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Res 1999-47 RESOLUTION NO.47-1999 RESOLUTION APPROVING THE ISSUANCE AND SALE OF THE $200,000 SUBORDINATED SENIOR HOUSING REVENUE NOTE, SERIES 1999 AND AUTHORIZING THE EXECUTION OF DOCUMENTS RELATING THERETO (BANFILL CROSSING HOMES PROJECT) BE IT RESOLVED by the City Council of the City of Fridley, Minnesota (the "City"), as follows: 1. LEGAL AUTHORIZATION AND FINDINGS. 1.1 Findings. The City hereby finds, determines and declares as follows: (a) The City is a political subdivision of the State of Minnesota and is authorized under Minnesota Statutes, Chapter 462C, as amended (the "Act") to assist the revenue producing project herein referred to, and to issue and sell the Subordinated Note, as hereinafter defined, for the purpose, in the manner and upon the terms and conditions set forth in the Act and in this Resolution. (b) As required by the Act and Section 147(f) of the Internal Revenue Code of 1986, as amended (the "Code"), the City has, on July 14, 1997, held a public hearing on the issuance of one or more revenue notes to finance the Project. (c) The issuance of the $200,000 Subordinated Senior Housing Revenue Note, Series 1999 (Banfill Crossing Homes Project) to be issued in a single note (the "Subordinated Note")by the City, pursuant to the Act, is in the best interest of the City, and the City hereby determines to issue the Subordinated Note, as provided herein. (d) Pursuant to a Subordinated Note Loan Agreement (the "Subordinated Note Loan Agreement") to be entered into between the City and Minnesota Christian Homes of Fridley, Inc. (the "Borrower"), the Borrower has agreed to repay the Subordinated Note in specified amounts and at specified times sufficient to pay in full when due the principal of, premium, if any, and interest on the Subordinated Note. In addition, the Subordinated Note Loan Agreement contains provisions relating to the construction, the maintenance and operation of the Project, indemnification, insurance, and other agreements and covenants which are required or permitted by the Act and which the City and the Borrower deem necessary or desirable for the financing of the Project. A draft of the Subordinated Note Loan Agreement is on file with the City. (e) Pursuant to a Pledge Agreement to be entered into between the City and the Purchaser(as herein defined),the City has pledged and granted a security interest in all of its rights, title, and interest in the Subordinated Note Loan Agreement to the Purchaser (except for certain rights of indemnification and to reimbursement for certain costs and expenses). A draft of the Pledge Agreement is on file with the City. Resolution No.47-1999 Page 2 (f) The Subordinated Note will be a special limited obligation of the City. The Subordinated Note shall not be payable from or charged upon any funds other than the revenues pledged to the payment thereof, nor shall the City be subject to any liability thereon. No holder of the Subordinated Note shall ever have the right to compel any exercise of the taxing power of the City to pay the Subordinated Note or the interest thereon, nor to enforce payment thereof against any property of the City. The Subordinated Note shall not constitute a debt of the City within the meaning of any constitutional or statutory limitation. (g) It is desirable, feasible and consistent with the objects and purposes of the Act to issue the Subordinated Note. 2. THE SUBORDINATED NOTE. 2.1 Authorized Amount and Form of Subordinated Note. The Subordinated Note issued pursuant to this Resolution shall be in substantially the form attached as Exhibit A with such appropriate variations, omissions and insertions as are permitted or required by this Resolution, and in accordance with the further provisions hereof. The Subordinated Note in the amount of$200,000 shall be issued to Senior Housing Construction, Inc. (the "Purchaser"). The Subordinated Note may be issued in such amount but not to exceed $200,000 unless a duplicate Subordinated Note is issued pursuant to Section 2.7 and shall be registered to such individuals or entities as designated by the Purchaser. The Subordinated Note will be issued in satisfaction of$200,000 owed by the Borrower to the Purchaser pursuant to that certain Stipulated Sum Standard Form Agreement Between Owner and Contractor(Labor), dated June 18, 1999 (the"Construction Contract"), and shall be issued to the Purchaser concurrently with the issuance of the City's Senior Housing Revenue Bonds (Banfill Crossing Homes Project) Series 1999, to be issued in the approximate amount of$9,630,000 (the "Bonds"). The Subordinated Note shall bear interest at the rates set forth in the Subordinated Note and shall be subordinate to the Bonds under the terms set forth in the Subordinated Note. 2.2 The Subordinated Note. The Subordinated Note shall be dated as of the date of delivery to the Purchaser, shall be payable at the times and in the manner, shall bear interest at the rate, and shall be subject to such other terms and conditions as are set forth therein. 2.3 Execution. The Subordinated Note shall be executed on behalf of the City by the signatures of its Mayor and City Manager and shall be sealed with the seal of the City;provided that the seal may be intentionally omitted as provided by law. In case any officer whose signature shall appear on the Subordinated Note shall cease to be such officer before the delivery of the Subordinated Note, such signature shall nevertheless be valid and sufficient for all purposes, the same as if had remained in office until delivery. In the event of the absence or disability of the Mayor or the City Manager such officers of the City as, in the opinion of the City Attorney, may act in their behalf, shall without further act or authorization of the City Council execute and deliver the Subordinated Note. 2.4 Delivery of Initial Subordinated Note. Before delivery of the Subordinated Note there shall be filed with the Purchaser the following items: 2 Resolution No.47-1999 Page 3 (i) an executed copy of each of the following documents: (ii) the Subordinated Note Loan Agreement; (iii) the Pledge Agreement; (b) an opinion of Counsel for the Borrower as prescribed by the Purchaser and Bond Counsel; (c) the opinion of Bond Counsel as to the validity and tax exempt status of the Subordinated Note; (d) a 501(c)(3) determination letter from the Internal Revenue Service evidencing that the Borrower is exempt from income taxation under Section 501(c)(3) of the Code; (e) such other documents and opinions as Bond Counsel may reasonably require for purposes of rendering its opinion required in subsection (c) above or that the Purchaser may reasonably require for the closing. 2.5 Disposition of Subordinated Note Proceeds. Upon delivery of the Subordinated Note to the Purchaser, the Purchaser shall issue a receipt to the Borrower and the City for $200,000 with respect to payments owed on the Construction Contract. 2.6 Registration of Transfer. The City will cause to be kept at the office of the City Manager a Subordinated Note Register in which, subject to such reasonable regulations as it may prescribe, the City shall provide for the registration of transfers of ownership of the Subordinated Note. The Subordinated Note shall be initially registered in the name of the Purchaser and shall be transferable upon the Subordinated Note Register by the Purchaser in person or by its agent duly authorized in writing, upon surrender of the Subordinated Note together with a written instrument of transfer satisfactory to the City Manager, duly executed by the Purchaser or its duly authorized agent. The following form of assignment shall be sufficient for said purpose. For value received hereby sells, assigns and transfers unto the within Subordinated Note of the City of Fridley, Minnesota, and does hereby irrevocably constitute and appoint attorney to transfer said Subordinated Note on the books of said City with full power of substitution in the premises. The undersigned certifies that the transfer is made in accordance with the provisions of Section 2.9 of the Resolution authorizing the issuance of the Subordinated Note. Dated: Registered Owner I 3 Resolution No.47-1999 Page 4 Upon such transfer the City Manager shall note the date of registration and the name and address of the new Purchaser in the Subordinated Note Register and in the registration blank appearing on the Subordinated Note. 2.7 Mutilated, Lost or Destroyed Subordinated Note. In case any Subordinated Note issued hereunder shall become mutilated or be destroyed or lost, the City shall, if not then prohibited by law, cause to be executed and delivered, a new Subordinated Note of like outstanding principal amount, number and tenor in exchange and substitution for and upon cancellation of such mutilated Subordinated Note, or in lieu of and in substitution for such Subordinated Note destroyed or lost, upon the Purchaser's paying the reasonable expenses and charges of the City in connection therewith, and in the case of a Subordinated Note destroyed or lost, the filing with the City of evidence satisfactory to the City with indemnity satisfactory to it. If the mutilated, destroyed or lost Subordinated Note has already matured or been called for redemption in accordance with its terms it shall not be necessary to issue a new Subordinated Note prior to payment. 2.8 Ownership of Subordinated Note. The City may deem and treat the person in whose name the Subordinated Note is last registered in the Subordinated Note Register and by notation on the Subordinated Note whether or not such Subordinated Note shall be overdue, as the absolute owner of such Subordinated Note for the purpose of receiving payment of or on account of the Principal Balance, redemption price or interest and for all other purposes whatsoever, and the City shall not be affected by any notice to the contrary. 2.9 Limitation on Subordinated Note Transfers. The Subordinated Note has been issued without registration under state or other securities laws, pursuant to an exemption for such issuance; and accordingly the Subordinated Note may not be assigned or transferred in whole or part, nor may a participation interest in the Subordinated Note be given pursuant to any participation agreement, except upon receipt of a written opinion of Bond Counsel that an exemption exists for such transfer. 2.10 Issuance of New Subordinated Notes. Subject to the provisions of Section 2.9, the City shall, at the request and expense of the Purchaser, issue new notes, in aggregate outstanding principal amount equal to that of the Subordinated Note surrendered, and of like tenor except as to number and principal amount, and registered in the name of the Purchaser or such transferee as may be designated by the Purchaser. 3. MISCELLANEOUS. 3.1 Severability. If any provision of this Resolution 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 or 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 provision or provisions herein contained invalid, inoperative, or unenforceable to any extent whatever. The invalidity of any one or more phrases, sentences, clauses or paragraphs in this Resolution contained shall not affect the remaining portions of this Resolution or any part thereof. 4 Resolution No.47-1999 Page 5 3.2 Authentication of Transcript. The officers of the City are directed to furnish to Bond Counsel certified copies of this Resolution and all documents referred to herein, and affidavits or certificates as to all other matters which are reasonably necessary to evidence the validity of the Subordinated Note. All such certified copies, certificates and affidavits, including any heretofore furnished, shall constitute recitals of the City as to the correctness of all statements contained therein. 3.3 Authorization to Execute Agreements. The forms of the proposed Subordinated Note Loan Agreement, and the Pledge Agreement, are hereby approved in substantially the form on file with the City, together with such additional details therein as may be necessary and appropriate and such modifications thereof, deletions therefrom and additions thereto as may be necessary and appropriate and approved by Bond Counsel and the City Attorney prior to the execution of the documents, and the Mayor and City Manager of the City are authorized to execute the Subordinated Note Loan Agreement, the Assignment and the Pledge Agreement in the name of and on behalf of the City and such other documents as Bond Counsel consider appropriate in connection with the issuance of the Subordinated Note. In the event of the absence or disability of the Mayor or the City Manager such officers of the City as, in the opinion of the City Attorney, may act in their behalf, shall without further act or authorization of the City Council do all things and execute all instruments and documents required to be done or executed by such absent or disabled officers. The execution of any instrument by the appropriate officer or officers of the City herein authorized shall be conclusive evidence of the approval of such documents in accordance with the terms hereof. PASSED AND ADOPTED BY THE CITY COUNCIL OF THE CITY OF FRIDLEY THIS 12TH DAY OF JULY, 1999 14;''‘(-13-9;:i ,!Y J ORGENSON—MAYOR ATTEST: DEBRA A. SKOGEN-. ITY CLERK 5 Resolution No.47-1999 Page 6 EXHIBIT A UNITED STATES OF AMERICA STATE OF MINNESOTA COUNTY OF ANOKA CITY OF FRIDLEY Subordinated Senior Housing Revenue Note, Series 1999 (Banfill Crossing Homes Project) $200,000 FOR VALUE RECEIVED the CITY OF FRIDLEY, Anoka County, Minnesota (the "City") hereby promises to pay Senior Housing Construction, Inc., in Victoria, Minnesota, its successors or registered assigns (the "Holder"), from the source and in the manner hereinafter provided, the principal sum of$200,000, or so much thereof as remains unpaid from time to time (the "Principal Balance"), with interest thereon from the date hereof until March 1, 2034(the"Final Maturity Date") at 6.25%per annum, in any coin or currency which at the time or times of payment is legal tender for the payment of public or private debts in the United States of America, in accordance with the terms hereinafter set forth. This Subordinated Note and interest thereon and any service charge or premium, if any, due hereunder are payable solely from the revenues and proceeds derived from the Subordinated Note Loan Agreement of even date herewith between the City and Minnesota Christian Homes of Fridley, Inc. (the "Borrower") (the "Subordinated Note Loan Agreement"). The City and the Holder intend that this Subordinated Note be paid only from and to the extent of sums available therefor under the Subordinated Loan Agreement after(i)payment of current debt service with respect to the City's [$9,630,000] of Senior Housing Revenue Bonds (Banfill Crossing Homes Project) Series 1999 (the "Bonds"), and (ii) the Borrower has caused all deposits to the funds and accounts as provided for in Section 5.3(2), subsections (a) through (g), of that certain Indenture of Trust, dated as of July 1, 1999, between the City and U.S. Bank Trust National Association, as trustee (the "Trustee"), entered into with respect to the Bonds (the "Indenture"). All payments hereunder shall be applied first to accrued and unpaid interest, and the balance shall be applied to the outstanding Principal Balance. If the interest on this Note should become subject to federal income taxation pursuant to a "Determination of Taxability" as that term is defined in the Subordinated Note Loan Agreement, and the Holder delivers to the Borrower a copy of the notice of the"Determination of Taxability",the interest rate shall be immediately adjusted to be three percent above the interest rate then in effect and each installment thereafter payable shall be accordingly adjusted and shall be equal to the amount necessary to amortize the remaining Principal Balance by the Final Maturity Date with interest at said adjusted rate; and in addition the Holder shall be entitled to receive upon demand an amount equal to the aggregate difference between (i) the monthly payments theretofore made to the Holder on this Note between the "Date of Taxability", as that term is defined in the Subordinated Note Loan Agreement, and the date of receipt by the Borrower of notice of such "Determination of Taxability", and (ii) the monthly payments which would have been made during such period if the adjusted rate had been in effect throughout such period. A-6 Resolution No.47-1999 Page 7 1. Accrued interest and principal, to the extent sums are available therefor pursuant to Section 5.3(2)(h) of the Indenture, shall be payable only to the extent of such available funds semiannually on March 1 and September 1 of each year (each, an "Payment Date"), commencing on March 1, 2001 (the "Commencement Date"), and continuing on each Payment Date thereafter until the Maturity Date. 2. In any event, the payments hereunder shall be sufficient to pay all principal and interest due, as such principal and interest becomes due, and to pay any premium or service charge, at maturity, upon redemption, or otherwise. Interest shall be computed on the basis of a 360 day year,but charged for the actual number of days elapsed. 3. Principal and interest and premium or service charge, if any, due hereunder shall be payable at the principal office of the Holder, or at such other place as the Holder may designate in writing. 4. This Note is issued by the City to provide financing for a portion of the cost of a project, as defined in Minnesota Statutes, Chapter 462C, consisting of the acquisition and equipping of senior housing facilities to be owned and operated by Minnesota Christian Homes of Fridley, Inc., a Minnesota nonprofit corporation (the "Borrower") pursuant to a Subordinated Note Loan Agreement dated as of July 1, 1999 by and between the City and the Borrower (the "Subordinated Note Loan Agreement"), and this Note is further issued pursuant to and in full compliance with the Constitution and laws of the State of Minnesota, particularly Minnesota Statutes, Chapter 462C and pursuant to a resolution of the City Council duly adopted on June 28, 1999 (the"Resolution"). 5. This Note is secured by a Pledge Agreement of even date herewith between the City and the Holder(the"Pledge Agreement"). 6. Payments on this Note are subordinate to payments of debt service on the Bonds, and Holder agrees that the following terms of subordination apply to this Note: (a) Subordination of Notes' Debt Service. (i) During any time that (i) the City has not paid in full, on a current basis, all amounts then due and payable under the Bonds, or(ii)the Rebate Fund, the Bond Reserve Fund, the Operations and Maintenance Fund, the Bond Fund, the Replacement Fund or the Operating Deficit Fund (collectively, the "Trust Funds") are not fully funded at their required amounts pursuant to the terms of the Indenture, the Holder will not ask for, demand, sue for, take, receive or accept from the City or the Borrower, by setoff or in any other manner, any payment or distribution from the City or the Borrower relating to the Subordinated Note or any other obligation or indebtedness,whether presently existing or arising in the future. (ii) During any time that (i) the City has not paid in full, on a current basis, all amounts then due and payable under the Bonds, or (ii) the Trust Funds are not fully funded at their required amounts pursuant to the terms of the Indenture, the City and the Borrower covenant and agree that they shall not pay to the Holder, by A-7 Resolution No.47-1999 Page 8 setoff or in any other manner, any payment or distribution relating to the Subordinated Note or any other obligation or indebtedness, whether presently existing or arising in the future. (iii) the Holder will not ask for, demand, sue for, take, receive or accept from the City or the Borrower, by setoff or in any other manner, any payment or distribution from the City or the Borrower if the making of such payment will constitute or would result in the occurrence of a violation of the provisions of any instrument or agreement evidencing, in connection with, or securing the Bonds or would result in the occurrence of any event which with the giving of notice or lapse of time or both would constitute an event of default under the provisions of any such instrument or agreement. (iv) In the event the Holder shall receive any payment or distribution which the Holder is not entitled to receive under the foregoing provisions, the Holder will turn over such payment to Trustee in the form received by it to be applied to the Bonds or deposited into the Trust Funds, as the case may be. (b) Limitation on Remedies of the Holder. Until such time as the Bonds are paid in full,the Holder shall not do any of the following: (i) Commence any action or proceeding against the City or the Borrower to recover all or any part of the Subordinated Note or join with any other creditor, unless the Trustee shall also join, in bringing any proceedings against the City or the Borrower under any bankruptcy, reorganization, readjustment or debt, arrangement of debt, receivership, liquidation or insolvency law or statute of the federal or any state government. (ii) Commence any action or proceeding against any collateral provided as security for the Subordinated Note, including without limitation against the Project or the rents therefrom, unless the Trustee provides written consent and shall have previously commenced and continues to pursue such an action pursuant to the Bonds. Furthermore, if the Trustee ceases to pursue a previously commenced action as a result of the City's or Borrower's cure of the default or for any other reason, the Holder shall likewise cease to pursue any action commenced by it whether or not the default under the Subordinated Note has been cured. (iii) The limitation of the Holder's remedies shall preclude any foreclosure, taking in possession, appointment of a receiver, exercise of any rights under any assignment of rents or any other action which may interfere with the Trustee's possession, operation or management of the Project or the exercise by the Trustee of its rights and remedies under the Indenture until such time as specifically provided in the Indenture. (c) Modification of Bond Loan. The Trustee, the City and the Borrower, or their successors and assigns may, at any time, and from time to time, without the consent of or notice to the Holder,without incurring responsibility to the Holder, and without impairing or A-8 Resolution No.47-1999 Page 9 releasing any of the obligations of the Holder hereunder and without said actions affecting the full and complete subordination of the Subordinated Note to the Bonds: (i) change the amount, manner, place or terms of payment, or change or extend for any period of time of payment of or renewal or otherwise alter or modify, the Bonds or any instrument or agreement evidencing, in connection with, as security for or providing for the issuance of any portion of the Bonds in any manner or enter into or amend in any manner any other agreement relating to the Bonds; (ii) sell, exchange, release or otherwise deal with all or any part of any property or other security pledged or mortgaged to secure the Bonds including without limitation the Project; (iii) release anyone liable in any manner for payment or collection of the Bonds; (iv) exercise or refrain from exercising any rights against the City or the Borrower or others; (v) accept additional security of any kind for repayment of the Bonds; and (vi) apply any sum received by the Trustee, by whomsoever paid and however realized, to payment of the Bonds in such manner as the Trustee, in its sole discretion,may deem appropriate. (d) Covenants of the Holder. The Holder covenants that it will: (i) execute any and all other instruments reasonably required by the City or the Trustee to evidence the subordination of the Subordinated Note to the Bonds; and (ii) not assign or transfer to any others any claim the Holder has or may have against the City or the Borrower as long as any of the Bonds remains outstanding,unless such assignment or transfer is expressly made subject to the terms hereof; and (iii) not increase the principal balance of the Subordinated Note or extend, alter or otherwise modify the terms of the Subordinated Note in any manner without the prior written approval of the Trustee (which approval may be granted or withheld by the Trustee in its sole discretion). 7. The City, for itself, its successors and assigns, hereby waives demand, presentment, protest and notice of dishonor; and to the extent permitted by law, the Holder may extend interest and/or principal of or any service charge or premium due on this Subordinated Note, including the Final Maturity Date, or release any part or parts of the property and interest subject to any security document from the same, all without notice to or consent of any party liable hereon or thereon and without releasing any such party from such liability and whether or not as a result thereof the interest on the Subordinated Note is no longer exempt from the A-9 Resolution No.47-1999 Page 10 federal or state income tax. In no event, however, may the Final Maturity Date of the Subordinated Note be extended beyond thirty-five (35)years from the date hereof. 8. Subject to the terms of Section 6 hereof, this Subordinated Note may be prepaid in whole or in part, at the option of the Borrower, on any business day thereafter, without premium, at a price of par and accrued interest. 9. Upon the occurrence of an Event of Default, as defined in the Subordinated Note Loan Agreement, the Holder may declare the Principal Balance and accrued interest on the Subordinated Note to be immediately due and payable. 10. As provided in the Resolution and subject to certain limitations set forth therein, this Subordinated Note is only transferable upon the books of the City at the office of the City Clerk, by the Holder in person or by its agent duly authorized in writing, at the Holder's expense, upon surrender hereof together with a written instrument of transfer satisfactory to the City Clerk, duly executed by the Holder or its duly authorized agent. Upon such transfer the Clerk will note the date of registration and the name and address of the new registered owner in the registration blank appearing below. The City may deem and treat the person in whose name the Subordinated Note is last registered upon the books of the City with such registration noted on the Subordinated Note, as the absolute owner hereof, whether or not overdue, for the purpose of receiving payment of or on the account, of the Principal Balance, redemption price or interest and for all other purposes, and all such payments so made to the Holder or upon his order shall be valid and effective to satisfy and discharge the liability upon the Subordinated Note to the extent of the sum or sums so paid, and the City shall not be affected by any notice to the contrary. 11. All of the agreements, conditions, covenants, provisions and stipulations contained in the Resolution, the Subordinated Note Loan Agreement and the Pledge Agreement are hereby made a part of this Subordinated Note to the same extent and with the same force and effect as if they were fully set forth herein. 12. This Subordinated Note and interest thereon and any service charge or premium, if any, due hereunder are payable solely from the revenues and proceeds derived from the Subordinated Note Loan Agreement and do not constitute a debt of the City within the meaning of any constitutional or statutory limitation, are not payable from or a charge upon any funds other than the revenues and proceeds pledged to the payment thereof, and do not give rise to a pecuniary liability of the City or any of its officers, agents or employees, and no holder of this Subordinated Note shall ever have the right to compel any exercise of the taxing power of the City to pay this Subordinated Note or the interest thereon, or to enforce payment thereof against any property of the City, and this Subordinated Note does not constitute a charge, lien or encumbrance, legal or equitable, upon any property of the City, and the agreement of the City to perform or cause the performance of the covenants and other provisions herein referred to shall be subject at all times to the availability of revenues or other funds furnished for such purpose in accordance with the Subordinated Note Loan Agreement, sufficient to pay all costs of such performance or the enforcement thereof. 13. If an Event of Default (as that term is defined in the Subordinated Note Loan Agreement) shall occur, then the Holder shall have the right and option to declare, upon ten (10) days A-10 Resolution No.47-1999 Page 11 written notice, the Principal Balance and accrued interest thereon, immediately due and payable, whereupon the same, plus any premiums or service charges, shall be due and payable,but solely from sums made available under the Subordinated Note Loan Agreement. Failure to exercise such option at any time shall not constitute a waiver of the right to exercise the same at any subsequent time. 14. The remedies of the Holder, as provided herein and in the Subordinated Note Loan Agreement and the Pledge Agreement, are not exclusive and shall be cumulative and concurrent and may be pursued singly, successively or together, at the sole discretion of the Holder, and may be exercised as often as occasion therefor shall occur; and the failure to exercise any such right or remedy shall in no event be construed as a waiver or release thereof. 15. The Holder shall not be deemed, by any act of omission or commission, to have waived any of its rights or remedies hereunder unless such waiver is in writing and signed by the Holder and, then only to the extent specifically set forth in the writing. A waiver with reference to one event shall not be construed as continuing or as a bar to or waiver of any right or remedy as to a subsequent event. 16. This Subordinated Note has been issued without registration under state or federal or other securities laws, pursuant to an exemption for such issuance; and accordingly the Subordinated Note may not be assigned or transferred in whole or part, nor may a participation interest in the Subordinated Note be given pursuant to any participation agreement, except in accordance with an applicable exemption from such registration requirements. The City acknowledges that the Holder intends to enter into a participation agreement with one or more sophisticated investors. IT IS HEREBY CERTIFIED AND RECITED that all conditions, acts and things required to exist to happen and to be performed precedent to or in the issuance of this Subordinated Note do exist,have happened and have been performed in regular and due form as required by law. IN WITNESS WHEREOF, the City has caused this Subordinated Note to be duly executed in its name by the manual signatures of the Mayor and City Manager,the corporate seal having been intentionally omitted as permitted by law, and has caused this Subordinated Note to be dated as of July_, 1999 PROVISIONS AS TO REGISTRATION The ownership of the unpaid Principal Balance of this Subordinated Note and the interest accruing thereon is registered on the books of the City of Fridley in the name of the holder last noted below. Date of Name and Address Signature of Registration Registered Owner City Manager July , 1999 Senior Housing Construction,Inc. A-11