06052023 Complete AgendaSPECIAL HOUSING AND REDEVELOPMENT AUTHORITY MEETING
RICHFIELD MUNICIPAL CENTER, BARTHOLOMEW ROOM
JUNE 5, 2023
7:00 PM
Call to Order
Open Forum
Each speaker is to keep their comment period to three minutes to allow sufficient time for others. Comments
are to be an opportunity to address the HRA. Please refer to the HRA agenda and minutes web page for
additional ways to submit comments. You may also call 612-861-9764 or email ldubois@richfieldmn.gov with
questions. Call into the open forum by dialing 1-415-655-0001 Use webinar access code: 2452 800 6454 and
password: 1234.
AGENDA APPROVAL
1.Approval of the Agenda
PUBLIC HEARINGS
2.Consider a resolution authorizing the issuance of $10 million in multifamily housing revenue bonds for the benefit
of the Upper Post Flats housing development and related Post-Issuance Compliance Policy.
Staff Report No. 9
HRA DISCUSSION ITEMS
3.Executive Director Poehlman will provide an update on discussions and actions related to the request by Best
Buy to terminate the Minimum Assessment Agreement for the Corporate Campus property at 7601 Penn Avenue
South.
Staff Report No. 10
4.Adjournment
Auxiliary aids for individuals with disabilities are available upon request. Requests must be made at least 96
hours in advance to the City Clerk at 612-861-9739.
AGENDA SECTION:PUBLIC HEARINGS
AGENDA ITEM #2.
STAFF REPORT NO. 9
HOUSING AND REDEVELOPMENT AUTHORITY
MEETING
6/5/2023
Melissa Poehlman, Executive DirectorREPORT PREPARED BY:
EXECUTIVE DIRECTOR REVIEW: Melissa Poehlman, Executive Director
5/31/2023
ITEM FOR COUNCIL CONSIDERATION:
Consider a resolution authorizing the issuance of $10 million in multifamily housing revenue bonds for
the benefit of the Upper Post Flats housing development and related Post-Issuance Compliance Policy.
EXECUTIVE SUMMARY:
The Upper Post Flats housing development is an extensive redevelopment and historic preservation project of
26 buildings within Historic Fort Snelling. The development includes approximately 190 units ranging from
studios to five-bedroom units and will house hundreds of residents; likely adding more than 200 students to the
Richfield School District once it is complete.
The development project is partially complete, with some units available and occupied today. To
help manage increased costs of the project, and remain eligible for Low Income Housing Tax Credits
(LIHTC), Dominium, dba Fort Snelling Leased Housing Associates I, LLLP, (Developer) has
approached the HRA to request the issuance of $10 million in Conduit Bonds (Bonds). The
issuance of these Bonds would not impact the City's ability to issue their own bank-qualified bonds
and would not impact the City or Housing and Redevelopment Authority (HRA) financially. It does;
however, offer the HRA the opportunity to influence the project. HRA staff have worked with the
Developer on the following stipulations:
Minimum:
Increased affordability: Minimum 20 units at 40% Area Median Income (AMI) for 25 years;
Acceptance of Richfield Kids @ Home families; and
1.5% upfront fee ($150,000).
Additional Requirements if Developer is able to take advantage of 4% floor under the Internal Revenue Code:
Additional 60-80 units at 50% Area Median Income (AMI) or 20-35 units at 40% AMI for a period of
25 years; and
Limit on rent increases (no more than 7% annually).
The Upper Post Flats project is a development that already exists and is part of our community through it's
location within the Richfield School District. Through the issuance of conduit debt, the HRA is able to
increase the affordability of the project for Richfield families, receive a fee that will help to do additional work
within the borders of the City, and also formalize a relationship with the Developer. This is possible without
any financial risk to the HRA or any cost to Richfield taxpayers.
Should the HRA approve the issuance, it should also approve the attached Post-Issuance Compliance Policy
which provides guidance on the use of proceeds of tax-exempt bonds such as the Obligations to
ensure that the interest on such tax-exempt bonds does not become taxable.
RE C O M M E ND E D AC T I O N:
Conduct and close a public hearing and by motion:
1) Approve the attached resolution authorizing the issuance, sale, and delivery of multifamily housing
revenue obligations for the benefit of Fort Snelling Leased Housing Associates I, L LL P, and
authorizing the execution and delivery of documents related thereto; and
2) Approve the attached Post-Issuance Compliance Policy.
B AS IS O F RE C O M M E ND AT I O N:
A.H IS TOR IC AL C ON T E X T
The buildings that comprise Historic Fort Snelling were constructed in the late 1800s and early
1900s. The structures had been largely empty since the early 1970s and were in a significant
state of disrepair.
The property is owned by the Minnesota Department of Natural Resources and is considered
Unorganized Territory, outside any particular city's jurisdiction. The area is within the Richfield
School District boundary, however.
I n 2015, the Developer was selected to restore the property. An extensive list of approvals have
been granted and significant funds allocated to the project, including the issuance of an
$88,000,000 Multifamily Housing Revenue Note by the Hennepin County HRA; the proceeds of
which were loaned to the Developer to finance the project.
Current funding sets affordability requirements at 60% A MI .
I n December 2022, the HRA authorized Bond Council to request a housing allocation from
Minnesota Management and Budget; this allocation has been received.
Following a public hearing, the Board of Commissioners of Hennepin County adopted a resolution
consenting to the issuance of multifamily housing revenue obligations by the Richfield HRA on
April 11, 2023.
B.P OL IC IE S (resolutions, ordinances, regulations, statutes, etc):
The HRA must conduct a public hearing as required by Section 147(f) of the I nternal Revenue
Code of 1986, as amended.
Consent to the issuance of the Bonds and authority to hold this public hearing was delegated to
the Richfield HRA by the City Council on April 25, 2023.
C.C R IT IC AL T IMIN G IS S U E S:
The project is underway and the Developer is hoping to close on this final piece of financing as
soon as possible.
D.F IN AN C IAL IMPAC T:
I ssuance of Bonds will not directly impact the City or HRA financially. The principal and interest
on the Bonds will be paid by the project and does not constitute a debt to the City or HRA.
The Developer will pay all costs associated with the request as well as a 1.5% fee (approximately
$150,000) to the HRA.
E.L E GAL C ON S ID E R AT ION:
Kennedy & Graven serve as the Bond Counsel for the issuance. The attached documents and
resolution have been prepared by HRA Attorney J ulie Eddington.
ALTE R N AT IV E R E C O MME N D ATIO N(S):
Deny the attached resolution authorizing the issuance of $10 million in Bonds for the benefit of the Upper Post
Flats housing development.
P R IN C IPAL PAR TIE S E X P E C TE D AT ME E TIN G:
Owen Metz, Dominium/Fort Snelling Leased Housing Associates I , L L L P; and J ulie Eddington, HRA Attorney
AT TAC H ME N T S:
D escription Type
Resolution Resolution L etter
P ost-Issuance C ompliance P olicy C ontract/A greement
HRA A ttorney - L etter of E xplanation C over Memo
C ooperative A greement - Richfield HRA & Hennepin
C ounty C ontract/A greement
L oan A greement - HRA & F t. S nelling L eased Hsg C ontract/A greement
Indenture - HRA & US B ank C ontract/A greement
Regulatory A greement - HRA , F t. S nelling L eased Hsg,
US B ank C ontract/A greement
Map E xhibit
Response to A pril 25 C ouncil Open F orum C omments E xhibit
HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE
CITY OF RICHFIELD, MINNESOTA
RESOLUTION NO. _______
RESOLUTION AUTHORIZING THE ISSUANCE, SALE, AND DELIVERY OF
MULTIFAMILY HOUSING REVENUE OBLIGATIONS FOR THE BENEFIT OF
FORT SNELLING LEASED HOUSING ASSOCIATES I, LLLP; AUTHORIZING
THE EXECUTION AND DELIVERY OF DOCUMENTS RELATED THERETO;
AND TAKING OTHER ACTIONS IN CONNECTION THEREWITH
BE IT RESOLVED by the Board of Commissioners (the “Board”) of the Housing and
Redevelopment Authority in and for the City of Richfield, Minnesota (the “Authority”), as follows:
Section 1. Recitals.
1.01. Pursuant to the Constitution and laws of the State of Minnesota, particularly
Minnesota Statutes, Chapter 462C (the “Act”), as amended, a municipality is authorized to issue
revenue bonds to finance multifamily housing developments.
1.02. Minnesota Statutes, Section 471.656, as amended, authorizes a municipality to
issue obligations to finance the acquisition or improvement of property located outside of the
corporate boundaries of such municipality if (i) the obligations are issued under a joint powers
agreement between the municipality issuing the obligations and the municipality in which the
property to be acquired or improved is located; or (ii) the governing body of the county in which
the property is located consents, by resolution, to the issuance of the obligations.
1.03. Pursuant to Minnesota Statutes, Section 471.59, as amended, by the terms of a
joint powers agreement entered into through action of their governing bodies, two or more
municipalities may jointly or cooperatively exercise any power common to the contracting
parties or any similar powers, including those which are the same except for the territorial limits
within which they may be exercised and the joint powers agreement may provide for the
exercise of such powers by one or more of the participating governmental units on behalf of the
other participating units; and
1.04. On November 25, 2020, the Hennepin County Housing and Redevelopment
Authority (the “County HRA”) issued its Multifamily Housing Revenue Note (Fort Snelling Upper
Post Project), Series 2020, in the original aggregate principal amount of $88,000,000 and
loaned the proceeds thereof to Fort Snelling Leased Housing Associates I, LLLP, a Minnesota
limited liability limited partnership (the “Borrower”), to finance all or a portion of the costs of the
leasehold acquisition, rehabilitation and/or construction, and equipping of an approximately
192-unit multifamily housing rental facility and facilities functionally related and subordinate
thereto located at 58 Taylor Avenue, Unorganized Territory of Fort Snelling, Minnesota 55111,
known as the Fort Snelling Upper Post Project (the “2020 Project”), of which at least forty
percent (40%) of the units are available to individuals and families with incomes at or below
(60%) of the area median income.
1.05. The Borrower has proposed that the Authority issue one or more series of
taxable or tax-exempt revenue obligations (the “Obligations”) in the approximate aggregate
principal amount of $10,000,000 to complete the construction and/or rehabilitation of the 2020
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Project (the “2023 Project”). The Borrower has also proposed to use the proceeds of the
Obligations to finance capitalized interest, if necessary, any required reserves, and costs of
issuance of the Obligations.
1.06. On December 19, 2022, the Board adopted a resolution authorizing the
submission of an application to the office of Minnesota Management and Budget for an
allocation of bonding authority with respect to the Obligations to finance the 2023 Project in
accordance with the requirements of Minnesota Statutes, Chapter 474A, as amended, and
providing preliminary approval for the sale and issuance of the Obligations. Pursuant to
Certificate No. 450, dated January 10, 2023, the Obligations received an allocation of bonding
authority from the State of Minnesota in the principal amount of $10,000,000.
1.07. On February 28, 2023, the Administration, Operations, and Budget Committee of
Hennepin County, Minnesota (the “County”) conducted a public hearing at which a reasonable
opportunity was provided for interested individuals to express their views, both orally and in
writing, on providing consent to the issuance of the Obligations by the Authority pursuant to the
requirements of Section 147(f) of the Internal Revenue Code of 1986, as amended (the “Code”),
and the regulations promulgated thereunder.
1.08. On April 11, 2023, the Board of Commissioners of the County adopted a
resolution consenting to the issuance of the Obligations by the Authority to finance the 2023
Project, all in accordance with Section 147(f) of the Code and Minnesota Statutes,
Sections 471.59 and 471.656, as amended. The Board of Commissioners of the County also
approved the execution and delivery of a Cooperative Agreement (the “Cooperative
Agreement”) with the Authority to satisfy the requirements of Minnesota Statutes,
Sections 471.59 and 471.656, as amended.
1.09. Section 147(f) of the Code and regulations promulgated thereunder require that,
because the Authority’s governing body is appointed and not elected, prior to the issuance of
the Obligations, the City Council of the City of Richfield, Minnesota (the “City”) must consent to
the issuance of the Obligations by the Authority after conducting a public hearing thereon
preceded by publication of a notice of public hearing (in the form required by Section 147(f) of
the Code and applicable regulations) in a newspaper of general circulation in the City at least
seven (7) days prior to the public hearing date.
1.10. Pursuant to Section 1.147(f)-1(d)(3) of the Treasury Regulations, the City is
authorized to delegate authority to the Board to conduct the public hearing as required by
Section 147(f) of the Code and the regulations promulgated thereunder.
1.11. On April 25, 2023, the City Council of the City approved a resolution delegating
authority to the Board to conduct the required public hearing under Section 147(f) of the Code
and consenting to the issuance of the Obligations by the Authority.
1.12. In accordance with the Act, the Authority has prepared a housing program (the
“Housing Program”) to authorize the Authority’s issuance of the Obligations to finance the 2023
Project. The Housing Program was prepared and submitted to the Metropolitan Council for its
review and comment.
1.13. A notice of public hearing (the “Public Notice”) was published in the Sun Current,
the official newspaper of the Authority and a newspaper of general circulation in the City, with
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respect to the required public hearing under Section 147(f) of the Code and Section 462C.04,
subdivision 2 of the Act.
1.14. The Public Notice was published at least fifteen (15) days before the regularly
scheduled meeting of the Board, and on the date hereof, the Board conducted a public hearing
at which a reasonable opportunity was provided for interested individuals to express their views,
both orally and in writing.
Section 2. Housing Program. The Housing Program, in the form substantially on file
with the Authority, is hereby approved.
Section 3. The Obligations.
3.01. The Borrower has requested that the Authority issue, sell, and deliver the
Obligations in an estimated principal amount not to exceed $10,000,000. The Obligations are
proposed to be sold publicly and underwritten by Colliers Securities LLC, a Delaware limited
liability company (the “Underwriter”).
3.02. The Obligations are proposed to be issued pursuant to this resolution, the Act,
and an Indenture of Trust (the “Indenture”) between the Authority and U.S. Bank Trust
Company, National Association, a national banking association (the “Trustee”).
3.03. The proceeds derived from the sale of the Obligations will be loaned by the
Authority to the Borrower (the “Loan”) pursuant to the terms of a Loan Agreement (the “Loan
Agreement”) between the Authority and the Borrower.
3.04. The Obligations and the interest on the Obligations (i) shall be payable solely
from the revenues pledged therefor under the Loan Agreement and additional sources of
revenue provided by or on behalf of the Borrower; (ii) shall not constitute a debt of the Authority
or the City within the meaning of any constitutional or statutory limitation; (iii) shall not constitute
or give rise to a pecuniary liability of the Authority or the City or a charge against their general
credit or taxing powers; (iv) shall not constitute a charge, lien, or encumbrance, legal or
equitable, upon any property of the Authority or the City other than the Authority’s interest in the
Loan Agreement; and (v) shall not constitute a general or moral obligation of the Authority or the
City.
3.05. The loan repayments to be made by the Borrower under the Loan Agreement will
be fixed so as to produce revenue sufficient to pay the principal of, premium, if any, and interest
on the Obligations when due. Such loan repayments will be assigned to the Trustee under the
terms of the Indenture.
3.06. The Borrower’s repayment obligations in respect of the Loan will be secured by
one or more guaranties, an assignment of capital contributions and partnership interests of the
Borrower, assignments of developer’s fee and contractor’s fee, and other security agreed upon
by the Borrower, the Underwriter, and the Trustee.
3.07. The Authority acknowledges, finds, determines, and declares that the issuance of
the Obligations is authorized by the Act and is consistent with the purposes of the Act and that
the issuance of the Obligations, and the other actions of the Authority under the Indenture, the
Loan Agreement, and this resolution constitute a public purpose and are in the interests of the
City and the County as a whole. In authorizing the issuance of the Obligations to finance the
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2023 Project and the related costs, the Authority’s purpose is and the effect thereof will be to
promote the public welfare of the City, the County, and their residents by providing multifamily
housing developments for low or moderate income residents of the City and the County and
otherwise furthering the purposes and policies of the Act.
3.08. For the purposes set forth above, there is hereby authorized the issuance, sale,
and delivery of the Obligations in the estimated principal amount not to exceed $10,000,000.
The Obligations shall bear interest at the rates, shall be designated, shall be numbered, shall be
dated, shall mature, shall be in the aggregate principal amount, shall be subject to redemption
prior to maturity, shall be in such form, and shall have such other terms, details, and provisions
as are prescribed in the Indenture, substantially in the form now on file with the Authority, with
the amendments referenced herein. The Authority hereby authorizes all or a portion of the
Obligations to be issued as “tax-exempt Obligations,” the interest on which is not includable in
gross income for federal and State of Minnesota income tax purposes.
All of the provisions of the Obligations, when executed as authorized herein, shall be
deemed to be a part of this resolution as fully and to the same extent as if incorporated verbatim
herein and shall be in full force and effect from the date of execution and delivery thereof. The
Obligations shall be substantially in the form of the Indenture on file with the Authority, which
form is hereby approved, with such necessary and appropriate variations, omissions, and
insertions (including changes to the aggregate principal amount of the Obligations, the stated
maturities of the Obligations, the interest rates on the Obligations and the terms of redemption
of the Obligations) as the Chair and the Executive Director, in their discretion, shall determine.
The execution of the Obligations with the manual or facsimile signatures of the Chair and the
Executive Director and the delivery of the Obligations by the Authority shall be conclusive
evidence of such determination.
3.09. The Obligations shall be special, limited obligations of the Authority payable
solely from the revenues provided by the Borrower pursuant to the Loan Agreement and other
funds pledged pursuant to the Indenture. The Board hereby authorizes and directs the Chair
and the Executive Director to execute the Obligations in accordance with the terms thereof.
3.10. All of the provisions of the Indenture, when executed as authorized herein, shall
be deemed to be a part of this resolution as fully and to the same extent as if incorporated
verbatim herein and shall be in full force and effect from the date of execution and delivery
thereof. The Indenture shall be substantially in the form on file with the Authority, which is
hereby approved, with such necessary and appropriate variations, omissions and insertions as
do not materially change the substance thereof, and as the Chair and the Executive Director, in
their discretion, shall determine, and the execution thereof by the Chair and the Executive
Director shall be conclusive evidence of such determination. The Chair and the Executive
Director are hereby authorized and directed to execute the Indenture, and to deliver the
Indenture to the Trustee, and hereby authorizes and directs the execution of the Obligations in
accordance with the terms of the Indenture, and hereby provides that the Indenture shall
provide the terms and conditions, covenants, rights, obligations, duties, and agreements of the
owners of the Obligations, the Authority, and the Trustee as set forth therein.
3.11. The Chair and the Executive Director are hereby authorized and directed to
execute and deliver the Loan Agreement, the Cooperative Agreement, a Bond Purchase
Agreement between the Authority, the Borrower, and the Underwriter, and all other documents
and assignments related to the Loan required to be executed by the Authority. All of the
provisions of such documents, when executed and delivered as authorized herein, shall be
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deemed to be a part of this resolution as fully and to the same extent as if incorporated verbatim
herein and shall be in full force and effect from the date of execution and delivery thereof. The
aforementioned documents shall be substantially in the forms on file with the Authority which
are hereby approved, with such omissions and insertions as do not materially change the
substance thereof, and as the Chair and the Executive Director, in their discretion, shall
determine, and the execution thereof by the Chair and the Executive Director shall be
conclusive evidence of such determinations.
3.12. To ensure compliance with certain rental and occupancy restrictions imposed by
the Act and Section 142(d) of the Code, and to ensure compliance with certain restrictions
imposed by the Authority, the Chair and Executive Director are also hereby authorized and
directed to execute and deliver a Regulatory Agreement (the “Regulatory Agreement”) between
the Authority, the Borrower, Fort Snelling Leased Housing Associates Master Tenant I, LLLP, a
Minnesota limited liability limited partnership and the master tenant, and the Trustee. All of the
provisions of the Regulatory Agreement, when executed and delivered as authorized herein,
shall be deemed to be a part of this resolution as fully and to the same extent as if incorporated
verbatim herein and shall be in full force and effect from the date of execution and delivery
thereof. The Regulatory Agreement shall be substantially in the form on file with the Authority
which is hereby approved, with such omissions and insertions as do not materially change the
substance thereof, or as the Chair and the Executive Director, in their discretion, shall
determine, and the execution thereof by the Chair and the Executive Director shall be
conclusive evidence of such determination.
3.13. The Authority will not participate in the preparation of the Preliminary Official
Statement or the Official Statement (together, the “Official Statement”) relating to the offer and
sale of the Obligations and will make no independent investigation with respect to the
information contained therein, including the appendices thereto, except for the information set
forth in the Official Statement regarding the Authority and certain matters relating to litigation,
and the Authority assumes no responsibility for the sufficiency, accuracy, or completeness of
such information. Subject to the foregoing, the Authority hereby consents to the distribution and
the use by the Underwriter of the Official Statement in connection with the offer an d sale of the
Obligations. The Official Statement is the sole material consented to by the Authority for use in
connection with the offer and sale of the Obligations.
3.14. The Authority hereby authorizes the Borrower to provide such security for
payment of its obligations under the Obligation Loan Agreement and for payment of the
Obligations, including but not limited to the security described herein, and the Authority hereby
approves the execution and delivery of such security. The Chair and the Executive Director are
authorized and directed to execute one or more subordination or intercreditor agreements as
required by the Underwriter and the Trustee so long as Authority staff and Bond Counsel
approve the forms thereof.
Section 4. Additional Findings and Certifications.
4.01. The Obligations are authorized to be issued in the estimated principal amount not
to exceed $10,000,000.
4.02. The Chair and the Executive Director are authorized and directed to execute any
additional documents deemed necessary to carry out the intentions of this resolution and to
complete the financing described herein, so long as Authority staff and legal counsel approve
such documents.
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4.03. The Chair and the Executive Director are hereby authorized to execute and
deliver, on behalf of the Authority, such other documents and certificates as are necessary or
appropriate in connection with the issuance, sale, and delivery of the Obligations, including
various certificates of the Authority, an Information Return for Tax-Exempt Private Activity Bond
Issues, Form 8038, an endorsement of the Authority to the tax certificate of the Borrower, and
similar documents, and all other documents and certificates as shall be necessary and
appropriate in connection with the issuance, sale, and delivery of the Obligations. The Authority
hereby authorizes Kennedy & Graven, Chartered, as bond counsel (“Bond Counsel”), to
prepare, execute, and deliver its approving legal opinions with respect to the Obligations.
4.04. Except as otherwise provided in this resolution, all rights, powers, and privileges
conferred and duties and liabilities imposed upon the Authority or the Board by the provisions of
this resolution or of the aforementioned documents shall be exercised or performed by the
Authority or by such members of the Board, or such officers, board, body or agency thereof as
may be required or authorized by law to exercise such powers and to perform such duties.
No covenant, stipulation, obligation or agreement herein contained or contained in the
aforementioned documents shall be deemed to be a covenant, stipulation, obligation or
agreement of any member of the Board, or any officer, agent or employee of the Authority in
that person’s individual capacity, and neither the Board nor any officer or employee executing
the Obligations shall be personally liable on the Obligations or be subject to any personal
liability or accountability by reason of the issuance thereof.
No provision, covenant or agreement contained in the aforementioned documents, the
Obligations, or in any other document relating to the Obligations, and no obligation therein or
herein imposed upon the Authority or the breach thereof, shall constitute or give rise to a
general or moral obligation of the Authority or the City or any pecuniary liability of the Authority
or the City or any charge upon their general credit or taxing powers. In making the agreements,
provisions, covenants, and representations set forth in such documents, the Authority has not
obligated itself to pay or remit any funds or revenues, other than funds and revenues as
described herein which are to be applied to the payment of the Obligations, as provided therein.
4.05. Except as herein otherwise expressly provided, nothing in this resolution or in the
aforementioned documents expressed or implied is intended or shall be construed to confer
upon any person or firm or corporation, other than the Authority, any holder of the Obligations
issued under the provisions of this resolution, any right, remedy or claim, legal or equitable,
under and by reason of this resolution or any provisions hereof, this resolution, the
aforementioned documents, and all of their provisions being intended to be and being for the
sole and exclusive benefit of the Authority, and any holder from time to time of the Obligations
issued under the provisions of this resolution.
4.06. In case any one or more of the provisions of this resolution, other than the
provisions contained in the first sentence of Section 3.09 hereof, or of the aforementioned
documents, or of the Obligations issued hereunder shall for any reason be held to be illegal or
invalid, such illegality or invalidity shall not affect any other provision of this resolution, or of the
aforementioned documents, or of the Obligations, but this resolution, the aforementioned
documents, and the Obligations shall be construed and endorsed as if such illegal or invalid
provisions had not been contained therein.
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4.07. The Obligations, when executed and delivered, shall contain a recital that they
are issued pursuant to the Act, and such recital shall be conclusive evidence of the validity of
the Obligations and the regularity of the issuance thereof, and that all acts, conditions, and
things required by the laws of the State of Minnesota relating to the adoption of this resolution,
to the issuance of the Obligations, and to the execution of the aforementioned documents to
happen, exist, and be performed precedent to the execution of the aforementioned documents
have happened, exist, and have been performed as so required by law.
4.08. The officers of the Authority, Bond Counsel, other attorneys, engineers, and
other agents or employees of the Authority are hereby authorized to do all acts and things
required of them by or in connection with this resolution, the aforementioned documents, and
the Obligations, for the full, punctual, and complete performance of all the terms, covenants,
and agreements contained in the Obligations, the aforementioned documents, and this
resolution. If for any reason the Chair or the Executive Director is unable to execute and deliver
the documents referred to in this resolution, such documents may be executed by any member
of the Board or any officer of the Authority delegated the duties of the Chair or the Executive
Director with the same force and effect as if such documents were executed and delivered by
the Chair or the Executive Director.
4.09. The Borrower shall pay the administrative fee of the Authority on the date of
issuance of the Obligations as provided in the Loan Agreement. The Borrower will also pay, or,
upon demand, reimburse the Authority for payment of, any and all costs incurred by the
Authority in connection with the 2023 Project and the issuance of the Obligations, whether or
not the Obligations are issued, including any costs for attorneys’ fees.
Section 5. Post-Issuance Compliance Policy. Under Sections 103 and 140 to 150 of
the Code and related regulations, the Authority is required to take certain actions after the
issuance of such bonds to ensure that interest on those bonds remains tax exempt. There has
been presented before the Board a Post-Issuance Compliance Procedure and Policy for
Tax-Exempt Governmental Bonds (the “Policy”), which constitutes the Authority’s written
procedures regarding how the Authority will carry out its bond compliance responsibilities with
respect to the Obligations and other obligations that may be issued by the Authority on a
tax-exempt basis. For all conduit bonds issued by the Authority, the Authority shall rely on the
conduit bond borrower to perform or cause to be performed the duties laid out in this policy.
The Board hereby approves the Policy in substantially the form on file with the Authority.
Section 6. Effective Date. This resolution shall be in full force and effect from and
after its approval. The approvals contained in the resolution are effective for one year after the
date hereof.
(The remainder of this page is intentionally left blank.)
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Adopted by the Housing and Redevelopment Authority in and for the City of Richfield,
Minnesota this 5th day of June, 2023.
Erin Vrieze Daniels, Chair
ATTEST:
Gordon Hanson, Secretary
RC125-394(JAE)
874541v2
Housing and Redevelopment Authority in and for the
City of Richfield, Minnesota
POST-ISSUANCE COMPLIANCE PROCEDURE AND POLICY
FOR TAX-EXEMPT GOVERNMENTAL BONDS
June 5, 2023
1
Post-Issuance Compliance Procedure and Policy
for Tax-Exempt Governmental Bonds
The Housing and Redevelopment Authority in and for the City of Richfield, Minnesota (the
“Authority”) issues tax-exempt governmental bonds to finance capital improvements. As an issuer of tax-
exempt governmental bonds, the Authority is required by the terms of Sections 103 and 141-150 of the
Internal Revenue Code of 1986, as amended (the “Code”), and the Treasury Regulations promulgated
thereunder (the “Treasury Regulations”), to take certain actions subsequent to the issuanc e of such bonds
to ensure the continuing tax-exempt status of such bonds. In addition, Section 6001 of the Code and
Section 1.6001-1(a) of the Treasury Regulations, impose record retention requirements on the Authority
with respect to its tax-exempt governmental bonds. This Post-Issuance Compliance Procedure and Policy
for Tax-Exempt Governmental Bonds (the “Policy”) has been approved and adopted by the Authority to
ensure that the Authority complies with its post-issuance compliance obligations under applicable
provisions of the Code and Treasury Regulations.
1. Effective Date and Term. The effective date of this Policy is June 5, 2023, and shall
remain in effect until superseded or terminated by the Authority.
2. Responsible Parties. The Executive Director of the Authority shall be the party primarily
responsible for ensuring that the Authority successfully carries out its post-issuance compliance
requirements under applicable provisions of the Code and Treasury Regulations. The Executive Director
will be assisted by Authority staff and officials when appropriate. The Executive Director of the
Authority will also be assisted in carrying out post-issuance compliance requirements by the following
organizations:
(a) Bond Counsel (the law firm primarily responsible for providing bond counsel
services for the Authority);
(b) Municipal Advisor (the organization utilized from time to time for providing
financial advisor services to the Authority);
(c) Paying Agent (the person, organization, or Authority officer primarily
responsible for providing paying agent services for the Authority); and
(d) Rebate Analyst (the organization primarily responsible for providing rebate
analyst services for the Authority).
The Executive Director shall be responsible for assigning post-issuance compliance responsibilities to
staff of the Authority, Bond Counsel, Municipal Advisor, Paying Agent, and Rebate Analyst. The
Executive Director shall utilize such other professional service organizations as are necessary to ensure
compliance with the post-issuance compliance requirements of the Authority. The Executive Director
shall provide training and educational resources to Authority staff who are responsible for ensuring
compliance with any portion of the post-issuance compliance requirements of this Policy.
3. Post-Issuance Compliance Actions. The Executive Director shall take the following
post-issuance compliance actions or shall verify that the following post-issuance compliance actions have
been taken on behalf of the Authority with respect to each issue of tax-exempt governmental bonds issued
by the Authority:
2
(a) The Executive Director shall prepare a transcript of principal documents (this
action will be the primary responsibility of Bond Counsel).
(b) The Executive Director shall file with the Internal Revenue Service (the “IRS”),
within the time limit imposed by Section 149(e) of the Code and applicable Treasury Regulations,
an Information Return for Tax-Exempt Governmental Obligations, Form 8038-G (this action will
be the primary responsibility of Bond Counsel).
(c) The Executive Director shall prepare an “allocation memorandum” for each issue
of tax-exempt governmental bonds in accordance with the provisions of Treasury Regulations,
Section 1.148-6(d)(1), that accounts for the allocation of the proceeds of the tax -exempt bonds to
expenditures not later than the earlier of:
(i) eighteen (18) months after the later of (A) the date the expenditure is
paid, or (B) the date the project, if any, that is financed by the tax-exempt bond issue is
placed in service; or
(ii) the date sixty (60) days after the earlier of (A) the fifth anniversary of the
issue date of the tax-exempt bond issue, or (B) the date sixty (60) days after the
retirement of the tax-exempt bond issue.
Preparation of the allocation memorandum will be the primary responsibility of the Executive
Director (in consultation with Bond Counsel, and, if employed with respect to the tax-exempt
issue, the Municipal Advisor).
(d) The Executive Director, in consultation with Bond Counsel, shall identify
proceeds of tax-exempt governmental bonds that must be yield-restricted and shall monitor the
investments of any yield-restricted funds to ensure that the yield on such investments does not
exceed the yield to which such investments are restricted.
(e) In consultation with Bond Counsel, the Executive Director shall determine
whether the Authority is subject to the rebate requirements of Section 148(f) of the Code with
respect to each issue of tax-exempt governmental bonds. In consultation with Bond Counsel, the
Executive Director shall determine, with respect to each issue of tax-exempt governmental bonds
of the Authority, whether the Authority is eligible for any of the temporary periods for
unrestricted investments and is eligible for any of the spending exceptions to the rebate
requirements. The Executive Director shall contact the Rebate Analyst (and, if appropriate, Bond
Counsel) prior to the fifth anniversary of the date of issuance of each issue of tax-exempt
governmental bonds of the Authority and each fifth anniversary thereafter to arrange for
calculations of the rebate requirements with respect to such tax-exempt governmental bonds. If a
rebate payment is required to be paid by the Authority, the Executive Director shall prepare or
cause to be prepared the Arbitrage Rebate, Yield Reduction and Penalty in Lieu of Arbitrage
Rebate, Form 8038-T, and submit such Form 8038-T to the IRS with the required rebate payment.
If the Authority is authorized to recover a rebate payment previously paid, the Executive Director
shall prepare or cause to be prepared the Request for Recovery of Overpayments Under Arbitrage
Rebate Provisions, Form 8038-R, with respect to such rebate recovery, and submit such
Form 8038-R to the IRS.
4. Procedures for Monitoring, Verification, and Inspections. The Executive Director shall
institute such procedures as the Executive Director shall deem necessary and appropriate to monitor the
use of the proceeds of tax-exempt governmental bonds issued by the Authority, to verify that certain
3
post-issuance compliance actions have been taken by the Authority, and to provide for the inspection of
the facilities financed with the proceeds of such bonds. At a minimum, the Executive Director shall
establish the following procedures:
(a) The Executive Director shall monitor the use of the proceeds of tax-exempt
governmental bonds to: (i) ensure compliance with the expenditure and investment requirements
under the temporary period provisions set forth in Treasury Regulations, Section 1.148-2(e);
(ii) ensure compliance with the safe harbor restrictions on the acquisition of investments set forth
in Treasury Regulations, Section 1.148-5(d); (iii) ensure that the investments of any yield-
restricted funds do not exceed the yield to which such investments are restricted; and
(iv) determine whether there has been compliance with the spend-down requirements under the
spending exceptions to the rebate requirements set forth in Treasury Regulations,
Section 1.148-7.
(b) The Executive Director shall monitor the use of all bond-financed facilities in
order to: (i) determine whether private business uses of bond-financed facilities have exceeded
the de minimus limits set forth in Section 141(b) of the Code as a result of leases and subleases,
licenses, management contracts, research contracts, naming rights agreements, or other
arrangements that provide special legal entitlements to nongovernmental persons; and
(ii) determine whether private security or payments that exceed the de minimus limits set forth in
Section 141(b) of the Code have been provided by nongovernmental persons with respect to such
bond-financed facilities. The Executive Director shall provide training and educational resources
to any Authority staff who have the primary responsibility for the operation, maintenance, or
inspection of bond-financed facilities with regard to the limitations on the private business use of
bond-financed facilities and as to the limitations on the private security or payments with respect
to bond-financed facilities.
(c) The Executive Director shall undertake the following with respect to each
outstanding issue of tax-exempt governmental bonds of the Authority: (i) an annual review of the
books and records maintained by the Authority with respect to such bonds; and (ii) an annual
physical inspection of the facilities financed with the proceeds of such bonds, conducted by the
Executive Director with the assistance of any Authority staff who have the primary responsibility
for the operation, maintenance, or inspection of such bond-financed facilities.
5. Record Retention Requirements. The Executive Director shall collect and retain the
following records with respect to each issue of tax-exempt governmental bonds of the Authority and with
respect to the facilities financed with the proceeds of such bonds: (i) audited financial statements of the
Authority; (ii) appraisals, demand surveys, or feasibility studies with respect to the facilities to be
financed with the proceeds of such bonds; (iii) publications, brochures, and newspaper articles related to
the bond financing; (iv) trustee or paying agent statements; (v) records of all investments and the gains (or
losses) from such investments; (vi) paying agent or trustee statements regarding investments and
investment earnings; (vii) reimbursement resolutions and expenditures reimbursed with the proceeds of
such bonds; (viii) allocations of proceeds to expenditures (including costs of issuance) and the dates and
amounts of such expenditures (including requisitions, draw schedules, draw requests, invoices, bills, and
cancelled checks with respect to such expenditures); (ix) contracts entered into for the construction,
renovation, or purchase of bond-financed facilities; (x) an asset list or schedule of all bond-financed
depreciable property and any depreciation schedules with respect to such assets or property; (xi) records
of the purchases and sales of bond-financed assets; (xii) private business uses of bond-financed facilities
that arise subsequent to the date of issue through leases and subleases, licenses, management contracts,
research contracts, naming rights agreements, or other arrangements that provide special legal
entitlements to nongovernmental persons and copies of any such agreements or instruments;
4
(xiii) arbitrage rebate reports and records of rebate and yield reduction payments; (xiv) resolutions or
other actions taken by the governing body subsequent to the date of issue with respect to s uch bonds;
(xv) formal elections authorized by the Code or Treasury Regulations that are taken with respect to such
bonds; (xvi) relevant correspondence, including letters, faxes or emails, relating to such bonds;
(xvii) documents related to guaranteed investment contracts or certificates of deposit, credit enhancement
transactions, and financial derivatives entered into subsequent to the date of issue; (xviii) bidding of
financial products for investment securities; (xix) copies of all Form 8038 -Ts, Form 8038-Rs, and
Form 8038-CPs filed with the IRS and any other forms or documents filed with the IRS; (xx) the
transcript prepared with respect to such tax-exempt governmental bonds, including but not limited to
(a) official statements, private placement documents, or other offering documents, (b) minutes and
resolutions, orders, or ordinances or other similar authorization for the issuance of such bonds, and
(c) certification of the issue price of such bonds; and (xxi) documents related to government grants
associated with the construction, renovation, or purchase of bond-financed facilities.
The records collected by the Executive Director shall be stored in any format deemed appropriate
by the Executive Director and shall be retained for a period equal to the life of the tax-exempt
governmental bonds with respect to which the records are collected (which shall include the life of any
bonds issued to refund any portion of such tax-exempt governmental bonds or to refund any refunding
bonds) plus three (3) years. The Executive Director shall also collect and retain reports of any IRS
examination of the Authority or any of its bond financings.
6. Remedies. In consultation with Bond Counsel, the Executive Director shall become
acquainted with the remedial actions (including redemption or defeasance) under Treasury Regulations,
Section 1.141-12, to be utilized in the event that private business use of bond-financed facilities exceeds
the de minimus limits under Section 141(b)(1) of the Code. In consultation with Bond Counsel, the
Executive Director shall become acquainted with the Tax Exempt Bonds Voluntary Closing Agreement
Program described in Notice 2008-31, 2008-11 I.R.B. 592, to be utilized as a means for an issuer to
correct any post-issuance infractions of the Code and Treasury Regulations with respect to outstanding
tax-exempt bonds.
7. Continuing Disclosure Obligations. In addition to its post-issuance compliance
requirements under applicable provisions of the Code and Treasury Regulations, the Authority has agreed
to provide continuing disclosure, such as annual financial information and material event notices,
pursuant to a continuing disclosure certificate or similar document (the “Continuing Disclosure
Document”) prepared by Bond Counsel and made a part of the transcript with respect to each issue of
bonds of the Authority that is subject to such continuing disclosure requirements. The Continuing
Disclosure Documents are executed by the Authority to assist the underwriters of the Authority’s bonds in
meeting their obligations under Securities and Exchange Commission Regulation, 17 C.F.R.
Section 240.15c2-12, as in effect and interpreted from time to time (“Rule 15c2-12”). The continuing
disclosure obligations of the Authority are governed by the Continuing Disclosure Documents and by the
terms of Rule 15c2-12. The Executive Director is primarily responsible for undertaking such continuing
disclosure obligations and to monitor compliance with such obligations.
8. Other Post-Issuance Actions. If, in consultation with Bond Counsel, Municipal Advisor,
Paying Agent, Rebate Analyst, the Executive Director, the Authority Attorney, or the Board of
Commissioners, the Executive Director determines that any additional action not identified in this Policy
must be taken by the Executive Director to ensure the continuing tax-exempt status of any issue of
governmental bonds of the Authority, the Executive Director shall take such action if the Executive
Director has the authority to do so. If, after consultation with Bond Counsel, Municipal Advisor, Paying
Agent, Rebate Analyst, the Executive Director, the Authority Attorney, or the Board of Commissioners,
the Executive Director and the Executive Director determine that this Policy must be amended or
5
supplemented to ensure the continuing tax-exempt status of any issue of governmental bonds of the
Authority, the Executive Director shall recommend to the Board of Commissioners that this Policy be so
amended or supplemented.
9. Taxable Governmental Bonds. Most of the provisions of this Policy, other than the
provisions of Section 7, are not applicable to governmental bonds the interest on which is includable in
gross income for federal income tax purposes. However, if an issue of taxable governmental bonds is
later refunded with the proceeds of an issue of tax-exempt governmental refunding bonds, then the uses of
the proceeds of the taxable governmental bonds and the uses of the facilities financed with the proceeds
of the taxable governmental bonds will be relevant to the tax-exempt status of the governmental refunding
bonds. Therefore, if there is any reasonable possibility that an issue of taxable governmental bonds may
be refunded, in whole or in part, with the proceeds of an issue of tax-exempt governmental bonds, for
purposes of this Policy, the Executive Director shall treat the issue of taxable governmental bonds as if
such issue were an issue of tax-exempt governmental bonds and shall carry out and comply with the
requirements of this Policy with respect to such taxable governmental bonds. The Executive Director
shall seek the advice of Bond Counsel as to whether there is any reasonable possibility of issuing
tax-exempt governmental bonds to refund an issue of taxable governmental bonds.
10. Qualified 501(c)(3) Bonds. If the Authority issues bonds to finance a facility to be
owned by the Authority but which may be used, in whole or in substantial part, by a nongovernmental
organization that is exempt from federal income taxation under Section 501(a) of the Code as a result of
the application of Section 501(c)(3) of the Code (a “501(c)(3) Organization”), the Authority may elect to
issue the bonds as “qualified 501(c)(3) bonds” the interest on which is exempt from federal income
taxation under Sections 103 and 145 of the Code and applicable Treasury Regulations. Although such
qualified 501(c)(3) bonds are not governmental bonds, at the election of the Executive Director, for
purposes of this Policy, the Executive Director shall treat such issue of qualified 501(c)(3) bonds as if
such issue were an issue of tax-exempt governmental bonds and shall carry out and comply with the
requirements of this Policy with respect to such qualified 501(c)(3) bonds.
11. Conduit Bonds. For all conduit bonds issued by the Authority, the Authority shall rely on
the conduit bond borrower to perform or cause to be performed the duties laid out in this policy.
RC125-394 (JAE)
878553v1
Offices in
Minneapolis
St. Cloud
Fifth Street Towers
150 South Fifth Street, Suite 700
Minneapolis, MN 55402
(612) 337-9300 telephone
(612) 337-9310 fax
kennedy-graven.com
Affirmative Action, Equal Opportunity Employer
JULIE A. EDDINGTON
Attorney at Law
Direct Dial (612) 337-9213 Email: jeddington@kennedy-graven.com
May 30, 2023
Melissa Poehlman, Community Development Director
City of Richfield
6700 Portland Avenue
Richfield, MN 55423
Re: Resolution approving the issuance of conduit revenue obligations by the Housing and
Redevelopment Authority in and for the City of Richfield, Minnesota for the benefit of Fort Snelling
Leased Housing Associates I, LLLP
Dear Melissa,
On November 25, 2020, the Hennepin County Housing and Redevelopment Authority (the “County HRA”)
issued its Multifamily Housing Revenue Note (Fort Snelling Upper Post Project), Series 2020, in the original
aggregate principal amount of $88,000,000, and loaned the proceeds thereof to Fort Snelling Leased Housing
Associates I, LLLP, a Minnesota limited liability limited partnership (the “Borrower”), to finance a portion of
the costs of the leasehold acquisition, rehabilitation and/or construction, and equipping of an approximately
192-unit multifamily housing rental facility and facilities functionally related and subordinate thereto located
at 58 Taylor Avenue, Unorganized Territory of Fort Snelling, Minnesota 55111, known as the Fort Snelling
Upper Post Project (the “2020 Project”), of which at least forty percent (40%) of the units are available to
individuals and families with incomes at or below (60%) of the area median income. As you know, the
Borrower is requesting that the Housing and Redevelopment Authority in and for the City of Richfield,
Minnesota (the “Authority”) issue one or more series of taxable or tax-exempt revenue obligations (the
“Obligations”) in the estimated maximum principal amount of $10,000,000 and loan the proceeds thereof to
the Borrower to provide additional financing for the 2020 Project (the “2023 Project”).
The Obligations will be issued in accordance with Minnesota Statutes, Chapters 462C and 474A, as amended
(the “Act”), and Minnesota Statutes, Sections 471.59 and 471.656, as amended (the “Joint Powers Act”). In
order to issue the Obligations, the Authority is required to conduct a public hearing in accordance with
Section 147(f) of the Internal Revenue Code of 1986, as amended (the “Code”), and Section 462C.04,
subdivision 2 of the Act. The public hearing will be held during the Board of Commissioner’s meeting on
June 5, 2023. Following the public hearing, the Board of Commissioners will be asked to consider the
enclosed resolution, which provides approval for the housing program prepared in accordance with the Act,
the issuance of the Obligations, and the execution of loan documents and related documents, including a
Cooperative Agreement with Hennepin County, Minnesota (the “County”). On April 11, 2023, the County,
as the general jurisdiction in which the project is located, authorized the execution of the Cooperative
Agreement with the Authority and consented to the issuance of the Obligations by the Authority to finance
the 2023 Project, in accordance with the requirements of the Joint Powers Act.
As an issuer of tax-exempt obligations, the Authority is required to execute and deliver an Information Return
for Tax-Exempt Private Activity Bond Issues, IRS Form 8038. I have prepared a post-issuance compliance
policy for consideration by the Board of Commissioners at their meeting. This policy provides guidance on
the use of proceeds of tax-exempt bonds such as the Obligations to ensure that the interest on such
tax-exempt bonds does not become taxable.
The Obligations will be payable from the revenues pledged under the terms of the various financing
documents, including but not limited to a loan agreement (the “Loan Agreement”) between the Authority
and the Borrower. The Obligations will not constitute a general or moral obligation of the Authority or
the City of Richfield, Minnesota (the “City”) and will not be secured by or payable from any property or
assets of the Authority or the City (other than the interests of the Authority in the Loan Agreement) and
will not be secured by any taxing power of the Authority or the City. The Obligations will not be subject
to any debt limitation imposed on the Authority or the City, and the issuance of the Obligations will not
have any adverse impact on the credit rating of the Authority or the City, even in the event that the
Borrower encounters financial difficulties with respect to the facilities to be financed with the proceeds of
the Obligations.
The Obligations will be “private activity bonds” within the meaning of Section 141(a) of the Code but
will be “exempt facility bonds” the net proceeds of which are to be used to provide a “qualified residential
rental project” within the meaning of Sections 142(a)(7) and 143(d) of the Code and will not affect the
ability of the Authority or the City to issue and designate up to $10,000,000 in tax-exempt bonds as
“qualified tax-exempt obligations” (or “bank-qualified bonds”) for calendar year 2023.
The Borrower will pay the out-of-pocket expenses of the Authority with respect to this transaction as well
as the Authority’s administrative fee.
I will attend the Board of Commissioners meeting on June 5, 2023 and can answer any questions that may
arise during the meeting. Please contact me with any questions you may have prior to the Board of
Commissioners meeting.
KENNEDY & GRAVEN, CHARTERED
Julie Eddington
RC125-394 (JAE)
879182v1
Fourth Draft
May 16, 2023
COOPERATIVE AGREEMENT
THIS COOPERATIVE AGREEMENT, dated as of June 1, 2023 (the “Cooperative Agreement”),
is made and entered into between the HOUSING AND REDEVELOPMENT AUTHORITY IN AND
FOR THE CITY OF RICHFIELD, MINNESOTA, a public body and political subdivision duly organized
and existing under the Constitution and laws of the State of Minnesota (the “Issuer”), and HENNEPIN
COUNTY, MINNESOTA, a public body and political subdivision duly organized and existing under the
Constitution and laws of the State of Minnesota (the “County”).
RECITALS
WHEREAS, Minnesota Statutes, Section 471.656, as amended, authorizes a municipality to issue
obligations to finance the acquisition or improvement of property located outside of the corporate
boundaries of such municipality if (i) the obligations are issued under a joint powers agreement between
the municipality issuing the obligations and the municipality in which the property to be acquired or
improved is located; or (ii) the governing body of the county in which the property is located consents,
by resolution, to the issuance of the obligations; and
WHEREAS, pursuant to Minnesota Statutes, Section 471.59, as amended, by the terms of a joint
powers agreement entered into through action of their governing bodies, two or more municipalities may
jointly or cooperatively exercise any power common to the contracting parties or any similar powers,
including those which are the same except for the territorial limits wit hin which they may be exercised,
and the joint powers agreement may provide for the exercise of such powers by one or more of the
participating municipalities on behalf of the other participating municipalities; and
WHEREAS, the County and the Issuer are authorized by Minnesota Statutes, Chapter 462C, as
amended (the “Act”), to issue revenue obligations to finance multifamily rental housing developments;
and
WHEREAS, on November 25, 2020, the Hennepin County Housing and Redevelopment
Authority (the “County HRA”) issued its Multifamily Housing Revenue Note (Fort Snelling Upper Post
Project), Series 2020 (the “Series 2020 Note”), in the original aggregate principal amount of $88,000,000
and loaned the proceeds thereof to Fort Snelling Leased Housing Associates I, LLLP, a Minnes ota
limited liability limited partnership (the “Borrower”), to finance all or a portion of the costs of the
leasehold acquisition, rehabilitation and/or construction, and equipping of an approximately 192-unit
multifamily housing rental facility and facilities functionally related and subordinate thereto located at 58
Taylor Avenue, Unorganized Territory of Fort Snelling, Minnesota 55111, known as the Fort Snelling
Upper Post Project (the “2020 Project”), of which at least forty percent (40%) of the units are available
to individuals and families with incomes at or below (60%) of the area median income ; and
WHEREAS, the Borrower has proposed to finance additional costs to complete the construction
and/or rehabilitation of the 2020 Project (the “2023 Project”); and
2
WHEREAS, the County and the Issuer are proposing to enter into this Cooperative Agreement
pursuant to which the County will consent to the issuance of such revenue obligations and the financing
of the 2023 Project by the Issuer, and the Issuer will agree to issue such revenue obligations to finance
the 2023 Project; and
WHEREAS, the revenue obligations (and any refunding obligations) proposed to be issued by
the Issuer for the benefit of the Borrower shall not constitute general or moral obligations of, or pledge
the full faith and credit or taxing powers of, the County, the County HRA, the Issuer, the State of
Minnesota, or any other agency or political subdivision thereof, but shall be payable solely from the
revenues pledged and assigned thereto pursuant to one or more loan agreements between the Issuer and
the Borrower; and
WHEREAS, the governing bodies of the County and the Issuer have authorized the execution
and delivery of this Cooperative Agreement; and
NOW, THEREFORE, the County and the Issuer hereby agree as follows:
1. The Issuer will issue its Multifamily Housing Revenue Bonds (Fort Snelling Upper Post
Project), Series 2023 (the “Bonds”), in the original aggregate principal amount of $10,000,000. The
proceeds of the Bonds will be used to finance the 2023 Project, fund any required reserves, finance
capitalized interest during the construction and/or rehabilitation of the 2023 Project (together, the
“Project”), if necessary, and pay the costs of issuing the Bonds.
2. The governing bodies of the County and the Issuer have conducted public hearings with
respect to the financing of the 2023 Project.
3. The governing bodies of the County and the Issuer have each adopted a resolution
approving this Cooperative Agreement and authorizing its execution and delivery.
4. Pursuant to Resolution 23-0137, adopted by the Board of Commissioners of the County
on April 11, 2023, the County consented to and approved (a) the issuance of the Bonds by the Issuer; and
(b) the financing of the 2023 Project by the Issuer with the proceeds of the Bonds.
5. The County and the Issuer understand and agree that the Issuer will be the responsible
party for the housing plan prepared for the Bonds in accordance with Section 462C.03 of the Act. The
County and the Issuer acknowledge that the Borrower and the 2020 Project remain subject to an existing
Regulatory Agreement with respect to the Series 2020 Note and that the Issuer has required that the
Borrower enter into a separate Regulatory Agreement with respect to the Bonds, wherein the Issuer will
require the Borrower to comply with additional affordability requirements.
6. Except to the extent specifically provided herein, the County and the Issuer shall not
incur any obligations or liabilities to each other as a result of the issuance of the Bonds. The Bonds shall
be special, limited obligations of the Issuer payable solely from proceeds, revenues, and other amounts
specifically pledged to the payment of the Bonds. The Bonds and the interest thereon shall not constitute
or give rise to a pecuniary liability, general or moral obligation, or a pledge of the full faith and credit or
taxing powers of the County, the County HRA, the Issuer, the State of Minnesota, or any political
subdivision of the above, within the meaning of any constitutional or statutory provisions.
3
7. All costs incurred by the County, the County HRA, and the Issuer in the authorization,
execution, delivery, and performance of this Cooperative Agreement and all related transactions shall be
paid by the Borrower.
8. This Cooperative Agreement may not be terminated by any party so long as the Bonds
are outstanding.
9. This Cooperative Agreement may be amended by the County and the Issuer at any time
with the consent of all parties to this Cooperative Agreement. No amendment may impair the rights of
the Borrower or the holders of the Bonds.
10. This Cooperative Agreement may be executed in several counterparts, each of which
shall be regarded as an original and all of which shall constitute but one and the same agreement.
11. The parties agree that the electronic signature of a party to this Cooperative Agreement
shall be as valid as an original signature of such party and shall be effective to bind such party to this
Cooperative Agreement. For purposes hereof: (i) “electronic signature” means a manually signed
original signature that is then transmitted by electronic means, or a digital signature provided by
DocuSign or other digital signature provider; and (ii) “transmitted by electronic means” means sent in the
form of a facsimile or sent via the internet as a portable document format (“pdf”) or other replicating
image attached to an electronic mail or internet message.
(The remainder of this page is intentionally left blank.)
S-1
IN WITNESS WHEREOF, duly authorized officers of the County and the Issuer have executed
this Cooperative Agreement as of the date and year first written above.
COUNTY OF HENNEPIN
Reviewed by the County STATE OF MINNESOTA
Attorney’s Office
By: _________________________ By:
Chair
Date: ________________________ Date:
ATTEST:
Deputy/Clerk of County Board
Date:
By:
County Administrator
Date:
Recommended for Approval:
By:
Chief Housing and Economic Development Officer
Date:
S-2
Execution page of the Issuer to the Cooperative Agreement, dated as of the date and year first written
above.
HOUSING AND REDEVELOPMENT
AUTHORITY IN AND FOR THE CITY OF
RICHFIELD, MINNESOTA
By
Its Chair
By
Its Executive Director
RC125-394 (JAE)
856495v4
Second Draft
May 27, 2023
LOAN AGREEMENT
between
HOUSING AND REDEVELOPMENT AUTHORITY
IN AND FOR THE
CITY OF RICHFIELD, MINNESOTA,
as Issuer
and
FORT SNELLING LEASED HOUSING ASSOCIATES I, LLLP,
as Borrower
Dated as of June 1, 2023
Relating to:
$10,000,000
Housing and Redevelopment Authority
in and for the
City of Richfield, Minnesota
Multifamily Housing Revenue Bonds
(Fort Snelling Upper Post Project)
Series 2023
With the exception of certain reserved rights, the interest of the Housing and Redevelopment Authority in
and for the City of Richfield, Minnesota in this Loan Agreement has been assigned to U.S. Bank Trust
Company, National Association, as trustee for the above-referenced bonds.
This instrument was drafted by:
Kennedy & Graven, Chartered (JAE)
150 South Fifth Street, Suite 700
Minneapolis, MN 55402-1299
i
TABLE OF CONTENTS
PAGE
ARTICLE 1
Definitions, Exhibits and Miscellaneous
Section 1.1 Definitions ......................................................................................................................... 2
Section 1.2 Exhibits .............................................................................................................................. 2
Section 1.3 Borrower’s Acts ................................................................................................................. 2
Section 1.4 Rules of Interpretation ....................................................................................................... 2
ARTICLE 2
Representations of Issuer and Borrower
Section 2.1 Representations of Issuer ................................................................................................... 4
Section 2.2 Representations of Borrower ............................................................................................. 4
ARTICLE 3
Completion of Project
Section 3.1 Acquisition, Rehabilitation, Renovation, Construction and Equipping of Project
by Borrower ....................................................................................................................... 7
Section 3.2 Payment of Costs by Borrower .......................................................................................... 7
Section 3.3 Authorization by Issuer ...................................................................................................... 8
Section 3.4 Issuance of Bonds .............................................................................................................. 9
Section 3.5 Disbursements from Project Fund ..................................................................................... 9
Section 3.6 Establishment of Completion Date .................................................................................. 11
Section 3.7 Payment and Performance Bond ...................................................................................... 11
Section 3.8 Enforcement of Contract .................................................................................................. 11
Section 3.9 Recycling of Allocation ................................................................................................... 11
ARTICLE 4
The Loan, Basic Payments, Additional Charges and Additional Financing
Section 4.1 The Loan .......................................................................................................................... 13
Section 4.2 Basic Payments ................................................................................................................ 13
Section 4.3 [Reserved] ........................................................................................................................ 14
Section 4.4 Additional Charges .......................................................................................................... 14
Section 4.5 Borrower’s Obligations Unconditional ............................................................................ 15
Section 4.6 Assignment of Issuer’s Rights ......................................................................................... 15
Section 4.7 Borrower’s Remedies ...................................................................................................... 15
Section 4.8 Borrower’s Obligations Upon Tender of Bonds .............................................................. 16
ARTICLE 5
Project Covenants
Section 5.1 Project Operation and Maintenance ................................................................................. 17
Section 5.2 Sale or Lease of Project ................................................................................................... 17
Section 5.3 Security Documents ......................................................................................................... 17
Section 5.4 Advances .......................................................................................................................... 17
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Section 5.5 Alterations to Project and Removal of Project Equipment .............................................. 17
Section 5.6 Insurance .......................................................................................................................... 18
Section 5.7 Damage or Destruction .................................................................................................... 19
Section 5.8 Condemnation .................................................................................................................. 20
Section 5.9 [Reserved] ........................................................................................................................ 21
Section 5.10 Hazardous Materials ........................................................................................................ 21
ARTICLE 6
[RESERVED]
ARTICLE 7
Borrower’s Covenants
Section 7.1 Covenant for the Benefit of Trustee and Bondholders .................................................... 24
Section 7.2 Inspection and Access ...................................................................................................... 24
Section 7.3 Annual Statement, Audit, Certificate of Compliance and Other Reports ........................ 24
Section 7.4 Indemnity by Borrower .................................................................................................... 25
Section 7.5 Status of Borrower ........................................................................................................... 26
Section 7.6 Filing of Financing Statement .......................................................................................... 27
Section 7.7 Assurance of Tax Exemption ........................................................................................... 27
Section 7.8 Determination of Taxability ............................................................................................. 29
Section 7.9 Subordination of Management Fees ................................................................................ 29
Section 7.10 Special Covenants of the Borrower ................................................................................. 29
Section 7.11 Subordination ................................................................................................................... 29
ARTICLE 8
Borrower’s Options
Section 8.1 Assignment and Transfer ................................................................................................. 30
Section 8.2 Prepayment ...................................................................................................................... 30
Section 8.3 Direction of Investments .................................................................................................. 30
Section 8.4 Remarketing of Bonds ..................................................................................................... 30
ARTICLE 9
Events of Default and Remedies
Section 9.1 Events of Default ............................................................................................................. 32
Section 9.2 Remedies .......................................................................................................................... 32
Section 9.3 Disposition of Funds ........................................................................................................ 33
Section 9.4 Nonexclusive Remedies ................................................................................................... 33
Section 9.5 Attorneys’ Fees and Expenses ......................................................................................... 33
Section 9.6 Effect of Waiver ............................................................................................................... 33
Section 9.7 Waiver of Stay or Extension ............................................................................................ 33
Section 9.8 Issuer May File Proofs of Claim ...................................................................................... 34
Section 9.9 Restoration of Positions ................................................................................................... 34
Section 9.10 Suits to Protect the Project ............................................................................................... 34
Section 9.11 Performance by Third Parties .......................................................................................... 34
Section 9.12 Exercise of the Issuer’s Remedies by Trustee ................................................................. 34
Section 9.13 Limited Recourse ............................................................................................................. 34
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ARTICLE 10
General Provisions
Section 10.1 Amounts Remaining in Funds ......................................................................................... 36
Section 10.2 Notices ............................................................................................................................. 36
Section 10.3 Binding Effect .................................................................................................................. 37
Section 10.4 Severability ...................................................................................................................... 37
Section 10.5 Amendments, Changes, and Modifications ..................................................................... 37
Section 10.6 Execution Counterparts .................................................................................................... 37
Section 10.7 Required Approvals ......................................................................................................... 37
Section 10.8 Limitation on Issuer’s Liability ....................................................................................... 37
Section 10.9 Representations of Borrower ........................................................................................... 38
Section 10.10 Termination ...................................................................................................................... 38
Section 10.11 Administrative Fees, Attorneys’ Fees and Costs ............................................................. 38
Section 10.12 Release ............................................................................................................................. 38
Section 10.13 Audit Expenses ................................................................................................................ 38
SIGNATURES ....................................................................................................................................... S-1
EXHIBIT A Legal Description .......................................................................................................... A-1
EXHIBIT B Form of Disbursement Request ..................................................................................... B-1
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LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of June 1, 2023 (the “Loan agreement”), is between the
HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD,
MINNESOTA, a public body corporate and politic under the laws of the State of Minnesota (the “Issuer”),
and FORT SNELLING LEASED HOUSING ASSOCIATES I, LLLP, a Minnesota limited liability limited
partnership (the “Borrower”).
RECITALS
Reference is hereby made to the Indenture of Trust, dated as of June 1, 2023 (the “Indenture”),
between the Issuer and U.S. Bank Trust Company, National Association, a national banking association
(the “Trustee”), for the recitals and the definitions of various terms used herein.
In consideration of the premises, the respective representations and agreements contained herein,
and for other good and valuable consideration, the receipt whereof is hereby acknowledged, and in order to
secure the payments to be made by the Borrower pursuant to Article 2 hereof and the performance of all
the covenants of the Borrower contained herein, the parties hereto agree as follows:
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ARTICLE 1
DEFINITIONS, EXHIBITS AND MISCELLANEOUS
Section 1.1. Definitions. For all purposes of this Loan Agreement, the terms defined in
Section 1.1 of the Indenture, when used in this Loan Agreement, shall have the meanings specified in that
Section.
Section 1.2. Exhibits. The following exhibits are attached to and by reference made a part of
this Loan Agreement:
(1) EXHIBIT A: legal description of the property on which the Project is located.
(2) EXHIBIT B: form of Disbursement Request.
Section 1.3. Borrower’s Acts. Where the Borrower is permitted or required to do or accomplish
any act or thing hereunder, the Borrower may cause the same to be done or accomplished by a third party
selected by the Borrower with the same force and effect as if done or accomplished by the Borrower.
Section 1.4. Rules of Interpretation.
(1) This Loan Agreement shall be interpreted in accordance with and governed by the
laws of the State.
(2) The words “herein,” “hereof” and “hereunder” and words of similar import,
without reference to any particular section or subdivision, refer to this Loan Agreement as a whole
rather than to any particular section or subdivision of this Loan Agreement.
(3) References in this instrument to any particular article, section or subdivision hereof
are to the designated article, section or subdivision of this instrument 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 Loan Agreement, and shall not define 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 Loan Agreement.
(8) For purposes of this Loan Agreement and the Indenture, an Act of Bankruptcy
shall be deemed no longer in effect if either (a) the petition initiating the Act of Bankruptcy is
dismissed by order of a court of competent jurisdiction and no further appeal rights exist from such
order; or (b) the Borrower notifies the Trustee that such a dismissal has occurred.
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(9) Any opinion of counsel required hereunder shall be a written opinion of such
counsel.
(10) References to the Bonds as “tax exempt” or to the “tax-exempt status of the Bonds”
are to the exclusion of interest on the Bonds from gross income pursuant to Section 103(a) of the
Code, irrespective of such forms of taxation as the alternative minimum tax or branch profits tax
on foreign corporations, as is consistent with the approach taken in Section 59(i) of the Code.
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ARTICLE 2
REPRESENTATIONS OF ISSUER AND BORROWER
Section 2.1. Representations of Issuer. The Issuer makes the following representations and
warranties as the basis for its covenants herein:
(1) The Issuer is a public body corporate and politic under the laws of the State of
Minnesota and is authorized to issue the Bonds to finance the Project pursuant to the Act and
Minnesota Statutes, Sections 471.59 and 471.656, as amended.
(2) To the undersigned’s actual knowledge there is no pending or, without inquiry or
investigation, threatened suit, action, or proceeding against the Issuer before any court, arbitrator,
administrative agency, or other governmental authority that challenges the Issuer’s execution and
delivery of the Issuer Documents.
(3) To the actual knowledge of the undersigned, without inquiry or investigation, the
execution and delivery of the Issuer Documents will not constitute a breach of or default under any
existing (a) provision of any special legislative act relating to the establishment of the Issuer; or
(b) agreement, indenture, mortgage, lease, or other instrument to which the Issuer is a party or by
which it is bound.
(4) No proceeding of the Issuer for the issuance, execution, or delivery of the Issuer
Documents has been repealed, rescinded, amended or revoked.
Section 2.2. Representations of Borrower. The Borrower makes the following representations
and warranties as the basis for its covenants herein:
(1) The Borrower is a limited liability limited partnership duly organized under the
laws of the State, is duly authorized to conduct its business in the State, has power to enter into this
Loan Agreement and the other Related Documents to which it is a party, and to use the Project for
the purpose set forth in this Loan Agreement and by proper action has authorized the execution and
delivery of this Loan Agreement and the other Related Documents to which it is a party, and has
approved the Indenture.
(2) The execution and delivery of this Loan Agreement and the other Related
Documents to which it is a party, and the consummation of the transactions contemplated thereby,
and the fulfillment of the terms and conditions thereof do not and will not conflict with or result in
a breach of any of the terms or conditions of the Partnership Agreement of the Borrower, any
restriction or any agreement or instrument to which the Borrower is now a party or by which it is
bound or to which any property of the Borrower is subject, and do not and will not constitut e a
default under any of the foregoing, or cause the Borrower to be in violation of any order, decree,
statute, rule or regulation of any court or any state or federal regulatory body having jurisdiction
over the Borrower or its properties, including the Project, and do not and will not result in the
creation or imposition of any lien, charge or encumbrance of any nature upon any of the property
or assets of the Borrower contrary to the terms of any instrument or agreement to which the
Borrower is a party or by which it is bound.
(3) The design and plan of the Project comprise a multifamily rental housing
development as contemplated by the Act; subject to the other provisions of this Loan Agreement,
5
it is presently intended and reasonably expected that the equipment purchased from the proceeds
of the Bonds will be permanently located and exclusively used on the Project and that the Borrower
will own and operate the Project on the Project throughout the Term of Loan Agreement in the
normal conduct of the Borrower’s business.
(4) There is public access to the Project. As of the Date of Loan Agreement, the use
of the Project complies, in all material respects, with all presently applicable development,
pollution control, water conservation and other laws, regulations, rules and ordinances of the
federal government and the State and the respective agencies thereof and the political subdivisions
in which the Project is located. As of the Date of Loan Agreement, the Borrower has obtained or
will obtain all necessary and material approvals of and licenses, permits, consents and franchises
from federal, state, county, municipal or other governmental authorities having jurisdiction over
the Project to acquire, rehabilitate, renovate, construct and equip the Project and to enter into,
execute and perform its obligations under this Loan Agreement and the other Related Documents
to which it is a party.
(5) The proceeds of the Bonds, together with any other funds to be contributed to the
Project by the Borrower or otherwise in accordance with this Loan Agreement, will be sufficient
to pay the cost of acquiring, rehabilitating, renovating, constructing and equipping the Project in a
manner suitable for operation as a multifamily housing development as required in Article 3 hereof.
(6) The Bonds are issued within the exemption provided under Section 142(d) of the
Code with respect to residential rental property; “substantially all” of the proceeds of the Bonds
will be used for expenditures chargeable to the capital account of the Project.
(7) A major inducement to the Borrower to acquire, rehabilitate, renovate, construct
and equip the Project was the source of financing provided under the Act and the assurance the
Borrower received from the Issuer that such financing would be made available to the Borrower .
All Project Costs heretofore incurred by the Borrower for which the Borrower will seek
reimbursement from the proceeds of the Bonds were incurred in anticipation of reimbursement
from the proceeds of the Bonds of the Issuer if such proceeds should become available on terms
acceptable to the Borrower. The Borrower investigated the possibility of such financing prior to
incurring such Project Costs. With respect to the 2020 Project, the Borrower did not commence
acquisition, rehabilitation, renovation, construction or equipping of the Project prior to
August 14, 2018, which is sixty (60) days prior to the date on which the Board of Commissioners
of the County HRA first gave preliminary approval of the 2020 Project and the financing thereof
in whole or part through the Series 2020 Note. With respect to the 2023 Project, the Borrower did
not commence acquisition, rehabilitation, renovation, construction or equipping of the Project prior
to December 19, 2022, which is sixty (60) days prior to the date on which the Issuer gave
preliminary approval of the 2023 Project and the financing thereof in whole or part through the
Bonds.
(8) The Borrower is not in the trade or business of selling properties such as the
Project; the Borrower is acquiring the Project for investment purposes only or otherwise for use by
the Borrower in its trade or business, and therefore the Borrower has no intention, now or in the
foreseeable future to voluntarily sell, surrender or otherwise transfer, in whole or part, its interest
in the Project.
(9) There are no actions, suits, or proceedings pending or, to the knowledge of the
Borrower, threatened against the Borrower or any property of the Borrower in any court or before
any federal, state, municipal or other governmental agency, which, if decided adversely to the
6
Borrower, would have a material adverse effect upon the Borrower or upon the business or
properties of the Borrower or upon the validity or enforceability of the instruments referred to in
subsection (1) above, or the ability of the Borrower to perform its obligations thereunder; and the
Borrower is not in default with respect to any order of any court or governmental agency.
(10) The Borrower is not in default in the payment of the principal of or interest on any
indebtedness for borrowed money nor in default under any instrument or agreement under and
subject to which any indebtedness for borrowed money has been issued.
(11) The Borrower has filed all federal and state income tax returns which, to the
knowledge of the Borrower, are required to be filed and has paid all taxes shown on said returns
and all assessments and governmental charges received by it to the extent that they have become
due.
(12) To the best of the Borrower’s knowledge, no public official of the Issuer has either
a direct or indirect financial interest in this Loan Agreement nor will any public official either
directly or indirectly benefit financially from this Loan Agreement within the meaning of
Minnesota Statutes, Sections 412.311 and 471.87, as amended.
(13) No other obligations have been or will be issued under Section 103 of the Code
which are sold at substantially the same time as the Bonds, pursuant to the same plan of financing,
which are reasonably expected to be paid out of substantially the same source of funds as the Bonds.
(14) The Project is expected to be eligible for low-income housing tax credits under
Section 42 of the Code.
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7
ARTICLE 3
COMPLETION OF PROJECT
Section 3.1. Acquisition, Rehabilitation, Renovation, Construction and Equipping of Project by
Borrower. In connection with the acquisition, rehabilitation, renovation, construction, equipping and
completion of the Project, the Borrower represents and covenants as follows:
(1) Installation and Construction. The Borrower will acquire, rehabilitate, renovate,
construct and equip the Project within the boundary lines of the Project and will provide all other
improvements, access roads, utilities, parking facilities, and other items required for a facility fully
operable for use as a multifamily residential rental property.
(2) Completion. The Borrower will acquire, rehabilitate, renovate, construct and
equip the Project as promptly as practicable with all reasonable dispatch and in any event no later
than December 31, 2024, except only as completion may be delayed by strikes, riots or acts of God
or the public enemy, shortages of materials or supplies or any other reason beyond the reasonable
control of the Borrower for which a reasonable extension of the time of completion shall be granted
as determined by the Issuer, provided that if the Project is not completed by that date there shall be
no resulting liability on the part of the Issuer and no abatement or diminution in the payments
required to be made by the Borrower under Article 4 hereof.
Section 3.2. Payment of Costs by Borrower. The Borrower agrees that it will provide any and
all money required for the prompt and full payment of all sums required to complete the Project, including
all of the following items which the Issuer agrees will be reimbursable from Bond proceeds from and to the
extent and in the manner provided in Sections 3.5 and 3.6 hereof and subject to the applicable provisions
of the Act and the Code:
(1) all expenses incurred and to be incurred in connection with the acquisition,
rehabilitation, renovation, construction and equipping of the Project, including but not limited to
the cost of acquiring the Project, the contract price of all labor, services, materials, supplies and
equipment furnished under any contract for rehabilitation, construction and renovation of the
Project, any developer fee or construction management fee or other amounts incurred in connection
therewith, provided that such fee is not paid to the Borrower or an affiliate thereof, including the
cost of all Project Equipment and all appurtenances thereto, and of all rights-of-way for access and
utility connections to and from the Project, and all fees required for recording all financing
statements and any real estate documents;
(2) the expense of preparation of the plans and specifications for the Project, including
utilities, and all other facilities necessary or desirable in connection therewith, and all other
architectural, engineering and supervisory services incurred and to be i ncurred in the planning,
rehabilitation, construction and completion of the Project;
(3) all fees, costs, and expenses related to legal services (including Bond Counsel and
counsel to the Issuer, Borrower, Original Purchaser, and Trustee), abstractors’, financial and
accounting services, administrative and rating agency services (if any), expenses of any Rebate
Consultant (as defined in Section 7.7(12) hereof), printing and engraving costs and other expenses
incurred and to be incurred on or before or in connection with the Completion Date with respect to
(a) the establishment of title to the Project; (b) the authorization, sale and issuance of the Bonds;
(c) the preparation of the Indenture, the Related Documents, and all other documents necessary for
8
the issuance of the Bonds or required by this Loan Agreement or the Indenture; (d) the
establishment of the Completion Date, including compliance with any governmental or
administrative rules or regulations on or before such date; or (e) the administrative charges imposed
by the Issuer pursuant to Section 4.4(2) hereof in connection with the issuance of the Bonds;
(4) premiums on all insurance (including any title insurance) required to be taken out
and maintained during the period before the Completion Date;
(5) all expenses incurred in seeking to enforce any remedy against any contractor, or
any subcontractor or any supplier in respect of any default under any contract with such Person;
(6) all deed taxes, mortgage registry taxes, recording fees and other taxes, charges and
assessments and license and registration fees of every nature whatsoever incurred and to be incurred
in connection with acquisition or completion of the Project including the financing thereof;
(7) the cost of all other labor, services, materials, supplies and equipment necessary to
complete the acquisition, rehabilitation, renovation, construction and equipping of the Project,
including but not limited to the Project Equipment;
(8) all fees and expenses of the Trustee and Paying Agent under the Indenture that
become due on or before the Completion Date or in connection with the establishment of the
Completion Date; and
(9) without limitation by the foregoing, all other expenses which under accepted
accounting practice constitute necessary capital expenditures for the completion of the Project or
issuance of the Bonds, not including Working Capital Expenses (all of which, in excess of three
percent (3%) of the Net Bond Proceeds, are nevertheless to be supplied by the Borrower from its
own funds without reimbursement).
All Project Costs may be paid or reimbursed from available money in the Project Fund to
the extent and in the manner permitted in Sections 3.5 and 3.6 hereof. If, however, such money is
insufficient to pay in full Project Costs payable therefrom or are otherwise unavailable to pay any
Project Costs, the Borrower shall nevertheless promptly pay so much of such Project Costs as may
be in excess of such available money in the Project Fund or shall, at the request of the Truste e,
forthwith pay over to the Trustee such money as is necessary to pay such Project Costs. The
Borrower shall not by reason of the payment of such excess Project Costs be entitled to any
reimbursement from the Issuer in excess of any money available therefor in the Project Fund or for
any abatement or diminution of the Basic Payments or Additional Charges.
Section 3.3. Authorization by Issuer. In accordance with the Act, the Borrower is authorized
by the Issuer, and the Borrower, pursuant to such authorization, agrees:
(1) to acquire, rehabilitate, renovate, construct and equip the Project and install the
Project Equipment as provided in Section 3.1 hereof;
(2) to make, execute, acknowledge and deliver any contracts, orders, receipts, writings
and instructions, with any other Persons, and in general to do all things which may be requisite or
proper for acquiring, rehabilitating, renovating, constructing and installing the Project;
(3) pursuant to the provisions of this Loan Agreement, to pay all fees, costs and
expenses incurred in the acquisition, rehabilitation, renovation, construction and equipping of the
9
Project from funds made available therefor in accordance with this Loan Agreement or otherwise
subject to the right to contest such fees, costs and expenses; and
(4) so long as the Borrower is not in default under any of the provisions of this Loan
Agreement to exercise all authority hereby conferred, which is granted and conferred irrevocably
to the Completion Date and thereafter until all activities in connection with the acquisition,
rehabilitation, renovation, construction and equipping of the Project shall have been completed.
Neither the authorization granted in this section nor any other provision of this Loan Agreement
shall be construed as making the Borrower an agent or joint venturer with the Issuer.
Section 3.4. Issuance of Bonds. The Issuer and Borrower have contracted for the sale of the
Bonds authorized by the Indenture, and the Borrower has approved and does approve the terms of the
Indenture. Forthwith upon execution of this Loan Agreement, the Bond Purchase Agreement, the
Indenture, the Cooperative Agreement, the Regulatory Agreement and all other documents required to be
executed by the aforementioned documents, or as soon thereafter as practicable, the Issuer will execute the
Bonds and cause them to be authenticated by the Trustee and delivered to the Original Purchaser upon
payment of the purchase price of the Bonds and filing with the Trustee of the opinion of Bond Counsel as
to the legality of the Bonds and the furnishing of all other documents required by this Loan Agreement, the
Disbursing Agreement, the Bond Purchase Agreement, the Security Documents and the Indenture to be
furnished before delivery. The Issuer will cause the proceeds of the Bonds to be transmitted to the Trustee,
who is required by the Indenture to deposit the same in the following trust funds in the following amounts:
(1) to the Capitalized Interest Fund, proceeds of the Bonds in the amount of
$_____________ and equity of the Borrower in the amount of $__________; and
(2) to the Project Fund, proceeds of the Bonds in the amount of $______________
and equity of the Borrower in the amount of $_______________.
If for any reason such documents are not furnished and the approving opinion of Bond Counsel in
customary form cannot be obtained, then this Loan Agreement shall be terminated and be void and of no
effect and the Borrower shall be obligated to pay all costs and expenses enumerated in Section 3.2 and
incurred on or before the date of such termination.
Section 3.5. Disbursements from Project Fund.
(1) The Issuer has in the Indenture authorized and directed the Trustee in writing to
disburse money from the Project Fund, subject to the Disbursing Agreement (except the
disbursement of Issuance Expenses of the Bonds shall not be subject to the provisions of the
Disbursing Agreement), to or upon the order of the Borrower, in payment or reimbursement of
Project Costs enumerated in Section 3.2 hereof and certified, in writing by the Borrower
Representative, provided, however, that:
(a) in no event shall any Net Bond Proceeds be used to pay or reimburse for
the payment of the acquisition of any property other than land (or an interest therein) unless
the first use of such property is pursuant to such acquisition;
(b) in no event shall twenty-five percent (25%) or more of Net Bond Proceeds
be used to pay or reimburse for the payment of the acquisition of land; and
10
(c) in no event shall any Net Bond Proceeds, including earnings thereon, be
used to pay or reimburse for the payment of any Working Capital Expenses in excess of
three percent (3%) of the Net Bond Proceeds.
(2) The cost of acquiring the Project Premises and the Project Costs described in
Section 3.2(3), (4), (5), (6) and (8) hereof may be paid or reimbursed in full upon receipt by the
Trustee of any statement of the payee covering such expenses endorsed by the payee and approved
by a Representative of the Borrower or, with respect to fees of Bond Counsel, counsel to the Issuer
or other fees of the Trustee or Issuer or printing expenses, of the Issuer. With respect to all other
Project Costs, each Disbursement Request shall be in substantially the form attached hereto as
EXHIBIT B and shall constitute a representation by the Borrower that:
(a) All items for which disbursement is requested thereunder either (i) are
presently due and payable, constitute Project Costs properly incurred by the Borrower in
connection with the Project being financed with the proceeds of the Loan, or are
reimbursable Project Costs properly chargeable against the Loan; or (ii) are to be deposited
to an escrow fund to be disbursed therefrom solely for Project Costs properly incurred by
the Borrower in connection with the Project; in each case none of the items for which
disbursement is requested has formed the basis for any disbursement heretofore made from
the Project Fund.
(b) Each such item is or was necessary in connection with the acquisition,
rehabilitation, renovation, construction and equipping of the Dwelling Units (as defined in
the Regulatory Agreement) of the Project.
(c) The costs specified in the Disbursement Schedule, when added to all
previous disbursements, will result in at least ninety-five percent (95%) of the aggregate
amount of all disbursements having been used to pay or reimburse the Borrower for
amounts which are Qualified Project Costs (as defined in the Regulatory Agreement).
(d) To the knowledge of the Borrower, there is no current or existing event of
default pursuant to the terms of this Loan Agreement or the Regulatory Agreement and no
event exists which by notice or passage of time or both would constitute an event of default
under any of the foregoing documents.
(e) No representation or warranty of the Borrower contained in this Loan
Agreement or the Regulatory Agreement is materially incorrect or inaccurate, except as the
Borrower has set forth in writing, and there has been no event of default under the terms
of any of those documents and which is continuing and no event shall exist which by notice,
passage of time or both would constitute an event of default under any of those documents.
(f) Each item for which payment or reimbursement is requested is or was
necessary in connection with the Project, qualifies as a Project Cost under this Loan
Agreement and, if for the rehabilitation, construction or equipping of the Project, was made
or incurred in accordance with the plans and specifications for the Project and that none of
such items has formed the basis for any previous payment from the Project Fund.
(g) There is no outstanding indebtedness known, after due inquiry, for labor,
wages, materials or supplies which, if unpaid, might become the basis of a vendor’s lien,
or a mechanics’ materialmen’s, statutory or other similar lien upon the Project or any part
thereof, other than indebtedness then certified for payment or diligently being contested in
11
good faith by the Borrower and that each contractor, subcontractor and materialman has
filed with the Borrower receipts or waivers of liens for all amounts theretofore certified for
payment, or any amount therein certified for reimbursement to the Borrower for payment,
for work, materials and equipment furnished by him, her, or them or that there is on file
with the construction manager a cancelled check endorsed by the contractor, subcontractor
or materialman evidencing such payment.
(h) All payments made from the Project Fund shall be presumed by the
Trustee to be made for the purposes certified in said written requests, and the Trustee shall
not be required to see to the application of any payments made from the Project Fund or to
inquire into the purposes for which withdrawals are being made from the Project Fund.
The Trustee shall not be bound to make an investigation into the facts or matters stated in
any written request. The Trustee shall not be responsible for determining whether the funds
on hand in the Project Fund are sufficient to complete the Project. The Trustee shall have
no responsibility whatsoever to disburse or transfer funds absent written instructions from
the Borrower.
Section 3.6. Establishment of Completion Date. On the Completion Date, any balance
remaining in the Project Fund in excess of the amount retained therein pursuant to the Disbursing
Agreement shall be disbursed by the Trustee to the Borrower or its order in such amount as may be
necessary (and all thereof shall be disbursed if necessary) to pay, or to reimburse to the Borrower for the
payment of, any part of the Project Costs which have not theretofore been paid by the Borrower or has not
theretofore been reimbursed to the Borrower, as the case may be, in accordance with the provisions of
Section 3.5 hereof. Any balance remaining in the Project Fund in excess of any amount retained therein to
secure completion by any contractor shall be transferred by the Trustee to the Bond Fund and used to
redeem the Bonds in accordance with Section 3.1(2) of the Indenture.
Section 3.7. Payment and Performance Bond. The requirement for any payment and
performance bond is hereby waived.
Section 3.8. Enforcement of Contract. In the event of default of any contractor or subcontractor
under any construction contract or in the event of a breach of warranty with respect to any materi als,
workmanship or performance, the Borrower will promptly proceed, either separately or in conjunction with
others, to exhaust its remedies against the contractor, subcontractor or vendor in default and against any
surety on a bond securing the performance of such contract; provided, however, that the Borrower may on
the advice of its counsel and with the Trustee’s consent refrain from exhausting such remedies if determined
by the Borrower not to be in its best interests and not necessary to complete the Project. The Borrower will
promptly advise the Trustee in writing of the steps it intends to take in connection with any such default.
Any amounts recovered pursuant to any bond or by way of damages, refunds, adjustments or otherwise in
connection with the foregoing, after deduction of expenses incurred in such recovery, other than any
amounts resulting from the loss of income, shall be paid into the Project Fund if received before the
Completion Date, and otherwise shall be paid into the Bond Fund, provided that the Borrower may obtain
reimbursement for any payments made by the Borrower in connection with such action as an item of Project
Cost as provided in Section 3.5 hereof.
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ARTICLE 4
THE LOAN, BASIC PAYMENTS,
ADDITIONAL CHARGES AND ADDITIONAL FINANCING
Section 4.1. The Loan. The Issuer agrees, upon the terms and conditions herein specified, to
lend to the Borrower the proceeds received by the Issuer from the sale of the Bonds, by causin g such
proceeds to be deposited with the Trustee for disposition as provided herein and in the Indenture. The
amount of the Loan shall be deemed to include any “discount” or any other amount by which the aggregate
price at which the Issuer sells the Bonds to the Underwriter is less than the aggregate principal amount of
the Bonds; and the obligation of the Issuer to make the Loan shall be deemed fully discharged upon so
depositing the proceeds of the Bonds with the Trustee.
Section 4.2. Basic Payments. Subject to the Borrower’s right of prepayment granted in
Section 8.2 hereof, the Borrower agrees to repay the Loan in installments of Basic Payments as follows:
(1) During the Term of Loan Agreement, the Borrower shall make Basic Payments in
immediately available funds as follows:
(a) On or before each Interest Payment Date, an amount which, together with
any balance on hand in the Bond Fund or the Capitalized Interest Fund and available for
that purpose, will equal the total interest due on all Outstanding Bonds on such Interest
Payment Date.
(b) On July 1, 2027, an amount which is not less than the principal amount
due on the Outstanding Bonds on such date.
(c) The Borrower will promptly deposit the proceeds of the Assigned Capital
Contributions, when and if received, with the Trustee with written instructions to deposit
the amounts in the Bond Fund for application to the mandatory redemption of the Bonds
pursuant to Section 3.1(3) of the Indenture. The Borrower represents that the aggregate
proceeds of the Assigned Capital Contributions are expected to exceed the amount
necessary to redeem the Bonds in full, but only the amount necessary to redeem the then
Outstanding Bonds in full shall be deposited with the Trustee. The Investor Limited
Partner has agreed with the General Partner in the Partnership Agreement to deposit the
Assigned Capital Contributions (but only the amount necessary to redeem the Outstanding
Bonds in full) directly to the Title Company for deposit to the Trustee on behalf of the
Borrower, to be disbursed pursuant to the terms of the Indenture ; provided, however, that
notwithstanding anything contained herein to the contrary, the obligations of the Investor
Limited Partner to make any equity contributions to the Borrower are governed solely by,
and subject to the conditions, terms and provisions of, the Partnership Agreement.
(d) On the Mandatory Tender Date, the Borrower shall cause the Outstanding
Bonds to be purchased at the Mandatory Purchase Price, in accordance with Section 3.7 of
the Indenture.
(e) In any event the sum of the Basic Payments payable under this Section
shall be sufficient to pay all principal, interest and premium, if any, on the Bonds as such
principal, interest and premiums become due, at maturity, upon redemption, acceleration
or otherwise.
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(2) All payments of Basic Payments shall be made directly to the Trustee at its
designated corporate trust office, for the account of the Issuer and shall be deposited by the Trustee
in the Bond Fund. In the event the Borrower should fail to make any of the payments required in
this Section 4.2, the item so in default shall continue as an obligation of the Borrower until the
amount in default shall have been fully paid, and the Borrower agrees to pay the same with interest
thereon (including to the extent permitted by law, interest on overdue installments of interest) at
the rate borne by the respective Bonds as to which such default exists.
(3) As provided in Internal Revenue Service Revenue Procedure 79-5, Revenue
Procedure 81-22 and 26 CFR 601.201 (and any subsequent amendments, modifications or
replacements thereof), Restricted Project Funds in the Bond Fund shall be used only to prepay
Bonds which are subject to redemption at their earliest call date without penalty or premium or to
pay a pro rata portion of the principal of the Bonds as provided in Section 5.3(2) of the Indenture.
(4) Except during the continuance of an Event of Default, all available remaining sums
on deposit in the Bond Fund not credited against currently payable installments of Basic Payments
or applied as provided in Section 7.8 or 8.2 hereof shall be credited against the last installments of
Basic Payments.
(5) In no event shall any purchase of any Bonds made by or on behalf of the Borrower
result in the discharge of (a) the Bonds so purchased, (b) the obligations under this Section 4.2 to
make Basic Payments relating to the Bonds so purchased, or (c) the Loan made hereunder to the
extent of the Bonds so purchased, unless and to the extent the Bonds so purchased are surrendered
to the Trustee and canceled.
(6) So long as the Series 2020 Note is outstanding, the Borrower shall repay the Loan
solely from the Assigned Capital Contributions and certain other property that may be received by
the Trustee pursuant to the Security Documents.
Section 4.3. [Reserved].
Section 4.4. Additional Charges. The Borrower agrees to pay, when due, each and all of the
following:
(1) to or upon the order of the Trustee, when due, all reasonable fees of the Trustee for
services rendered under the Indenture and all reasonable fees and charges of the Paying Agent,
registrars, legal counsel, accountants, engineers, public agencies and others incurred in the
performance on request of the Trustee of services required under the Indenture for which the
Trustee and such other Persons are entitled to payment or reimbursement, provided that the
Borrower may, without creating a default hereunder, contest in good faith the necessity or
reasonableness of any such services, fees or expenses;
(2) to the Issuer in immediately available funds an administrative fee equal to
[____________ of the principal amount of the Bonds] [$___________], which administrative fee is
not pledged to payment of the Bonds and may be used by the Issuer for any proper purpose of the
Issuer;
(3) to the Trustee, the amount of all advances made by the Trustee, with interest
thereon, as provided in Section 5.4 hereof;
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(4) to the Issuer or Trustee, as the case may be, interest at the rate equal to one percent
(1%) over the prime rate on each payment commencing on the date when due and required in this
Section to be made to the Issuer or Trustee, if not made when due and if not advanced by the Trustee
under the Indenture;
(5) any costs incurred by the Trustee or Original Purchaser in the preparation of
printed bonds;
(6) all sums required under Section 3.8 of the Indenture in order to revise or extend
the Mandatory Tender Date or remarket the Bonds, and the Borrower further agrees to execute any
and all certificates required by the Issuer, the Trustee or the Remarketing Agent in order to
effectuate such revision, extension or remarketing; and
(7) to the Remarketing Agent, the Remarketing Agent’s Fee and any Remarketing
Expenses.
Section 4.5. Borrower’s Obligations Unconditional. All Basic Payments and Additional
Charges and all other payments required of the Borrower hereunder shall be paid without notice or demand
and without setoff, counterclaim, or defense for any reason and without abatement or deduction or defense
(except as provided in Sections 8.2 and 9.13 hereof). The Borrower will not suspend or discontinue any
such payments, and will perform and observe all of its other agreements in this Loan Agreement, and,
except as expressly permitted in Sections 7.8 and 8.2, will not terminate this Loan Agreement for any cause,
including but not limited to any acts or circumstances that may constitute failure of consideration,
destruction or damage to the Project or the Borrower’s business, the taking of the Project or the Borrower’s
business by Condemnation or otherwise, the lawful prohibition of the Borrower’s use of the Project or the
Borrower’s business, the interference with such use by any Person, the invalidity or unenforceability or
lack of due authorization or other infirmity of this Loan Agreement, the lack of right, power or authority of
the Issuer to enter into this Loan Agreement, eviction by paramount title, commercial frustration of purpose,
bankruptcy or insolvency of the Issuer or Trustee, change in the tax or other laws or administrative rulings
or actions of the United States of America or of the State or any political subdivision there of, or failure of
the Issuer to perform and observe any agreement, whether express or implied, or any duty, liability or
obligation arising out of or connected with this Loan Agreement, or for any other cause whether similar or
dissimilar to the foregoing, any present or future law to the contrary notwithstanding, it being the intention
of the parties hereto that the Basic Payments and other amounts payable by the Borrower hereunder shall
be paid in full when due without any delay or diminution whatever.
Section 4.6. Assignment of Issuer’s Rights. As security for the payment of the Bonds, the
Issuer will pledge the amounts payable hereunder and assign, without recourse or liability, to the Trustee,
the Issuer’s rights under this Loan Agreement (except for the Unassigned Issuer’s Rights), including the
right to receive payments hereunder (except the right to receive payments, if any, under Sections 3.2, 4.4,
7.4, 9.5, 10.8, 10.11, 10.12, and 10.13 hereof) and hereby directs the Borrower to make said payments
directly to the Trustee. The Borrower herewith assents to such assignment and will make payments under
this Loan Agreement directly to the Trustee without defense or setoff by reason of any dispute between the
Borrower and the Trustee.
Section 4.7. Borrower’s Remedies. Nothing contained in this Article shall be construed to
release the Issuer from the performance of any of its agreements herein, and if the Issuer should fail to
perform any such agreements, the Borrower may institute such action against the Issuer as the Borrower
may deem necessary to compel such performance so long as such action shall not violate the Borrower’s
agreements in Section 4.4 hereof or diminish or delay the amounts required to be paid by the Borrower
pursuant to Section 4.2 hereof. The Borrower acknowledges, however, and agrees that any pecuniary
15
obligation of the Issuer created by or arising out of this Loan Agreement shall be payable solely out of the
proceeds derived from this Loan Agreement and the sale of the Bonds.
Section 4.8. Borrower’s Obligations Upon Tender of Bonds. If any Bond tendered for purchase
is not remarketed on any Mandatory Tender Date and a sufficient amount is not available under the
Indenture for the purpose of paying the purchase price of such Bond, the Borrower will cause to be paid to
the Trustee by the applicable times provided in the Indenture, an amount equal to the amount by which the
principal amount of all Bonds tendered and not remarketed, together with interest accrued to the Mandatory
Tender Date, exceeds the amount otherwise available pursuant to the Indenture.
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ARTICLE 5
PROJECT COVENANTS
Section 5.1. Project Operation and Maintenance. The Borrower shall pay all expenses of the
operation and maintenance of the Project, including without limitation adequate insurance thereon and
insurance against all liability for injury to Persons or property arising from the operation thereof, and all
taxes and special assessments levied upon or with respect to the Project and payable during the Term of
Loan Agreement and further described in this Article 5.
Section 5.2. Sale or Lease of Project. So long as any Bonds are Outstanding, the Borrower will
not lease the Project (except leases in the normal course of business), in whole or in part, nor sell, mortgage
or otherwise encumber its interests in the Project, in whole or part, except as otherwise provided in
Sections 8.1 and 7.5 hereof, provided that in no event shall such lease, assignment or sale be permitted if
(1) the effect thereof would be to impair the validity or the exclusion from gross income under Section 103
of the Code of the interest on the Bonds, as applicable; or (2) if any such transaction should release the
Borrower of any of its obligations under this Loan Agreement (except as otherwise provided in Section 8.1
hereof). Before any such lease, sale or assignment, the Borrower shall deliver to the Trustee an opinion of
Bond Counsel, addressed to the Trustee, stating in effect that such lease, sale or assignment is authorized
under this Loan Agreement and will not cause interest on the Bonds to be included in gross income for
purposes of federal income taxation. The Borrower shall give at least thirty (30) days’ notice to the Trustee
and Issuer of any such sale, assignment or lease, unless such thirty (30) day notice is waived by the Trustee
and the Issuer.
Section 5.3. Security Documents. In consideration of the Loan, and as security for the Basic
Payments to be made by the Borrower for the payment of the Bonds, and as security for the performance
of all of the other obligations, agreements and covenants of the Borrower to be performed and observed
hereunder, the Borrower shall execute and cause the Security Documents to be delivered and, to the extent
applicable, recorded and shall keep, perform and observe each of its obligations thereunder and shall cause
the Security Documents and all supplements thereto, to be kept, recorded and filed in such manner and in
such places as may be required by law in order to preserve and protect fully the security of the Holders of
the Bonds and the rights of the Trustee under the Indenture and under any other instruments aforesaid. The
Borrower acknowledges and agrees that the Trustee will not know and is not responsible for the legality,
effectiveness or sufficiency of any security document.
Section 5.4. Advances. The Borrower acknowledges and agrees that under the Indenture the
Trustee may take certain action and make certain advances relating to the Project or to certain other matters
as expressly provided therein, and the Borrower shall be obligated to repay all such advances on demand,
with interest from the date of each such advance, at the rate and under the conditions set forth in the
Indenture.
Section 5.5. Alterations to Project and Removal of Project Equipment. The Borrower shall
have the right from time to time, at its cost and expense, to remodel and make such additions, modifications,
alterations, improvements and changes (collectively referred to as “alterations”) in or to the Project or to
remove any equipment therefrom as the Borrower, in its discretion, may deem to be desirable for its uses
and purposes, provided such alterations or removal do not impair the character of the Project as a “project”
within the meaning of the Act or otherwise impair the exclusion from gross income under Section 103 of
the Code of the interest on the Bonds.
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Section 5.6. Insurance. The Borrower shall maintain, or cause to be maintained, at its cost and
expense, insurance as follows:
(1) Insurance against loss and/or damage to the Project under a policy or policies
covering such risks as are ordinarily insured against by similar businesses, including (without
limiting the generality of the foregoing) fire and extended coverage in an amount not less than one
hundred percent (100%) of the full insurable replacement cost of the Project but any such policy
may have a deductible amount of not more than $100,000. No policy of insurance shall be so
written that the proceeds thereof will produce less than the minimum coverage required by the
preceding sentence, by reason of co-insurance provisions or otherwise, without the prior consent
thereto in writing by the Trustee. The term “full insurable replacement cost” shall mean the actual
replacement cost of the Project (excluding foundation and excavation costs and costs of
underground flues, pipes, drains and other uninsurable items) and equipment. All policies
evidencing insurance required by this subsection (1) with respect to the Project shall be carried in
the names of the Borrower and the Trustee as their respective interests may appear and shall contain
standard mortgage clauses which provide for Net Proceeds of insurance resulting from claims per
casualty thereunder to the Project which are less than $100,000 for loss or damage covered thereby
to be made payable directly to the Borrower, and Net Proceeds from such claims which are equal
to or in excess of $100,000 to be made payable directly to the Trustee. The Net Proceeds of such
insurance required by this subsection (1) with respect to the Project shall be applied as provided in
Sections 5.7 and 5.8 hereof.
(2) Comprehensive general public liability insurance, including personal injury
liability, and, if the Borrower owns or leases any automobiles, automobile insurance, including
owned, non-owned and hired automobiles, against liability for injuries to persons and/or property,
in the minimum amount for each occurrence and for each year of $1,000,000, for public liability
not arising from ownership or operation of automobiles (or other motor vehicles), and in the
minimum amount of $500,000 for each occurrence and for each year for liability arising out of
ownership or operation of automobiles (or other motor vehicles) and shall be endorsed to show the
Trustee and Issuer as an additional insured.
(3) Business interruption insurance or rental loss insurance covering actual losses in
gross operating earnings of the Borrower resulting directly from necessary interruption of business
caused by damage to or destruction (resulting from fire and lightning; accident to a fired-pressure
vessel or machinery; and other perils, including windstorm and hail, explosion, civil commotion,
aircraft and vehicles, sprinkler leakage, smoke, vandalism and malicious mischief, and accident) to
real or personal property constituting part of the Project, less charges and expenses which do not
necessarily continue during the interruption of business, for such length of time as may be required
with the exercise of due diligence and dispatch to rebuild, repair or replace such properties as have
been damaged or destroyed, with limits equal to at least the sum of twelve (12) months’ operating
expenses of the Project, plus the maximum amount of principal of (other than the principal amount
due on the maturity date of the Bonds) and interest payable on the Outstanding Bonds in the current
or any future calendar year.
(4) Such other insurance, including workers’ compensation insurance respecting all
employees of the Borrower, in such amount as is customarily carried by like organizations engaged
in like activities of comparable size and liability exposure, provided that the Borrower may be
self-insured with respect to all or any part of its liability for workers’ compensation.
All insurance required in this Section shall be taken out and maintained in responsible insurance companies
selected by the Borrower which are authorized under the laws of the State to assume the risks covered
18
thereby. The Borrower will provide annually to the Trustee a certificate stating that the insurance required
by this section is in full force and effect upon which the Trustee shall conclusively rely. Each policy shall
contain a provision that the insurer shall not cancel nor modify it without giving written notice to the
Borrower and the Trustee at least thirty (30) days before the cancellation or modification becomes effective.
Not less than thirty (30) days prior to the expiration of any policy, upon request, the Borrower shall furnish
the Trustee evidence satisfactory to the Trustee that the policy has been renewed or replaced by another
policy conforming to the provisions of this Section, or that there is no necessity therefor under the terms
hereof. In lieu of separate policies, the Borrower may maintain a single policy, blanket or umbrella policies,
or a combination thereof, having the coverage required herein.
Section 5.7. Damage or Destruction. The Borrower agrees to notify the Trustee in writing
immediately in the case of damage exceeding $100,000 in amount to, or destruction of, the Project or any
portion thereof resulting from fire or other casualty. In the event that any such damage or destruction does
not exceed $100,000, the Borrower shall forthwith repair, reconstruct and restore the Project to substantially
the same or an improved condition or value as existed prior to the event causing such damage and, to the
extent necessary to accomplish such repair, reconstruction and restoration, the Borrower will apply the Net
Proceeds of any insurance relating to such damage received by the Borrower to the payment or
reimbursement of the costs thereof. Net Proceeds of any insurance relating to such damage up to $100,000
shall be paid directly to the Borrower.
In the event the Project or any portion thereof is destroyed by fire or other casualty and the damage
or destruction is estimated to exceed $100,000, then the Borrower shall within one hundred twenty (120)
days after such damage or destruction elect one (1) of the following two (2) options by written notice of
such election to the Trustee:
(1) Option A - Repair and Restoration. The Borrower may elect to repair, reconstruct
and restore the damaged Project. In such event, the Borrower shall proceed forthwith to repair,
reconstruct and restore the damaged or destroyed Project to substantially the same condition or
value as existed prior to the event causing such damage or destruction and, to the extent necessary
to accomplish such repair, reconstruction and restoration, the Borrower will apply the Net Proceeds
of any insurance relating to such damage or destruction received by the Borrower from the Trustee
to the payment or reimbursement of the costs thereof. So long as no Event of Default exists, any
Net Proceeds of insurance relating to such damage or destruction received by the Trustee shall be
released from time to time by the Trustee to the Borrower upon the receipt of:
(a) a Certificate of the Borrower Representative specifying the expenditures
made or to be made or the indebtedness incurred in connection with such repair,
reconstruction and restoration and stating that such Net Proceeds, together with any other
money legally available for such purposes, will be sufficient to complete such repair,
reconstruction and restoration; and
(b) the written approval of such certificate by an Independent Engineer.
In the event the Borrower shall elect this Option A, the Borrower shall complete the repair,
reconstruction and restoration of the Project, whether or not the Net Proceeds of insurance received
by the Borrower for such purposes are sufficient to pay for the same. Net Proceeds not required
for the repair, reconstruction and restoration of the Project shall be applied to the prepayment of
the Bonds or used for such other purpose as the Trustee, based upon an opinion of Bond Counsel,
determines will not cause interest on the Bonds to be included in gross income for purposes of
federal income taxation.
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(2) Option B - Redemption of the Bonds. In the event that the Borrower shall
determine that it is not practical or desirable to rebuild, repair or restore the Project, or, in case the
Borrower is unable to deliver the certificates or reports necessary under Option A above, the Bonds
shall be redeemed on the earliest date for which notice may be given for redemption in accordance
with Section 3.1(1) of the Indenture. If the Net Proceeds of insurance, together with all amounts
then held by the Trustee under the Indenture available to redeem or retire the Bonds, shall be
insufficient to so redeem the Bonds (including the expenses of redemption), the Borrower shall pay
such deficiency to the Trustee as a Basic Payment and the Net Proceeds of insurance, together with
such Basic Payment and amounts held by the Trustee under the Indenture, shall be applied to such
redemption of the Bonds in accordance with Section 8.2 hereof and Section 3.1 of the Indenture.
If the Bonds have been fully paid and all obligations of the Borrower hereunder have been paid or
provided for, all Net Proceeds shall be paid to the Borrower.
Section 5.8. Condemnation. If the Project or any material portion thereof is condemned or
taken for any public or quasi-public use and title thereto vests in the party condemning or taking the same,
the Borrower hereby irrevocably assigns to the Trustee all its right, title and interest in and to any Net
Proceeds of any award, compensation or damages (hereinafter referred to as an “award”), payable in
connection with any such condemnation or taking. The Trustee shall cooperate fully with the Borrower in
the handling and conduct of any prospective or pending condemnation proceedings with respect to the
Project or any material part thereof.
In the event of any condemnation or taking where title shall have been taken to all or substantially
all of the Project or Project, the Borrower shall, within one hundred twenty (120) days after the date on
which the Net Proceeds are finally determined, elect one (1) of the following two (2) options by written
notice of such election to the Trustee.
(1) Option A - Repairs and Improvements. The Borrower may elect to use the Net
Proceeds of the award made in connection with such condemnation or taking for additions, repairs
and improvements to the Project. In such event, so long as no Event of Default exists, the Borrower
shall have the right to receive such Net Proceeds from the Trustee from time to time upon receipt
by the Trustee of:
(a) a Certificate of the Borrower Representative specifying the expenditures
made or to be made or the indebtedness incurred in connection with such repairs and
improvements and stating that such Net Proceeds, together with any of the money legally
available for such purposes, will be sufficient to complete such repairs and improvements;
and
(b) if such Net Proceeds equal or exceed $500,000 in amount, the written
approval of such Certificate by an Independent Engineer.
The Borrower agrees to apply any such Net Proceeds so received solely to the purposes specified
in such Certificate. Net Proceeds not required for the repairs and improvements shall be applied to
the prepayment of the Bonds or in such other manner as the Trustee, based upon an opinion of
Bond Counsel, determines will not cause interest on the Bonds to be included in gross income for
purposes of federal income taxation.
(2) Option B - Redemption of the Bonds. In the event that any material part of the
Project is condemned, or such use or control thereof is taken by eminent domain, to the extent
described above, or, in case the Borrower is unable to deliver the certificates or reports necessary
under Option A above, and, in the reasonable judgment of the Borrower the Project cannot be
20
restored within twelve (12) months following completion of the proceedings by which such title is
taken to a condition permitting conduct of the normal operations of the Borrower and at a cost not
exceeding the Net Proceeds of the award in such condemnation proceedings the Bonds shall be
redeemed on the earliest date for which notice may be given for redemption in accordance with
Section 3.1(1) of the Indenture. If the Net Proceeds of condemnation, together with the amount
then held by the Trustee under the Indenture available to redeem the Bonds shall be insufficient to
redeem the Bonds (including principal, accrued interest, and expenses of redemption), the Borrower
shall pay such deficiency to the Trustee as a Basic Payment, and the Net Proceeds of condemnation,
together with such Basic Payment and amounts held by the Trustee under the Indenture shall be
applied to such redemption of the Bonds in accordance with Section 8.2 hereof and Section 3.1 of
the Indenture. If the Bonds have been duly paid and all other obligations of the Borrower hereunder
have been paid or provided for, any remaining Net Proceeds shall be paid to the Borrower.
Section 5.9. [Reserved].
Section 5.10. Hazardous Materials. The Borrower shall not use the Project in any manner so as
to violate in any material respect any applicable law, rule, regulation or ordinance of any governmental
body or in such manner as to vitiate insurance upon the Project. The Borrower shall not commit or permit
any waste upon the Project which would materially decrease the value of the Project. The Borrower shall
comply in all material respects with all regulations concerning the environment, health and safety relating
to the generation, use, handling, production, disposal, discharge and storage of Hazardous Materials, as
defined herein, in, on, under, or about the Project. The Borrower shall promptly take any and all necessary
action in response to the presence, storage, use, disposal, transportation or discharge of any Hazardous
Materials in, on, under or about the Project by the Borrower or Persons acting on behalf of or at the direction
of the Borrower as all applicable laws, rules, regulations, or ordinances may require ; provided, however,
that the Borrower shall not take any remedial action in response to the presence of any Hazardous Materials
in, on, under or about the Project, nor enter into any settlement agreement, consent decree, or other
compromise in respect to any claims, proceedings, lawsuits or actions, completed or threatened pursuant to
any Hazardous Materials laws or in connection with any third party, if such remedial action, settlement,
consent or compromise might impair the value of the Project; in the event that the presence of Hazardous
Materials in, on, under, or about the Project either (1) poses an immediate threat to the health, safety, welfare
or property right of any individual; or (2) is of such a nature that an immediate remedial response is
necessary under applicable laws, rules, regulations, or ordinances, the Borrower shall promptly take
necessary action. In the event the Borrower undertakes any remedial action with respect to any Hazardous
Materials on, under or about the Project, the Borrower shall immediately notify the Trustee and the Issuer
in writing of any such remedial action, and shall conduct and complete such remedial action (a) in
compliance with all applicable federal, state and local laws, regulations, rules, ordinances and policies; and
(b) in accordance with the orders and directives of all federal, state and local governmental authorities. As
used herein, the term “Hazardous Materials” shall mean (unless, and only to the extent that, being used in
compliance with all applicable federal, state and local laws, regulations, rules, ordinances and policies):
(i) oil, flammable substances, explosives, radioactive materials, hazardous wastes or substances, toxic
wastes or substances or any other substances, materials or pollutants which (A) pose a hazard to the Project,
to adjacent premises or to Persons on or about the Project or adjacent premises, (B) cause the Project to be
in violation of any local, state or federal law, rule, regulation, ordinance, or policy, or (C) are defined as or
included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” or “toxic
substances” or words of similar import under any applicable local, state or federal law or under the
regulations, policy guidelines or other publications adopted or promulgated pursuant thereto, including, but
not limited to: (1) the Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended, 42 U.S.C. § 9601, et seq.; (2) the Hazardous Materials Transportation Act, as amended, 49
U.S.C. § 1601, et seq.; (3) the Resource Conservation and Recovery Act, as amended, 42 U.S.C. § 6901, et
seq.; (4) the Clean Air Act, 42 U.S.C. § 7412; (5) the Toxic Substance Control Act, 15 U.S.C. § 2601 et
21
seq.; (6) the Clean Water Act, 33 U.S.C. § 1317 and 1321(b)(2)A; and (7) rules, regulations, ordinances
and other publications adopted or promulgated pursuant to the aforesaid laws; (ii) asbestos in any form
which is or could become friable; (iii) urea formaldehyde foam insulation; and (iv) any other chemical,
material or substance, exposure to which is prohibited, limited or regulated by any governmental authority
or may or could pose a hazard to the health and safety or property interests of the Borrower or its employees,
the occupants of the Project or the owners or occupants of property adjacent to or surrounding the Project.
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22
ARTICLE 6
[RESERVED]
23
ARTICLE 7
BORROWER’S COVENANTS
Section 7.1. Covenant for the Benefit of Trustee and Bondholders. The Borrower recognizes
the authority of the Issuer to assign its interest in and pledge money receivable under this Loan Agreement
(other than certain payments required to be made to the Issuer under Sections 3.2, 4.4, 7.4, 9.5, 10.8, 10.11,
10.12, and 10.13 hereof) to the Trustee as security for the payment of the principal and purchase price of
and interest and redemption premiums, if any, on the Bonds, and the payment of all fees and expenses of
the Trustee; and hereby agrees to be bound by, and joins with the Issuer in the grant of, a security interest
to the Trustee in any right and interest the Borrower may have in sums held in the Funds described in Article
5 of the Indenture, pursuant to the terms and conditions thereof, to secure payment of the Bonds. Each of
the terms and provisions of this Loan Agreement is a covenant for the use and benefit of the Trustee and
Holders of the Bonds, so long as any thereof shall remain Outstanding; but upon payment in full of the
Bonds in accordance with Article 7 of the Indenture and of all fees and charges of the Trustee and Paying
Agent, all references in this Loan Agreement to the Bonds, the Holders thereof and the Trustee shall be
ineffective, and neither the Trustee nor the Holders of any of the Bonds shall thereafter have any rights
hereunder, save and except those that shall have theretofore vested or that arise from provisions hereunder
which survive termination of this Loan Agreement.
Section 7.2. Inspection and Access. The Borrower agrees that the Trustee and its duly
authorized agents shall have the right at all reasonable times to examine and inspect, and for that purpose
to enter upon, the Project, and shall also have such right of access thereto as may be reasonably necessary
to cause the Project to be properly maintained in accordance with Article 5 in the event of failure by the
Borrower to perform these obligations.
Section 7.3. Annual Statement, Audit, Certificate of Compliance and Other Reports.
(1) Upon request, commencing in 2023 for the fiscal year ending December 31, 2023,
the Borrower shall furnish to the Trustee and the Original Purchaser by no later than one hundred
twenty (120) days after the close of each fiscal year of the Borrower during the term hereof, a copy
of annual audited financial statements of the Borrower for the preceding fiscal year, including a
balance sheet and operating statements, audited by an Independent Accountant. The Borrower also
agrees to furnish to the Trustee (upon request), the Issuer and the Original Purchaser of the Bonds
by no later than thirty (30) days after the close of each of its fiscal quarters commencing with the
fiscal quarter ending June 30, 2023 a report prepared by the Borrower summarizing the status of
rehabilitation and providing an estimated completion date, as well as physical and economic
occupancy statistics for such quarter. The Trustee is authorized to provide, at the Borrower’s
expense, such information to any holder upon request.
(2) At the time the Borrower causes to be furnished the annual financial statements,
the Borrower shall also furnish the Trustee a certificate executed by the Borrower Representative,
declaring that during the same fiscal year covered by the statements and continuing to the d ate of
execution of the certificate, the Borrower has fully complied with the terms and conditions of this
Loan Agreement.
(3) The Borrower will furnish the Issuer and the Trustee, upon request, all reports
required pursuant to law and regulations of the Act.
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(4) The Borrower will, and at the request of the Issuer or Trustee at the Borrower’s
expense, furnish to the Trustee and Issuer at such times and in such form as the Issuer and Trustee,
may reasonably require (a) a copy of such other reports containing such information as is necessary
to comply with any lawful reporting or continuing registration requirements imposed by any agency
of the State under the Act, the Minnesota Blue Sky Laws or any other applicable state law as it now
exists or may hereafter be amended or by any agency of any other state in which the Bonds have
been sold; or (b) such information as is necessary to comply with federal securities law.
The Trustee shall have no duty to review or analyze any such financial statements or reports. The
Trustee shall not be deemed to have notice of any information contained therein or event or event of default
which may be disclosed in any manner therein.
Section 7.4. Indemnity by Borrower. The Borrower releases the Issuer and the Trustee from,
agrees that the Issuer and the Trustee shall not be liable for, and indemnifies, defends and holds the Issuer
and the Trustee harmless from and against, all liabilities, claims, costs and expenses and attorneys’ fees
imposed upon, incurred or asserted against the Issuer or the Trustee on account of: (1) any loss or damage
to property or injury to or death of or loss by any person that may be occasioned by any cause whatsoever
pertaining to the acquisition, financing, rehabilitation, renovation, construction, occupation, possession,
management, equipping, furnishing, maintenance, operation and use of the Project or from any work or
thing done in or about the Project site, or any sidewalks, passageways, driveways, curbs, vaults and vault
space, streets or parking areas on the Project site or adjacent thereto; (2) any breach or default on the part
of the Borrower in the performance of any covenant or agreement of the Borrower under this Loan
Agreement, the Tax Certificate, the Regulatory Agreement, the Security Documents, or any related
document, or arising from any act or failure to act by the Borrower, or any of its agents, contractors,
servants, employees or licensees; (3) the Borrower’s failure to comply with any requirement of this Loan
Agreement including the covenant in Section 5.4 hereof; (4) any action taken or omitted to be taken by the
Issuer or the Trustee under this Loan Agreement, the Indenture or the Regulatory Agreement; (5) the
issuance of the Bonds; and (6) any claim, action or proceeding brought with respect to any matter set forth
in subsections (1) through (5) above, provided, however, that the indemnification provided in this Section
shall not apply to any matter arising or resulting fr om the gross negligence or willful misconduct of the
party proposed to be indemnified hereunder.
The Borrower agrees to indemnify the Trustee for and to hold it harmless against all liabilities,
claims, costs and expenses incurred without negligence or willful misconduct on the part of the Trustee, on
account of any action taken or omitted to be taken by the Trustee in accordance with the terms of this Loan
Agreement, the Bonds, the Regulatory Agreement, the Security Documents, the Tax Certificate, or the
Indenture or any action taken at the request of or with the consent of the Borrower, including the costs and
expenses of the Trustee in defending itself against any such claim, action or proceeding brought in
connection with the exercise or performance of any of its powers or duties under this Loan Agreement, the
Bonds, the Indenture, or the Regulatory Agreement.
In case any action or proceeding is brought against the Issuer or the Trustee in respect of which
indemnity may be sought hereunder, the party seeking indemnity promptly shall give notice of that action
or proceeding to the Borrower, and the Borrower upon receipt of that notice shall have the obligation and
the right to assume the defense of the action or proceeding, provided that failure of a party to give that
notice shall not relieve the Borrower from any of its obligations under this Section unless that failure
prejudices the defense of the action or proceeding by the Borrower. The indemnified party shall have the
right to employ separate counsel in any such action or proceedings and to participate in the defense thereof,
but, unless such separate counsel is employed with the approval and consent of the Borrower, or because
the indemnified party has been advised by counsel that there may be a conf lict of interest between the
Borrower and the indemnified party, the Borrower shall not be required to pay the fees and expenses of
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such separate counsel. The Borrower shall not be liable for any settlement made without its consent, which
consent shall not be unreasonably withheld, conditioned or delayed.
The indemnification set forth above is intended to and shall include the indemnification of all
affected officials, directors, officers, agents, representatives and employees of the Issuer and the Trustee,
respectively. That indemnification is intended to and shall be enforceable by the Issuer and the Trustee,
respectively, to the full extent permitted by law.
The provisions of this Section 7.4 shall survive the payment and discharge of the Bonds.
Section 7.5. Status of Borrower. Throughout the Term of Loan Agreement, the Borrower will
maintain its existence as a limited liability limited partnership organized under the laws of the State and a
Single Purpose Entity and will not wind up or otherwise dispose of all or substantially all of its assets;
provided that subject to the sale restrictions in Section 5.2 hereof and the assignment and transfer conditions
in Section 8.1 hereof, the Borrower may, sell or otherwise transfer to another Person all or substantially all
of its assets in its entirety and thereafter wind up if the transferee Person assumes all of the obligations of
the Borrower under this Loan Agreement, the Security Documents and the Regulatory Agreement by
written instrument delivered to the Issuer and the Trustee. Every such transferee shall be bound by all of
the covenants and agreements of the Borrower herein with respect to any further sale or transfer.
Upon any change in the identity of its general partner by way of substitution, sale or otherwise of
the Borrower, the Trustee shall be promptly informed and, if requested, each and every general partner of
the Borrower as newly constituted shall deliver to the Trustee for the benefit of the Issuer and Bondholders
an instrument in form satisfactory to the Trustee affirming the joint and several liability of all then existing
general partners for the obligations of the Borrower hereunder for which the general partners are liable
(subject, in all instances, to Section 9.13 hereof).
The Issuer and Borrower agree that, upon any change in the status of the Borrower, including a
change in the identity of its general partner, so long as the requirements, restrictions and conditions of
Sections 5.2 and 8.1 hereof and the Regulatory Agreement with respect to such change have been satisfied
as provided therein, the general partner involved shall be discharged from liability hereunder. The Trustee
by execution of the Indenture shall be deemed to have agreed to execute such documents as may be
necessary or desirable to indicate such discharge upon receipt of evidence satisfactory to said parties that
the requirements for this Section, Sections 5.2 and 8.1 hereof and the Regulatory Agreement have been
satisfied, and provided that no Event of Default under this Loan Agreement shall have happened and be
continuing on the date of the discharge.
The Borrower shall not effect such transfer or change if the result thereof would be to violate any
sale restrictions set forth in Section 5.2 hereof, or to subject the interest payable on the Bonds (in the hands
of any Person who is not a “substantial user” of the Project or a “related person”) to federal income taxes
under Section 103 of the Code.
Notwithstanding anything to the contrary contained herein or in any other loan document none of
the following shall be deemed an Event of Default hereunder or under any other loan document and shall
not require the consent of the Issuer or the Trustee: (1) the Assignment of Partnership Interest and Capital
Contributions, whereby the General Partner and Borrower pledge all of their respective right, title and
interest in the Borrower and to certain capital contributions to the Borrower as security for the Bonds, and
the Trustee’s foreclosure on such right, title and interest following an Event of Default hereunder; (2) the
removal of the general partner pursuant to the terms of the Partnership Agreement ; (3) the transfer of the
interest of the Investor Limited Partner in the Borrower to a third party; or (4) the transfer of the interest of
the Investor Limited Partner in the Borrower to the Borrower’s general partner or affiliate.
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Section 7.6. Filing of Financing Statements. The Borrower agrees that it will, at its sole
expense, file or cause to be filed any financing statements and continuation statements required to perfect
the security interest granted to the Trustee under the Security Documents and under the Indenture in this
Loan Agreement and the payments to be made hereunder.
Section 7.7. Assurance of Tax Exemption. In order to assure that the interest on the Bonds
shall at all times be excluded from gross income for the purposes of federal income taxation, the Borrower
represents and covenants with the Issuer, Trustee and all Holders of the Bonds as follows:
(1) The Borrower will fulfill all continuing conditions specified in Section 142 of the
Code and Section 1.103-8(b) of the Treasury Regulations promulgated thereunder, to qualify the
Bonds as residential rental property bonds thereunder, and the Borrower shall fulfill its obligations
under the Regulatory Agreement.
(2) The Borrower will not use (or permit to be used) the Project or use or invest (or
permit to be used or invested) the proceeds of the Bonds or any other sums treated as “bond
proceeds” under Section 148 of the Code and applicable federal income tax regulations, including
“investment proceeds,” “invested sinking funds” and “replacement proceeds,” in such a manner as
to cause the Bonds to be classified “arbitrage bonds” under Section 148 of the Code or “federally
guaranteed obligations” under Section 149(b) of the Code.
(3) At least ninety-five percent (95%) of net proceeds of the Bonds will be used to
finance costs properly chargeable to the capital account of a qualified reside ntial rental project
within the meaning of Section 142(d) and functionally related and subordinate property thereto.
(4) The Borrower has not permitted and will not permit any obligation or obligations
other than the Bonds to be issued within the meaning of Section 103(b) of the Code so as to cause
such obligations to become part of the same “issue of obligations” as the Bonds.
(5) No portion of the proceeds of the Bonds shall be used to provide any airplanes,
skybox, or other private luxury box, health club facility, facility primarily used for gambling or
liquor store;
(6) No portion of the proceeds of the Bonds will be used to acquire (a) property to be
leased to the government of the United States of America or to any department, agency or
instrumentality of the government of the United States of America; (b) any property not part of the
residential rental housing portion of the Project; or (c) any private or commercial golf course,
country club, massage parlor, tennis club, skating facility (including roller skating, skateboard and
ice skating), racquet sports facility (including any handball or racquetball court), hot tub facility,
suntan facility or racetrack.
(7) No portion of the proceeds of the Bonds (including investment earnings thereon)
shall be used (directly or indirectly) for the acquisition of land (or an interest therein) to be used
for farming purposes, and less than twenty-five percent (25%) of the proceeds of the Bonds
(including investment earnings thereon) shall be used (directly or indirectly) for the acquisition of
land to be used for purposes other than farming purposes.
(8) The Borrower understands that the Code imposes a penalty for failure to file with
the Secretary of the Treasury an annual certification of compliance with low income occupancy
requirements, and if the requirements for a “qualified residential rental project” are not met, does
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not allow deduction for interest paid on the Bonds which accrues during the period beginning on
the first day of the taxable year in which the Project ceases to meet such requirements and ending
on the date the Project again meets such requirements.
(9) The average maturity of the Bonds does not and will not exceed one hundred
twenty percent (120%) of the average reasonably expected economic life of the Project financed
with the proceeds of the Bonds within the meaning of Section 147(b) of the Code.
(10) The Borrower shall provide the Issuer on or prior to the Issue Date with all
information required to satisfy the informational requirements set forth in Section 149(e) of the
Code, including the information necessary to complete IRS Form 8038.
(11) No money in the Bond Fund, the Capitalized Interest Fund or the Project Fund
shall be invested in investments which cause the Bonds to be federally guaranteed within the
meaning of Section 149(b) of the Code. If at any time the money in such funds exceeds, within the
meaning of Section 149(b), (a) amounts invested for an initial temporary period until the money is
needed for the purpose for which the Bonds were issued, (b) investments of a bona fide debt service
fund, and (c) investments of a reserve which meet the requirement of Section 148(c) and (d) of the
Code, such excess money shall be invested in only those Permitted Investments or Government
Obligations, as otherwise appropriate, which are (i) obligations issued by the United States
Treasury, (ii) other investments permitted under regulations, or (iii) obligations which are (A) not
issued by, or guaranteed by, or insured by, the United States or any agency or instrumentality
thereof or (B) not federally insured deposits or accounts, all within the meaning of
Section 149(b)(3)(B) of the Code.
(12) The Borrower on behalf of the Issuer shall pay to the United States, as a rebate, an
amount equal to the sum of (a) the excess of (i) the aggregate amount earned on all nonpurpose
investments (other than investments attributable to an excess described in this clause), over (ii) the
amount which would have been earned if all nonpurpose investments were invested at a rate equal
to the yield on the Bonds, plus (b) any income attributable to the excess described in clause (a)
above, at the times and in the amounts required by Section 148(f) of the Code, all within the
meaning of Section 148(f) of the Code. The Borrower and the Trustee shall maintain detailed
records of the interest rate borne by the Bonds and the investments of the Project Fund, the
Capitalized Interest Fund and the Bond Fund (and any other fund created under the Indenture with
respect to the Bonds) and earnings thereon. The Borrower shall engage a qualified firm selected
by the Borrower (the “Rebate Consultant”) to calculate the amount of any rebate required to be
made to the United States at times and in installments which satisfy Section 148(f) of the Code and
the Regulations, at least once every five (5) years and within sixty (60) days after the day on which
the last of the Bonds is redeemed, and the Trustee shall be immediately furnished with such
calculations. Such calculations shall be retained until six (6) years after the retirement of the last
Bond. The rebate shall be calculated as provided in Section 148(f) of the Code and Sections 1.148-0
through 1.148-9 of the Treasury Regulations, including taking into account the gain or loss on the
disposition of nonpurpose investments but not gross earnings of up to $100,000 on the portion, if
any, of the Bond Fund constituting a bona fide debt service fund. The Borrower shall acquire, and
shall cause the Trustee to acquire all nonpurpose investments at their fair market value in
arm’s-length transactions. The Trustee may conclusively rely upon the calculation made by the
Rebate Consultant and shall not be liable or responsible therefor.
(13) The Borrower shall not permit more than two percent (2%) of the proceeds of the
Bonds to be expended (or to be used to reimburse any person for an expenditure) to pay Issuance
Expenses as provided by Section 147(g) of the Code.
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(14) In order to qualify the Bonds and this Loan Agreement under the “program
investment” provisions of Section 1.148-2(d)(2)(iii) of the Treasury Regulations, the Borrower
(and any “related person” thereto) will take no action the effect of which would be to disqualify
this Loan Agreement as a “program investment” as defined in Section 1.148-1(b) of the Treasury
Regulations, including but not limited to entering into any arrangement, formal or infor mal, for the
Borrower to purchase bonds or notes of the Issuer in an amount related to the amount of the Bonds.
(15) The Borrower will not otherwise use proceeds of the Bonds, including expenses,
earnings thereon, or take, or permit or cause to be taken, any action that would adversely affect the
exclusion from gross income of the interest on the Bonds, nor otherwise omit to take or cause to be
taken any action necessary to maintain such exclusion from gross income; if it should take or
permit, or omit to take or cause to be taken, as appropriate, any such action, the Borrower shall take
all lawful actions necessary to rescind or correct such actions or omissions promptly upon having
knowledge thereof.
Section 7.8. Determination of Taxability.
(1) Promptly after the occurrence of a Determination of Taxability, the Borrower shall
promptly give written notice to the Issuer and Trustee of the Determination of Taxability.
(2) Neither the Borrower nor any Holder shall be required to contest or appeal any
notice of deficiency, ruling, decision or legislative enactment which may give rise to a
Determination of Taxability. The expenses of any such contest or appeal shall be paid by the party
initiating the contest or appeal.
Section 7.9. Subordination of Management Fees. If, and during any period that, an affiliate of
the Borrower is the manager of the Project, any management fees payable by the Borrower with respect to
the Project will be wholly subordinate and junior in right of payment to all sums payable under this Loan
Agreement. Without limiting the foregoing, during the continuance of an Event of Default hereunder, no
payment of such management fees shall be made by the Borrower. Further, the Borrower will not pay any
such management fees if such payment will cause an Event of Default hereunder.
Section 7.10. Special Covenants of the Borrower. If the Borrower is able to take advantage of
the four percent (4%) floor under Section 42(b)(3) of the Code, the Borrower shall provide the following:
(1) 20 units must be leased to households at or below 40% of the Area Median Income (25
years);
(2) An additional 60-80 units at 50% or 20-35 units at 40% AMI (25 years);
(3) Accept clients of the Richfield Kids@Home program; and
(4) Shall limit rent increases to 7% annually
Section 7.11. Alternative Covenants of the Borrower. If the Borrower is unable to able to take
advantage of the four percent (4%) floor under Section 42(b)(3) of the Code, the Borrower shall provide
the following:
(1) 20 units to households at or below 40% of the Area Median Income;
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(2) Accept clients of the Richfield Kids@Home program
Section 7.12. Subordination. The Borrower’s obligation with respect to the repayment of the
Loan will be subordinate in repayment of the loan evidenced by the Series 2020 Note issued by the County
HRA. [Add specific provisions or reference to subordination document]
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ARTICLE 8
BORROWER’S OPTIONS
Section 8.1. Assignment and Transfer. The Borrower may assign its rights and obligations
under this Loan Agreement and, as an incident thereto, transfer its interest in the Project without prior
consent of the Issuer or the Trustee, but subject to the provisions of Sections 5.2 and 7.5 hereof.
Section 8.2. Prepayment.
(1) The Borrower shall have the option to direct the Trustee to call for redemption and
prepayment of the Outstanding Bonds in whole or in part as provided in Section 3.1 of the
Indenture. The Bonds to be redeemed shall be redeemed at a price equal to their principal amount
plus accrued interest set forth in Section 3.1 of the Indenture. In the event the Bonds are called for
redemption in whole or in part, the Borrower shall make a Basic Payment as provided in Section 4.2
hereof on such Redemption Date. The Borrower shall give the Trustee written notice at least 30
days prior to the prepayment date to effect a redemption of the Bonds pursuant to Section 3.1 of
the Indenture.
(2) The Borrower shall prepay the Loan in whole or in part to the extent of the
mandatory redemption of the Bonds under Article 3 of the Indenture and will at any time transmit
directly to the Trustee, for deposit in the Bond Fund, funds in the required amount in addition to
any other amounts required to be paid at that time pursuant to this Loan Agreement. The principal
amount of the Loan to be prepaid from money remaining on deposit in the Project Fund following
the Completion Date will be determined in accordance with Section 3.1(2) of the Indenture. The
principal amount of the Loan of the Bonds to be prepaid upon the Borrower’s receipt of the
proceeds of the Assigned Capital Contributions will be determined in accordance with
Section 3.1(3) of the Indenture.
(3) If, after the Borrower exercises its option to redeem all Bonds, no Bonds remain
Outstanding, the Indenture is discharged, and the Borrower has satisfied all of its obligations
hereunder, the Trustee and the Issuer shall execute and deliver to the Borrower such release and
other instruments as the Borrower reasonably determines are necessary to terminate this Loan
Agreement. All further obligations of the Borrower hereunder, except as set forth in Section 10.10
hereof, shall thereupon terminate.
Section 8.3. Direction of Investments. Except during the continuance of an Event of Default,
the Borrower shall have the right during the Term of Loan Agreement to direct the Trustee to invest or
reinvest all money held for the credit of funds established by Article 5 of the Indenture in such securities as
are authorized by law for such funds, subject, however, to the further conditions of Article 6 of the Indenture
and Section 7.7 hereof.
The Borrower acknowledges that regulations of the Comptroller of the Currency grant the Borrower
the right to receive brokerage confirmations of the security transactions as they occur. The Borrower
specifically waives such notification to the extent permitted by law and shall receive periodic cash
transaction statements from the Trustee that will detail all investment transactions.
Section 8.4. Remarketing of Bonds. The Borrower is hereby granted the right to (1) request a
remarketing of the Bonds in the manner and to the extent set forth in Section 3.8 of the Indenture; and (2) in
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consultation with the Remarketing Agent, designate the length of the Remarketing Period and the related
Mandatory Tender Date in the manner and to the extent set forth in Sections 3.7 and 3.8 of the Indenture.
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ARTICLE 9
EVENTS OF DEFAULT AND REMEDIES
Section 9.1. Events of Default. Any one (1) or more of the following events is an Event of
Default under this Loan Agreement, and the term “Event of Default,” wherever used herein, means any one
of the following events, whatever the reason for such 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) if the Borrower shall fail to pay any Basic Payments on the date due under this
Loan Agreement, and such failure continues for five days after mailing of a notice to it by the
Trustee;
(2) if the Borrower shall fail to pay any Additional Charges on or before the date that
the payment is due, and shall continue to be in arrears for thirty (30) days after mailing of a notice
to it by the Issuer or the Trustee that said Additional Charges have not been received o n the due
date;
(3) if the Borrower shall fail to observe and perform or shall breach any other
covenant, condition or agreement on its part under this Loan Agreement for a period of sixty (60)
days after mailing of a notice to it by the Issuer or the Trustee, stating that it is a “Notice of Default”
hereunder and specifying such default or breach and requesting that it be remedied;
(4) if the Borrower shall be dissolved or liquidated (other than when a new entity
assumes the obligations of the Borrower under the conditions permitting such action contained in
Section 7.5 hereof) or the Partnership Agreement shall expire or be annulled;
(5) if any representation or warranty made by the Borrower herein, or by a general
partner or Representative of the Borrower in any document or certificate furnished the Trustee or
the Issuer or the Underwriter in connection herewith or therewith or pursuant hereto or thereto,
shall prove at any time to be, in any material respect, incorrect or misleading as of the date made;
(6) if an event of default shall occur and be continuing under the Indenture or any
Related Document, subject to applicable notice and cure periods; or
(7) if the Borrower shall fail to pay or cause to be paid the Mandatory Purchase Price
on the Mandatory Tender Date.
The Investor Limited Partner in the Borrower shall have the right, but not the obligation,
to cure Events of Default on behalf of the Borrower.
Section 9.2. Remedies.
(1) Whenever any Event of Default shall have happened and be subsisting the Trustee
may, by written notice to the Borrower, declare all the Basic Payments payable for the remainder
of the Term of Loan Agreement (an amount equal to that necessary to pay in full all Outstanding
Bonds and the interest thereon assuming acceleration of the Bonds under the Indenture and to pay
all other indebtedness thereunder) to be immediately due and payable whereupon the same shall
become immediately due and payable by the Borrower.
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(2) Upon the occurrence of an Event of Default, the Trustee may also take whatever
action at law or in equity may appear necessary or appropriate to collect all sums then due and
thereafter to become due, or to enforce performance and observance of any obligation, agreement,
covenant, representation or warranty of the Borrower, under this Loan Agreement, or any Collateral
Documents; or to otherwise compensate the Issuer, Trustee or Bondholders for any damages on
account of such Event of Default.
(3) The Issuer (without the prior written consent of the Trustee if the Trustee is not
enforcing the Issuer’s right in a manner to protect the Issuer or is otherwise taking action that brings
adverse consequences to the Issuer) may take whatever action at law or in equity may appear
necessary or appropriate to enforce its rights of indemnification under Section 7.4 and to collect all
sums then due and thereafter to become due to the Issuer under Sections 3.2, 4.4, 7.4, 9.5, 10.11,
10.12, and 10.13 hereof. Notwithstanding the foregoing, the Issuer is not precluded from exercising
any of its rights reserved to it as set forth in this Section, even if the Trustee is exercising the rights
of the Issuer hereunder.
Section 9.3. Disposition of Funds. Any amounts collected pursuant to action taken under
Section 9.2 hereof (other than sums collected for the Issuer on account of its rights to indemnification and
certain direct payments to be made to the Issuer under Sections 3.2, 4.4, 7.4, 9.5, 10.8, 10.11, 10.12, and
10.13 hereof, which sums shall be paid directly to the Issuer) shall be applied in accordance with the
provisions of the Indenture.
Section 9.4. Nonexclusive Remedies. No remedy herein conferred upon or reserved to the
Issuer or Trustee is intended to be exclusive of any other available remedy or remedies, but each and every
such remedy shall be cumulative and shall be in addition to every other remedy given under this Loan
Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise
any right or power accruing upon any Event of Default shall impair any such right or power or shall be
construed to be a waiver thereof, but any such right and power may be exercised from time to time and as
often as may be deemed expedient. In order to entitle the Issuer (or Trustee) to e xercise any remedy
reserved to it in this Article, it shall not be necessary to give any notice, other than such notice as may be
herein expressly required or as may be required by law.
Section 9.5. Attorneys’ Fees and Expenses. If an Event of Default shall exist under this Loan
Agreement and the Issuer or Trustee should employ attorneys or incur other expenses for the collection of
any amounts due hereunder, or for the enforcement of performance of any obligation or agreement on the
part of the Borrower, the Borrower will upon demand pay to the Issuer or Trustee the reasonable fees of
such attorneys and such other expenses so incurred.
Section 9.6. Effect of Waiver. In the event any agreement contained in this Loan Agreement
should be breached by either party and thereafter waived by the other party, such waiver shall be limited to
the particular breach so waived and shall not be deemed to waive any other breach hereunder.
Section 9.7. Waiver of Stay or Extension. The Borrower covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take
the benefit or advantage of, any appraisement, valuation, stay, or extension law wherever enacted, now or
at any time hereafter in force, which may affect the covenants in, or the performance of, this Loan
Agreement; and the Borrower (to the extent that it may lawfully do so) hereby expressly waives all benefit
or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Issuer or Trustee, but will suffer and permit the execution of every such power
as though no such law had been enacted.
34
Section 9.8. Issuer May File Proofs of Claim. In case of the pendency of any receivership,
insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Borrower or the property of the Borrower, the Trustee, or the Issuer with the prior
consent of the Trustee, shall be entitled and empowered, by intervention in such proceeding or otherwise,
(1) to file and prove a claim and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Issuer and Trustee (for themselves and on
behalf of Bondholders) (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Issuer and Trustee, their agents and counsel) allowed in such
judicial proceeding; and
(2) to collect and receive any money or other property payable or deliverable on any
such claims, and to distribute the same.
Section 9.9. Restoration of Positions. If the Issuer or Trustee have instituted any proceeding to
enforce any right or remedy under this Loan Agreement, and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Issuer or Trustee, then and in every such
case the Borrower, Trustee and Issuer shall, subject to any determination in the proceeding, be restored to
the positions they held prior to commencement of such proceedings, and thereafter all rights and remedies
of the Issuer shall continue as though no such proceeding had been instituted.
Section 9.10. Suits to Protect the Project. If the Borrower shall fail to do so after thirty (30) days
prior written notice from the Issuer or Trustee, the Issuer shall have power to institute and to maintain such
proceedings as it may deem expedient to prevent any impairment of the Project or a ny portion thereof, by
any acts which may be unlawful or in violation of this Loan Agreement, and such suits and proceedings as
the Issuer may deem expedient to protect its interests in the Project or any portion thereof, including power
to institute and maintain proceedings to restrain the enforcement of or compliance with any governmental
enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement of, or
compliance with, such enactment, rule or order would impair or adversely affect the Project or be prejudicial
to the interests of the Bondholders.
Section 9.11. Performance by Third Parties. The Issuer may permit third parties to perform any
and all acts or take such action as may be necessary for and on behalf of the Borrower to cure any Event of
Default hereunder. The acceptance by the Issuer or the Trustee of any such performance by third parties
shall not in any way diminish or absolve the Borrower of primary liability hereunder.
Section 9.12. Exercise of the Issuer’s Remedies by Trustee. Whenever any Event of Default
shall have happened and be subsisting the Trustee may, but except as otherwise provided in the Indenture
shall not be obliged to, exercise any or all of the rights of the Issuer under this Article 9, without notice to
the Issuer.
Section 9.13. Limited Recourse. Notwithstanding any provision or obligation to the contrary set
forth in this Loan Agreement, (1) the liability of the Borrower and any partner, trustee, director, officer,
employee, or agent thereof (collectively, “Borrower Parties”) under this Loan Agreement or the Security
Documents shall be limited to the property subject to the Security Documents or to such other security as
may from time to time be given or have been given for payment of the Borrower’s obligations under this
Loan Agreement and Bonds, and any judgment rendered against the Borrower Parties under this Loan
Agreement, the Security Documents and the Bonds shall be limited to the property subject to the Security
Documents and any other security so given for satisfaction thereof; and (2) no deficiency or other personal
judgment nor any order or decree of specific performance shall be sought or rendered against the Borrower
35
Parties, their successors, transferees or assigns, in any action or proceeding arising out of the Security
Documents, this Loan Agreement, the Bonds, or any judgment, order or decree rendered pursuant to any
such action or proceeding; provided, however, that nothing in this Loan Agreement, the Security
Documents or the Bonds shall limit the Issuer’s or Trustee’s ability to exercise any right or remedy that it
may have with respect to any property pledged or granted to the Issuer or the Trustee, or both of them, or
to exercise any right against the Borrower Parties or any other person or entity on account of any damage
caused by fraud or intentional misrepresentation by the Borrower or any intentional damage of the property
subject to the Security Documents. Furthermore, the Borrower shall be fully liable for the misapplication
of (a) proceeds paid prior to any foreclosure under any and all insurance policies, under which the Trustee
and/or the Issuer is named as insured, by reason of damage, loss or destruction to any portion of the property
subject to the Security Documents, to the full extent of such misapplied proceeds and awards; (b) proceeds
or awards resulting from the condemnation, or other taking in lieu of condemnation, prior to any foreclosure
of the property subject to the Security Documents, to the full extent of such misapplied proceeds and
awards; (c) rents, issues, profits and revenues received or applicable to a period subsequent to the
occurrence of a default under this Loan Agreement, the Security Documents and the Bonds but prior to
foreclosure; and (d) proceeds from the sale of all or any part of the property subject to the Security
Documents and any other proceeds that, under the terms hereof, should have been paid to the Issuer or the
Trustee. Furthermore, the Borrower shall be fully liable for the breach of the Borrower’s covenants
contained in Sections 3.2, 4.4(1), (2) and (3), 7.4, 9.5, 10.8, 10.11, 10.12, and 10.13 hereof; provided,
however, that in no event shall the Borrower or any Borrower Parties be personally liable for payment of
the principal of, premium, if any, or interest on the Bonds. The limit on the Borrower’s liability set forth
in this paragraph shall not, however, be construed, and is not intended in any way, to constitute a release,
in whole or in part, of the Borrower’s obligations under this Loan Agreement or a release, in whole or in
part, or an impairment of the lien and security interest of the Security Documents, this Loan Agreement and
the Bonds upon the properties described therein, or to preclude the Issuer or the Tru stee from foreclosing
pursuant to the Security Documents in case of any default or enforcing any other right of the Issuer or the
Trustee, or to alter, limit or affect the liability of any person or party who may now or hereafter or prior
hereto guarantee, or pledge, grant or assign its assets or collateral as security for, the obligations of the
Borrower under the Security Documents, this Loan Agreement and the Bonds.
(The remainder of this page is intentionally left blank.)
36
ARTICLE 10
GENERAL PROVISIONS
Section 10.1. 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 Loan Agreement, as provided herein, and after adequate provision has been made
for payment in full of the Bonds, in accordance with Article 7 of the Indenture, any Additional Charges
payable to the Trustee and Issuer, including Paying Agent’s fees and expenses, and all other amounts
required to be paid under this Loan Agreement and the Indenture, shall forthwith be paid to the Borrower.
Section 10.2. Notices. All notices, certificates or other communications hereunder shall be in
writing (except as otherwise expressly provided herein) and shall be sufficiently given and shall be deemed
given when mailed by first class mail, postage prepaid, with proper address as indicated below. The Issuer,
the Borrower, and Trustee may, by written notice given by each of them 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 Loan Agreement. Until otherwise provided by the respective parties, all notices,
certificates and communications to each of them shall be addressed as follows:
To the Issuer: Housing and Redevelopment Authority in and for the
City of Richfield, Minnesota
6700 Portland Avenue
Richfield, MN 55423
Attention: Executive Director
To the Borrower: Fort Snelling Leased Housing Associates I, LLLP
c/o Dominium Development & Acquisition, LLC
2905 Northwest Boulevard, Suite 150
Plymouth, MN 55441-7400
Attention: Owen Metz
With a copy to: Winthrop & Weinstine, P.A.
225 South Sixth Street, Suite 3600
Minneapolis, MN 55402-4629
Attention: John Nolde, Esq.
To the Trustee: U.S. Bank Trust Company, National Association
EP-MN-WS3C
60 Livingston Avenue, Third Floor
Saint Paul, MN 55107
Attention: Corporate Trust Services
To the Remarketing Agent: Colliers Securities LLC
90 South Seventh Street, Suite 4300
Minneapolis, MN 55402-4108
Attention: Frank J. Hogan
37
To the Original Purchaser of
the Bonds:
Colliers Securities LLC
90 South Seventh Street, Suite 4300
Minneapolis, MN 55402-4108
Attention: Frank J. Hogan
Section 10.3. Binding Effect. This Loan Agreement shall inure to the benefit of and shall be
binding upon the Issuer and Borrower and their respective successors and assigns.
Section 10.4. Severability. In the event any provisions of this Loan Agreement shall be held
invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision hereof.
Section 10.5. Amendments, Changes, and Modifications. Except as otherwise provided in this
Loan 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 Loan Agreement may not be
effectively amended, changed, modified, altered or terminated except in accordance with the provisions of
Article 11 of the Indenture, as applicable.
Section 10.6. Execution Counterparts. This Loan 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 10.7. Required Approvals. Consents and approvals required by this Loan 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 10.8. Limitation on Issuer’s Liability. No covenant, provision or agreement of the Issuer
herein or in the Bonds or in any other document executed by the Issuer (or any other party) in connection
with the issuance, sale and delivery of the Bonds, or any obligation herein or therein imposed upon the
Issuer or respecting the breach thereof, shall give rise to a pecuniary liability of the Issuer or the City or
their respective officers, employees or agents, or a charge against the general credit or taxing powers of the
Issuer or the City or shall obligate the Issuer or the City or their respective officers, employees or agents,
financially in any way except with respect to this Loan Agreement and the application of revenues therefrom
and the proceeds of the Bonds. The Bonds shall be and constitute only special, limited revenue obligations
of the Issuer, payable solely from the revenues pledged to the payment thereof pursuant to this Loan
Agreement and the Indenture. The Bonds do not now and shall never constitute an indebtedness, a general
or moral obligation or a loan of the credit of the Issuer, the City, the State or any political subdivision
thereof or a lien, charge or encumbrance, legal or equitable, against the general credit or taxing powers of
the Issuer or the City or any of the Issuer’s property. No failure of the Issuer to comply with any term,
condition, covenant or agreement therein shall subject the Issuer or the City or their respective officers,
employees or agents, to liability for any claim for damages, costs or other financial or pecuniary charges
except to the extent that the same can be paid or recovered from this Loan Agreement or revenues therefrom.
No execution on any claim, demand, cause of action or judgment shall be levied upon or collected from the
general credit, general funds or taxing powers of the Issuer or the City. In making the agreements,
provisions and covenants set forth herein, the Issuer has not obligated itself except with respect to this Loan
Agreement and the application of revenues hereunder as hereinabove provided. It is further understood and
agreed by the Borrower and the Lender that the Issuer and the City and their respective officers, employees
or agents shall incur no pecuniary liability hereunder and shall not be liable for any expenses related hereto,
including administrative expenses and the reasonable fees and disbursement of the Issuer’s attorney, Bond
Counsel, and fiscal consultant retained in connection therewith, all of which the Borrower agr ees to pay.
If, notwithstanding the provisions of this Section, the Issuer or the City or their respective officers,
38
employees or agents incurs any expense, or suffers any losses, claims or damages or incurs any liabilities
arising out of or relating to the transaction contemplated by this Loan Agreement and the other Related
Documents, other than as a result of the willful misconduct of such indemnitee, the Borrower will indemnify
and hold harmless the Issuer and the City and their respective officers, employees or agents from the same
and will reimburse the Issuer and its officers, employees or agents for any legal or other expenses incurred
by the Issuer and the City and their respective officers, employees or agents in relation thereto. This
covenant to indemnify, hold harmless and reimburse the Issuer and the City and their respective officers,
employees or agents shall survive delivery of and payment for the Bonds and expiration or termination of
this Loan Agreement. The liability of the Issuer is further restricted as provided in the Act.
Section 10.9. Representations of Borrower. All representations made in this Loan Agreement
by the Borrower are based on the best of the Borrower’s knowledge of the facts and law, and no such
representations are made in reliance upon any representations made or legal advice given by the Issuer, its
Bond Counsel, or any of its agents, officers or employees.
Section 10.10. Termination. At any time when no Bonds remain Outstanding and arrangements
satisfactory to the Issuer and Trustee have been made for the discharge of all liabilities under this Loan
Agreement, this Loan Agreement shall terminate. All obligations of the Borrower under Sections 7.4, 7.7,
7.8, 10.11 and 10.12 hereof shall survive termination of this Loan Agreement.
Section 10.11. Administrative Fees, Attorneys’ Fees and Costs. The Borrower shall reimburse
the Issuer, upon demand, for all costs and expenses, including without limitation attorneys’ fees, paid or
incurred by the Issuer in connection with (1) the discussion, negotiation, preparation, approval, execution
and delivery of the Bonds, the Indenture, this Loan Agreement, and the documents and instruments related
hereto or thereto; (2) any amendments or modifications to any of the foregoing documents, instruments or
agreements and the discussion, negotiation, preparation, approval, execution and delivery of any and all
documents necessary or desirable to effect such amendments or modifications; (3) the servicing and
administration of the Loan during the Term of Loan Agreement or thereafter; and (4) the enforcement by
the Issuer during the term hereof or thereafter of any of the rights or remedies of the Issuer hereunder or
under the foregoing documents, or any document, instrument or agreement related hereto or thereto,
including, without limitation, costs and expenses of collection in the Event of Default, whether or not suit
is filed with respect thereto.
Section 10.12. Release. The Borrower hereby acknowledges and agrees that the Issuer, its
officers, employees and agents shall not be liable to the Borrower, and hereby releases and discharges the
Issuer, its officers, employees and agents from any liability, for any and all losses, costs, expenses
(including attorneys’ fees), damages, judgments, claims and causes of action, paid, incurred or sustained
by the Borrower as a result of or relating to any action, or failure or refusal to act, on the part of the Trustee
or any other party with respect to the Bonds, the Indenture, this Loan Agreement, or the documents and
transactions related hereto or thereto or contemplated hereby or thereby, including, without limitation, the
exercise by the Trustee or any third party (other than the Trustee) of any of its rights or remedies pursuant
to any of such documents.
Section 10.13. Audit Expenses. The Borrower agrees to pay any costs incurred by the Issuer,
including fees of Issuer’s counsel, as a result of the Issuer’s compliance with an audit or inquiry of any
kind, random or otherwise, by the Internal Revenue Service, the Minnesota Department of Revenue, the
Minnesota Office of the State Auditor, or any other governmental agency with respect to the Bonds, the
Borrower, or the Project.
S-1
IN WITNESS WHEREOF, the Issuer and the Borrower have caused this Loan Agreement to be
executed by their duly authorized officers as of the date and year first written above.
HOUSING AND REDEVELOPMENT AUTHORITY
IN AND FOR THE CITY OF RICHFIELD,
MINNESOTA
By
Its Chair
By
Its Executive Director
S-2
Execution page of the Borrower to the Loan Agreement, dated as of the date and year first written above.
FORT SNELLING LEASED HOUSING
ASSOCIATES I, LLLP, a Minnesota limited liability
limited partnership
By: Fort Snelling Leased Housing Associates I, LLC
Its: General Partner
By:
Name: Owen C. Metz
Its: Vice President
A-1
EXHIBIT A
LEGAL DESCRIPTION
PARCEL 1 (Area J):
That part of Section 29, Township 28 North, Range 23 West, Hennepin County, Minnesota, described as
follows:
Commencing at the Northwest corner of said Section 29; thence on an assumed bearing of South 00 degrees
07 minutes 15 seconds East along the West line of said Section 29, a distance of 771.38 feet; thence South
60 degrees 25 minutes 10 seconds East 2326.03 feet; thence South 46 degrees 05 minutes 08 seconds East
166.37 feet; thence North 37 degrees 54 minutes 07 seconds East 218.84 feet; thence South 60 degrees 10
minutes 22 seconds East 1820.75 feet to the point of beginning of the line to be described; thence North
23 degrees 24 minutes 45 seconds East 1564.32 feet; thence Northeasterly 566.88 feet along a tangential
curve, concave to the Southeast, having a radius of 1502.00 feet and a central angle of 21 degrees 37
minutes 28 seconds; thence North 45 degrees 02 minutes 13 seconds East, tangent to said curve 697.91
feet to a Westerly right-of-way line of State Highway Number 5; thence Southerly and Southwesterly along
said Westerly right-of-way line of State Highway Number 5 to the point of intersection with a line bearing
South 60 degrees 10 minutes 22 seconds East from said point of beginning; thence North 60 degrees 10
minutes 22 seconds West 622.24 feet to the point of beginning.
Hennepin County, Minnesota
Abstract Property
PARCEL 2 (Officer’s Row):
That part of Section 29, Township 28 North, Range 23 West, Hennepin County, Minnesota, described as
follows:
Commencing at the Northwest corner of said Section 29; thence on an assumed bearing of South 00 degrees
07 minutes 15 seconds East along the West line of said Section 29, a distance of 771.38 feet; thence South
60 degrees 25 minutes 10 seconds East 2326.03 feet; thence South 46 degrees 05 minutes 08 seconds East
166.37 feet; thence North 37 degrees 54 minutes 07 seconds East 218.84 feet; thence South 60 degrees 10
minutes 22 seconds East 1439.04 feet to the point of beginning of the land to be described; thence continue
South 60 degrees 10 minutes 22 seconds East 341.45 feet; thence North 23 degrees 24 minutes 45 seconds
East 1075.01 feet; thence North 66 degrees 38 minutes 47 seconds West 339.32 feet; thence South 23
degrees 24 minutes 45 seconds West 1036.52 to the point of beginning.
Hennepin County, Minnesota
Abstract Property
PARCEL 3 (BOQ):
That part of Section 29, Township 28 North, Range 23 West, Hennepin County, Minnesota, described as
follows:
Commencing at the Northwest corner of said Section 29; thence on an assumed bearing of South 00 degrees
07 minutes 15 seconds East along the West line of said Section 29, a distance of 771.38 feet; thence South
A-2
60 degrees 25 minutes 10 seconds East 2326.03 feet; thence South 46 degrees 05 minutes 08 seconds East
166.37 feet; thence North 37 degrees 54 minutes 07 seconds East 218.84 feet; thence South 60 degrees 10
minutes 22 seconds East 1439.04 feet; thence North 23 degrees 24 minutes 45 seconds East 1036.52 feet;
thence North 66 degrees 38 minutes 47 seconds West 30.00 feet to the point of beginning of the land to be
described; thence continuing North 66 degrees 38 minutes 47 seconds West 237.21 feet; thence South 15
degrees 35 minutes 58 seconds West 98.99 feet; thence South 18 degrees 02 minutes 36 seconds East 90.00
feet; thence South 66 degrees 38 minutes 47 seconds East 164.17 feet; thence North 23 degrees 24 minutes
45 seconds East 165.60 feet to the point of beginning.
Hennepin County, Minnesota
Abstract Property
B-1
EXHIBIT B
FORM OF DISBURSEMENT REQUEST
DISBURSEMENT REQUEST NO. _____ OF FUNDS
FROM THE PROJECT FUND
Date of Disbursement Request: _________________, 20___
Pursuant to Section 3.5 of the Loan Agreement, dated as of June 1, 2023 (the “Loan Agreement”),
between the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota (the
“Issuer”) and Fort Snelling Leased Housing Associates I, LLLP, a Minnesota limited liability limited
partnership (the “Borrower”), relating to the Issuer’s Multifamily Housing Revenue Bonds (Fort Snelling
Upper Post Project), Series 2023 (the “Bonds”), in the original aggregate principal amount of $10,000,000,
the undersigned authorized representative of the Borrower (the “Representative”) hereby requests and
authorizes U.S. Bank Trust Company, National Association, a national banking association (the “Trustee”),
as depository of the Project Fund created by the Indenture of Trust, dated as of June 1, 2023 (the
“Indenture”), between the Issuer and the Trustee, to disburse out of the moneys deposited in the Project
Fund in the amount(s) and to the person(s) set forth in this Disbursement Request. Capitalized terms used
herein and not otherwise defined herein shall have the meanings set forth in the Indenture.
To induce the Trustee to release moneys deposited in the Project Fund pursuant to the terms of the
Indenture and the Loan Agreement in the amounts(s) and to the person(s) set forth herein and in the
Disbursement Schedule attached hereto, the undersigned Representative represents, warrants and certifies
to the Issuer and the Trustee:
(a) All items for which disbursement is requested thereunder either are presently due and
payable, constitute Project Costs properly incurred by the Borrower in connection with the
Project being financed with the proceeds of the Loan, or are reimbursable Project Costs
properly chargeable against the Loan; and in each case none of the items for which
disbursement is requested has formed the basis for any disbursement heretofore made from
the Project Fund.
(b) Each such item is or was necessary in connection with the acquisition, rehabilitation,
renovation and equipping of the Dwelling Units (as defined in the Regulatory Agreement)
of the Project.
(c) The costs specified in the Disbursement Schedule attached hereto, when added to all
previous disbursements under the Loan, will result in at least ninety-five percent (95%) of
the aggregate amount of all disbursements having been used to pay or reimburse the
Borrower for amounts which are Qualified Project Costs (as defined in the Regulatory
Agreement).
(d) To the knowledge of the undersigned, there is no current or existing event of default
pursuant to the terms of the Loan Agreement or the Regulatory Agreement and no event
exists which by notice or passage of time or both would constitute an event of default under
any of the foregoing documents.
(e) No representation or warranty of the Borrower contained in the Loan Agreement or the
Regulatory Agreement is materially incorrect or inaccurate, except as the Borrower has set
B-2
forth in writing, and there has been no event of default under the terms of any of those
documents and which is continuing and no event shall exist which by notice, passage of
time or both would constitute an event of default under any of those documents.
(f) Each item for which payment or reimbursement is requested either is or was necessary in
connection with the Project, qualifies as a Project Cost under the Loan Agreement and, if
for the rehabilitation, renovation, construction and equipping of the Project, was made or
incurred in accordance with the plans and specifications for the Project and none of such
items has formed the basis for any previous payment from the Project Fund.
(g) There is no outstanding indebtedness known, after due inquiry, for labor, wages, materials
or supplies which, if unpaid, might become the basis of a vendor’s lien, or a mechanics’
materialmen’s, statutory or other similar lien upon the Project or any part thereof, other
than indebtedness then certified for payment or diligently being contested in good faith by
the Borrower and that each contractor, subcontractor and materialman has filed with the
Borrower receipts or waivers of liens for all amounts theretofore certified for payment, or
any amount therein certified for reimbursement to the Borrower for payment, for work,
materials and equipment furnished by him or that there is on file with the construction
manager a cancelled check endorsed by the contractor, subcontractor or materialman
evidencing such payment.
This statement constitutes the approval of the Borrower of the disbursement hereby requested and
authorized.
FORT SNELLING LEASED HOUSING
ASSOCIATES I, LLLP, a Minnesota limited liability
limited partnership
By: Fort Snelling Leased Housing Associates I, LLC,
a Minnesota limited liability company
Its: General Partner
By:
Name:
Its:
B-3
DISBURSEMENT SCHEDULE
PAYEE AMOUNT PURPOSE
RC125-394 (JAE)
871941v2
Second Draft
May 27, 2023
INDENTURE OF TRUST
between
HOUSING AND REDEVELOPMENT AUTHORITY
IN AND FOR THE
CITY OF RICHFIELD, MINNESOTA,
as Issuer
and
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,
as Trustee
Dated as of June 1, 2023
Relating to:
$10,000,000
Housing and Redevelopment Authority
in and for the
City of Richfield, Minnesota
Subordinate Multifamily Housing Revenue Bonds
(Fort Snelling Upper Post Project)
Series 2023
This instrument was drafted by:
Kennedy & Graven, Chartered (JAE)
150 South Fifth Street, Suite 700
Minneapolis, MN 55402-1299
i
TABLE OF CONTENTS
PAGE
ARTICLE 1
Definitions and General Provisions
Section 1.1 Definitions ......................................................................................................................... 4
Section 1.2 Rules of Interpretation ..................................................................................................... 16
ARTICLE 2
The Bonds
Section 2.1 Authorized Amount and Form of Bonds ......................................................................... 18
Section 2.2 Initial Issue ....................................................................................................................... 18
Section 2.3 Execution ......................................................................................................................... 19
Section 2.4 Authentication .................................................................................................................. 19
Section 2.5 Delivery of Initial Issue ................................................................................................... 20
Section 2.6 Mutilated, Lost, Stolen or Destroyed Bonds .................................................................... 20
Section 2.7 Ownership of Bonds ........................................................................................................ 21
Section 2.8 Preparation of Bonds ....................................................................................................... 21
Section 2.9 Registration, Transfer and Exchange of Bonds ............................................................... 21
Section 2.10 Interest Rights Preserved ................................................................................................. 22
Section 2.11 Cancellation of Bonds ...................................................................................................... 22
Section 2.12 Book-Entry System .......................................................................................................... 22
Section 2.13 Termination of Book-Entry Only System ........................................................................ 24
ARTICLE 3
Redemption and Remarketing of Bonds Before Maturity
Section 3.1 Redemption Provisions .................................................................................................... 25
Section 3.2 Partial Redemption of Bonds ........................................................................................... 25
Section 3.3 Procedure for Redemption ............................................................................................... 26
Section 3.4 Payment of Bonds Upon Redemption .............................................................................. 27
Section 3.5 No Partial Redemption After Default .............................................................................. 28
Section 3.6 Cancellation of Redeemed Bonds .................................................................................... 28
Section 3.7 Mandatory Purchase of Bonds on Mandatory Tender Date ............................................. 28
Section 3.8 Remarketing of Bonds ..................................................................................................... 29
Section 3.9 Establishment and Notice of Remarketing Rate .............................................................. 31
Section 3.10 Cancellation of Bonds ...................................................................................................... 31
Section 3.11 Concerning the Remarketing Agent ................................................................................. 31
Section 3.12 Qualifications of Remarketing Agent .............................................................................. 32
Section 3.13 Notices to Remarketing Notice Parties ............................................................................ 32
ARTICLE 4
General Covenants
Section 4.1 Payment of Principal, Premium and Interest ................................................................... 33
Section 4.2 Performance of and Authority for Covenants .................................................................. 33
Section 4.3 Instruments of Further Assurance .................................................................................... 33
Section 4.4 Recording and Filing ....................................................................................................... 33
ii
Section 4.5 Books and Records .......................................................................................................... 34
Section 4.6 Bondholders’ Access to Bond Register ......................................................................... 34
Section 4.7 Rights under Loan Agreement ......................................................................................... 34
ARTICLE 5
Funds and Accounts
Section 5.1 “Trust Money” Defined ................................................................................................... 35
Section 5.2 Project Fund ..................................................................................................................... 35
Section 5.3 Bond Fund........................................................................................................................ 36
Section 5.4 Capitalized Interest Fund ................................................................................................. 37
Section 5.5 Rebate Fund ..................................................................................................................... 37
Section 5.6 Deposit of Funds with Paying Agent ............................................................................... 39
ARTICLE 6
Investments
Section 6.1 Investments by Trustee .................................................................................................... 41
Section 6.2 Return on Investments ..................................................................................................... 42
Section 6.3 Computation of Balances in Funds .................................................................................. 42
Section 6.4 Rebate to United States .................................................................................................... 43
ARTICLE 7
Discharge of Lien
Section 7.1 Payment of Bonds; Satisfaction and Discharge of Bonds and
Obligation to Bondholders ............................................................................................... 44
Section 7.2 Discharge of Indenture ..................................................................................................... 45
ARTICLE 8
Default Provisions and Remedies
Section 8.1 Events of Default ............................................................................................................. 46
Section 8.2 Acceleration ..................................................................................................................... 46
Section 8.3 Remedies .......................................................................................................................... 47
Section 8.4 Direction of Proceedings by Bondholders ....................................................................... 47
Section 8.5 Waiver of Stay or Extension Laws .................................................................................. 48
Section 8.6 Priority of Payment and Application of Money ............................................................... 48
Section 8.7 Remedies Vested in Trustee............................................................................................. 49
Section 8.8 Rights and Remedies of Holders ...................................................................................... 49
Section 8.9 Termination of Proceedings ............................................................................................. 49
Section 8.10 Waiver of an Event of Default ......................................................................................... 50
Section 8.11 Borrower as Agent of Issuer ............................................................................................ 50
ARTICLE 9
The Trustee
Section 9.1 Acceptance of Trustee ..................................................................................................... 51
Section 9.2 Trustee’s Fees, Charges and Expenses ............................................................................ 53
Section 9.3 Notice to Holders of Default ............................................................................................ 54
Section 9.4 Intervention by Trustee .................................................................................................... 54
iii
Section 9.5 Successor Trustee ............................................................................................................ 54
Section 9.6 Resignation by Trustee .................................................................................................... 54
Section 9.7 Removal of Trustee .......................................................................................................... 54
Section 9.8 Appointment of Successor Trustee .................................................................................. 54
Section 9.9 Acceptance by Successor Trustees .................................................................................. 55
Section 9.10 Right of Trustee to Pay Taxes and Other Charges ........................................................... 55
Section 9.11 Trustee Protected in Relying upon Resolutions ............................................................... 55
Section 9.12 Successor Trustee as Custodian of Bond Fund and Paying Agent .................................. 55
Section 9.13 Co-Trustee ....................................................................................................................... 55
Section 9.14 Obligation to Trustee as to Reporting .............................................................................. 57
Section 9.15 Successor Paying Agent ................................................................................................... 57
Section 9.16 Confirmation of Trustee ................................................................................................... 57
ARTICLE 10
Supplemental Indentures
Section 10.1 Supplemental Indentures Not Requiring Consent of Bondholders .................................. 59
Section 10.2 Supplemental Indentures Requiring Consent of Holders ................................................. 59
Section 10.3 Rights of Trustee .............................................................................................................. 60
ARTICLE 11
Amendments to Loan Agreement and Other Related Documents
Section 11.1 Amendments Not Requiring Bondholder Consent .......................................................... 61
Section 11.2 Amendments Requiring Bondholder Consent ................................................................. 61
ARTICLE 12
Miscellaneous Provisions
Section 12.1 Consent of Holders .......................................................................................................... 62
Section 12.2 Rights under Indenture ..................................................................................................... 62
Section 12.3 Meetings of Bondholders ................................................................................................. 62
Section 12.4 Severability ...................................................................................................................... 64
Section 12.5 Notices ............................................................................................................................. 65
Section 12.6 Required Approvals ......................................................................................................... 65
Section 12.7 Counterparts ..................................................................................................................... 65
Section 12.8 Limitation of Liability of Issuer, City and Their Officers, Employees and Agents ......... 65
Section 12.9 Amounts Remaining in Funds ......................................................................................... 65
Section 12.10 [Reserved] ........................................................................................................................ 66
Section 12.11 Payments Due on Saturdays, Sundays and Holidays ....................................................... 66
Section 12.12 Binding Effect .................................................................................................................. 66
Section 12.13 Governing Law ................................................................................................................ 66
Section 12.14 Security Advice Waiver ................................................................................................... 66
Section 12.15 Patriot Act ........................................................................................................................ 66
SIGNATURES ....................................................................................................................................... S-1
EXHIBIT A Form of Bond ................................................................................................................ A-1
INDENTURE OF TRUST
THIS INDENTURE OF TRUST, dated as of June 1, 2023 (the “Indenture”), is between the
HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD,
MINNESOTA, a public body corporate and politic under the laws of the State of Minnesota (the “Issuer”),
and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association,
authorized to accept and execute trusts of the character herein set out, with a principal corporate trust office
in Saint Paul, Minnesota (the “Trustee”). Capitalized terms used herein shall have the meanings provided
in Section 1.1 hereof.
WITNESSETH
WHEREAS, Minnesota Statutes, Chapters 462C and 474A, as amended (the “Act”), authorize the
Issuer to issue revenue obligations to finance the acquisition, construction, rehabilitation, and equipping of
multifamily housing developments; and
WHEREAS, in accordance with Minnesota Statutes, Section 471.656, as amended, a municipality
is authorized to issue obligations to finance the acquisition or improvement of property located outside of
the corporate boundaries of such municipality if the obligations are issued under a joint powers agreement
between the governmental unit issuing the obligations and the governmental unit in which the property to
be acquired or improved is located; and
WHEREAS, pursuant to Minnesota Statutes, Section 471.59, as amended, by the terms of a joint
powers agreement entered into through action of their gove rning bodies, two governmental units may
jointly or cooperatively exercise any power common to the contracting parties or any similar powers,
including those which are the same except for the territorial limits within which they may be exercised and
the joint powers agreement may provide for the exercise of such powers by one or more of the participating
governmental units on behalf of the other participating units; and
WHEREAS, on November 25, 2020, the Hennepin County Housing and Redevelopment Authority
(the “County HRA”) issued its Multifamily Housing Revenue Note (Fort Snelling Upper Post Project),
Series 2020 (the “Series 2020 Note”), in the original aggregate principal amount of $88,000,000 and loaned
the proceeds thereof to the Borrower to finance all or a portion of the costs of the leasehold acquisition,
rehabilitation and/or construction, and equipping of an approximately 192-unit multifamily housing rental
facility and facilities functionally related and subordinate thereto located at 58 Taylor Avenue, Unorganized
Territory of Fort Snelling, Minnesota 55111, known as the Fort Snelling Upper Post Project (the “2020
Project”), of which at least forty percent (40%) of the units are available to individuals and families with
incomes at or below (60%) of the area median income; and
WHEREAS, the Borrower has proposed to finance additional costs to complete the construction
and/or rehabilitation of the 2020 Project (the “2023 Project”); and
WHEREAS, the Issuer has agreed to issue its Subordinate Multifamily Housing Revenue Bonds
(Fort Snelling Upper Post Project), Series 2023 (the “Bonds”), in the original aggregate principal amount
of $10,000,000, pursuant to the Act, Minnesota Statutes, Sections 471.59 and 471.656, as amended (the
“Joint Powers Act”), and a resolution adopted by the Board of Commissioners of the Issuer on June 5, 2023;
and
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WHEREAS, to satisfy the requirements of the Joint Powers Act, the Issuer and Hennepin County,
Minnesota (the “County”) will enter into a Cooperative Agreement, dated as of June 1, 2023, pursuant to
which the County will consent to the issuance of the Bonds by the Issuer to finance the 2023 Project; and
WHEREAS, as security for the payment of the Bonds, the Issuer has agreed to assign and pledge
to the Trustee, among other things, all right, title and interest of the Issuer in and to the Loan Agreement
(except the Unassigned Issuer’s Rights), including the Basic Payments; and
WHEREAS, as additional security for the Bonds, the Borrower has caused the Security Documents
to be executed and delivered; and
WHEREAS, the Issuer, the Borrower, Fort Snelling Leased Housing Associates Master Tenant I,
LLLP, a Minnesota limited liability limited partnership and the master tenant, and the Lender will enter
into a Regulatory Agreement, dated the date of issuance of the Bonds, relating to the Borrower’s compliance
with certain federal and state requirements applicable to the 2023 Project; and
WHEREAS, all things necessary to make the Bonds, when authenticated by the Trustee and issued
as in this Indenture provided, valid, binding and legal limited obligations of the Issu er 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 creation, execution and delivery of this Indenture, and the creation, execution
and issuance of said Bonds, subject to the terms hereof, have in all respects been duly authorized; and
NOW THEREFORE, KNOW ALL PERSONS BY THESE PRESENTS, THIS INDENTURE
WITNESSETH:
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 of and interest and premium, if any, 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 grant a security interest in, assign, transfer in trust, and pledge to the Trustee,
and to its successors in trust, and to them and their assigns forever, the following:
FIRST
All rights, title, interest and privileges of the Issuer in, to and under the Loan Agreement, including
but not limited to all sums which the Issuer is entitled to receive from the Borrower pursuant to the Loan
Agreement and in particular the Basic Payments (but excluding the Unassigned Issuer’s Rights), and all
other sums (including Bond proceeds) which are required to be deposited in the trust accounts in accordance
with Article 5 hereof, except for the Rebate Fund which is not a part of the Trust Estate, and the earnings
derived from the investment of any of the foregoing sums as provided herein; and
SECOND
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, including but not limited to the interests of the Issuer, if any, under the Collateral
Documents (including without limitation the proceeds of the Assigned Capital Contributions), 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
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THIRD
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 hold and apply the sa me as additional
security hereunder subject to the terms hereof.
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;
SUBJECT TO the rights of the Borrower under the Loan Agreement;
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 lien or otherwise of any of the
Bonds over any of the others except as otherwise provided 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 under Article 5 hereof or shall provide, as permitted hereby, for the payment thereof
by depositing with the Trustee sums sufficient for 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, terminate and be void except as
otherwise provided herein; otherwise, this Indenture shall be and remain in full force and effect.
UNDER THE PROVISIONS OF THE ACT the Bonds may not be payable from or be a charge
upon any funds of the Issuer other than the revenue pledged to the payment thereof nor shall the Issuer be
subject to any pecuniary liability thereon and no Holder or Holders of the Bonds shall ever have the right
to compel any exercise of the taxing power of the Issuer or the City to pay any Bonds or the interest and
premium, if any, thereon, or to enforce payment thereof against any property of the Issuer or the City,
except as above provided; the Bonds shall not constitute a charge, lien or encumbrance, legal or equitable,
upon any property of the Issuer or the City, except as above provided; and no Bond shall constitute a debt
of the Issuer or the City within the meaning of any constitutional or statutory limitation, but nothing in the
Act impairs the rights of the Holders of Bonds issued under this Indenture to enforce the covenants made
for the security thereof as provided in this Indenture and in the Act, and by authority of the Act the Issuer
and the Trustee mutually covenant and agree, to the extent specifically provided herein, for the equal and
proportionate benefit of all Holders of the Bonds, as follows:
(The remainder of this page is intentionally left blank.)
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ARTICLE 1
DEFINITIONS 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 Agreement
shall have the same meanings when used herein as assigned them in the Loan Agreement unless the context
or use thereof indicates another or different meaning or intent:
Act: Minnesota Statutes, Chapters 462C and 474A, as amended.
Act of Bankruptcy: any of the following events:
(1) if the Borrower shall (a) apply for or consent to the appointment of, or the taking
of possession by, a receiver, custodian, trustee, liquidator or the like, or of all or a substantial part
of its property; (b) commence a voluntary case under the Federal Bankruptcy Code (as now or
hereafter in effect); or (c) file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts; or
(2) a proceeding or case shall be commenced, without the application or consent of
the Borrower, in any court of competent jurisdiction, and shall not be dismissed, vacated, or stayed
within sixty (60) days after commencement, seeking (a) the liquidation, reorganization, dissolution,
winding-up, or the composition or adjustment of its debts; (b) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Borrower, or of all or any substantial part of its assets; or
(c) similar relief in respect of the Borrower under any law relating to bankruptcy, insolvency,
reorganization, winding-up or composition or adjustment of debts.
Additional Charges: the payments required by Section 4.4 of the Loan Agreement.
Affiliated Party: as to a particular Person, any Person directly or indirectly controlling or controlled
by or under direct or indirect common control with such specified Person. “Control”, when used with
respect to a particular Person, means the possession, directly or indirectly, of the power to direct
management and policies of such Person whether through the ownership of voting stock, by contract or
otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
Assigned Capital Contributions: (1) the fifth capital installment, which is in the expected amount
of $22,653,792, (2) the sixth capital installment, which is in the expected amount of $24,025,743, and
(3) the seventh capital installment, which is in the expected amount of $11,603,256, of the equity
contribution to be made by the Investor Limited Partner to the Borrower, pursuant to Section 3.2 of the
Partnership Agreement, but only to the extent such installments are dedicated in the Partnership Agreement
towards redemption or repayment of the then Outstanding Bonds in full, and subject to the conditions, terms
and provisions of the Partnership Agreement.
Assignment of Partnership Interest and Capital Contributions: the Assignment of Partnership
Interest and Capital Contributions, dated as of June 1, 2023, by the Borrower and the General Partner in
favor of the Trustee, and acknowledged by the Investor Limited Partner, whereby the Borrower and the
General Partner assign to the Trustee all right, title and interest of the General Partner in the Borrower,
including all ownership and partnership rights of the General Partner as partner under the Partnership
Agreement and all of the Borrower’s rights, now existing or hereafter arising, to receive the Assigned
Borrower Capital Contributions under the Partnership Agreement.
5
Authorized Denominations: $25,000 or any integral multiple of $5,000 in excess thereof.
Basic Payments: the payments required by Section 4.2 of the Loan Agreement.
Beneficial Owner: the Person for which a DTC Participant holds an interest in the Bonds as shown
on the books and records of the DTC Participant.
Bond Counsel: Kennedy & Graven, Chartered, and any other firm of nationally recognized bond
counsel experienced in tax-exempt bond financing selected by the Issuer and acceptable to the Borrower.
Bond Fund: the Bond Fund so designated in Section 5.3 hereof from which the principal of and
interest on the Series are payable.
Bondholder or Holder: a Person in whose name a Bond is registered in the Bond Register.
Bond Purchase Agreement: the Bond Purchase Agreement, dated June ___, 2023, between the
Issuer, the Borrower, and the Underwriter pursuant to which the Underwriter agrees to purchase the Bonds.
Bond Register: the register maintained by the Trustee pursuant to Section 2.9 hereof.
Bonds: the Subordinate Multifamily Housing Revenue Bonds (Fort Snelling Upper Post Project),
Series 2023, issued by the Issuer on the Issue Date in the original aggregate principal amount of
$10,000,000.
Bond Year: any twelve (12) month period ending on the anniversary of the Issue Date.
Book-Entry Form or Book-Entry System: with respect to the Bonds, a form or system, as applicable,
under which (1) physical Bond certificates in fully registered form are issued only to a Depository or its
nominee, with the physical Bond certificates “immobilized” in the custody of the Depository; and (2) the
ownership of book-entry interests in Bonds and payments thereon may be transferred only through a book
entry made by Persons other than the Issuer or the Trustee. The records maintained by Persons other than
the Issuer or the Trustee constitute the written record that identifies the owners, and records the transfer, of
book-entry interests in the Bonds and payments thereon;
Borrower: Fort Snelling Leased Housing Associates I, LLLP, a Minnesota limited liability limited
partnership, and its successors and assigns or other Person which may assume its obligations under the
Loan Agreement.
Business Day: any day on which the Trustee or the Federal Reserve Bank of New York is not
authorized by law to close.
Capitalized Interest Fund: the fund so designated in Section 5.4 hereof from which interest on the
Bonds is payable.
Cede & Co.: initially, Cede & Co., as nominee of DTC, and any successor or subsequent such
nominee designated by DTC respecting DTC’s functions as book-entry depository for any Bond or Bonds.
City: the City of Richfield, Minnesota, a home rule city and political subdivision organized and
existing under its Charter and the Constitution and laws of the State.
6
Code: the Internal Revenue Code of 1986, as amended, and all applicable Treasury Regulations.
Collateral Documents: the Security Documents and any other written instrument other than the
Loan Agreement and this Indenture, whereby any property or interest in property of any kind is granted,
pledged, conveyed, assigned, or transferred to the Issuer or Trustee, or both, as security for payment of the
Bonds or performance by the Borrower of its obligations under the Loan Agreement.
Completion Date: the date that the Borrower certifies the acquisition, rehabilitation, renovation,
construction and equipping of the Project is complete pursuant to Section 3.6 of the Loan Agreement.
Condemnation or eminent domain: the taking or requisition by governmental authority or by a
Person, acting under governmental authority and a conveyance made under threat of Condemnation, and
“Condemnation award” shall refer to payment for property condemned or conveyed under threat of
Condemnation.
Continuing Disclosure Agreement: the Continuing Disclosure Agreement, dated as of June 1, 2023,
between the Borrower and the Dissemination Agent, as it may be amended from time to time.
County: Hennepin County, Minnesota.
County HRA: the Hennepin County Housing and Redevelopment Authority, a housing and
redevelopment authority and political subdivision organized and existing under the Constitution and laws
of the State, as the issuer of the Series 2020 Note.
Date of Loan Agreement: June 1, 2023.
Defaulted Interest: this term has the meaning stated in Section 2.2 hereof.
Depository: with respect to the Bonds, DTC, until a successor Depository shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter, Depository shall mean the successor
Depository. Any Depository shall be a securities depository that is a clearing agency under federal law
operating and maintaining, with its participants or otherwise, a Book-Entry System to record ownership of
book-entry interests in the Bonds or payments thereon, and to effect transfers of book-entry interests in the
Bonds.
Determination of Taxability: a determination that the interest income on any Bond is included in
gross income for federal income tax purposes under Section 103 of the Code for any reason, other than that
the Holder is a Substantial User of the Project or a Related Person thereto, which determination shall be
deemed to have been made upon the occurrence of the first to occur of the following:
(1) the date on which any change in law or regulation becomes effective or on which
the Internal Revenue Service has issued any private ruling, technical advice or any other written
communication to the effect that the interest income on any of the Bonds is included in gross
income for federal income tax purposes; or
(2) the date on which the Borrower shall receive notice from the Trustee or the Issuer
in writing that the Trustee has been advised by any Holder that the Internal Revenue Service has
issued a thirty (30) day letter or other notice which asserts that the interest on such Bond is included
in gross income for federal income tax purposes;
7
Disbursement Request: the written request by the Borrower for the disbursement of moneys from
the Project Fund in substantially the form attached as Exhibit B to the Loan Agreement.
Disbursing Agreement: the [Construction Loan Disbursement Agreement], dated the Issue Date,
between the Trustee, the Borrower, the Title Company, and __________________________, as it may be
amended form time to time.
Discharge Date: the date on which all Outstanding Bonds are discharged under Article 7 hereof.
Dissemination Agent: U.S. Bank Trust Company, National Association, a national banking
association, its successors and assigns.
DTC: The Depository Trust Company, New York, New York, a limited purpose trust company
organized under the laws of the State of New York, or any successor book-entry securities depository for
the Bonds appointed pursuant to Section 2.13 hereof.
DTC Participants: those broker-dealers, banks and other financial institutions from time to time
for which DTC holds bonds or securities as depository.
Event of Default: any of the events set forth in Section 8.1 hereof or Section 9.1 of the Loan
Agreement.
Federal Bankruptcy Code: the United States Bankruptcy Reform Act of 1978, as amended, or any
similar or succeeding federal bankruptcy law.
Final Maturity Date: the Stated Maturity, Discharge Date or Redemption Date on which all
Outstanding Bonds either mature, are redeemed or discharged, whichever is earliest.
General Partner: Fort Snelling Leased Housing Associates I, LLC, a Minnesota limited liability
company, its permitted successors and assigns.
Government Obligations: direct general obligations of, or obligations the prompt payment of the
principal of and the interest on which are fully and unconditionally guaranteed by, the United States of
America.
Guarantors: together, Dominium Holdings I, LLC, a Minnesota limited liability company, and
Dominium Holdings II, LLC, a Minnesota limited liability company, their successors and assigns.
Guaranty: the Guaranty Agreement, dated as of June 1, 2023, by the Guarantors in favor of the
Trustee, as it may be amended from time to time.
Holder or Bondholder: the Person in whose name a Bond is registered in the Bond Register.
Indenture: this Indenture of Trust, dated as of June 1, 2023, between the Issuer and the Trustee, as
the same may from time to time be amended or supplemented as herein provided.
Independent: when used with reference to an attorney, engineer, architect, certified public
accountant, consultant or other professional person, a person who (1) is in fact independent; (2) does not
have any material financial interest in the Borrower or the transaction to which his, her, or their certificate
or opinion relates (other than payment to be received for professional services rendered); and (3) is not
connected with the Issuer or the Borrower as an officer, director or employee.
8
Independent Accountant: a certified public accountant or firm of certified public accountants
registered and qualified to practice as such under the laws of the State, who does not have any direct
financial interest in the Borrower, other than the payment to be received under contract for services
performed and who is not connected with the Borrower as an officer, employee, underwriter, partner,
affiliate, subsidiary, or person performing similar functions and is not a trustee or director of the Borrower .
Independent Counsel: any attorney duly admitted to practice law before the highest court of any
state, who may be counsel to the Borrower or the Issuer but who may not be an officer or a full-time
employee of the Borrower or the Issuer.
Independent Engineer: an Independent engineer or engineering firm or an Independent architect
or architectural firm qualified to practice the profession of engineering or architecture under the laws of the
State.
Initial Mandatory Tender Date: July 1, 2025.
Initial Remarketing Date: the Initial Mandatory Tender Date, but only if the conditions for the
remarketing the Bonds on such date as provided in Section 3.8 hereof are satisfied.
Interest Payment Date: each January 1 and July 1, commencing January 1, 2024 and continuing
until payment in full of the Bonds.
Investor Limited Partner: collectively, USB LIHTC Fund 2021-6, LLC, a Delaware limited
liability company, USB LIHTC-NMTC Fund 2022-1, LLC, a Delaware limited liability company, and U.S.
Bancorp Community Development Corporation, a Minnesota corporation.
Issuance Expenses: any and all costs and expenses relating to the issuance, sale and delivery of the
Bonds incurred or payable by the Borrower, including but not limited to the Underwriter’s discount, all fees
and expenses of legal counsel, the Trustee, financial consultants, feasibility consultants and accountants,
any fee to be paid to the Issuer, the preparation and printing of the Loan Agreement, this Indenture, the
Disbursing Agreement, the Regulatory Agreement, the Cooperative Agreement, the Security Documents,
any preliminary and final official statement or offering memorandum, the Bonds and all other related
closing documents, the costs of rating the Bonds, and all other expenses relating to the issuance, sale and
delivery of the Bonds and any other costs which are treated as “issuance costs” within the meaning of
Section 147(g) of the Code.
Issue Date: June ___, 2023, which is the date on which there is delivery by the Issuer of and
payment by the Underwriter for the Bonds.
Issuer: the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota, a
public body corporate and politic under the laws of the State, its successors and assigns.
Issuer Documents: collectively, the Bonds, this Indenture, the Loan Agreement, the Regulatory
Agreement, and the Cooperative Agreement.
Loan: the loan of Bond proceeds by the Issuer to the Borrower described in Section 4.1 of the Loan
Agreement.
9
Loan Agreement: the Loan Agreement, dated as of June 1, 2023, between the Issuer and the
Borrower, as the same may from time to time be amended or supplemented as provided therein and in this
Indenture.
Local Time: Central time (daylight or standard, as applicable) in the City.
Mandatory Purchase Price: this term has the meaning provided in Section 3.7 hereof.
Mandatory Tender Date: the later of (a) the Initial Mandatory Tender Date; or (b) if the Bonds
Outstanding on such date or on any subsequent Mandatory Tender Date are remarketed pursuant to
Section 3.8 hereof for a Remarketing Period that does not extend to the final maturity of the Bonds, the day
after the last day of the Remarketing Period.
Master Tenant: Fort Snelling Leased Housing Associates Master Tenant I, LLLP, a Minnesota
limited liability limited partnership, its successors and assigns.
Maximum Interest Rate: the interest rate equal to the lesser of (a) eight percent (8%) per annum;
or (b) the maximum interest rate per annum permitted by applicable State law.
Moody’s: Moody’s Investors Service, Inc., a corporation organized and existing under the laws of
the State of New York, and its successors and assigns, and, if such corporation shall be dissolved or
liquidated or shall no longer perform the functions of a municipal securities rating agency, “Moody’s” shall
be deemed to refer to any other nationally recognized municipal securities rating agency designated by the
Issuer (other than S&P).
Net Bond Proceeds: proceeds of the Bonds, including interest earnings thereon, less such proceeds
of the Bonds, including interest earnings thereon, used to fund any reserve fund.
Net Proceeds: when used with respect to proceeds of insurance or a condemnation award, money
received or receivable by the Borrower as owner or the Trustee as secured party of the Project, less the cost
of recovery (including attorneys’ fees) of such money from the insuring company or the condemning
authority.
Net Revenues: the excess of revenues over expenses of the Borrower before depreciation, interest
and amortization of financing expenses, as determined in accordance with generally accepted accounting
principles; for purposes of the Loan Agreement, Net Revenues shall exclude (1) any items properly
classified as extraordinary in accordance with generally accepted accounting principles; and (2) any gain
arising from the sale or other disposition of any assets of the Borrower other than current assets.
Notice by Mail: notice of any action or condition by mail shall mean a written notice meeting the
requirements of this Indenture mailed by first-class mail, postage prepaid, to the Holders of specified Bonds
at the addresses shown in the Bond Register.
Original Purchaser: the Underwriter.
Outstanding: with respect to the Bonds issued under this Indenture, as of the date of determination,
all Bonds theretofore issued and delivered under this Indenture except:
(1) Bonds theretofore cancelled by the Trustee or Paying Agent or delivered to the
Trustee or Paying Agent cancelled or for cancellation;
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(2) Bonds for which payment or redemption money or securities (as provided in
Article 7 hereof) shall have been theretofore deposited with the Trustee in trust for the Holders of
such Bonds; provided, however, that if such Bonds are to be redeemed, notice of such rede mption
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
(3) Bonds in exchange for or in lieu of which other Bonds shall have been issued and
delivered pursuant to 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 deemed not to be Outstanding Bonds,
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 owned by
the Borrower shall be disregarded.
Paying Agent: the Trustee or any other entity designated pursuant to this Indenture as the agent of
the Issuer and the Trustee to receive and disburse the principal of and premium, if any, and interest on the
Bonds.
Payment Date: any Interest Payment Date, any Stated Maturity, the Discharge Date or any
Redemption Date.
Partnership Agreement: the Amended and Restated Agreement of Limited Liability Limited
Partnership of Borrower, dated on or about the Issue Date, as amended, modified, supplemented or restated
from time to time, or any agreement entered into in substitution therefor.
Permitted Investments:
(1) Government Obligations;
(2) obligations of any of the following federal agencies which obligations represent
full faith and credit of the United States of America, including:
- Export-Import Bank
- Farmers Home Administration
- General Services Administration
- U.S. Maritime Administration
- Small Business Administration
- Government National Mortgage Association (GNMA)
- U.S. Department of Housing & Urban Development (PHA’s)
- Federal Housing Administration;
(3) bonds, notes or other evidences of indebtedness rated on the date of purchase
“AAA” by S&P and “Aaa” by Moody’s issued by the Federal National Mortgage Association or
the Federal Home Loan Mortgage Corporation with remaining maturities not exceeding three (3)
years;
(4) U.S. dollar denominated deposit accounts, federal funds and banker’s acceptances
with domestic commercial banks which have a rating on their short-term certificates of deposit on
the date of purchase of “A-l” or “A-l+” by S&P and “P-1” by Moody’s and maturing no more than
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three hundred sixty (360) days after the date of purchase (ratings on holding companies are not
considered as the rating of the bank);
(5) commercial paper which is rated at the time of purchase in the single highest
classification, “A-l+” by S&P and “P-1” by Moody’s and which matures not more than two hundred
seventy (270) days after the date of purchase;
(6) investments in a money market fund rated on the date of purchase “AAAm” or
“AAAm-G” or better by S&P; which fund invests primarily in Government Obligations;
(7) pre-refunded municipal obligations defined as follows: any bonds or other
obligations of any state of the United States of America or of any agency, instrumentality or local
governmental unit of any such state which are not callable at the option of the obligor prior to
maturity or as to which irrevocable instructions have been given by the obligor to call on the date
specified in the notice; and
(a) which are rated on the date of purchase, based on an irrevocable escrow
account or fund (the “escrow”), in the highest rating category of S&P and Moody’s; or
(b) (i) which are fully secured as to principal and interest and redemption premium,
if any, by an escrow consisting only of cash or obligations described in clause (1) above,
which escrow may be applied only to the payment of such principal of and interest and
redemption premium, if any, on such bonds or other obligations on the maturity date or
dates thereof or the specified redemption date or dates pursuant to such irrevocable
instructions, as appropriate, and (ii) which escrow is sufficient, as verified by a nationally
recognized independent certified public accountant, to pay principal of and interest and
redemption premium, if any, on the bonds or other obligations described in this paragraph
on the maturity date or dates specified in the irrevocable instructions referred to above, as
appropriate;
(8) investment agreements issued by any financial institution maintaining a rating of
“A” or better by S&P or “A2” or better by Moody’s; or
(9) fixed income securities issued by any state of the United States of America or any
agency, instrumentality or political subdivision thereof which are rated on the date of purchase not
less than “A” by S&P or “A2” by Moody’s.
Person: any natural person, corporation, limited liability company, joint venture, cooperative,
partnership, trust or unincorporated organization, government or governmental body or agency, political
subdivision or other legal entity, as in the context may be appropriate.
Pledge of Contractor Fee: the ____________________________, dated [the Issue Date] [as of
June 1, 2023], by _______________________ in favor of the Trustee, as it may be amended from time to
time.
Pledge of Developer Fee: the ____________________________, dated [the Issue Date] [as of
June 1, 2023], by _______________________ in favor of the Trustee, as it may be amended from time to
time.
Project: the approximately 192-unit multifamily rental housing development and functionally
related facilities to be located at located at 58 Taylor Avenue, Unorganized Territory of Fort Snelling,
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Minnesota 55111, known as the Fort Snelling Upper Post Project, the leasehold acquisition, construction
and/or rehabilitation, and equipping of which will be financed, in part, with the proceeds of the Bonds. The
leasehold acquisition, construction and/or rehabilitation, and equipping of the Project was also financed
with the proceeds of the Series 2020 Note.
Project Costs: the cost items enumerated in Section 3.2 of the Loan Agreement.
Project Equipment: any and all (1) fixtures or tangible personal property now or hereafter attached
or affixed to the Project; (2) other tangible personal property now or hereafter located within or used in
connection with the Project; and (3) any additions to, replacements of and substitutions for any of the
foregoing.
Project Fund: the fund so designated in Section 5.2 hereof.
Rating Agency: S&P or Moody’s.
Rating Category: one (1) of the generic rating categories of a Rating Agency, without regard to
any refinement or gradation of such Rating Category by a numerical or other modifier.
Rebate Amounts: the amount determined pursuant to Section 7.7(13) of the Loan Agreement to be
rebated to the United States.
Rebate Consultant: this term has the meaning provided in 7.7(12) of the Loan Agreement.
Rebate Fund: the fund so designated in Section 5.5 hereof.
Record Date: the fifteenth day of the calendar month next preceding an Interest Payment Date,
whether or not such day is a Business Day.
Redemption Date: when used with respect to any Bond to be redeemed, the date on which it is to
be redeemed pursuant hereto.
Redemption Price: when used with respect to any Bond to be redeemed, the price at which it is to
be redeemed pursuant hereto.
Regular Interest Payments: all interest payments on the Bonds, other than Special Interest
Payments.
Regulatory Agreement: the Regulatory Agreement, dated the Issue Date, between the Issuer, the
Borrower, the Master Tenant, and the Trustee, as the same may be amended from time to time.
Related Documents: collectively, the Loan Agreement, the Regulatory Agreement, the Cooperative
Agreement, the Security Documents, the Disbursing Agreement, the Remarketing Agreement, the Bond
Purchase Agreement, and the Continuing Disclosure Agreement.
Related Person: with reference to any Substantial User, a “related person” within the meaning of
Section 147(a)(2) of the Code.
Remarketing Agent: Colliers Securities LLC, a Delaware limited liability company, or any
successor remarketing agent named by the Borrower.
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Remarketing Agent’s Fee: the fee of the Remarketing Agent for its remarketing services.
Remarketing Agreement: the Remarketing Agreement, dated as of June 1, 2023, between the
Borrower and the Remarketing Agent, as amended, supplemented or restated from time to time, or any
agreement entered into in substitution therefor.
Remarketing Date: the Initial Remarketing Date and, if the Bonds Outstanding on such date or on
any subsequent Remarketing Date are remarketed pursuant to Section 3.8 hereof for a Remarketing Period
that does not extend to the final maturity of the Bonds, the day after the last day of the Remarketing Period.
Remarketing Expenses: the costs and expenses incurred by the Trustee and its counsel, the
Remarketing Agent and its counsel, the Issuer and its counsel, and Bond Counsel in connection with the
remarketing of the Bonds, including bond printing and registration costs, costs of funds advanced by the
Remarketing Agent, registration or filing fees, and other costs and expenses incurred in connection with or
properly attributable to the remarketing of the Bonds as certified to the Trustee by the Remarketing Agent
in writing.
Remarketing Notice Parties: collectively, the Borrower, the Issuer, the Trustee, the Remarketing
Agent, and the Investor Limited Partner.
Remarketing Period: the period beginning on a Remarketing Date and ending on the last day of
the term for which Bonds are remarketed pursuant to Section 3.8 hereof or the Final Maturity Date of the
Bonds, as applicable.
Remarketing Rate: the interest rate or rates established pursuant to Section 3.9 hereof and borne
by the Bonds then Outstanding from and including each Remarketing Date to, but not including, the next
succeeding Remarketing Date or the Final Maturity Date of the Bonds, as applicable.
Representation Letter: such Letter of Representations to DTC or other documentation required by
DTC as a condition to its acting as book-entry depository for any bond or bonds together with any
replacement thereof or amendment or supplement thereto (and including any standard procedures or
policies referenced therein or applicable thereto) respecting the procedures and other matters relating to
DTC’s role as book-entry depository for the Bonds.
Representative: the Chair or the Executive Director of the Officer and any other officer of the
Issuer or an officer of the general partner of 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 the other party and the Trustee containing the specimen signature of such person and signed for the Issuer
by its Chair or Executive Director or for the Borrower by an officer of the general partner of the Borrower.
Responsible Agent: any Person duly authorized and designated by the Trustee to act on its behalf
in carrying out the applicable duties and powers of the Trustee as set forth in this Indenture (any action
required by the Trustee under this Indenture may be taken by a Responsible Agent).
Responsible Officer: when used with respect to the Trustee, any officer within the corporate trust
department of the Trustee, including any vice president, assistant vice president, assistant secretary,
assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions
similar to those performed by the persons who at the time shall be such officers, respectively, or to whom
any corporate trust matter is referred because of such person's knowledge of and familiarity with the
particular subject and who shall have direct responsibility for the administration of this Indenture.
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Restricted Project Funds: any Bond proceeds, including interest thereon, which are required to be
transferred on the Completion Date from the Project Fund to the Bond Fund and which the Trustee is
required under Section 5.3(2) hereof to apply towards the prepayment or pro rata payment of Bonds.
Security Documents: collectively, the Assignment of Partnership Interest and Capital
Contributions, the Guaranty, the Pledge of Developer Fee, and the Pledge of Contractor Fee.
Series 2020 Note: the Multifamily Housing Revenue Note (Fort Snelling Upper Post Project),
Series 2020, issued by the County HRA on November 25, 2020, in the original aggregate principal amount
of $88,000,000.
Single Purpose Entity: a Person, other than an individual, which is formed or organized solely for
the purpose of directly holding an ownership interest in the Project, does not engage in any business
unrelated to the Project, does not have any assets other than those related to its interest in such Project, has
its own separate books and records and has its own accounts, in each case which are separate and apart
from the books and records and accounts of any other Person, and holds itself out as being a Person, separate
and apart from any other Person. In addition to the foregoing, with respect to the Borrower, a
Single-Purpose Entity shall also be as follows:
(1) a Person which is and at all times since its formation has been (a) a duly formed
and existing Person which is either not treated as a taxpayer under the tax laws of any governmental
authority or (i) treated as a taxpayer under any tax law of any governmental authority and (ii) has
tax liability which is adequately provided for; and (b) duly qualified as a foreign Person in each
jurisdiction in which such qualification was or may be necessary for the conduct of its business;
(2) a Person which is in compliance with, and at all times since its formation has
complied with, the provisions of its organizational documents and the laws of its jurisdiction of
formation;
(3) a Person which has at all times since its formation observed all customary
formalities regarding its existence;
(4) a Person which (a) has at all times since its formation accurately maintained its
financial statements, accounting records and other books and records separate from those of any
Person; (b) has not at any time since its formation commingled its assets with those of any Person;
and (c) has at all times since its formation accurately maintained its own bank accounts, payroll
and separate books of account;
(5) a Person which has at all times since its formation paid its own liabilities from its
own separate assets;
(6) a Person which (a) has at all times since its formation identified itself in all dealings
with the public, under its own name or under any “doing business as” name (provided such “doing
business as” name is used exclusively by such Person) and as a separate and distinct entity; (b) has
not at any time since its formation identified itself as being a division or a part of any other entity;
and (c) has not at any time since its formation identified any other Person as being a division or
part of such Person;
(7) a Person which has been at all times since its formation adequately capitalized in
light of the nature of its business;
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(8) a Person which, except with respect to obligations and liabilities set forth in the
Loan Agreement and in the Collateral Documents, and except with respect to the Series 2020 Note,
has not at any time since its formation incurred, assumed or guaranteed any indebtedness
(contingent or otherwise) or the liabilities of any Person or has not at any time since its formation
acquired obligations or securities of any Person or has not at any time since its formation made
loans or advances to any Person; and
(9) a Person which has not at any time since its formation entered into and was not a
party to any transaction with any affiliate, except in the ordinary course of business of such Person
on terms which are no less favorable to such Person than would be obtained in a comparable
arm’s-length transaction with an unrelated third party.
SLGS: United States Treasury Certificates of Indebtedness, Notes and Bonds State and Local
Government Series.
S&P: S&P Global Ratings, a division of the McGraw Hill Companies, and its successors and their
assigns, and if such entity shall be dissolved or liquidated or shall no longer perform the functions of a
municipal securities rating agency, “S&P” shall be deemed to refer to any other nationally recognized
municipal securities rating agency designated by the Issuer (other than Moody’s).
Special Interest Payments: all payments of (or with respect to) interest on the Bonds made upon
the acceleration of the Bonds pursuant to Section 8.2 hereof.
Special Record Date: the date fixed by the Trustee pursuant to Section 2.2 hereof relating to the
payment of any Defaulted Interest.
State: the State of Minnesota.
Stated Maturity: when used with respect to any Bond or any installment of interest thereon, the
date specified in such Bond as the fixed date on which principal of such Bond or such installment of interest
is due and payable.
Substantial User: a “Substantial User” within the meaning of Section 147(a)(1) of the Code.
Tax Certificate: the Tax Certificate of the Borrower executed by the Borrower on the Issue Date,
including the endorsement of the Issuer.
Term of Loan Agreement: the period of time commencing on the Date of Loan Agreement and
terminating on the date set forth in Section 10.10 of the Loan Agreement or such earlier date as provided
by Section 7.8 or 8.2 of the Loan Agreement, whichever date occurs sooner.
Title Company: Commercial Partners Title, LLC, a Minnesota limited liability company.
Trustee: U.S. Bank Trust Company, National Association, a national banking association, and any
co-trustee or successor trustee appointed, qualified and then acting as such under the provisions of this
Indenture.
Trust Estate: the Trust Estate as defined and set forth in the Granting Clauses hereof.
2020 Project: the portion of the Project financed with the proceeds of the Series 2020 Note.
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2023 Project: the portion of the Project financed with the proceeds of the Bonds.
Unassigned Issuer’s Rights: all of the rights of the Issuer to receive Additional Charges under
Section 4.4 of the Loan Agreement, the payment of costs and fees under Sections 3.2 and 10.13 of the Loan
Agreement, to be held harmless and indemnified under Sections 7.4 and 10.8 of the Loan Agreement, to be
an insured under Section 5.6 of the Loan Agreement, to be reimbursed for attorneys’ fees and expenses
under Sections 9.5 and 10.11 of the Loan Agreement, to receive notices pursuant to Section 10.2 of the
Loan Agreement, to give or withhold consent to amendments, changes, modifications, alterations and
termination of the Loan Agreement under Section 10.5 of the Loan Agreement, to enforce compliance with
the requirements under Section 2.3 of the Loan Agreement, and to release under Section 10.12 of the Loan
Agreement.
Underwriter: Colliers Securities LLC, a Delaware limited liability company.
Unpaid Bonds: all Outstanding Bonds and any other Bonds which have neither matured nor been
redeemed or purchased and cancelled under this Indenture.
Working Capital Expense: any cost that is not properly chargeable to the Project’s capital account
within the meaning of the Code.
Section 1.2. Rules of Interpretation. This Indenture shall be interpreted in accordance with and
governed by the laws of the State.
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.
References in this Indenture to any particular article, section or subdivisi on hereof are to the
designated article, section or subdivision of this Indenture as originally executed.
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.
The Table of Contents and titles of articles and sections herein are for convenience only and are
not a part of this Indenture.
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.
Articles, sections, subsections and clauses mentioned by number only are those so numbered which
are contained in this Indenture.
For purposes of this Indenture and the Loan Agreement, an Act of Bankruptcy shall be deemed no
longer pending if either (1) the petition is dismissed by order of a court of competent jurisdiction and no
further appeal rights exist from such order or (2) the Borrower notifies the Trustee that such a dismissal has
occurred.
Any opinion of counsel called for herein shall be a written opinion of such counsel.
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References to the Bonds as “tax exempt” or to the “tax-exempt status of the Bonds” are to the
exclusion of interest from gross income pursuant to Section 103(a) of the Code, irrespective of such forms
of taxation as the alternative minimum tax or branch profits tax on foreign corporations, as is consistent
with the approach taken in Section 59(i) of the Code.
(The remainder of this page is intentionally left blank.)
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ARTICLE 2
THE BONDS
Section 2.1. Authorized Amount and Form of Bonds. Bonds secured by this Indenture shall be
issued in fully registered form, without coupons, in any Authorized Denominations, in substantially the
form set forth in EXHIBIT A attached hereto 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 total principal amount of the Bonds that may be Outstanding hereunder is expressly limited to
$10,000,000. No additional bonds may be issued hereunder.
Section 2.2. Initial Issue. The Bonds to be issued and secured under this Indenture shall be
designated the “Subordinate Multifamily Housing Revenue Bonds (Fort Snelling Upper Post Project),
Series 2023” and shall:
(1) be dated as of their date of original issuance;
(2) be issued and delivered to the designated office of the Trustee for the account of
the Original Purchaser as fully registered bonds without coupons in any Authorized Denomination
and shall be numbered R-1 upward;
(3) be initially issued in the original aggregate principal amount of $10,000,000 and,
subject to the provisions of Sections 3.1 and 3.7 hereof, mature in the principal amount and bear
interest as provided below until paid or discharged as herein provided, with interest computed on
the basis of a three hundred sixty (360) day year composed of twelve (12) thirty (30) day months;
Stated Maturity
(January 1)
Principal Amount
Interest Rate
___________________________________________________________________________
* Subject to mandatory tender on the Mandatory Tender Date.
** Interest rate on the Bonds from the Issue Date to but not including the Initial Mandatory
Tender Date.
(4) bear interest payable semiannually on each Interest Payment Date and continuing
until payment in full of the Bonds;
(5) be subject to redemption upon the terms and conditions and at the prices specified
in Article 3 hereof;
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(6) 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 trust office of
the Trustee acting as the Paying Agent, or a duly appointed successor Paying Agent, except that
interest on the Bonds will be payable by check or draft mailed by the Trustee to the Record Date
Holders (as defined in the Bond) 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 office of the Trustee; provided that any interest on any Bond which is payable but which
is not punctually paid or duly provided (“Defaulted Interest”) shall be payable, on a date selected
by the Trustee, to the Person in whose name such Bond is registered in the Bond Register at the
close of business on a Special Record Date selected by the Trustee and which shall be at least ten
(10) days but not more than thirty (30) days before the date selected by the Trustee for payment of
such Defaulted Interest. The Trustee shall give Notice by Mail of the Special Record Date and date
for payment of Defaulted Interest at least ten (10) days before the Special Record Date; and
(7) notwithstanding the foregoing, if the date for payment of the principal of, premium,
if any, or interest on any 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.
Notwithstanding the foregoing, any Record Holder of at least $1,000,000 in principal amount of
the Outstanding Bonds may file with the Trustee an instrument satisfactory to the Trustee requesting th e
interest 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 pa yment of the
principal of any Bond, such Bond shall have been presented to the Trustee. All payments so made shall be
valid and effectual to satisfy and discharge the liability upon such Bonds.
Notwithstanding the foregoing, the Bonds issued under this Indenture are subject to the procedures
of DTC.
Section 2.3. Execution. The Bonds shall be executed on behalf of the Issuer by the signatures
of the officers of the Issuer designated to sign the Bonds in a resolution of the Issuer and be sealed with the
seal of the Issuer; provided, however, that the seal of the Issuer may be a printed facsimile or may be
omitted; provided further that all of such signatures may be printed or photocopied facsimiles, in which
event the Bonds shall also be executed manually by the Trustee as authenticating agent as provided in
Section 2.4 hereof and Minnesota Statutes, Section 475.55, as amended. In the event of disability or
resignation or other absence of either such officer, the Bonds may be signed by the manual or facsimile
signature of that officer who may act on behalf of such absent or disabled officer. In case either such officer
whose signature or facsimile of whose signature shall appear on the Bonds shall cease to be such officer
before the delivery of the Bonds, such signature or facsimile shall nevertheless be valid and sufficient for
all purposes, the same as if he had remained in office until delivery. The Bonds may be issued and delivered
as typewritten bonds or as printed bonds, provided that if the typewritten bonds are delivered, the facsimile
signatures of the Issuer may be conformed signatures.
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 A attached hereto, shall have been duly executed manually
by a Responsible Agent. Certificates of Authentication on different Bonds need not be signed by the same
person. The Trustee shall authenticate the signatures of officers of the Issuer on each Bond by execution
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of the Certificate of Authentication on the Bond; and the executed Certificate of Authentication on each
Bond shall be conclusive evidence that it has been authenticated and delivered under this Indenture.
Section 2.5. Delivery of Initial Issue. Upon the execution and delivery of this Indenture the
Issuer shall execute and deliver to the Trustee, and the Trustee shall authenticate, or cause the authentication
of, the Bonds in the original aggregate principal amount of $10,000,000. The Trustee shall deliver the
Bonds to the Original Purchaser as hereinafter provided after filing with the Trustee the following:
(1) original executed counterparts of the Loan Agreement, Regulatory Agreement, the
Cooperative Agreement, the Disbursing Agreement, the Security Documents, and this Indenture;
(2) a copy, duly certified by the Issuer’s appropriate recording officer, of the
resolutions adopted and approved by the governing body of the Issuer, authorizing the execution
and delivery of this Indenture and the documents described in subsection (1) above;
(3) a request and authorization (which may be part of a certificate of the Issuer) to the
Trustee on behalf of the Issuer, signed by the officers of the Issuer designated to sign the Bonds in
a resolution of the Issuer, to deliver the Bonds to the Original Purchaser therein identified upon
payment to the Trustee for the account of the Issuer of a specified sum plus accrued interest;
(4) the opinion of the Borrower’s counsel in the form required by Bond Counsel and
counsel to the Original Purchaser;
(5) the opinion of Bond Counsel approving the legality of the Bonds issued pursuant
to this Indenture and the tax-exempt status of the Bonds;
(6) any other documents or opinions as Bond Counsel may require for purposes of
rendering its opinion required under subsection (5) above; and
(7) payment to the Trustee, for the account of the Issuer, of the purchase price of the
Bonds.
Section 2.6. Mutilated, Lost, Stolen or Destroyed Bonds.
(1) 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 Trustee shall
authenticate and deliver, a new Bond of like series, amount, maturity date and tenor 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 Trustee and Issuer and, in the case of a Bond destroyed or lost, the filing with
the Trustee evidence satisfactory to the Trustee that such Bond was destroyed or lost, and of the
ownership thereof, and furnishing the Issuer and the Trustee 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.
(2) In executing a new Bond and in furnishing the Trustee with the written
authorization to authenticate and deliver a new Bond as provided for in this Section, the Issuer may
rely conclusively on a representation of the Trustee that the Trustee is satisfied with the adequacy
of the evidence presented concerning the mutilation, loss, theft or destruction of any Bond.
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Section 2.7. Ownership of Bonds. The Issuer, Trustee 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 and the Paying Agent shall not be affected by any notice to the contrary.
Section 2.8. Preparation of Bonds. The Bonds shall be printed or typewritten bonds
substantially in the form attached hereto as EXHIBIT A.
Section 2.9. Registration, Transfer and Exchange of Bonds.
(1) The Trustee will cause to be kept at the principal corporate trust office of the
Trustee a Bond Register in which, subject to such reasonable regulations as the Trustee may
prescribe, the Issuer shall provide for the registration of Bonds and the registration of transfers of
Bonds; and the Trustee is hereby appointed “Bond Registrar” for the purpose of registering the
Bonds and transfers of the Bonds as herein provided. The Bond Register shall contain a record of
every Bond 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 Trustee.
(2) Upon surrender for transfer of any Bond at the principal corporate trust office of
the Trustee, the Issuer shall execute (if necessary), and the Trustee 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 (1) or more new Bonds of any Authorized Denomination, having the
same Stated Maturity and interest rate, as requested by the transferor. The execution by the Issuer
of any Bond of any denomination shall constitute full and due authorization of such denomination
and the Trustee shall thereby be authorized to authenticate and deliver such Bond.
(3) At the option of the Holder, Bonds may be exchanged for other Bonds of the same
series of any Authorized Denomination of a like aggregate principal amount and Stated Maturity,
upon surrender of the Bonds to be exchanged at the principal corporate trust office of the Trustee,
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, and the Trustee
shall authenticate and deliver, the Bonds which the Holder making the exchange is entitled to
receive.
(4) All Bonds surrendered upon any exchange or transfer provided for in this Indenture
shall be promptly cancelled by the Trustee and thereafter disposed of in accordance with the
Trustee’s policies and procedures.
(5) All Bonds delivered in exchange for or upon transfer of Bonds shall be valid
special, limited 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.
(6) Transfer of a Bond may be made on the Issuer’s books by the registered owner in
person or by the registered owner’s attorney duly authorized in writing. Every Bond presented or
surrendered for transfer or exchange shall (if so required by the Issuer or the Trustee) 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 Trustee, duly executed and with guaranty of
signature of the Holder thereof or his attorney duly authorized in writing and shall include written
instructions as to the details of the transfer of the Bond.
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(7) No service charge shall be made to the Holder for any registration, transfer or
exchange, but the Trustee 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.
(8) Subject to the provisions of subsection (9) below, the Trustee as Bond Registrar
shall endeavor to comply with rules applicable to transfer agents registered with the Securities and
Exchange Commission as to the seventy-two (72) hour “turnaround” standard established for the
transfer of registered corporate securities.
(9) The Trustee shall not be required (a) to transfer or exchange any Bond during a
period beginning at the opening of business ten (10) days before the day of the first publication or
the mailing (if there is no publication) of a notice of redemption 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 in whole or in part.
(10) The Bond Registrar shall insert in each Bond the date of registration which, for
purposes of delivering the original Bonds to the Original Purchaser, shall be the date of original
issue, and which for all other events shall be the last Interest Payment Date preceding the date of
authentication to which interest on the Bond has been paid or made available for payment, unless
the date of authentication is an interest payment date to which interest has been paid or made
available for payment, in which case the Bond shall be dated as of the date of authentication. Each
Bond shall be so dated that neither gain nor loss in interest shall result from any transfers, exchange
or substitution provided for herein.
(11) Notwithstanding the foregoing, transfers are subject to the requirements of DTC
while the Bonds are held in Book-Entry Form. Neither the Trustee nor any agent shall have any
responsibility or liability for any actions taken or not taken by DTC.
Section 2.10. Interest Rights Preserved. Each Bond delivered upon transfer of or in exchange
for or in lieu of any other Bond shall carry all the rights to interest accrued and unpaid, and to accrue, which
were carried by such other Bond.
Section 2.11. Cancellation of Bonds. Whenever any Outstanding Bond shall be delivered to the
Trustee for cancellation pursuant to this Indenture, upon payment of the principal amount and interest
represented thereby or for replacement pursuant to Section 2.6 hereof or transfer pursuant to Section 2.9
hereof, such Bond shall be cancelled and, subject to the Trustee’s business practices, destroyed by the
Trustee.
Section 2.12. Book-Entry System. Upon request of a Holder any Bond may be registered in the
Bond Register in the name of Cede & Co., as the nominee of DTC, who will thereafter act as securities
depository for such Bond or Bonds.
With respect to Bonds registered in the Bond Register in the name of Cede & Co., as nominee of
DTC, none of the Issuer, the Borrower or the Trustee shall have any responsibility or obligation to any DTC
Participant or to any Beneficial Owner. Without limiting the immediately preceding sentence, none of the
Issuer, the Borrower or the Trustee shall have any responsibility or obligation with respect to (1) the
accuracy of the records of DTC, Cede & Co., or any DTC Participant with respect to any ownership interest
in the Bonds; (2) the delivery to any DTC Participant, any Beneficial Owner or any other Person, other than
DTC, of any notice with respect to the Bonds, including any notice of redemption; (3) the payment to any
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DTC Participant, any Beneficial Owner or any other Person, other than DTC, of any amount with respect
to the principal of or premium, if any, or interest on the Bonds; or (4) the failure of DTC to provide any
information or notification on behalf of any DTC Participant or Beneficial Owner.
The Issuer, the Borrower and the Trustee may treat as and deem DTC to be the absolute owner of
each Bond for the purpose of payment of the principal of and premium and interest on such Bond, for the
purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of
registering transfers with respect to such Bonds, and for all other purposes whatsoever (except for the giving
of certain Bondholder consents). The Trustee shall pay all principal of and premium, if any, and interest
on the Bonds to the Bondholders as shown on the Bond Register, and all such payments shall be valid and
effective to fully satisfy and discharge the Issuer’s obligations with respect to the principal of and premium,
if any, and interest on the Bonds to the extent of the sum or sums so paid.
Upon delivery by DTC to the Trustee of written notice to the effect that DTC has determined to
substitute a new nominee in place of Cede & Co., and subject to the transfer provisions in Section 2.9
hereof, references to “Cede & Co.” in this Section shall refer to such new nominee of DTC.
Replacement Bonds may be issued directly to the Beneficial Owners of the Bonds other than a
Depository, or its nominee, but only in the event that (a) the Depository determines not to continue to act
as securities depository for the Bonds (which determination shall become effective no less than ninety (90)
days after written notice to such effect to the Issuer and the Trustee); (b) the Trustee has, at the direction of
the Borrower, advised a Depository of its determination (which determination is conclusive as to the
Depository and Beneficial Owners of the Bonds) that the Depository is incapable of discharging its duties
as securities depository for the Bonds; or (c) the majority of the Holders of the Bonds have determined
(which determination is conclusive as to the Depository and the Beneficial Owners of the Bonds) that the
interests of the Beneficial Owners of the Bonds might be adversely affected if such book-entry only system
of transfer is continued. Upon occurrence of any of the foregoing events, the Borrower shall use
commercially reasonable efforts to attempt to locate another qualified securities depository. If the Borrower
fails to locate another qualified securities depository to replace the Depository, the Trustee and the Issuer,
at the Borrower’s expense, shall cause to be authenticated and delivered replacement Bonds, in certificate
form, to the Beneficial Owners of the Bonds. In the event that the determination noted in clause (b) or (c)
above is made (provided that the Trustee undertakes no obligation to make any investigation to deter mine
the occurrence of any events that would permit the Trustee to make any such determination), and has made
directed the Trustee in writing to notify the Beneficial Owners of the Bonds of such determination by
mailing an appropriate notice to the Depository, the Trustee and the Issuer shall cause to be issued
replacement Bonds in certificate form to Beneficial Owners of the Bonds as shown on the records of the
Depository provided to the Trustee and the Issuer.
Upon the written consent of one hundred percent (100%) of the Beneficial Owners of the Bonds,
the Trustee shall withdraw the Bonds from any Depository and authenticate and deliver Bonds fully
registered to the assignees of that Depository or its nominee. If the request for withdrawal is not the result
of any Issuer, Borrower or Trustee action or inaction, such withdrawal, authentication and delivery shall be
at the cost and expense (including costs of printing, preparing and delivering such Bonds) of the persons
requesting such withdrawal, authentication and delivery; otherwise such withdrawal, authentication and
delivery shall be at the cost and expense of the Borrower.
Whenever, during the term of the Bonds, the beneficial ownership thereof is determined by a book
entry at a Depository, (i) the requirements in this Indenture of holding, delivering or transferring Bonds
shall be deemed modified to require the appropriate Person or entity to meet the requirements of the
Depository as to registering or transferring the book entry to produce the same e ffect; and (ii) delivery of
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the Bonds will be in accordance with arrangements among the Issuer, the Trustee and the Depository
notwithstanding any provision of this Indenture to the contrary.
The Issuer shall enter into any letter of representation with a Depository to implement the
Book-Entry System of bond registration described above.
Neither the Trustee nor any of its agents shall have any responsibility or liability for any actions
taken or not taken by DTC.
Section 2.13. Termination of Book-Entry Only System. DTC may determine to discontinue
providing its services with respect to any Bonds registered in the name of Cede & Co. at any time by giving
written notice to the Trustee and discharging its responsibilities with respect thereto under applicable law.
Upon the termination of the services of DTC as provided above, the Bonds may be registered in whatever
name or names the Bondholders shall designate at that time, in accordance with Section 2.9 hereof. To the
extent that the Beneficial Owners are designated as the transferee by the Bondholders, in accordance with
Section 2.9 hereof, the Bonds will be delivered in appropriate form, content and Authorized Denomination
to the Beneficial Owners.
So long as any Bond is registered in the name of Cede & Co., as nominee of DTC, all payments
with respect to the principal of and premium, if any, and interest on such Bond and all notices with respect
to such Bond shall be made and given, respectively, to DTC as provided in the Representation Letter.
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ARTICLE 3
REDEMPTION AND REMARKETING OF BONDS BEFORE MATURITY
Section 3.1. Redemption Provisions. The Bonds are subject to redemption and prepayment as
follows:
(1) Optional Prepayment. Subject to subsection (4) below, the Bonds are subject to
redemption and prepayment upon request by the Borrower to the Trustee on any Business Day, on
or after July 1, 2024, in whole or in part, in principal increments of $25,000, or any integral amount
of $5,000, and by lot within any Stated Maturity, at a Redemption Price equal to the principal
amount thereof, without premium, plus accrued interest thereon to the date fixed for redemption.
(2) Redemption from Money Remaining in Project Fund. The Bonds are subject to
mandatory redemption in part at a Redemption Price equal to the principal amount thereof, without
premium, plus accrued interest thereon to the date fixed for redemption, on the earliest practicable
date for which notice can be given pursuant to Section 3.3 hereof, to the extent of money remaining
on deposit in the Project Fund that is transferred to the Bond Fund upon completion of the Project
and payment of all costs of the Project as provided in Section 5.2(2) hereof.
(3) Mandatory Redemption from Certain Money. The Bonds are subject to mandatory
redemption in part, at a Redemption Price equal to the principal amount thereof, without premium,
plus accrued interest thereon to the date fixed for redemption, on the earliest practicable date for
which notice can be given pursuant to Section 3.3 hereof, from the proceeds of the Assigned Capital
Contributions, redemption of the Bonds in part to occur upon each receipt by the Borrower or its
designee and deposit with the Trustee in accordance with Section 4.2(1)(c) of the Loan Agreement.
If the mandatory redemption pursuant to this subsection (3) occurs resulting in the redemption of
all Outstanding Bonds, remaining money on deposit in the Capitalized Interest Fund will be used
to pay first the portion of the Redemption Price attributable to accrued interest on the Outstanding
Bonds, and second the portion of the Redemption Price attributable to principal of the Outstanding
Bonds.
(4) No Redemption Prior to Placed in Service Date. Notwithstanding anything to the
contrary contained herein, the Bonds shall not be redeemed prior to the date upon which the
Borrower has advised the Trustee in writing that the Project has been placed in service for purposes
of Section 42 of the Code.
Section 3.2. Partial Redemption of Bonds. In the case of any partial redemption of Bonds of
the same maturity pursuant to any provision of this Indenture, the particular Bonds or portions thereof to
be redeemed shall be selected by the Trustee by lot. Notwithstanding the foregoing, DTC shall select the
Bonds with respect to any Bonds registered in the name of Cede & Co. for redemption within particular
maturities according to its stated procedures. In the case of any partial redemption of a Bond in a
denomination greater than $5,000 then for all purposes in connection with such redemption, the first $5,000
of face value of such Bond shall be treated as though it were a separate Bond in the denomination of $5,000
and each remaining $5,000 of face value of such Bond shall be treated as though it were a separate Bond
in the denomination of $5,000, and such Bond shall be redeemed only in a principal amount sufficient to
redeem one or more of such separate Bonds in full and so long as no Bond is Outstanding in an amount less
than $25,000. Any Bond which is to be redeemed only in part shall be surrendered to the Trustee (1) for
payment of the Redemption Price (including accrued interest thereon to the Redemption Date) of the portion
thereof called for redemption and (2) for exchange for Bonds in any Authorized Denomination in aggregate
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principal amount equal to the unredeemed portion of such Bond without charge therefor. For all purposes
of this Indenture, unless the context otherwise requires, all provisions relating to the redemp tion of Bonds
shall relate, in the case of any Bond redeemed or to be redeemed only in part, to the portion of the principal
of such Bond which has been or is to be redeemed.
Section 3.3. Procedure for Redemption.
(1) Notice of the intended redemption of any Bonds shall be given by the Trustee not
less than twenty (20) nor more than sixty (60) days prior to the date fixed for redemption by
first-class mail, postage prepaid, to the registered owner of each Bond to be redeemed (with a copy
to the Remarketing Agent), at the address of such owner shown on the Bond Register; and a second
notice of redemption shall be sent by first-class mail, postage prepaid at such address to the
registered owner of any Bond who has not submitted his Bond to the Trustee for payment on or
before the date sixty (60) days following the date fixed for redemption of such Bond in each case
stating:
(a) the complete official caption of which the Bonds being redeemed are a
part;
(b) the date of mailing of the notice of redemption;
(c) the date fixed for redemption;
(d) the redemption price or prices;
(e) with respect to the redemption of the Bonds in part, the numbers of the
Bonds to be redeemed, by giving the individual certificate number of each Bond to be
redeemed (or stating that all Bonds between two stated certificate numbers, both inclusive,
are to be redeemed or that all of the Bonds of one or more maturities have been called for
redemption);
(f) the CUSIP numbers of all Bonds being redeemed (provided that such
notice may contain a disclaimer as to the accuracy of the CUSIP numbers);
(g) in the case of a partial redemption of Bonds, the principal amount and
Stated Maturity of each Bond being redeemed;
(h) the date of issue of the Bonds as originally issued;
(i) the rate or rates of interest borne by each Bond being redeemed;
(j) the Stated Maturity of each Bond being redeemed; and
(k) the place or places where amounts due upon such redemption will be
payable.
The notice will state that Bonds must be surrendered at the payment office of the Trustee
for redemption at the Redemption Price and shall state that further interest on such Bond will not
accrue from and after the Redemption Date provided the Trustee has on deposit sufficient funds to
redeem the Bonds on such date. CUSIP number identification with appropriate dollar amounts for
each CUSIP number also shall accompany all redemption payments made by check or draft.
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With respect to optional redemptions, such notice may be conditioned upon money being
on deposit with the Trustee on or prior to the Redemption Date in an amount sufficient to pay the
Redemption Price on the Redemption Date. If such notice is conditional and either the Trustee
receives written notice from the Borrower that money sufficient to pay the Redemption Price will
not be on deposit on the Redemption Date, or such money is not received on or prior to the
Redemption Date, then such notice shall be of no force and effect, the Trustee shall not redeem
such Bonds and the Trustee shall give notice, in the same manner in which the notice of redemption
was given, that such money was not or will not be so received and that such Bonds will not be
redeemed.
(2) Notice of such redemption also shall be sent by certified mail, return receipt
requested, overnight delivery service or other secure means (including electronic transmission),
postage prepaid, to any registered owner of $1,000,000 or more in aggregate principal amount of
Bonds to be redeemed, to certain municipal registered securities depositories which are known to
the Trustee to be holding Bonds and to at least two (2) of the national information services that
disseminate securities redemption notices, when possible, at least two (2) days prior to the mailing
of notices required by subsection (1) above, but in any event at least twenty (20) days, but not more
than sixty (60) days, prior to the Redemption Date; provided that neither failure to receive such
notice nor any defect in any notice so delivered shall affect the sufficiency of the proceedings for
the redemption of such Bonds.
(3) Failure to give notice by mailing to the registered owner of any Bond designated
for redemption or any defect in such notice shall not affect the validity of the proceedings for the
redemption of such Bond.
(4) As long as DTC is effecting book-entry transfers of the Bonds or is acting as a
registered securities depository with respect to any Bonds, the Trustee shall provide the notices
specified in this Section 3.3 to the Securities Depository by overnight delivery service, facsimile
transmission or by certified mail, return receipt requested at least one (1) day prior to the mailing
of the notice to Bondholders required pursuant to subsection (1) above. It is expected that DTC
shall, in turn, notify the DTC Participants and that the DTC Participants, in turn, will notify or
cause to be notified the Beneficial Owners. Any failure on the part of DTC or a DTC Participant,
or failure on the part of a nominee of a Beneficial Owner of a Bond (having been mailed notice
from the Trustee, a DTC Participant or otherwise) to notify the Beneficial Owner of the Bond so
affected, shall not affect the validity of the redemption of such Bond.
(5) Notice of redemption having been given in the manner provided above, and money
sufficient for the redemption being held by the Trustee or Paying Agent for that purpose, thereupon
the Bonds so called for redemption shall become due and payable on the Redemption Date, and
interest thereon shall cease to accrue; and the owners of the Bonds so called for redemption shall
thereafter no longer have any security or benefit under this Indenture except to receive payment of
the Redemption Price for such Bonds.
Section 3.4. Payment of Bonds Upon Redemption. The Redemption Price of Bonds or portions
thereof called for redemption in accordance with Section 3.3 hereof shall be payable on the date of
redemption upon presentation and surrender of such Bonds at the place or places of payment. If, on the
Redemption Date, sufficient money shall have been deposited with the Trustee to effect such redemption
in accordance with this Indenture, then interest shall cease to accrue on all Bonds or portions thereof so
called for redemption.
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Section 3.5. No Partial Redemption After Default. Anything in this Indenture to the contrary
notwithstanding, if there shall have occurred and be continuing an Event of Default, there shall be no
redemption of less than all of the Bonds at the time Outstanding.
Section 3.6. Cancellation of Redeemed Bonds. All Bonds which have been redeemed shall be
cancelled by the Trustee as provided in Section 2.11 hereof and shall not be reissued.
Section 3.7. Mandatory Purchase of Bonds on Mandatory Tender Date. All Bonds then
Outstanding are subject to mandatory purchase from the Bondholders on Initial Mandatory Tender Date at
a purchase price equal to one hundred percent (100%) of the outstanding principal amount thereof plus
accrued interest (the “Mandatory Purchase Price”). All Bonds purchased on the Mandatory Tender Date
as provided for herein and in the Loan Agreement shall continue to be Outstanding for all purposes hereof
and shall be registered in the name or at the direction of the Remarketing Agent or the Borrower, as the
case may be, following such mandatory purchase on the Mandatory Tender Date. Pursuant to the Loan
Agreement, the Borrower shall, on or prior to the Mandatory Tender Date, deposit or cause to be deposited
into the Bond Fund a sum equal to the Mandatory Purchase Price and the Mandatory Purchase Price shall
be paid on the Mandatory Tender Date by the Trustee to the registered owners of record of the Bonds from
such funds deposited by or on behalf of the Borrower.
On the Mandatory Tender Date, if the Bonds are remarketed pursuant to Section 3.8 hereof, the
interest rates on the Bonds shall be adjusted in accordance with Section 3.9 hereof. On or prior to the
Mandatory Tender Date, a schedule of such adjusted rates for each of the Bonds shall be furnished to the
Trustee and the Borrower by the Remarketing Agent. On the Mandatory Tender Date, all of the then
Outstanding Bonds shall be subject to mandatory tender for purchase by or on behalf of the Borrower from
the Bondholders on the Mandatory Tender Date, and the Bondholders shall have no right to retain the
ownership of such Bonds following the Mandatory Tender Date. The Trustee shall deliver or mail by first
class mail a notice of the mandatory purchase at least thirty (30) days but not more than forty-five (45) days
prior to the Mandatory Tender Date to each registered owner of such Bonds (with a copy to the Remarketing
Agent) at the address shown on the registration books. Any notice given as provided in this Section shall
be conclusively presumed to have been duly given, whether or not a particular Bondholder receives the
notice. Said notice shall state in substance the following:
(1) the Mandatory Tender Date;
(2) that all registered owners of the Bonds then Outstanding are required to tender
such Bonds to the Trustee at its principal office for purchase at the Mandatory Purchase Price on
the Mandatory Tender Date; and
(3) that all of the Bondholders shall be deemed to have tendered their Bonds for
purchase on the Mandatory Tender Date regardless of whether they tender such Bonds on or prior
to such date and no interest will accrue on or after the Mandatory Tender Date to the owners of
such Bonds tendered or deemed tendered.
The Mandatory Tender Date shall be (a) the Initial Mandatory Tender Date; and (b) any subsequent
dates for mandatory tender of the Bonds established by the Borrower in consultation with the Remarketing
Agent in connection with a remarketing of the Bonds pursuant to Section 3.8 hereof.
All owners of Bonds shall be required to tender such Bonds to the Trustee for purchase by or on
behalf of the Borrower at the Mandatory Purchase Price, and any such Bonds not delivered to the
Remarketing Agent or the Trustee on or prior to the Mandatory Tender Date (the “Undelivered Bonds”),
for which there has been irrevocably deposited in trust with the Trustee an amount of money sufficient to
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pay the Mandatory Purchase Price of the Undelivered Bonds, shall be deemed to have been purchased on
the Mandatory Tender Date pursuant to this Section. IN THE EVENT OF A FAILURE BY AN OWNER
OF BONDS TO DELIVER SUCH BONDS ON OR PRIOR TO THE MANDATORY TENDER DATE,
SAID OWNER SHALL NOT BE ENTITLED TO ANY PAYMENT (INCLUDING ANY INTEREST TO
ACCRUE SUBSEQUENT TO THE MANDATORY TENDER DATE) OTHER THAN THE
MANDATORY PURCHASE PRICE FOR SUCH UNDELIVERED BONDS, AND ANY
UNDELIVERED BONDS SHALL NO LONGER BE ENTITLED TO THE BENEFITS OF THE
INDENTURE, EXCEPT FOR THE PURPOSE OF PAYMENT OF THE MANDATORY PURCHASE
PRICE THEREFOR.
Section 3.8. Remarketing of Bonds.
(1) Notice of Mandatory Tender. No later than 11:00 am Local Time on the thirty-fifth
day prior to each Mandatory Tender Date, the Trustee shall give notice in writing to the
Remarketing Notice Parties which states the aggregate principal amount of Bonds which are to be
tendered or deemed to be tendered pursuant to Section 3.7 hereof.
(2) Preliminary Conditions to Remarketing. No later than 11:00 a.m. Local Time on
the twentieth day prior to the Mandatory Tender Date then in effect, the Borrower may give notice
in writing to the Remarketing Notice Parties that the Borrower elects to cause the Bonds to be
remarketed. A remarketing of the Bonds shall be permitted only if the following conditions are
satisfied no later than the time the foregoing election notice is given:
(a) Notice by the Borrower to the Remarketing Agent of the Remarketing
Period pursuant to Section 8.4 of the Loan Agreement; and
(b) Notice by the Borrower to the Remarketing Agent that it has approved as
to form and substance any disclosure document or offering materials which, in the
discretion of the Remarketing Agent, is necessary to be used in connection with the
remarketing of the Outstanding Bonds.
(3) Remarketing. Not less than ten (10) days before each Remarketing Date, the
Remarketing Agent shall offer for sale and use its best efforts to sell the Bonds Outstanding on the
Remarketing Date at a price equal to one hundred percent (100%) of the principal amount of such
Bonds in accordance with Section 3.9 hereof plus, if such Remarketing Date is a date other than an
Interest Payment Date, accrued interest on such Bonds from the preceding Interest Payment Date
to which interest has been paid. Not less than four (4) Business Days before each Remarketing
Date, the Remarketing Agent shall give notice in writing to the Remarketing Notice Parties
specifying the principal amount of Bonds, if any, it has remarketed (including Bonds to be
purchased by the Remarketing Agent on the Remarketing Date for its own account, if any), the
Remarketing Rate and the Remarketing Period applicable to the Bonds.
The Remarketing Agent shall have the right to remarket any Bond tendered pursuant to
Section 3.7 hereof; provided, however, that no such Bond shall be remarketed at a price less than
one hundred percent (100%) of the principal amount thereof in accordance with Section 3.9 hereof
plus accrued interest (if any). The Remarketing Agent shall have the right but not the obligation to
purchase any Bond tendered or deemed tendered pursuant to Section 3.7 hereof at one hundred
percent (100%) of the principal amount thereof, and to thereafter sell such Bond. Any such
purchase shall constitute a remarketing hereunder.
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The Remarketing Agent shall not remarket any Bond to the Issuer, the Borrower, any
guarantor of the Bonds or any person which is an “insider” of the Is suer, Borrower, or any such
guarantor within the meaning of the Federal Bankruptcy Code.
(4) Final Conditions to Remarketing. If, not later than the Remarketing Date:
(a) the Remarketing Agent shall have notified the Trustee in writing of the
remarketing of the Outstanding Bonds and that the proceeds from the remarketing
(including proceeds of remarketing of Outstanding Bonds to be purchased by the
Remarketing Agent on the Remarketing Date for its own account) or other funds equal to
the amount needed to purchase the remarketed Bonds on the Remarketing Date are
expected to be available to the Trustee on the Remarketing Date for deposit into the Bond
Fund;
(b) there shall be on deposit with the Trustee, from funds made available by
the Borrower, an amount determined by the Remarketing Agent for deposit to the
Capitalized Interest Fund with respect to the payment of Bond Service Charges during the
new Remarketing Period; and
(c) there shall either (i) be on deposit with the Trustee an amount sufficient to
pay the estimated Remarketing Expenses as certified in writing to the Trustee by the
Borrower, or (ii) the Remarketing Agent shall have certified in writing to the Trustee that
provision for the payment of the estimated Remarketing Expenses shall have been made to
the satisfaction of the Remarketing Agent;
then the Trustee shall immediately give notice in writing to the Remarketing Notice Parties that
(A) all conditions precedent to the remarketing of the Outstanding Bonds have been satisfied and
(B) the sale and settlement of the Outstanding Bonds is expected to occur on the Remarketing Date.
Following the Trustee’s notice, the Outstanding Bonds shall be sold to the purchasers identified by
the Remarketing Agent for delivery and settlement on the Remarketing Date, and the Trustee shall
apply the funds in the Bond Fund on the Remarketing Date to payment of the purchase price of the
Outstanding Bonds.
(5) Failure to Satisfy Final Conditions. If, not later than the Remarketing Date, any
condition set forth in subsection (4) above has not been satisfied, then, unless the Outstanding
Bonds are otherwise purchased on the Remarketing Date, the Remarketing Agent shall not sell any
of the Outstanding Bonds on the Remarketing Date.
(6) Remarketing Proceeds. No later than 11:00 a.m. Local Time on each Remarketing
Date, the Remarketing Agent shall pay to the Trustee, in immediately available funds, the proceeds
theretofore received by the Remarketing Agent from the remarketing of Bonds tendered for
purchase on such Remarketing Date; provided, that the Remarketing Agent may use its best efforts
to cause the purchasers of the remarketed Bonds to pay the purchase price plus accrued interest (if
any) to the Trustee in immediately available funds. The proceeds from the remarketing of the
Bonds shall be segregated from any funds of the Borrower and the Issuer and shall in no case be
considered to be or be assets of the Borrower or the Issuer. Funds representing remarketing
proceeds received by the Remarketing Agent after 11:00 a.m. Local Time on each Remarketing
Date shall be paid to the Trustee as soon as practicable upon such receipt.
(7) Delivery of Purchased Bonds. On or before the Business Day next preceding each
Remarketing Date, the Remarketing Agent shall notify the Trustee in writing of (a) the principal
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amount of Bonds to be sold by the Remarketing Agent pursuant to this Section 3.8 and the purchase
price, and, unless the Bonds are then in Book-Entry Form, the names, addresses and social security
numbers or other tax identification numbers of the proposed purchasers thereof; and (b) the
principal amount of Bonds tendered for purchase on such Remarketing Date which will not be sold
by the Remarketing Agent pursuant to this Section 3.8.
Bonds purchased by the Trustee on a Mandatory Tender Date that have been remarketed shall be
delivered to the purchasers thereof as directed by the Remarketing Agent. Bonds delivered as provided in
this Section shall be registered in the manner directed in writing by the recipient thereof.
Section 3.9. Establishment and Notice of Remarketing Rate. The Remarketing Agent shall
establish the interest rate on the Bonds Outstanding for each Remarketing Period at the Remarketing Rate
in accordance with this Section. Not less than ten (10) Business Days preceding each Remarketing Date,
the Remarketing Agent, taking into consideration prevailing market conditions, shall, using its best
professional judgment, determine the minimum rate(s) of interest which, if borne by the Bonds then
Outstanding for the Remarketing Period specified by the Borrower as provided in Section 3.8 hereof, would
permit all such Bonds to be remarketed at a price equal to par. The rate of interest determined in accordance
with the previous sentence shall be the Remarketing Rate for the specified Remarketing Period; provided
that if the rate of interest so determined for such period would exceed the Maximum Interest Rate, the
Bonds Outstanding shall be remarketed for the longest Remarketing Period for which the minimum rate of
interest that would enable such Bonds to be remarketed at a price equal to one hundred percent (100%) of
the principal amount of such Bonds that would not exceed the Maximum Interest Rate. Notwithstanding
the foregoing, if the rate of interest so determined for any Remarketing Period would exceed the Maximum
Interest Rate, the Bonds Outstanding shall not be remarketed.
The Remarketing Agent shall, upon determination of the Remarketing Rate and Remarketing
Period, immediately (and in no event later than the Business Day following the day on which the
Remarketing Agent makes its determination of the Remarketing Rate and the Remarketing Period) give
notice of its determination in writing to the Remarketing Notice Parties. The Remarketing Rate and the
Remarketing Period shall be conclusive and binding upon the Remarketing Notice Parties and the Holders
for the purposes of this Indenture.
Section 3.10. Cancellation of Bonds. The Trustee shall immediately cancel Bonds if the tender
price of the Bonds is paid from amounts other than proceeds derived from the remarketing of the Bonds.
Section 3.11. Concerning the Remarketing Agent. The Remarketing Agent identified in
Section 1.1 hereof shall serve as the Remarketing Agent for the Bonds. The Remarketing Agent shall
designate to the Trustee its designated office and signify its acceptance of the duties and obligations
imposed upon it hereunder by a written instrument of acceptance delivered to the Issuer, the Borrower and
the Trustee. In addition, the Remarketing Agent will agree particularly to:
(1) keep such records relating to its computations of interest rates for the Bonds as
shall be consistent with prudent industry practice and to make such records available for inspection
by the Issuer, the Trustee and the Borrower at all reasonable times; and
(2) perform all of its functions and duties under this Indenture.
The Remarketing Agent shall be entitled to advice of legal counsel on any matter relating to the
Remarketing Agent’s obligations hereunder and shall be entitled to act upon the opinion of such counsel in
the exercise of reasonable care in fulfilling such obligations.
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The Remarketing Agent shall be entitled to appoint additional co-Remarketing Agents to assist in
the performance of the Remarketing Agent’s obligations under this Indenture, and any such appointment
shall be effective without any action by the Issuer or the Borrower being necessary; provided that any such
co-Remarketing Agent, shall have a capitalization of at least $5,000,000, or shall have a line of credit with
a commercial bank in the amount of at least $5,000,000, shall be in conformity with all standards and
requirements of the Municipal Securities Rulemaking Board and the Securities and Exchange Commission,
and shall be authorized by law to perform all the duties imposed upon it by this Indenture. The Remarketing
Agent shall take responsibility for any co-Remarketing Agent it appoints.
Section 3.12. Qualifications of Remarketing Agent. The Remarketing Agent shall be a member
in good standing of the Financial Industry Regulatory Authority having a capitalization of at least
$5,000,000, or shall have a line of credit with a commercial bank in the amount of at least $5,000,000, and
shall be authorized by law to perform all the duties imposed upon it by this Indenture. Subject to the terms
of the Remarketing Agreement, the Remarketing Agent may at any time resign and be discharged of the
duties and obligations created by this Indenture by giving at least thirty (30) days’ notice of such resignation
to the Issuer, the Borrower, Investor Limited Partner and the Trustee. The Remarketing Agent may be
removed, with prior notice to the Issuer, at any time by the Borrower, with at least thirty (30) days’ notice
of such removal to the Remarketing Agent.
Upon any resignation or removal of the Remarketing Agent, the departing Remarketing Agent shall
pay over, assign and deliver any money and Bonds held by it in such capacity to its successor.
The Trustee, within thirty (30) days of the resignation or removal of the Remarketing Agent or the
appointment of a successor Remarketing Agent, shall give notice thereof by registered or certified mail to
the Holders of the Bonds.
Section 3.13. Notices to Remarketing Notice Parties. The Trustee shall notify the Remarketing
Notice Parties of (1) the occurrence of an Event of Default of which the Trustee has actual notice ; (2) the
occurrence of any monetary or other material default under the Loan of which the Trustee has actual notice;
(3) any change in the identity of the Trustee; (4) any amendments, modifications, supplements or changes
to this Indenture, the Loan Agreement or the Bonds, including any extension of principal or modification
of interest or redemption premium due on any of the Bonds, in each case only in the event the Trustee has
actual notice; (5) any change or proposed change in the structure or identity of the Borrower of which the
Trustee has actual knowledge; (6) any change or notification of proposed change of the Mandatory Tender
Date or Remarketing Date; (7) any partial prepayment of the Loan or the giving of notice of the call for
redemption of any Bonds; (8) any defeasance or acceleration of the Bonds hereunder; or (9) any change in
the Remarketing Agent of which its Trustee has actual knowledge.
The Trustee shall not, however, be subject to any liability to any Holder or any party to the
transaction by reason of its failure to mail any such notice, and any such failure shall not affect the validity
of actions which are the subject of such notice.
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ARTICLE 4
GENERAL COVENANTS
Section 4.1. Payment of Principal, Premium and Interest. Solely from the money derived from
the Loan Agreement (other than to the extent payable from proceeds of the Bonds or temporary
investments), 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. Money derived from the Loan
Agreement includes all money derived from the Granting Clauses set forth herein, including but not limited
to Basic Payments under the Loan Agreement and trust funds deposited in the funds and accounts
established under Article 5 hereof to the extent and in the manner provided in said Article. 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 and Authority for Covenants. The Issuer covenants that it is duly
authorized under the Act and the Joint Powers Act to issue the Bonds authorized hereby, to execute this
Indenture, to loan the Bond proceeds 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.
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 impaired, changed or encumbered in
any manner whatsoever, except as may be expressly permitted herein; 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 reasonably require
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 and interest on the Bonds.
Section 4.4. Recording and Filing. The Borrower, in accordance with Section 5.3 of the Loan
Agreement, has covenanted to cause the Security Documents and all supplements thereto, to be kept,
recorded and filed in such manner and in such places as may be required by law in order to preserve and
protect fully the security of the Holders of the Bonds and the rights of the Trustee hereunder and under any
other instruments aforesaid.
The Trustee will not know and is not responsible for the legality, effectiveness or sufficiency of
any Security Document. To continue the security interest evidenced by such Security Documents or
financing statements where the Trustee is named as the secured party, which are filed upon the issuance of
the Bonds and included in the transcript of documents delivered to the Trustee, the Trustee shall, at the
expense of the Borrower, cause the Borrower to file and record or cause to be filed and recorded such
necessary continuation statements from time to time as may be required pursuant to the provisions of the
said Uniform Commercial Code or other similar law to fully preserve and protect the security interest of
the Trustee in the Trust Estate and to perfect the security interest in the Security Documents. In addition,
unless the Trustee shall have been notified in writing by the Borrower that any such initial filing or
description of collateral was or has become defective, the Trustee shall be fully protected in (1) relying on
such initial filing and descriptions in filing any financing or continuation statements or modifications
thereto pursuant to this Section; and (2) filing any continuation statements in the same filing offices as the
initial filings were made.
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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 proper books or
records and accounts, 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 and this
Indenture. At reasonable times and under reasonable regulations established by the Trustee, such books
shall be open to the inspection of Holders and such accountants or other agencies as the Trustee may from
time to time designate.
Section 4.6. Bondholders’ Access to Bond Register. 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 Trustee by the Issuer.
Section 4.7. Rights under Loan Agreement. The Loan Agreement sets forth covenants and
obligations of the Issuer and 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 in its name or in the
name of the Issuer may enforce all rights of the Issuer and all obligations of the Borrower under and
pursuant to the Loan Agreement and on behalf of the Holders, whether or not the Issuer has undertaken to
enforce such rights and obligations. The Trustee shall not be bound to ascertain or inquire as to the
observance or performance of any covenants, agreements or obligations on the part of the Issuer or the
Borrower under the Loan Agreement except as set forth therein. The Trustee may require of the Issuer or
the Borrower full information and advice as to the observance or performance of those covenants,
agreements and obligations. Except as otherwise provided herein, the Trustee shall have no obligation to
observe or perform any of the duties of the Issuer under the Loan Agreement.
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ARTICLE 5
FUNDS AND ACCOUNTS
Section 5.1. “Trust Money” Defined. All money received by the Trustee (all such money being
herein sometimes called “Trust Money”):
(1) as elsewhere herein provided to be held and applied under this Article 5, or
required to be paid to the Trustee and whose disposition is not elsewhere herein otherwise
specifically provided for, including but not limited to the investment income of all Trust Funds held
by the Trustee under this Indenture;
(2) as proceeds from the sale of the Bonds; or
(3) as Basic Payments, or as otherwise payable under the Loan Agreement;
shall be held by the Trustee as a part of the Trust Estate, and, upon the exercise by the Trustee of any remedy
specified in Article 8 hereof, such Trust Money shall be applied in accordance with Section 8.6 hereof,
except to the extent that the Trustee is holding in Trust Money or Government Obligations, as the case may
be, for the payment of any specified Bonds which are no longer deemed to be Outstanding under the
provisions of Article 7 hereof, which money or Government Obligations shall be applied only as provided
in said Article 7. Prior to the exercise of any such remedy, all or any part of the Trust Money shall be held,
invested, withdrawn, paid or applied by the Trustee, from time to time, as provided in this Article 5 and in
Articles 6 and 7 hereof.
Section 5.2. Project Fund.
(1) There is hereby created a Project Fund. On the Issue Date, the Project Fund will
be funded with proceeds of the Bonds in the amount of $______________ and equity of the
Borrower in the amount of $__________. Subject to the provisions of this Section 5.2, other than
disbursements on the Issue Date to pay Project Costs in accordance with the closing memorandum
and without a disbursement request, the Trustee shall make disbursements from the Project Fund
to pay Project Costs only upon the receipt of a Disbursement Request of the Borrower in the form
attached as Exhibit B to the Loan Agreement and in accordance with the Disbursing Agreement,
the Loan Agreement, and this Indenture. Proceeds of the Bonds deposited in the Project Fund shall
be disbursed by the Trustee in accordance with the applicable provisions of Article 3 of the Loan
Agreement and the Disbursing Agreement. The Issuance Expenses of the Bonds may be disbursed
by the Trustee from the Project Fund, upon a written request of the Borrower, without having to
comply with the provisions of the Disbursing Agreement or the Loan Agreement regarding
disbursement of Bond proceeds for the payment of Project Costs.
(2) Any sums in the Project Fund in excess of any amount required to pay Project
Costs shall be transferred to the Bond Fund at the time or times and in the manner provided in
Article 3 of the Loan Agreement.
(3) Any funds deposited in the Project Fund by the Borrower shall be disbursed before
any proceeds of the Bonds, including any earnings thereon, shall be disbursed.
(4) Any interest earned on sums held in the Project Fund prior to the Completion Date
shall remain a part of the Project Fund.
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(5) For purposes of complying with the requirements of this Section, the Trustee may
conclusively rely on the Disbursement Request executed by the Borrower and shall be protected in
acting or refraining from acting upon the Disbursement Request, which may be submitted by email
(pdf). All payments made from the Project Fund shall be presumed by the Trustee to be made for
the purposes certified in said written requests, and the Trustee shall not be required to see to the
application of any payments made from the Project Fund or to inquire into the purposes for which
withdrawals are being made from the Project Fund. The Trustee shall not be bound to make an
investigation into the facts or matters stated in any written request. The Trustee shall not be
responsible for determining whether the funds on hand in the Project Fund are sufficient to
complete the Project. The Trustee shall not be responsible to collect lien waivers. The Trustee
shall not be responsible for determining whether the funds on hand in the Project Fund are sufficient
to complete the Project. The Trustee shall have no responsibility whatsoever to disburse or transfer
funds absent written instructions from the Borrower. The Trustee shall not be liable or accountable
for the use or application by the Borrower of any of the Bonds or the proceeds thereof or for the
use or application of any money paid over by the Trustee in accordance with the provisions of this
Section.
Section 5.3. Bond Fund.
(1) There is hereby created a Bond Fund.
(a) There shall be credited to the Bond Fund, as and when received:
(i) each payment received by the Trustee under and pursuant to any
of the provisions of this Indenture or the Loan Agreement which is required to be
paid into Bond Fund, or which is accompanied by directions that such payment is
to be credited to the Bond Fund;
(ii) funds transferred from the Capitalized Interest Fund pursuant to
Section 5.4(1) hereof;
(iii) all income derived from the investment of amounts described in
clause (i) above, as realized.
(b) The Trustee shall disburse, from time to time, sufficient money from the
Bond Fund as specified below to pay the principal of, premium, if any, and the interest on,
the Bonds as the same become due and payable.
(c) If any Bond shall not be presented for payment at maturity, provided
money sufficient to pay such Bond shall have been made available to the Trustee and held
by the Trustee for the benefit of the Holder thereof, all liability of the Issuer to the Holder
thereof for the payment of such Bond shall forthwith cease, determine and be completely
discharged, and thereupon it shall be the duty of the Trustee to hold such money, without
liability for interest thereon, for the benefit of the Holder of such Bond, who shall thereafter
be restricted exclusively to such money for any claim of whatever nature on his part
hereunder or on, or with respect to, such Bond.
(d) Any money remaining in the Bond Fund after payment in full of the
respective series of Bonds, and payment of the fees, charges and expenses of the Trustee,
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the Paying Agent, the Issuer and any co-Paying Agent which have accrued and which will
accrue and all other items required to be paid hereunder shall be paid to the Borrower.
(e) Money in the Bond Fund shall be invested as provided in Section 6.1
hereof.
(f) At any time upon request, the Trustee shall advise the Borrower and the
Investor Limited Partner of the amount of funds determined by the Trustee to be necessary
to redeem the Bonds in full pursuant to Section 3.1(3) of the Indenture, which
determination shall take into account any money on deposit in the Capitalized Interest Fund
that may be applied to the Redemption Price of the Bonds pursuant to this Indenture.
(2) Any surplus money in the Project Fund at the Completion Date which is transferred
to the Bond Fund as provided in Section 5.2(2) (and interest earned thereon) shall be used by the
Trustee to (a) to redeem the largest number of respective Bonds callable, without premium or
penalty, under the terms of this Indenture at the first opportunity; or (b) pay that portion of the
annual principal due on the respective Bonds in an amount that bears the same ratio to the annual
principal due that the total of such surplus funds bears to the face amount of such Bonds; and such
funds, to the extent transferred to the Bond Fund, shall be invested as directed by the Borrower and
shall not be invested to produce a yield greater than the yield on the Bonds, as required by Internal
Revenue Service Revenue Procedure 79-5, Revenue Procedure 81-22 and 26 CFR 601.201 (and
any subsequent amendments, modifications or replacements thereof), provided that, if the Trustee
receives an opinion of Bond Counsel, the funds may be invested at a yield greater than the yield on
the Bonds or the balance may be applied to meet current debt service requirements and accordingly
become a part of the balance in the Bond Fund which may be credited against current installments
of Basic Payments.
Section 5.4. Capitalized Interest Fund.
(1) There is hereby created a Capitalized Interest Fund. On the Issue Date, the
Capitalized Interest Fund will be funded with proceeds of the Bonds in the amount of
$______________ and equity of the Borrower in the amount of $__________. Funds in the
Capitalized Interest Fund shall be transferred automatically by the Trustee to the Bond Fund on the
last Business Day of the month prior to a month in which an Interest Payment Date occurs in full
or partial satisfaction of the interest payment payable by the Borrower with respect to the Bonds
until the Capitalized Interest Fund is fully depleted.
(2) Any interest earned on sums held in the Capitalized Interest Fund prior to the
Completion Date shall remain a part of the Capitalized Interest Fund.
(3) At the written direction of the Borrower, any funds remaining in the Capitalized
Interest Fund following the Completion Date of the Project shall be transferred to the Bond Fund.
Section 5.5. Rebate Fund.
(1) There is hereby created a Rebate Fund. The Trustee shall deposit in the Rebate
Fund, upon receipt, all Rebate Amounts deposited with the Trustee in accordance with
Section 7.7(12) of the Loan Agreement; and for purposes of making such deposits the Trustee shall,
at the direction of the Borrower, transfer from the appropriate fund to the Rebate Fund a sum equal
to any Rebate Amounts attributable to sums held in the Project Fund.
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(2) The Trustee shall cooperate with the Borrower in making the determinations for
each computation required pursuant to 7.7(12) of the Loan Agreement; and to that end, the Trustee
shall, within thirty (30) days after the end of the fifth Bond Year for the Bonds, prepare and file
with the Borrower a report with respect to the Project Fund setting forth the total amount invested
during the preceding five (5) Bond Years, the investments made with the money in the Project Fund
and the investment earnings (and losses) resulting from such investments, together with such
additional information concerning the Bond Fund and the investments therein as the Rebate
Consultant or the Borrower shall reasonably request.
(3) The Trustee shall remit sums in the Rebate Fund to the United States as provided
in Section 7.7(12) of the Loan Agreement.
(4) Upon written direction of the Borrower, the Trustee shall remit to the Borrower,
or transfer to the Bond Fund, any surplus rebate sums held in the Rebate Fund as provided in
Section 7.7(13) of the Loan Agreement.
(5) Within the Rebate Fund, the Trustee shall maintain such accounts as shall be
necessary to comply with written instructions of the Borrower given pursuant to the terms and
conditions of the Tax Certificate. Subject to the transfer provisions provided below, all money at
any time deposited in the Rebate Fund shall be held by the Trustee in trust, to the extent required
to satisfy the required rebate payments (the “Rebate Requirement”) to the federal government of
the United States of America. All amounts deposited into or on deposit in the Rebate Fund shall
be governed by this Section and by the Tax Certificate (which is incorporated herein by reference).
The Trustee shall be deemed conclusively to have complied with such provisions if it follows the
directions of the Borrower including supplying all necessary information in the manner provided
in the Tax Certificate, and shall have no liability or responsibility to enforce compliance by the
Borrower or the Issuer with the terms of the Tax Certificate or any other tax covenants contained
in the Loan Agreement. The Trustee shall not be responsible for calculating rebate amounts or for
the adequacy or correctness of any rebate report or rebate calculations. The Trustee shall have no
independent duty to review such calculations or enforce the compliance by the Borrower with such
rebate requirements. The Trustee shall have no duty or obligation to determine the applicability of
the Code and shall only be obligated to act in accordance with written instructions provided by the
Borrower.
(6) Computations of the Rebate Requirement shall be furnished by or on behalf of the
Borrower in accordance with the Tax Certificate. The Trustee shall supply to the Borrower and/or
the Issuer and any Rebate Consultant of the Borrower all necessary information in the manner
provided in the Tax Certificate to the extent such information is reasonably available to the Trustee.
(7) The Trustee shall have no obligation to rebate any amounts required to be rebated
pursuant to this Section, other than from moneys held in the funds and accounts created under this
Indenture or from other moneys provided to it by the Borrower.
(8) At the written direction of the Borrower, which shall include a statement to the
effect that such direction complies with the restrictions set forth in the Tax Certificate, the Trustee
shall invest all amounts held in the Rebate Fund in Permitted Investments. The Trustee shall not
be liable for any consequences arising from such investment.
(9) Any funds remaining in the Rebate Fund after each five year remission to the
United States of America, redemption and payment of all of the Bonds and payment and satisfaction
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of any Rebate Requirement, or provision made therefor s atisfactory to the Trustee, shall be
withdrawn and remitted to the Borrower.
(10) Notwithstanding any other provision of this Indenture, the obligation to remit the
Rebate Requirement to the United States and to comply with all other requirements of this Section
and the Tax Certificate shall survive the defeasance or payment in full of the Bonds.
Section 5.6. Deposit of Funds with Paying Agent.
(1) The Trustee shall transfer and remit sums from the Bond Fund to the Paying Agent
in advance of each interest and principal due date and redemption 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) Interest on each Bond, including accrued interest to the date of deposit and interest,
to the extent permitted by law, on overdue installments of interest at the rate borne by such Bond,
(a) shall cease on its Stated Maturity, or on any prior date on which it shall have been duly called
for redemption as herein provided, provided that funds sufficient for the payment thereof with
accrued interest and any redemption premium have been deposited with the Paying Agent on or
before the Stated Maturity or Redemption Date, as the case may be, and in the case of redemption,
that the requirements of Article 3 have been complied with; or (b) shall cease on any date after
Stated Maturity on which such deposit has been made, and the Holder shall have no further rights
with respect to the Bonds or under this Indenture except to receive the payment so deposited.
(3) If any Bond is not presented for payment when due and funds sufficient to pay
such Bond shall have been paid to the Trustee (or other Paying Agent, if any): (a) all liability of
the Issuer for payment of such Bond shall forthwith cease; (b) such Bond shall forthwith cease to
be entitled to any lien, benefit or security under this Indenture, and the Holder of such Bond shall
forthwith have no rights in respect thereof except to receive payment thereof; and (c) the Trustee
(or other Paying Agent, if any) shall hold such funds, without liability for interest thereon, for the
benefit of the Holder of such Bond. Any money still held by the Trustee (or other Paying Agent,
if any) after two (2) years and eleven (11) months from the date on which the Bond with respect to
such amount was paid to the Trustee (or other Paying Agent, if any), shall, if and to the extent
permitted by law, be paid by the Trustee (or other Paying Agent, if any) to the Borrower and shall
be discharged from the trust and all liability of the Paying Agent or the Trustee with respect to such
Trust Money shall cease; and the Bondholders shall thereafter be entitled to look only to the
Borrower for payment, and the Borrower shall not be liable for any interest thereon.
(4) If there is any Paying Agent who is not the Trustee, the Trustee will cause such
Paying Agent 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:
(a) 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
(b) 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.
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The Trustee, acting as Paying Agent, shall also be bound by the terms of the foregoing
requirements.
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ARTICLE 6
INVESTMENTS
Section 6.1. Investments by Trustee.
(1) Except during the continuance of an Event of Default, and subject to the provisions
of Section 8.2 hereof, money held for the credit of the funds established by Article 5 hereof shall
be held by the Trustee as required by law and shall at the written request and direction of the
Representative of the Borrower, to the extent practicable and permitted by the Act, and except as
provided below with respect to the money in the Bond Fund be invested as received and reinvested
by the Trustee in Permitted Investments (including investments in securities authorized by the Act,
through a common trust fund or similar fund maintained by a bank (including the Trustee)
exclusively for the collective investment and reinvestment of money contributed thereto by the
bank in its capacity as trustee, certificates of deposit, and repurchase agreements).
Subject to Minnesota Statutes, as to the investment of sums (other than Bond proceeds)
held in the Bond Fund, the type, amount and maturity of such investments shall be as specified by
the Representative of the Borrower, provided that sums in the Bond Fund may i n any event only
be invested in securities which mature or are subject to redemption or repurchase at the option of
the Trustee on or prior to the date or dates on which the Trustee anticipates that cash funds will be
required.
(2) The Trustee shall sell and reduce to cash funds 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 investmen t of
money shall be held by the Trustee, shall be registered in the name of the Trustee 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.
(3) The Trustee shall have no liability whatsoever for any loss, fee, tax or other charge
incurred in connection with any investment, reinvestment, sale or liquidation of an investment
hereunder. The Trustee shall be entitled to rely on any written direction of the Borrower as to the
suitability and legality of the directed investments. The Trustee shall have no responsibility
whatsoever to determine whether any investments made pursuant to this Indenture are or continue
to be Permitted Investments. Any deposit or investment directed by the Borrower shall constitute
a certification by the Borrower to the Trustee that the assets so deposited or to be purchased
pursuant to such directions are Permitted Investments. In no event shall the Trustee be deemed an
investment manager or adviser in respect of any selection of investments hereunder.
(4) Such Permitted Investments shall be made so as to mature or be subject to
redemption at the option of the holder thereof on or prior to the date or dates that the Borrower
anticipates that money therefrom will be required. The Trustee may trade with itself or its
affiliates in the purchase and sale of such Permitted Investments. Such Permitted Investments
shall be registered in the name of the Trustee. The Trustee may invest in Permitted Investments
through its own trust department or through or from any of its affiliates and Trust Money may be
deposited in time deposits, or certificates of deposit issued by, the Trustee or any of its affiliates.
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(5) The Trustee shall without further direction from the Issuer or the Borrower sell
such Permitted Investments as and when required to make any payment for the purpose of which
such investments are held. Each investment shall be credited to the fund for whic h it is held,
subject to any other provision of this Indenture directing some other credit, but income on such
Permitted Investments shall be held or transferred, as received, in accordance with this Indenture.
(6) If the Borrower does not file a Borrower request with the Trustee with respect to
the investment of the money held under this Indenture, the Trustee shall invest to the extent
practicable in investments described in clause (6) of the definition of the term “Permitted
Investment”; provided, however, that any such investment shall be made by the Trustee only if,
prior to the date on which such investment is to be made, the Trustee shall have received a written
Borrower request specifying a specific money market fund or other Permitted Investment and , if
no such written Borrower request is so received, the Trustee shall hold such moneys uninvested.
Section 6.2. Return on Investments.
(1) In directing investments pursuant to Section 8.3 of the Loan Agreement, the
Borrower will not instruct the Trustee to use the proceeds of the Bonds or other sums pledged to
the payment of the Bonds, directly or indirectly, to acquire any securities or obligations the
acquisition of which would cause any of the Bonds to be an “arbitrage bond” as defined in
Section 148 of the Code, and for this purpose the Trustee, in order to restrict yield on investments,
may invest in SLGS, when available (and accordingly is hereby authorized to act as agent of the
Issuer for such purpose). The Trustee has no duty to monitor the yield on any directed investment
or any obligation to limit the yield or any investment the Borrower directs the Trustee to make.
The Trustee shall be fully protected in relying on the Borrower’s directions with respect to whether
the acquisition of any securities or obligations would have the effect prohibited by this Section.
(2) No money in any fund or account shall be invested in investments which cause the
Bonds to be “federally guaranteed” within the meaning of Section 149(b) of the Code. If at any
time the money in all funds and accounts relating to the Bonds exceeds, within the meaning of
Section 149(b) of the Code, (a) amounts invested for an initial temporary period until the money is
needed for the purpose for which the Bonds were issued, (b) investments of a bona fide debt service
fund, and (c) investments of a reserve which meet the requirement of Section 148(d) of the Code,
then money in excess of such amounts shall be invested at the direction of the Borrower pursuant
to Section 8.3 of the Loan Agreement in (i) obligations issued by the United States Treasury,
(ii) other investments permitted under regulations, or (iii) obligations which are (A) not issued by,
or guaranteed by, or insured by, the United States or any agency or instrumentality thereof or (b) not
federally insured deposits or accounts, all within the meaning of Section 149(b) of the Code. The
Borrower shall not direct the Trustee to take any action or do anything the effect of which shall be
to cause the Bonds to be “federally guaranteed” within the meaning of Section 149(b) of the Code.
(3) The provisions of this Section 6.2 shall survive discharge and release of the
Indenture.
Section 6.3. 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 such investments shall be valued at par value, or at the Redemption Price thereof, if then redeemable
at the option of the holder; provided that in any event for purposes of determining whether any balance in
a fund may only be invested at a restricted yield to comply with Section 148 of the Code and the federal
arbitrage regulations, any investments in the fund shall be valued at their par value or the price (less accrued
interest) at which they were purchased, whichever is the greater.
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Section 6.4. Rebate to United States. The Bonds are subject to the rebate to the United States
of earnings in excess of the yield on the Bonds imposed by Section 148 of the Code and Section 1.148-3 of
the Treasury Regulations. The Trustee shall have no obligation to calculate the amount of, or make, any
required rebate as provided in Section 5.5 hereof. The Trustee shall cooperate with the Borrower in
determining the amount of any rebate.
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ARTICLE 7
DISCHARGE OF LIEN
Section 7.1. Payment of Bonds; Satisfaction and Discharge of Bonds and Obligation to
Bondholders. Whenever the conditions specified in either clause (a) or (b) of subsection (1) below and the
conditions specified in the following subsections (2) and (3) to the extent applicable, shall exist, namely:
(1) either:
(a) all Bonds have been cancelled by the Trustee or delivered to the Trustee
for cancellation, excluding, however,
(i) Bonds for whose payment money has theretofore been deposited
in trust or segregated and held in trust by th e Paying Agent or Trustee and
thereafter repaid to the Borrower or discharged from such trust; and
(ii) Bonds alleged to have been destroyed, lost or stolen which have
been replaced or paid as provided in Section 2.6 hereof, and (A) which, prior to
the satisfaction and discharge of this Indenture as hereinafter provided, have not
been presented to the Paying Agent or the Trustee with a claim of ownership and
enforceability by the Holder thereof; or (B) whose enforceability by the Holder
thereof has been determined adversely to the Holder by a court of competent
jurisdiction or other competent tribunal; or
(b) the Issuer or the Borrower has deposited or caused to be deposited as trust
funds:
(i) with the Paying Agent, cash which shall be sufficient; or
(ii) with the Trustee cash and/or Government Obligations, 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, 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 hereof; and
(2) the Borrower has paid, caused to be paid or made arrangements satisfactory to the
Trustee for the payment of all other sums payable hereunder and under the Loan Agreement, and
the Related Documents by the Trustee or the Borrower until the Bonds are so paid; and
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(3) the Borrower has delivered to the Trustee a report of an Independent Accountant
stating that the payments to be made on the security referred to in clause (b)(ii) 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; and
(4) if discharge is to be effected under clause (b) of subsection (1) above, an opinion
of Bond Counsel is delivered to the Trustee stating in effect that such discharge will not impair the
tax-exempt status of the Bonds;
then, except as otherwise provided in Article 7 and Sections 8.2 and 9.3 hereof, the rights of the Bondholders
shall be limited to the cash or cash and securities deposited as provided in clause (a) or (b) of subsection (1)
above, and upon the Borrower’s request the rights and interest hereby granted or granted by the Loan
Agreement and the Collateral Documents to or for the benefit of the Trustee or Bondholders shall cease,
terminate and become null and void, 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 the
Loan Agreement and this Indenture (except the money or securities or both deposited as required above
and except as may otherwise be provided in Article 7 and Sections 8.2 and 9.3 hereof shall thereupon be
discharge and satisfied); except that in any event the obligations of the Borrower under Sections 7.4, 7.7,
7.8, 10.10, 10.11, 10.12, and 10.13 of the Loan Agreement shall survive.
Section 7.2. Discharge of Indenture. Notwithstanding the fact that the lien of this Indenture
upon the Trust Estate may have been discharged and cancelled in accordance with Section 7.1 hereof, this
Indenture and the rights granted and duties imposed hereby, to the extent not inconsistent with the fact that
the lien upon the Trust Estate may have been discharged and cancelled, shall nevertheless continue and
subsist until the principal of and the interest on, all of the Bonds shall have actually been paid in full and
the Trustee shall have applied all funds theretofore held by the Trustee for payment of any Bonds not
theretofore presented for payment or purchase, as the case may be, which funds shall be held in trust solely
for the Holders of such Bonds pending their application in accordance herewith.
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ARTICLE 8
DEFAULT PROVISIONS AND REMEDIES
Section 8.1. Events of Default. Each of the following events is hereby defined as, and declared
to be and to constitute, an “Event of Default” hereunder:
(1) default in the due and punctual payment of any interest on any Bond or the
Mandatory Purchase Price of any Bond on the Mandatory Tender Date;
(2) default in the due and punctual payment of the principal of any Bond at its Stated
Maturity;
(3) if default shall be made in the due and punctual payment of any other money
required to be paid to the Trustee under the provisions hereof and such default shall have continued
for a period of thirty (30) 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 twenty-five percent (25%) in aggregate principal amount of the then
Outstanding Bonds;
(4) if default shall be made in the performance or observance 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 thirty (30) days after written notice
thereof given in the manner provided in subsection (3) above. Notwithstanding the foregoing, if
the default reasonably requires more than thirty (30) days to cure, such default shall not constitute
an Event of Default, provided that the curing of the default is promptly commenced upon receipt
by the Issuer of the notice of the default, and with due diligence is thereafter continuously
prosecuted to completion and is completed within a reasonable period of time, and provided that
Issuer keeps the Trustee well informed at all times of its progress in curing the default; provided in
no event shall such additional cure period extend beyond sixty (60) days;
(5) the occurrence of an Act of Bankruptcy; or
(6) the occurrence of an “Event of Default” under the Loan Agreement or the Security
Documents.
The Investor Limited Partner in the Borrower shall have the right, but not the obligation, to cure
Events of Default on behalf of the Borrower.
Section 8.2. Acceleration.
(1) Upon the occurrence of an Event of Default referred to in Section 8.1 hereof, the
Trustee may, and at the written request of the Holders of not less than twenty-five percent (25%)
in aggregate principal amount of the Outstanding Bonds shall, by notice in writing delivered to the
Issuer and the Borrower declare the principal of all Bonds immediately due and payable, whereupon
the same shall become immediately due and payable any time herein or in the Bonds to the contrary
notwithstanding.
(2) Upon any declaration of acceleration, or occurrence resulting in acceleration under
this Section 8.2, the Trustee shall immediately declare the Basic Payments required to be made by
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the Borrower under the Loan Agreement to be immediately due and payable in accordance wi th
Section 9.2 of the Loan Agreement.
(3) Upon any acceleration required under this Section 8.2, interest shall cease to accrue
on the Bonds as of the date of declaration of such acceleration.
(4) Except as provided in this Section 8.2, under no other circumstances may the
Trustee accelerate the payment of the Bonds.
Section 8.3. Remedies.
(1) Subject to the provisions of Section 8.2, upon the occurrence of an Event of Default
and acceleration of the Bonds, the Trustee may proceed to pursue any available remedy by suit at
law or in equity to enforce all rights of the Bondholders, including without limitation the right to
the payment of the principal or premium, if any, and interest on the then Outstanding Bonds. Upon
the occurrence of an Event of Default under the Loan Agreement, the Trustee may also enforce any
and all rights, if any, of the Issuer thereunder. The Issuer may also exercise any of its rights as
provided in Section 9.12 of the Loan Agreement.
(2) If any Event of Default shall have occurred, and if it shall have been requested to
do so by the Holders of seventy-five percent (75%) in aggregate principal amount of the then
Outstanding Bonds, and if it shall have received an indemnity bond as provided in Section 9.1
hereof, the Trustee shall be obliged to exercise such rights and powers conferred on the Trustee by
this Section and Section 8.2 hereof as the Trustee (being advised by Independent Counsel) shall
deem most expedient in the interests of the Bondholders; provided, however, that the Trustee shall
have the right to decline to comply with any such request if the Trustee shall be advised by
Independent Counsel that the action so requested may not lawfully be taken or if the Trustee in
good faith shall determine that such action would be unjustly prejudicial to the Bondholders not
parties to such request.
(3) No remedy by the terms of this Indenture conferred upon or reserved to the Trustee
(or to the Bondholders) is intended to be exclusive of any other remedy, but each and every such
remedy shall be cumulative and shall be in addition to any other remedy (a) given to the Trustee or
to the Holders hereunder; or (b) now or hereafter existing at law or in equity or by statute.
(4) 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.
(5) No waiver of any Event of Default hereunder, whether by the Trustee or by 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 Bondholders. The Holders of a majority in aggregate
principal amount of the then Outstanding Bonds shall have the right, at any time, by an instrument or
instruments in writing executed and delivered to the Trustee, to direct the method and place of conducting
all proceedings to be taken in connection with the enforcement of the terms and conditions of this Indenture,
the Loan Agreement, the Collateral Documents 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.
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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 enforceme nt 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 Money. All money received by the Trustee
pursuant to any right given or action taken under the provisions of this Article shall, after payment of the
costs and expenses of the proceedings resulting in the collection of such other money and of the related
expenses, liabilities and advances incurred or made by the Issuer or the Trustee, be deposited in the Bond
Fund. All money in the Bond Fund shall be applied, subject to the provisions of Article 5 hereof, pro rata
with respect to the outstanding amounts of the Bonds, as follows:
(1) Unless the principal of all the Bonds shall have become or shall have been declared
due and payable, all such money shall be applied:
FIRST: To the payment to the Persons entitled thereto of all installments of
interest then due on the Bonds, in the order of the maturity of the installments of such
interest and, if the amount available shall not be sufficient to pay in full any particular
installment, then to the payment ratably, according to the amounts due on such installment,
to the Persons entitled thereto, without any discrimination or privilege.
SECOND: To the payment to the Persons entitled thereto the unpaid principal of
any of the Bonds which shall have become due in the order of their due dates with interest
on such Bonds at the applicable rate and, if the amount available shall not be sufficient to
pay in full the unpaid principal on 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, without any discrimination or privilege.
(2) If the principal of all Bonds shall have become due or shall have been declared due
and payable, all such money shall be applied to the payment of the principal and interest then due
and unpaid upon the Bonds, without preference or priority of principal or any redemption premium
over interest or of interest over principal or any redemption premium, or of any installment of
interest over any other installment of interest, or of any Bond over any other Bond, ratably,
according to the amounts due respectively for principal and interest, to the Persons entitled thereto,
without any discrimination or privilege.
(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 subsection (2) above in the event that the principal of all
the Bonds shall later become due or be declared due and payable, the money shall be applied in
accordance with the provisions of subsection (1) above.
Whenever money is to be applied by the Trustee pursuant to the provisions of this Section, such
money 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 money available for application and the likelihood of additional money
becoming available for such application in the future. Whenever the Trustee shall apply such funds, it shall
(i) fix the date (which shall be an Interest Payment Date unless it shall deem another date more suitable)
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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 money necessary to
effect such application. The Trustee shall give to the Bondholders mailed notice of the deposit with it of
any such money and of the fixing of any such date. Neither the Trustee nor any Paying Agent shall be
required to make payment to the Holder of any Bond until such Bond shall be presented to the Trustee for
appropriate endorsement or for cancellation if fully paid.
Whenever all Bonds and interest thereon have been paid under the provisions of this Section 8.6,
and all expenses and charges of the Trustee and the Issuer have been paid, any balance remaining shall be
paid to the person entitled to receive the same pursuant to Section 12.9 hereof.
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 the 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 effe ct
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, the Loan
Agreement, or for the execution of any trust hereof or any remedy hereunder or thereunder or for the
appointment of a receiver, unless: (1) a default thereunder shall have become an Event of Default and the
Holders of seventy-five percent (75%) in aggregate principal amount of the Bonds then Outstanding 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;
(2) such Holders shall have offered to indemnify the Trustee as provided in Section 11.1(11) hereof; and
(3) 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, the Loan Agreement, or for the appointment of a receiver or for any
other remedy hereunder; it being understood and intended that no one or more Holders of the Bonds shall
have any right in any manner whatsoever to affect, disturb or prejudice the lien of this Indenture, by its, his
or their action or to enforce any right thereunder except in the manner herein provided, and tha t 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 the Loan Agreement 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 the
Trustee shall be restored to their former positions and rights hereunder with respect to the property herein
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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 may waive any Event of Default and
its consequences and shall do so upon written request of the Holders of a majority in aggregate principal
amount of the Bonds then Outstanding. No Event of Default giving rise to mandatory acceleration may be
waived. No such waiver or rescission shall extend to any subsequent or other Events of Default, or impair
any right consequent thereon.
Section 8.11. Borrower as Agent of Issuer.
(1) No default under Section 8.1(4) hereof shall constitute an Event of Default until
actual notice of such default by registered or certified mail shall be given by the Trustee to the
Issuer, the Borrower, and the Issuer and the Borrower shall have had the time permitted by the
applicable subsection after receipt of such notice to correct said default or cause said default to be
corrected and the Issuer or Borrower shall not have corrected said default or caused said default to
be corrected within said time.
(2) With regard to any alleged default concerning which notice is given to the
Borrower under the provisions of this Section 8.11, the Issuer hereby names and appoints the
Borrower as its attorney-in-fact and agent with full authority to perform any covenant or obligation
of the Issuer alleged in said notice to constitute a default, in the name and stead of the Issuer with
full power to do any and all things and acts to the same extent that the Issuer could do and perform
any such things and acts and with power of substitution; provided that the Borrower shall give the
Issuer notice of its intention so to perform on behalf of the Issuer, and provided further that the
Issuer may at any time, by a writing addressed to the Borrower withdraw, limit or modify the
appointment hereby made.
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ARTICLE 9
THE TRUSTEE
Section 9.1. Acceptance of 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. Upon the
occurrence and continuation of an Event of Default, the Trustee shall exercise such of the rights and powers
vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person
ordinarily would exercise and use under the circumstances in the conduct of their own affairs, but in any
such 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, but shall be answerable for the
conduct of the same in accordance with the standard specified above, 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. The Trustee may act upon the written opinion or written advice of
any attorney, surveyor, engineer or accountant selected by it in the exercise of reasonable care or,
if selected or retained by the Issuer, approved by the Trustee in the exercise of such care, 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 resulting from any action or nonaction 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 (except
with respect to the certificate of authentication on the Bonds) or for the investment of money as
herein provided, except as may be provided in Section 6.1, 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 sufficiency of any security for the Bonds issued hereunder or intended to be secured
hereby, 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, 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 as to the condition
of the Project and the performance of all other obligations thereunder and shall use its best efforts,
but without any obligation, to advise the Issuer and the Borrower of any impending Event of Default
known to the Trustee.
(3) The Trustee shall not be accountable for the use or application by the Issuer or the
Borrower 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 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 by it to be
genuine and correct and to have been signed or sent by the proper person or persons. Any action
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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 rely upon a
certificate of the Issuer signed by a Representative of the Issuer as sufficient evidence of the facts
stated therein as the same appear from the books and records under such Representative’s custody
or control or are otherwise known to him, her, or them. The Trustee may accept a certificate of
such Representative under the seal 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, resolution or ordinance 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.
(6) The Trustee shall not be answerable except for its own negligence, willful
misconduct or willful default.
(7) 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 they may be in possession of or managing the real and tangible personal
property as in this Indenture provided.
(8) 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 Project, including all books, papers and records of the
Issuer pertaining to the Project and the Bonds, and to take such memoranda from and with regard
thereto as may be desired.
(9) The Trustee shall not be required to give any bond or surety with respect to the
execution of said trusts and powers or otherwise in respect to the premises.
(10) Notwithstanding anything elsewhere in this Indenture contained, the Trustee shall
have the right, but shall not be required, to demand, with respect to the authentication of any Bonds,
the withdrawal of any cash, 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 corporat e 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.
(11) Before taking any action under this Indenture, the Trustee may require that it be
furnished an indemnity bond satisfactory to the Trustee for the reimbursement of al l expenses to
which the Trustee may be put and to protect the Trustee against all liability except liability which
is adjudicated to have resulted from the negligence, willful misconduct or willful default of the
Trustee, by reason of any action so taken by the Trustee.
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(12) All money received by the Trustee, the Paying Agent or any co-Paying Agent for
the Bonds shall, until used or applied or invested as herein provided, be held in trust for the purposes
for which they were received but need not be segregated from other funds except to the extent
required herein or by law. None of the Trustee, the Paying Agent, or any co-Paying Agent shall be
under any liability for interest on any money received hereunder except such as may be agreed
upon.
(13) No provision of this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or
in the exercise of any of its rights or powers, if the Trustee shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(14) The Trustee shall make no representation as to the validity or adequacy of this
Indenture or the Bonds, it shall not be accountable for the Issuer’s use of the proceeds of the Bonds
or any money paid to the Issuer or upon the Issuer’s direction under any provision hereof, it shall
not be responsible for the use or application of any money received by any Paying Agent other than
the Trustee and it shall not be responsible for any statement or recital herein or any statement in the
Bonds or any other document in connection with the sale of the Bonds or pursuant to this Indenture
other than its certificate of authentication.
(15) The Trustee shall not be liable for any error in judgment exercised in good faith
and believed by it to be authorized or within the discretion or rights or powers conferred upon it by
this Indenture.
(16) In no event shall the Trustee be liable for incidental, indirect, special, consequential
or punitive damages or penalties (including, but not limited to lost profits), even if the Trustee has
been advised of the likelihood of such damages or penalty and regardless of the form of action.
(17) The Trustee shall not be required to take notice or be deemed to have notice of any
Event of Default, except Events of Default described in Section 8.1(1) and (2) hereof, unless the
Responsible Officer shall be notified of such default in writing by the Issuer or by the Holders of a
majority in aggregate principal amount of the Bonds then Outstanding and all notices required to
be delivered to the Responsible Officer must, in order to be effective, be delivered at the designated
corporate trust office of the Trustee and, in the absence of such notice so delivered, the Trustee may
conclusively assume there is no default except as aforesaid.
Section 9.2. Trustee’s Fees, Charges and Expenses. The Trustee and any Paying Agent shall
be entitled to payment and/or reimbursement for reasonable fees for services rendered hereunder and all
advances, counsel fees and other expenses reasonably and necessarily made or incurred by the Trustee in
and about the execution of the trusts created by this Indenture and in and about the exercise and performance
of the powers and duties of the Trustee hereunder 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, willful misconduct or willful default of the Trustee). In
this regard the Issuer has made provisions in Section 4.4 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. Upon
an Event of Default, but only upon an Event of Default, the Trustee shall have a first li en with right of
payment prior to payment on account of interest on or principal or premium, if any, of any Bond and upon
the money received by it hereunder, for said fees, advances, counsel fees, costs and expenses incurred by
it.
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Section 9.3. Notice to Holders of Default. The Trustee shall give to the Bondholders written
notice of all Events of Default known to the Trustee, within ninety (90) days after the occurrence of an
Event of Default; provided that, except in the case of an Event of Default in the payment of the principal of
or interest on any of the Bonds, the Trustee shall be protected in withholding such notice if and so long as
the Board of Directors, the executive committee or a trust committee of directors or chief executive officer
of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders.
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 Holders
of Bonds, the Trustee may intervene on behalf of Holders and shall do so if requested in writing by the
Holders of at least twenty-five percent (25%) of the aggregate principal amount of Outstanding Bonds. 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, ipso facto, shall 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 othe r 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.
Section 9.6. Resignation by Trustee. The Trustee and any successor trustee may at any time
resign from the trusts hereby created by giving thirty (30) days’ written notice to the Issuer and to the
Borrower and by first-class mail to each Holder of Bonds as shown on the Bond Register, and such
resignation shall take effect upon the appointment of a successor trustee by the Holders or by the Issuer.
Such notice to the Issuer and the Borrower may be served personally or sent by registered mail. The Trustee
shall not be relieved of its duties until such successor trustee has accepted appointment. If at any time the
Trustee resigns and no appointment of a successor trustee is made pursuant hereto within forty-five (45)
days after the giving of a notice of resignation, the resigning Trustee may apply to a court of competent
jurisdiction at the expense of the Issuer for the appointment of a successor Trustee. The resigning Trustee
shall not be liable for the actions of the successor Trustee.
Section 9.7. Removal of Trustee. The Trustee may be removed at any time upon thirty (30)
days’ written notice by an instrument or concurrent instruments in writing delivered to the Trustee, to the
Borrower and to the Issuer, and signed by the Holders of a majority in aggregate principal amount of then
Outstanding Bonds. Such removal shall only take effect upon the appointment of a successor trustee.
Section 9.8. Appointment of Successor Trustee. In case the Trustee shall resign or be removed,
or be dissolved or shall be in course of dissolution or liquidation, or otherwise become incapable of acting
hereunder, or in case it shall be taken under the control of any public officer or officers, or of a receiver
appointed by a court, a successor may be appointed by the Holders of a majority in aggregate principal
amount of the then Outstanding Bonds, by an instrument or concurrent instruments in writing signed by
such Holders, or by their attorney-in-fact, duly authorized. Nevertheless, in case of such vacancy the Issuer
by resolution of its governing body may appoint a temporary trustee to fill such vacancy until a successor
trustee shall be appointed by the Holders in the manner above provided; and any such temporary trustee so
appointed by the Issuer shall immediately and without further act be superseded by the trustee so appointed
by such Holders. Every such Trustee appointed pursuant to the provisions of this Section 9.8 shall be a
trust company or bank having trust powers and having a reported capital and surplus not less than
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$25,000,000, if there be such an institution willing, qualified and able to accept the trust upon reasonable
or customary terms.
Section 9.9. Acceptance by Successor Trustees. Every successor Trustee appointed hereunder
shall execute, acknowledge and deliver to its predecessor, to the Borrower and also to the Issuer, an
instrument in writing accepting such appointment hereunder, and thereupon such successor, without any
further act, deed or conveyance shall become fully vested with all the estates, properties, 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 money 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 the Indenture shall have been filed or recorded or
both.
Section 9.10. Right of Trustee to Pay Taxes and Other Charges. If any tax, assessment or
governmental or other charge upon any part of the Trust Estate is not paid as required herein, the Trustee
may pay such tax, assessment or charge, without prejudice, however, to any rights of the Trustee or the
Bondholders hereunder arising in consequence of such failure; and any amount at any time so paid under
this Section, or under the Loan Agreement, with interest thereon (to the extent permitted by law) from the
date of such payment until paid to the Trustee in full at a rate per annum equal to the prime rate, shall
become so much additional indebtedness secured hereby, and the same shall be given a preference in
payment over the principal of and the interest on, the Bonds and shall be paid out of the revenues and
receipts from the Trust Estate, if not otherwise caused to be paid. The Trustee shall not be unde r an
obligation to make any such payment unless it shall have been requested to do so by the Holders of at least
twenty-five percent (25%) in principal amount of the Bonds then Outstanding and shall have been provided
with sufficient money for the purpose of making such payment.
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 Bond Fund and Paying Agent. In the event of
a change in the office of the Trustee the predecessor trustee which has resigned or been removed shall cease
to be custodian of the funds described in Article 5 hereof and shall cease to act as the Paying Agent for
principal and interest on the Bonds, and the successor trustee shall be and become such custodian and
Paying Agent.
Section 9.13. Co-Trustee. At any time or times, for the purpose of meeting any legal
requirements of any jurisdiction in which any part of the Trust Estate may at the time be located, the Issuer
and the Trustee shall have the power to appoint, and, upon the request of the Trustee or of the Holders of
at least fifty-one percent (51%) in aggregate principal amount of the then Outstanding Bonds, the Issuer
shall for such purpose join with the Trustee in the execution, delivery and performance of all instruments
and agreements necessary or proper to appoint one or more persons approved by the Trustee either to act
as co-trustee or co-trustees, jointly with the Trustee, of all or any part of the Trust Estate, or to act as separate
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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 Issuer and the Trustee may consider necessary or desirable subject to the remaining
provisions of this Section 9.13.
If the Issuer shall not have joined in such appointment within fifteen (15) days after the receipt by
it of a request so to do, or in case an Event of Default shall have occurred and be continuing, the Trustee
alone shall have power to make such appointment.
The Issuer shall execute, acknowledge and deliver all such instruments as may be required by any
such co-trustee or separate trustee for more fully confirming such title, rights, powers, trusts, duties and
obligations to such co-trustee or separate trustee.
Every co-trustee or separate trustee shall, to the extent permitted by law but to such extent only, be
appointed subject to the following terms, namely:
(1) The Bonds shall be authenticated and delivered, and all rights, powers, trusts,
duties and obligations by this Indenture conferred upon the Trustee in respect of the custody,
control or management of money, papers, securities and other personal property shall be exercised
solely by the Trustee.
(2) All rights, powers, trusts, duties and obligations conferred or imposed upon the
trustees shall be conferred or imposed upon and exercised or performed by the Trustee, or by the
Trustee and such co-trustee or co-trustees or separate trustee or separate trustees jointly, as shall be
provided in the instrument appointing such co-trustee or co-trustees or separate trustee or separate
trustees, except to the extent that, under the law of any jurisdiction in which any particular act or
acts are to be performed, the Trustee shall be incompetent or unqualified to 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.
(3) 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.
(5) The Trustee at any time, by an instrument in writing, with the concurrence of the
Issuer, may accept the resignation of or remove any co-trustee or separate trustee appointed under
this Section 9.13, and, in case of a continuing Event of Default the Trustee shall have power to
accept the resignation of, or remove, any such co-trustee or separate trustee without the concurrence
of the Issuer. Upon the request of the Trustee, the Issuer shall join with the Trustee in the execution,
delivery and performance of all instruments and agreements necessary or proper to effectuate such
resignation or removal. A successor to any co-trustee or separate trustee so resigned or removed
may be appointed in the manner provided in this Section 9.13.
(6) No trustee hereunder shall be personally liable by reason of any act or omission of
any other trustee hereunder.
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(7) 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.
(8) Any money, papers, securities or other items of personal property received by any
such co-trustee or separate trustee hereunder shall forthwith, so far as may be permitted by law, be
turned over to the Trustee.
Upon the acceptance in writing of such appointment by any such co-trustee or separate trustee, it
or he 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
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 behalf and in its or his name.
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. Obligation to Trustee as to Reporting. The Trustee shall, at the request and
direction of the Borrower, cause to be filed any reports lawfully required by any public agency to be filed
under any applicable security laws and any other reports lawfully required by any public agency to be filed
under the Act or any other applicable state law. For this purpose the Borrower shall cause to be furnished
to the Trustee whatever information is necessary to comply with such reporting requirements at the
Borrower’s sole expense.
Section 9.15. Successor Paying Agent. The provisions of Sections 9.5 through 9.9 hereof with
respect to removal, resignation and appointment of a successor trustee shall be equally applicable to
resignation, removal and appointment of a successor to the Paying Agent. The Trustee shall be eligible for
appointment as successor to the Paying Agent.
Section 9.16. Confirmation of Trustee.
(1) At any time while the Bonds remain Outstanding under this Indenture and in any
of the following circumstances, to the extent permitted by law, to-wit:
(a) The Trustee is in doubt as to whether or not the Indenture or any Related
Document or instrument requires Bondholders’ consent or the consent of the Borrower,
any guarantor, or the Issuer in connection with any proposed action;
(b) The Trustee has substantial doubt as to whether its consent to a proposed
action, although authorized, should in the particular circumstances be given;
(c) The Trustee’s consent is sought or deemed necessary in connection with a
proposed action which is not specifically dealt with or contemplated by the Indenture or
any other Related Document, or it is unclear whether the Indenture or other Related
Document is intended to deal with the proposed action;
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(d) There is a disagreement between any of the parties to the Indenture or any
other Related Document as to whether a proposed action may be taken or is required to be
taken;
(e) There appears to be a conflict, ambiguity or inconsistency between or
among the provisions of the Indenture and any other Related Document other than as
provided for in Sections 10.1 and 11.1 hereof;
(f) There is doubt as to whether or not a proposed action falls within one (1)
of the provisions of Sections 10.1 and 11.1 hereof authorizing such action without
Bondholders’ consent;
(g) Bondholders’ consent is required by this Indenture or Related Document
but consent cannot be obtained because:
(i) it is not possible to comply with requirements of this Indenture or
any other Related Document as to the notice to be given to Bondholders with
respect to the proposed matter requiring consent; or
(ii) if action is to be taken at a meeting of Bondholders, the requisite
number of Bondholders (the quorum) necessary to be present at a meeting in order
for a proposed action to be taken was not present at such meeting or any adjourned
meeting;
(h) The Trustee wishes to depart from the procedures set forth in Section 12.3
hereof for purposes of calling or conducting a meeting of the Bondholders; or in any other
eventuality in which it shall be necessary to determine a question arising under or to
construe this Indenture or any other Related Document, the Trustee may, and upon request
of the Issuer, the Borrower or the Holders of twenty-five percent (25%) or more in principal
amount of Outstanding Bonds shall, proceed in accordance with the provisions of
Minnesota Statutes, Sections 501C.0201 through 501C.0208, as amended.
If Bondholder’s consent cannot be obtained because of the circumstances described in
clause (g) above a court of competent jurisdiction may amend or supplement the Loan Agreement
or Indenture or any Related Document upon a proper showing of the necessity therefor.
(2) In construing and interpreting the Indenture and any other Related Document, the
objective shall always be to ascertain and effectuate the intention of the parties. So far as possible
and appropriate, and to the extent that it does not conflict with the provisions of the Indenture or
the other Related Documents, the principles of statutory construction enunciated in Minnesota
Statutes, Sections 645.16 through 645.20, as amended, shall be applied in the interpretation and
construction of the Indenture and other Related Documents.
(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(11) hereof, prior to taking any action directed
by final order of the court.
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ARTICLE 10
SUPPLEMENTAL INDENTURES
Section 10.1. Supplemental Indentures Not Requiring Consent of Bondholders. The Issuer and
the Trustee may, from time to time and at any time, without the consent of, or notice to, any of the 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 the Trustee; (3) more precisely identify the Trust Estate, or
any other property 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 and/or Paying Agent 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 taxable under the Federal income tax laws 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 316(a)(2) of said Trust
Indenture Act of 1939; (7) make any other change which is required by any provision of this Indenture
necessary to reconcile the Indenture with the Related Documents, or any amendments thereto; or (8) make
any other change which is necessary or desirable and will not materially prejudice any non-consenting
Holder of a Bond.
Section 10.2. Supplemental Indentures Requiring Consent of Holders. Exclusive of
supplemental indentures covered by Section 10.1 hereof 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 Holders of not less than fifty-one percent (51%) of the
aggregate principal amount of the then Outstanding Bonds affected thereby, 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, 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 issued hereunder; (2) a reduction in the principal amount of any Bond or the
rate of interest thereon or any premium 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) a modification
to any of the provisions of this Section without the consent of the Holders of one hundred percent (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 which does not require 100% Bondholders’ Consent, 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 Holders of the Bonds
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
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when consented to and approved as provided in this Section. If the Holders of not less than fifty-one percent
(51%) in aggregate principal amount of the then Outstanding Bonds at the time of the execution of any such
supplemental indenture shall have consented to and approved the execution thereof as herein provided, no
Holder of any Bond shall have any right to object to any of the terms and provisions contained 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 the Issuer from executing the same or from taking any action pursuant to the
provisions thereof. Upon the execution of any such supplemental indenture as in this Section permitted and
provided, this Indenture shall be and is deemed to be modified and amended in accordance herewith.
Anything herein to the contrary notwithstanding, a supplemental indenture under this Article 10
which adversely affects the right of the Borrower under the Loan Agreement shall not become effective
unless and until the Borrower shall have consented in writing 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, the Investor Limited Partner at least thirty (30) days
prior to the proposed date of execution and delivery of any such supplemental indenture.
Anything contained herein to the contrary notwithstanding, a supplemental indenture executed and
delivered in accordance with this Article 10 which affects any rights or obligations of the Remarketing
Agent shall not become effective unless and until the Remarketing Agent shall have consented in writing
to the execution and delivery of that supplemental indenture. The Trustee shall cause notice of the proposed
execution and delivery of any supplemental indenture and a copy of the proposed supplemental indenture
to be mailed to the Remarketing Agent (a) at least thirty (30) days (unless waived by the Remarketing
Agent) before the date of the proposed execution and delivery in the case of a supplemental indenture to
which reference is made in Section 10.1 hereof; and (b) at least thirty (30) days (unless waived by the
Remarketing Agent) before the giving of the notice of the proposed execution and delivery in the case of a
supplemental indenture for which provision is made in this Section 10.2.
Section 10.3. Rights of Trustee. If, in the opinion of the Trustee, any supplemental indenture
provided for in this Article affects the rights, duties or immunities of the Trustee under this Indenture or
otherwise, the Trustee may, in its discretion, decline to execute such supplemental indenture, except to the
extent that this may be required in the case of a supplemental indenture entered into under Section 10.1
hereof. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an opinion of
Independent Counsel as conclusive evidence that any such supplemental indenture conforms to the
requirements of this Indenture.
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ARTICLE 11
AMENDMENTS TO LOAN AGREEMENT AND OTHER RELATED DOCUMENTS
Section 11.1. Amendments Not Requiring Bondholder Consent. The Issuer and/or the Trustee
may, without the consent of or notice to the Bondholders, consent to any amendment, change or
modification of the Related Documents:
(1) which may be required or permitted without Bondholder consent by the provisions
of the Related Documents or this Indenture;
(2) for the purpose of curing any ambiguity or formal defect or omission;
(3) to reconcile the Related Documents with any amendment or supplement to the
Indenture; or
(4) to effect any other change to the Related Documents which will not materially
prejudice any non-consenting Holder of a Bond.
Section 11.2. Amendments Requiring Bondholder Consent. Except for amendments, changes
or modifications as provided in Section 11.1, neither the Issuer nor the Trustee shall consent to any other
amendment, change or modification of the Related Documents, without the giving of notice and the written
approval or consent of the Holders of not less than fifty-one percent (51%) in aggregate principal amount
of the Bonds affected thereby 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
the Related 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 Related Documents,
the Borrower shall request consent of the Trustee to any such proposed amendment, change or modification,
and 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
hereof with respect to supplemental indentures. Such notice shall briefly set forth the nature of such
proposed amendment, change or modification and shall state that copies of the instrument embodying the
same are on file at the principal 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 to and approved as provided in this Section.
If the Holders of not less than fifty-one percent (51%) 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 the Issuer from executing the same or from taking any action
pursuant to the provisions thereof. Upon the execution of any such amendment, the affected Related
Document 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
(1) by Section 4.2 of the Loan Agreement; or (2) permitting a reduction or change in the Stated Maturities
of the Bonds.
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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 an
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, her, or them
the execution thereof, or by an affidavit of any witness to such execution.
(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 th e
Bond Register.
Section 12.2. Rights under Indenture. With the exception of rights herein expressly conferred,
nothing expressed or mentioned in or to be implied from this Indenture or the Bonds is intended or shall be
construed to give any person or company other than the parties hereto, and the Bondholders, any legal or
equitable right, remedy, or claim under or in respect to this Indenture or any covenants, conditions and
provisions herein contained; this Indenture and all of the covenants, conditions and provisions 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. Meetings of Bondholders.
(1) A meeting of Bondholders may be called at any time and from time to time
pursuant to this Section to facilitate any of the following purposes:
(a) to give any notice to the Issuer, the Borrower or the Trustee, or to give any
directions to the Trustee, or to consent to the waiving of any default under this Indenture,
or to take any other action authorized to be taken by the Bondholders under this Indenture;
(b) to remove the Trustee or to appoint a successor trustee pursuant to
Sections 9.7 and 9.8 hereof;
(c) to consent to the execution of a supplemental indenture pursuant to
Section 10.2 hereof, or to consent to the execution of an amendment, change or
modification of any Related Document pursuant to Section 11.2 hereof; or
(d) to take any other action authorized to be taken by or on behalf of the
Holders of any specified aggregate principal amount of the Bonds under any other
provision of this Indenture or under applicable law.
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(2) Meetings of Bondholders may be held at such place or places as the Trustee or, in
case of its failure to act, the Bondholders calling the meeting, shall from time to time determine.
(3) The Trustee may at any time call a meeting of Bondholders to be held at such time
and at such place as the Trustee shall determine. Notice of every meeting of Bondholders setting
forth the time and the place of such meeting and in general terms the action proposed to be taken
at such meeting, shall be mailed by first-class mail, postage prepaid, to the Holders of the Bonds at
the address shown on the Bond Register. Any failure of the Trustee to mail such notice to a
particular Bondholder, or any defect therein shall not, however, in any way impair or affect the
validity of any such meeting if notice was generally mailed to Bondholders. In the event that the
Holders of at least ten percent (10%) in aggregate principal amount of the Outstanding Bonds
affected shall have requested the Trustee to call a meeting of the Bondholders by written request
setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee
shall not have accomplished the mailing of notice of such meeting within twenty (20) days after
receipt of such request, then such Bondholders may determine the time and the place for such
meeting and may call such meeting to take any action authorized in subsection (1) above by giving
notice of such meeting in accordance with the provisions of this subsection (3).
(4) To be entitled to vote at any meeting of Bondholders, a person shall be a Holder
of one or more Bonds Outstanding, or a person appointed by an instrument in writing as proxy for
a Bondholder by such Bondholder. The only persons who shall be entitled to be present or to speak
at any meeting of Bondholders shall be the persons entitled to vote at such meeting and their counsel
and any representatives of the Trustee, Borrower, and Issuer and their counsel.
(5) Notwithstanding any other provisions of this Indenture, the Trustee may make such
reasonable regulations as it may deem advisable for any meeting of Bondholders in regard to proof
of the ownership of Bonds and of the appointment of proxies and in regard to the appointment and
duties of inspectors of votes, the submission and examination of proxies, certificates and other
evidence of the right to vote, and such other matters concerning the conduct of the meeting as it
shall deem appropriate. Except as otherwise permitted or required by any such regulations, the
ownership of Bonds shall be proved in the manner specified in Section 12.1 hereof and the
appointment of any proxy shall be proved in the manner specified in said Section or by having the
signature of the person executing the proxy witnessed or guaranteed by any bank, banker or trust
company authorized by said Section to certify to the ownership of Bonds:
(a) The Trustee or, if the Bondholders have called the meeting, the
Bondholders shall, by an instrument in writing, appoint a temporary chairperson of the
meeting. A permanent chairperson and a permanent secretary of the meeting shall be
elected by vote of the Holders of a majority of the Bonds represented at the meeting and
entitled to vote.
(b) At any meeting such Bondholder or proxy shall be entitled to one (1) vote
for each $5,000 of principal amount of Outstanding Bonds owned or represented by him,
her, or them; provided, however, that no vote shall be cast or counted at any meeting in
respect of any Bond challenged as not Outstanding and ruled by the chairperson of the
meeting to be not Outstanding. The chairperson of the meeting shall have no right to vote,
except as a Bondholder or proxy.
(c) At any meeting of Bondholders, the presence of persons owning or
representing Bonds in an aggregate principal amount sufficient under the appropriate
provision of this Indenture to take action upon the business for the transaction of which
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such meeting was called shall constitute a quorum. Any meeting of Bondholders duly
called pursuant to this Section may be adjourned from time to time by vote of the Holders
(or proxies for the Holders) of a majority of the Bonds represented at the meeting and
entitled to vote, whether or not a quorum shall be present; and the meeting may be held as
so adjourned without further notice.
(6) The vote upon any resolution submitted to any meeting of Bondholders shall be by
written ballots on which shall be subscribed the signatures of the Bondh olders or of their proxies
and the number or numbers of the Bonds Outstanding held or represented by them. The permanent
chairperson of the meeting shall appoint two inspectors of votes who shall count all votes cast at
the meeting for or against any resolution and who shall make and file with the secretary of the
meeting their verified written reports in triplicate of all votes cast at the meeting. A record, at least
in triplicate, of the proceedings of each meeting of Bondholders shall be prepared by the secretary
of the meeting. The original reports of the inspectors of votes on any vote by ballot taken at such
meeting, and affidavits by one (1) or more persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice was published or mailed as provided
in this Section shall be attached to such record. Each copy shall be signed and verified by the
affidavits of the permanent chairperson and secretary of the meeting and one such copy shall be
delivered to the Issuer, another to the Borrower and another to the Trustee to be preserved by the
Trustee, which copy shall have attached thereto the ballots voted at the meeting. Any record so
signed and verified shall be conclusive evidence of the matters therein stated.
(7) At any time prior to the preparation of the record of the meeting in accordance with
the terms of this Section for delivery to the Trustee evidencing the taking of any action by the
Holders of the percentage in aggregate principal amount of the Bonds specified in this Indenture in
connection with such action, any Holder of a Bond the number of which is included in the Bonds,
the Holders of which have consented to such action, may, by filing written notice with the Trustee
at its principal corporate trust office and upon proof of holding as provided in Section 12.1 hereof,
revoke such consent so far as it concerns such Bond. Except as aforesaid, any such consent given
by the Holder of any Bond shall be conclusive and binding upon such Holder a nd upon all future
Holders and owners of such Bond and of any Bond issued in exchange therefor, upon transfer
thereof, or in lieu thereof, irrespective of whether or not any notation in regard thereto is made upon
such Bond. Any action taken by the Holders of the percentage in aggregate principal amount of
the Bonds specified in this Indenture in connection with such action shall be conclusively binding
upon the Issuer, the Borrower, the Trustee and the Holders of all the Bonds.
(8) Nothing in this Section 12.3 is intended to limit or prevent the Trustee from taking
any action permitted under Section 9.16 hereof, including but not limited to the Trustee’s right to
apply to a court of competent jurisdiction for confirmation of appointment, or for instructions in
accordance with the provisions of Minnesota Statutes, Sections 501C.0201 through 501C.0208, as
amended.
Section 12.4. 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.
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The invalidity of any one or more phrases, sentences, clauses or paragraphs in this Indenture
contained shall not affect the remaining portions of this Indenture or any part thereof.
Section 12.5. Notices. All notices, certificates or other communications hereunder shall be in
writing (except as otherwise expressly provided herein) and shall be sufficiently given and shall be deemed
given when mailed by first-class mail, postage prepaid, with proper address as indicated below. The Issuer,
the Borrower, the Bondholders and the Trustee 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. Until otherwise provided by the respective parties, all notices,
certificates and communications to each of them shall be addressed as provided in Section 10.2 of the Loan
Agreement.
Section 12.6. 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 12.7. 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 (1) and the same
instrument.
Section 12.8. Limitation of Liability of Issuer, City, and Their Officers, Employees and Agents.
No covenant, provision or agreement of the Issuer herein or in the Bonds or in any other document executed
by the Issuer in connection with the issuance, sale and delivery of the Bonds, or any obligation herein or
therein imposed upon the Issuer or breach thereof, shall give rise to a pecuniary liability of the Issuer or the
City or a charge against their general credit or taxing powers or shall obligate the Issuer or the City
financially in any way except with respect to this Indenture and the application of revenues therefrom and
the proceeds of the Bonds. No failure of the Issuer to comply with any term, condition, covenant or
agreement therein shall subject the Issuer to liability for any claim for damages, costs or ot her financial or
pecuniary charges except to the extent that the same can be paid or recovered from this Indenture or
revenues therefrom or proceeds of the Bonds. No execution on any claim, demand, cause of action or
judgment shall be levied upon or collected from the general credit, general funds or taxing powers of the
Issuer or the City. In making the agreements, provisions and covenants set forth herein, the Issuer has not
obligated itself except with respect to this Indenture and the application of r evenues hereunder as
hereinabove provided.
The Bonds constitute special, limited obligations of the Issuer, payable solely from the revenues
pledged to the payment thereof pursuant to this Indenture, and do not now and shall never constitute an
indebtedness or a loan of the credit of the Issuer, the City, the State or any political subdivision thereof or
a charge against the general taxing powers of the Issuer, the City, the State or any political subdivision
thereof within the meaning of any constitutional or statutory provision whatsoever. It is further understood
and agreed by the Borrower and the Holders that the Issuer shall incur any pecuniary liability hereunder
nor shall it be liable for any expenses related hereto, all of which the Borrower agre es to pay. If,
notwithstanding the provisions of this Section, the Issuer incurs any expense, or suffers any losses, claims
or damages or incurs any liabilities, the Borrower will indemnify and hold harmless the Issuer from the
same and will reimburse the Issuer, for any legal or other expenses incurred by the Issuer, in relation thereto,
and this covenant to indemnify, hold harmless and reimburse the Issuer shall survive delivery of and
payment for the Bonds. The liability of the Issuer is further restricted as provided in the Act.
Section 12.9. Amounts Remaining in Funds. Upon expiration or sooner termination of the Loan
Agreement as provided therein and after adequate provision has been made to discharge the Bonds in
accordance with Article 7 hereof and make all other payments required hereunder and under the Loan
66
Agreement, the Trustee forthwith shall, pay all remaining amounts in the funds established in Article 5
hereof to the Borrower.
Section 12.10. [Reserved].
Section 12.11. Payments Due on Saturdays, Sundays and Holidays. If any Interest Payment Date
or a date of maturity of the principal of any Bonds is a Saturday, Sunday or a day on which (1) the Trustee
is required, or authorized or not prohibited, by law (including without limitation, executive orders) to close
and is closed, then payment of interest and principal need not be made by the Trustee or the Paying Agent
on that date, but that payment may be made on the next succeeding Business Day on which the Trustee and
the Paying Agent are open for business with the same force and effect as if that payment were made on the
Interest Payment Date or Stated Maturity, and no interest shall accrue for the period after that date, or (2) a
Paying Agent is required, or authorized or not prohibited, by law (including without limitation, executive
orders) to close and is closed, then payment of interest and principal need not be made by that Paying Agent
on that date, but that payment may be made on the next succeeding Business Day on which that Paying
Agent is open for business with the same force and effect as if that payment were made on the Interest
Payment Date or Stated Maturity and no interest shall accrue for the period after that date; provided, that if
the Trustee is open for business on the applicable Interest Payment Date or Stated Maturity, it shall make
any payment required hereunder with respect to payment of interest on Outstanding Bonds and payment of
principal of the Bonds presented to it for payment, regardless of whether the Paying A gent shall be open
for business or closed on the applicable Interest Payment Date or Stated Maturity.
Section 12.12. Binding Effect. This Indenture shall inure to the benefit of and shall be binding
upon the Issuer and the Trustee and their respective successors and assigns, subject, however, to the
limitations contained herein.
Section 12.13. Governing Law. This Indenture and the Bonds shall be deemed to be contracts
made under the laws of the State and for all purposes shall be governed by and construed in accordance
with the laws of the State.
Section 12.14. Security Advice Waiver. The Issuer acknowledges that regulations of the
Comptroller of the Currency grant the Borrower the right to receive brokerage confirmations of the security
transactions as they occur. Pursuant to Section 8.3 of the Loan Agreement, the Borrower specifically
waives such notification to the extent permitted by law and will receive periodic cash transaction statements
that will detail all investment transactions.
Section 12.15. Patriot Act. To help the government fight the funding of terrorism and money
laundering activities, federal law requires all financial institutions to obtain, verify and record information
that identifies each person who opens an account. For a non-individual person such as a business entity, a
charity, a trust or other legal entity the Trustee will request documentation to verify its formation and
existence as a legal entity. Furthermore, if required by the Patriot Act, Trustee may request fina ncial
statements, licenses, identification and authorization documents from individuals claiming authority to
represent the entity or other relevant documentation.
(The remainder of this page is intentionally left blank.)
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IN WITNESS WHEREOF, the Issuer has caused this Indenture of Trust to be signed in its name
on its behalf by its duly authorized officials, and to evidence its acceptance of the trusts hereby created the
Trustee has caused these presents to be signed in its name and behalf by its duly authorized officer, all as
of the date and year first written above.
HOUSING AND REDEVELOPMENT AUTHORITY
IN AND FOR THE CITY OF RICHFIELD,
MINNESOTA
By
Its Chair
By
Its Executive Director
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Execution page of the Trustee to the Indenture of Trust, dated as of the date and year first written above.
U.S. BANK TRUST COMPANY, NATIONAL
ASSOCIATION
By
Its Vice President
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EXHIBIT A
FORM OF BOND
UNITED STATES OF AMERICA
STATE OF MINNESOTA
COUNTY OF HENNEPIN
No. R-1 $10,000,000
HOUSING AND REDEVELOPMENT AUTHORITY
IN AND FOR THE
CITY OF RICHFIELD, MINNESOTA
SUBORDINATE MULTIFAMILY HOUSING REVENUE BOND
(FORT SNELLING UPPER POST PROJECT)
SERIES 2023
Interest
Rate
Stated
Maturity
Mandatory
Tender Date
Date of
Original Issue
CUSIP
Number
____% July 1, 20___ July 1, 2025 June __, 2023
REGISTERED HOLDER: CEDE & CO.
PRINCIPAL AMOUNT: _____________________________________ DOLLARS
(1) KNOW ALL PERSONS BY THESE PRESENTS that the Housing and Redevelopment
Authority in and for the City of Richfield, Minnesota, a public body corporate and politic under the laws of
the State of Minnesota (the “Issuer”), for value received, promises to pay to the registered holder named
above, or registered assigns, but only from the Bond Fund, and upon presentation and surrender hereof at
the principal corporate trust office of the Trustee named below, the principal sum specified above, on the
Stated Maturity specified above, or, if this Bond is prepayable as stated below, or a prior date on which it
shall have been duly called for redemption, and to pay interest on said principal sum to the Record Date
Holder hereof, semiannually on January 1 and July 1 of each year (each an “Interest Payment Date”),
commencing January 1, 2024, solely from the Bond Fund, until the principal sum is paid or discharged at
the rates per annum specified above on the basis of a three hundred sixty (360) day year composed of twelve
(12) thirty (30) day months. Capitalized terms used herein that are otherwise not defined shall have the
meanings provided in the Indenture of Trust, dated as of June 1, 2023 (the “Indenture”), between the Issuer
and U.S. Bank Trust Company, National Association, a national banking association (the “Trustee”).
This Bond shall bear interest from the date of original issue set forth above, or in the case of transfer
or exchange, from the most recent Interest Payment Date to which interest has been paid or pr ovided for.
The “Record Date Holder” is the person in whose name this Bond is registered in the Bond Register
maintained by the Trustee named below or its successor in trust (the “Registered Holder” or “Holder”) on
the fifteenth day of the calendar month next preceding an Interest Payment Date, whether or not such day
is a Business Day. Interest shall be payable by check or draft mailed to the Registered Holder at his , her,
or their address as it appears on the Bond Register on the Record Date, except as otherwise provided in the
Indenture.
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The principal of and interest and premium, if any, on this Bond are payable in lawful money of the
United States of America. Upon notice to the Trustee accompanied by proper wire instructions, any Holder
of Bonds in an aggregate principal amount equal to or greater than $1,000,000 may elect to be paid the
interest on such Bond payable on any Interest Payment Date by Federal Reserve wire transfer in
immediately available funds to any bank in the United States specified by such Holder.
Interest not timely paid or duly provided for will be paid by check mailed to the person in whose
name this Bond is registered on the Bond Register at the close of business on a date (the “Special Record
Date”) fixed by the Trustee, notice of which is to be mailed to all Bondholders.
(2) This Bond is one of a duly authorized issue of obligations of the Issuer designated as the
“Subordinate Multifamily Housing Revenue Bonds (Fort Snelling Upper Post Project), Series 2023” (the
“Bonds”), issued in the original aggregate principal amount of $10,000,000, all of like nominal date of
original issue and tenor, except as to number, rate, amount, and redemption privilege, issued in accordance
with the Indenture, setting forth the terms upon which the Bonds are issued. The Bonds are issued for the
purpose of financing a portion of the costs of the leasehold acquisition, construction and/or rehabilitation,
and equipping of a an approximately 192-unit multifamily housing rental facility and facilities functionally
related and subordinate thereto located at 58 Taylor Avenue, Unorganized Territory of Fort Snelling,
Minnesota 55111, known as the Fort Snelling Upper Post Project (the “Project”), to be owned by Fort
Snelling Leased Housing Associates I, LLLP, a Minnesota limited liability limited partnership (the
“Borrower”). The Borrower has agreed under a Loan Agreement, dated as of June 1, 2023 (the “Loan
Agreement”), between the Issuer and the Borrower, to repay all amounts necessary to repay the Bonds,
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 (the “Basic Payments”). The Issuer,
the Borrower, Fort Snelling Leased Housing Associates Master Tenant I, LLLP, a Minnesota limited
liability limited partnership and the master tenant of the Project, and the Trustee have entered into a
Regulatory Agreement of even date herewith (the “Regulatory Agreement”), which requires compliance
with certain requirements of federal and state law relating to the operation of the Project as a multifamily
rental housing project. 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, the Basic Payments due under the Loan
Agreement. As additional security for the Bonds, the Borrower has delivered the Guaranty and the
Assignment of Partnership Interest and Capital Contributions (together, the “Security Documents”).
Proceeds of the Bonds will be disbursed to or for the benefit of the Borrower pursuant to the Disbursing
Agreement.
(3) Reference is hereby made to the Loan Agreement, the Regulatory Agreement, the
Disbursing Agreement, the Security Documents and the Indenture, including all indentures supplemental
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.
(4) The term “Business Day” shall mean any day on which the Trustee or the Federal Reserve
Bank of New York are not authorized by law to close. If the date for making any payment or the last date
for performance of any act or the exercising of any right, as provided in this Bond, is not a Business Day,
such payment may be made or act performed or right exercised on the next succeeding Business Day.
(5) The Bonds are subject to redemption prior to maturity as provided in the Indenture as
follows:
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(a) Optional Prepayment. Subject to the provisions of paragraph (d) below, the Bonds
are subject to redemption and prepayment upon request by the Borrower to the Trustee on any
Business Day, on or after July 1, 2024, in whole or in part, in principal increments of $5,000, so
long as no Bond is Outstanding in an amount less than $100,000, and by lot within a maturity, at a
Redemption Price equal to the principal amount of the Bonds to be redeemed, plus accrued interest
thereon.
(b) Mandatory Redemption from Money Remaining in the Project Fund. The Bonds
are subject to mandatory redemption in part, at a Redemption Price equal to the principal amount
thereof, without premium, plus accrued interest thereon to the date fixed for redemption, on the
earliest practicable date for which notice can be given pursuant to the Indenture, to the extent of
money remaining on deposit in the Project Fund that is transferred to the Bond Fund upon
completion of the Project and payment of all costs of the Project as provided in Indenture.
(c) Mandatory Redemption from Certain Money. The Bonds are subject to mandatory
redemption in part, at a Redemption Price equal to the principal amount thereof, without premium,
plus accrued interest thereon to the date fixed for redemption, on the earliest practicable date for
which notice can be given pursuant to the Indenture, from the Assigned Capital Contributions
described in the Indenture, redemption of the Bonds in part to occur upon each receipt by the
Borrower or its designee and deposit with the Trustee in accordance with the Loan Agreement.
(d) No Redemption Prior to Placed in Service Date. Notwithstanding anything to the
contrary contained herein, the Bonds shall not be redeemed prior to the date upon which the Project
has been placed in service for purposes of Section 42 of the Code.
(6) In the case of any partial redemption of the Bonds of the same maturity, the particular
Bonds to be redeemed shall be selected by the Trustee by lot and the Bonds shall be redeemed in the
principal amounts specified in the Indenture. Any Bond which is to be redeemed only in part shall be
surrendered to the Trustee (i) for payment of the Redemption Price (including accrued interest thereon to
the Redemption Date) of the portion thereof called for redemption and (ii) for exchange for Bonds in any
authorized denomination or denominations in aggregate principal amount equal to the unredeemed portion
of such Bond.
(7) Notice of the intended redemption of Bonds shall be given by first-class mail, to the
registered owner of each Bond to be redeemed, at the address of such owner shown on the Bond Register.
Notice by publication shall not be required. All such redemption notices shall be given not less than twenty
(20) days nor more than sixty (60) days prior to the date fixed for redemption. Each notice with respect to
a partial redemption of Bonds shall specify the numbers of the Bonds being called, the Redemption Date,
and the place or places where amounts due upon such redemption will be payable. Such notice shall further
state that payment of the applicable Redemption Price plus accrued interest (if not previously paid) to the
date fixed for redemption will be made upon presentation and surrender of the Bonds. Failure to give notice
by mailing to the registered owners of any Bonds designated for redemption or any defect in such notice
shall not affect the validity of the proceedings for the redemption of such Bonds.
With respect to optional redemptions, such notice may be conditioned upon money being on deposit
with the Trustee on or prior to the Redemption Date in an amount sufficient to pay the Redemption Price
on the Redemption Date. If such notice is conditional and either the Trustee receives written notice from
the Borrower that money sufficient to pay the Redemption Price will not be on deposit on the Redemption
Date, or such money is not received on or prior to the Redemption Date, then such notice shall be of no
force and effect, the Trustee shall not redeem such Bonds and the Trustee shall give notice, in the same
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manner in which the notice of redemption was given, that such money was not or will not be so received
and that such Bonds will not be redeemed.
Notice of redemption having been given in the manner provided above, and money sufficient for
the redemption being held by the Trustee for that p urpose, thereupon the Bonds so called for redemption
shall become due and payable on the Redemption Date, and interest thereon shall cease to accrue; and the
owners of the Bonds so called for redemption shall thereafter no longer have any security or benefit under
the Indenture except to receive payment of the Redemption Price for such Bonds.
(8) The Bonds are subject to mandatory tender and purchase prior to their stated maturity in
whole on the Mandatory Tender Date.
(9) In addition to the foregoing, if under certain circumstances an Event of Default shall occur,
the principal of all the Bonds and all interest accrued thereon may, without prior notice to the Bondholders,
be declared due and payable in the manner and with the effect provided in the Loan Agreement and
Indenture.
(10) The Bonds are issued pursuant to and in full compliance with the Constitution and laws of
the State, particularly Minnesota Statutes, Chapters 462C and 474A, as amended, and Minnesota Statutes,
Sections 471.59 and 471.656, as amended, and pursuant to a resolution adopted and approved by the
governing body of the Issuer on June 5, 2023, which resolution authorized the financing of the Project and
the execution and delivery of the Indenture, and the issuance of the Bonds as special, limited obligations
payable solely from revenues derived from the Loan Agreement and the Security Documents except that
under certain circumstances the Bonds may be payable from Bond proceeds. The loan repayments under
the Loan Agreement are scheduled to be sufficient to pay the principal of, premium, if any, and interest on
the Bonds as the same become due and payable and are to be paid to the Trustee for the account of the
Issuer and credited to the Bond Fund as a special trust fund account created by the Issuer and have been
and are hereby pledged for that purpose.
(11) The Bonds, including principal, premium and any other payments however designated, and
the interest due thereon do not and shall never constitute a general indebtedness of the Issuer, the City, the
State of Minnesota (the “State”), or any political subdivision thereof within the meaning of any state
constitutional or statutory provision and do not and shall not constitute or give rise to a pecuniary liability
or moral obligation of the Issuer, the City, the State or any of its political subdivisions, or a charge against
its general credit or taxing powers, or to the extent permitted by law, any pecuniary liability of any officer,
employee or agent of the Issuer or the City. The provisions of this paragraph are controlling
notwithstanding anything herein to the contrary.
(12) The Registered 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, or of an y
indenture supplemental thereto, may be made only to the extent and in the circumstances permitted by the
Indenture.
(13) With the consent of the Issuer, the Borrower and the Trustee, as appropriate, and to the
extent permitted by and as provided in the Indenture, the terms and provisions of the Indenture, the Loan
Agreement, or of any instrument supplemental thereto relating to the Bonds, may be modified or altered by
the consent of the Registered Holders of at least fifty-one percent (51%) in aggregate principal amount of
the Bonds then Outstanding thereunder.
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(14) The Indenture also contains provisions permitting Holders of a majority in aggregate
principal amount of the Bonds at the time 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. Any such consent or waiver by the Registered Holder of this Bond shall
be conclusive and binding upon such Registered Holder and on all future Registered Holders of this Bond
and of any Bond issued in lieu hereof whether or not notation of such consent or waiver is made upon this
Bond.
(15) The Bonds are issued as fully registered bonds without coupons in the Authorized
Denominations. No single Beneficial Owner of Bonds is authorized to own a bond in an amount less than
an Authorized Denomination. The Bonds are interchangeable for one or more Bonds in Authorized
Denominations and of the same series, aggregate principal amount, interest rate and maturity date, upon
surrender thereof by the Holder at the principal office of the Trustee, in the manner and subject to the
limitations provided in the Indenture. The Issuer, the Trustee and any additional paying agents may deem
and treat the Registered Holder hereof as the absolute owner hereof (whether or not this Bond shall be
overdue) for the purpose of receiving payment of or on account of principal hereof and interest (except as
otherwise hereinabove provided with respect to the Record Date) due hereon and for all other purposes, and
the Issuer, the Trustee and any additional paying agents shall not be affected by any notice to the contrary.
(16) Subject to the limitations provided in the Indenture, this Bond is only transferable by the
Registered Holder hereof upon surrender of this Bond for transfer at the principal corporate trust office of
the Trustee, 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 Trustee and executed and with guaranty of
signature by the Registered Holder hereof or his, her, or their attorney duly authorized in writing, containing
written instructions as to the details of the transfer of the Bond. Thereupon the Issuer shall execute (if
necessary) and the Trustee shall authenticate and deliver, in exchange for this Bond, one or more new Bonds
in the name of the transferee (but not registered in blank or to “bearer” or a similar designation), of an
authorized denomination, in aggregate principal amount equal to the principal amount of this Bond, of the
same maturity, and bearing interest at the same rate.
(17) No service charge shall be made to the Registered Holder for any registration, transfer or
exchange hereinbefore referred to, but the Trustee 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 Bondholders.
(18) IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and
things required to exist, to happen and to be performed precedent to and in the execution and delivery of
the Indenture and the issuance of this Bond do exist, have happened and have been performed in due time,
form and manner, as required by law, and that the issuance of this Bond and the series of which it forms a
part, together with all other obligations of the Issuer, does not exceed or violate any constitutional or
statutory limitation.
(19) This Bond shall not be valid or become obligatory for any purpose or be entitled to any
security or benefit under the Indenture unless the Certificate of Authentication hereon shall have been
executed by the Trustee.
IN WITNESS WHEREOF, the Housing and Redevelopment Authority in and for the City of
Richfield, Minnesota, by its governing body, has caused this Bond to be executed in its name by the
facsimile signature of its duly authorized official and by the manual signature of a Responsible Agent of
the Trustee acting as authenticating agent.
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HOUSING AND REDEVELOPMENT AUTHORITY
IN AND FOR THE CITY OF RICHFIELD,
MINNESOTA
By
Its Chair
By
Its Executive Director
___________________________________
CERTIFICATE OF AUTHENTICATION
This is one of the Bonds of the series designated therein referred to in the within -mentioned
Indenture.
Date of Authentication: _________, 2023
U.S. BANK TRUST COMPANY, NATIONAL
ASSOCIATION
By
Responsible Officer
___________________________________
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
,
the within Bond and does hereby irrevocably constitute and appoint ,
attorney, to transfer the within Bond on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: ____________________
A-7
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER OF
ASSIGNEE ____________________
NOTICE: The signature to this assignment must
correspond with the name as it appears upon the face of
the within Bond in every particular, without alteration or
enlargement or any change whatsoever. Signature(s)
must be guaranteed by an “eligible guarantor institution”
meeting the requirements of the Trustee, which
requirements include membership or participation in
STAMP or such other “signature guaranty program” as
may be determined by the Trustee in addition to or in
substitution for STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
RC125-394 (JAE)
871942v2
Second Draft
May 27, 2023
REGULATORY AGREEMENT
between
HOUSING AND REDEVELOPMENT AUTHORITY
IN AND FOR THE
CITY OF RICHFIELD, MINNESOTA,
as Issuer
FORT SNELLING LEASED HOUSING ASSOCIATES I, LLLP,
as Borrower
FORT SNELLING LEASED HOUSING ASSOCIATES MASTER TENANT I, LLLP,
as Master Tenant
and
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,
as Trustee
Dated June ___, 2023
Relating to:
$10,000,000
Housing and Redevelopment Authority
in and for the
City of Richfield, Minnesota
Subordinate Multifamily Housing Revenue Bonds
(Fort Snelling Upper Post Project)
Series 2023
This instrument was drafted by:
Kennedy & Graven, Chartered (JAE)
150 South Fifth Street, Suite 700
Minneapolis, MN 55402-1299
i
TABLE OF CONTENTS
Page
PARTIES .................................................................................................................................................... 1
RECITALS ................................................................................................................................................. 1
Section 1. Definitions ........................................................................................................................ 2
Section 2. Representations by the Borrower ...................................................................................... 4
Section 3. Qualified Residential Rental Project ................................................................................. 6
Section 4. Low Income Tenants ........................................................................................................ 8
Section 5. Restrictions Imposed by Minnesota Statutes, Chapter 474A .......................................... 10
Section 6. Covenants Run with the Land ......................................................................................... 11
Section 7. Indemnification ............................................................................................................... 11
Section 8. Consideration .................................................................................................................. 11
Section 9. Reliance .......................................................................................................................... 11
Section 10. Sale or Transfer of the Project ........................................................................................ 12
Section 11. Term ................................................................................................................................ 12
Section 12. Burden and Benefit ......................................................................................................... 13
Section 13. Enforcement .................................................................................................................... 13
Section 14. The Trustee and the Issuer .............................................................................................. 14
Section 15. Amendment ..................................................................................................................... 14
Section 16. Right of Access to the Project and Records .................................................................... 14
Section 17. No Conflict with Other Documents ................................................................................ 14
Section 18. Severability ..................................................................................................................... 14
Section 19. Notices ............................................................................................................................ 14
Section 20. Governing Law ............................................................................................................... 15
Section 21. Payment of Fees .............................................................................................................. 15
Section 22. Limited Liability ............................................................................................................. 15
Section 23. Actions of Issuer ............................................................................................................. 15
Section 24. Counterparts .................................................................................................................... 16
Section 25. Recording and Filing ...................................................................................................... 16
SIGNATURES ........................................................................................................................................ S-1
EXHIBIT A — Legal Description of Land ............................................................................................ A-1
EXHIBIT B — Form of Income Certification ........................................................................................ B-1
EXHIBIT C — Certificate of Continuing Program Compliance ............................................................ C-1
REGULATORY AGREEMENT
THIS REGULATORY AGREEMENT, dated June ___, 2023 (the “Regulatory Agreement”), is
between the HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF
RICHFIELD, MINNESOTA, a public body corporate and politic under the laws of the State of Minnesota
(the “Issuer”), FORT SNELLING LEASED HOUSING ASSOCIATES I, LLLP, a Minnesota limited
liability limited partnership (the “Borrower”), as the leasehold owner of the property described in
EXHIBIT A attached hereto (the “Land”), FORT SNELLING LEASED HOUSING ASSOCIATES
MASTER TENANT I, LLLP, a Minnesota limited liability limited partnership (the “Master Tenant”), and
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association (the
“Trustee”).
RECITALS
Minnesota Statutes, Chapters 462C and 474A, as amended (the “Act”), authorize the Issuer to issue
revenue obligations to finance the acquisition, construction, rehabilitation, and equipping of multifamily
housing developments.
In accordance with Minnesota Statutes, Section 471.656, as amended, a municipality is authorized
to issue obligations to finance the acquisition or improvement of property located outside of the corporate
boundaries of such municipality if the obligations are issued under a joint powers agreement between the
governmental unit issuing the obligations and the governmental unit in which the property to be acquired
or improved is located.
Pursuant to Minnesota Statutes, Section 471.59, as amended, by the terms of a joint powers
agreement entered into through action of their governing bodies, two governmental units may jointly or
cooperatively exercise any power common to the contracting parties or any similar powers, including those
which are the same except for the territorial limits within which they may be exercised and the joint powers
agreement may provide for the exercise of such powers by one or more of the participating governmental
units on behalf of the other participating units.
On November 25, 2020, the Hennepin County Housing and Redevelopment Authority (the “County
HRA”) issued its Multifamily Housing Revenue Note (Fort Snelling Upper Post Project), Series 2020 (the
“Series 2020 Note”), in the original aggregate principal amount of $88,000,000 and loaned the proceeds
thereof to the Borrower to finance all or a portion of the costs of the leasehold acquisition, rehabilitation
and/or construction, and equipping of an approximately 192-unit multifamily housing rental facility and
facilities functionally related and subordinate thereto located on the Land at 58 Taylor Avenue,
Unorganized Territory of Fort Snelling, Minnesota 55111, known as the Fort Snelling Upper Post Project
(the “2020 Project”), of which at least forty percent (40%) of the units are available to individuals and
families with incomes at or below (60%) of the area median income.
The Borrower has proposed to finance additional costs to complete the construction and/or
rehabilitation of the 2020 Project (the “2023 Project”). The Issuer has agreed to issue its Subordinate
Multifamily Housing Revenue Bonds (Fort Snelling Upper Post Project), Series 2023 (the “Bonds”), in the
original aggregate principal amount of $10,000,000, pursuant to the Act, Minnesota Statutes,
Sections 471.59 and 471.656, as amended, a resolution adopted by the Board of Commissioners of the
Issuer on June 5, 2023, and an Indenture of Trust, dated as of June 1, 2023 (the “Indenture”), between the
Issuer and the Trustee. The Issuer will loan the proceeds derived from the sale of the Bonds to the Borrower
pursuant to the terms of a Loan Agreement, dated as of June 1, 2023 (the “Loan Agreement”), between the
Issuer and the Borrower, and the Borrower will apply such proceeds to finance the 2023 Project.
2
For good and valuable consideration, the Borrower, the Trustee, and the Issuer have determined to
enter into this Regulatory Agreement in order to assure compliance with certain requirements of the Code
(hereinafter defined) and of the Act applicable to the 2020 Project and the 2023 Project (together, the
“Project”).
NOW, THEREFORE, the Borrower, the Trustee, and the Issuer do hereby impose upon the Project
the following covenants, restrictions, charges, and easements, which shall run with the Land and shall be
binding and a burden upon the Project and all portions thereof, and upon any purchaser, grantee, owner, or
lessee of any portion of the Project and any other person or entity having any right, title, or interest therein
and upon the respective heirs, executors, administrators, devisees, successors, and assigns of any purchaser,
grantee, owner, or lessee of any portion of the Project and any other person or entity having any right, title,
or interest therein, for the length of time that this Regulatory Agreement shall be in full force and effect:
Section 1. Definitions. Unless otherwise expressly provided herein or unless the context clearly
requires otherwise, the terms defined above shall have the meanings set forth above and the following terms
shall have the respective meanings set forth below for the purposes hereof. Capitalized terms used but not
defined herein shall have the meanings assigned to such terms in the Indenture.
“Act” means Minnesota Statutes, Chapters 462C and 474A, as amended.
“Adjusted Income” means the adjusted income of a person (together with the adjusted income of
all persons of the age of 18 years or older who intend to reside with such person in one Dwelling Unit), as
calculated in the manner prescribed under Section 142(d)(2)(B) of the Code.
“Bond Counsel” means Kennedy & Graven, Chartered, or any other attorney at law or firm of
attorneys, of nationally recognized standing in matters pertaining to the federal tax exemption of interest
on bonds and other obligations issued by states and political subdivisions thereof, duly admitted to practice
law before the highest court of any state of the United States of America.
“Bonds” means the Subordinate Multifamily Housing Revenue Bonds (Fort Snelling Upper Post
Project), Series 2023, issued by the Issuer on the Closing Date in the original aggregate principal amount
of $10,000,000.
“Borrower” means Fort Snelling Leased Housing Associates I, LLLP, a Minnesota limited liability
limited partnership, and its lawful successors and assigns to the extent permitted by the Loan Agreement.
“Closing Date” means June ___, 2023, which is the date of issuance of the Bonds.
“Code” means the Internal Revenue Code of 1986, as amended, and all applicable regulations
(whether proposed, temporary or final) under the Code and the statutory predecessor of the Code, and any
official rulings and judicial determinations under the foregoing applicable to the Bonds.
“County” means Hennepin County in the State.
“County HRA” means the Hennepin County Housing and Redevelopment Authority, a housing and
redevelopment authority and political subdivision organized and existing under the Constitution and laws
of the State, as the issuer of the Series 2020 Note.
“Dwelling Units” means the units of multifamily residential rental housing comprising the Project.
3
“Event of Default” has the meaning specified in Section 13 hereof.
“Functionally Related and Subordinate” means and includes facilities for use by tenants, for
example, laundry facilities, parking areas, and recreational facilities, provided that the same is of a character
and size commensurate with the character and size of the Project.
“Housing Act” means the United States Housing Act of 1937, as amended, codified as 42 U.S.C.
Sections 1401 et seq.
“Indenture” means the Indenture of Trust, dated as of June 1, 2023, between the Issuer and the
Trustee, as it may be supplemented and amended from time to time.
“Issuer” means the Housing and Redevelopment Authority in and for the City of Richfield,
Minnesota, a public body corporate and politic under the laws of the State.
“Loan” means the loan provided by the Issuer to the Borrower pursuant to the Loan Agreement to
provide financing for the 2023 Project.
“Loan Agreement” means the Loan Agreement, dated as of June 1, 2023, between the Issuer and
the Borrower, as amended from time to time.
“Low Income Tenants” means persons or families with Adjusted Income which does not exceed
sixty percent (60%) of the Median Income for the Area adjusted for household size. In no event will the
occupants of a unit be considered to be Low Income Tenants if all of such occupants are students (as defined
in Section 152(f)(2) of the Code), unless the unit is occupied:
(i) by an individual who is (A) a student and receiving assistance under Title IV of
the Social Security Act, (B) a student who was previously under the care and placement
responsibility of the State agency responsible for administering a plan under Pa rt B or Part E of
Title IV of the Social Security Act, or (C) enrolled in a job training program receiving assistance
under the Job Training Partnership Act or under other similar federal, State, or local laws; or
(ii) entirely by full-time students if such students are (A) single parents and their
children and such parents are not dependents (as defined in Section 152 of the Code, determined
without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of another individual and such
children are not dependents (as defined in Section 152 of the Code, determined without regard to
subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of another individual other than a parent of such
children, or (B) married and entitled to file a joint return.
“Low Income Units” means the Dwelling Units in the Project designated for occupancy by Low
Income Tenants pursuant to Section 4(a) hereof.
“Master Tenant” means Fort Snelling Leased Housing Associates Master Tenant I, LLLP, a
Minnesota limited liability limited partnership, its successors and assigns.
“Median Income for the Area” means the median yearly income for households of an applicable
size in the applicable Primary Metropolitan Statistical Area as most recently determined by the Secretary
of Housing and Urban Development under Section 8(f)(3) of the Housing Act, or, if such figures are no
longer available, the method of calculation is substantially altered, or the programs under Section 8(f) are
terminated, the Issuer shall provide the Borrower with another income determination that is reasonably
similar to the method used by the Secretary prior to such termination.
4
“Project” means, in general, the leasehold acquisition, construction and/or rehabilitation, and
equipping of the approximately 192-unit multifamily rental housing development and functionally related
facilities to be located at located at 58 Taylor Avenue, Unorganized Territory of Fort Snelling, Minnesota
55111, known as the Fort Snelling Upper Post Project, and consists of the 2020 Project and the 2023 Project.
“Qualified Project Period” means the period beginning on the later of the date of issuance of the
Bonds and the first day on which ten percent (10%) of the Dwelling Units in the Project are occupied and
ending on the latest of:
(i) the date which is twenty (20) years after the date on which fifty percent (50%) of
the Dwelling Units in the Project are occupied;
(ii) the first day on which no tax-exempt private activity bond issued with respect to
the Project is outstanding; or
(iii) the date on which any assistance provided with respect to the Project under
Section 8 of the United States Housing Act of 1937 terminates.
“Regulatory Agreement” means this Regulatory Agreement, dated the Closing Date, between the
Issuer, the Borrower, the Master Tenant, and the Trustee, together with any amendments or supplements
hereto.
“Section 474A Penalty” means the penalty described in Section 474A.047, subdivision 3 of the
Act, as applied to the Project.
“Series 2020 Note” means the Multifamily Housing Revenue Note (Fort Snelling Upper Post
Project), Series 2020, issued by the County HRA on November 25, 2020, in the original aggregate principal
amount of $88,000,000.
“State” means the State of Minnesota.
“Treasury Regulations” means the regulations promulgated or proposed by the Department of the
Treasury pursuant to the Code from time to time or pursuant to any predecessor statute to the Code.
“Trustee” means U.S. Bank Trust Company, National Association, a national banking association,
its successors and assigns.
“2020 Project” means the portion of the Project financed with the proceeds of the Series 2020 Note.
“2023 Project” means the portion of the Project financed with the proceeds of the Bonds.
Unless the context clearly requires otherwise, as used in this Regulatory Agreement words of the
masculine, feminine or neuter gender shall be construed to include each other gender when appropriate, and
words of the singular number shall be construed to include the plural number, and vice versa, when
appropriate. This Regulatory Agreement and all of the terms and provisions hereof shall be construed to
effectuate the purposes set forth herein and to sustain the validity hereof.
Section 2. Representations by the Borrower. The Borrower covenants, represents, and warrants
that:
5
(a) The Borrower is a limited liability limited partnership organized and existing under the
laws of the State. The Borrower is in good standing in the State and has duly authorized, by proper action,
the execution and delivery of this Regulatory Agreement. The Borrower is duly authorized by the laws of
the State to transact business in the State and to perform all of its duties hereunder.
(b) Neither the execution and delivery of this Regulatory Agreement or any other document in
connection with the financing of the 2023 Project, the consummation of the transactions contemplated
hereby and thereby nor the fulfillment of or compliance with the terms and conditions hereof and thereof
conflicts with or results in a breach of any of the terms, conditions, or provisions of any agreement or
instrument to which the Borrower is now a party or by which it is bound or constitutes a default (with due
notice or the passage of time or both) under any of the foregoing or results in the creation or imposition of
any prohibited lien, charge, or encumbrance whatsoever upon any of the property or assets of the Borrower
under the terms of any instrument or agreement to which the Borrower is now a party or by which it is
bound.
(c) The execution, delivery, and performance of this Regulatory Agreement and all other
documents to be delivered by the Borrower in connection with the consummation of the transactions
contemplated hereby will not conflict with, or constitute a breach of or de fault under, any indenture,
mortgage, deed of trust, lease, commitment, agreement, or other instrument or obligation to which the
Borrower is a party or by which the Borrower or any of its property is bound, or under any law, rule,
regulation, judgment, order, or decree to which the Borrower is subject or by which the Borrower or any of
its property is bound.
(d) There is no action, suit, proceeding, inquiry, or investigation by or before any governmental
agency, public board, or body pending or to the best of the Borrower’s knowledge, threatened against the
Borrower (nor to the best of its knowledge is there any basis therefor), which:
(i) affects or seeks to enjoin, prohibit, or restrain the issuance, sale, or delivery of the
Bonds or the use of the proceeds of the Bonds to finance the leasehold acquisition, rehabilitation,
and equipping of the 2023 Project or the execution and delivery of this Regulatory Agreement;
(ii) affects or questions the validity or enforceability of the Bonds or this Regulatory
Agreement;
(iii) questions the tax-exempt status of the Bonds (except for any loss of tax-exempt
status that results from the application of Section 147(a) of the Code or any successor provisions
of the Code and applicable Treasury Regulations or any successor law or regulation); or
(iv) questions the power or authority of the Borrower to own, acquire, rehabilitate,
construct, equip, or operate the Project or to execute, deliver, or perform the Borrower’s obligations
under this Regulatory Agreement.
(e) The Project will be located wholly within the boundaries of unincorporated land in the
County.
(f) On and after the date on which the Bonds are executed and delivered to the Trustee, the
Borrower will have a leasehold interest in the Project sufficient to carry out the purposes of this Regulatory
Agreement, and such title shall be in and remain in the name of the Borrower except as otherwise permitted
by this Regulatory Agreement.
6
(g) The Project consists and will consist of those facilities described herein, which generally
are described as a residential apartment building and related facilities situated on the Land. The Borrower
shall make no changes to the Project or to the operation thereof which would affect the qualification of the
Project under the Act or impair the exemption from federal income taxation of the interest on the Bonds.
The Borrower will utilize and operate the Project as a multifamily rental housing project during the term of
the Bonds in accordance with all applicable federal, State, and local laws, rules, and regulations applicable
to the Project.
(h) The Borrower has obtained, or will obtain on or before the date required therefor, all
necessary certificates, approvals, permits, and authorizations with respect to the operation of the Project.
(i) The Borrower acknowledges that if the Borrower or a “substantial user” of the Project
financed with the proceeds of the Bonds or a “related person,” as those terms are employed in
Section 147(a) of the Code, owns the Bonds, or any portion thereof, interest on the Bonds during such
period of ownership will not be excludable from gross income for federal income tax purposes.
(j) The Borrower does not own any buildings or structures which are proximate to the Project
other than those buildings or structures which comprise the Project, which are being financed pursuant to a
common plan under which the Project is also being financed.
(k) The Borrower will incur rehabilitation expenditures (as defined in Section 147(d)(3) of the
Code) with respect to the Project in an amount of at least fifteen percent (15%) of the acquisition cost of
the Project financed with the proceeds of the Bonds within two (2) years from the later of (i) the date the
Borrower acquires the Project or (ii) the date of issuance of the Bonds.
(l) The statements made in the various certificates delivered by the Borrower to the Issuer or
the Trustee on the date of issuance of the Bonds are true and correct.
Section 3. Qualified Residential Rental Project. The Borrower shall acquire, rehabilitate,
construct, equip, own, manage, and operate the Project as a “qualified residential rental project,” as such
phrase is utilized in Section 142(d) of the Code, on a continuous basis during the Qualified Project Period.
To that end, the Borrower hereby represents, warrants, and covenants as follows:
(a) that a qualified residential rental project will be rehabilitated and/or constructed on the
property described in EXHIBIT A hereto, and the Borrower shall own, through a leasehold interest, manage
and operate the Project as a qualified residential rental project containing Dwelling Units and facilities
Functionally Related and Subordinate to such Dwelling Units, in accordance with Section 142(a)(7) and
Section 142(d) of the Code and all applicable Treasury Regulations promulgated thereunder, as the same
may be amended from time to time;
(b) that all of the Dwelling Units of the Project will be similarly constructed and rehabilitated
and each Dwelling Unit in the Project will contain complete facilities for living, sleeping, eating, cooking,
and sanitation for a single person or a family;
(c) that:
(i) none of the Dwelling Units in the Project shall at any time in the future be utilized
on a transient basis;
(ii) that none of the Dwelling Units in the Project shall at any time in the future be
leased or rented for a period of less than thirty (30) days; and
7
(iii) that neither the Project nor any portion thereof shall be used as a hotel, motel,
dormitory, fraternity house, sorority house, rooming house, hospital, nursing home, sanitarium, rest
home, or trailer park or trailer court for use on a transient basis, or by a cooperative housing
corporation (as defined in Section 216(b)(1) of the Code);
(d) that following the rehabilitation thereof, once available for occupancy:
(i) each Dwelling Unit in the Project must be rented or available for rental on a
continuous basis to members of the general public, in compliance with this Regulatory Agreement,
during the Qualified Project Period, except for any Dwelling Unit for a resident manager or
maintenance personnel; and
(ii) the Borrower shall not give preference in renting Dwelling Units in the Project to
any particular class or group of persons, other than Low Income Tenants as provided herein or as
otherwise permitted by law, including in particular, Revenue Procedure 2019-17, 2019-17 I.R.B.,
issued on April 22, 2019, which clarifies that a qualified residential rental project (as defined in
Section 142(d) of the Code) does not fail to meet the general public use requirement applicable to
exempt facilities solely because of occupancy restrictions or preferences that favor tenants
described in Section 42(g)(9), including those tenants who are members of a specified group under
a federal program or state program or policy that supports housing for such a specified group;
(e) that the Project consists of one (1) or more discrete edifices and other man-made
construction, each consisting of an independent foundation, outer walls and roof, all of which will be
(i) owned by the same person for federal tax purposes; (ii) located on a common tract of land or two (2) or
more parcels of land which are contiguous except for being separated only by a road, street, stream, or a
similar property; and (iii) financed by the Loan or otherwise pursuant to a common plan of financing, and
which consists entirely of:
(i) units which are similar in quality and type of construction and amenities; and
(ii) property Functionally Related and Subordinate in purpose and size to the Project,
e.g., parking areas, laundries, swimming pools, tennis courts, and other recreational facilities (none
of which may be unavailable to any person because such person is a Low Income Tenant) and other
facilities which are reasonably required for the Project, e.g., heating and cooling equipment, trash
disposal equipment, or units for residential managers or maintenance personnel;
(f) that no portion of the Project shall be used to provide any health club facility, any facility
primarily used for gambling, or any store the principal business of which is the sale of alcoholic beverages
for consumption off premises;
(g) that the Project shall not include a Dwelling Unit in a building where all Dwelling Units in
such building are not also included in the Project;
(h) that the Borrower shall not convert the Project to condominium or cooperative ownership;
(i) that no Dwelling Unit in the Project shall be occupied by the Borrower (or any person
related to the Borrower within the meaning of Section 147(a)(2) of the Code) at any time unless such person
resides in a Dwelling Unit in a building or structure which contains at least five Dwelling Units and unless
the resident of such Dwelling Unit is a resident manager or other necessary employee (e.g., maintenance
and security personnel);
8
(j) that the Bonds will not be “federally guaranteed,” as defined in Section 149(b) of the Code;
(k) that the Project shall at all times be used and operated as a “multifamily housing
development,” as defined in the Act; and
(l) that the Borrower shall not discriminate on the basis of race, creed, color, sex, sexual
preference, source of income (e.g., AFDC or SSI), physical disability, national origin, or marital status in
the rental, lease, use, or occupancy of the Project or in connection with the employment or application for
employment of persons for the operation and management of the Project.
Section 4. Low Income Tenants. Pursuant to the requirements of the Act and Section 142(d) of
the Code, the Borrower hereby represents, warrants, and covenants as follows:
(a) Upon completion of the rehabilitation of the Project, at least forty percent (40%) of the
units in the Project will be occupied or held for occupancy by Low Income Tenants. Throughout the
Qualified Project Period, not less than forty percent (40%) of the completed units in the Project shall be
continuously occupied or held for occupancy by Low Income Tenants. The Borrower will designate the
Low Income Units and will make any revisions to such designations as necessary to comply with the
applicable provisions of the Code and the Treasury Regulations. As set forth in subsection (e) below, the
Borrower shall advise the Issuer and the Trustee by delivery of a certificate in writing of the status of the
occupancy of the Project with respect to Low Income Tenants on an annual basis for the term of this
Regulatory Agreement. An Annual Certification of a Residential Rental Project, Form 8703 (Rev.
December 2021), or successor form, shall be prepared annually by the Borrower and filed with the United
States Secretary of the Treasury pursuant to Section 142(d)(7) of the Code (currently with the Internal
Revenue Service Center, Ogden, Utah 84201), with a copy to be filed by the Borrower with the Issuer and
the Trustee. The percentage of units is measured by number of units, and not square footage of units.
For purposes of satisfying the occupancy requirements set forth above, a unit occupied by a person
or family who at the commencement of their occupancy qualified as a Low Income Tenant shall be treated
as occupied by a Low Income Tenant until such time as any recertification of such tenant’s income in
accordance with Sections 4(c) and (h) below demonstrates that such tenant’s income exceeds one hundred
forty percent (140%) of the income limitation applicable to Low Income Tenants.
A unit occupied by a Low Income Tenant shall be deemed, upon the termination of such tenant’s
occupancy, to be continuously occupied by a Low Income Tenant until reoccupied, other than for a
temporary period (not to exceed sixty (60) days), at which time the character of the unit shall be
redetermined.
(b) The Borrower will notify the Issuer on an annual basis of any vacancy of any Low Income
Units.
(c) The Borrower will obtain, complete, and maintain on file income certifications from each
Low Income Tenant, obtained immediately prior to the initial occupancy of such tenant in the Project and
at least annually thereafter. Such income certifications (based upon their then current income) from each
Low Income Tenant shall be provided in the form of income certification set forth in EXHIBIT B attached
hereto or another form approved by Bond Counsel (the “Tenant Income Certification”). The preceding
sentence shall not apply for any year if, during such year, no residential unit in the Project is occupied by a
new resident whose income exceeds the applicable income limit for Low Income Tenants. The Borrower
will also provide such additional information as may be required by Section 142(d) of the Code, as the same
may be amended from time to time, or in such other form and manner as may be required by applicable
9
rules, rulings, policies, procedures, Treasury Regulations now or hereafter promulgated, proposed or made
by the Department of the Treasury or the Internal Revenue Service applicable to the Bonds. Such Tenant
Income Certification shall be obtained prior to initial occupancy. If requested by the Trustee or Issuer, a
copy of such Tenant Income Certification shall be filed with the Trustee and the Issuer prior to occupancy
by the tenant whenever possible but in no event more than one month after initial occupancy by the tenant.
A copy of each re-certification of income shall be attached to each report filed with the Issuer and the
Trustee pursuant to subsection (a) above. The Borrower shall make a good-faith effort to verify that the
income reported by an applicant in an income certification is accurate by taking at least one (1) of the
following steps as a part of the verification process: (1) obtain a pay stub for the most recent pay period;
(2) obtain an income tax return for the most recent tax year; (3) conduct a credit or similar search; (4) obtain
an income verification form from the applicant’s current employer; (5) obtain an income verification form
from the Social Security Administration if the applicant receives assistance from such agency; or (6) if the
applicant is unemployed and has no such tax return, obtain another form of independent verification. If the
Low Income Tenant is a Section 8 certificate holder, the Borrower shall retain a copy of the certificate or
voucher for verification of income in lieu of an income verification.
The Borrower understands that failure to file the Annual Certification of a Residential Rental
Project, Form 8703 (Rev. December 2021), or successor form, as required by Section 142(d)(7) of the Code
at the times stated therein may subject it to the penalty described in Section 6652(j) of the Code.
(d) The Borrower will maintain complete and accurate records pertaining to the Low Income
Units and will permit, upon reasonable prior notice, any duly authorized representative of the Issuer, the
Trustee, the Department of the Treasury, or the Internal Revenue Service to inspect the books and records
of the Borrower pertaining to the Project, including those records pertaining to the occupancy of the Low
Income Units. This section is not intended to create any additional duties to inspect records.
(e) The Borrower will prepare and submit to the Issuer and the Trustee on or before March 1
of each year during the Qualified Project Period, beginning the first March 1 following commencement of
the Qualified Project Period, a Continuing Program Compliance Certificate in the form attached hereto as
EXHIBIT C and executed by the Borrower, and, if requested by the Issuer, or the Trustee, the Tenant
Income Certification described in subsection (c) above.
(f) The Borrower, upon becoming aware of an Event of Default, will notify the Issuer and the
Trustee, in writing, of the occurrence of any such Event of Default hereunder or any event which, with the
passage of time or service of notice, or both, would constitute an Event of Default hereunder, specifying
the nature and period of existence of such event and the actions being taken or proposed to be taken with
respect thereto. Such notice shall be given promptly and in no event longer than ten (10) business days
after the Borrower receives notice or gains knowledge of the occurrence of any such event. The Borrower
further agrees that it will give prompt written notice to the Issuer and the Trustee if insurance proceeds or
condemnation awards are received with respect to the Project and are not used to repair or replace the
Project, which notice shall state the amount of such proceeds or award.
(i) Except as provided in clause (ii) below, the Borrower shall accept as tenants on the
same basis as all other prospective tenants Low Income Tenants who are recipients of federal
certificates for rent subsidies pursuant to the existing program under Section 8 of the Housing Act
or its successor and shall not apply selection criteria to Section 8 certificate/voucher holders that
are more burdensome than the criteria applied to all other prospective tenants.
(ii) The Borrower agrees to modify the leases for units in the Project as necessary to
allow the rental of Low Income Units to Section 8 certificate/voucher holders.
10
(g) Each lease pertaining to a Low Income Unit shall contain a provision to the effect that the
Borrower has relied on the income certification and supporting information supplied by the Low Income
Tenant in determining qualification for occupancy of the Low Income Unit and that any material
misstatement in such certification (whether or not intentional) will be cause for immediate termination of
such lease.
(h) Throughout the Qualified Project Period, the Borrower shall re -certify each Low Income
Tenant’s income on or before the anniversary of the Low Income Tenant’s tenancy by obtaining a
completed Income Certification. The preceding sentence shall not apply for any year if, during such year,
no residential unit in the Project is occupied by a new resident whose income exceeds the applicable income
limit for Low Income Tenants. In the event the recertification demonstrates that any such tenant’s
household income exceeds one hundred forty percent (140%) of the applicable income limit, the Borrower
shall hold the next available unit or units of comparable or smaller size in the Project available for rental
by new Low Income Tenants.
The Borrower in its sole discretion may notify, in writing, each tenant who is no longer a Low
Income Tenant of such fact, and that the rent of such tenant(s) is subject to increase thirty (30) days after
receipt of such notice. The Borrower shall be entitled to so increase any such tenant’s rent only if Borrower
complies with any law applicable thereto and only after the Borrower has rented the next available unit or
units in the Project on a one-for-one basis to a Low Income Tenant, or holds units vacant and available for
occupancy by Low Income Tenants.
The Borrower agrees to inform all prospective Low Income Tenants of the requirements for
recertification of income and of the provisions of the preceding paragraph.
Section 5. Restrictions Imposed by Minnesota Statutes, Chapter 474A. Because the Bonds are
issued by the Issuer as a “residential rental project bond,” as defined in Chapter 474A of the Act, and has
received an allocation of tax-exempt bonding authority pursuant to applicable provisions of Chapter 474A,
the restrictions imposed by Chapter 474A apply to the Project as described below.
(a) In addition to any other restrictions on rent or the income of tenants set forth in this
Regulatory Agreement, during the Qualified Project Period, the Borrower shall restrict rents on at least
twenty percent (20%) of the units in the Project (which may consist of the same units as meet the
requirements of Section 4 hereof) to an amount not exceeding the area fair market rents or exception fair
market rents, as applicable, for existing housing as established by the federal Department of Housing and
Urban Development from time to time, which units shall be occupied, or held for occupancy, by Low
Income Tenants.
(b) The annual certifications required to be made by the Borrower hereunder shall conform to
the requirements of Section 474A.047, subdivision 3, and the Issuer shall have the authority to impose upon
the Borrower any and all penalties described in Section 474A.047, subdivision 3, from time to time, in
addition to any remedies otherwise available under this Regulatory Agreement.
(c) The Borrower must satisfy the requirements of Section 474A.047, subdivision 1(a), during
the Qualified Project Period. The Borrower must annually certify to the Issuer over the term of this
Regulatory Agreement that the rental rates for the rent -restricted units are within the limitations under
Section 474A.047, subdivision 1(a). The Issuer may request individual certification of the income of
residents of the income-restricted units. The Commissioner of Minnesota Management and Budget may
request from the Issuer a copy of the annual certification prepared by the Borrower. The Commissioner of
Minnesota Management and Budget may require the Issuer to request individual certification of all residents
of the income-restricted units.
11
Section 6. Covenants Run with the Land. The Borrower hereby declares its express intent that
the covenants, restrictions, charges, and easements set forth herein shall be deemed covenants running with
the land and shall, except as otherwise provided in this Regulatory Agreement, pass to and be binding upon
the Borrower’s successors in title including any purchaser, grantee, owner, or lessee of any portion of the
Project and any other person or entity having any right, title, or interest therein and upon the respective
heirs, executors, administrators, devisees, successors, and assigns of any purchaser, grantee, owner, or
lessee of any portion of the Project and any other person or entity having any right, title, or interest therein.
Except as otherwise provided in this Regulatory Agreement, each and every contract, deed, or other
instrument hereafter executed covering or conveying the Project or any portion thereof or interest therein
shall contain an express provision making such conveyance subject to the covenants, restriction s, charges,
and easements contained herein; provided, however, that any such contract, deed, or other instrument shall
conclusively be held to have been executed, delivered, and accepted subject to such covenants, regardless
of whether or not such covenants are set forth or incorporated by reference in such contract, deed, or other
instrument.
Section 7. Indemnification. The Borrower hereby covenants and agrees that it shall indemnify
and hold harmless the Issuer and the City and their respective officer s, agents, and employees (the
“Indemnified Parties”) and the Trustee and its officers, members, directors, officials, and employees, as
provided in the Loan Agreement. All provisions of the Loan Agreement relating to indemnification are
incorporated by reference herein and are considered provisions of this Regulatory Agreement, as if
expressly set out herein.
Section 8. Consideration. The Issuer has issued the Bonds in part to provide funds to make the
Loan to finance the 2023 Project all for the purpose, among others, of inducing the Borrower to acquire,
rehabilitate, construct, equip, and operate the Project. In consideration of the issuance of the Bonds by the
Issuer, the Borrower has entered into this Regulatory Agreement and has agreed to restrict the uses to which
the Project can be put on the terms and conditions set forth herein.
Section 9. Reliance. The Issuer and the Borrower hereby recognize and agree that the
representations and covenants set forth herein may be relied upon by all persons interested in the legality
and validity of the Bonds and in the exemption from federal income taxation of the interest on the Bonds.
In performing their duties and obligations hereunder and under the Loan Agreement, the Issuer and the
Trustee may rely upon statements and certificates of the Borrower and the tenants and upon audits of the
books and records of the Borrower pertaining to the Project. In addition, the Issuer and the Trustee may
consult with counsel, and the written opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken or suffered by the Issuer or the Trustee hereunder in good faith and
in conformity with such written opinion. A copy of any such opinion shall be furnished by the Issuer or
the Trustee to the Borrower upon written request. In determining whether any default or lack of compliance
by the Borrower exists under this Regulatory Agreement, the Issuer or the Trustee shall not be required to
conduct any investigation into or review of the operations or records of the Borrower and may rely solely
on any notice or certificate delivered to the Issuer or the Trustee by the Borrower with respect to the
occurrence or absence of a default unless it knows, or in the exercise of reasonable care should have known,
that the notice or certificate is erroneous or misleading.
The Trustee shall be under no duty to make any investigation or inquiry as to any statements or
other matters contained or referred to in any documents or any instruments delivered to it in accordance
with this Regulatory Agreement, but it may receive and accept the same as conclusive evidence of the truth
and accuracy of such statements.
12
Section 10. Sale or Transfer of the Project. Any attempted sale, transfer, or disposition which
would cause or result in the violation of any of the covenants herein, provisions, reservations, restrictions,
charges, or easements shall be null and void ab initio and of no force and effect. Nothing herein shall
prohibit the transfer, sale or assignment of the interests in the Borrower or any direct or indirect ownership
interests in Borrower’s partners. In the event of sale, transfer, or disposition of the Project, the Borrower
shall provide notice to the Issuer of such event.
Notwithstanding anything to the contrary contained herein, the Borrower has entered into the
Master Sublease, dated November 25, 2020, with the Master Tenant. The Master Tenant joins in the
execution of this Regulatory Agreement for the purpose of being bound hereby; provided, however, that all
references in this Regulatory Agreement to the Master Tenant shall be of no further forc e or effect and shall
be disregarded for all purposes of this Regulatory Agreement from and after the date the aforementioned
Master Sublease is terminated.
Section 11. Term. This Regulatory Agreement and the terms hereof shall become effective upon
its execution and delivery and shall remain in full force and effect for a term and period equal to the
Qualified Project Period, it being expressly agreed and understood that the provisions hereof are intended
to survive the retirement of the Bonds and termination of the Loan Agreement and the Loan if the Qualified
Project Period has not expired at the time of such retirement and expiration. Notwithstanding anything in
this Regulatory Agreement to the contrary:
(a) The Project may be transferred pursuant to a foreclosure, exercise of power of sale, or deed
in lieu of foreclosure, or comparable proceedings without the consent of or fee of any kind payable to the
Issuer or compliance with the provisions of this Regulatory Agreement. In connection with any su ch
foreclosure, deed in lieu of foreclosure, or other proceedings, this Regulatory Agreement shall be terminated
upon completion of the foreclosure and expiration of the applicable redemption period, or recording of a
deed in lieu of foreclosure.
(b) The requirements of this Regulatory Agreement shall terminate and be of no further force
and effect in the event of involuntary noncompliance with the provisions of this Regulatory Agreement
caused by fire or other casualty, seizure, requisition, foreclosure, transfer of title by deed in lieu of
foreclosure, change in a federal law, or an action of a federal agency after the date of this Regulatory
Agreement, which prevents the Issuer and the Trustee from enforcing such provisions, or condemnation or
a similar event, but only if, within a reasonable period, the Bonds are retired or amounts received as a
consequence of such event are used to provide a project that meets the requirements hereof (provided that
this shall be deemed met if the Bonds have been previously retired); provided, however, that the preceding
provisions of this sentence shall cease to apply and the restrictions contained herein shall be reinstated if,
at any time subsequent to the termination of such provisions as the result of the foreclosure, or the delivery
of a deed in lieu of foreclosure, or a similar event, the Borrower or any related person (within the meaning
of Section 1.103-10(e) of the Treasury Regulations) obtains an ownership interest in the Project for federal
income tax purposes. The Borrower hereby agrees that, following any foreclosure, transfer of title by deed
in lieu of foreclosure, or similar event, if the Borrower or any such related person as described above obtains
an ownership interest in the Project for federal tax purposes during the Qualified Project Period, the
limitations imposed by Section 4 hereof shall apply to the Project for the remainder of the Qualified Project
Period.
(c) This Regulatory Agreement, or any of the provisions or sections hereof, may be terminated
upon agreement by the Issuer, the Borrower and the Trustee, upon receipt by the Issuer, the Borrower and
the Trustee of an opinion of Bond Counsel to the effect that such termination will not cause interest on the
Bonds to become included in gross income for federal income tax purposes or cause interest on the Bonds
13
to become included in the net taxable income of individuals, trusts, and estates for State income tax
purposes.
Upon the termination of the terms of this Regulatory Agreement, the parties hereto agree to execute,
deliver, and record appropriate instruments of release and discharge of the terms hereof; provided, however,
that the execution and delivery of such instruments shall not be necessary or a prerequisite to the termination
of this Regulatory Agreement in accordance with its terms.
Section 12. Burden and Benefit. The Issuer and the Borrower hereby declare their understanding
and intent that the burden of the covenants set forth herein touch and concern the land in that the Borrower’s
legal interest in the Project is rendered less valuable thereby. The Issuer and the Borrower hereby further
declare their understanding and intent that the benefit of such covenants touch and concern the land by
enhancing and increasing the enjoyment and use of the Project by Low Income Tenants, the intended
beneficiaries of such covenants, reservations, and restrictions, and by furthering the public purposes for
which the Bonds were issued. Notwithstanding the foregoing, the Low Income Tenants are not intended to
be third-party beneficiaries of this Regulatory Agreement and shall have no rights to enforce any provision
herein.
Section 13. Enforcement. If the Borrower defaults in the performance or observance of any
covenant, agreement, or obligation of the Borrower set forth in this Regulatory Agreement, and if such
default remains uncured for a period of sixty (60) days after written notice thereof shall have been given by
the Issuer or the Trustee to the Borrower, then the Issuer or the Trustee, acting upon the direction of the
Holders of the Bonds pursuant to the Indenture, may declare an “Event of Default” to have occurred
hereunder and, at its option, may take any one (1) or more of the following steps:
(a) by mandamus or other suit, action, or proceeding at law or in equity require the Borrower
to perform its obligations and covenants hereunder or enjoin any acts or things which may be unlawful or
in violation of the rights of the Issuer or the Trustee hereunder;
(b) have access to and inspect, examine, and make copies of all the books and records of the
Borrower pertaining to the Project;
(c) take such other action at law or in equity as may appear necessary or desirable to enforce
the obligations, covenants, and agreements of the Borrower hereunder; or
(d) with the Trustee’s consent, declare a default under the Loan, accelerate the indebtedness
evidenced by the Loan, and proceed to redeem the Bonds in accordance with their terms.
Notwithstanding anything to the contrary contained herein, the Issuer and the Trustee hereby agree that any
cure of any default made or tendered by one or more of Borrower’s partners or by the Trustee shall be
deemed to be a cure by Borrower and shall be accepted or rejected on the same basis as if made or tendered
by Borrower.
All fees, costs, and expenses of the Trustee or the Issuer incurred in taking any action pursuant to
this Section 13 shall be the sole responsibility of the Borrower and shall be paid to the Trustee or the Issuer,
as the case may be, on demand.
After the Bonds have been discharged, the Issuer may act on its own behalf to declare an “Event of
Default” to have occurred and to take any one (1) or more of the steps specified hereinabove to the same
extent and with the same effect as if taken by the Trustee at the direction of the holders of the Bonds.
14
Section 14. The Trustee and the Issuer. The Trustee is entering into this Regulatory Agreement
in its capacity as the Trustee for the Bonds with respect to the Bonds and the Indenture. The Issuer may, at
all times, assume the Borrower’s compliance with this Regulatory Agreement unless otherwise notified in
writing by the Trustee (but the Trustee shall have no obligation to so notify the Issuer), or unless the Issuer
has actual knowledge of noncompliance. The Trustee can rely on the accuracy of any certificates,
instruments, opinions, or reports delivered to it by the Borrower. It is expected that the Bonds will be
discharged and the Indenture and the Loan Agreement will terminate prior to the expiration of the Qualified
Project Period. Following the payment in full and the discharge of the Bonds and the termination of the
Indenture and the Loan Agreement: (i) all obligations, rights, and duties of the Trustee under this
Regulatory Agreement will terminate and be of no further force and effect; (ii) all actions required by the
Trustee will instead be undertaken by the Issuer; (iii) all notices to be delivered to the Trustee will instead
be delivered to the Issuer and all notices to be delivered by the Trustee will instead be delivered by the
Issuer; and (iv) the Trustee shall no longer be a party to this Regulatory Agreement and shall be considered
released from all obligations hereunder.
Section 15. Amendment. The provisions hereof shall not be amended or revised prior to the stated
term hereof except by an instrument in writing duly executed by the Issuer and the Borrower, and consented
to by the Trustee as may be required by the Loan Agreement, and duly recorded. The Issuer’s and the
Trustee’s consent to any such amendment or revision (whether or not the Bonds shall then be outstanding)
shall be given only upon receipt of an opinion of Bond Counsel addressed to the Issuer and the Trustee that
such amendment or revision will not adversely affect the exemption from federal income taxation of interest
on the Bonds. Neither the Issuer nor the Trustee shall have a duty to prepare any such consent, amendment,
or revision. The Trustee may rely upon counsel or consultants in determining whether to consent to any
amendment as set forth in the provisions of the Indenture.
Section 16. Right of Access to the Project and Records. The Borrower agrees that during the
term of this Regulatory Agreement, the Issuer and the Trustee and the duly authorized agents of either of
them shall have the right at all reasonable times, and upon reasonable notice of at least twenty-four (24)
hours, to enter upon the site of the Project during normal business hours to examine and inspect the Project
and to have access to the books and records of the Borrower with respect to the Project, a copy of which
shall be maintained at the site of the Project.
Section 17. No Conflict with Other Documents. The Borrower warrants that it has not executed
and will not execute any other agreement with provisions contradictory to, or in opposition to, the
provisions hereof.
Section 18. Severability. The invalidity of any clause, part, or provision of this Regulatory
Agreement shall not affect the validity of the remaining portions thereof.
Section 19. Notices. All notices to be given pursuant to this Regulatory Agreement shall be in
writing and shall be deemed given when sent by unsecured e-mail, facsimile transmission or other similar
unsecured electronic methods or when mailed by certified or registered mail, return receipt requested, to
the parties hereto at the addresses set forth below, or to such other place as a party may from time to time
designate in writing:
To the Issuer: Housing and Redevelopment Authority in and for the
City of Richfield, Minnesota
6700 Portland Avenue
Richfield, MN 55423
Attention: Executive Director
15
To the Borrower: Fort Snelling Leased Housing Associates I, LLLP
c/o Dominium Development & Acquisition, LLC
2905 Northwest Boulevard, Suite 150
Plymouth, MN 55441-7400
Attention: Owen C. Metz
With a copy to: Winthrop & Weinstine, P.A.
225 South Sixth Street, Suite 3600
Minneapolis, MN 55402-4629
Attention: John Nolde, Esq.
To the Trustee: U.S. Bank Trust Company, National Association
EP-MN-WS3C
60 Livingston Avenue, Third Floor
Saint Paul, MN 55107
Attention: Corporate Trust Services
Section 20. Governing Law. This Regulatory Agreement shall be governed by and construed in
accordance with the laws and judicial decisions of the State, except as such laws may be preempted by any
federal rules, regulations, and laws.
Section 21. Payment of Fees. Notwithstanding payment of the Loan, the termination of the
Project Loan Agreement, and the defeasance or discharge of the Bonds, throughout the term of the Qualified
Project Period, the Borrower shall continue to pay:
(a) to the Issuer, reimbursement for all reasonable fees and expenses, including but not limited
to financial advisory and legal fees and expenses necessary for the Issuer’s reviewing and, if necessary,
enforcing compliance by the Borrower with the terms of this Regulatory Agreement; and
(b) the fees and expenses of any entity or person designated by the Issuer to perform the review
of the Borrower’s compliance with this Regulatory Agreement; provided that such fees and expenses are
not duplicative of any fees and expenses paid under subsection (a) above.
Section 22. Limited Liability. All obligations of the Issuer hereunder shall be special, limited
obligations of the Issuer, payable solely and only from proceeds of the Bonds and amounts derived by the
Issuer from the Loan and the Loan Agreement.
Section 23. Actions of Issuer. The Issuer shall be entitled to rely conclusively on an opinion of
counsel in the exercise or non-exercise of any of the rights or powers vested in the Issuer by virtue of this
Regulatory Agreement or any other agreement or instrument executed in connection with the issuance of
the Bonds; it being the intent of the parties hereto that the Issuer, and any and all present and future trustees,
members, commissioners, officers, employees, attorneys, and agents of the Issuer shall not incur any
financial or pecuniary liability for the exercise or non-exercise of any rights or powers vested in the Issuer
by this Regulatory Agreement or any other instrument or agreement executed in connection with the
issuance of the Bonds; or for the performance or nonperformance of any obligation under, or the failure to
assert any right, power, or privilege under this Regulatory Agreement, the Bonds, the Indenture, the Loan
Agreement or any other instrument or agreement executed in connection with the issuance of the Bonds. If
the Issuer’s consent or approval is required under this Regulatory Agreement, or any other agreement or
instrument executed in connection with the issuance of the Bonds, the Issuer shall be entitled to rely
16
conclusively on an opinion of counsel and shall not be responsible for any loss or damage resulting from
any action or inaction in reliance upon such opinion.
Section 24. Counterparts. This Regulatory Agreement may be executed in any number of
counterparts, each of which, when so executed and delivered, shall be an original; but such counterparts
shall together constitute but one and the same Regulatory Agreement, and, in making proof of this
Regulatory Agreement, it shall not be necessary to produce or account for more than one such counterpart.
Section 25. Recording and Filing. The Borrower shall cause this Regulatory Agreement and all
amendments and supplements hereto and thereto to be recorded and filed in the real property records of the
County, the State, and in such other places as the Issuer may reasonably request. The Borrower shall pay
all fees and charges incurred in connection with any such recording.
(The remainder of this page is intentionally left blank.)
S-1
IN WITNESS WHEREOF, the Issuer, the Borrower, the Master Tenant, and the Trustee have
caused this Regulatory Agreement to be executed by their respective duly authorized representatives as of
the date and year first written above.
HOUSING AND REDEVELOPMENT AUTHORITY
IN AND FOR THE CITY OF RICHFIELD,
MINNESOTA
By
Its Chair
By
Its Executive Director
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this _____ day of __________, 2023, by
___________________________, the Chair of the Housing and Redevelopment Authority in and for the
City of Richfield, Minnesota, a public body corporate and politic under the laws of the State of Minnesota,
on behalf of the Issuer.
Notary Public
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this _____ day of ____________, 2023,
by Melissa Poehlman, the Executive Director of the Housing and Redevelopment Authority in and for the
City of Richfield, Minnesota, a public body corporate and politic under the laws of the State of Minnesota,
on behalf of the Issuer.
Notary Public
S-2
Execution page of the Borrower to the Regulatory Agreement, dated the date and year first written above.
FORT SNELLING LEASED HOUSING
ASSOCIATES I, LLLP, a Minnesota limited liability
limited partnership
By: Fort Snelling Leased Housing Associates I, LLC
Its: General Partner
By:
Name: Owen C. Metz
Its: Vice President
STATE OF ____________ )
) ss
COUNTY OF ____________ )
The foregoing instrument was acknowledged before me this ____ day of ___________, 2023, by
Owen C. Metz, the Vice President of Fort Snelling Leased Housing Associates I, LLC, a Minnesota limited
liability company, the general partner of Fort Snelling Leased Housing Associates I, LLLP, a Minnesota
limited liability limited partnership, on behalf of the Borrower.
Notary Public
S-3
Execution page of the Master Tenant to the Regulatory Agreement , dated the date and year first written
above.
FORT SNELLING LEASED HOUSING
ASSOCIATES MASTER TENANT I, LLLP, a
Minnesota limited liability limited partnership
By: Fort Snelling Leased Housing Associates Master
Tenant I, LLC
Its: General Partner
By:
Name: Owen C. Metz
Its: Vice President
STATE OF ____________ )
) ss
COUNTY OF ____________ )
The foregoing instrument was acknowledged before me this ____ day of ___________, 2023, by
Owen C. Metz, the Vice President of Fort Snelling Leased Housing Associates Master Tenant I, LLC, a
Minnesota limited liability company, the general partner of Fort Snelling Leased Housing Associates
Master Tenant I, LLLP, a Minnesota limited liability limited partnership, on behalf of the Master Tenant.
Notary Public
S-4
Execution page of the Trustee to the Regulatory Agreement, dated the date and year first written above.
U.S. BANK TRUST COMPANY, NATIONAL
ASSOCIATION
By
Its Vice President
STATE OF MINNESOTA )
) ss.
COUNTY OF RAMSEY )
The foregoing instrument was acknowledged before me this ____ day of ____________, 2023, by
__________________________________, the Vice President of U.S. Bank Trust Company, National
Association, a national banking association, on behalf of the Trustee.
Notary Public
A-1
EXHIBIT A
LEGAL DESCRIPTION OF LAND
PARCEL 1 (Area J):
That part of Section 29, Township 28 North, Range 23 West, Hennepin County, Minnesota, described as
follows:
Commencing at the Northwest corner of said Section 29; thence on an assumed bearing of South 00 degrees
07 minutes 15 seconds East along the West line of said Section 29, a distance of 771.38 feet; thence South
60 degrees 25 minutes 10 seconds East 2326.03 feet; thence South 46 degrees 05 minutes 08 seconds East
166.37 feet; thence North 37 degrees 54 minutes 07 seconds East 218.84 feet; thence South 60 degrees 10
minutes 22 seconds East 1820.75 feet to the point of beginning of the line to be described; thence North
23 degrees 24 minutes 45 seconds East 1564.32 feet; thence Northeasterly 566.88 feet along a tangential
curve, concave to the Southeast, having a radius of 1502.00 feet and a central angle of 21 degrees 37
minutes 28 seconds; thence North 45 degrees 02 minutes 13 seconds East, tangent to said curve 697.91
feet to a Westerly right-of-way line of State Highway Number 5; thence Southerly and Southwesterly along
said Westerly right-of-way line of State Highway Number 5 to the point of intersection with a line bearing
South 60 degrees 10 minutes 22 seconds East from said point of beginning; thence North 60 degrees 10
minutes 22 seconds West 622.24 feet to the point of beginning.
Hennepin County, Minnesota
Abstract Property
PARCEL 2 (Officer’s Row):
That part of Section 29, Township 28 North, Range 23 West, Hennepin County, Minnesota, described as
follows:
Commencing at the Northwest corner of said Section 29; thence on an assumed bearing of South 00 degrees
07 minutes 15 seconds East along the West line of said Section 29, a distance of 771.38 feet; thence South
60 degrees 25 minutes 10 seconds East 2326.03 feet; thence South 46 degrees 05 minutes 08 seconds East
166.37 feet; thence North 37 degrees 54 minutes 07 seconds East 218.84 feet; thence South 60 degrees 10
minutes 22 seconds East 1439.04 feet to the point of beginning of the land to be described; thence continue
South 60 degrees 10 minutes 22 seconds East 341.45 feet; thence North 23 degrees 24 minutes 45 seconds
East 1075.01 feet; thence North 66 degrees 38 minutes 47 seconds West 339.32 feet; thence South 23
degrees 24 minutes 45 seconds West 1036.52 to the point of beginning.
Hennepin County, Minnesota
Abstract Property
PARCEL 3 (BOQ):
That part of Section 29, Township 28 North, Range 23 West, Hennepin County, Minnesota, described as
follows:
Commencing at the Northwest corner of said Section 29; thence on an assumed bearing of South 00 degrees
07 minutes 15 seconds East along the West line of said Section 29, a distance of 771.38 feet; thence South
A-2
60 degrees 25 minutes 10 seconds East 2326.03 feet; thence South 46 degrees 05 minutes 08 seconds East
166.37 feet; thence North 37 degrees 54 minutes 07 seconds East 218.84 feet; thence South 60 degrees 10
minutes 22 seconds East 1439.04 feet; thence North 23 degrees 24 minutes 45 seconds East 1036.52 feet;
thence North 66 degrees 38 minutes 47 seconds West 30.00 feet to the point of beginning of the land to be
described; thence continuing North 66 degrees 38 minutes 47 seconds West 237.21 feet; thence South 15
degrees 35 minutes 58 seconds West 98.99 feet; thence South 18 degrees 02 minutes 36 seconds East 90.00
feet; thence South 66 degrees 38 minutes 47 seconds East 164.17 feet; thence North 23 degrees 24 minutes
45 seconds East 165.60 feet to the point of beginning.
Hennepin County, Minnesota
Abstract Property
B-1
EXHIBIT B
FORM OF INCOME CERTIFICATION
TENANT INCOME CERTIFICATION
Initial Certification Recertification Other
_______________
Effective Date: __________________________
Move-in Date: __________________________
(MM/DD/YY): __________________________
PART I. DEVELOPMENT DATA
Property Name: Fort Snelling Upper Post
Address: 58 Taylor Avenue, Unorganized Territory of Fort
Snelling, Minnesota 55111
County: Hennepin
Unit Number: _____________
BIN #: ___________
# Bedrooms: ______
PART II. HOUSEHOLD COMPOSITION
HH
Br #
Last Name
First Name &
Middle Initial
Relationship to
Head of
Household
Date of Birth
(MM/DD/YY)
F/T
Student
(Y or N)
Social Security
or Alien Reg.
No.
1 HEAD
2
3
4
5
6
PART III. GROSS ANNUAL INCOME (USE ANNUAL AMOUNTS)
HH
Br #
(A)
Employment or Wages
(B)
Soc. Security / Pensions
(C)
Public Assistance
(D)
Other Income
TOTAL $ $ $ $
Add totals from (A) through (D) above TOTAL INCOME (E): $
B-2
PART IV. INCOME FROM ASSETS
HH
Mbr#
(F)
Type of Asset
(G)
C/I
(H)
Cash Value of Asset
(I)
Annual Income from
Asset
TOTALS: $ $
Enter Column (H) Total Passbook Rate
if over $5,000 $________________ x 0.06 % = (J) Imputed Income
Enter the greater of the total column I, or J: imputed income TOTAL INCOME FROM
ASSETS (K)
$
$
(L) Total Annual Household Income from all sources [Add (E) + (K)] $
HOUSEHOLD CERTIFICATION & SIGNATURES
The information on this form will be used to determine maximum income eligibility. I/we have provided
for each person(s) set forth in Part II acceptable verification of current anticipated annual income. I/we
agree to notify the landlord immediately upon any member of the household moving out of the unit or any
new member moving in. I/we agree to notify the landlord immediately upon any member becoming a full-
time student.
Under penalties of perjury, I/we certify that the information presented in this Certification is true and
accurate to the best of my/our knowledge and belief. The undersigned further understands that providing
false representations herein constitutes an act of fraud. False, misleading or incomplete information may
result in the termination of the lease agreement.
_______________________
Signature
____________________
(Date)
_______________________
Signature
____________________
(Date)
_______________________
Signature
____________________
(Date)
_______________________
Signature
____________________
(Date)
PART V. DETERMINATION OF INCOME ELIGIBILITY
TOTAL ANNUAL HOUSEHOLD
INCOME FROM ALL SOURCES
From Item (L) on page 1
Current Income Limit per Family Size: $ _________
Household Income at Move-in _________
Household Meets
Income Restriction
at:
60% 50%
40% 30%
___%
RECERTIFICATION ONLY:
Current Income Limit x 140%
$ ______________________________
Household income exceeds 140% at
recertification:
Yes No
$
B-3
Household Size at Move-in:
_____________
PART VI. RENT
Tenant Paid Rent $ ___________
Utility Allowance $ ___________
GROSS RENT FOR UNIT:
Tenant paid rent plus Utility
Allowance and other non-optional
charges
Maximum Rent Limit for this unit: $ ___________
Rent Assistance: $ _____________
Other non-optional charges: $ _____________
Unit Meets Rent Restriction at:
60% 50% 40% 30% ___%
PART VII. STUDENT STATUS
ARE ALL OCCUPANTS
FULL-TIME STUDENTS?
yes no
If yes, enter student explanation**
(also attach documentation)
Student explanation:
1. TANF assistance
2. Job training program
3. Single parent/dependent child
4. Married/joint return*
* Exception 4 for married/joint return is the only exception available for units necessary to qualify tax-exempt
bonds.
PART VIII. PROGRAM TYPE
Mark the program(s) listed below (a. through e.) for which this household’s unit will be counted toward the property’s
occupancy requirements. Under each program marked, indicate the household’s income status as established by this
certification/recertification
a. Tax Credit b. HOME c. Tax Exempt d. AHDP e. ____________
(Name of Program)
See Part V above.
Income Status
Income Status
Income Status
Income Status
≤ 50% AMGI
≤ 60% AMGI
≤ 80% AMGI
≤ OI **
50% AMGI
60% AMGI
80% AMGI
OI **
≤ 50% AMGI
≤ 80% AMGI
≤ OI **
__________
__________
≤ OI **
** Upon recertification, household was determined over income (OI) according to eligibility requirements of the
program(s) marked above.
SIGNATURE OF OWNER / REPRESENTATIVE
$
Enter
1-4
B-4
Based on the representations herein and upon the proofs and documentation required to be submitted, the
individual(s) named in Part II of this Tenant Income Certification is/are eligible under the provisions of
Section 42 of the Internal Revenue Code, as amended, and the Land Use Restriction Agreemen t (if
applicable), to live in a unit in this Project.
________________________________________________ ________________
SIGNATURE OF OWNER / REPRESENTATIVE DATE
INSTRUCTIONS FOR COMPLETING
TENANT INCOME CERTIFICATION
This form is to be completed by the owner or an authorized representative.
Part I – Development Data
Check the appropriate box for Initial Certification (move-in), Recertification (annual recertification), or
Other. If Other, designate the purpose of the recertification (i.e., a unit transfer , a change in household
composition, or other state-required recertification).
Move-in Date Enter the date the tenant has or will take occupancy of the unit.
Effective Date Enter the effective date of the certification. For move-in, this should be the
move-in date. For annual recertification, this effective date should be no later
than one year from the effective date of the previous (re)certification.
Property Name Enter the name of the development.
County Enter the county (or equivalent) in which the building is located.
BIN # Enter the Building Identification Number (BIN) assigned to the building (from
IRS Form 8609).
Address Enter the unit number.
Unit Number Enter the unit number.
# Bedrooms Enter the number of bedrooms in the unit.
Part II – Household Composition
List all occupants of the unit. State each household member’s relationship to the head of the household by
using one of the following coded definitions:
H Head of household S Spouse
A Adult co-tenant O Other family member
C Child F Foster child
L Live-in caretaker N None of the above
Enter the date of birth, student status, and Social Security number or alien registration number for each
occupant.
B-5
If there are more than seven occupants, use an additional sheet of paper to list the remaining household
members and attach it to the certification.
Part III – Annual Income
See HUD Handbook 4350.3 for complete instructions on verifying and calculating income, including
acceptable forms of verification.
From the third party verification forms obtained from each income source, enter the gross amount
anticipated to be received for the 12 months from the effective date of the (re)certification. Complete a
separate line for each income-earning member. List the respective household member number from Part II.
Column (A) Enter the annual amount of wages, salaries, tips, commissions, bonuses, and
other income from employment; distributed profits and/or net income from a
business.
Column (B) Enter the annual amount of Social Security, Supplemental Security Income,
pensions, military retirement, etc.
Column (C) Enter the annual amount of income received from public assistance (i.e., TANF,
general assistance, disability, etc.)
Column (D) Enter the annual amount of alimony, child support, unemployment benefits, or
any other income regularly received by the household.
Row (E) Add the totals from columns (A) through (D) above. Enter this amount.
Part IV – Income from Assets
See HUD Handbook 4350.3 for complete instructions on verifying and calculating income from assets,
including acceptable forms of verification.
From the third party verification forms obtained from each asset source, list the gross amount anticipated
to be received during the 12 months from the effective date of the certification. Lis t the respective
household member number from Part II and complete a separate line for each member.
Column (F) List the type of asset (i.e., checking account, savings account, etc.)
Column (G) Enter C (for current, if the family currently owns or holds the asset), or I (for
imputed, if the family has disposed of the asset for less than fair market value
within two years of the effective date of (re)certification).
Column (H) Enter the cash value of the respective asset.
Column (I) Enter the anticipated annual income from the asset (i.e., savings account balance
multiplied by the annual interest rate).
TOTALS Add the total of Column (H) and Column (I), respectively.
If the total in Column (H) is greater than $5,000, you must do an imputed calculation of asset income. Enter
the Total Cash Value, multiply by 0.06% and enter the amount in (J), Imputed Income.
B-6
Row (K) Enter the Greater of the total in Column (I) or (J)
Row (L) Total Annual Household Income from All Sources Add (E) and (K) and enter
the total
HOUSEHOLD CERTIFICATION AND SIGNATURES
After all verifications of income and/or assets have been received and calculated, each household member
age 18 or older must sign and date the Tenant Income Certification. For move-in, it is recommended that
the Tenant Income Certification be signed no earlier than five days prior to the effective date of the
certification.
Part V – Determination of Income Eligibility
Total Annual Household
Income from all sources
Enter the number from item (L).
Current Income Limit per
Family Size
Enter the Current Move-in Income Limit for the household size.
Household income at move-in
Household size at move-in
For recertifications only. Enter the household income from the
move-in certification. On the adjacent line, enter the number of
household members from the move-in certification.
Household Meets Income
Restriction
Check the appropriate box for the income restriction that the
household meets according to what is required by the set-aside(s)
for the project.
Current Income Limit x 140% For recertification only. Multiply the Current Maximum Move-in
Income Limit by 140% and enter the total. Below, indicate whether
the household income exceeds that total. If the Gross Annual
Income at recertification is greater than 140% of the current income
limit, then the available unit rule must be followed.
Part VI – Rent
Tenant Paid Re Enter the amount the tenant pays toward rent (not including rent
assistance payments such as Section 8).
Rent Assistance Enter the amount of rent assistance, if any.
Utility Allowance Enter the utility allowance. If the owner pays all utilities, enter
zero.
Other non-optional charges Enter the amount of non-optional charges, such as mandatory
garage rent, storage lockers, charges for services provided by the
development, etc.
Gross Rent for Unit Enter the total of Tenant Paid Rent plus Utility Allowance and
other non-optional charges.
B-7
Maximum Rent Limit for this
unit
Enter the maximum allowable gross rent for the unit.
Unit Meets Rent Restriction
at??
Check the appropriate rent restriction that the unit meets according
to what is required by the set-aside(s) for the project.
Part VII – Student Status
If all household members are full-time* students, check “yes.” If at least one household member is not a
full-time student, check “no.”
If “yes” is checked, the appropriate exemption must be listed in the box to the right. If none of the
exemptions apply, the household is ineligible to rent the unit.
* Full time is determined by the school the student attends.
Part VIII – Program Type
Mark the program(s) for which this unit will be counted toward the property’s occupancy requirements.
Under each program marked, indicate the household’s income status as established by this
certification/recertification. If the property does not participate in the HOME, Tax-Exempt Bond,
Affordable Housing Disposition, or other housing program, leave those sections blank.
Tax Credit See Part V above.
HOME If the property participates in the HOME program and the unit this household
will occupy will count towards the HOME program set-asides, mark the
appropriate box indicating the household’s designation.
Tax Exempt If the property participates in the Tax Exempt Bond program, mark the
appropriate box indicating the household’s designation.
AHDP If the property participates in the Affordable Housing Disposition Program
(AHDP), and this household’s unit will count towards the set-aside requirements,
mark the appropriate box indicating the household’s designation.
Other If the property participates in any other affordable housing program, complete the
information as appropriate.
SIGNATURE OF OWNER / REPRESENTATIVE
It is the responsibility of the owner or the owner’s representative to sign and date this document immediately
following execution by the resident(s).
The responsibility of documenting and determining eligibility (including completing and signing the Tenant
Income Certification form) and ensuring such documentation is kept in the tenant file is extremely import ant
and should be conducted by someone well-trained in tax credit compliance.
These instructions should not be considered a complete guide on tax credit compliance. The responsibility
for compliance with federal program regulations lies with the owner of the building(s) for which the credit
is allowable.
C-1
EXHIBIT C
CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE
The undersigned, an authorized representative of Fort Snelling Leased Housing Associates I, LLLP,
a Minnesota limited liability limited partnership (the “Owner”), hereby certifies, represents, and warrants
that:
1. The Owner has a leasehold interest in the multifamily housing development located at 58
Taylor Avenue, Unorganized Territory of Fort Snelling, Minnesota 55111 commonly known as Fort
Snelling Upper Post Project (the “Project”).
2. The undersigned and the Owner have read and are thoroughly familiar with the provisions
of (1) the Regulatory Agreement, dated June ___, 2023 (the “Regulatory Agreement”), between the
Housing and Redevelopment Authority in and for the City of Richfield , Minnesota (the “Issuer”), the
Owner, Fort Snelling Leased Housing Associates Master Tenant I, LLLP, a Minnesota limited liability
limited partnership, as master tenant, and U.S. Bank Trust Company, National Association, a national
banking association (the “Trustee”);and (2) the Loan Agreement, dated as of June 1, 2023 (the “Loan
Agreement”), between the Issuer and the Borrower with respect to the Bonds. The Regulatory Agreement
was executed, delivered, and recorded against the Project in connection with the issuance of the Bonds.
Capitalized terms used herein that are otherwise not defined shall have the meanings provided in the
Regulatory Agreement.
3. A review of the activities of the Owner and of the Owner’s performance under the
Regulatory Agreement during the year ending ____ has been made under the supervision of the
undersigned.
4. The Project’s Qualified Project Period commenced on _________, 20__ (the date on which
ten percent (10%) of the residential units in the Project were occupied), and will end on the latest of:
(i) _________, 20__ (the date which is twenty (20) years after the date on which fifty
percent (50%) of the residential units in the Project were occupied);
(ii) the first day on which no tax-exempt private activity bond issued with respect to
the Project is outstanding; or
(iii) the date on which any assistance provided with respect to the Project under
Section 8 of the United States Housing Act of 1937 terminates.
5. As of the date of this Certificate, the following percentages of completed residential units
in the Project are (i) occupied by Low Income Tenants or (ii) currently vacant and being held available for
occupancy by Low Income Tenants and have been so held continuously since the date a Low Income Tenant
vacated such unit, as indicated:
Occupied by Low Income Tenants _____ % Units Nos.____
Continuously held vacant for occupancy by Low
Income Tenants since last occupied by Low
Income Tenants
_____ % Units Nos.____
C-2
6. At no time since the date of filing of the last Continuing Program Compliance Certificate
(or since the issuance of the Bonds, if this is the first such certificate) have fewer than forty percent (40%)
of the completed units in the Project been occupied by, last occupied, or held for occupation by Low Income
Tenants.
7. As of the date of this Certificate, at least forty percent (40%) of the units in the Project are
(i) occupied by persons or families with Adjusted Income which does not exceed sixty percent (60%) of
the Median Income for the Area adjusted for household size; or (ii) held vacant for occupancy for persons
or families with Adjusted Income which does not exceed sixty percent (60%) of the Median Income for the
Area adjusted for household size. Project Units occupied or held vacant for persons or families with
Adjusted Income which does not exceed sixty percent (60%) of the Median Income for the Area adjusted
for household size include Unit numbers _______________________________.
8. At all times since the date of filing of the last Continuing Program Compliance Certificate
the rent on at least twenty percent (20%) of the units in the Project has been equal to or less than the
applicable area fair market rents or exception fair market rents, as applicable, for existing housing as
established by the federal Department of Housing and Urban Development from time to time.
9. To the knowledge of the undersigned, after due inquiry, all units were rented or available
for rental on a continuous basis during the immediately preceding year to members of the general public,
and the Owner is not now and has not been in default under the terms of the Regulatory Agreement or
Project Loan Agreement, and to the knowledge of the undersigned, no Determination of Taxability has
occurred with respect to the Bonds.
10. [CHOOSE ONE: None/One or more] of the Tenants in the Project are currently receiving
assistance under Section 8 of the United States Housing Act of 1937.
11. The Owner has not transferred any interest in the Project since the date of submission of
the Continuing Program Compliance Certificate last submitted to the Issuer and the Trustee with respect to
the Project. (If the Owner has transferred any interest in the Project, such transfer should be detailed
here.)
Dated: _____________, 20___.
FORT SNELLING LEASED HOUSING
ASSOCIATES I, LLLP, a Minnesota limited liability
limited partnership
By: Fort Snelling Leased Housing Associates I, LLC
Its: General Partner
By:
Name:
Its: ____________________________________
RC125-394 (JAE)
869028v2
Upper Post Flats
Error! Unknown document property name.
Response to Open Forum Questions of April 25, 2023
1. Why refurbish a building outside of Richfield?
The City and the HRA are not refurbishing a building outside of Richfield. They would be providing
the borrower with the ability to obtain tax-exempt debt known as “conduit bonds” in order to
rehabilitate buildings at the Upper Post of Fort Snelling to provide affordable housing.
2. How will bringing in another 200 students improve the quality of education we offer our
children?
It is our understanding that the School District is supportive of the project and the proposed action.
Specific impacts of additional students should be addressed with the District directly; however in any
case, the project will open and children will live there and be eligible to attend RPS. This action does
not impact whether or not the project will exist. Additionally, more children attending school means
more funds for the school district, which would likely be seen as a positive impact.
3. What is the borrower’s track record?
Dominium has many housing developments in Minnesota and across the county. We have never
heard of Dominium defaulting on its debt.
4. What security has the borrower pledged to secure the loan?
The HRA has proposed to issue conduit bonds for Dominium. The City and the HRA have no liability
with respect to the bonds to be issued. The Dominium affiliate rehabilitating the Upper Post of Fort
Snelling is solely responsible to pay the principal of and interest on the debt.
Conduit debt issued by the City or the HRA does not impact the City’s credit rating. The debt is not
payable from any revenues of the City or the HRA. If there is a default or an IRS audit, the borrower
must pay all costs incurred by the City and/or the HRA. The conduit debt will not impact the city’s
ability to issue bank-qualified bonds later this year.
5. Why did the borrower not approach a traditional bank to secure the loan
Private developers can only issue conduit bonds for housing if they obtain housing allocation from
Minnesota Management and Budget. The conduit bonds must be issued by a governmental entity
and must be tax-exempt. Traditional banks cannot issue tax-exempt debt without involving a
governmental entity.
6. Why does Richfield want to function as a bank?
The City of Richfield and the HRA are not functioning as a bank. They will not be loaning any money
of the City or the HRA to Dominium.
7. And lastly and most importantly, how will this benefit the City of Richfield?
Error! Unknown document property name.
The Richfield HRA will receive a fee for issuing the bonds and will have all its costs paid with respect
to the conduit bonds. The HRA is also seeking additional affordability and other requests related to
the Upper Post of Fort Snelling project.
AGENDA SECTION:HRA DISCUSSION ITEMS
AGENDA ITEM #3.
STAFF REPORT NO. 10
HOUSING AND REDEVELOPMENT AUTHORITY
MEETING
6/5/2023
Melissa Poehlman, Executive DirectorREPORT PREPARED BY:
EXECUTIVE DIRECTOR REVIEW: Melissa Poehlman, Executive Director
5/30/2023
ITEM FOR COUNCIL CONSIDERATION:
Executive Director Poehlman will provide an update on discussions and actions related to the request
by Best Buy to terminate the Minimum Assessment Agreement for the Corporate Campus property at
7601 Penn Avenue South.
EXECUTIVE SUMMARY:
On May 23, 2023, the City Council denied a proposal by Best Buy to terminate the Minimum Assessment
Agreement in place for their property at 7601 Penn Avenue. The details of the proposal are included in the
attached Council packet. This discussion time will allow the Housing and Redevelopment Authority (HRA)
Commissioners an opportunity to ask questions of staff regarding the attached information.
Staff continues to participate in discussions with Best Buy representatives in hopes that a mutually beneficial
resolution can be found.
RECOMMENDED ACTION:
None. Discussion only.
BASIS OF RECOMMENDATION:
A.HISTORICAL CONTEXT
N/A
B.POLICIES (resolutions, ordinances, regulations, statutes, etc):
N/A
C.CRITICAL TIMING ISSUES:
N/A
D.FINANCIAL IMPACT:
N/A
E.LEGAL CONSIDERATION:
N/A
ALTERNATIVE RECOMMENDATION(S):
N/A
P R IN C IPAL PAR TIE S E X P E C TE D AT ME E TIN G:
AT TAC H ME N T S:
D escription Type
052323 C ity C ouncil Report E xhibit
AGENDA SECTION:OTHER BUSINESS
AGENDA ITEM #6.
STAFF RE P ORT NO. 66
CIT Y COUNCIL ME E T ING
5/23/2023
RE P O RT P RE PA RE D B Y: Melissa P oehlman, C ommunity D evelopment D irector / HRA E xecutive
D irector
D E PA RTME NT D IRE C TO R
RE V IE W:
Melissa P oehlman, C ommunity D evelopment D irector / HRA E xecutive
D irector
5/18/2023
O THE R D E PA RTM E NT RE V IE W:
C ITY MA NA G E R RE V IE W: K atie Rodriguez, C ity Manager
5/18/2023
I T E M F O R C O UNC IL C O NS ID E RAT I O N:
Consider a request to modify (2024) and then terminate (2025) Best Buy's Minimum Assessment
Agreement.
E X E C UT IV E S UM M ARY:
The I nterchange W est / Ly ndale Gateway Tax I ncrement Financ ing (TI F) Distric t was established in 1999.
This D istrict is a “sc attered site” redevelopment D istrict with multiple projects and outstanding obligations,
including the Best Buy corporate headquarters, Mainstreet Village, and the Casteel Plac e Townhomes. Best
Buy has approac hed the City and Housing and Redevelopment Authority (HRA) to request a modific ation to
their individual contract which would remove the Minimum Assessment A greement that prevents the tax value
of their property from falling below $118.5 million during the life of the TI F Distric t (ending Dec ember 31,
2025).
The Minimum Assessment Agreement (MA A) is in place for two purposes. As part of the Contract for Private
Development with Best Buy, the City agreed to issue General Obligation Bonds (Bonds) to help fund the
significant infrastructure improvements nec essary to handle the traffic of the Best B uy Corporate Campus.
The princ ipal and interest payments on these Bonds are made with tax increment generated by the project.
This obligation remains outstanding, with the final pay ment due on February 1, 2024. Sufficient inc rement will
be available to make the remaining two pay ments. The MA A is also in place to provide a mechanism for
pooling. Pooling allows the HRA to spend a portion of tax increment outside the geographical boundaries of
the TI F District for TI F-eligible activities such as affordable housing. A modification or termination of the MA A
will not impac t remaining B ond payments, but it will likely impac t the amount of money c ontributed to the
Housing and Redevelopment Fund.
I n November of 2022, Best Buy submitted a request for termination of the MA A (attached). After significant
work by HRA staff, the HRA A ttorney, and HRA financial c onsultants from Ehlers, a work session was held
with the Counc il and HRA in Marc h to disc uss the potential impac ts to the HRA and Best Buy. At the time,
Best Buy proposed a c ontrac t amendment that would ensure no loss of revenue to the HRA for pooling for
affordable housing, which is estimated to be between $210,000 and $385,000 over the remaining two y ears of
the District.
Best B uy also requested that the HRA provide an acc ounting of pay ments to Best Buy and pooling over the
life of the TI F Distric t. This analy sis was ongoing at the time of the work session; however, policymakers
made it clear that a global solution to all outstanding issues should be found prior to any request to modify or
terminate the MA A. This financial review has now been c ompleted and has revealed that due to the
complexities of this D istrict and two succ essful tax court petitions by Best Buy to reduc e their property tax
value, the HRA has overpaid Best Buy by approximately $851,000.
HRA and City staff have indicated support for a solution that 1) ensures that the Housing and Redevelopment
Fund is fully funded at the level anticipated by the MA A and 2) that Best Buy ac knowledge that the HRA
intends to rec oup the identified overpay ment by withholding additional available increment rec eived over the
last two years of the TI F District.
Best Buy has submitted the attached letter and legal analysis (dated May 12, 2023) disputing the HRA's
assertion that they have been overpaid. To resolve the dispute and move forward with their request for
modification and termination of the MA A, they have proposed that the C ity and HRA approve their request in
exchange for 20% of the ac tual tax benefit to B est Buy in 2024 and 2025 (staff recommends that the request
to subtrac t Best Buy ’s legal and appraisal fees to pursue a tax value reduc tion be rejected out of hand;
therefore the following analysis does not include a reduction for these costs).
I f succ essful in their request for a reduced tax value in 2024 and 2025, the potential pay ment to the HRA
under the proposal is estimated to be between $423,000 and $764,000 (c umulative). HRA staff and financial
consultants believe that this would leave the HRA between $472,000 and $638,000 short of full rec oupment. I f
Best Buy is unable to get a reduc tion for pay 2024 taxes, the amount paid to the HRA would be halved. The
HRA has advised Best Buy and believes that the approval of the City, Sc hool Distric t and C ounty are
required to modify and/or terminate the MA A and the deadline for these approvals is J une 30, 2023. The
HRA believes that Best Buy is unlikely to be suc cessful in their request for the 2024 tax year and that the
second scenario is therefore more likely. Finally, there is a possibility (though seemingly unlikely) that no
reduction in value would be granted, in which case, the HRA would c ontinue to receive the antic ipated funds
for the Housing and Redevelopment Fund but would not recoup any overpayment.
HRA and City staff, along with the HRA Attorney and financial experts have reviewed the proposal and legal
analysis provided. W e strongly disagree with the analysis and a legal response by the HRA A ttorney is
included as an attac hment to this report. Based on our analy sis, we recommend denial of the request. W hile
Best Buy is an important and valued employer in our c ommunity, the c ontrac tual agreement in plac e should
be honored unless a “do no harm” solution can be found.
RE C O M M E ND E D AC T I O N:
By Motion: Deny a request to modify and/or terminate the Minimum Assessment Agreement for the
Best Buy Corporate Campus at 7601 Penn Avenue South.
B AS IS O F RE C O M M E ND AT I O N:
A.H IS TOR IC AL C ON T E X T
The MA A requires that during the life of the TI F Distric t the value upon which Best Buy's taxes are
calculated does not fall below $118.5 million. The value of the Best Buy parcel exc eeded the MA A
amount until 2014. Since that time, the value has remained at the minimum assessment.
B.P OL IC IE S (resolutions, ordinances, regulations, statutes, etc):
See attached legal analysis by HRA Attorney J ulie Eddington.
C.C R IT IC AL T IMIN G IS S U E S:
Best Buy has indicated to staff that they would like the MMA modified/terminated as soon as possible. I n
order to reduce pay 2024 taxes, Best Buy must obtain written approval of a modification or termination of
the MA A from the City, County, and School Board and record the document modifying the MMA on or
prior to J une 30, 2023.
D.F IN AN C IAL IMPAC T:
The HRA has concluded that Best Buy has been overpaid by approximately $851,000.
Modification and/or termination of the Minimum Assessment Agreement will reduce money
available for other housing and redevelopment work in the c ommunity by an estimated $210,000 to
$385,000.
I n exchange for the City and HRA's support, Best Buy has proposed to share the benefits of a
reduced tax value with the HRA should their request to the C ounty be succ essful. The HRA
estimates that this amount could be in the range of $212,000 to $764,000. HRA staff and
consultants believe that the lower end of the range is more likely given timing constraints for a pay
2024 reduction.
I n all of the proposed scenarios, the HRA fails to recoup the total increment and pooling that it
should receive under the terms of the current contract.
E.L E GAL C ON S ID E R AT ION:
The HRA has the legal authority and duty to recoup overpayments and will begin to do so with the
August 1, 2023 TI F Payment.
HRA Attorney J ulie Eddington will be present to address legal questions.
An amendment to the Contract for Private Development between the HRA and Best Buy is also
required. Consideration by the HRA has been scheduled for J une 5, 2023.
ALTE R N AT IV E R E C O MME N D ATIO N(S):
Approve the request for modification/termination of the Minimum Assessment Agreement with Best Buy for
property at 7601 Penn Avenue South.
P R IN C IPAL PAR TIE S E X P E C TE D AT ME E TIN G:
J ulie Eddington, HRA Attorney, Kennedy & Graven J eanne Vogt, Senior Fiscal Consultant, Ehlers Tracy
Smith, Senior Director and Tax Counsel, Best Buy Dan Lopez, Director of Government Affairs, Best Buy
W illiam Griffith & Timothy Rye, Attorneys for Best Buy, Larkin Hoffman
AT TAC H ME N T S:
D escription Type
B est B uy - Min. A ssessment Termination Request E xhibit
051223 B est B uy L tr to Richfield HRA E xhibit
051223 B est B uy L egal A nalysis of HRA P osition E xhibit
HRA L egal Response to 051223 B est B uy L tr E xhibit
May 12, 2022
Sent via email to: MPoehlman@richfieldmn.gov
Melissa Poehlman, Executive Director
Richfield Housing and Redevelopment Authority
6700 Portland Avenue
Richfield, MN 55423
Re: Interchange West TIF District – Settlement of Issues as the District Approaches
Decertification
Dear Ms. Poehlman:
This letter follows up our recent discussion in which Best Buy, the City of Richfield (“City”) and
the Richfield Housing and Redevelopment Authority (“HRA”) are seeking a global resolution of
all matters and issues facing the parties regarding administration of the Interchange West TIF
District (the “TIF District” or the “District”). To do so, the parties must be respectful of their
mutual good work, long term relationship, and fruitful negotiations over the past two decades
that have led to the unqualified success of the largest office building in Richfield, along with
significant funding of the housing programs of the HRA.
As discussed, the parties recognize and are proud that the increased tax increment generated
from Best Buy’s corporate headquarters has supported numerous affordable housing and
rehabilitation initiatives in Richfield, including the new home program, the rehabilitation loan
program, Richfield Rediscovered, transformation home loans, and the affordable housing trust
fund. Best Buy itself has funded over $11 million to the City/HRA to be used as they saw fit to
support the community and these affordable housing initiatives. Best Buy also is proud of its
significant presence in the Richfield community, which includes repeated contributions to over a
dozen local organizations, including Richfield Public Schools, and its recent and very exciting
opening of a Best Buy Teen Tech Center at Richfield Middle School.
In this letter, Best Buy’s intent is to provide the parties with a win-win resolution; this intent has
remained constant throughout our discussions this past year (and previously). Today we are
again making a “win-win” proposal to address all issues at hand, while also making it clear that
Best Buy has a strong legal basis for its claims. In furtherance of our desire to reach a global
resolution with full transparency and on a reasonable and fair basis, I have asked our outside
counsel to provide relevant background, our understanding of the HRA’s position with respect to
outstanding matters, and Best Buy’s response to this position. See attached correspondence and
exhibits to Larkin Hoffman letter dated May 12, 2023 (“Larkin Hoffman Letter”).
Best Buy
Tax – C6-938
Mobile: 612-817-8573
tracy.smith4@bestbuy.com
Melissa Poehlman
May 12, 2023
Page 2
• Best Buy’s New Proposal for Resolution
In addition to resolving administrative and legal claims, Best Buy puts forth a global resolution
that would include: (1) Richfield’s express support and cooperation with Best Buy’s request to
modify and then terminate the Minimum Assessment Agreement, which agreement has fully
served its intended purpose; (2) a resolution of Richfield’s recent claim that it has overpaid Best
Buy, which according to Richfield’s own analysis largely arose from payments made about a
decade ago; and (3) a resolution of the HRA’s pooling of tax increment generated by the District,
which Best Buy believed had previously been resolved as a result of our discussions that
culminated in execution of the Fifth Amendment in 2014.
To be clear, this proposal is made for global settlement purposes only. Aside from the legal and
financial issues outlined in the Larkin Hoffman Letter, Best Buy and the HRA have worked
diligently to align on matters associated with the Minimum Assessment Agreement. The parties
understand the Minimum Assessment Agreement is no longer beneficial to either party (with the
full payment of bonds), particularly given Best Buy’s offer to “make the HRA whole” for the
loss of any funds associated with the modification/termination of the Minimum Assessment
Agreement (assuming Best Buy is able to reduce the value of the property for property tax
purposes to a reasonable fair market value).
As discussed at the meeting with the HRA on March 6th, the parties were encouraged to negotiate
a global resolution of all matters, including those associated with the modification and
termination of the Minimum Assessment Agreement and pooling limitations. In various
discussions following the City Council meeting, and despite the strength of Best Buy’s legal
position, Best Buy has offered to be flexible with respect to the substantial amount of funds to
which it believes Best Buy is entitled under Minnesota law and the Contract for Private
Development (about $1.5 million as of the end of the District). The HRA, however, continues to
pursue its newfound position desiring to collect a legally questionable “overpayment” to Best
Buy of approximately $850,000 – most of which arises from payments over a decade ago.
Setting aside these past discussions, Best Buy is offering a new resolution for the mutual benefit
of the parties. In very simple terms, (1) the HRA/City agrees to, and expressly supports, the
modification and termination of the Minimum Assessment Agreement on or before June 27,
2023, and (2) any property tax benefit flowing to Best Buy from the reduction in assessed value
below $118,500,000 in tax years pay-2024 and pay-2025 (net of attorney’s fees and appraisal
costs incurred in pursuing this change to the Minimum Assessment Agreement and the property
tax reduction) will be shared by the parties – with 20 percent of such net benefit to be received
by the HRA. The idea behind this proposal is that the parties work in collaboration to their
mutual benefit, with the HRA ultimately receiving funds that may well exceed the “make whole”
payment originally discussed with the HRA. Of course, any shared benefit is dependent on a
lower assessed value reached for the pay-2024 and pay-2025 tax years.
Please keep in mind that the potential benefit to the HRA and to Best Buy as a result of a reduced
assessed value for property tax purposes is reduced dramatically if the Minimum Assessment
Agreement is not modified and consented to by the County Assessor before June 30, 2023.
Melissa Poehlman
May 12, 2023
Page 3
Conclusion
Best Buy, like the HRA, strongly believes a global resolution is in the best interests of the
parties; it manages risk, resolves longstanding concerns with the administration of the District,
shares potential benefits, and avoids protracted dispute resolution. Best Buy does not believe the
HRA’s current position is supported by law. Best Buy has acted in good faith throughout our
long relationship with the HRA and the City and does so again with this proposal for a global
resolution that offers a “win-win” for all parties.
We look forward to hearing from you within the next week or so to discuss our next steps.
Sincerely,
Tracy M. Smith
Vice President, Tax Counsel
cc via email: Julie Eddington
William Griffith
Timothy Rye
Mike Hiltner
Dan Lopez
4857-3332-4131, v. 5
May 12, 2023
Ms. Tracy Smith
Best Buy
7601 Penn Avenue South
Richfield, MN 55423-3645
Via Email
(tracy.smith4@bestbuy.com)
Re: Legal Analysis of Issues Presented for Wind Down of the Best Buy-Richfield HRA TIF
District
Dear Tracy:
Since 2014, Best Buy Co., Inc. (“Best Buy”), has been working to understand the administration
by the City of Richfield (the “City”) and the Richfield Housing and Redevelopment Authority
(the “HRA”), of the Interchange West TIF District (the “District”) that includes the Best Buy
corporate headquarters at 7601 Penn Ave. S. (the “Campus”). In 2014, it was discovered that the
HRA was collecting tax increment at levels well in excess of statutory limits, which would result
in a substantial overcollection by the HRA through the end of the District if action were not
taken. As a result, Best Buy and the HRA agreed to amend the Contract for Private Development
(the “Contract”) to bring the HRA collections in line with statutory limits and moderate the
degree of overcollections by the HRA so that it would be easier to fall under the statutory limit
before decertification. That agreement was memorialized in the Fifth Amendment to the
Contract, dated July 14, 2014 (the “Fifth Amendment”).
Throughout that process, and even after the Fifth Amendment, calculation errors and issues with
the administration of the District were identified. We had correspondence, meetings and
information exchanges with you and the HRA from 2015 through 2018, but substantial issues
remained. We were frequently reminded, by the HRA and its counsel, that the HRA only had to
comply with pooling requirements by the end of the District and that any miscalculations and
overcollections would be corrected in the final years of the District.
In the fall of 2022, we reached out to the HRA to open that discussion and work toward an
orderly wind down of the District. As part of that conversation, Best Buy requested the
termination or modification of the Minimum Assessment Agreement (“MAA”) so that the
Campus could be fairly valued at market rates allowing Best Buy and other tenants to pay taxes
Ms. Tracy Smith
May 12, 2023
Page 2
in line with other similar quality office buildings in the Twin Cities, particularly given the
unprecedented downsizing taking place in the office market.1
Through many meetings and exchanges, progress was made. We now have a common
understanding of how the District was administered by the HRA, and the HRA seems to agree
that the Campus being valued at market levels would be a positive for Best Buy, potential
tenants, and the City. Unfortunately, other legal and administrative issues remain unresolved.
The HRA has presented a position that disregards Best Buy’s rights under the Contract and
violates Minnesota statutory law. This letter outlines our legal analysis of the HRA’s position.
We have outlined below the HRA’s position as we understand it and our responsive analysis.
1. HRA Position
a. HRA Asserts Overpayment to Best Buy
The HRA currently alleges it overpaid Best Buy $851,420.75 to date. This is a newfound
assertion made by the HRA for the first time during the parties’ recent discussions in 2022 and
2023. The HRA’s recent analysis of the TIF payments over the life of the District shows that
almost every single semi-annual payment to Best Buy over the past two decades has been
inaccurate. Attached hereto as Ex. 1 (column entitled “Over/(Under) Payment”). Ex. 1 is the
HRA’s own current analysis of the tax increment calculations associated with the District.
Despite these numerous inaccuracies over the years with respect to the District, the HRA now
purports it overpaid Best Buy between 2010 and 2014, almost more than a decade ago.
b. HRA Argues that Minn. Stat. § 469.1763, Subd. 2, 25% Pooling Limit, Does
Not Apply
The HRA asserts it follows Minn. Stat. § 469.1763, Subd. 2, the statutory 25% pooling limit,
despite HRA’s own analysis and documentation showing that it has collected 29% of total tax
increment. See Ex. 1. As shown at the bottom of Column M in Exhibit 1, the HRA admits it
currently has collected amounts in excess of 29%, which is well above the 25% statutory limit as
discussed below. Moreover, the HRA asserts it has no plans to reduce its collections below 25%
1 Recent articles regarding office downsizing:
https://www.axios.com/2023/05/09/commercial-real-estate-us-fed
https://protect-us.mimecast.com/s/PUKSC5yALjHMpvl3tzpLRG?domain=startribune.com/
https://www.startribune.com/marshalls-in-downtown-minneapolis-is-closing/600234487/
https://www.bizjournals.com/twincities/news/2022/12/15/what-to-do-with-big-office-blocks-in-twin-
cities.html?utm_source=st&utm_medium=en&utm_campaign=me&utm_content=MN&ana=e_MN_me&j=300012
85&senddate=2022-12-16
https://www.startribune.com/ameriprise-will-cut-its-downtown-mpls-office-space-moving-to-one-building-from-
two/600234538/
https://www.axios.com/2023/05/09/commercial-real-estate-us-fed
https://www.startribune.com/unitedhealth-group-headquarters-building-in-minnetonka-is-for-sale/600261083/
https://www.axios.com/local/twin-cities/2023/04/17/wells-fargo-office-consolidation-twin-cities-home-mortage-
campus
https://www.twincities.com/2023/03/30/blue-cross-blue-shield-downsizing-eagan-real-estate-footprint/
https://www.startribune.com/thomson-reuters-searches-for-new-offices-in-the-twin-cities/600243289/
Ms. Tracy Smith
May 12, 2023
Page 3
per payment, but nonetheless the HRA claims it will comply with pooling requirements at the
end of the District.
HRA Wind Down Proposal to Best Buy
In recent discussions with Best Buy, the HRA said it would withhold $851,420.75 from the
remaining PayGo payments to Best Buy while continuing to collect 25% of the tax increment
from Best Buy’s portion of the District – the same rate it has been collecting since the
commencement of the Fifth Amendment. See Ex. 2, which is a copy of the Fifth Amendment.
Either or both actions by the HRA, the withholding of the $851,420.75 and the continuing to
collect 25% of the tax increment, are contrary to the parties’ agreement and understanding as of
the execution of the Fifth Amendment. Attached hereto is Ex. 3, the HRA’s own forecast and
analysis as of February 2014, prepared by Ehlers, the HRA’s finance expert, to calculate the the
impact of the Fifth Amendment and the parties’ negotiations at that time to address the 25%
statutory limit problem. Ex. 3 provides, “…From 2014 forward, we have projected increment
and payments using the following assumptions…Total pooling of 25% for the HRA to allocate
between the Administration and Housing and Redevelopment Fund…We also want to note that
we previously estimated that the HRA would not take administration the last 1.5 years; however,
based on final review that period will be 3.0 years.” The chart in Ex. 3 further confirms, “City
cannot collect Admin/Pooling [for last six semi-annual payments] to stay within 25% limit.”
Clearly, the HRA’s continued collection of 25% of the tax increment is contrary to the parties’
understanding at the time of the Fifth Amendment, as confirmed by Ex. 3 specifically showing
HRA collections of zero during the last three years of the District to allow the overall collection
percentage to meet the 25% statutory threshold.
2. Legal Problems with the HRA Position
a. Asserted Overpayment Is Beyond the Statute of Limitations and
Unenforceable
The HRA Act, defined as Minn. Stat. §§ 469.001-469.047 by the Contract under Article 1,
provides that contract and tort law apply to the Contract for Private Development between the
parties. The HRA Act provides that “an authority shall be liable in contract or tort in the same
manner as a private corporation.” Minn. Stat. § 469.014 (emphasis added). As such, any action
for the enforcement of a contract or other obligation (such as an assertion of an overpayment)
must be commenced within six years from the commission of the act. Minn. Stat. § 541.05, subd.
1(1). Since the majority of the alleged overpayments occurred between 2010 and 2014, stated
simply, the statute of limitations has expired, and any assertion of overpayment is time barred.
Moreover, if the HRA attempted to collect the claimed overpayment now, it also would be a
breach of the Contract pursuant to the 5th Amendment and all remedies for breach would be
available to Best Buy. Accordingly, the HRA’s claim for payment of $851,420.75 is legally
infirm and unenforceable.
Keep in mind that one rationale for Minnesota’s six-year contract dispute statute of limitations is
to ensure that any such dispute is decided on good, valid, and available information and
evidence. When disputes, such as contract disputes, are a decade old, the witnesses and
documents involved become dated and often inaccurate. In fact, it is clear that many of the
Ms. Tracy Smith
May 12, 2023
Page 4
discussions and communications between the parties in the 2010 through 2014 period are no
longer available and have not been thoroughly researched. Today’s assertion by the HRA of an
overpayment is based solely on an analysis of the numbers as of today, and not the specific facts
that may have existed at the time. Even if the HRA somehow overlooks both the clear statute of
limitations bar and the breach of contract problem, the HRA still can only “find” an
“overpayment” if the HRA collects and spends tax increment in excess of the statutory pooling
limit, which it cannot under Minnesota law as we explain in the next section.
b. The HRA is in Violation of the Statutory 25% Pooling Limit
Minn. Stat. § 469.1763, Subd. 2, limits the amount of money eligible for spending by the HRA
for activities outside the District but within a defined geographic area to 25%. More importantly,
the statute mandates that at least 75% of the total revenue derived from the tax increment “must
be expended on activities in the district”, which in this case are the Bonds and the PayGo Note.
Minn. Stat. 469.1763, Subd. 3(a)(2) and (3).
Under the HRA’s own analysis, HRA collections of 29% of the total tax increment generated
from taxes paid by Best Buy confirms that its collections violate the 25% statutory limit. See,
Ex. 1. Moreover, in May of 2022, pursuant to Resolution No 11979, the HRA unilaterally
amended the TIF Plan attempting to increase the pooling limit from 25% to 35%, so long as 10%
was for affordable housing. However, the statute relied on by the City, Minn. Stat. § 469.1763,
Subd. 2(d) does not increase the 25% pooling limit, it merely alters the geographic area in which
the funds can be spent.
Subdivision 2(a) provides:
Not more than 25 percent of the total revenue derived from tax increments paid by
properties within the district may be expended, through a develop fund or otherwise, on
activities outside of the district but within the defined geographic area of the project.
Subdivision 2(d) provides:
The authority may elect, in the tax increment financing plan for the district, to increase by
up to ten percentage points the permitted amount of expenditures for activities located
outside the geographic area of the district under paragraph (a).
There are two components to the 25% pooling limit: 1) expenditures outside of the District; and
2) within a specified geographic area. Subdivision 2(d) does not change the 25% limit or the
mandate that at least 75% of the tax increment must be spent on in district obligations. It only
changes the geographic area in which the HRA can spend its maximum 25%. As a result, the
election by the HRA pursuant to Minn. Stat. § 469.1763, subd. 2(d) does increase the 25%
pooling limit to 35%, it only changes where the 25% can be spent.
Interestingly, this election would have been relevant at the beginning of the District when the
Richfield Redevelopment Project Area (“Project Area”) did not incorporate the entire city, but on
December 13, 2005 the Project Area was increased to incorporate the entire city. After
December 13, 2005 the HRA could spend its 25% anywhere in the city. As a result, the May
2022 Amendment to the TIF Plan has no meaning and the 25% pooling limit remains.
Ms. Tracy Smith
May 12, 2023
Page 5
Moreover, even if the City were successful in increasing the pooling limit to 35%, it would
violate the terms of the Fifth Amendment, and of the Contract, which also set the limit at 25%.
Finally, the HRA cannot make any change that would alter the terms or application of the
agreement without written consent of Best Buy – see Section 10.13 of the Contract. Accordingly,
any unilateral change to the terms or operations of the contract is a material breach of the
Contract.
c. Other issues
(1) Best Buy appreciates the work that the HRA, the City, and Best Buy have
invested to understand the TIF calculations performed by Ehlers, the
HRA’s financial advisor. However, Best Buy only agrees with the current
Ehlers TIF calculations for the District for purposes of settlement
discussions; in any other venue, the HRA will need to prove all of its
calculations and the particular facts and errors applicable to each payment
to Best Buy pursuant to the PayGo Note;
(2) Consistent with the above explanation, Minn. Stat. § 469.1763, Subd. 2(d)
does not increase the spending limit outside the district to 35%; as such,
the HRA has overcollected approximately $575,000 from the non-Best
Buy portion of the District, which will need to go to in-district obligations,
including the PayGo Note.
3. An Orderly Wind Down of the TIF District Requires Payment to Best Buy of
$605,449 to Comply with Minnesota Law and the Parties’ Contract for Private
Development.
As of this moment, according to the HRA’s own financial advisor, the HRA has collected
$10,304,940 of the $35,392,281 in total tax increment; or 29.12% of the total tax increment.
Twenty-five percent (25%) of the $35,392,281 in total tax increment equals $8,848,070, which
means the HRA currently has overcollected $1,456,870 from Best Buy portion of the District.
Due to accounting errors, some of the nearly $1.45 million must be transferred to the Best Buy
portion of the District, including toward paydown of the PayGo Note. To comply with Minn.
Stat. 469.1763, Subd. 2(a), the HRA is required to pay Best Buy $605,449, consistent with the
following schedule.
Total Tax
Increment
HRA @ 25% Bonds PayGo
Compliant $35,392,281 $8,848,070 $11,826,921 $14,717,290
Actual $35,392,281 $10,304,940 $11,826,921 $14,111,841
Correction $0 ($1,456,870) $0 $605,4492
2 This amount is less than the HRAs overcollection because it offsets any purported
overpayments on the PayGo.
Ms. Tracy Smith
May 12, 2023
Page 6
Best Buy’s request to confirm the orderly wind down of the TIF District, consistent with the
parties’ discussions in 2014 when the Fifth Amendment was executed, has already led to
correction of administrative errors and, more importantly, is a reasonable step to resolve the
HRA’s continued overcollection to avoid refunds that would be required by the HRA to meet the
25% pooling limit by the end of the District.
The HRA’s newfound assertion of an overpayment to Best Buy reaches back more than a decade
ago. This assertion is not only problematic because it is inconsistent with the HRA’s projections
in 2014 that it would be able to meet the 25% limit by the end of the District by ending pooling
early, but is barred by the statute of limitations and is a violation of Minn. Stat. § 469.1763, subd.
2(a) limiting HRA collections to 25%. This is what the parties intended when negotiating the
Fifth Amendment. See Exhibit 3.
4. Conclusion
As of this moment, the HRA has collected $10,304,940 of the $35,392,281 in total tax
increment; or 29.12% of the total tax increment (25% of $35,392,281 is $8,848,070, which
means the HRA has overcollected by $1,456,870). To comply with Minn. Stat. 469.1763, subd.
2(a) as of now the tax increment should be corrected as shown in the preceding section
As you have noted on several occasions in our discussions with HRA staff, legal counsel, and
consultants, Best Buy initiated discussions in 2014 and again in 2022 to resolve the substantial
financial and legal issues set forth in this letter, among others on a cooperative basis. Through
Best Buy’s insistence and diligence in this regard, significant accounting errors have been
corrected and both parties have a better understanding of collections over the life of the District.
Still, the HRA cannot unilaterally alter the applicable TIF Plan, TIF collections, and pooling
limits in ways that undermine the Contract, PayGo Note or avoid its obligations under Minnesota
law.
Sincerely,
Timothy A, Rye, for
Larkin Hoffman
William C. Griffith, for
Larkin Hoffman
4884-9723-6067, v. 7
City of RichfieldLyndale Gateway / Interchange West TIF DistrictHistory of PAYGO Payments to Best BuyThrough and Including August 1, 2022 PaymentTies to G/L 10% 15%Ties to G/LAB C DE FGHI = D ‐ E ‐ F ‐ G ‐ HJ K = J ‐ IL MNDeveloper Agreement Requirements Increment Used in PAYGO Calc Admin CostsTo HRA Trust Fund (Pooling)TIF Shortfall Payments / AdjustmentsDebt Service Payments Actual PaymentOver / (Under) PaymentComments% of Admin & Pooling to TIF Received8/1/2002 2nd Amendment‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ 2/1/2003 2nd Amendment‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 8/1/2003 3rd Amendment Fixed Exhibits‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 2/1/2004 3rd Amendment Fixed Exhibits‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 8/1/2004 3rd Amendment Fixed Exhibits 868,271.00 870,480.02 (32,012.00) (224,084.00) ‐ (195,321.88) 419,062.14 416,853.00 (2,209.14) Admin is Exhibit C 29% (2,209.14) 2/1/2005 3rd Amendment Fixed Exhibits 868,271.00 870,480.01 (32,686.00) (228,801.00) ‐ (455,321.88) 153,671.13 156,853.00 3,181.87 Admin is Exhibit C 30% 972.73 8/1/2005 3rd Amendment Fixed Exhibits 923,239.00 906,162.44 (32,686.00) (228,801.00) ‐ (190,121.88) 454,553.56 471,631.00 17,077.44 Admin is Exhibit C 29% 18,050.17 2/1/2006 3rd Amendment Fixed Exhibits 923,239.00 945,408.92 (33,371.00) (233,598.00) ‐ (460,121.88) 218,318.04 201,631.00 (16,687.04) Admin is Exhibit C 28% 1,363.13 8/1/2006 3rd Amendment Fixed Exhibits 856,073.00 858,672.26 (33,371.00) (233,598.00) ‐ (184,721.88) 406,981.38 404,382.00 (2,599.38) Admin is Exhibit C 31% (1,236.25) 2/1/2007 3rd Amendment Fixed Exhibits 856,073.00 858,672.25 (34,068.00) (238,479.00) ‐ (469,721.88) 116,403.37 119,382.00 2,978.63 Admin is Exhibit C 32% 1,742.38 8/1/2007 3rd Amendment Fixed Exhibits 895,588.00 898,460.12 (34,068.00) (238,479.00) ‐ (179,021.88) 446,891.24 444,020.00 (2,871.24) Admin is Exhibit C 30% (1,128.86) 2/1/2008 3rd Amendment Fixed Exhibits 895,588.00 898,460.13 (34,777.00) (243,443.00) ‐ (474,021.88) 146,218.25 149,020.00 2,801.75 Admin is Exhibit C 31% 1,672.89 8/1/2008 3rd Amendment Fixed Exhibits 994,093.51 990,015.10 (34,777.00) (243,443.00) ‐ (173,121.88) 538,673.22 ‐ (538,673.22) Admin is Exhibit C 28% (537,000.33) 2/1/2009 3rd Amendment Fixed Exhibits 994,093.51 990,015.10 (35,499.00) (248,493.00) ‐ (483,121.88) 222,901.22 767,330.01 544,428.79 Admin is Exhibit C 29% 7,428.46 8/1/2009 3rd Amendment Fixed Exhibits 1,186,644.76 1,029,251.37 (35,499.00) (248,493.00) ‐ (166,766.88) 578,492.49 ‐ (578,492.49) Admin is Exhibit C 28% (571,064.03) 2/1/2010 3rd Amendment Fixed Exhibits 1,180,652.87 1,026,100.11 (36,233.00) (253,631.00) ‐ (486,766.88) 249,469.23 1,137,941.96 888,472.73 PAYGO Pd on full district, not just Best Buy 28%317,408.70 8/1/2010 3rd Amendment Fixed Exhibits 897,090.80 893,861.27 (36,233.00) (253,631.00) ‐ (160,046.88) 443,950.39 453,912.18 9,961.79 Admin is Exhibit C 32% 327,370.49 2/1/2011 4th Amendment Fixed Exhibits 993,584.48 893,861.27 (36,979.00) (263,611.08) ‐ (495,046.88) 98,224.31 190,345.99 92,121.68 Debt refinanced 34% 419,492.17 8/1/2011 4th Amendment Fixed Exhibits 678,299.10 510,892.14 (36,979.00) (258,857.00) ‐ (95,458.45) 119,597.69 287,004.69 167,407.00 PAYGO Pd on full district, not just Best Buy 58% 586,899.17 2/1/2012 4th Amendment Fixed Exhibits 633,289.20 475,121.50 (37,739.00) (320,583.63) ‐ (451,433.75) (334,634.88) ‐ 334,634.88 $170,391.14 withheld; paid on full district75% 921,534.05 8/1/2012 4th Amendment Fixed Exhibits 948,293.74 949,230.22 (37,739.00) (264,173.00) (28,897.04) (300,508.75) 346,809.47 230,208.31 (116,601.16) Admin is Exhibit C 32% 804,932.89 2/1/2013 4th Amendment Fixed Exhibits 971,755.62 949,230.20 (38,511.00) (328,632.26) (28,896.82) (300,508.75) 281,578.19 310,081.06 28,502.87 G/L doesn't have Clean‐up settlement of $1,777.09 39% 833,435.76 8/1/2013 4th Amendment Fixed Exhibits 1,037,457.24 1,037,368.76 (38,511.00) (269,581.00) (28,905.89) (301,358.75) 427,918.01 309,121.34 (118,796.67) Admin changed from Exhibit B to Exhibit C30% 714,639.09 2/1/2014 4th Amendment Fixed Exhibits 1,037,457.24 1,037,457.77 (39,297.00) (330,783.26) (28,899.22) (301,358.75) 366,018.76 368,179.28 2,160.52 Admin changed from Exhibit B to Exhibit C36% 716,799.61 8/1/2014 4th Amendment Fixed Exhibits 907,565.45 997,757.58 (39,297.00) (275,082.00) (28,905.89) (301,633.75) 381,744.83 506,220.81 124,475.98 Reduction for pooling not included in payment 32% 841,275.58 2/1/2015 5th Amendment 75% of TIF Received 907,565.45 997,757.57 (99,775.76) (149,663.64) (28,906.86) (301,633.75) 446,684.42 350,133.48 (96,550.94) PAYGO schedule had incorrect frozen rate 25% 744,724.64 8/1/2015 5th Amendment 75% of TIF Received 1,181,472.27 1,181,465.53 (118,146.55) (177,219.83) ‐ (303,483.75) 582,615.40 582,620.45 5.05 Value petitioned 25% 744,729.70 2/1/2016 5th Amendment 75% of TIF Received 1,181,472.27 1,181,465.53 (118,146.55) (177,219.83) (206,924.92) (303,483.75) 375,690.48 375,695.54 5.06 Value petitioned ‐ portion of payment withheld 25% 744,734.75 8/1/2016 5th Amendment 75% of TIF Received 1,529,741.27 1,378,151.63 (137,815.16) (206,722.74) (346,357.95) (304,573.75) 382,682.03 382,682.02 (0.01) Value petitioned ‐ portion of payment withheld 25% 744,734.74 2/1/2017 5th Amendment 75% of TIF Received 1,377,593.76 1,378,151.61 (137,815.16) (206,722.74) (346,357.94) (304,573.75) 382,682.02 382,682.02 ‐ Value petitioned ‐ portion of payment withheld 25% 744,734.74 8/1/2017 5th Amendment 75% of TIF Received 1,300,674.61 1,300,681.97 (130,068.20) (195,102.30) (323,359.72) (304,638.75) 347,513.00 347,507.49 (5.51) Value petitioned ‐ portion of payment withheld 25% 744,729.23 12/31/2017 5th Amendment 75% of TIF Received (179,851.69) (179,851.01) 17,985.10 26,977.65 206,924.92 ‐ 72,036.66 109,778.73 37,742.07 2015 Adjustment ‐ Tax Court Petition 782,471.30 12/31/2017 5th Amendment 75% of TIF Received (586,554.23) (585,104.29) 58,510.43 87,765.64 692,715.89 ‐ 253,887.67 292,273.34 38,385.67 2016 Adjustment ‐ Tax Court Petition 820,856.97 12/31/2017 5th Amendment 75% of TIF Received 754,306.25 745,418.54 (74,541.85) (111,812.78) 323,359.72 (304,638.75) 577,784.88 578,901.16 1,116.28 Includes reduction for Pay 2017 tax court petition 25% 821,973.25 8/1/2018 5th Amendment 75% of TIF Received 979,426.56 975,900.99 (97,590.10) (146,385.15) ‐ (304,258.75) 427,666.99 428,166.72 499.73 Bond payment reduction for 2019 not 2018 25% 822,472.98 2/1/2019 5th Amendment 75% of TIF Received 979,426.56 975,900.99 (97,590.10) (146,385.15) ‐ (304,258.75) 427,666.99 428,166.72 499.73 Bond payment reduction for 2019 not 2018 25% 822,972.71 8/1/2019 5th Amendment 75% of TIF Received 1,011,713.23 987,514.72 (98,751.47) (148,127.21) ‐ (306,898.75) 433,737.29 756,053.30 322,316.01 Payment not reduced for debt service 25% 1,145,288.72 2/1/2020 5th Amendment 75% of TIF Received 1,011,713.23 987,514.72 (98,751.47) (148,127.21) ‐ (306,898.75) 433,737.29 142,255.80 (291,481.49) Payment corrected 25% 853,807.23 8/1/2020 5th Amendment 75% of TIF Received 896,142.72 892,916.61 (89,291.66) (133,937.49) ‐ (306,621.25) 363,066.21 363,066.21 (0.00) 25% 853,807.23 2/1/2021 5th Amendment 75% of TIF Received 896,142.72 892,916.61 (89,291.66) (133,937.49) ‐ (306,621.25) 363,066.21 363,066.21 (0.00) 25% 853,807.22 8/1/2021 5th Amendment 75% of TIF Received 885,065.89 881,875.38 (88,187.54) (132,281.31) ‐ (308,090.00) 353,316.53 353,319.74 3.21 25% 853,810.43 2/1/2022 5th Amendment 75% of TIF Received 885,065.89 885,065.89 (88,506.59) (132,759.88) ‐ (308,090.00) 355,709.42 353,319.74 (2,389.68) G/L not reduced for OSA fee 25% 851,420.75 8/1/2022 5th Amendment 75% of TIF Received 816,730.29 813,790.06 (81,379.01) (122,068.51) ‐ (311,325.00) 299,017.54 299,017.55 0.01 25% 851,420.75 2/1/2023 5th Amendment 75% of TIF Received 816,730.29 813,790.06 (81,379.01) (122,068.51) (311,325.00) 299,017.54 299,017.54 ‐ 25% 851,420.75 8/1/2023 5th Amendment 75% of TIF Received 813,790.06 (81,379.01) (122,068.51) (313,500.00) 296,842.54 296,842.54 ‐ 25% 851,420.75 2/1/2024 5th Amendment 75% of TIF Received 813,790.06 (81,379.01) (122,068.51) (313,500.00) 296,842.54 296,842.54 ‐ 25% 851,420.75 8/1/2024 5th Amendment 75% of TIF Received 813,790.06 (81,379.01) (122,068.51) ‐ 610,342.54 610,342.54 ‐ 25% 851,420.75 2/1/2025 5th Amendment 75% of TIF Received 813,790.06 (81,379.01) (122,068.51) ‐ 610,342.54 610,342.54 ‐ 25% 851,420.75 8/1/2025 5th Amendment 75% of TIF Received 813,790.06 (81,379.01) (122,068.51) ‐ 610,342.54 610,342.54 ‐ 25% 851,420.75 2/1/2026 5th Amendment 75% of TIF Received 813,790.06 (81,379.01) (122,068.51) ‐ 610,342.54 610,342.54 ‐ 25% 851,420.75 GRAND TOTALS ‐ PAID THROUGH & INCLUDING 2/1/2023 36,957,602.78$ 35,392,281.65$ (2,400,864.31)$ (7,904,075.71)$ (173,411.72)$ (11,826,921.02)$ 13,260,420.61$ 14,111,841.36$ 851,420.75$ 29%CALCULATION OF ADMIN AND POOLING CAPPED AT 25% 35,392,281.65$ (3,539,228.17)$ (5,308,842.25)$ (173,411.72)$ (11,826,921.02)$ 14,717,290.21$ 14,111,841.36$ (605,448.85)$ 25%DIFFERENCE‐$ (1,138,363.86)$ 2,595,233.46$ ‐$ ‐$ 1,456,869.60$ ‐$ (1,456,869.60)$ Payment DateNet Payment to Best BuyCummulative Over / (Under) PaymentAmounts WithheldTax Increment Received ‐ Best Buy Portion OnlyDeveloper Agreement In Place** REVISED AS OF 03/13/2023 ‐ FINAL ** 3/13/2023Best Buy Historical PAYGO Analysis ‐ FINALEXHIBIT 1
FIFTH AMENDMENT
TO
CONTRACT FOR PRIVATE REDEVELOPMENT
THIS AGREEMENT, made and entered into as of the ith day of Ju Ji x__, 2014, by and
between the HOUSING AND REDEVELOPMENT AUTHORITY IN AND F THE CITY OF
RICHFIELD, MINNESOTA, a Minnesota public body corporate and politic (the “HRA”), and BEST
BUY CO., INC., a Minnesota corporation (the “Redeveloper”).
WITNESSETH:
WHEREAS, the parties hereto did on or about March 28, 2000 enter into an agreement entitled
Contract for Private Redevelopment (the “Contract”), calling for the redevelopment of an area of land (the
“Property”) lying within the City of Richfield; and
WHEREAS, the parties hereto did on or about November 27, 2000, February 20, 2001,
March 5, 2003, and December 21, 2010, enter into agreements entitled First Amendment to Contract for
Private Redevelopment (the “First Amendment”), the Second Amendment to Contract for Private
Redevelopment (the “Second Amendment”), the Third Amendment to Contract for Private
Redevelopment (the “Third Amendment”), and the Fourth Amendment to Contract for Private
Redevelopment (the “Fourth Amendment”), respectively, which amended the Contract; and
WHEREAS, the HRA and the Redeveloper propose to amend the Contract further to revise the
provisions related to the City’s administrative fees and housing fund fees; and
NOW, THEREFORE, based upon the mutual covenants and undertakings hereinafter, and in the
Contract provided, the parties hereto stipulate and agree as follows:
I The WHEREAS clauses set forth above are incorporated into this Fifth Amendment to
Contract for Private Redevelopment and confirmed in all respects.
II. The Contract is hereby amended in the following respects:
1. The definition of “Available Tax Increment” found in Section 1.1 of the Contract (as
amended by the Fourth Amendment) is amended as follows:
"Available Tax Increment" for the purpose of the Note means seventy-five percent (75%) of the
Tax Increment attributable to the Minimum Improvements and Development Property that is paid to the
HRA by the County in the six months preceding each Payment Date, after deducting any amount necessary
to pay principal and interest on the TIF Bonds or, subject to the provisions of Section 3.5, subd. 3, any TIF
Refunding Bonds.
2. Exhibits A, B, and C to the Fourth Amendment are deleted.
3. The HRA and the Redeveloper acknowledge and agree that pursuant to the terms of the
Contract and the Note, all Available Tax Increment will be used to pay the principal of and interest on the
Note.
EXHIBIT 2
IN WITNESS WHEREOF, the parties hereto have caused this Fifth Amendment to Contract for
Private Redevelopment to be duly executed in their behalf by their authorized representatives on or as of the
date first above written.
HOUSING AND REDEVELOPMENT AUTHORITY
IN AND FOR THE CITY OF RICHFIELD
STATE OF MINNESOTA )
) SS.
COUNTY OF HENNEPIN )
III. The foregoing instrument was acknowledged before me this 1{, day of DM 2014, by
Noey BB. Suprle SuzammeM—Sandaht, the CRaifperson of the Housing and Redevelopment Authority in and for the City of
Richfield, a public body corporate and politic under the laws of Minnesota, on behalf of the HRA.
NANCY K GIBBS :
& NOTARY PUBLIC - MINNESOTA £ * My Comm. Expires Jan. 31. 2015 ¢ STATE OF MINNESOTA )
) ss.:
COUNTY OF HENNEPIN )
IV. The foregoing instrument was acknowledged before me this {iy day of fun Une. 2
2014, by Steven L. Devich, the Executive Director of the Housing and Redevelopment Authority in and for
the City of Richfield, a public body corporate and politic under the laws of Minnesota, on be a
’
A MYRTLE A. LINK
; NOTARY PUBLIC-MINNESOTA
My Commission Expires Jan. 31, 2017
BEST BUY CO., INC.
By Its VP Global Propeties
STATE OF MINNESOTA )
) SS.
COUNTY OF HENNEPIN )
foregoing instrument Yi S aghn wledged before me this | day of Jul , 2014,
Dard Sisson, the C loba | of Best Buy Co., Inc., a Minnesota corporation, on
ait of the Redeveloper. Forel es ans
Notary Public sas
KELLY JO EWERT R Y PUBLIC - MNNESOTA § NOTAR es on. 3. 015 8
S-2 441449v2 JAE RC125-210
From: Rebecca Kurtz [mailto:rkurtz@ehlers-inc.com]
Sent: Monday, February 03, 2014 11:41 AM
To: Griffith, William C.
Cc: Steve Devich (SDevich@cityofrichfield.org); John Stark; Myrt Link (MLink@cityofrichfield.org); Julie
Eddington (External Address)
Subject: RE: Best Buy Co.
Good morning, Bill,
Attached is the cashflow for the estimated increment and payments for the Best Buy TIF Note,
assuming the minimum market value of $118,500,000 and the needed adjustments for the HRA’s
administration and pooling.
The top half shows actual TIF payments from Hennepin County to date and the Pooling
(Administration and Housing and Redevelopment Fund) payments. These payments are per the
Contract. We received the final settlement information for 2013 from the County last week, so
that has been updated for the 2013 information. From 2014 forward, we have projected
increment and payments using the following assumptions:
Semi-annual TIF settlement based on the current market value and tax rate with no inflationary
increases
Total Pooling of 25% for the HRA to allocate between the Administration and Housing and
Redevelopment Fund
Based on the updated information and final review, we are estimating that the remaining amount
to be paid on the Pay-as-you-go Note is $18,712,117. We also want to note that we previously
estimated that the HRA would not take administration the last 1.5 years; however, based on final
review, that period will be 3.0 years.
As you know, to the extent that market values and tax rates change, the TIF projections will
change, and therefore the Paygo Note and Pooling projections will be adjusted.
Please do not hesitate to contact me with any questions.
Rebecca L. Kurtz, Financial Advisor/CIPFA
3060 Centre Pointe Drive
Roseville, MN 55113
Phone: (651) 697-8516
EXHIBIT 3
2.
From: Griffith, William C. [mailto:wgriffith@larkinhoffman.com]
Sent: Friday, January 31, 2014 9:36 AM
To: Rebecca Kurtz
Subject: Best Buy Co.
Good morning Rebecca,
I am following up our last meeting with you and City staff to see if we can get copies of your
modeling of the revised administrative fees and impact on the PAYG Note. Thanks so much,
Bill
William C. Griffith
Shareholder
p | 952-896-3290
m | 612-986-7711
www.larkinhoffman.com
CONFIDENTIALITY NOTICE:
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the law firm of Larkin Hoffman Daly & Lindgren Ltd., and as such is privileged and confidential. If you are not an intended
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you have received this message in error, and that any review, dissemination, distribution, or copying of this message is
strictly prohibited. If you received this message in error, please notify the sender immediately, delete the message, and
return any hard copy print-outs. No legal advice is being provided or implied via this communication unless you are (1) a
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CIRCULAR 230 DISCLOSURE: Any advice contained in this email (including any
attachments unless expressly stated otherwise) is not intended or written to be used, and
cannot be used, for purposes of avoiding tax penalties that may be imposed on any
taxpayer.
City of Richfield
Best Buy proj with proposed d to Contract (reducing and Pooling amount)
Actual to date and projections beginning in 2014 based on minimum assessed market value of $118,500,000 and estimated Pay 2014 tax information, but City takes only 25% for Administration and Pooling beginning in 2014.
| Proposed
Per Semi-Annual ‘Admin. Housing Tax Exempt $170,408 Annual
Tax Payment Gross Tax Total at at Pooling G.O.Bond Repayment of Available Available Year Date MVHC FIXED FIXED 25% Payment _2/1/12Shortfall _for Paygo for Paygo
1999
2000 1,440 1,440
2001 74,977 74377
2002 91,095 2ss 91,350
2003 384,269 4157 388,426
2004 1,740,960 5,890 1,746,850 116,278 448,169
2005 1,851,571 1,851,571 118,622 457,601
2006 1,717,344 1,717,344 121,004 467,196
2007 1,796,920 1,796,920 123,428 476,957
2008 1,980,030 1,980,030 125,894 486,886
2009 2,055,351 2,055,351 128,404 496,987
2010 1,787,723 1,787,723 130,956 507,261
2011 986,014 986,014 133,552 522,468
2012 1,898,460 1,898,460 136,192 584,757
2013 2,078,663 2,078,663 138,878 598,213
through 2013 18,444,817 10,302 18,455,119 1,273,208 5,046,496
2014 08/01/14 1,037,457 1,037,457 (259,364) (76,634) (28,897) 931,926
2014 02/01/15, 1,037,457 1,037,457 (259,364) (526,634) (28,907) 481,916 1,413,843
2015 08/01/15 1,037,457 1,037,487 (259,364) (73,484) 963,973
2015 02/01/16 1,037,457 eigenen 1,037,457 (259,364) (533,484) 503,973 1,467,947
2016 08/01/16 1,037,457 |change 1,037,457 (259,364) (69,874) 967,883 259,364
2016 02/01/17 1,037,457 |based on 1,037,457 (259,364) (539,574) 497,883 1,465,767 259,364
2017 08/01/17 1,037,457 [changes in 9 1,037,457 (259,364) (64,639) 972,818 259,364 2017 02/01/18 1,037,457 [market 1037,457 (259,364) (544,639) 492,818 1,465,637 259,364
2018 08/01/18 1,037,487 1,037,487 (259,364) (58,759) 978,698 259,364
2018 02/01/19 1,037,457 1,037,457 (259,364) (548,759) 488,698 1,467,397 259,364
2019 08/01/19 1,037,457 1,037,457 (259,364) (51,899) 985,558 259,364 2019 02/01/20 1,037,457 1,037,457 (259,364) (561,899) 475,558 1,461,117 259,364
2020 08/01/20 1,037,457 1,037,487 (259,364) (44,121) 993,336 259,364
2020 02/01/21 1,037,457 1,037,457 (259,364) (569,121) 468,336 1,461,672 259,364
2021 08/01/21 1,037,457 1,037,457 (259,364) (35,590) 1,001,867 259,364 2021 02/01/22 1,037,457 1,037,457 (259,364) (580,590) 456,867 1,458,734 259,364
2022 08/01/22 1,037,457 1,037,487 (259,364) (26,325) 1,011,132 259,364
2022 02/01/23 1,037,457 1,037,457 (259,364) (596,325) 441,132 1,452,264 259,364
2023 08/01/23 1,037,457 1,037,487 o (13,500) 1,023,957
2023 02/01/24 1,037,457 1,037,487 o (613,500) 423,957 1,447,914
2024 08/01/24 1,037,457 1,037,457 o o 1,037,487
2024 02/01/25 1,037,457 1,037,457 0 1,037,487 2,074,914
2025 08/01/28 1,037,457 1,037,487 o 1,037,487
2025 02/01/26 1,037,457 1,037,457 oO 1,037,457 2,074,914 Estimated Totals: 43,343,785 10,302 43,354,087 1,273,208 5,046,496 (4,668,557) (6,129,048) (57,804) 18,712,117 | 872
Notes: 1. Projections are estimates based on the Pay 2014 market value. To the extend that market values and tax rates change, the payment for the Paygo note and Pooling will change.
4886-331 1-3187, v. 1
3.
4886-3311-3187, v. 1
Error! Unknown document property name.
May 18, 2023
Melissa,
Thank you for sharing with me the letter drafted by Larkin Hoffman which Tracy Smith from Best Buy
provided to you. There are a number of inaccuracies in the letter that I would like to clarify. I believe a lot
of the inaccuracies arise due to the fact that the contract is what drives the TIF payments for the Best Buy
development and the manner of providing TIF to the HRA and to Best Buy fluctuated over time.
Contract for Private Development
The contract and its five amendments provide the requirements of how TIF is used for the Best Buy portion
of the TIF District. The contract itself had numerous changes in TIF payments over the years. The HRA
is required to follow the requirements of the contract and its amendments. The manner of providing TIF to
the HRA and Best Buy changed four times over the years.
It is important to note that TIF contracts can be structured in many ways - an authority can provide any
amount of TIF (from a very small amount like $5,000 to 100% of the TIF). An authority may determine to
collect some TIF to pool for other projects. How TIF is used and what TIF amounts are provided to the
developer are memorialized in the contract.
HRA Expenditures of TIF
An authority can collect TIF and keep the TIF as provided by the contract. However, an authority cannot
expend more than 25% of the TIF. The HRA can use up to 10% of the TIF from the TIF District for
administrative expenses and can pool tax increment with a maximum of pooled TIF in the amount of 25%
of the TIF (including administrative expenses).
TIF District
The TIF District is complicated. The TIF District has three different developments and each development
has or had its own contract and TIF Note. Each development has to comply with the requirements of their
contracts. Each development receives TIF from the property upon which it has developed. For purposes
of reporting to the Office of the State Auditor every year, the HRA must treat the TIF District as on e TIF
District. The HRA is currently below the 25% expenditure limit for the TIF District.
Change in TIF Payments Over Time (TIF Note was issued 7/31/2001)
The original contract (2000) had a set schedule of payments to be provided under the TIF Note to
Best Buy and the HRA kept the remaining TIF.
The First Amendment (2000) changed the TIF payment formula to provide that the HRA receive
15% of the TIF (with a maximum amount of $634,366 per year), plus 5% of the TIF (with a
maximum of $210,566).
The Third Amendment (2010) revised the definition of “Available Tax Increment” to include set
schedule of payments to the HRA for pooling for affordable housing (to replace the housing that
was lost) and a set schedule of payments for administrative expenses of the HRA.
Error! Unknown document property name.
The Fourth Amendment (2010) revised the definition of “Available Tax Increment” to include set
payments to the HRA for pooling for affordable housing (to replace the housing that was lost) and
set payments for administrative expenses of the HRA.
The Fifth Amendment (2014) revised the definition of “Available Tax Increment” to the following
formula (which remains in place today):
“Available Tax Increment” for the purpose of the Note means seventy-five percent (75%)
of the Tax Increment attributable to the Minimum Improvements and Development
Property that is paid to the HRA by the County in the six months preceding each Payment
Date, after deducting any amount necessary to pay principal and interest on the TIF Bonds
or, subject to the provisions of Section 3.5, subd. 3, any TIF Refunding Bonds.
The HRA and Best Buy approved the original contract and all the amendments that changed how TIF was
distributed over time.
Confusion Regarding Fifth Amendment
The only material change made in the Fifth Amendment was to update the definition of “Available Tax
Increment.” The definition was changed as follows:
“Available Tax Increment” for the purpose of the Note means seventy-five percent (75%) of the
Tax Increment attributable to the Minimum Improvements and Development Property that is paid
to the HRA by the County in the six months preceding each Payment Date, after deducting any
amount necessary to pay principal and interest on the TIF Bonds or, subject to the provisions of
Section 3.5, subd. 3, any TIF Refunding Bonds.
What the Fifth Amendment says is that moving forward (as of July 14, 2014), the developer will receive
75% of the TIF collected from the County in the last six months and the HRA will receive the remaining
25% of the Tax Increment collected from the County in the last six months. There was no other substantive
agreement in the Fifth Amendment.
“Unilateral” Amendment to TIF Plan
The TIF Plan is a document approved by the City and the HRA and not approved or executed by the
developer. The HRA modified the TIF Plan for this TIF district (per Minn. Stat. Section 469.1763, subd.
2d) in order to maximize the use of the T IF it had received under the First Amendment and used the
unobligated TIF funds to (i) transfer money to a spending plan pursuant to Minn. Stat. Section 469.176,
subd. 4n; and (ii) transfer money to the City’s affordable housing trust fund as provided in s pecial
legislation the HRA received in 2021. These were funds that otherwise would have been returned to the
County for redistribution and not funds that would have been paid to Best Buy. To be clear, these funds
were provided to the HRA in the early 2000s and were lawfully provided to the HRA based on the contract
at the time.
Overpayments of TIF to Best Buy
TIF law does not prevent the TIF authority from seeking to correct an overpayment. We confirmed this
with Jason Nord at the Office of the State Auditor. In fact, the HRA has a duty to correct the error because
otherwise, an overpayment is an unauthorized use of tax increment. Best Buy’s position that a statute of
limitations is applicable does not make sense in this context. The HRA makes payments on the TIF Note
every six months. A statute of limitations argument does not apply because the semi-annual TIF payments
on the TIF Note are effectively just prepayments of the total amount that is due to the developer under the
terms of the TIF Note and the contract. The statute of limitations period would not be triggered payment
by payment but rather based on the total amount due at maturity. A statute of limitations period would only
begin after final payment of the TIF Note.
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Minimum Assessment Agreement
We discussed the assessment agreement during our meetings with Best Buy several times. We repeatedly
informed the Best Buy team that they would need significant lead time in order to get the proper sign offs
from the County, the School District, and the City in order to remove the assessment agreement from the
Best Buy property (as required by Minn. Stat. Section 469.177, subd. 8).
Please contact me at your convenience with any questions regarding the foregoing.
KENNEDY & GRAVEN, CHARTERED
Julie Eddington