemption. The Bonds are subject to redemption at the option of the Borrower, in whole or in part on any date on which the Loan may be prepaid pursuant to Section 10.1 (b) of the Loan Agreement, at a redemption price equal to the outstanding principal amount thereof, plus accrued interest to the redemption date and plus a Prepayment Premium as provided in Section 10.1 of the Loan Agreement. (3) Mandatory Sinking Fund Redemption. (4 The Series A Bonds shall be subject to mandatory sinking fund redemption at a redemption price equal to the principal amount thereof, without premium, plus accrued interest thereon to such redemption date, on the dates and in the principal amounts as determined by the Bondowner Representative as follows. Not less than two Business Days prior to the Series A Conversion Date, the Bondowner Representative shall prepare and provide to the Trustee and the Borrower an amortization schedule for the Series A Bonds showing substantially level monthly debt service on the Series A Bonds, based on the principal amount of the Series A Bonds outstanding on the Series A Conversion Date and the Permanent Interest Rate then applicable to the Series A Bonds, for the period from the Series A Conversion Date until the Maturity Date of the Series A Bonds. Based on the amortization schedule so provided, the Bondowner Representative shall provide to the Trustee and the Borrower a schedule showing the Sinking Fund Installments for the Bonds payable on each Payment Date, commencing on the Payment Date immediately following the Series A Conversion Date and ending on the Maturity Date of the Series A Bonds. The amortization schedule shall become effective on the Series A Conversion Date and shall be binding on the Trustee, the Issuer, the Borrower, and the holders of the Bonds, absent manifest error in the amortization schedule. (b) The Series B Bonds shall be subject to mandatory sinking fund redemption on the second and third anniversaries of the Series B Conversion Date (but in no event later than December 1, 2002 and December 1, 2003) from amounts on deposit in the Series B Account of the Bond Fund on such dates not applied to (i) the payment of interest on the Series B Bonds and the Series B-T Bonds due and payable on such dates, if any, and (ii) the payment of principal of the Series B-T Bonds set forth below. The Sinking Fund Installment for the Series B Bonds on each such redemption date shall be equal to the principal amount thereof, without premium, plus accrued interest thereon to such redemption date, in a principal amount equal to the amounts so remaining on deposit in the Series B Account of the Bond Fund on such dates after the Exhibit C Page 5 of 9 l-71 payments set forth above, but not less than the principal amounts for each redemption date set forth in Exhibit E to this Indenture. (c) The Series B-T Bonds shall be subject to mandatory sinking fund redemption on the first and second anniversaries of the Series B Conversion Date (but in no event later than December 1, 2001 and December 1, 2002) from amounts on deposit in the Series B Account of the Bond Fund on such dates not applied to the payment of interest on the Series B Bonds and the Series B-T Bonds due and payable on such dates. The Sinking Fund Installment for the Series B-T Bonds on each such redemption date shall be equal to the principal amount thereof, without premium, plus accrued interest thereon to such redemption date, in a principal amount equal to the amounts so remaining on deposit in the Series B Account of the Bond Fund on such dates after the payments set forth above, but not less than the principal amounts for each redemption date set forth in Exhibit E to this Indenture. Selection of Bonds for Redemption. To effect the partial redemption or purchase of Bonds under the Indenture, the Trustee, prior to giving notice of redemption or purchase, shall assign to each Bond then outstanding a distinctive number for each $5,000 of the principal amount of such Bond. The Trustee shall then select by lot, using such method of selection as it shall deem proper in its discretion, from the numbers so assigned to such Bonds, as many numbers as, at $5,000 for each number, shall equal the principal amount of such Bonds to be redeemed. The Bonds to be redeemed or purchased shall be the Bonds to which were assigned numbers so selected; provided, however, that only so much of the principal amount of such Bond of a denomination of more than $5,000 shall be redeemed or purchased as shall equal $5,000 for each number assigned to it and so selected. If a Bond may be redeemed or purchased only in part, it shall be surrendered to the Trustee (with, if the Issuer or the Trustee so requires, a written instrument of transfer in form satisfactory to the Issuer and the Trustee duly executed by the Holder thereof or his, her or its attorney duly authorized in writing) and the Issuer shall execute (if necessary) and the Bond Registrar shall authenticate and deliver to the Holder of such Bond, without service charge, a new Bond or Bonds of the same series, of any Authorized Denomination or Denominations, as requested by such Holder, having the same stated maturity and interest rate in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Bonds so surrendered. Notice of Redemption. Notice of redemption or purchase shall be mailed to each Holder of a Bond to be purchased or redeemed at least 30 days prior to the redemption or purchase date. No defect in or failure to give notice of redemption or purchase shall affect the validity of the proceedings for redemption or purchase of any Bond not affected by such defect. All Bonds so called for redemption or purchase, provided funds for their redemption or purchase have been duly deposited, will, except as otherwise provided in the Indenture, cease to bear interest on the specified redemption or purchase date and except for the purpose of payment shall not be entitled to the lien of the Indenture or the benefits of the Agreement. Business Day Payments. If the date for payment of the principal of, premium, if any, or interest on this Bond shall be a day which is not a Business Day, then the date for such payment shall be the next succeeding day which is a Business Day, and payment on such later date shall have the same force and effect as if made on the nominal date of payment. Enforcement; Modification of Indenture and Loan Documents. The Holder of this Bond shall have no right to enforce the provisions of the Indenture or to institute action to enforce the covenants therein, or to take any action with respect to any Event of Default under the Indenture, or to institute, appear in or defend any suit or other proceedings with respect thereto, except as provided in the Indenture. Modifications or alterations of the Indenture, of any indenture supplemental thereto or of Loan Documents, may be made only to the extent and in Exhibit C Page 6 of 9 the circumstances permitted by the Indenture and may be made in certain cases without the consent of the holders of the Bonds. Consent to Modifications. With the consent of the Issuer, Borrower and Trustee, as appropriate, and to the extent permitted by and as provided in the Indenture, the terms and provisions of the Indenture and the Loan Documents or any instrument supplemental thereto may be modified or altered by the consent of the Holders of the percentage required by the Indenture in an aggregate principal amount of the Bonds outstanding thereunder. Supplemental indentures may also be executed and delivered, without consent or notice to any Holders, for the purpose of curing any ambiguity or formal defect or omission in the Indenture or in any supplemental indenture, granting for the benefit of the Holders additional rights, remedies, powers, authority, revenues, property, collateral or security, more precisely identifying the Trust Estate, subjecting the lien and pledge of the Indenture to additional rights, remedies, powers, authority or security, preventing the interest on the Bonds from becoming includable in gross income for federal income tax purposes, qualifying the Indenture under the Trust Indenture Act of 1939 evidencing appointment of a co-trustee or successor trustee, successor paying agent, or successor bond registrar, providing for the issuance of Additional Bonds as allowed by the Indenture, reconciling the Indenture with Loan Documents, or making any other change which in the judgment of the Trustee based upon an opinion of Bond Counsel is necessary or desirable and will not materially prejudice any non-consenting Holders. Every Holder hereof is deemed by the Holder’s purchase and retention of this Bond to consent to be bound by every supplemental indenture and every modification and amendment adopted in accordance with the provisions of the Indenture, whether or not noted or endorsed hereon or incorporated herein. Waiver or Consent Conclusive. The Indenture also contains provisions permitting the Trustee, in its discretion, upon written request of the Holders of a majority in aggregate principal amount of the Bonds outstanding, on behalf of all the Holders of all the Bonds, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Denomination; Exchange; Treatment of Registered Holder. The Bonds are issued as fully registered book-entry-only bonds without coupons in Authorized Denominations of a single maturity. The Bonds may be exchanged by the Holder for other Bonds of any Authorized Denominations and of a like aggregate principal amount and stated maturity, upon surrender thereof by the Holder at the principal corporate trust office of the Bond Registrar, in the manner and subject to the limitations provided in the Indenture. The Issuer, the Trustee, the Bond Registrar and any additional paying agents may deem and treat the Holder of this Bond as the absolute owner of this Bond (whether or not this Bond shall be overdue) for the purpose of receiving payment on this Bond (except as otherwise hereinabove provided with respect to the Record Date and special Record Date) and for all other purposes, and the Issuer, Trustee, the Bond Registrar and the Paying Agent shall not be affected by any notice to the contrary. Registration of Transfer. The transfer of this Bond is subject to certain restrictions as provided in the Indenture and described below and to registration by the Holder in person or by the Holder’s attorney hereof upon surrender of this Bond at the principal corporate trust office of the Bond Registrar, duly endorsed or accompanied by a written instrument or instruments of transfer in the form printed on this Bond or in another form satisfactory to the Bond Registrar and executed and with guaranty of signature by the Holder hereof or his, her or its attorney duly authorized in writing, containing written instructions as to the details of the registration of the transfer of the Bond. Thereupon the Issuer shall execute (if necessary) and the Bond Registrar shall authenticate and deliver in the name of the transferee or transferees (but not registered in blank or to “bearer” or a similar designation) one or more new Bonds of any Authorized Denomination or Denominations, of a like principal amount having the same stated maturity and interest rate. Exhibit C Page 7 of 9 The Bonds may be transferred, as a whole or in part, to one or more Bondholders only upon receipt by the Registrar, the Issuer and the Trustee of evidence that such Bonds are being transferred to “accredited investors” (as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended). The Trustee shall not register any transfer or exchange of any Bonds unless such Bondholder’s prospective transferee delivers to the Trustee an investor’s letter substantially in the form set forth in Exhibit D to the Indenture. Service Charges, Taxes. No service charge shall be made to the Holder for any registration, transfer or exchange hereinbefore referred to, but the Bond Registrar and the Issuer may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in connection with any transfer or exchange of Bonds, other than exchanges expressly provided in the Indenture to be made without charge to Holders, and any legal or other unusual costs of transfers and lost bonds. Acceleration. In certain events, on the conditions, in the manner and with the effect set forth in the Indenture, the principal of all the Bonds then outstanding under the Indenture may become or may be declared due and payable before the stated maturities thereof, together with the interest accrued thereon. Governing Law. This Bond shall be governed by and construed in accordance with the laws of the State of California. indenture Controlling. The terms of this Bond are subject in all respects to the terms of the Indenture. If there is a conflict between the provisions of this Bond and the Indenture, the Indenture shall control. Exhibit C Page 8 of 9 (Form of Assignment) unto FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers (Please Print or Typewrite Name and Address) (please Insert Social Security or Other Identifying Number of Assignee: ) the within Bond and all rights and title therein, and hereby irrevocably constitutes and appoints attorney to transfer the within Bond on the books kept for registration thereof, with full power of substitution in the premises. Dated: Registered Owner NOTICE: The signature(s) to this assignment must correspond with the name as it appears upon the face of the within Bond in every particular, without alteration or enlargement or any change whatever. Signature guaranteed NOTICE: Signature(s) must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. Exhibit C Page 9 of 9 - The following abbreviations, when used in the inscription on the face of the within Bond, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM as tenants in common TEN ENT as tenants by the entirety JT TEN as joint tenants with rights of survivorship and not as tenants in common UNIF GIFT MIN ACT (Minor) Custodian (Cust) Under Uniform Gifts to Minors Act (State) Additional abbreviations may also be used though not in the above list. Exhibit C Page 10 of9 l!XHlBITD INVESTOR’S LETTER City of Carlsbad 2965 Roosevelt Street, Suite B Carlsbad, California 92008 Bank One Trust Company, N.A. 201 North Central Avenue, 26th Floor Phoenix, AZ 85004 RE: City of Carlsbad [Taxable] Multifamily Housing Mortgage Revenue Bonds (Poinsettia Station Apartments) Series 1999A, Series 1999B and Series 1999B-T Ladies and Gentlemen: The undersigned representative of Bank of America, FSB (the “Purchaser”), being the purchaser of $ of the aggregate principal amount of Multifamily Housing Mortgage Revenue Bonds (Poinsettia Station Apartments) Series 1999A, $ of the aggregate principal amount of Multifamily Housing Mortgage Revenue Bonds (Poinsettia Station Apartments) Series 1999B, and $ of the aggregate principal amount of Taxable Multifamily Housing Mortgage Revenue Bonds (Poinsettia Station Apartments) Series 1999B-T, dated as of June 1, 1999 (collectively, the “Bonds”) does hereby certify, represent and warrant for the benefit of the City of Carlsbad (the “Issuer”) and Bank One Trust Company, N.A. (the “Trustee”) that: (4 The Purchaser understands that the Bonds are special limited obligation of the Issuer payable solely from the sources pledged, and to the extent provided, in the Resolution of the Issuer adopted on May 18, 1999, authorizing the execution of the Indenture, as defined herein (the “Resolution”). The Purchaser further understands that: (1) the execution of the Indenture of Trust by and between the Issuer and the Trustee dated June 1, 1999 (the “Indenture”) which authorizes the issuance of the Bonds is not, and shall not be deemed to constitute, an indebtedness of the Issuer, any county or municipality of the State of California (the “State”) or the State, within the meaning of any constitutional or statutory limitation, (2) the Bonds do not constitute a general or moral obligation of the Issuer, the State or any county or municipality thereof, (3) the full faith and credit of neither the State nor any county or municipality thereof is pledged to the payment of or any security for the Bonds, and (4) the Issuer has no general taxing power. M The Purchaser has received, read and reviewed such documents, instruments and information related to the issuance of the Bonds as the Purchaser has requested in order to evaluate the merits and risks of purchasing the Bonds, including, without limitation, a copy of the Resolution, the Indenture and the Loan Agreement by and among the Issuer, Bank of America, FSB and Poinsettia Housing Associates, a Exhibit C Page 1 of 9 California limited partnership (the “Borrower”) dated as of June 1, 1999, and the Purchaser understands the risks of, and other considerations relating to, the purchase of the Bonds (collectively, the “Offering Information”). (4 The Purchaser has been provided an opportunity to ask questions of, and the Purchaser has received answers from, representatives of the Issuer and the Borrower regarding the terms and conditions of the Bonds, and the Purchaser has obtained all additional information requested by it in connection with the Bonds. (4 The Purchaser has such knowledge and experience in financial and business matters in general, and investments in particular, that it is capable of evaluating and has evaluated the merits and risks of purchasing the Bonds and the Purchaser is capable and prepared to bear the risks of any investment in the Bonds. (4 Neither the Borrower, the Bond Counsel to the Issuer, the Issuer, its governing body, or any of its employees or agents will have any responsibility to the Purchaser for the accuracy or completeness of information obtained by the Purchaser from any source regarding the Project, the Issuer, the Borrower or their financial conditions or regarding the Bonds, the provisions for payment thereof, or the sufficiency of any security therefor, including, without limitation, any information specifically provided by any of such parties contained in the Offering Information. The Purchaser acknowledges that, as between Purchaser and all of such parties: (i) the Purchaser has assumed responsibility for obtaining such information and making such review as the Purchaser has deemed necessary or desirable in connection with its decision to purchase the Bonds, (ii) the Offering Information and any additional information specifically requested from the Issuer or the Borrower and provided to the Purchaser prior to closing constitute all the information and review, with the investigation made by Purchaser (including specifically the Purchaser’s investigation of the Issuer, the Project and the Borrower) prior to its purchase of the Bonds, that Purchaser has deemed necessary or desirable in connection with its decision to purchase the Bonds. The Purchaser is either a bank, savings and loan association, registered investment company, insurance company or other “accredited investor” as defined in Rule 501(a)(l), (2), (3), (4), (7) or (8) of Regulation D of the Securities Act of 1933, as amended. Purchaser is duly and validly organized under the laws of its jurisdiction of incorporation or organization, and it can bear the economic risk of the purchase of the Bonds and has such knowledge and experience in business and financial matters, including the analysis of a participation in the purchase of similar investments, as to be capable of evaluating the merits and risks of an investment in the Bonds on the basis of the information and review described in section (b) and (c) above. 0 The Purchaser has purchased the Bonds for its own account for investment, provided, however, the Purchaser may dispose of the Bonds or any portion thereof or interest therein if such disposition can be made without violating federal or state securities laws, and more specifically, and without limiting the generality of the foregoing, it is to be understood that the Purchaser may not dispose of the Bonds or any portion thereof or interest therein except to a person or entity that Purchaser has reasonable grounds to believe is an “accredited investor” as defined in Rule 501 (a) (1)) (2), (3)) (4)) (7) or (8) of Regulation D of the Securities Act of 1933, as amended. Ud If Purchaser intends to sell, transfer or otherwise dispose of the Bonds to an “accredited investor”, Purchaser must first obtain and deliver to the Trustee, pursuant to Section 2.15 of the Indenture, an executed copy of an investor’s letter addressed to the Issuer and the Trustee substantially in the form of this investor’s letter. Exhibit C Page 2 of 9 6) To the extent permitted by law, Purchaser agrees to indemnify and hold harmless the Trustee and the Issuer, each member, officer, director, partner or employee of the Trustee or the Issuer and each person who controls the Trustee, or the Issuer within the meaning of Section 15 of the Securities Act of 1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as amended (collectively called the “Indemnified Parties”), against any and all losses, claims, damages, liabilities or expenses (including any legal or other expenses incurred by it in connection with investigating any claims against it and defending any actions) whatsoever caused by any untrue statement or misleading statement or alleged untrue statement or alleged misleading statement of a material fact contained in the Offering Information or caused by any omission or alleged omission from the Offering Information of any material fact the statements made therein, in the light of the circumstances under which they were made, not misleading insofar as such losses, claims, damages, liabilities or expenses are caused by any such untrue or misleading statement or omission or alleged untrue or misleading statement or omission in the information contained in the Offering Information; provided, however, that the Purchaser shall not be liable to an Indemnified Party in any such case to the extent that any such loss, claim, damage liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in any of such documents in reliance upon and in conformity with written information furnished to it by the Trustee or the Issuer specifically for use therein. No Indemnified Parties shall be indemnified hereunder for any losses, claims, damages or liabilities resulting from the negligence of such Indemnified Parties. 0’) The Purchaser understands that (i) the Bonds have not been registered with any federal or state securities agency or commission, and (ii) no credit rating has been sought or obtained with respect to the Bonds, and the Purchaser acknowledges that the Bonds are a speculative investment and that there is a high decree of risk in such investment. 04 The Purchaser is legally authorized to purchase the Bonds as a lawful investment of the Purchaser. (1) The undersigned is a duly appointed, qualified and acting officer of the Purchaser and authorized to make the certifications, represents and warranties contained herein. IN WITNESS WHEREOF, I have hereunto set my hand the day of [NAME OF PURCHASER] Name: Title: Exhibit C Page 3 of 9 EXHIBITE MANDATORY SINKING FUND REDEMPTION SCHEDULE Series B Bonds Second anniversary of Series BConversion Date Third anniversary of Series B Conversion Date Series B-T Bonds First anniversary of Series B Conversion Date Second anniversary of Series B Conversion Date SF------ -------- Third anniversary of Series B Conversion Date (10) Enforce any and all of the Borrower’s obligations to complete construction on the Project as contemplated by this Agreement, including obligations to repay sums advanced by the Issuer or the Trustee, as the Issuer’s assignee, for such purpose; or (11) Enforce any indemnity or other obligation of the Borrower arising from or in connection with the issuance by or the performance of or under by the Issuer, or by the Trustee (as the Issuer’s assignee) any set aside letter or comparable undertaking to any municipality or contractor concerning the sufficiency of the Loan to pay specified costs or the enforcement of any set aside letter or comparable undertaking against the Issuer or the Trustee (as the Issuer’s assignee). The limitation of liability set forth in this Section 11.13(b) will be deemed void and have no force or effect if Borrower or the General Partner attempts to materially delay any foreclosure of or on the Mortgage or any other collateral for the Loan, or if the Borrower or the General Partner claims that this Agreement or any related documents are invalid or unenforceable to an extent that would preclude foreclosure. Notwithstanding anything in the Loan Documents to the contrary, the individuals who are owners, directors, officers, employees, agents, lenders, affiliates, successors and assigns of the Borrower or of the partners in the Borrower shall not have any personal, recourse and/or deficiency liability under the Loan Documents except as expressly undertaken by those individuals or entities in a separate guaranty or other instrument signed by the individual or entity in question. Nothing contained in this Section impairs the validity of this Agreement or any related documents or any lien or security interest created or perfected by it. 58 ARTICLE XII GENERAL PROVISIONS Section 12.1. Amounts Remaining: in Funds. Except during the continuance of an Event of Default, any amounts remaining in the Funds created under Article 5 of the Indenture upon expiration or earlier termination of this Agreement, as provided herein shall be distributed as provided in Section 5.12 of the Indenture. Section 12.2. Notices. All notices, certificates or other communications hereunder shall be given to all parties identified below, shall be in writing (except as otherwise expressly provided herein) and shall be sufficiently given and shall be deemed given when delivered by hand delivery, telegram or facsimile or served by depositing the same with the United States Postal Service, or any official successor thereto, designated as Registered or Certified Mail, Return Receipt Requested, bearing adequate postage, or delivery by reputable private courier such as Federal Express, Airborne, DHL or similar overnight delivery service, and addressed as hereinafter provided (or, in the case of Investor Limited Partner, at the address set forth in Section 11.2 (6). Notices shall be deemed given when mailed as provided herein. All parties identified below may, by written notice given by each to the others, designate any address or addresses to which notices, certificates or other communications to them shall be sent when required as contemplated by this Agreement. Any notice, certificate, report, financial statement or other communication properly provided by legal counsel on behalf of any party hereunder shall be deemed properly provided by the party represented by such counsel. Until otherwise provided by the respective parties, all notices, certificates and communications to each of them shall be addressed as follows: To the Issuer: City of Carlsbad 2965 Roosevelt Street, Suite B Carlsbad, California 92008 Attention: Fax No.: (760) 720-2037 To the Borrower: Poinsettia Housing Associates c/o BRIDGE Housing Corporation , California 9 Attention: with a copy to: Edison Capital Housing Investments 18101 Von Karman Avenue, Suite 1700 Irvine, California 92612-1046 Attention: Asset Manager-Poinsettia Gardens To the Trustee: Bank One Trust Companv, N.A. 201 North Central Avenue, 26th Floor 59 Phoenix, AZ 85004 Attention: Fax No.: To the initial Bondowner Representative: Bank of America, FSB Community Development Banking 485 California Street, Unit 15838 San Francisco, CA 94104 Attention: Loan Administration with a copy to: Bank of America, FSB 450 “B” Street, Suite 450 San Diego, CA 92101 Attention: Section 12.3. Binding Effect, This Agreement shall inure to the benefit of and shall be binding upon the Issuer and Borrower and their respective successors and assigns. Insofar as this Agreement provides for rights of the Trustee, this Agreement shall also inure to the benefit of the Trustee. Section 12.4. Complete Agreement. The parties understand that oral agreements or commitments to loan money, extend credit or to forbear from enforcing repayment of a debt including promises to extend or renew such debt are not enforceable. To protect the parties from misunderstanding or disappointment, any agreements the parties reach covering such matters are contained in this Agreement, which is the complete and exclusive statement of the agreement between the parties, except as the parties may later agree in writing (subject to the provisions of Article 11 of the Indenture) to modify this Agreement. Section 12.5. Severability. (1) If any provision of this Agreement 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 provisions of any constitution or statute or rule of public policy, or for any other reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance, or of rendering any other provisions herein contained invalid, inoperative or unenforceable to any extent whatever. (2) The invalidity of any one or more phrases, sentences, clauses or paragraphs contained in this Agreement shall not affect the remaining portions of this Agreement or any part thereof. Section 12.6. Amendments, Changes and Modifications. Except as otherwise provided in this Agreement or in the Indenture, subsequent to the issuance of the Bonds and before the lien of the Indenture is satisfied and discharged in accordance with its terms, this Agreement may not be effectively amended, changed, modified, altered or terminated without the written consent of Borrower, the holders of a majority of the aggregate principal amount of the Bonds then outstanding as provided in Article 11 of the Indenture and the Issuer. Bondowner 60 Representative shall have the right to waive or modify, conditionally or unconditionally, the conditions to its approvals and consents provided hereunder, without the consent of any party other than Borrower. Section 12.7. Execution in Counterparts. This Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 12.8. Required Annrovals. Consents and approvals required by this Agreement to be obtained from the Borrower, the Issuer or the Trustee shall be in writing and shall not be unreasonably withheld or delayed. Section 12.9. Limitation on Issuer’s Liability. No covenant, agreement or obligation contained herein shall be deemed to be a covenant, agreement or obligation of any present or future director, officer, employee or agent of the Issuer in his individual capacity, and neither the directors of the Issuer nor any officer thereof executing the Bonds shall be liable personally on the Bonds or be subject to any personal liability or accountability by reason of the issuance thereof. No director, officer, employee or agent of the Issuer shall incur any personal liability with respect to any other action taken by him pursuant to this Loan Agreement or the Act, provided such director, officer, employee or agent acts in good faith. No agreements or provisions contained in this Agreement nor any agreement, covenant or undertaking by the Issuer contained in any document executed by the Issuer in connection with the Project or the issuance, sale and delivery of the Bonds shall give rise to any pecuniary liability of the Issuer or a charge against its general credit or taxing powers, or shall obligate the Issuer financially in any way. Section 12.10. No Waiver: Consents. No alleged waiver by Trustee, Bondowner Representative or Issuer will be effective unless in writing, and no waiver will be construed as a continuing waiver. No waiver may be implied from any delay or failure by Trustee, Bondowner Representative or Issuer to take action on account of any default of the Borrower or to exercise any right or remedy against the Borrower or any security. Consent by Trustee, Bondowner Representative or Issuer to any act or omission by the Borrower may not be construed as a consent to any other or subsequent act or omission or as a waiver of the requirement for Bondowner Representative’s consent to be obtained in any future or other instance. All Bondowner Representative’s rights and remedies are cumulative. Section 12.11. Purpose and Effect of Bondowner Representative Approval. Bondowner Representative’s approval of any matter in connection with the Loan is for the sole purpose of protecting the Issuer’s security and rights of Trustee and the Bondholders. No such approval will result in a waiver of any default of the Borrower. In no event may Bondowner Representative’s approval be a representation of any kind with regard to the matter being approved. Section 12.12. No Commitment to Increase Loan. From time to time, Bondowner Representative may approve changes to the Plans and Specifications at the Borrower’s request and also require the Borrower to make corrections to the work of construction, all on and subject to the terms and conditions of this Agreement. The Borrower acknowledges that no such action or other action by Bondowner Representative will in any manner commit or obligate Bondowner Representative to increase the amount of the Loan. Section 12.13. No Third Parties Benefitted. This Agreement is made and entered into for the sole protection and benefit of Bondowner Representative, Issuer and the Borrower and their permitted successors and assigns and, to the extent expressly set forth herein, the Trustee. No 61 trust fund is created by this Agreement, and no other persons or entities (other than Investor Limited Partner, with respect to its rights under Section 11.2(6) hereof (“Notice to Investor Limited Partner”) have any right of action under this Agreement or any right to the Loan funds. Issuer (and, with respect to Section 11.2(6) hereof, the Investor Limited Partner) is an express third party beneficiary of this Agreement. Section 12.14. Authoritv to File Notices. The Borrower irrevocably appoints Bondowner Representative as its attorney-in-fact, with full power of substitution, to file or record, at the Borrower’s cost and expense and in the Borrower’s name, any notices of completion, notices of cessation of labor or any other notices that Bondowner Representative in its sole discretion considers necessary or desirable to protect its security, if the Borrower fails to do so. Section 12.15. [Reserved] Section 12.16. Actions. Each of Trustee, Bondowner Representative and Issuer has the right, but not the obligation, to commence, appear in and defend any action or proceeding that might affect its security or its rights, duties or liabilities relating to the Loan, the Project or any of the Loan Documents. The Borrower must pay promptly on demand all of Trustee’s, Bondowner Representative’s and Issuer’s reasonable out-of-pocket costs, expenses and legal fees and expenses of Trustee, Bondowner Representative’s and Issuer’s counsel incurred in those actions or proceedings. Section 12.17. Attorneys’ Fees. In any lawsuit, reference or arbitration arising out of or relating to this Agreement, the Loan Documents or the Loan, including any alleged tort action, regardless of which party commences the action, the prevailing party will be entitled to recover from each other party such sums as the court, referee or arbitrator adjudges to be reasonable attorneys’ fees in the action, reference or proceeding, in addition to costs and expenses otherwise allowed by law. Any attorneys’ fees incurred by either party in enforcing a judgment in its favor under this Agreement will be recoverable separately from and in addition to any other amount included in the judgment, and the attorneys’ fees obligation is intended to be severable from the other provisions of this Agreement and to survive and not be merged into any judgment. In all other situations, including any bankruptcy or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships, the Borrower agrees to pay all of Trustee’s, Bondowner Representative’s and Issuer’s costs and expenses, including attorneys’ fees, that may be incurred in any effort to collect or enforce the Loan or any part of it or any term of any Loan Document. Attorneys’ fees include the allocated costs for services of in-house counsel. From the time(s) incurred until paid in full to Bondowner Representative, all such sums will bear interest at the Default Rate. Section 12.18. In-House Counsel Fees. Whenever the Borrower is obligated to pay or reimburse Bondowner Representative for any attorneys’ fees, those fees include the allocated costs for services of in-house counsel. Section 12.19. Applicable Law. This Agreement is governed by the laws of the State without regard to the choice of law rules of that State. Section 12.20. Heirs, Successors and Assigns: Participation. The terms of this Agreement will bind and benefit the heirs, legal representatives, successors and assigns of the parties: provided, however, that the Borrower may not assign this Agreement or any Loan funds, or assign or delegate any of its rights or obligations, without the prior written consent of Bondowner Representative and Issuer in each instance. Also without notice to or the consent of the Borrower, Bondowner Representative and Issuer may disclose to any actual or prospective purchaser of any securities issued or to be issued by Bondowner Representative or Issuer and to 62 any actual or prospective purchaser or assignee of any participation or other interest in the Loan or any other loans made by Bondowner Representative or Issuer to the Borrower (whether under this Agreement or otherwise), any financial or other information, data or material in Bondowner Representative’s possession relating to the Borrower, any partners of the Borrower, the Loan, the Facility or the Project. Section 12.2 1. Relationships With Other Bondowner Representative Customers. From time to time, Bondowner Representative may have business relationships with the Borrower’s customers, suppliers, contractors, tenants, partners, shareholders, officers or directors, or with businesses offering products or services similar to those of the Borrower, or with persons seeking to invest in, borrow from or lend to the Borrower. The Borrower agrees that Bondowner Representative may extend credit to such parties and take any action it deems necessary to collect the credit, regardless of the effect that such extension or collection of credit may have on the Borrower’s financial condition or operations. The Borrower further agrees that in no event will Bondowner Representative be obligated to disclose to the Borrower any information concerning any other Bondowner Representative customer. Section 12.22. Disclosure to Title Company_. Without notice to or the consent of the Borrower, Bondowner Representative may disclose to any title insurance company insuring any interest of Bondowner Representative under the Mortgage (whether as primary insurer, coinsurer or reinsurer) any information, data or material in Bondowner Representative’s possession relating to the Borrower, the Loan, the Facility or the Project. Section 12.23. Improvement District. The Borrower may not vote in favor of, or directly or indirectly advocate or assist in, the incorporation of any part of the Project Premises into any improvement or community facilities district, special assessment district or other district without Bondowner Representative’s prior written consent in each instance. Section 12.24. Restriction on Disposition of Personal Propertv. Except for the replacement of personal property made in the ordinary course of the Borrower’s business with items of equal or greater value, the Borrower may not sell, convey or otherwise transfer or dispose of its interest in any personal property in which Bondowner Representative has a security interest or contract to do any of the foregoing, without the prior written consent of Bondowner Representative in each instance. Section 12.25. Interpretation. The language of this Agreement must be construed as a whole according to its fair meaning, and not strictly for or against any party. Whenever the context requires, all words used in the singular will be construed to have been used in the plural, and vice versa, and each gender will include any other gender. The captions of the sections of this Agreement are for convenience only and do not define or limit any terms or provisions. The word “include(s)” means “include(s), without limitation,” and the word “including” means “including, but not limited to.” No listing of specific instances, items or matters in any way limits the scope or generality of any language of this Agreement. The exhibits to this Agreement are hereby incorporated in this Agreement. Section 12.26. Miscellaneous. If the Borrower is more than one person or entity, each will be jointly and severally liable to Issuer and Bondowner Representative for the performance of this Agreement and the other Loan Documents. Time is of the essence in the performance of this Agreement and the other Loan Documents. Section 12.27. Publicitv. The Borrower hereby agrees that Bondowner Representative, at its expense, may publicize the financing of the Project and, in connection therewith, may use the address, description and a photograph or other illustrative drawing of the Project. 63 Section 12.28. Loan Commission. Bondowner Representative is not obligated to pay any brokerage commission or fee in connection with or arising out of the Loan. The Borrower must pay any and all brokerage commissions or fees arising out of or in connection with the Loan. Section 12.29. Compliance with Usurv Laws. Notwithstanding any other provision of this Agreement, it is agreed and understood that in no event shall this Agreement, with respect to the Notes or other instrument of indebtedness, be construed as requiring the Borrower or any other person to pay interest and other costs or considerations that constitute interest under any applicable law which are contracted for, charged or received pursuant to this Agreement in an amount in excess of the maximum amount of interest allowed under any applicable law. In the event of any acceleration of the payment of the principal amount of the Notes or other evidence of indebtedness, that portion of any interest payment in excess of the maximum legal rate of interest, if any, provided for in this Agreement or related documents shall be canceled automatically as of the date of such acceleration, or if theretofore paid, credited to the principal amount. The provisions of this Section prevail over any other provision of this Agreement. Section 12.30. General Partners. Any person signing this Agreement on behalf of General Partner agrees that such General Partner is jointly and severally liable for performance of the Borrower’s obligations under the Loan Documents, except as and to the extent expressly set forth in the Notes and subject to Section 11.13. Section 12.31. Integration and Relation to Loan Commitment. The Loan Documents (a) integrate all the terms and conditions mentioned in or incidental to this Agreement, (b) supersede all oral negotiations and prior writings with respect to their subject matter, including Bondowner Representative’s loan commitment to the Borrower, and (c) are intended by the parties as the final expression of their agreement with respect to the terms and conditions set forth in those documents and as the complete and exclusive statement of the terms agreed to by the parties. No representation, understanding, promise or condition is enforceable against any party unless it is contained in the Loan Documents. If there is any conflict between the terms, conditions and provisions of this Agreement and those of any other agreement or instrument, including any other Loan Document, the terms, conditions and provisions of this Agreement will prevail. 64 IN WITNESS WHEREOF, the Issuer, the Borrower and the Bondowner Representative have caused this Agreement to be executed by their duly authorized officers. “Issuer”: CITY OF CARLSBAD By: [OFFICER] (Seal) ATTEST: [city clerk] “Bondholder Representative”: BANK OF AMERICA, FSB By: “Borrower”: POINSETTIA HOUSING ASSOCIATES, a California limited partnership By: BRIDGE Housing -Southern California, a California nonprofit public benefit corporation Its: General Partner By: Its: 65 SCHEDULE A LEGAL DESCRIPTION OF PROJECT PREMISES All that certain real property located in the City of Carlsbad, County of San Diego, State of California, described as follows: Schedule A Page 1 SCHEDULE A-l TITLE POLICY REQUIREMENTS The title policy shall be dated as of the date of recording of the Mortgage (the “Title Policy”), and shall be in an “LP-10” form of ALTA Loan Policy (1970 form), with a commitment to reissue the Title Policy as an ALTA Loan Policy (1970 form) with unlimited and unqualified CLTA Form 100 Indorsement attached and without additional premium, upon completion of construction of the Facility without encroachment, in form and substance reasonably satisfactory to the Bondholder Representative and the Issuer. The Title Policy shall name the Trustee as insured and shall contain a CLTA Form 112.1 Indorsement. The Title Policy shall not contain creditor’s rights exceptions, and shall be in an amount not less than the original principal amount of the Bonds. The Title Policy shall insure (4 that fee title to the Project Premises is vested in the General Partner and Borrower has good leasehold interest in the Project Premises; 04 that the Mortgage is a valid first lien upon the Project Premises, subject only to Permitted Encumbrances (as that term is defined in Section 3.5(3)); (4 that the Project and its use does not violate any zoning or other use restrictions covering the Project Premises; (4 that the following standard exceptions be waived and insured: (i) facts which would be disclosed by a comprehensive survey of the Project Premises, (ii) mechanic’s, contractors’ or materialmen’s liens and lien claims, (iii) rights of parties in possession other than residential tenants under leases with a term of one year or less and (iv) such other exceptions noted in Schedule B, Section I of the Title Policy as the Bondholder Representative may require in its sole discretion; (4 discretion. such other matters as the Bondowner Representative may require in its sole Schedule A Page 1 SCHEDULE A-2 PERMITTED ENCUMBRANCES [TO COME] SCHEDULE B-l SERIES A PROMISSORY NOTE June 1, 1999 FOR VALUE RECEIVED, Poinsettia Housing Associates, a California limited partnership (the “Borrower”), promises to pay in lawful money of the United States of America to the order of the City of Carlsbad, its successors or assigns (the “Issuer”), the principal sum of Thousand and no/ 100 Dollars Million Hundred ($ ), with interest thereon from the date of delivery hereof at the rates per annum on the outstanding principal balance hereon from time to time as provided with respect to the Series 1999A Bonds in the hereinafter referred to Indenture. Terms not otherwise defined in this Note shall have the respective meanings as set forth in the Indenture. The principal and interest on this Note shall be payable at the times and in the amounts determined as provided in Section 4.2 of the Loan Agreement dated as of June 1, 1999, among the Borrower, Issuer and Bank of America, FSB (the “Agreement”), with the final payment of all outstanding principal and interest on this Note to be paid on the thirtieth (30th) anniversary of the Conversion Date (as defined in the Agreement) but in no event later than December 1, 2030. Both principal and interest under this Note shall be payable at the payment office of Bank One Trust Company, N.A. (the “Trustee”), at 201 North Central Avenue, 26th Floor, Phoenix, Arizona 85004, or such other address as the Trustee provides by notice to the Borrower from time to time. The Borrower may make prepayments upon this Note as provided in Section 10.1 of the Agreement, with such prepayments applied as provided in the Agreement. The Borrower must pay a Prepayment Premium in connection with any prepayments upon this Note, as provided in Section 10.1 of the Agreement. This Note is made pursuant to the Agreement wherein, among other things, the Issuer has agreed to lend to the Borrower and the Borrower has agreed to take a loan in the aggregate principal amount of $ being the proceeds from the sale of the Issuer’s Multifamily Housing Mortgage Revenue Bonds (Poinsettia Apartments Project) Series 1999A in the principal amount of $ the Issuer’s Multifamily Housing Mortgage Revenue Bonds (Poinsettia Apartments Project) Series 1999B in the principal amount of $ , and Issuer’s Taxable Multifamily Housing Mortgage Revenue Bonds (Poinsettia Apartments Project) Series 1999B-T in the principal amount of $ (collectively, the “Bonds”), said proceeds to be disbursed to the Borrower from time to time in accordance with the provisions of said Agreement. The Bonds are being issued by the Issuer pursuant to an Indenture of Trust dated as of June 1, 1999, between the Issuer and the Trustee (the “Indenture”). Upon the occurrence of any Event of Default as described in Section 11.1 of the Agreement, all unpaid principal of and interest on this Note may be declared to be forthwith due and payable in the manner and with the effect provided in said Agreement. Failure to exercise this option shall not constitute a waiver of the right to exercise the same in the event of any subsequent occurrence of such an Event of Default. Schedule B- 1 Page 1 The indebtedness evidenced by this Note may be secured by a Construction and Permanent Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing hereafter delivered to Issuer and dated as of June 1, 1999, and by certain other personal property collateral. The obligations of the Borrower to make Basic Payments, Additional Charges and payment of any other amounts due under the Agreement shall be absolute and unconditional, and the Borrower shall make such payments without abatement, diminution or deduction regardless of any cause or circumstances whatsoever including, without limitation, any defense, setoff, recoupment or counterclaim which the Borrower may have or assert against the Issuer, the Trustee or any other Person; provided that the Loan Payments and all obligations of the Borrower (other than the Unassigned Rights) under the Borrower Documents shall be nonrecourse as and to the extent provided in Section 11.13 of the Agreement only after the Adjustment Date (as defined in the Agreement). If this Note shall be placed in the hands of an attorney or attorneys for collection, the Borrower agrees to pay, in addition to the amount due hereon, the reasonable costs and expenses of collection, including reasonable attorneys’ fees. All parties to this Note, whether principal, surety, guarantor or endorser, hereby waive presentment for payment, demand, protest, notice or protest and notice of dishonor. Schedule B-l Page 2 Executed as of this 1st day of June, 1999. POINSETTIA HOUSING ASSOCIATES, a California limited partnership By: Bridge Housing-Southern California Its: General Partner By: Its: Schedule B-l Page 3 SCHEDULE B-2 SERIES B PROMISSORY NOTE $ June 1,1999 FOR VALUE RECEIVED, Poinsettia Housing Associates, a California limited partnership (the “Borrower”), promises to pay in lawful money of the United States of America to the order of the City of Carlsbad, its successors or assigns (the “Issuer”), the principal sum of ($__--Million Thousand and no/ 100 Dollars Hundred ), with interest thereon from the date of delivery hereof at the rates per annum on the outstanding principal balance hereon from time to time as provided with respect to the Series 1999B Bonds in the hereinafter referred to Indenture. Terms not otherwise defined in this Note shall have the respective meanings as set forth in the Indenture. The principal and interest on this Note shall be payable at the times and in the amounts determined as provided in Section 4.2 of the Loan Agreement dated as of June 1, 1999, among the Borrower, Issuer and Bank of America, FSB (the “Agreement”), with the final payment of all outstanding principal and interest on this Note to be paid on the third (3rd) anniversary of the Conversion Date (as defined in the Agreement) but in no event later than December 1, 2003. Both principal and interest under this Note shall be payable at the Payment Office of Bank One Trust Company, N.A. (the “Trustee”), at 201 North Central Avenue, 26th Floor, Phoenix, Arizona 85004, or such other address as the Trustee provides by notice to the Borrower from time to time. The Borrower may make prepayments upon this Note as provided in Section 10.1 of the Agreement, with such prepayments applied as provided in the Agreement. The Borrower must pay a Prepayment Premium in connection with any prepayments upon this Note, as provided in Section 10.1 of the Agreement. This Note is made pursuant to the Agreement wherein, among other things, the Issuer has agreed to lend to the Borrower and the Borrower has agreed to take a loan in the aggregate principal amount of $ being the proceeds from the sale of the Issuer’s Multifamily Housing Mortgage Revenue Bonds (Poinsettia Apartments Project) Series 1999A in the principal amount of $ the Issuer’s Multifamily Housing Mortgage Revenue Bonds (Poinsettia Apartments Project) Series 1999B in the principal amount of $ , and Issuer’s Taxable Multifamily Housing Mortgage Revenue Bonds (Poinsettia Apartments Project) Series 1999B-T in the principal amount of $ (collectively, the “Bonds”), said proceeds to be disbursed to the Borrower from time to time in accordance with the provisions of said Agreement. The Bonds are being issued by the Issuer pursuant to an Indenture of Trust dated as of June 1, 1999, between the Issuer and the Trustee (the “Indenture”). Upon the occurrence of any Event of Default as described in Section 11.1 of said Agreement, all unpaid principal of and interest on this Note may be declared to be forthwith due and payable in the manner and with the effect provided in said Agreement. Failure to exercise this option shall not constitute a waiver of the right to exercise the same in the event of any subsequent occurrence of such an Event of Default. The indebtedness evidenced by this Note may be secured by a Construction and Permanent Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing hereafter delivered to Issuer and dated as of June 1, 1999, and by certain other personal property collateral. Schedule B- 1 Page 1 The obligations of the Borrower to make Basic Payments, Additional Charges, Limited Partner Equity Payments, and payment of any other amounts due under the Agreement shall be absolute and unconditional, and the Borrower shall make such payments without abatement, diminution or deduction regardless of any cause or circumstances whatsoever including, without limitation, any defense, setoff, recoupment or counterclaim which the Borrower may have or assert against the Issuer, the Trustee or any other Person; provided that the Loan Payments and all obligations of the Borrower (other than the Unassigned Rights) under the Borrower Documents shall be nonrecourse as and to the extent provided in Section 11.13 of the Agreement only after the Adjustment Date (as defined in the Agreement). If this Note shall be placed in the hands of an attorney or attorneys for collection, the Borrower agrees to pay, in addition to the amount due hereon, the reasonable costs and expenses of collection, including reasonable attorneys’ fees. All parties to this Note, whether principal, surety, guarantor or endorser, hereby waive presentment for payment, demand, protest, notice or protest and notice of dishonor. Schedule B- 1 Page 2 C Executed as of this 1st day of June, 1999. POINSETTIA HOUSING ASSOCIATES, a California limited partnership By: Bridge Housing-Southern California Its: General Partner By: Its: Schedule B- 1 Page 3 SCHEDULE B-3 SERIES B-T PROMISSORY NOTE $ June 1,1999 FOR VALUE RECEIVED, Poinsettia Housing Associates, a California limited partnership (the “Borrower”), promises to pay in lawful money of the United States of America to the order of the City of Carlsbad, its successors or assigns (the “Issuer”), the principal sum of Thousand and no/ 100 Dollars Million Hundred 6 ), with interest thereon from the date of delivery hereof at the rates per annum on the outstanding principal balance hereon from time to time as provided with respect to the Series 1999B-T Bonds in the hereinafter referred to Indenture. Terms not otherwise defined in this Note shall have the respective meanings as set forth in the Indenture. The principal and interest on this Note shall be payable at the times and in the amounts determined as provided in Section 4.2 of the Loan Agreement dated as of June 1, 1999, among the Borrower, Issuer and Bank of America, FSB (the “Agreement”), with the final payment of all outstanding principal and interest on this Note to be paid on the second anniversary of the Conversion Date (as defined in the Agreement) but in no event later than December 1, 2002. Both principal and interest under this Note shall be payable at the Payment Office of Bank One Trust Company, N.A. (the “Trustee”), at 201 North Central Avenue, 26th Floor, Phoenix, Arizona 85004, or such other address as the Trustee provides by notice to the Borrower from time to time. The Borrower may make prepayments upon this Note as provided in Section 10.1 of the Agreement, with such prepayments applied as provided in the Agreement. The Borrower must pay a Prepayment Premium in connection with any prepayments upon this Note, as provided in Section 10.1 of the Agreement. This Note is made pursuant to the Agreement wherein, among other things, the Issuer has agreed to lend to the Borrower and the Borrower has agreed to take a loan in the aggregate principal amount of $ being the proceeds from the sale of the Issuer’s Multifamily Housing Mortgage Revenue Bonds (Poinsettia Apartments Project) Series 1999A in the principal amount of $ the Issuer’s Multifamily Housing Mortgage Revenue Bonds (Poinsettia Apartments Project) Series 1999B in the principal amount of $ , and Issuer’s Taxable Multifamily Housing Mortgage Revenue Bonds (Poinsettia Apartments Project) Series 1999B-T in the principal amount of $ (collectively, the “Bonds”), said proceeds to be disbursed to the Borrower from time to time in accordance with the provisions of said Agreement. The Bonds are being issued by the Issuer pursuant to an Indenture of Trust dated as of June 1, 1999, between the Issuer and the Trustee (the “Indenture”). Upon the occurrence of any Event of Default as described in Section 11.1 of said Agreement, all unpaid principal of and interest on this Note may be declared to be forthwith due and payable in the manner and with the effect provided in said Agreement. Failure to exercise this option shall not constitute a waiver of the right to exercise the same in the event of any subsequent occurrence of such an Event of Default. The indebtedness evidenced by this Note may be secured by a Construction and Permanent Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing hereafter delivered to Issuer and dated as of June 1, 1999, and by certain other personal property collateral. The obligations of the Borrower to make Basic Payments, Additional Charges, Limited Partner Equity Payments, and payment of any other amounts due under the Agreement shall be absolute and unconditional, and the Borrower shall make such payments without abatement, diminution or deduction regardless of any cause or circumstances whatsoever including, without limitation, any defense, setoff, recoupment or counterclaim which the Borrower may have or assert against the Issuer, the Trustee or any other Person: provided that the Loan Payments and all obligations of the Borrower (other than the Unassigned Rights) under the Borrower Documents shall be nonrecourse as and to the extent provided in Section 11.13 of the Agreement only after the Adjustment Date (as defined in the Agreement). If this Note shall be placed in the hands of an attorney or attorneys for collection, the Borrower agrees to pay, in addition to the amount due hereon, the reasonable costs and expenses of collection, including reasonable attorneys’ fees. All parties to this Note, whether principal, surety, guarantor or endorser, hereby waive presentment for payment, demand, protest, notice or protest and notice of dishonor. Executed as of this 1st day of June, 1999. POINSETTIA HOUSING ASSOCIATES, a California limited partnership By: Bridge Housing-Southern California Its: General Partner By: Its: SCHEDULE C PROJECT COSTS (Affordable Housing) The initial cost breakdown attached as Schedule C-l to this Agreement is an analysis, prepared by Borrower and approved by Bondowner Representative, of the total amount needed by Borrower to construct the Improvements and to perform Borrower’s other obligations under the Loan Documents. The analysis breaks down that total amount into the four (4) cost categories of “Land Cost,” “Hard Costs, ” “Interest Reserve” and “Soft Costs.” The categories of Hard Costs and Soft Costs are further broken down by line items, each for a specific type of cost associated with construction or performance of Borrower’s obligations under the Loan Documents. Whenever a revised cost breakdown is required, Borrower must prepare and submit it for Bondowner Representative’s approval. Any revised cost breakdown approved by Bondowner Representative will be a more recent version of the analysis provided in the initial cost breakdown, and must include revised versions of any detailed breakdowns included in the initial cost breakdown. The signature of Borrower or any of its authorized agents or representatives on the initial cost breakdown or any revised cost breakdown constitutes representations and warranties made by Borrower to Trustee and Bondowner Representative under Sections 2.2 (19), (20) and (21) of the Agreement. Schedule C Page 1 SCHEDULE D DISBURSEMENT SCHEDULE AND APPLICATION OF PAYMENTS 1. Cost Breakdown (4 Bondowner Representative will consent to the making by the Trustee of disbursements of the Loan based on a detailed breakdown (“cost breakdown”) of construction, financing and other development costs, as more fully described in Schedule C. 04 The cost breakdown restricts disbursements to line items in cost categories. Borrower agrees to use disbursements solely in conformity with the cost breakdown. If the Improvements cannot be completed in strict conformity with the most recently approved cost breakdown, Borrower must submit immediately to Bondowner Representative for its approval a revised cost breakdown, In the revised cost breakdown Borrower must identify requested changes in any line items and provide a written statement of reasons for the changes. Borrower must execute such documentation and provide such endorsements to Bondowner Representative’s title insurance policy as Bondowner Representative may reasonably require in connection with the revised cost breakdown. If further changes are required, Borrower must seek Bondowner Representative’s approval, following the procedures described above. Bondowner Representative need make no further disbursements unless and until it approves the revised cost breakdown. Bondowner Representative reserves the right to approve or disapprove any cost breakdown in its reasonable judgment. The most recently approved cost breakdown supersedes all previously approved cost breakdowns. 2. Loan in Balance: Borrower’s Funds Account (4 The Loan is “in balance” whenever the amount of the undisbursed Loan funds, plus any sums provided or to be provided by Borrower as shown in the cost breakdown most recently approved by Bondowner Representative, are sufficient in Bondowner Representative’s reasonable judgment to pay, through completion of the Project and the later to occur of the Series A Conversion Date or the Series B Conversion Date, all of the following sums: (i) all costs of construction, marketing, ownership, maintenance and sale or leasing of the Land and Improvements: and (ii) all interest, including any and all sums accruing or payable under this Loan Agreement. Unless otherwise shown in the cost breakdown, all sums provided by Borrower are on deposit in an interest-bearing account at a bank approved by the Bondowner Representative in the name of Borrower (“Borrower’s Funds Account”). The Loan is “out of balance” if and when Bondowner Representative in its reasonable judgment determines that the funds (including all undisbursed Loan funds and any sums provided and to be provided by Borrower are insufficient to pay for all such costs and sums payable under this Loan Agreement. 04 Borrower acknowledges that the Loan may become “out of balance” in numerous ways, not all of which may now be foreseen. Borrower further acknowledges that the Loan may become “out of balance” from a shortage of funds in any single line item or category of the cost breakdown, even if there are undisbursed Loan funds in other line items or categories. Undisbursed Loan funds in one category or line item (e.g., insurance costs) may not be applied to another category or line item (e.g., interest reserve) unless either the cost breakdown allows such use (and only to the extent specifically allowed) or Bondowner Representative consents in writing to such use in each instance. Schedule D Page 1 (c) Whenever the Loan is “out of balance,” Bondowner Representative may make written demand on Borrower to deposit Borrower’s own funds into the Borrower’s Funds Account in an amount sufficient in Bondowner Representative’s reasonable judgment to cause the Loan to be “in balance.” Borrower must deposit immediately all funds required by Bondowner Representative’s demand. Also, if required by Bondowner Representative, Borrower must submit, for Bondowner Representative’s approval, a revised cost breakdown within fifteen (15) days after any such demand. (4 At any time, Bondowner Representative may evaluate the sufficiency of undisbursed Loan funds allocated for payment of future interest, including any Additional Interest (“Interest Reserve”), exercising its reasonable judgment in light of (i) Bondowner Representative’s projections of interest rates for period(s) up to and including the full remaining term of the Loan (and permitted extensions, if any): (ii) the effect of any Interest Rate Protection Agreement: (iii) cost overruns or change orders; (iv) failure of the Improvements to be completed, leased and occupied as projected by Borrower in Schedule E. Based on Bondowner Representative’s evaluation of these data and projections, the Loan may be “out of balance.” If this happens, at its sole election and discretion, Bondowner Representative may exercise its rights under clause (c) above or make written demand on Borrower to pay all future interest out of Borrower’s own funds until the portion of the Loan budgeted for payment of interest is sufficient in Bondowner Representative’s reasonable judgment to cover any and all such amounts coming due through completion of the Project and the later to occur of the Series A Conversion Date or the Series B Conversion Date. 3. Conditions to Disbursement Before Bondowner Representative becomes obligated to authorize any disbursement under this Loan Agreement, all conditions to the disbursement must have been satisfied at Borrower’s sole cost and expense in a manner acceptable to Bondowner Representative in the exercise of its reasonable judgment. Borrower acknowledges that delays in disbursements may result from the time necessary for Bondowner Representative to verify satisfactory fulfillment of any and all conditions to a given disbursement. Borrower consents to all such delays. No waiver of any condition to disbursement is effective unless expressly made by Bondowner Representative in writing. If Bondowner Representative authorizes a disbursement before fulfillment of one or more required conditions, that disbursement alone will not be a waiver of such conditions, and Bondowner Representative reserves the right to require their fulfillment before making any subsequent disbursements. If all conditions are not satisfied, Bondowner Representative, acting in its reasonable judgment, may disburse as to certain items or categories of costs and not others. 3.1 Bond Issuance. Bondowner Representative is not required to purchase the Bonds until all conditions to issuance of the Bonds are satisfied. Those conditions include the following: (4 The Mortgage must be duly executed and delivered and must be recorded in a first-priority lien position, subsequent in recording priority only to the Regulatory Agreement. (W Bondowner Representative’s security interest in all personal property and fixtures covered by the Mortgage must be duly perfected in a first-priority lien position. (c) A title insurance company acceptable to Bondowner Representative must have issued or committed to issue the title policy described in Schedule A-l. Schedule D Page 2 (4 Borrower must provide comprehensive liability insurance naming Bondowner Representative as an additional insured, on an “occurrence” basis against claims for “personal injury” liability, including bodily injury, death or property damage liability, with a limit of not less than One Million and No/100 Dollars ($l,OOO,OOO.OO). Such insurance must be primary and noncontributory with any other insurance carried by Bondowner Representative. (4 Bondholder Representative shall have provided written approval of an initial cost breakdown in accordance with Schedule C and conditions to its consent to disbursement of funds allocated to each line item within such cost breakdown. @I Bondowner Representative must receive a Certification of Applicant Regarding Transaction Screen or Phase I ESA or AG-ESIQ prepared and certified by Borrower using Bondowner Representative’s prescribed form, and the information set forth in it must be acceptable to Bondowner Representative. If Bondowner Representative requires, Bondowner Representative also must receive a report prepared by a licensed or registered environmental engineer or other qualified party satisfactory to Bondowner Representative stating that no Hazardous Substances are present in, on, under or around the Property, and that no condition or circumstance warranting further investigation or analysis exists in the opinion of the preparer of the report. 0 [Reserved] 04 Bondowner Representative’s loan fee and all of its other costs and expenses in connection with the Loan (including attorneys’ fees) must be paid by Borrower out of its own funds. 0) Bondowner Representative must receive such financial statements, tax returns and other financial information as it may require regarding the financial condition of Borrower, any of its partners, or any other parties or the Project. 6) Bondowner Representative must receive evidence of the due formation and good standing of Borrower, General Partner, Initial Limited Partner, and any other partners in Borrower, including such organizational documents (including partnership agreements and articles of incorporation) and certificates of status as Bondowner Representative requires. (k) Bondowner Representative must receive evidence of the due execution of the Borrower Documents (and all other documents contemplated by the Borrower Documents) by Borrower, General Partner, and any other partners in Borrower, as the case may be, including appropriate resolutions or certificates of authority. 0) Bondowner Representative shall have received a funding commitment in an amount, form and content satisfactory to Bondowner Representative executed by Edison Capital Housing Investments. b-4 Borrower provides evidence reasonably satisfactory to Bondowner Representative that Borrower’s application for low income housing tax credits has been approved, and Borrower and/or the Project will receive an allocation of such low income housing tax credits. Cd Bondowner Representative must receive a soils report (“Soils Report”) prepared within three (3) years prior to Loan closing by a qualified licensed soils engineer satisfactory to Bondowner Representative (“Soils Engineer”). The Soils Report must be based on adequate due Schedule D Page 3 diligence and investigation, contain proper recommendations satisfactory to Bondowner Representative and state that construction of the Improvements as proposed is feasible under existing soil conditions so long as those recommendations are followed. Bondowner Representative must receive evidence, including a statement signed by the Soils Engineer, that the Plans and Specifications and all other documents and agreements relating to construction of the Improvements conform to the recommendations of the Soils Report. (0) Bondowner Representative must receive evidence that all utilities necessary to develop and occupy the Project will be provided, including written assurances from such utility companies as Bondowner Representative requires, (P) Bondowner Representative must receive evidence of such zoning (including variances) and other land use entitlements necessary to permit any intended or foreseeable use of the Project. (4) Bondowner Representative shall have approved each of the following: (0 the Plans and Specifications for the Improvements; (ii) all agreements relating to the construction of the Project (“Project Agreements”), including without limitation the general construction contract with Contractor (the “Construction Contract”), the architectural contract with Architect (the “Architecture Contract”) and the contract governing the engagement of the Soils Engineer; and (iii) the identity, reputation, experience and creditworthiness of the general contractor for the Project and the property manager for the Project. (4 Each of the following documents shall have been delivered to Bondowner Representative in form and substance satisfactory to Bondowner Representative fully executed by all of the appropriate parties: (8 Assignments by Borrower to Bondowner Representative of its rights under the Project Agreements; and (ii) Consents to assignment by Borrower to Bondowner Representative of the rights of Borrower under the Project Agreements, executed by such parties to the Project Agreements as Bondowner Representative may require; (4 Borrower must provide such policy or policies of worker’s compensation insurance as may be required by applicable worker’s compensation insurance laws (including employer’s liability insurance, if required by Bondowner Representative), covering all employees (if any) of Borrower and Borrower must provide (or cause the Contractor to provide) such policy or policies of worker’s compensation insurance as may be required by applicable worker’s compensation insurance laws (including employer’s liability insurance, if required by Bondowner Representative), covering all employees of the Contractor. N Borrower must provide a policy or policies of builder’s “all risk” insurance in nonreporting form, in an amount not less than the full insurable completed value of the Property on a replacement cost basis. The policy or policies must insure against loss or damage by hazards customarily included within such “all risk” policies, and any other risks or hazards Bondowner Representative may reasonably specify, and each must contain a Lender’s Loss Payable Endorsement (Form 438 BFU) in favor of Bondowner Representative. Schedule D Page 4 b-4 If there are any leases of any part of the Land or any space within the Improvements, those leases must be approved by Bondowner Representative, and Bondowner Representative must receive satisfactory estoppel certificates and subordination and attornment agreements executed by such tenants or proposed occupants of leased space in such forms as Bondowner Representative may require. (v) [Reserved.] (w) Bondowner Representative must receive an ALTA survey satisfactory to Bondowner Representative. (4 Borrower shall have obtained additional financing for the Project and each of the following conditions shall have been satisfied in connection with such financing: (3 Bondowner Representative shall have approved the amount and plan for disbursement of the proceeds of such financing as being consistent with the approved cost breakdown for the Project; (ii) Bondowner Representative shall have approved the form and content of the documents executed between Borrower and the provider of such financing (the “Co- Construction Lender”); (iii) The Co-Construction Lender shall have executed and delivered to Bondowner Representative and/or the Trustee such subordination agreements and intercreditor agreements as Bondowner Representative may require; and (iv) Borrower shall provide to Trustee, at Borrower’s sole cost, such indorsements to the Title Policy as Bondowner Representative may reasonably require in order to insure the continued first priority of the Mortgage, senior to any liens securing the obligations of Borrower in connection with such financing. W Trustee has obtained such estoppel certificates, subordination agreements or other agreements as Bondowner Representative shall require from the parties to development agreements, disposition and development agreements, covenants, conditions and restrictions or other agreements affecting the Project or the Project Premises. 3.2 First Disbursement. Bondowner Representative is not required to consent to the making by Trustee of the first disbursement of Bond Proceeds until all of the following conditions have been satisfied: (4 Bondowner Representative must receive evidence of the enforceability of covenants made by Borrower, General Partner and any other parties and Guarantor, including, if requested by Bondowner Representative, one or more opinion(s) to be rendered in form and in substance satisfactory to Bondowner Representative by counsel acceptable to Bondowner Representative for Borrower, General Partner, or the other parties. (b> Bondowner Representative must receive a Draw Request, as defined in Section 5.1 of this Schedule D. (4 Bondowner Representative shall have confirmed to its reasonable satisfaction that Borrower has received and disbursed for costs of the Project, in accordance with the Schedule D Page 5 approved cost breakdown, funds obtained from loans fromthe Co-Construction Lender in an amount not less than NineHundred Twenty Thousand and No/100 Dollars ($920,000). (4 Borrower shall have satisfied all of the conditions contained in Section 3.1 of this Schedule D. (4 Bondowner Representative must receive evidence that Borrower has received all building permits necessary to commence construction of the Project. 3.3 Subsequent Disbursements After the first disbursement, Bondowner Representative is not required to consent to any further disbursements if: (4 Bondowner Representative does not receive a Draw Request, or Bondowner Representative in its reasonable judgment considers any Draw Request to be incomplete or otherwise unacceptable, based on Bondowner Representative’s observations while visiting the construction site or for any other reason; or (b) The Project is materially damaged and not repaired, unless Bondowner Representative receives funds from Borrower or insurance proceeds sufficient to pay for all repairs in a timely manner: or (4 The Project or any interest in it is affected by eminent domain or condemnation proceedings; or (4 For any reason the title insurer fails or refuses at Bondowner Representative’s request to issue a CLTA Form 122 endorsement or its equivalent, or any other title policy endorsement that Bondowner Representative in its reasonable judgment requires; or (4 Bondowner Representative receives a bonded stop notice, unless Borrower files a release bond satisfactory to Bondowner Representative in its reasonable judgment; or (fl The Loan is “out of balance” according to Section 2 of this Schedule D, and Borrower fails to comply with any demand by Bondowner Representative to deposit funds, or Bondowner Representative does not approve any revised cost breakdown proposed by Borrower; or (Ed Bondowner Representative in its reasonable judgment determines that there has been or will be a material failure to meet the projections of the Pro Forma Schedule, and Borrower fails to comply with any demand by Bondowner Representative to submit a revised Pro Forma Schedule or Bondowner Representative does not approve any revised Pro Forma Schedule proposed by Borrower: or (h) For any reason Borrower fails or refuses at Bondowner Representative’s request to provide evidence that the Soils Engineer observed the soils work and found it to have been completed in accordance with the recommendations of the Soils Report; or (8 Bondowner Representative has a reasonable basis to believe that a breach, default or failure of condition of or under any of the Partnership Agreements, any funding agreement, or any other syndication documents of Borrower exists; or Schedule D Page 6 25-l (i) Under any of the Loan Documents, an Event of Default (as defined in that document) has occurred and is continuing, or an event has occurred that with notice or the passage of time could become such an Event of Default. 4. Disbursement Amounts. Set forth in the cost breakdown is a “Loan Disbursement Budget” broken down by line items. From each line item, Bondowner Representative will authorize disbursements of Loan funds by the Trustee in a total amount not to exceed the Loan Disbursement Budget for that line item, taking into account all prior disbursements, any applicable retention requirements and any reallocation of funds to which Bondowner Representative has consented in writing. Any and all sums on deposit in the Borrower’s Funds Account (“Borrower’s Funds”) will be disbursed as described below. 4.1 Disbursements of Certain Costs Not Requiring Retention (Line Items 1 and 1 l-24) Bondowner Representative will authorize one or more disbursements from each of these line items, without retention. 4.2 Disbursements of Certain Hard Costs Requiring Retention (Line Items 2-7) (4 From this line item, Bondowner Representative will authorize periodic disbursements as construction progresses. Each disbursement will be equal to 90% of the amount applied for in the applicable Draw Request, Until the conditions set forth in clause (b) below have been satisfied, Bondowner Representative may require that the Trustee retain the remaining undisbursed portions of this line item, which will equal 10% of the aggregate dollar amount to be disbursed from those line items, whether consisting of Loan funds, Borrower’s Funds or a combination of both. [See Schedule D Addendum. ] [BANK: CONFIRM OR OMIT REFERENCE TO ADDENDUM] 04 Bondowner Representative will authorize the disbursement of the aggregate retention upon satisfaction of the following conditions: 0) The Improvements must be completed in accordance with Section 5.7 of this Agreement. (ii) Bondowner Representative must receive evidence that a valid Notice of Completion has been recorded. (iii) Bondowner Representative must receive a Draw Request for such retention, including written certification by the Architect and the Contractor that the completed Improvements conform to the Plans and Specifications. (iv) Borrower has provided endorsements to or a reissue of Bondowner Representative’s title insurance policy insuring lien-free completion of the Improvements as well as first-lien priority of the disbursement and such other endorsements insuring such other matters relating to the completed construction as Bondowner Representative requires. (4 No event defined as an Event of Default under any of the Loan Documents has occurred and is continuing, and no event has occurred that, with notice or the passage of time, would be such an Event of Default. Schedule D Page 7 200 4.3 Disbursement of Interest Reserve (Line Item 10) Any funds in the Interest Reserve will be disbursed from time to time to pay interest as and when it becomes due on the Loan. 4.4 Disbursements of Developer Fee (Line Item 230 Loan funds allocated to payment of Developer Fee may be disbursed prior to the later to occur of the Series A Conversion Date or the Series B Conversion Date only if Bondowner Representative consents to such disbursement. 4.5 Disbursements of Hard and Soft Cost Contingency Reserves (Line Items 8,221 From time to time, Borrower may request Bondowner Representative to reallocate Loan funds from the hard cost contingency reserve to other hard cost line items, subject to any retention requirements applying to those line items. From time to time, Borrower also may request Bondowner Representative to reallocate Loan funds from the soft cost contingency reserve to other soft cost line items. Each Draw Request for hard or soft cost contingency funds must contain such supporting documentation, including invoices and canceled checks, in such forms as Bondowner Representative requires. Bondowner Representative in its sole judgment may decline any Draw Request for hard or soft cost contingency funds and also decline any request by Borrower to increase, reallocate or deplete either of such reserves. If that happens, or if either reserve becomes depleted for any other reason, Borrower’s obligations with respect to the Loan will not be affected. 4.6 Disbursements of Borrower’s Funds (All Line Items) (4 Whenever Borrower’s Funds are allocated to any line item, Bondowner Representative may authorize all disbursements first from those Borrower’s Funds until they are exhausted, regardless of the allocations of those funds set forth in the cost breakdown, unless Bondowner Representative and Borrower have agreed otherwise in writing in each instance. This means that Borrower’s Funds allocated in the cost breakdown to pay certain costs may be disbursed to pay other costs. As a result, one or more line items may have an excess of Borrower’s Funds, while one or more other line items may have a shortage of Borrower’s Funds. This, in turn, may cause the Loan to become “out of balance.” @I If the Loan becomes “out of balance” for this reason, Bondowner Representative may reallocate undisbursed Loan funds from any line items to any other line items, so long as the reallocation would cause the Loan to be “in balance.” Bondowner Representative, however, is not obligated to make any such reallocation if, under any of the Loan Documents, an Event of Default (as defined in that document) has occurred and is continuing, or if an event has occurred that with notice or the passage of time or both would be such an Event of Default, Bondowner Representative will give written notice to Borrower of any reallocation, and the reallocation will be effective upon the sending of such notice without any further action. 5. Disbursement Procedures The disbursement procedures described below apply to the Loan funds and also to any Borrower’s Funds on deposit in the Borrower’s Funds Account. 5.1 Draw Requests Schedule D Page 8 (4 For each disbursement, Borrower must submit to Bondowner Representative a written request signed by Borrower or its agent designated below and the Contractor, together with such documentation and information as Bondowner Representative requires (collectively, a “Draw Request”). Each Draw Request must be acceptable in form and substance to Bondowner Representative in the exercise of its reasonable judgment and include such items of information and documentation, including invoices, canceled checks, lien waivers and other evidence as Bondowner Representative requires, to show that Borrower is in compliance with the Loan Documents. If Bondowner Representative so requires, any given Draw Request also must include written certification by the Architect and the Contractor that the Improvements as constructed to date conform to the Plans and Specifications. 0.4 In each Draw Request, Borrower must request disbursement for one or more specified line items of the cost breakdown. Borrower may submit a Draw Request to Bondowner Representative on or about the first day of each month, unless Bondowner Representative agrees to make disbursements more frequently than once a month. Borrower must use all Loan funds strictly for the purposes for which they are disbursed. (4 Unless Borrower has notified Bondowner Representative in writing to the contrary, each Draw Request constitutes Borrower’s representation and warranty to Bondowner Representative that (i) the Loan is “in balance,” (ii) all prior disbursements, as well as that currently being requested, were and will be used in strict compliance with the cost breakdown and (iii) no Event of Default has occurred, and no event has occurred that, with notice or the passage of time, could become an Event of Default. 5.2 Disbursements to Other Parties Unless Bondowner Representative and Borrower have agreed otherwise in writing, Bondowner Representative if it so chooses may make disbursements directly to the Contractor, subcontractors, laborers or material suppliers. 5.3 Pavments Acting in its reasonable judgment, Bondowner Representative may use Loan funds to pay Loan fees owing to Bondowner Representative, interest on the Loan, legal fees and expenses of Bondowner Representative’s attorneys and such other sums as may be owing from time to time by Borrower to Bondowner Representative with respect to the Loan, all without further notice to or authorization by Borrower. Bondowner Representative at its option may make any such payment on Borrower’s behalf by debiting the Loan funds in the amount of the payment and disbursing such amount to itself. Alternatively, Bondowner Representative may disburse all or part of the payment amount into the Account, and then may either debit the Account or invoice Borrower in the amount of the payment. For these purposes, Bondowner Representative is not restricted to the line items and cost categories of the cost breakdown, Borrower acknowledges that such a use of Loan funds by Bondowner Representative may cause the Loan to become “out of balance,” requiring deposits by Borrower into the Borrower’s Funds Account. Schedule D Page 9 5.4 Authorized Signers Borrower authorized any of the following persons, acting alone, to sign Draw Requests and other documents in connection with the administration of the Loan, Borrower represents and warrants to Bank that the following signatures are specimen signatures of such authorized persons: [Name] [Name] [Name] [Name] [Name] [Signature] [Signature] [Signature] [Signature] [Signature] Schedule D Page 10 SCHEDULE E PRO FORMA SCHEDULE Completion of Construction of the Facility 90% of Units Occupied Latest Permitted Conversion Date: December 1,200O. Schedule E Page 1 SCHEDULE F CONDITIONS RELATING TO RESERVE ACCOUNT 1. Operating Reserve Account. (1) On or before the earlier to occur of the Series A Conversion Date or the Series B Conversion Date, the Borrower must establish and thereafter maintain with the Trustee an operating reserve subaccount (the “Operating “Reserve Account”) of the Reserve Account. Funds held in the Operating Reserve Account may be applied to cover any operating deficit (’ I.e., insufficient cash flow from the Project to cover normal operating expenses and maintenance, including debt service) in connection with the Project after such Conversion Date. (2) as a condition to conversion of the Loan, the Borrower must deposit and thereafter maintain from the earlier to occur of the Series A Conversion Date or the Series B Conversion Date through the Maturity Date of the Series A Bonds (unless released in accordance with paragraph (9) below), a minimum balance of $ in the Operating Reserve Account. (3) Any withdrawal from the Operating Reserve Account for operating deficits is subject to the approval of Bondowner Representative. Bondowner Representative will consider disbursing such amounts to the Borrower provided that the following conditions have been satisfied in Bondowner Representative’s reasonable judgment: (4 Bondowner Representative has received a written request signed by the Borrower, together with such documentation and information as Bondowner Representative may require. Each such request must be acceptable in form and substance to Bondowner Representative in the exercise of its reasonable judgment, and shall include such items of information and documentation, including invoices, canceled checks, lien waivers and other evidence, as Bondowner Representative may require to show that there currently is, or potentially will be, an operating deficit, and that the Borrower is otherwise in compliance with the Loan Documents; M The Facility must not have been materially damaged: (c) The Project Premises and the Facility, or any interest in the Project Premises and the Facility, must not have been materially affected by eminent domain or condemnation proceedings; (4 No Event of Default, or event that with notice or the passage of time or both could become such an Event of Default, shall have occurred and be continuing; and (4 The Operating Reserve Account must have been replenished to the minimum required amount set forth in paragraph (2) from any previously permitted withdrawals. (4) Any withdrawal from the Operating Reserve Account must be replenished within the time frame required by Bondowner Representative until the Operating Reserve Account is fully refunded to the amount set forth in paragraph (2) above. (5) No cash flow distributions may be made to the Borrower or any of its partners until and at all times unless the Operating Reserve Account is fully funded. (6) The funds held in the Operating Reserve Account are pledged as additional security for the indebtedness evidenced by the Notes and secured by the Mortgage. The Borrower agrees to execute any financing statements in connection therewith as the Trustee or Bondowner Representative may reasonably request. Upon an Event of Default, the giving of any applicable notice to Borrower (but not to any third parties) and the expiration of any applicable cure period, then the Trustee, at the direction of Bondowner Representative acting in its sole and absolute discretion, may apply all or any portion of the Operating Reserve Account in any order it deems advisable, as follows: (8 to payment of the indebtedness evidenced by the Notes or any unpaid fees, costs or expenses that the Borrower is required to pay under any Loan Documents, provided, however, that such application of funds will not cure or be deemed to cure any default; (ii) to reimburse the Trustee for any losses or expenses (including reasonable legal fees) suffered or incurred by the Trustee as a result of such default; (iii) to make or complete repairs or replacements to the Facility; or (iv) to any payment in connection with exercising all rights and remedies available to the Trustee at law or in equity or under any of the Loan Documents. (7) Nothing in this Schedule F may in any manner whatsoever alter, impair or affect the obligations of the Borrower or relieve the Borrower of any of its obligations to make payments and perform all of its other obligations required under the Loan Documents. (8) The Borrower agrees to indemnify, defend and hold harmless the Trustee and Bondowner Representative from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations and costs or expenses, including litigation costs and reasonable attorneys’ fees, arising from or in any way connected with the Operating Reserve Account. (9) The Borrower may request a release of the funds held in the Operating Reserve Account at any time after three (3) years from the later to occur of the Series A Conversion Date or the Series B Conversion Date, provided: (i) for the immediately preceding two (2) consecutive years the Borrower has maintained a debt service coverage of l.lO:l.OO, and (ii) no Event of Default, or event that with notice or the passage of time could become such an Event of Default, shall have occurred and be continuing. Any release under this paragraph (9) will have the effect of reducing the minimum balance requirement of the Operating Reserve Account established under paragraph (2) above. 2. Replacement Reserve Account. (1) On or before the earlier to occur of the Series A Conversion Date or the Series B Conversion Date, the Borrower must establish and thereafter maintain with the Trustee a replacement reserve subaccount (the “Replacement Reserve Account”) of the Reserve Account. Funds held in the Replacement Reserve Account may be applied to cover the costs of replacing Eligible Replacement Items (as defined below) in connection with the Facility. (2) As a condition to conversion of any portion of the Loan, the Borrower must deposit $ into the Replacement Reserve Account. Following this initial deposit, the Borrower shall deposit into and maintain the Replacement Reserve Account in accordance with paragraph (3) below. “Eligible Replacement Items” means Capital Improvement Items (as defined below) and other substantial items approved by Bondowner Representative in its reasonable judgment, but does not include maintenance and repairs made during the normal course of business, including broken windows, roof repairs and maintenance, landscaping, office equipment, interior painting, fire-damaged equipment, building additions and any repair or maintenance item. “Capital Improvement Items” means items recognized as capital improvements in accordance with generally accepted accounting practices that require an outlay of funds for acquisition or improvement of a fixed asset which can be depreciated over its useful life and extends the life or increases the productivity of the Facility. (3) During each one-year period commencing on the earlier to occur of the Series A Conversion Date or the Series B Conversion Date and each anniversary thereof (each, a “Loan Year”), on a quarterly basis, beginning on the first day of the second quarter following the Conversion Date and continuing on the first day of each subsequent quarter until the Series A Bonds have been paid in full, the Borrower must deposit into the Replacement Reserve Account $220 per unit per Loan Year, based on the number of existing apartment units comprising the Improvements. The dollar amount per unit per year to be deposited by the Borrower into the Replacement Reserve Account is subject to revision by Bondowner Representative based upon Bondowner Representative’s periodic review and analysis of the condition of the Facility during the life of the Loan. Bondowner Representative will notify the Borrower in writing in the event Bondowner Representative determines that there is to be an increase in the minimum annual deposit requirements. (4) Any withdrawal from the Replacement Reserve Account for costs incurred by the Borrower for Eligible Replacement Items is subject to Bondowner Representative’s approval. Bondowner Representative will consider permitting disbursment of such amounts to the Borrower provided that the following conditions have been satisfied in Bondowner Representative’s reasonable judgment: (4 Bondowner Representative must have received a written request signed by the Borrower, together with such documentation and information as Bondowner Representative may require. Each such request must be acceptable in form and substance to Bondowner Representative in the exercise of its reasonable judgment and include such items of information and documentation, including invoices, canceled checks, lien waivers and other evidence, as Bondowner Representative may require to show that the Borrower is in compliance with the Loan Documents; 04 The Facility must not have been materially damaged, unless such damage is covered by insurance and Bondowner Representative has allowed the Borrower to use such insurance proceeds to repair or restore the Improvements in accordance with the Mortgage; (4 The Project Premises and the Facility, or any interest in the Project Premises and the Facility, must not have been materially affected by eminent domain or condemnation proceedings; (4 The Borrower must have provided such endorsements to the Title Policy as Bondowner Representative may reasonably require to insure first lien priority of the Mortgage, as well as such other matters relating to the Eligible Replacement Items as Bondowner Representative may specify: and 2\5 (4 No Event of Default, or event that with notice or the passage of time or both could become such an Event of Default, shall have occurred and be continuing. (5) No cash flow distributions may be made to the Borrower or any of its partners until and at all times unless the Replacement Reserve Account is being funded at the levels required under paragraph (3) above. (6) The funds held in the Replacement Reserve Account are pledged as additional security for the indebtedness evidenced by the Notes and secured by the Mortgage. The Borrower agrees to execute any financing statements in connection therewith as the Trustee or Bondowner Representative may reasonably request. Upon an Event of Default, the giving of any applicable notice to the Borrower (but not to any third parties) and the expiration of any applicable cure period, then the Trustee, at the direction of Bondowner Representative acting in its sole and absolute discretion, may apply all or any portion of the Replacement Reserve Account in any order it deems advisable, as follows: (9 to payment of the indebtedness evidenced by the Notes or any unpaid fees, costs or expenses that Borrower is required to pay under any Loan Documents, provided, however, that such application of funds will not cure or be deemed to cure any default; (ii) to reimburse the Trustee for any losses or expenses (including reasonable legal fees) suffered or incurred by the Trustee as a result of such default; (iii) to make or complete repairs or replacements to the Facility: or (iv) to any payment in connection with exercising all rights and remedies available to the Trustee at law or in equity or under any of the Loan Documents. (7) Nothing in this Schedule F may in any manner whatsoever alter, impair or affect the obligations of the Borrower or relieve the Borrower of any of its obligations to make payments and perform all of its other obligations required under the Loan Documents. (8) The Borrower agrees to indemnify, defend and hold harmless the Trustee and Bondowner Representative from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations and costs or expenses, including litigation costs and reasonable attorneys’ fees, arising from or in any way connected with the Replacement Reserve Account. (9) The Trustee’s release of funds from the Replacement Reserve Account or other acknowledgment of completion of any repair or replacement in any manner satisfactory to Bondowner Representative may not be deemed an acknowledgment that the repair or replacement has been completed in accordance with applicable building, zoning or other codes, ordinances, statutes, laws, regulations or requirements of any governmental or quasi- governmental agency. SCHEDULE G [RESERVED] Schedule G Page 1 SCHEDULE H REQUIRED EQUITY DEPOSITS Prior to the first anniversary of the Series B Conversion Date $ Prior to the second anniversary of the Series B Conversion Date $ Prior to the third anniversary of the Series B Conversion Date $ Total: $ Schedule H Page 1 SCHEDULE I CONVERSION CONDITIONS (0 the Facility has received a final certificate of occupancy or other governmental permits and consents required in order to permit occupancy of all 92 units within the Facility by residential tenants; (ii) all labor and material shall have been delivered in connection with the planned construction of the Facility in accordance with the Plans and Specifications, and the Bondowner Representative shall have received evidence to its reasonable satisfaction (which may be in the form of an endorsement to the Title Policy) that no mechanics, materialmen’s or other liens or claims have been or may be asserted in connection with such work, or that such liens or claims are covered by a bond posted for such purposes; (iii) the Architect shall have certified that such work has been completed in substantial compliance with the Plans; (iv) for the immediately preceding one-month period, an average of at least ninety percent (90%) of the units within the Facility shall have been occupied by residential tenants, in compliance with the Regulatory Agreement; (4 the Debt Service Coverage Ratio as of the calendar month most recently ended ([subject to adjustment for subsequent increases in Project occupancy]) must be at least l.lO:l.OO. In the event that the Project does not satisfy this item (v), Borrower has the option to redeem or purchase the amount of Series A Bonds in accordance with Section 10.1 of this Agreement or Section 3.1 of the Indenture such that after taking into consideration such prepayment, the Debt Service Coverage Ratio is at least l.lO:l.OO and any such Bonds so purchased shall thereupon be surrendered for cancellation: (vi) no Event of Default shall exist under the Agreement and no event which, with the notice or the passage of time or both, would be an Event of Default shall have occurred and be continuing; (vii) all of Borrower’s representations in Article 2 of the Agreement must be true in all material respects, and Borrower shall have delivered to the Trustee and Bondowner Representative a certificate to that effect: and (viii) Borrower shall have established and funded the initial deposits into the reserves required by Schedule F. Schedule I Page 1 SCHEDULE J [RESERVED] Schedule J Page 1 220 1. 2. SCHEDULE K LIST OF REQUIRED APPROVALS Grading Permit Building Permit Schedule K Page 1 221 SCHEDULE L LIST OF HAZARDOUS SUBSTANCES REPORTS 1. Phase I Environmental Assessment Review dated July 23, 1993, prepared by Centec Engineering. 2. Boogay. Environmental Site Assessment dated February 22, 1993, prepared by Mark A. 3. Report of Limited Pesticide Sampling, Poinsettia Properties, dated April 12, 1999, prepared by Christian Wheeler Engineering. 222, 13061-09 RECORDING REQUESTED BY AND WHEN RECORDED RIXURN TO: JONES HALL, A PROFESSIONAL LAW CORPORATION 650 California Street, 18th Floor San Francisco, California 94108 Attention: Thomas A. Downey, Esq. jH:TAD:SRF 4/01/99 4/15/99 5/03/99 REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS By and Between CITY OF CARLSBAD, as Issuer and BANK ONE TRUST COMPANY, N.A. as Trustee and POINSEXTIA HOUSING ASSOCIATES, a California Limited Partnership, as Borrower Dated as of June 1,1999 Relating to: City of Carlsbad Multifamily Housing Mortgage Revenue Bonds (Poinsettia Station Apartments) Series 1999A, Series 1999B and Series 1999B-T 223 TABLE OF CONTENTS Section 1. Section 2. Section 3. Section 4. Section 5. Section 6. Section 7. Section 8. Section 9. Section 10. Section 11. Section 12. Section 13. Section 14. Section 15. Section 16. Section 17. Section 18. Section 19. Section 20. Section 21. Section 22. Section 23. Section 24. Definitions and Interpretation .............................................................................. .2 Acquisition and Rehabilitation of the Project.. ....................................................... .6 Residential Rental Property ................................................................................. .7 Low Income Tenants.. .......................................................................................... ,9 Tax Status of the Bonds ....................................................................................... 12 Modification of Special Tax Covenants.. ............................................................... 12 Indemnification .................................................................................................. 13 Consideration ..................................................................................................... 14 Reliance.. ........................................................................................................... 14 Sale or Transfer of the Project .............................................................................. 14 Term.. ................................................................................................................ 15 Covenants to Run With the Land ........................................................................ 16 Burden and Benefit ............................................................................................. 16 Uniformity; Common Plan .................................................................................. 17 Enforcement ....................................................................................................... 17 Recording and Filing.. ........................................................................................ 17 Payment of Fees.. ............................................................................................... 17 Governing Law.. ................................................................................................ 18 Amendments ..................................................................................................... 18 Notice.. .............................................................................................................. 18 Severability.. ...................................................................................................... 19 Multiple Counterparts ......................................................................................... 19 Compliance by Borrower .................................................................................... 19 Limited Liability ................................................................................................ 19 EXHIBIT A LEGAL DESCRIPTION OF THE SITE EXHIBIT B INCOME COMPUTATION AND CERTIFICATION EXHIBIT C COMPLETION CERTIFICATE EXHIBIT D CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE May 25,1999 TO: CITY MANAGER FROM: Housing and Redevelopment Director POlNSElTlA PROPERTIES BOND ISSUANCE As you know, the City Council has taken several actions regarding the Poinsettia Properties Affordable Apartment Project. On December 8, 1998 the City Council adopted Resolution No. 98-398 which approved financial assistance in the amount of $920,000. On May 18, 1999, the Council adopted Resolution No. 99-l 77 which approved the sale and issuance of bonds necessary for the development of the project. Both Council actions authorized the City Manager to sign the documents listed below on behalf of the City: 1. City Escrow Instructions (2 copies) 2. City Loan Agreement (2 copies) 3. City Regulatory Agreement (2 copies) 4. City Promissory Note (2 copies) 5. Bank of America Subordination Agreement (2 copies) 6. Bond Loan Agreement (1 copy & 6 signature pages) 7. Bond Indenture of Trust (1 copy & 6 signature pages) 8. Bond Regulatory Agreement (1 copy & 6 signature pages) 9. Original Bonds R-l, R-2 & R-3 (1 copy each) 10. Officer’s Certificate (6 copies) 11. Order of the City to the Trustee (6 copies) 12. Requisition for Disbursement (6 copies) All of the above listed documents have been reviewed and approved by the City Attorney’s Office, the City’s special legal counsel (Goldfarb and Lipman), and the City’s bond counsel (Jones Hall). Please sign all the documents and return them to our office at your earliest convenience. Final execution of these documents will be completed on Wednesday, May 26, 1999, as part of the escrow process. If you have any questions or would like additional information, please contact me at extension 2935. 5lIhALQ >a: 3z& DEBBIE FOUNTAIN DF:CR:cr attachments