NEW ISSUE BOOK-ENTRY ONLY

OFFICIAL STATEMENT

0/-1'793 ti- l'i'i•/

RATING: Standard & Poor's: "AAAIA~l+" (See "RATING" herein)

In the f']Jinion of KutakRock LLP and Arter & Hadden LLP, Los Angeles, California, Co~Bond Counsel, under the laws, regulations, rulinl/.s andjJ!dJcial decisions existing_ as of tire date of initial issuance ojthe Series "E B011ds and assuming continuing compliance with the applicable requirements of the Internal Revenue Code of 1986 (the 'Code J, wldch must be satisfied after the date Of initial issua11ce Of the Series E Bonds, interest on tlie Series E Bonds received by the owners thereOf is not bic/udab{e in gross income for J?.Urposes of [~deral income taxation, except interest on any Series E Bond during tlie period thatsucil Series E Bond is held by a "substantial user" of a~facility financed with theproceiiis of the Series EBonds ora 'related person" within the meaning_o(&ction J 47(a) of the Code. I,1tereston the Series E Bonds is a specific pl'e(erence item forpurp_oses o calculaflng the federal alternative minimum tax of individuals and corporations. N.0')1.TI'EMPT HAS BEEN MADE OR WILL BE MADE TO COMPLY WITH CERTAIN REQ(/JREMENTS RELATING O THE EXCLUSION FROM GROSS INCOME FOR FEDERALJNCOMS TAX PU!U!J;}SES OF INTEREST ON THE SERIES F BONDS, AND INTEREST ON THE SER!ES F BONDS WILL BE SUBJECT TO ALL APPLICABLE FEDERAL TAXATION. In the further opi11ion pf.. Co-Bo11d Cmmsel, interest on the Bonds Is, under existing law, exempt(rom State of California personal income taxation. See "TAX MATTERS" herein for a more complete discussfon of the treatment OJ:interest oif}h.e {,eries E.qondsfor federal income tax purposes and California personal income tax purposes. ,,. . , .... ., ,.~) _

$23,600,000 The City of Los Angeles Variable Rate Demand

Multifamily Housing Revenue Bonds (San Regis Project)

Series 2001E

Dated: Date ofDelivery Price: 100°/,

. -\_ ·-'\c; ··i~~~

$6,400,000·,_. -··· The City of Los Angeles .. ,, <'.:, Variable Rate Demand . ·•

Taxable Multifamily Housing RfyenuecBonds (San Regis Project)-:;; . .--;::,

Series 2001F ';J' ·. ~ ... () "' Du~ecember 15, 2034

The City of Los Angeles Variable Rate Demand Multifamily Housing Revenue Bonds (San Regis Project) Series 2001B (the "Series E Bonds") and The City of Los Angeles Variable Rate Demand Taxable Multifamily Housing Revenue Bonds (San Re§?-s Project) Series 2001F (the "Series F Bonds," and to§ether with the Series E Bonds, the "Bonds") are being issued and delivered under a Trust Indenture, dated as of November 1, 2001 (the "Indenture ), by and belween The City of Los Angeles (the "Issuer ) and Chase Manhattan Bank and Trust Company, National Association, as trustee (the "Trustee") to provide fun din~ for a loan (the "Loan'') to be made by the Issuer to Green Room Properties, !LC, a Delaware limited liability company {the "Borrower"). The proceeds of the Loan will be used to par, (i) costs of the acqmsition and rehabilitation ofa 390-unit multifamily residential project and (ii) for certain costs of issuance of the Bonds. The project, to be known as San Regis Apartments (the "Project' or "Mortgaged Property"), is located in Van Nuys, California. The Loan will be made pursuant to a Financing Agreement, dated as ofNovember 1, 2001, among the Issuer, the Borrower and the Trustee.

Payment of the principal of and interest on Ote Bonds will be secured, to the ex.tent described herein, by the Loan and by certain other resources and assets constituting Ote Trust Estate under the Indenture, all as described herein; in addition credit enhancement and liquidity support for the Bonds will be provided by

~ Fan:nieMae.

pursuant to, and subject to the limitations of, the Direct Pay Irrevocable Transferable Credit Enhancement lnstrument(the "Credit Facility") described herein. The Credit Facility may be replaced by an Alternate Credit Facility at the option of the Borrower; such replacement will cause a mandatory tender of the Bonds.

Fannie Mae's participation in the financing may be limited. If the Conditions to Conversion (set forth in the Supplemental Financing Agreement, dated as of November 1, 2001 (the "Supplemental Financing Agreement"), among Fannie Mae, The Northwestern Mutual Life Insurance Company, a Wisconsin corporation, in its capacity as both Construction Administrator and Guarantor (each as defined herein), Berkshire Mortgage Finance Limited Partnership, a Massachusetts limited partnership, as Loan Servicer and Ote Borrower, relating primarily to completion of rehabilitation and stabilization of the Mortgaged Property at a specified level of occupancy) of the Loan from the Construction Phase to the Permanent Pl1ase (as each such term 1s defined herein) are not satisfied (or waived by Fannie Mae) on or before the Expiration Date specified in the Supplemental Financing Agreement, the Bonds will be subject to mandatory redemption, or, at the direction of the Guarantor, purchase, in whole ata price equal to the princlf· al amount of the Bonds to be redeemed or purchased, plus accrued interest on the Bonds to the redemption or purchase date without premiwn. The price ofanrsuch redemption or purchase in whole wi be paid with funds provided under the Credit Facility. If Conditions to Conversion are limely satisfied (or waived by Fannie Mae)1 the Bonds will not be subJect to mandatoryredemptionorpurchase for failure of Conversion (as defined herein) to occur. There can be no assurance that Conversion will occur. If Conversion does occur, me Bonds are nevertheless subject to mandatory redemption mp art after Ote Conversion Date if, on or before November 30, 2006, if Fannie Mae determines that themaximwn principal amountofthe Loan that can be supported by Ote ProJect under Fannie Mae's underwriting standards is less than the then outstanding principal amount of the Loan, as further descnbed herein.

The Bonds will initially be issued as weekly variable rate demand bonds and will bear interest at a Weekly Variable Rate to be determined on a weekly basis as described herein. Interest on the Bonds will be payable on the fifteenth day of each month (each, an "Interest Payment Date''), commencing December 15, 200 I. Subject to satisfaction of certain conditions in the Indenture, the Bonds may be adjusted to one oftlie other interest rate Modes permitted byOte Indenture (other permitted Modes bein_gthe Reset Rate and Ote Fixed Rate). Ifthc Bonds are to be adjusted to one of the other Modes, the Bonds will be subject to mandatory tender for purchase on the proposed Adjustment Date (without regard to wheOter each o(the conditions to the adjustment is satisfied and, therefore, without regard to whether the adjustment actually occurs) and the Bondholders will not have the right to retain their Bonds. See ''THE BONDS-Mandatory Tender and Purchase" herein. In addition, subject to satisfaction of certain conditions in Ote Indenture, interest on the Series F Bonds may become excludable from gross income for purposes offederalincome taxation. Should this occur, Ote Series F Bonds will be subject to mandatory tender for purchase in whole on the proposed Tax.Exempt Conversion Date (as defined herein) and the Bondholders will not have the right to retain Oteir Series F Bonds. See "THE BONDS - Tax-Exempt Conversion of Series F Bonds" herem.

THIS OFFICIAL STATEMENT DESCRIBES THE BONDS ONLY DURING THE INITIAL WEEKLY VARIABLE RATE PERIOD FOR THE BONDS, WHICH IS THE PERIOD BEGINNING ON THE CLOSING DATE AND ENDING ON THE DAY PRECEDING THE DATE ON WHICH THE INTEREST RATE ON THE BONDS IS ADJUSTED TO A RESET RATE OR TO THE FIXED RATE. IT IS NOT INTENDED TO DESCRIBE THE BONDS SUBSEQUENT TO THEIR ADJUSTMENT TO A RESET RATE OR TO THE FIXED RATE.

The Bonds are issuable only as fully registered bonds, wiOtout coupons, in the denomination of $100,000 or any integral multiple of $5,000 in excess thereof. The Bonds will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC''), Purchases of beneficial interests in the Bonds will be made in book•enlry·only fonn. DTC will act as securities depository for the Bonds. So long as Ote Bonds are registered in the name of Cede & Co., as nominee ofDTC, references herein to the registered owners of the Bonds shall mean Cede & Co. and shall not mean the beneficial owners of the Bonds. Purchasers of beneficial interests in the Bonds will not receive physical delivery of Bonds. Payments of principal of, premium, if any, and interest on Ote Bonds and the payment of the purchase price of tendered Bonds will be made directly to DTC or its nominee, Cede & Co., by the Trustee, so long as DTC is Ote registered owner of the Bonds. DTC will remit such payments to the applicable DTC Participants. The disbursements of such payments will be made by DTC participants to the beneficial owners of the Bonds. See ''THE BONDS - Book-Enlry·Only System" herein, .

So long as the Bonds bear interest at a Weekly Variable Rate, the re~stered owners of the Bonds will have Ote right to tender their Bonds for purchase to Chase Manhattan Bank and Trust Company, National Association, as Tender Agent, at its Principal Office (identified m this Official Statement), on any Business dayupou seven days' written notice. The Bonds are also subject to ma11datory tender and purchase on eachproposed Adjustment Date and under certain other circumstances as provided in the Indenture and described herein. See "THE BONDS- Optional Tender" and "TIIE BONDS - Mandatory Tender and Purchase" herein.

The Bonds are subject to speeial mandatory redemption and optional redemption prior to maturity as descried herein. See "THE BONDS - Redemption Provisions" herein, THE BONDS ARE ISSUED PURSUANT TO THE LAW AND THE ACT AND ARE LIMITED OBI1GA TIO NS OF THE ISSUER. NEITHER THE CITY COUNCIL OF THE ISSUER

NOR ANY OFFICIAL OR EMPLOYEE OF THE ISSUER NOR ANY PERSON EXECUTING THE BONDS· SHALL BE LlABLE PERSONALLY ON THE BONDS OR BE SUBJECT TO ANY PERSONALL1ABIUTYORACCOUNTABILITYBYREASONOFTHEIR1SSUANCE. THEBONDSANDTHEINTERESTTI-IBREONARELIMITEDOBUGATIONSOFTI-IBISSUER,PAYABLE ONLY FROM THE SECURITY. NEITHER THE ISSUER, THE STATE NOR ANY OTHER POLITICAL CORPORATION OR SUBDIVISION OR AGENCY THEREOF SHAU, BE OBLIGATED TO PAY THE PRINCIPAL OF SUCH BONDS OR THE INTEREST THEREON OR OTHER COSTS INCIDENT THERETO EXCEPT FROM THE MONEY PLEDGED THEREFOR. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE NOR ANY POLITICAL CORPORATION OR SUBDIVISION OR AGENCY THEREOF NOR THE FAJTH AND CREDIT OF THE ISSUER IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON TIIE BONDS OR OTHER COSTS INCIDENT THERETO. THE BONDS ARE NOT A DEBT OF THE UNITED STATES OF AMERICA OR ANY OTHER AGENCY THEREOF AND ARE NOT GUARANTEED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA.

FANNIE MAE'S OBLIGATIONS WITH RESPECT TO THE BONDS ARB SOLELY AS PROVIDED IN THE CREDIT FACILITY SO LONG AS THE CR.EDIT FACIIITY IS IN EFFECT AND WILL BE LlMITBD SOLELY TO ITS OBLIGATIONS THEREUNDER THE OBLIGATIONS OF FANNIE MAE UNDER THE CREDJT FACILITY WILL BB OBUGATIONS SOLELY OF FANNIE MAE. THE OBLlGATIONS OF FANNIE MAE ARE NOT BACKED BY THE FULL FAITH AND CREDIT OF THE UNITED ST ATES OF AMERICA, BUT BY THE CREDIT OF FANNIE MAE, A FEDERAU., Y CHARTERED STOCKHOLDER-OWNED CORPORATION.

This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read Ote entire Official Statement to obtain information essential to the making of an infonned inveslment decision.

The Bonds are offered when, as and ifissued, subject to prior sale, to withdrawal or modification of the offerwithoutnoticfl and to the approvaloflegality by Knt.ak Rock LLP, Omaha, Nebraska and Arter & Hadden !LP, Los Angeles, California, Co~Bond Counsel. Certain legal matters will be passed upon for Fannie Mae by its Legal Deparbnentand by Arent Fox Kintner Plotkin & Kahn, PLLC, Washington, D.C., for the Borrower by the Law DepartmentofThe Northwestern Mutual Life Insurance Company, Milwaukee, Wisconsin, by Foley & Lardner, Milwaukee, Wisconsin and by Rutan & Tucker, LLP, Costa Mesa, California, for the Trustee by Davis Wright Tremaine, UP, San Ansehno, California and for Newman and Associates, Inc. by Ritter Eichner & Norris PLLC, Washington, D.C. It is expected Otat the Bonds will be available for delivery in book--entry form through the facilities ofDTC in New York, New York on or about November 30, 2001.

Newman & Associates, Inc. November 30, 2001

No dealer, broker, salesman or other person has been authorized by the Issuer, the Borrower, Fannie Mae, the Underwriter or the Remarketing Agent to give any information or to make any representations other than those contained in this Official Statement and, if given or made, such other information or representation must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer tp sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale.

The information in this Official Statement has been obtained from the Issuer, the Borrower, Fannie Mae (to the limited extent noted below) and DTC and other sources which are believed to be reliable but is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation of, the Underwriter, the Remarketing Agent, the Issuer, except with respect to the description under the captions "THE ISSUER" and "NO LITIGATION'' (as it relates to the Issuer), or Fannie Mae, except with respect to the description under the caption "FANNIE MAE."

The Issuer has not provided or approved any information in this Official Statement except with respect to the information under the captions "THE ISSUER" and "NO LITIGATION" (as it relates to the Issuer) and takes no responsibility for any other information contained in this Official Statement.

Fannie Mae has not provided or approved any information in this Official Statement except with respect to the description under the caption "FANNIE MAE," takes no responsibility for any other information contained in this Official Statement, and makes no representation as to the contents of this Official Statement ( other than with respect to the description under the caption "FANNIE MAE"). Without limiting the foregoing, Fannie Mae makes no representation as to the suitability of the Bonds for any investor, the feasibility or performance of the Project, or compliance with any securities, tax or other laws or regulations. Fannie Mae's role with respect to the Bonds is limited to providing the Credit Facility to the Trustee.

The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale hereunder shall, under any circumstances, create any implication that there has been no change in the information referenced herein since the date hereof.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS WHICH STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE BONDS. THEUNDERWRITERMAYOFFERANDSELLTHEBONDSTOCERTAINDEALERSAND DEALER BANKS AND OTHERS AT A PRICE LOWER THAN THE PUBLIC OFFERING PRICE STATED ON THE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICE MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER.

THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION ORREGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

TABLE OF CONTENTS

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I THE ISSUER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 THE BONDS ....................................................................... 7 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 CERTAIN BONDHOLDERS' RISKS .................................................. 20 FANNIE MAE ..................................................................... 21 THE BORROWER AND THE PROJECT .. . .. .. .. .. . .. .. . .. . . . . .. . . . . . . . . . . . . . . .. . . . . . . 22 THE LOAN SERVICER . .. . .. .. . .. .. .. .. .. .. .. . . . .. .. . .. .. . . .. . . . . . . . . . . .. . . .. . . . . . . 25 TAX MATTERS ................................................................... 25 LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 NO LITIGATION .. . .. . .. . . .. . . . . .. .. .. . . .. .. .. .. .. . . . .. . . .. . . . . . . . . . . .. .. .. . . . . . . . 27 RATING .......................................................................... 27 UNDERWRITING .. .. . .. . . .. . . .. . .. .. .. . . .. .. .. .. .. . .. . .. . .. . . . . . . . . . . .. . .. .. . . . . .. 28 CONTINUING DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

EXHIBIT A- PROPOSED FORM OF OPINION OF CO-BOND COUNSEL EXHIBIT B- SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE EXHIBIT C- SUMMARY OF CERTAIN PROVISIONS OF THE FINANCING AGREEMENT EXHIBIT D- SUMMARY OF CERTAIN PROVISIONS OF THE REGULATORY

AGREEMENT EXHIBIT E- EXCERPT FROM THE REIMBURSEMENT AGREEMENT EXHIBIT F - FORM OF CREDIT FACILITY

[This Page Intentionally Left Blank]

OFFICIAL STATEMENT

$23,600,000 The City of Los Angeles Variable Rate Demand

Multifamily Housing Revenue Bonds (San Regis Project)

Series 2001E

$6,400,000 The City of Los Angeles Variable Rate Demand

Taxable Multifamily Housing Revenue Bonds (San Regis Project)

Series 2001F

INTRODUCTION

The following introductory statement is subject in all respects to more complete information contained elsewhere in this Official Statement. The order and placement of materials in this Official Statement, which includes the cover page and Exhibits hereto, are not to be deemed to be a determination of relevance, materiality or relative importance, and this Official Statement, including the cover page and Exhibits hereto, must be considered in its entirety. All capitalized terms used in this Official Statement that are not otherwise defined herein shall have the meanings ascribed to them in the Indenture, the Financing Agreement, the Regulatory Agreement, the Reimbursement Agreement and the Credit Facility (as each such term is hereinafter defined).

The purpose of this Official Statement is to set forth certain information regarding the Variable Rate Demand Multifamily Housing Revenue Bonds (San Regis Project) Series 2001E in the aggregate principal amount of$23,600,000 (the "Series E Bonds") and the Variable Rate Demand Taxable Multifamily Housing Revenue Bonds (San Regis Project) Series ZOOIF in the aggregate principal amount of $6,400,000 (the "Series F Bonds," and together with the Series E Bonds, the "Bonds") to be issued by The City of Los Angeles (the "Issuer"). The Bonds are being issued pursuant to Chapter 7 of Part 5 of Division 31 of the Health and Safety Code of the State of California, as amended (the "Act"), and an authorizing resolution adopted by the Issuer on November 9, 2001 (the "Resolution"). The Bonds are being issued and delivered pursuant to a Trust Indenture, dated as of November 1, 2001 (the "Indenture"), by and between the Issuer and the Chase Manhattan Bank and Trust Company, National Association, as trustee (the "Trustee"). Certain capitalized terms used herein are defined in "EXHIBIT B -SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE" attached hereto.

The Bonds are being issued to provide funding for a loan (the "Loan") to be made by the Issuer to Green Room Properties, LLC, a Delaware limited liability company (the "Borrower"). The proceeds of the Loan will be used to pay (i) costs of a redevelopment project, specifically, the acquisition and rehabilitation ofa 390-unitmultifamilyresidential project and (ii) for certain costs ofissuance of the Bonds. The project, to be known as San Regis Apartments (the "Project" or "Mortgaged Property"), is located in Van Nuys, California. The Loan will be made pursuant to a Financing Agreement, dated as of November I, 2001 (the "Financing Agreement"), among the Issuer, the Borrower and the Trustee. Pursuant to the Indenture, the Issuer will assign the Financing Agreement (including all of the rights of the Issuer thereunder except for the Issuer's Reserved Rights), together with other property comprising the Trust Estate, to the Trustee for the benefit of the registered owners of the Bonds and Fannie Mae ("Fannie Mae" or the "Credit Provider"), as their interests may appear.

The Issuer will originate the Loan on the Closing Date. The Loan will be evidenced by a Multifamily Note (the "Note") executed by the Borrower in favor of the Issuer and secured by a first lien priority Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing

encumbering the Project (the "Security Instrument"). The Note is a nonrecourse obligation of the Borrower subject to certain limited exceptions. The principal amount and payment provisions of the Note have been established and structnred so that (a) the aggregate principal amount of the Note will equal the aggregate principal amount of Outstanding Bonds and (b) the interest payable on the Note will not be less than the interest payable on the Outstanding Bonds. The payments required to be made by the Borrower under the Note, if timely made by the Borrower, are intended to be sufficient in amount to pay, when due, the principal of and interest on the Outstanding Bonds. Payments on the Note will be made by the Borrower to Berkshire Mortgage Finance Limited Partnership, a Massachusetts limited partnership (the "Loan Servicer"), the Farmie Mae seller/servicer designated to service the Loan for Fannie Mae.

The Loan will be made by the Issuer in accordance with the requirements ofFarmie Mae and subject to the terms and conditions of a Commitment (the "Fannie Mae Commitment") issued by Fannie Mae to the Loan Servicer. Under the Fannie Mae Commitment, Fannie Mae has agreed, in connection with the Loan, but subject to the satisfaction of the terms and conditions of the Fannie Mae Commitment, to provide credit enhancement and liquidity support for the Bonds pursuant to, and subject to the limitations of, a Direct Pay Irrevocable Transferable Credit Enhancement Instrument (the "Credit Facility") provided to the Trustee. The obligation of the Borrower to reimburse Farmie Mae for any funds provided by Farmie Mae under the Credit Facility will be set forth in a Reimbursement Agreement, dated as ofNovember l, 2001 (the "Reimbursement Agreement," an excerpt thereof containing the Events of Default and Remedy provisions is attached hereto as Exhibit E), between the Borrower and Fannie Mae. See "SECURITY FOR THE BONDS - Credit Facility" herein.

On the date of issuance and delivery of the Bonds (the "Closing Date"), all of the Issuer's right, title and interest in and to the Loan, including the Note, the Security Instrument and the other Loan Documents (as defined herein) will be assigned by the Issuer to the Trustee and Farmie Mae, as their interests may appear, and upon such assignment, will be part of the Trust Estate securing the Bonds. Pursuant to an Assignment and Intercreditor Agreement, dated as of November 1, 2001, by and among the Issuer, Farmie Mae and the Trustee, and acknowledged, accepted and agreed to by the Borrower (the "Assignment"), the right, power and authority to make decisions in connection with the Loan and the Bonds and under the Loan Documents and the Bond Documents will be vested in Fannie Mae.

Fannie Mae's credit and liquidity support for the Bonds will not extend beyond the Construction Phase (as defined in the Supplemental Financing Agreement, dated as of November 1, 2001 (the "Supplemental Financing Agreement"), among Fannie Mae, The Northwestern Mutual Life Insurance Company, a Wisconsin corporation, in its capacity as construction administrator (the "Construction Administrator") and as guarantor (the "Guarantor"), the Loan Servicer and the Borrower) unless the Conditions to Conversion (as described below) set forth in the Supplemental Financing Agreement are satisfied on or before the Expiration Date set forth in the Supplemental Financing Agreement ( or, to the extent not satisfied, are waived by Fannie Mae).

The Conditions to Conversion include, among other things, completion of rehabilitation of the Mortgaged Property and the achievement of a specified level of occupancy from the leasing of units in the Mortgaged Property. No assurance can be given that all of the Conditions to Conversion will be satisfied or that other events or circumstances may or may not occur as a result of which Conversion will not occur.

If the Conditions to Conversion set forth in the Supplemental Financing Agreement are satisfied on or before the Expiration Date specified in the Supplemental Financing Agreement (or, to the extent not satisfied, are waived by Fannie Mae), the Loan will convert from the Construction Phase to the Permanent

2

Phase (as defined in the Supplemental Financing Agreement) ("Conversion") and Fannie Mae's participation in the financing will continue. If, however, the Conditions to Conversion are not satisfied on or before the Expiration Date ( or, to the extent not satisfied, are not waived by Fannie Mae) the Loan will not convert from the Construction Phase to the Permanent Phase, and the Bonds will be subject to mandatory redemption in whole. Any such mandatory redemption will be at a redemption price equal to the principal amount of the Bonds plus accrued interest to the Redemption Date. No such redemption will be made at a premium. In the event of such a mandatory redemption in whole, the redemption price is to be paid with funds provided under the Credit Facility. The Credit Facility will then terminate in accordance with its terms. Alternatively, in lieu of such redemption, the Bonds may be purchased by the Trustee for the account of the Guarantor. See "THE BONDS - Redemption" herein. In either case, the Bondholders will be required to deliver their Bonds for redemption or purchase, as the case may be. The Expiration Date specified in the Supplemental Financing Agreement is June 15, 2004; the Loan Servicer may request one 6-month extension of the Expiration Date. The grant of any such extension is in the sole discretion of Fannie Mae.

At Closing, the Borrower will enter into an Achievement Agreement (the "Achievement Agreement") with Fannie Mae and arrange for delivery to Fannie Mae of an irrevocable letter of credit (the "Letter of Credit") to, and for the sole benefit of, Fannie Mae in an amount equal to the original principal amount of the Series F Bonds ($6,400,000). The Letter of Credit will expire on December 31, 2006. The sole purpose of the Letter of Credit is to provide additional credit and liquidity support to Fannie Mae in the event that Conversion occurs but (i) the Conversion Date Loan Amount (as defined below) is less than $30,000,000 (the original principal amount of the Loan and the Bonds) and (ii) the Final Permanent Phase Loan Amount (as defined below), determined no later than November 30, 2006(the "Final Determination Date"), is less than the then outstanding principal amount of the Loan. The Letter of Credit does not secure the Bonds.

If Conversion occurs, the Loan Servicer will determine the maximum principal amount of the Loan that, based on Fannie Mae's underwriting standards, can be supported by the Mortgaged Property as of the Conversion Date (the "Conversion Date Loan Amount"). If the Conversion Date Loan Amount is equal to or greater than $30,000,000 (the original principal amount of the Loan and the Bonds), the Letter of Credit will be returned to its issuer. If, however, the Conversion Date Loan Amount is less than $30,000,000, Fannie Mae will continue to hold the Letter of Credit as additional security pending determination of the Final Permanent Phase Loan Amount (which determination will be made not later than the Final Determination Date). The principal amount of the Letter of Credit is subject to reduction if the Conversion Date Loan Amount is greater than $23,600,000 (the original principal amount of the Series E Bonds and the amount projected by the Loan Servicer, as of the Closing Date, to be the Conversion Date Loan Amount) or upon any determination after the Conversion Date and prior to the Final Determination Date thattheprincipal amount of the Loan that can be supported by the Mortgaged Property applying Fannie Mae's underwriting standards is greater than the Conversion Date Loan Amount or greater than the amount determinated on any earlier interim determination date. If the Conversion Date Loan Amount is less than $23,600,000, the Borrower must arrange for delivery of a replacement letter of credit in an amount equal to the difference between $30,000,000 and the Conversion Date Loan Amount or must prepay the Loan in part in an amount such that, following the prepayment, the Letter of Credit is in an amount equal to the difference between the outstanding principal amount of the Loan and the Conversion Date Loan Amount. The Loan Servicer is required to make a final determination of the principal amount of the Loan that can be supported by the Mortgaged Property under Fannie Mae's underwriting standards (the "Final Permanent 'Phase Loan Amount") on or before the Final Determination Date. If the Final Permanent Phase Loan Amount is less than the then outstanding principal amount of the Loan, the Loan will be subject to mandatory prepayment in an amount sufficient to reduce the outstanding principal amount of the Loan to the Final Permanent Phase Loan Amount. In that event, the Bonds will be subject to redemption in a:corresponding principal amount upon

3

principal amount upon the Trustee's receipt of written notice from Fannie Mae which (i) states that Fannie Mae has, in accordance with the Achievement Agreement, determined the Final Permanent Phase Loan Amount, (ii) sets forth the Final Permanent Phase Loan Amount and the difference between the then outstanding principal amount of the Loan and the Final Permanent Phase Loan Amount (the "Loan Difference"), (iii) states that the Loan is subject to mandatory prepayment in part in an amount equal to the Loan Difference, and (iv) directs the Trustee to effect a mandatory redemption of a corresponding principal amount of the Bonds.

Certain events described in the Supplemental Financing Agreement may also result in the prepayment of the Loan and a corresponding mandatory redemption of the Bonds. See "THE BONDS -Redemption Provisions - Mandatory Redemption" herein.

In order to assure compliaoce with the applicable provisions of the Internal Revenue Code of 1986 (the "Code"), the Borrower, the Trustee and the Issuerare entering into an Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenaots, dated as of November 1, 2001 (the "Regulatory Agreement"), which requires that 20% of the units in the Project be occupied by individuals or families of low income. See "EXHIBIT D- SUMMARY OF CERTAIN PROVISIONS OF THE REGULATORY AGREEMENT" attached hereto. The Project is also subject to additional restrictions. See "THE BORROWER AND THE PROJECT."

Any failure of the Borrower to comply with the terms of the Regulatory Agreement may cause interest on the Series E Bonds (and if the Tax-Exempt Conversion Date has occurred, the Series F Bonds) to be included in the gross income of the owners thereof for federal income tax purposes, possibly retroactively as well as prospectively. See "TAX MATTERS" herein. None of the Trustee, the Issuer or the Bondholders may cause an acceleration or redemption of any of the Bonds solely because of a default by the Borrower under the Regulatory Agreement or because interest on the Series E Bonds (and if the Tax-Exempt Conversion Date has occurred, the Series F Bonds) becomes includable in the gross income of the owners thereof for federal income tax purposes.

Fannie Mae has designated the Loan Servicer to service the Loan for Fannie Mae. Fannie Mae may subsequently designate another eligible servicing institution to service the Loan for Fannie Mae or may elect to service the Loan itself. Neither Fannie Mae nor the Loan Servicer will have any responsibility to monitor the Borrower's compliance with the requirements of the Regulatory Agreement.

THIS OFFICIAL STATEMENT DESCRIBES THE BONDS ONLY FOR THE PERIOD BEGINNINGONTHECLOSINGDATEANDCONTINUINGUNTIL THEFIRST ADWSTMENTDATE APPLICABLE TO THE BONDS. DURING SUCH PERIOD, PAYMENTS DUE ON THE BONDS ARE SECURED BY THE CREDIT FACILITY DESCRIBED HEREIN. THE CREDIT FACILITY ALSO SECURES THE PURCHASE PRICE OF BONDS TENDERED PURSUANT TO THE INDENTURE.

THE BONDS ARE ISSUED PURSUANT TO THE LAW AND THE ACT AND ARE LIMITED OBLIGATIONS OF THE ISSUER. NEITHER THE CITY COUNCIL OF THE ISSUER NOR ANY OFFICIAL OR EMPLOYEE OF THE ISSUER NOR ANY PERSON EXECUTING THE BONDS SHALL BE LIABLE PERSONALLY ON THE BONDS ORBE SUBJECT TO ANY PERSONAL LIABILITY OR ACCOUNTABILITY BY REASON OF THEIR ISSUANCE. THE BONDS AND THE INTEREST THEREON ARE LIMITED OBLIGATIONS OF THE ISSUER, PAYABLE ONLY FROM THE SECURITY. NEITHER THE ISSUER, THE STATE NOR ANY OTHER POLITICAL CORPORATION OR SUBDIVISION OR AGENCY THEREOF SHALL BE OBLIGATED TO PAY THE PRINCIPAL OF

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SUCH BONDS OR THE INTEREST THEREON OR OTHER COSTS INCIDENT THERETO EXCEPT FROM THE MONEY PLEDGED THEREFOR. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE NOR ANY POLITICAL CORPORATION OR SUBDIVISION OR AGENCY THEREOF NOR THE FAITH AND CREDIT OF THE ISSUER IS PLEDGED TO THE PAYMENTOFTHEPRINCIPALOF,PREMIUM,IFANY,ORINTERESTONTHEBONDSOROTHER COSTS INCIDENT THERETO. THE BONDS ARE NOT A DEBT OF THE UNITED STATES OF AMERICA OR ANY OTHER AGENCY THEREOF AND ARE NOT GUARANTEED BY THE FULL FAITHANDCREDITOFTHEUNITED STATES OF AMERICA.

FANNIE MAE'S OBLIGATIONS WITH RESPECT TO THE BONDS ARE SOLELY AS PROVIDED IN THE CREDIT FACILITY SO LONG AS THE CREDIT FACILITY IS IN EFFECT AND WILL BE LIMITED SOLELY TO ITS OBLIGATIONS THEREUNDER. THE OBLIGATIONS OF FANNIEMAEUNDERTHECREDITFACILITYWILLBEOBLIGATIONSSOLELYOFFANNIEMAE. THE OBLIGATIONS OF FANNIE MAE ARE NOT BACKED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA, BUT BY THE CREDIT OF FANNIE MAE, A FEDERALLY CHARTERED STOCKHOLDER-OWNED CORPORATION.

Summaries of the Indenture, the Financing Agreement, the Regulatory Agreement and an excerpt of the events of default and remedies provisions of the Reimbursement Agreement are attached as Exhibits to this Official Statement as is the form of the Credit Facility. All references herein to the Indenture, the Financing Agreement, the Regulatory Agreement, the Reimbursement Agreement and the Credit Facility and all other documents and agreements are qualified in their entirety by reference to such documents and agreements, and all references to the Bonds are qualified by reference to the form thereof included in the lndenture, copies of which are available for inspection at the corporate trust office of the Trustee located at Chase Manhattan Bank and Trust Company, National Association, Suite 3800, 101 California Street, San Francisco, California 94111, Corporate Trust Services.

THE ISSUER

General Description

The Issuer is a municipal corporation and charter city originally incorporated in 1850. On June 8, 1999, an election was held and a new city charter was approved. The new charter became operative on July 1, 2000. The new charter made the following significant changes from the previous charter, among others: increased authority for the mayor, particularly over the administration of City departments; decreased authority for the Council (as defined below), particularly over decisions by boards and commissions; increased authority for the Controller, including conducting performance audits of departments; changes to rules regarding control and settlement of litigation; an advisory redistricting commission; a system of self­selected advisory neighborhood councils and a Department of Neighborhood Empowerment; a new Office of Finance; and an enlarged city planning commission and area planning commissions. The current mayor­council form of City government and an elected City Attorney and Controller are unchanged. Under the Act, the Issuer is empowered to issue revenue bonds for the purpose, among others, of financing and refinancing multifamily residential rental developments.

The Issuer is governed by the Mayor and the City Council (the "Council"). The Mayor is elected at large for a four-year term. As executive officer of the Issuer, the Mayor supervises the administrative process of the Issuer and works with the Council in matters relating to legislation, budget and finance. The

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Mayor recommends and submits the annual budget to the Council and passes upon subsequent appropriations and transfers, approves or vetoes ordinances, and appoints certain city officials and commissioners. As prescribed by the Issuer's Charter and City ordinances, the Mayor operates an executive department, of which he is the ex-officio head. The current Mayor, James K. Hahn, was elected to his first term in the June, 2001 election.

The Council, the governing body of the Issuer, is a full time council and enacts ordinances subject to the approval or veto of the Mayor. The Council may override the veto of the Mayor by a two-thirds vote. The Council orders elections, levies taxes, authorizes public improvements, approves contracts, adopts zoning, and other land use controls and adopts traffic regulations. The Council adopts or modifies the budget proposed by the Mayor and provides the necessary funds, facilities, equipment and supplies for the budgetary departments and offices of the .Issuer. The Council creates positions, fixes salaries and authorizes the number of employees in budgetary departments. The Council consists of15 members elected by district for four-year

terms.

The other two elective offices of the Issuer are the Controller and the City Attorney, both elected for four-year terms. The Controller is the chief accounting office for the Issuer. The current Controller, Laura Newao Chick, was elected to her first term in the June, 2001 election. The City Attorney is attorney and legal advisor to the Mayor, the Council and all officers, boards and departments of the Issuer, and prosecutes misdemeanors. The current City Attorney, Rockard J. Delgadillo, was elected to his first term in the June, 2001 election.

The Chief Administrative Officer, appointed by the Mayor and confirmed by the Council, is the chief financial advisor to the Mayor and Council and reports directly to both. William T. Fujioka is serving as Chief Administrative Officer.

The City Treasurer, appointed by the Mayor and confirmed by the Council, receives and is the custodian of funds of the Issuer and affiliated entities. Joya C. DeFoor is serving as the City Treasurer.

The Issuer has 36 departments, bureaus, commissions and offices for which operating funds are annually budgeted by the Council. In addition, five departments (the Departments of Water and Power, Harbor, Airports and the two pension systems), the Community Redevelopment Agency and the Housing Authority are under the control of boards appointed by the Mayor and confirmed by the Council.

Los Angeles Housing Department

Effective August 12, 1990, the Council adopted an ordinance creating a new department which, pursuant to subsequent action taken in March of 1993, is called the Los Angeles Housing Department (the "Housing Department"). The Housing Department includes the Housing Development Division, the Housing Operations Division, the Rent Stabilization Division, the Planning Unit and the Administrative Unit. The Housing Development Division was transferred to the Housing Department in its entirety from the Issuer's Community Development Department (the "CDD"), of which it had been an integral part since the formation of the CDD in 1977. The Housing Department is under the management and control of a General Manager appointed by the Mayor and approved by the Council.

The Housing Development Division designs, implements and administers a variety of programs to provide quality housing for very low-, low- and moderate-income residents within the Issuer's jurisdiction. The Housing Development Division is funded mainly through the Housing and Community Development

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Act of 1992, as amended. The Housing Development Division concentrates its efforts on the rehabilitation, production and preservation of affordable housing units.

The goal of the housing production program, administered and operated by the Housing Development Division, is to provide newly constructed and rehabilitated affordable housing units for rent or sale to very low-, low- or moderate-income households. This is accomplished through the coordination of public and private sector resources, including the use of HUD-subsidized programs, land write-down assistance, tax­exempt bond financing and other available resources.

Affordable Housing Commission

Concurrently with the creation of the Housing Department, the Issuer created an Affordable Housing Commission (the "Commission") consisting of seven members. Four of the members are appointed by the Mayor and three are appointed by the President of the Council. The Commission advises the Mayor, the Council and the General Manager of the Housing Department on housing matters. The Commission may conduct public meetings and hearings to obtain information and input on housing issues and, in turn, make recommendations on housing policies and goals to meet the Issuer's affordable housing needs.

Prior Housing Bond Issues of the Issuer

In 1980, the Issuer initiated its bond program for affordable housing. Since that time, it has sold approximately $1.1 billion of multifamily housing revenue notes and bonds and approximately $50,000,000 of construction notes. The Issuer has sold 60 multifamily bond issues and proceeds were used to finance or refinance approximately 258 developments, representing over 15,700 units of rental housing, including approximately 5,100 units affordable for lower income households. The Issuer also sold eleven home mortgage revenue bond issues representing approximately $364,465,000. All of these financings were .completed for the Issuer by the Housing Department or the Community Development Department.

THE BONDS DO NOT CONSTITUTE AN INDEBTEDNESS OF THE ISSUER OR THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. THE BONDS ARE SPECIAL LIMITED OBLIGATIONS OF THE ISSUER PAYABLE SOLELY FROM AMOUNTS PLEDGED TO THE PAYMENT THEREOF PURSUANT TO THE INDENTURE.

THE BONDS

General

THIS OFFICIAL STATEMENT DESCRIBES THE BONDS ONLY DURING THE INITIAL WEEKLY VARIABLE RATE PERIOD FOR THE BONDS, WHICH IS THE PERIOD BEGINNING ON THE CLOSING DATE AND ENDING ON THE DAY PRECEDING THE DATE ON WHICH THE INTEREST RATE ON THE BONDS IS ADWSTED TO A RESET RATE OR TO THE FIXED RATE. IT IS NOT INTENDED TO DESCRIBE THE BONDS SUBSEQUENT TO THEIR ADWSTMENT TO A RESET RATE OR THE FIXED RATE.

Each Series of Bonds is dated and will mature on, respectively, the dated date and maturity date §et forth on the front cover hereof. Interest on the Bonds will be payable to the registered owner thereof, as of

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the close of business on the Record Date, in accordance with the terms set forth in the Indenture, on each Interest Payment Date. The initial rate of interest on the Bonds of each Series will be determined separately for each Series in connection with the initial offering of the Bonds and will be effective through December 5, 200 I. Thereafter, the interest rate on the Bonds of each Series will be determined by Newman and Associates, Inc. or its successor as Remarketing Agent (the "Remarketing Agent"), not later than 4:00 p.m. Eastern Time on each Rate Determination Date and will be the minimum rate of interest necessary, in the professional judgment of the Remarketing Agent, taking into consideration prevailing market conditions, to enable the Remarketing Agent to remarket all of the Bonds of the relevant Series on the applicable Rate Determination Date at par, plus accrued interest, if any, thereon (each a "Weekly Variable Rate"); each Weekly Variable Rate so determined will be effective for the seven day period beginning on Thursday of each week through and including the following Wednesday (each "a Week," as further defmed in the Indenture). The Weekly Variable Rate applicable to any portion of the Series F Bonds converted to a tax­exempt interest rate will be redetermined effective on the Tax-Exempt Conversion Date, if it occurs. The Remarketing Ageot will provide notice of each Weekly Variable Rate (a) before 5:00 p.m., Eastern Time, on the Rate Determination Date by telephone to any Beneficial Owner upon request and to the Loan Servicer and the Guarantor, and (b) not later than the next Business Day, by Electronic Means to the other Remarketing Notice Parties, as specified in the Indenture,. Each Weekly Variable Rate so determined by the Remarketing Agent will be conclusive and binding upon the Remarketing Notice Parties and the Registered Owners. Interest on the Bonds during the Weekly Variable Rate Period will be computed on the basis of a 365 or 366 day year, as applicable, for the actual number of days elapsed.

If during the Weekly Variable Rate Period, the Remarketing Agent fails to determine the Weekly Variable Rate applicable for any Week for the Series E Bonds (and, if the Tax-Exempt Conversion Date has occurred, the Series F Bonds), the interest rate to be borne by the Series E Bonds (and, if the Tax-Exempt Conversion Date has occurred, the Series F Bonds) during such Week will be the latest BMA Index Rate published on or immediately before the Rate Determination Date or, in the event the BMA Index Rate is no longer published, the last Weekly Variable Rate determined by the Remarketing Agent. If the Remarketing Agent fails orrefuses to determine the Weekly Variable Rate applicable for any Week for the Series F Bonds prior to the Tax-Exempt Conversion Date, the interest rate to be borne by the Series F Bonds prior to the Tax­Exempt Conversion Date will be the latest seven day LIBOR rate published on or before the Rate Determination Date. The Trustee shall be entitled to. rely on a certificate of the Remarketing Agent specifying such rate or rates. See "EXHIBIT B - SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE- Definitions".

Tax-Exempt Conversion of Series F Bonds

Upon compliance with the requirements of the Indenture, the Borrower may, prior to the Conversion Date, establish ·a Tax-Exempt Conversion Date. On the Tax-Exempt Conversion Date, the Series F Bonds shall, as provided in the Indenture, be subject to mandatory tender in whole, and will be remarketed by the Remarketing Agent at an interest rate which reflects, with respect to the Series F Bonds being converted to a tax-exempt rate, the excludability of interest on the Series F Bonds from gross income for purposes of federal income taxation. Any Series F Bonds not being converted to a tax-exempt rate shall be remarketed as otherwise provided in the Indenture. At least 15 days prior to the Tax-Exempt Conversion Date (which date must be an Interest Payment Date during a period when the Bonds bear interest at a Weekly Variable Rate) the Borrower must present to the Remarketing Notice Parties written notice of the Tax-Exempt Conversion Date, which notice must be accompanied by an opinion of Bond Counsel addressed to the Issuer, the Trustee and the Credit Provider to the effect that, as of the Tax-Exempt Conversion Date, interest on the portion of the Series F Bonds subject to Conversion will be excludible from gross income for purposes of

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f

federal income taxation. On the Tax-Exempt Conversion Date, the Series F Bonds will be subject to mandatory tender as provided in the Indenture and the Weekly Variable Rate relative to the Series F Bonds shall be reset by the Remarketing Agent as provided in the Indenture and described above.

Adjustment of the Interest Rate on the Bonds

At the option of the Borrower, the interest rate on all Outstanding Bonds of each Series may be adjusted on any Interest Payment Date designated by the Borrower (i) from the Weekly Variable Rate to a Reset Rate for each Series, each for a Reset Period of ten years or more selected by the Borrower, or such shorter period as may be selected by the Borrower with the prior written consent of the Credit Provider or (ii) from the Weekly Variable Rate to the Fixed Rate for each Series (the date of any such adjustment is an "Adjustment Date"). Each such adjustment is subject to several conditions, set forth in the Indenture, including but not limited to, delivery by the Borrower to the Issuer, the Trustee, the Tender Agent, the Credit Provider, the Loan Servicer, the Guarantor and the Remarketing Agent of written notice of the proposed adjustment at least 45 days' prior to the proposed Adjustment Date, together with the written preliminary consent of the Credit Provider to the proposed adjustment, which consent may be subject to the satisfaction ofconditions specified by the Credit Provider. The Indenture also requires that on the Adjustment Date there be delivered an opinion of Bond Counsel stating that the adjustment of the interest rate on each Series of Bonds to a Reset Rate or to the Fixed Rate, as applicable, is authorized and permitted by the Indenture and the laws of the State, and will not adversely affect the exclusion from gross income for federal income tax purposes of the interest payable on the Series E Bonds (and, if the Tax-Exempt Conversion Date has occurred, the Series F Bonds).

Not less than 30 days prior to the proposed Adjustment Date, the Trustee will give notice by first­class mail, postage prepaid, to Bondholders of the proposed Adjustment Date and that all Bonds of each Series are thereupon subject to mandatory tender and purchase. The Bonds of each Series are subject to .mandatory tender and purchase on the proposed Adjustment Date, as set forth in, and in accordance with, the Indenture, whether or not the conditions to the adjustment are satisfied and, therefore, without regard to whether the adjustment occurs. Bondholders will not have the option to retain their Bonds. See "THE BONDS - Mandatory Tender and Purchase" below.

Optional Tender

Subject to the provisions of the Indenture, during the Weekly Variable Rate Period, any Bond will be purchased by the Trustee on behalf of and as agent for the Borrower, but solely from the sources provided in the Indenture, on the demand of the Beneficial Owner thereof, on any Business Day at a purchase price equal to I 00% of the principal amount thereof plus accrued interest, if any, to the date of purchase, upon receipt by the Tender Agent at its Principal Office on any Business Day, of a notice (the "Bondholder Tender Notice") which (a) is accompanied by a guaranty of signature acceptable to the Tender Agent; (b) contains the CUSIP number and principal amount of the Bond ( or portion thereof) to be purchased, provided that the portion of the Bond retained is an Authorized Denomination); and (c) the name, address and taxpayer identification number or social security number of the Beneficial Owner of the Bond demanding such payment; and ( d) the date on which such Bond is to be purchased, which date shall be a Business Day not prior to the seventh day next succeeding the date of the delivery of the Bondholder Tender Notice to the Tender Agent. By delivering a Bondholder Tender Notice, the Beneficial Owner irrevocably agrees to deliver the Tendered Bond (with an appropriate transfer of registration form executed in blank and accompanied by a guaranty of signature satisfactory to the Tender Agent) to the Principal Office of the Tender Agent or any other address designated by the Tender Agent, at or prior to I 0:00 a.m., Eastern Time,

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on the date of purchase specified in the Bondholder Tender Notice; provided, however, that such Bond will be so purchased only if the Bond so delivered to the Tender Agent conforms in all respects to the description thereof in the Bondholder Tender Notice. The determination by the Tender Agent whether a Bondholder Tender Notice complies with requirements of the Indenture and whether Bonds delivered conform in all respects to the description thereof in the Bondholder Tender Notice is in the sole discretion of the Tender Agent and is binding on the Borrower, the Issuer, the Remarketing Agent, the Credit Provider, the Trustee, the Tender Agent, the Loan Servicer, the Guarantor and the Beneficial Owner of the Bonds. A Bondholder Tender Notice will not be effective unless it complies with the above-described requirements, and is received by the Tender Agent at the Principal Office of the Tender Agent prior to 3:30 p.m., Eastern Time, on a Business Day not later than the seventh day preceding the Business Day designated in such Bondholder Tender Notice as the date of purchase.

Any election by a Beneficial Owner to tender a Bond or Bonds ( or portion thereof) for purchase on a Business Day will be irrevocable and will be binding on the Beneficial Owner making such election and on any transferee of such Beneficial Owner. If after delivery to the Tender Agent of a Bondholder Tender Notice, the Beneficial Owner making such election fails to deliver the Bond or Bonds described in the Bondholder Tender Notice to the Tender Agent on the applicable purchase date, the untendered Bond or Bonds or portion thereof ( each an "UntenderedBond" or "UntenderedBonds") described in such Bondholder Tender Notice will be deemed to have been tendered to the Tender Agent for purchase and, to the extent that there is on deposit in the Bond Purchase Fund on the applicable purchase date an amount sufficient to pay the purchase price thereof, such Untendered Bond or Bonds ( or portion thereof) will, on such purchase date, cease to bear interest and no longer be considered to be Outstanding under the Indenture. The Trustee will promptly give notice by registered or certified first-class mail, postage prepaid, to each Beneficial Owner of any Bond which has been deemed to have been purchased, stating that interest on such Bond ceased to accrue on the date of purchase and that moneys representing the purchase price of such Bond are available against delivery thereof at the Principal Office of the Tender Agent. If a Beneficial Owner fails to deliver a Tendered Bond to the Tender Agent on the purchase date, the Issuer will execute and the Tender Agent will authenticate and deliver for redelivery to the purchaser a new Bond in replacement of the Untendered Bond. The replacement of any such Untendered Bond will not be deemed to create new indebtedness, but will be deemed to evidence the indebtedness previously evidenced by the Untendered Bond.

Notwithstanding the above, during any period that the Bonds are issued in book-entry-only form pursuant to the Indenture, (a) any Bondholder Tender Notice delivered as described in the Indenture must also (i) provide evidence satisfactory to the Tender Agent that the party delivering the notice is the Beneficial Owner of the Bonds or a custodian for the Beneficial Owner referred to in the notice, and (ii) if the Beneficial Owner is other than a DTC Participant, identify the DTC Participant through whom the Beneficial Owner will direct transfer; (b) on or before the purchase date, the Beneficial Owner must direct ( or if the Beneficial Owner is not a DTC Participant, cause its DTC Participant to direct) the transfer of such Bonds on the records ofDTC to the account of, or as directed by, the Trustee; and (c) it will not be necessary for Bonds to be physically delivered on the date specified for purchase thereof, but such purchase will be made as if such Bonds had been so delivered, and (d) the purchase price thereof will be paid to DTC. See "THE BONDS - Book-Entry-Only System" below.

Upon surrender of any Bond for purchase in part only, the Issuer will execute and the Tender Agent will authenticate and deliver to the holder thereof a new Bond or Bonds of the same Series, maturity and interest rate, of Authorized Denominations and in an aggregate principal amount equal to the unpurchased portion of the Bond surrendered. ·

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Any Tendered Bonds that have been remarketed will be deemed to continue to be Outstanding for all purposes and will continue to be fully secured by the Indenture until paid at maturity or redemption prior to maturity.

Payment for Tendered Bonds will be made by the Tender Agent at or before 4:00 p.m., Eastern Time, on the date specified in the Bondholder Tender Notice, first, from remarketing proceeds on deposit in the Bond Purchase Fund, second, from proceeds of a payment under the Credit Facility, and third, from funds provided by the Borrower. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS-Credit Facility."

There will be no remarketing of Bonds in connection with any optional tender ofBonds ifthe Trustee shall have given notice to the Remarketing Agent that there shall have occurred and be continuing a Wrongful Dishonor under the Indenture. There will be no purchase of Bonds in connection with any optional tender if the Trustee shall have given notice to the Remarketing Agent that there has occurred and is continuing an acceleration of Bonds pursuant to the Indenture. Payment of the Bonds upon acceleration will be secured by the Credit Facility and will be made in accordance with the provisions of the Indenture.

Mandatory Tender and Purchase

The Bonds are subject to mandatory tender and purchase by the Trustee on behalf of and as agent for the Borrower on each Mandatory Tender Date. Such purchase will be at a purchase price equal to I 00% of the principal amount thereof, plus accrued interest, if any, to the Mandatory Tender Date. In any such event, the holder of any Bond may not elect to retain its Bond. Mandatory Tender Dates include each Adjustment Date (even if a proposed change in Mode fails to occur), each Substitution Date (even if a proposed substitution of an Alternate Credit Facility fails to occur), the Tax-Exempt Conversion Date (with respect to the Series F Bonds only) and each Extension Date. Not less than 30 days prior to any proposed Adjustment Date, not less than 10 days prior to any proposed Substitution Date, not Jess than 10 days prior to any Extension Date (absent the Trustee's receipt of a binding commitment to extend the Alternate Credit Facility then in effect) or not less thanlO days prior to any Tax-Exempt Conversion Date, the Trustee will give notice by first-class mail, postage prepaid to the Bondholders of the proposed Adjustment Date, proposed Substitution Date, Tax-Exempt Conversion Date or Extension Date, as applicable, and that the Bonds (and only the Series F Bondholders in the case of a Tax-Exempt Conversion Date) are required to be tendered on the proposed Adjustment Date (even if a proposed change in Mode fails to occur), proposed Substitution Date ( even if an Alternate Credit Facility is not delivered on the proposed Substitution Date), Tax-Exempt Conversion Date or Extension Date (unless an extension of the Alternate Credit Facility is received prior to the Extension Date), as applicable. Such notice will state that the Bondholders will not have the right to elect to retain their Bonds. Any such notice will be conclusively presumed to have been duly given, whether or not the registered owner actually receives the notice.

In addition, the Bonds are subject to mandatory tender on the earliest practicable date (which shall be a Mandatory Tender Date), as determined by the Trustee, but not Jess than 10 days and not more than 15 days, after notice thereof has been given to Bondholders, which notice shall be given to the Bondholders upon receipt by the Trustee of written notice from the Credit Provider stating that an Event of Default under the Indenture, the Financing Agreement or the Reimbursement Agreement has occurred and directing that the Bonds be subject to mandatory tender rather than mandatory redemption. Immediately upon receipt by the Trustee of such written notice, the Trustee will give notice by first-class mail, postage prepaid to the owners of the Bonds stating (a) that such event has occurred, (b) that such Bonds are required to be tendered

II

on the Mandatory Tender Date specified in such notice, and ( c) that the owners thereof will not have the right to elect to retain their Bonds.

On each Mandatory Tender Date, Bondholders will be required to tender their Bonds to the Tender Agent for purchase by the Trustee on behalf of and as agent for the Borrower. Any Bond which is not so tendered ("Untendered Bond") will be deemed to have been tendered to the Tender Agent as of such Mandatory Tender Date, and, from and after such Mandatory Tender Date, will cease to bear interest and no longer will be considered to be Outstanding under the Indenture. In the event of a failure by a Bondholder to deliver its Bonds on the Mandatory Tender Date, such Bondholder will not be entitled to any payment (including any interest to accrue from and after the Mandatory Tender Date) other than the purchase price for such Untendered Bond, and such Untendered Bond will no longer be entitled to the benefits of the Indenture, except for the purpose of payment of the purchase price of such Untendered Bond. If a Bondholder fails to deliver such Bond to the Tender Agent on the Mandatory Tender Date, the Issuer will execute, and the Tender Agent will authenticate and deliver to the Remarketing Agent for redelivery to the purchaser, a new Bond or Bonds in replacement of the Untendered Bond. The replacement of any such Untendered Bond will not be deemed to create new indebtedness, but will be deemed to evidence the indebtedness previously evidenced by the Untendered Bond.

Notwithstanding the above, during any period that the Bonds are issued in book-entry-only form, ( a) each Beneficial Owner must direct ( or if a Beneficial owner is not a DTC Participant, cause its DTC Participant to direct) the transfer of its Bond(s) on the records ofDTC to the account of, or as directed by, the Trustee; and (b) it will not be necessary for Bond(s) subject to mandatory tender to be physically delivered on the date specified for purchase of such Bond(s), but such purchase will be made as if such Bond(s) had been so de]ivered, and the purchase price of such Bond(s) will be paid to DTC.

Payment for Tendered Bonds will be made by the Tender Agent at or before 4:00 p.m., Eastern Time, on the Mandatory Tender Date, first, from remarketing proceeds on deposit in the Bond Purchase Fund, second, to the extent necessary, from proceeds of a payment under the Credit Facility, and, third from funds providedbytheBorrower. See"SECURITY ANDSOURCESOFPAYMENTFORTHEBONDS-Credit Facility."

There will be no remarketing of Bonds in connection with any mandatory tender of Bonds if the Trustee shall have given notice to the Remarketing Agent that there shall have occurred and be continuing a Wrongful Dishonor under the Indenture. There will be no purchase of Bonds in connection with any mandatory tender of Bonds if the Trustee shall have given notice to the Remarketing Agent that there has occurred and is continuing an acceleration of Bonds pursuant to the Indenture. Payment of the Bonds upon acceleration will be secured by the Credit Facility and will be made in accordance with the provisions of the Indenture.

Redemption Provisions

The Bonds are subject to optional and mandatory redemption at the times and redemption prices set forth in the Indenture.

Optional Redemption. The Bonds are subject to optional redemption in whole or in part upon optional prepayment of the Loan in accordance with the Loan Documents, in Authorized Denominations only, provided that any such redemption will be in such amount that the Bonds remaining Outstanding will be in Authorized Denominations. Optional redemption may be made in accordance with the terms of the

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Indenture during the Weel<ly Variable Rate Period only on an Interest Payment Date or an Adjustment Date at a redemption price equal to 100% of the principal amount redeemed plus accrued interest to the Redemption Date.

The principal of and accrued interest on any Bond being optionally redeemed will be paid from an Advance under the Credit Facility and the premium, if any, will be paid with Available Moneys from a source other than the Credit Facility and from a party other than the Credit Provider. Neither the Issuer, the Credit Provider nor the Loan Servicer will have any obligation to provide funds to be included in any premium. Optional redemption of the Bonds will not occur unless, on or before the Redemption Date, the Trustee has on hand Available Moneys (from a source other than the Credit Provider) in an amount sufficient to pay the premium, if any, on the Redemption Date.

Mandatory Redemption. The Bonds are subject to mandatory redemption, in whole or in part, on the earliest practicable Redemption Date for which timely notice ofredemption can be given pursuant to the Indenture following the occurrence of the event requiring such redemption, as described below. The principal of and accrued interest on any Bond subject to mandatory redemption will be paid from an Advance under the Credit Facility. Bonds will be redeemed at a redemption price equal to 100 percent of the principal amount of such Bonds plus accrued interest to the Redemption Date. Bonds subject to mandatory redemption in part will be redeemed in Authorized Denominations, provided that any such redemption will be in such amount that the Bonds remaining Outstanding will be in Authorized Denominations. If the Trustee receives an amount for the mandatory redemption of Bonds that does not permit the redemption of Bonds in an amount that will cause the Bonds remaining Outstanding to be in Authorized Denominations, Bonds will be redeemed to the maximum extent that will result in the Bonds remaining Outstanding being in Authorized Denominations, with any excess to be held in the Redemption Account.

(a) Casualty or Condemnation. The Bonds will be redeemed in whole or in part in the event and to the. extent that proceeds of insurance from any casualty to, or proceeds of any award from any condemnation of or any award as part of a settlement in lieu of condemnation of the Mortgaged Property ("Proceeds") are applied in accordance with the Security Instrument to the prepayment of the Loan.

(b) Principal Reserve Fund. The Bonds will be redeemed in whole or in part as follows:

(1) on each Adjustment Date in an amount equal to the amount which has been transferred from the Principal Reserve Fund on such Adjustment Date to the Redemption Account pursuant to the Indenture; and

(2) on any Interest Payment Date in an amount equal to the amount which has been transferred from the Principal Reserve Fund on such Interest Payment Date to the Redemption Account pursuant to and for the purposes set forth in the Indenture.

( c) After an Event of Default under the Reimbursement Agreement. The Bonds will be redeemed in whole or in part at the written direction of the Credit Provider (and in the amount specified by the Credit Provider if the redemption is in part) requiring that the Bonds be redeemed following any Event of Default under the Reimbursement Agreement. In no event will such redemption occur later than two Business Days prior to the date, if any, that the Credit Facility terminates on account of the Credit Provider's giving direction to the Trustee to redeem the Bonds in whole.

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( d) Sinking Fund Redemption. The Bonds will be redeemed during the Fixed Rate Period if the Issuer has established a Sinking Fund Schedule, at the times and in the amounts set forth in the Sinking Fund Schedule.

( e) Detennination ofFinal Permanent Phase Loan Amount. The Bonds will be redeemed in part at the written direction ofFannie Mae, and in the amount specified by Fannie Mae, upon the Trustee's receipt of written notice from Fannie Mae (with a copy to the Loan Servicer, the Guarantor and the Bank) which (i) states that Fannie Mae has, in accordance with the Achievement Agreement, determined the Final Permanent Phase Loan Amount (as defined in the Supplemental Financing Agreement), (ii) sets forth the Final Permanent Phase Loan Amount and the difference between the then outstanding principal amount of the Loan and the Final Permanent Phase Loan Amount (the "Loan Difference"), (iii) states that the Loan is subject to mandatory prepayment in part in an amount equal to the Loan Difference, and (iv) directs the Trustee to effect a mandatory redemption ofa corresponding principal amount of the Bonds. See "EXHIBIT B- SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE-Loan Fund."

(t) Failure of Conversion or Borrower Default. The Bonds will be redeemed in whole if the Credit Provider notifies the Trustee that either (i) the Conditions to Conversion have not been satisfied on or before the Expiration Date or (ii) that a Borrower Default (as defined in the Supplemental Financing Agreement) has occurred or (iii) a Guarantor Default Event (as defined in the Supplemental Financing Agreement) has occurred.

(g) Excess Loan Funds. The Bonds will be redeemed in whole or in part in the event and to the extent that amounts on deposit in the Loan Fund are transferred to the Redemption Account pursuant to the fudenture.

fu the event of a redemption of the Bonds in whole, the Bonds may, upon satisfaction of certain conditions set forth in and in accordance with the terms of the Indenture, be purchased in lieu ofredemption.

Partial Redemption

Ifless than all the Outstanding Bonds are called for redemption, the Trustee will select by lot, in such manner as it determines in its discretion, the Bonds, or portions of the Bonds to be redeemed such that the Bonds remaining Outstanding are in Authorized Denominations. fu the selection process (i) any Pledged Bonds Outstanding will be called for redemption before any other Bonds are selected for redemption and (ii) if applicable, the Bonds with the highest interest rate will be called for redemption before any other Bonds are selected for redemption. For the purposes of this section, Bonds which have previously been selected for redemption will not be deemed Outstanding. Notwithstanding the foregoing, the Securities Depository for Book Entry Bonds will selectthe Bonds forredemption within particular maturities according to its stated procedures.

Notice of Redemption

Notice of a redemption of Bonds will be mailed by the Trustee by first-class mail, postage prepaid, not less than ten days before the Redemption Date, to each Registered Owner of the Bonds to be redeemed in whole or in part at the Registered Owner's address appearing on the Bond Register. The Trustee will send a second notice ofredemption by first-class mail, postage prepaid, on or within ten days after the 30th day following the Redemption date to any Bondholder who has not submitted its Bond to the Trustee for payment. At the same time notice of redemption is sent to the Registered Owners, the Trustee will send

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notice of redemption by first-class mail, overnight delivery service or other overnight means, postage or charges prepaid ( oras specified below) (a) to the Rating Agency, (b) if the Bonds are not subject to the book­entry-only system, to certain municipal registered Securities Depositories ( described in the Indenture) which are known to the Trustee, on the second Business Day prior to the date the notice of redemption is mailed to the Bondholders, to be holding Bonds, and ( c) at least two of the national information services ( described in the Indenture) that disseminate securities redemption notices. If notice is given as required by the Indenture, neither the failure to receive notice nor any defect in any notice so mailed will affect the validity of the proceedings for the redemption of such Bonds.

All Bonds so called for redemption will cease to bear interest on the specified date set for redemption, provided funds for their redemption have been duly deposited with the Trustee pursuant to the Indenture and, thereafter, the owners of such Bonds called for redemption shall have no rights in respect thereof, except to receive payment of the redemption price for such Bonds.

Book-Entry-Only System

The Bonds will be issued and delivered on the date of delivery thereof as fully-registered bonds in the name of Cede & Co., as nominee ofDTC, as registered owner of the Bonds. Purchasers of such Bonds will not receive physical delivery of bond certificates. For purposes of this Official Statement, so long as all of the Bonds are immobilized in the custody of OTC, references to Bondholders, holders, Bondowners or Owners mean DTC or its nominee.

The information in this section concerning OTC and the DTC book-entry-only system has been obtained from DTC and none of the parties mentioned herein takes any responsibility for the accuracy or completeness thereof. The Beneficial Owners ( as defined herein) should confirm the following infonnation with DTC or the DTC Participants.

DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities in the name of Cede & Co., DTC's partnership nominee ("Cede"). One fully-registered Bond certificate will be issued for the Bonds in the aggregate principal amount of each maturity and will be deposited with DTC.

DTC is a limited-purpose trust company organized under the New York Banking Law, a ''banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17 A of the Securities Exchange Act of 1934. DTC holds securities that its participants (the "Direct Participants") deposit with DTC. DTC also facilitates the settlement among Direct Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Direct Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is owned by a number ofits Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (the "Indirect Participants" and, together with Direct Participants, the "Participants"). The rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission.

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Purchases of Bonds under the DTC book-entry-only system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ("Beneficial Owner") is in tum to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Participants acting on behalf ofBeneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry-only system for the Bonds is discontinued.

To facilitate subsequent transfers, all Bonds deposited by Participants with DTC are registered in the name ofDTC's partnership nominee, Cede. The deposit of Bonds with DTC and theirregistration in the name of Cede effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

Redemption notices shall be sent to Cede. If less than all of the Bonds are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.

Neither DTC nor Cede will consent or vote with respect to Bonds. Under its usual procedures, DTC mails an Onmibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede' s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date identified in a listing attached to the Onmibus Proxy.

Principal and interest payments on the Bonds will be made to DTC. DTC's practice is to credit Direct Participants' accounts on a payment date in accordance with their respective holdings shown on DTC' s records unless DTC has reason to believe that it will not receive payment on such payment date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as in the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not ofDTC, the Trustee, the Tender Agent, the Borrower, the Remarketing Agent, the Credit Provider or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the Trustee or the Issuer, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. The requirement for physical delivery of Bonds in connection with a demand for purchase or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC's records.

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According to DTC, the foregoing information with respect to DTC has been provided to the industry for informational purposes only and is not intended to serve as a representation, warranty or contract modification of any kind.

THE ISSUER, THE TRUSTEE, THE TENDER AGENT, THE CREDIT PROVIDER, THE LOAN SERVICER, THE REMARKETING AGENT AND THE BORROWER SHALL HA VE NO RESPONSIBILITY OR OBLIGATION WITH RESPECT TO THE ACCURACY OF THE RECORDS OF DTC,CEDE&CO.ORANYDTCPARTICIPANTWITHRESPECTTOANYOWNERSHIPINTEREST IN THE BONDS, THEDELIVERYTOANYDTCPARTICIPANTORANYINDIRECTPARTICIPANT ORANYOTHERPERSON,OTHERTHANCEDE&CO.,ASNOMINEEOFDTC,ASSHOWNONTHE BOND REGISTER, OF ANY NOTICE WITH RESPECT TO THE BONDS, INCLUDING ANY NOTICE OF REDEMPTION, THEPAYMENTTOANYDTCPARTICIPANTORINDIRECTPARTICIPANTOR ANY OTHER PERSON, OTHER THAN CEDE & CO., AS NOMINEE OF DTC, AS SHOWN ON THE BOND REGISTER, OF ANY AMOUNT WITH RESPECT TO PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON, THE BONDS OR ANY CONSENT GIVEN BY CEDE & CO., AS NOMINEE OF DTC. SO LONG AS CERTIFICATES FOR THE BONDS ARE NOT ISSUED PURSUANT TO THE INDENTURE AND THE BONDS ARE REGISTERED TO DTC, THE ISSUER, THE BORROWER, THE CREDIT PROVIDER, THE LOAN SERVICER, THE TENDER AGENT, THE REMARKETING AGENT AND THE TRUSTEE SHALL TREAT DTC OR ANY SUCCESSOR SECURITIES DEPOSITORY AS, AND DEEM DTC OR ANY SUCCESSOR SECURITIES DEPOSITORY TO BE, THE ABSOLUTE OWNER OF THE BONDS FOR ALL PURPOSES WHATSOEVER, INCLUDING WITHOUT LIMITATION (1) THE PAYMENT OF PRINCIPAL AND INTEREST ON THE BONDS, (2) GIVING NOTICE OF REDEMPTION AND OTHER MATTERS WITH RESPECT TO THE BONDS, (3) REGISTERINGTRANSFERSWITHRESPECTTOTHEBONDSAND(4)THESELECTIONOFBONDS FOR REDEMPTION.

DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving notice to the Issuer, the Remarketing Agent, the Tender Agent, the Trustee, the Credit Provider, the Loan Servicer and the Borrower. The Issuer or the Borrower, with the consent of the other, may terminate the services of DTC with respect to the Bonds. Under any such circumstances, unless a successor securities depository is appointed to undertake the functions ofDTC under the Indenture, Bond certificates are required to be printed and delivered as described in the Indenture.

Remarketing Agent

Pursuant to a Remarketing Agreement, dated 11s of November I, 2001 (the "Remarketing Agreement"), between Newman and Associates, Inc. (the "Remarketing Agent") and the Borrower, Newman and Associates, Inc. has been appointed Remarketing Agent. The Remarketing Agent will determine the interest rates on the Bonds in accordance with the Indenture and is required to use its best efforts to remarket the Bonds in accordance with the Indenture and the Remarketing Agreement.

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SECURITY AND SOURCES OF PAYMENT FOR THE BONDS

General

Under the terms of the Indenture, the Bonds are secured by a pledge of the Trust Estate comprised of the following:

(I) all right, title and interest of the Issuer in and to the Loan, including the Note, the Security Instrument and the other Loan Documents and the Financing Agreement, reserving, however, the Reserved Rights;

(2) all rights to receive payments on the Note and under the other Loan Documents, including all proceeds of insurance or condemnation awards;

(3) all right, title and interest of the Issuer in and to the Net Bond Proceeds and the accrued interest, if any, derived from the sale of the Bonds, and all Funds and Accounts under the Indenture (including, without limitation, moneys, documents, securities, Investments, Investment Income, instruments and general intangibles on deposit or otherwise held by the Trustee) but excluding all moneys in the Fees Account, the Rebate Fund and the Costs of Issuance Fund unless and to the extent funded with Net Bond Proceeds (including within such exclusion Investment Income retained in the Costs oflssuance Fund and the Rebate Fund);

(4) all other rights and interests in property, whether tangible or intangible, from time to time conveyed, mortgaged, pledged, assigned or transferred by delivery or by writing of any kind to the Trustee as additional security under the Indenture for the benefit of the Bondholders and the Credit Provider; and

(5) all of the proceeds of the foregoing, including, without limitation, Investments and Investment Income (except as excluded in paragraph 3 above).

The foregoing ( collectively the "Trust Estate") are pledged for the equal and proportionate benefit, security and protection (subject to the terms of the Indenture) of (a) all registered owners of the Bonds, without privilege, priority or distinction as to the lien or otherwise ofany of the Bonds over any of the others of the Bonds and (b) the Credit Provider to secure the payment of all amounts owed to the Credit Provider under the Credit Facility Documents (including the Reimbursement Agreement). The Trust Estate, together with the Credit Facility, comprises the Security for the Bonds. Under the Assignment, the Credit Provider has the right to direct the Trustee to assign the Loan to the Credit Provider, but only upon filing with the Trustee a certification reaffirming the Credit Provider's obligations under the Credit Facility. The Credit Provider is obligated to assign the Assigned Rights (as defined in the Assignment) to the Trustee upon any Wrongful Dishonor (as defined in the Assignment) under the Credit Facility.

Credit Facility

In addition to the other security provided under the Indenture, the Credit Facility provides credit enhancement and liquidity support for the Bonds. The Credit Facility is an irrevocable direct pay obligation of the Credit Provider.

To receive payment under the Credit Facility, the Trustee must present certain certificates under the Credit Facility on or prior to the expiration date of the Credit Facility at the designated office of the Credit

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Provider. The Credit Facility will expire on December 20, 2034 (five days after the stated maturity of the Bonds). The form of the Credit Facility is attached as Exhibit F.

FANNlE MAE'S OBLIGATIONS WITH RESPECT TO THE BONDS ARE SOLELY AS PROVIDED IN THE CREDIT FACILITY SO LONG AS THE CREDIT FACILITY IS IN EFFECT AND WILL BE LIMITED SOLELY TO ITS OBLIGATIONS THEREUNDER. THE OBLIGATIONS OF FANNIE MAE UNDER THE CREDITFACILITYWILLBEOBLIGATIONS SOLELY OFF ANNlEMAE. THE OBLIGATIONS OF FANNIE MAE ARE NOT BACKED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA, BUT BY THE CREDIT OF FANNlE MAE, A FEDERALLY CHARTERED STOCKHOLDER-OWNED CORPORATION.

Information regarding the Credit Provider is contained herein under the caption FANNIE MAE.

Upon substitution of an Alternate Credit Facility, the Bonds will be subject to mandatory tender as described above under the caption THE BONDS - Mandatory Tender and Purchase.

Limited Obligation

THE BONDS ARE ISSUED PURSUANT TO THE LAW AND THE ACT AND ARE LIMITED OBLIGATIONS OF THE ISSUER. NEITHER THE CITY COUNCIL OF THE ISSUER NOR ANY OFFICIAL OR EMPLOYEE OF THE ISSUER NOR ANY PERSON EXECUTING THE BONDS SHALL BE LIABLE PERSONALLY ON THE BONDS OR BE SUBJECT TO ANY PERSONAL LIABILITY OR ACCOUNTABILITY BY REASON OF THEffi ISSUANCE. THE BONDS AND THE INTEREST THEREON ARE LIMITED OBLIGATIONS OF THE ISSUER, PAYABLE ONLY FROM THE SECURITY. NEITHER THE ISSUER, THE STATE NOR ANY OTHER POLITICAL CORPORATION OR SUBDIVISION OR AGENCY THEREOF SHALL BE OBLIGATED TO PAY THE PRINCIPAL OF SUCH BONDS OR THE INTEREST THEREON OR OTHER COSTS INCIDENT THERETO EXCEPT FROM THE MONEY PLEDGED THEREFOR. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE NOR ANY POLITICAL CORPORATION OR SUBDIVISION OR AGENCY THEREOF NOR THE FAITH AND CREDIT OF THE ISSUER IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM,IFANY,ORINTERESTONTHEBONDSOROTHERCOSTSINCIDENTTHERETO. THE BONDS ARE NOT A DEBT OF THE UNITED STATES OF AMERICA OR ANY OTHER AGENCY THEREOF AND ARE NOT GUARANTEED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA.

Enforceability of Remedies

The remedies available to the Trustee and the owners of the Bonds upon an event of default under the Credit Facility, the Indenture, the Regulatory Agreement or the Financing Agreement are in many respects dependent upon regulatory and judicial actions which are often subject to discretion and delay. Under existing law and judicial decisions, the remedies provided for under such documents may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Bonds and such documents will be qualified as to the enforceability of the various legal instruments by limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally and by equitable remedies and proceedings generally.

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CERTAIN BONDHOLDERS' RISKS

The purchase of the Bonds will involve a number of risks. The following is a summary, which does not purport to be comprehensive or definitive, of some of such risk factors.

No Personal Liability of Borrower

The Borrower has not been nor will it be (subject to certain exceptions to nonrecourse liability for the benefit of the Credit Provider set forth in the Note and the Security Instrument) personally liable for payments on the Loan; nor will the Borrower be (subject to certain exceptions to nonrecourse liability set forth in the Note and the Security Instrument and subject to certain exceptions to nonrecourse liability set forth in the Financing Agreement with respect to the Issuer and the payment of the rebate amount) personally liable under the other documents executed in connection with the issuance of the Bonds and the making of the Loan. All payments on the Loan are expected to be derived from revenues generated by the Project.

Limited Security

The Bonds are limited obligations of the Issuer payable solely from certain funds pledged to and held by the Trustee pursuant to the Indenture.

No Acceleration or Early Redemption Upon Loss of Tax Exemption on the Bonds

THEBONDSARENOTSUBJECTTOACCELERATIONORREDEMPTION,ANDTHERATE OF INTEREST ON THE SERIES E BONDS (AND IF THE TAX-EXEMPT CONVERSION DATE HAS OCCURRED, THE SERIES F BONDS) rs NOT SUBJECT TO ADJUSTMENT, BY REASON OF 'l;'HE INTEREST ON THE SERIES E BONDS (AND IF THE TAX-EXEMPT CONVERSION DATE HAS OCCURRED, THE SERIES F BONDS) BEING INCLUDED IN GROSS INCOME FOR PURPOSES OF FEDERAL INCOME TAXATION. Such event could occur if the Borrower (or any subsequent owner of the Project) does not comply with the provisions of the Financing Agreement and the Regulatory Agreement which are designed, if complied with, to satisfy the continuing compliance requirements of the Internal Revenue _Code of 1986 (the "Code") in order for the interest on the Series E Bonds (and, after the Tax­Exempt Conversion Date, the Series F Bonds) to be excludable from gross income for purposes of federal income taxation.

Early Redemption or Mandatory Tender

Purchasers of Bonds should consider the fact that the Bonds are subject to redemption prior to maturity, as described herein, and to mandatory tender on a Mandatory Tender Date, as described herein. This could occur, for example, in the event that the Loan is prepaid as a result of a casualty or condemnation award payment affecting the Project or if there is a default under the Reimbursement Agreement or if Conversion fails to occur. See THE BONDS - Redemption Provisions - Mandatory Redemption.

Economic Feasibility

The economic feasibility of the Project depends in large part upon (a) its being substantially occupied at projected rent levels and (b) actual operating expenses not substantially exceeding assumptions. There can be no assurance that in the future the Borrower will be able to rent units in the Project at rental rates or that operating expenses will remain low enough to enable it to make timely payments on the Loan.

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Competing Facilities

The Issuer, the Borrower, and persons who may or may not be affiliated with the Issuer or the Borrower may own, finance, develop, construct, and operate other facilities in the area of the Project that compete with the Project. Any competing facilities, if so constructed, could adversely affect occupancy and revenues of the Project.

Enforceability and Bankruptcy

The remedies available to the Trustee and the holders of the Bonds upon an event of default under the Financing Agreement, the Credit Facility, or the Indenture are in many respects dependent upon regulatory and judicial actions which are often subject to discretion and delay.

Under existing laws and judicial decisions, the remedies provided under the aforesaid documents may not readily be available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Bonds and the aforesaid documents will be qualified to the extent that the enforceability of certain legal rights related to the Bonds is subject to limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally and by equitable remedies and proceedings generally.

FANNIE MAE

The following information has been provided by Fannie Mae for use herein. While the information is believed to be reliable, neither the Issuer, the Underwriter, the Borrower, the Loan Servicer nor any of their respective counsel, members, commissioners, officers or employees make any representations as to the accuracy or sufficiency of such information.

Fannie Mae is a federally chartered and stockholder-owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. 1716 et seq. It is the largest investor in home mortgage loans in the United States with a net portfolio of $687 billion of mortgage loans as of September 30, 2001. Fannie Mae was originally established in 1938 as a United States government agency to provide supplemental liquidity to the mortgage market and became a stockholder-owned and privately managed corporation by legislation enacted in 1968.

Fannie Mae purchases, sells, and otherwise deals in mortgages in the secondary market rather than as a primary lender. It does not make direct mortgage loans but acquires mortgage loans originated by others. In addition, Fannie Mae issues mortgage-backed securities ("MBS"), primarily in exchange for pools of mortgage loans from lenders. Fannie Mae receives guaranty fees for its guarantee of timely payment of principal of and interest on MBS certificates.

Fannie Mae is subject to regulation by the Secretary of Housing and Urban Development ("HUD") and the Director of the independent Office of Federal Housing Enterprise Oversight within HUD. Approval of the Secretary of Treasury is required for Fannie Mae's issuance of its debt obligations and MBS. Five of the eighteen members of Fannie Mae's Board of Directors are appointed by the President of the United States, and the other thirteen are elected by the holders of Fannie Mae's common stock.

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The securities of Fannie Mae are not guaranteed by the United States and do not constitute a debt or obligation of the United States or any agency or instrumentality thereof other than Fannie Mae.

As of September 30, 2001, Fannie Mae's stockholders' equity was $13.8 billion. Information on Fannie Mae and its financial condition is contained in Fannie Mae's Information Statement ("Information Statement") dated March 30, 2001 and Supplements thereto dated May 15, 2001, August 14, 2001 and November 14, 2001 (and any later supplement to or update of such Information Statement). Copies of the most recent Information Statement, as well as any Supplements to the Information Statement and Fannie Mae's most recent annual report to stockholders and proxy statement, are available without charge from the Office oflnvestor Relations, Fannie Mae, 3900 Wisconsin Avenue, NW, Washington, DC 20016 (telephone: 202/752-7115). The Information Statement, Supplements and Annual Report are also available by accessing Fannie Mae's world wide web site at http:\\www.fanniemae.com/investors.

Fannie Mae makes no representation as to the contents of this Official Statement, the suitability of the Bonds for any investor, the feasibility of performance of any project, or compliance with any securities, tax or other laws or regulations. Fannie Mae's role with respect to the Bonds is limited to issuing and discharging its obligations under the Credit Facility and exercising the rights reserved to it in the Indenture and the Reimbursement Agreement.

THE BORROWER AND THE PROJECT

The following information has been provided by the Borrower for use herein ( except for the information under the subcaptions "-The Developer" and "-Managing Agent" which such information has been provided by Fairfield for use herein). While the information is believed to be reliable, neither the Issuer, the Underwriter, Fannie Mae, the Loan Servicer nor any of their respective counsel, members, commissioners, officers or employees make any representations as to the accuracy or sufficiency of such information.

The Borrower

The Borrower is Green Room Properties, LLC, a Delaware limited liability company. The sole member of the Borrower is NML Real Estate Holdings, LLC, a Wisconsin limited liability company whose sole member is The Northwestern Mutual Life Insurance Company, a Wisconsin corporation, and Northwestern Investment Management Company, a Wisconsin corporation and wholly owned subsidiary.

The Developer

FF Development, L.P., a Delaware limited partnership, whose I% general partner is FF Development, Inc., a Delaware corporation and whose 99% limited partner is Fairfield Residential LLC, a Delaware limited liability company ("Fairfield") will act as the Developer for the Project and will have no ownership in the Project. Fairfield acquires and develops new apartments and rehabilitates existing apartments, throughout the United States. Fairfield and its affiliates have developed or rehabilitated in excess of 60,000 units over a 27 year period. The company currently owns and manages 31,000 units in 15 states, and third party fee manages an additional 18,000 units. Fairfield's acquisition and rehabilitation team has acquired and substantially rehabilitated over 15,000 units since 1995.

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The Project

San Regis Apartments is a residential rental project comprised of four three-story apartment buildings containing a total of 390 units and one community building. The Project is located on approximately 5.76 acres located at 15434-60 Sherman Way, Van Nuys, California. The Project will undergo a rehabilitation which is expected to be completed by December of2003. The Project was originally built in 1967.

Project amenities will include: dishwasher, garbage disposal, refrigerator, electric range/oven, heating/cooling system and a patio/balcony. The interior finish includes countertops; carpeting in the living areas, vinyl flooring in the kitchen/bathrooms and entryway, venetian blinds and cabinets. The Project also contains a swimming pool, a three-story community/building room, an exercise room, volleyball court, basketball court, tot lot and laundry facilities. Covered and uncovered parking for approximately 581 cars is also provided.

The units consist of the following:

Studio One Bedroom Two Bedroom

Managing Agent

One Bath One Bath One Bath

Approximate Square Footage

432 638 864

Number of Units

144 150

_.2.§ 390

The Project will be managed by FF Properties, L.P. (the "Manager"), an affiliate of Fairfield Residential LLC. The Manager was founded in 1984 and has been involved in the management of residential rental projects since 1984. The Manager currently manages in excess of 48,000 apartment units located in 15 states.

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Summary of Operations

The following table provides a summary of operations of the Project for the years ended March 31, 1999, 2000 and 2001, based on the financial statements provided by the seller of the Project, and an unaudited summary of operations for the five-month period ended August 31, 2001.

Period of For the Years Ended Ownershil!

Al!ril - August

1999 2000 2001 2001

Average Annual Effective 95% 97% 96% 60% Occupancy

Total Net Revenue $3,102,477 $3,359,585 $3,508,305 $931,943

Total Operating Expenses (1,800,596} (2,008,188) (2,339,395) (631,952)

lncome Available for Debt Service $1,221,881 $1,351,397 $1,168,909 $299,990

Less: Interest, Depreciation and Amortization (875,297) (866,111) (1,168,909) (299,990)

Net Profit/(Loss) ($346,584) ($485,286) ($167,602) ($299,990)

*The Project's occupancy has pwposely been lowered to allow construction to be completed in the vacant units.

THE PROJECT WAS NOT OWNED OR OPERATED BY THE BORROWER DURING 1999, 2000 OR THEFIRSTP ART OF 2001. ACCORD!NGL Y, THEINFORMATIONPROVIDED FOR THESE PERIODS HAS BEEN BASED SOLEL YUPON!NFORMATIONPROVIDEDTO THEBORROWERBY A PRIOR OWNER AND/OR A PROPERTY MANAGEMENT FIRM. THE BORROWER HAS NOT INDEPENDENTLY CONFIRMED THE ACCURACY OF THE INFORMATION SET FORTH ABOVE AND NO ASSURANCE CAN BE GNEN AS TO THE ACCURACY OF SUCH INFORMATION.

Regulatory Agreement

The Project will be subject to the Regulatory Agreement. That agreement is summarized below and in Exhibit D to this Official Statement.

The Regulatory Agreement imposes certain requirements on the Borrower with respect to the tax­exempt status of the Bonds under the Code, which include, among other requirements, a set aside of 20% of the units for rental to persons or families having incomes at or below 50% of area median gross income, adjusted for family size and determined in accordance with Section 142( d) of the Code and certain other requirements under state Jaw. In addition, the Regulatory Agreement requires that 20% of such set-aside units be rented to tenants at "affordable rents," defined as rents not greater than 30% of 50% of area median income, adjusted for family size. See "EXHIBIT D- SUMMARY OF CERT A1N PROVISIONS OF THE REGULATORY AGREEMENT" herein for a description of the requirements affecting the operation of the Project in order to assure compliance with the Code and state law.

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In the event that the Borrower seeks to get tax credits for the Project at a future date, the Project would also be encumbered by an Extended Use Agreement required by the Code and the California Tax Credit Allocation Committee (the "Tax Credit Regulatory Agreement"), which would restrict the income levels of some or all of the tenants in the Project to amounts not greater than 60% of area median income adjusted for family size, and (b) restrict the rents which may be charged for occupancy of such restricted units in the Project to not more than 30% of 60% of area median income, adjusted for family size.

THE LOAN SERVICER

Berkshire Mortgage Finance Limited Partnership, a Massachusetts limited partnership (the "Loan Servicer"), will perform mortgage servicing functions with respect to the Loan on behalf of Fannie Mae and in accordance with Fannie Mae's requirements. The servicing arrangements between Fannie Mae and the Loan Servicer for the servicing of the Loan are solely between Fannie Mae and the Loan Servicer and neither the Issuer nor the Trustee is deemed to be party thereto or has any claim, right, obligation, duty or liability with respect to the servicing of the Loan.

The Loan Servicer will be obligated, pursuant to its arrangements with Fannie Mae and Fannie Mae's servicing requirements, to perform diligently all services and duties customary to the servicing of mortgages, as well as those specifically prescribed by Fannie Mae. Fannie Mae will monitor the Loan Servicer's performance and has the right to remove the Loan Servicer with or without cause. The duties performed by the Loan Servicer include general loan servicing responsibilities, collection and remittance of principal and interest payments, administration of mortgage escrow accounts and collection. of insurance claims. In addition, the Loan Servicer has certain billing, collection and remittance obligations under the Assignment and the Note.

The selection or replacement of the Loan Servicer is in the sole and absolute discretion ·of Fannie · Mae. The servicing arrangements between the Loan Servicer and Fannie Mae are subject to amendment or termination from time to time without the consent of the Issuer, the Trustee or the Borrower, and none of the Trustee, the Issuer or the Borrower have any rights under, and none is a third party beneficiary of, the servicing arrangements between the Loan Servicer and Fannie Mae.

The Loan Servicer is an approved DUS seller/servicer under Fannie Mae's Delegated Underwriting and Servicing product line.

The Loan Servicer makes no representation as to the contents of this Official Statement, the suitability of the Bonds for any investor, the feasibility of performance of the Project, compliance with any securities, tax or other laws or regulations or with respect to any other matter.

TAX MATTERS

General

In the opinion of Kutak Rock LLP and Arter & Hadden LLP, Co-Bond Counsel, under the laws, regulations, rulings and judicial decisions existing as of the date ofinitial issuance of the Series E Bonds and assuming continuing compliance with the requirements of the Code applicable to the Series E Bonds which must be satisfied after the issuance of the Series E Bonds, interest on the Series E Bonds is not includable

25

in gross income for purposes of federal income taxation, except interest on any Series E Bond during the period that such Series E Bond is held by a "substantial user" of any facility financed with the proceeds of the Series E Bonds or a "related person" within the meaning of Section 147(a) of the Code. Co-Bond Counsel are further of the opinion that interest on the Series E Bonds is a specific item of tax preference for purposes of the computation of the federal alternative minimum tax applicable to individuals and corporations.

The Code and the Regulations impose various restrictions, conditions and requirements relating to the exclusion from gross income for federal tax purposes of interest on obligations such as the Series E Bonds. The Issuer has covenanted and the Borrower will covenant to comply with certain requirements designed to assure that interest on the Series E Bonds will not become includable in gross income. Failure to comply with these covenants may result in interest on the Series E Bonds being included in gross income from the date of issuance of the Series E Bonds. The opinion of Co-Bond Counsel assumes compliance with such covenants.

Except as stated herein, Co-Bond Counsel will express no opinion as to any federal, state or local tax consequences resulting from the ownership of, receipt ofinterest on or disposition of the Series E Bonds.

The accrual or receipt of interest on the Series E Bonds may otherwise affect the federal income tax liability of certain recipients. The extent of these other tax consequences will depend on the recipient's particular tax status or other items of income or deduction. Purchasers of the Series E Bonds, particularly purchasers that are corporations (including S corporations and foreign corporations operating branches in the United States), banks, thrift institutions, property and casualty insurance companies, social security or Railroad Retirement recipients, taxpayers otherwise entitled to claim earned income credit and taxpayers who may be deemed to have incurred ( or continued) indebtedness to purchase or carry tax-exempt obligations are advised to consult their tax advisors as of the tax consequences of purchasing or holding the Series E Bonds. The extent of these other tax consequences will depend upon the recipient's particular tax status or other items of income or deduction. Co-Bond Counsel express no opinion regarding any such consequences, and investors should consult their tax advisors regarding the tax consequence of purchasing or holding the Series EBonds.

Interest on the Series F Bonds is includable in gross income for purposes of federal income taxation.

In the further opinion of Co-Bond Counsel, under existing law, interest on the Bonds is exempt from State of California personal income taxation.

From time to time, there are legislative proposals in the Congress that, if enacted, could alter or amend the federal tax matters referred to above or adversely affect the market value of the Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether if enacted it would apply to bonds issued prior to enactment. Purchasers of the Bonds should consult their tax advisors regarding any pending or proposed tax legislation. The opinions expressed by Co-Bond Counsel are based upon existing legislation as of the date ofissuance and delivery of the Bonds and Co-Bond Counsel have expressed no opinion as of any date subsequent thereto or with respect to any pending legislation.

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LEGAL MATTERS

Certain legal matters relating to the authorization and validity of the Bonds will be subject to the approving opinion ofKutakRock LLP, Omaha, Nebraska and Arter & Hadden LLP, Los Angeles, California, Co-Bond Counsel (the "Bond Opinion"), which will be furnished at the expense of the Borrower upon delivery of the Bonds. The Bond Opinion will be limited to matters relating to authorization and validity of the Bonds and to the tax-exempt status of interest on the Bonds as described in the Section "TAX MATTERS." Co-Bond Counsel has not been engaged to investigate (a) the financial resources of the Borrower or its ability to repay the Loan or (b) the financial resources of Fannie Mae or its ability to make payments under the Credit Facility, and the Bond Opinion will make no statement as to such matters or as to the accuracy or completeness of this Official Statement or any other information that may have been relied on by anyone in making the decision to purchase the Bonds. The proposed form of such opinion is included in this Official Statement as Exhibit A. The approving opinion of Co-Bond Counsel to the Issuer will be delivered with the Bonds. Certain legal matters will be passed on for Fannie Mae by its Legal Department and by its special counsel, Arent Fox Kintner Plotkin & Kahn, PLLC, Washington, D.C., for the Borrower by the Law Department of The Northwestern Mutual Life Insurance Company, by its counsel Foley & Lardner, and by Rutan & Tucker, LLP, Costa Mesa, California, for the Trustee by its counsel, Davis Wright Tremaine, LLP, San Anselmo, California, and for the Underwriter by its counsel, Ritter Eichner & Norris PLLC, Washington, D.C.

NO LITIGATION

The Issuer

There is not now pending or, to the knowledge of the Issuer threatened, any proceeding or litigation against the Issuer seeking to restrain or enjoin the issuance or delivery of the Bonds or questioning or affecting the validity of the Bonds or the proceedings and authority under which they are to be issued. Neither the creation, organization or existence, nor the title of the present members or other officers of the Issuer to their respective offices is being contested.

The Borrower

There is not now pending or threatened any proceeding or litigation against the Borrower affecting the ability of the Borrower to enter into or deliver the Financing Agreement, the Loan Documents, the Credit Facility Documents or the Regulatory Agreement, seeking to restrain or enjoin the Borrower's execution and delivery of the agreements described in this Official Statement, or contesting the existence or powers of the Borrower with respect to the transactions described in this Official Statement.

RATING

The Bonds have been assigned the rating set forth on the cover page hereof by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. (the "Rating Agency"). Such rating reflects only the view of the Rating Agency at the time the rating is given, and the Issuer makes no representation as to the appropriateness of the rating. An explanation of the significance of such rating may be obtained only from the Rating Agency. There is no assurance that such rating will continue for any given period of time or that they will not be revised downward, suspended or withdrawn entirely by the Rating

27

Agency, if, in its judgment, circumstances so warrant. Any such downward revision, suspension or withdrawal of such rating may have an adverse effect on the market price of the Bonds.

UNDERWRITING

Newman and Associates, Inc. as the Underwriter has agreed, subject to certain conditions, to purchase the Bonds from the Issuer at a price equal to 100% of the aggregate principal amount of the Bonds. The Borrower will pay the Underwriter an underwriting fee of $60,000.

The Underwriter intends to offer the Bonds to the public initially at the offering price set forth on the cover page of this Official Statement, which offering price may subsequently change without any requirement of prior notice. The Underwriter reserves the right to join with dealers and other underwriters in offering the Bonds to the public. The Underwriter may offer and sell Bonds to certain dealers (including dealers depositing Bonds into investment trusts) at prices lower than the public offering prices. In connection with its offering, the Underwriter may overallot or effect transactions which stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time.

Newman and Associates, Inc. will be the Remarketing Agent for the Bonds.

CONTINUING DISCLOSURE

During the time the Bonds bear interest at a Weekly Variable Rate pursuant to the Indenture, the Bonds are exempt from the continuing disclosure requirements of Securities Exchange Commission Rule 15c2-12(b)(5). Accordingly, no continuing disclosure with respect to the Bonds, the Borrower, the Credit Provider or the Issuer will be provided to the owners of the Bonds so long as the Bonds bear interest at a Weekly Variable Rate. Pursuant to the Financing Agreement and the Remarketing Agreement, the Borrower will covenant and agree that on and after adjustment of the Bonds to a Reset Rate or the Fixed Rate it will comply with and carry out all of the provisions of a Continuing Disclosure Agreement between the Borrower and the Trustee to be executed and delivered as a condition to the adjustment of the interest rate with respect to such Bonds to a Reset Rate or the Fixed Rate.

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MISCELLANEOUS

Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the Issuer and the purchasers or owners of any of the Bonds.

THE CITY OF LOS ANGELES

By: Los Angeles Housing Department, as Issuer

By: Isl Garry W. Pinney Authorized Officer

[Signatures continue on next page]

[Borrower's signature page to Official Statement]

GREEN ROOM PROPERTIES, LLC, a Delaware limited liability company

By: Isl Donald L. O'Dell Its: Authorized Representative

EXHIBIT A

PROPOSED FORM OF OPINION OF CO-BOND COUNSEL

[Closing Date]

The City of Los Angeles Los Angeles, California

Chase Manhattan Bank and Trust Company, National Association San Francisco, California

$23,600,000 The City of Los Angeles Variable Rate Demand

Multifamily Housing Revenue Bonds (San Regis Project)

Series 2001E

Ladies and Gentlemen:

$6,400,000 The City of Los Angeles Variable Rate Demand

Taxable Multifamily Housing Revenue Bonds (San Regis Project)

Series 2001F

We have acted as bond counsel in connection with the issuance on the date hereof by The City of Los Angeles (the "Issuer") of its Variable Rate Demand Multifamily Housing Revenue Bonds (San Regis Project) Series 2001E (the "Series E Bonds") in the aggregate principal amount of $23,600,000 and its Variable Rate Demand Taxable Multifamily Housing Revenue Bonds (San Regis Project) Series 200 IF (the "Series F Bonds" and, together with the Series E Bonds, the "Bonds") in the aggregate principal amount of $6,400,000. The Bonds are being issued to fund a loan (the "Loan") to Green Room Properties, LLC, a Delaware limited liability company (the "Borrower") to finance costs of the acquisition, rehabilitation and equipping of the multifamily rental housing project known as San Regis Apartments (the "Project" or "Mortgaged Property") located within the City of Los Angeles.

The Bonds are being issued pursuant to a Resolution adopted by the City Council of the City of Los Angeles on November 9, 2001 and concurred with by the Mayor of the Issuer (the "Resolution") and the Trust Indenture dated as of November I, 2001 (the "Indenture") between the Issuer and Chase Manhattan Bank and Trust Company, National Association, as Trustee (the "Trustee").

In connection with the issuance of the Bonds, we have examined (a) a certified copy of the Resolution, (b) a certified copy of Section 248 of the City Charter of the Issuer and Article 6.3 of Chapter I of Division 11 of the Los Angeles Administrative Code (the "Law") and Chapter 7 of Part 5 of Division 31 of the Health and Safety Code of the State of California, as amended (the "Act"), (c) an executed counterpart of the Indenture, ( d) the form of the Bonds, ( e) an executed counterpart of the Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants dated as ofNovember I, 200 I (the "Regulatory Agreement") imposing certain operating restrictions on the Project, (f) an executed counterpart of the Financing Agreement dated as of November I, 2001 (the "Financing Agreement") setting forth the conditions pursuant to which the Issuer will fund the Loan, (g) the applicable provisions of the Constitution, laws and rules and regulations of the State of California and of the United States of America, (h) the transcript of proceedings relating to the issuance and sale of the Bonds and the opinions, certifications and

statements of facts and expectations contained in such transcript and (i) such other documents and materials as we deemed relevant to the opinion expressed herein.

From an examination of the foregoing, we are of the opinion that:

( a) The Issuer is a municipal corporation and charter city duly organized and existing under the Constitution and laws of the State of California and has the power and authority, under the Constitution and laws of the State of California, including the Law and the Act, to carry out and consummate all transactions contemplated by the Indenture and to pledge the revenues and other amounts out of which the Bonds are payable.

(b) The Bonds have been validly authorized and issued in accordance with the laws of the State of California now in force and represent the valid, legal and binding limited obligations of the Issuer payable solely from revenues and amounts pledged under the Indenture.

( c) The Indenture has been duly authorized, executed and delivered by the Issuer and, assuming due authorization, execution and delivery by the Trustee, represents the valid, legal and binding agreement of the Issuer enforceable in accordance with its terms:

(d) Under existing laws, regulations, rulings and judicial decisions, the interest on the Series E Bonds is excludable from gross income for federal income tax purposes, except during any period wherein a Series E Bond is held by a "substantial user" of the facilities financed by the Series E Bonds or a "related person" within the meaning of Section 147(a) of 1he Internal Revenue Code of 1986 (the "Code"). In rendering the opinion in this paragraph ( d), we have assumed continuing compliance by the parties thereto with respect to certain covenants in the Financing Agreement, the Regulatory Agreement, the Tax Certificate as to Arbitrage and the provisions of Sections 103 and 141-150 of the Internal Revenue Code of 1986 and the Indenture concerning the continuing excludability of interest on the Series E Bonds from gross income for federal income tax purposes.

( e) Interest on the Series E Bonds will be included as a specific item of tax preference for purposes of computing the federal alternative minimum tax imposed on individuals and corporations by the Code.

(f) Interest on the Series F Bonds is includable in gross income for federal income tax purposes.

(g) Interest on the Bonds is exempt from State of California personal income taxes.

The accrual or receipt of interest on the Bonds may otherwise affect the federal income tax liability of the recipient. The extent of these other tax consequences will depend on the recipient's particular status or other items of income or deduction. We express no opinion regarding such consequences. The purchaser of the Bonds should consult its tax advisors as to the consequences of purchasing, holding or selling the Bonds.

The obligations of the parties, and the enforceability thereof, withrespectto the documents described above are subject to the provisions of the bankruptcy laws of the United States of America and other applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect. Certain of the obligations, and the

A-2

enforcement thereof, contained in the documents described above are also subject to general principles of equity, which may limit the specific enforcement of certain remedies but which do not affect the validity of such documents.

Certain requirements and procedures contained or referred to in the Indenture, the Financing Agreement, the Regulatory Agreement and other relevant documents may be changed, and certain actions may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents, upon the advice or with the approving opinion of nationally recognized bond counsel. No opinion is expressed as to the Bonds or the interest thereon if any such change occurs or action is taken or omitted upon the advice or approval of counsel other than ourselves.

We express no opinion as to title to, or the sufficiency of the description of, the Project in the Indenture or any other document or instrument or the priority of any liens, charges or encumbrances on the Project.

Very truly yours,

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[This Page Intentionally Left Blank]

EXHIBITB

SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE

The following is a brief summary of certain provisions of the Indenture. The summary does not purport to be complete or definitive and is qualified in its entirety by reference to the Indenture, a copy of which is on file with the Trustee.

Definitions

The following are definitions set forth in the Indenture and used in this Official Statement.

"Account" means an account established within a Fund.

"Achievement Agreement" means the Achievement Agreement dated as of November 1, 2001 between Fannie Mae and the Borrower.

"Act of Bankruptcy" means any proceeding instituted under the Bankruptcy Code or other applicable insolvency law by or against the Issuer.

"Adjustment Date" means any date on which the interest rate on the Bonds is adjusted to a different Mode or to a different Reset Rate. An Adjustment Date may only occur on an Interest Payment Date or, if such date is not a Business Day, the following Business Day. Any Reset Date and the Fixed Rate Adjustment Date are Adjustment Dates.

"Advance" means an advance made under the Credit Facility.

"Alternate Credit Facility" means a letter of credit (whether or not so named), surety bond, insurance policy, standby bond purchase agreement, credit enhancement instrument, collateral purchase agreement, mortgage backed security or similar agreement, instrument or facility ( other than the initial Credit Facility) provided in accordance with the Financing Agreement and which satisfies the requirements of the Indenture.

"Alternate Credit Provider" means the provider of an Alternate Credit Facility.

"Assignment" means the Assignment and lntercreditor Agreement, dated as of November 1, 2001, among the Issuer, the Trustee and Fannie Mae, and acknowledged, accepted and agreed to by the Borrower, as it may be amended, supplemented or restated from time to time.

"Authorized Attesting Officer" means the City Treasurer or Deputy City Treasurer of the Issuer, or such other officer or official of the Issuer who, in accordance with the laws of the State, the bylaws or other governing documents of the Issuer, or practice or custom, regularly attests or certifies official acts and records of the Issuer, and includes any assistant or deputy officer to the principal officer or officers exercising such responsibilities.

"Authorized Borrower Representative" means any person who, at any time and from time to time, is designated as the Borrower's authorized representative by written certificate furnished to the Issuer, the Loan Servicer, the Credit Provider and the Trustee. Such certificate must contain the specimen signature of the person authorized to act on behalf of the Borrower and be signed on behalf of the Borrower by or on behalf of any authorized general partner of the Borrower if the Borrower is a general or limited partnership, by any authorized managing member of the Borrower if the Borrower is a limited liability company, or by

any authorized officer of the Borrower if the Borrower is a corporation, which certificate may designate an alternate or alternates. The Trustee may conclusively presume that a person designated in a written certificate filed with it as an Authorized Borrower Representative is an Authorized Borrower Representative until such time as the Borrower files with the Trustee ( with a copy to the Issuer, the Loan Servicer and the Credit Provider) a written certificate revoking such authority.

"Authorized Construction Administrator Representative" means any person from time to time designated to act on behalf of the Construction Administrator by written certificate furnished to the Trustee and the Issuer. Such certificate must contain the specimen signatnre of the person authorized to act by resolution or other appropriate action of the Board of Directors of the Construction Administrator or by its bylaws. Such resolution or other appropriate action may designate an alternate or alternates who shall have the same authority, duties and powers as the Authorized Construction Administrator Representative. The Trustee may conclusively presume that a person designated in a written certificate filed with it as an Authorized Construction Administrator Representative is an Authorized Construction Administrator Representative until such time as such provider files with the Trustee and with the Issuer, the Loan Servicer and the Credit Provider a written certificate identifying a different person or persons to act in such capacity.

"Authorized Denomination" means, (i) during any Weekly Variable Rate Period, $100,000 or any integral multiple of$5,000 in excess of$100,000, and (ii) during any Reset Period or the Fixed Rate Period, $5,000 or any integral multiple of $5,000.

"Authorized Officer" means the Mayor or the General Manager, any Assistant General Manager or acting Assistant General Manager of the Los Angeles Housing Department of the Issuer, and any other officer or employee of the Issuer designated to perform a specified act, to sign a specified document or to act generally, on behalf of the Issuer by a written certificate furnished to the Trustee, which certificate is signed by the Mayor or the General Manager, any Assistant General Manager or acting Assistant General Manager of the Los Angeles Housing Department and contains the specimen signatnre of such other officer or employee of the Issuer.

"Available Moneys" means, as of any date of determination, any of (i) the proceeds of the Bonds, (ii) remarketing proceeds received from the Remarketing Agent or any purchaser of Bonds ( other than funds provided by the Borrower, the Issuer, any Affiliate of either the Borrower or the Issuer or any guarantor of the Loan), (iii) moneys received by the Trustee pursuant to the Credit Facility, (iv) any other amounts, including the proceeds of refunding bonds, for which, in each case, the Trustee has received an Opinion of Counsel acceptable to each Rating Agency to the effect that the use of such amounts to make payments on the Bonds would not violate Section 362(a) of the Bankruptcy Code (or that relief from the automatic stay provisions of such Section 362(a) would be available from the bankruptcy court) or be avoidable as preferential payments under Section 544, 547 or 550 of the Bankruptcy Code should the Issuer or the Borrower become a debtor in proceedings commenced under the Bankruptcy Code; and (v) Investment Income derived from the investment of moneys described in clause (i), (ii), (iii) or (iv).

"Banlc' means Bank of America, N.A. and its successors and assigns.

"Bankruptcy Code"means Title 11 of the United States Code entitled "Bankruptcy," as in effect now and in the future, or any successor statute.

"Beneficial Owner" means, for any Bond which is held by a nominee, the beneficial owner of such Bond.

B-2

"BMA Index Rate" means the rate published in The Bond Market Association Municipal Swap Index, produced by Municipal Market Data, a Thomson Financial Services Company, or its successors.

"Bond'' or "Bonds" means, collectively, the Series E Bonds and the Series F Bonds.

"Bond Documents" means the Assignment, the Bonds, the Bond Purchase Agreement, the Credit Facility, the Disclosure Agreement, if any, the Financing Agreement, the Indenture, the Regulatory Agreement (and any other agreement relating to rental restrictions on the Mortgaged Property), the Remarketing Agreement, the Tax Certificate, any Tender Agent Agreement, and all other documents, instruments and agreements executed and delivered in connection with the issuance, sale, delivery and/or remarketing of the Bonds, as each such agreement or instrument may be amended, supplemented or restated from time to time.

"Bondholder," "holder," "Owner," or "Registered Owner" means, with respect to any Bond, the owner of the Bond as shown on the Bond Register.

"Bondholder Tender Notice" means a written notice meeting the requirements of the Indenture.

"Bond Purchase Agreement" means the Bond Purchase Agreement, dated November 30, 2001, among the Underwriter, the Issuer and the Borrower.

"Bond Purchase Fund'' means the Bond Purchase Fund created by the Indenture.

"Bond Register" means the Bond Register maintained by the Trustee pursuant to the Indenture.

"Bond Resolution" means the resolution adopted by the Issuer on November 9, 2001, authorizing and approving the issuance and sale of the Bonds and the execution and delivery of the Indenture, the Assignment, the Bond Purchase Agreement, the Disclosure Agreement, the Financing Agreement, the Loan Documents, the Regulatory Agreement, the Tax Certificate and certain other documents, making certain appointments and determining certain details with respect to the Bonds.

"Book-Entry Bonds" means that part of the Bonds for which a Securities Depository or its nominee is the Bondholder.

"Book-Entry System" means an electronic system in which the clearance and settlement of securities transactions is made through electronic book-entry changes.

"Borrower" means Green Room Properties, LLC, a Delaware limited liability company.

"Business Day" means any day other than (i) a Saturday or a Sunday, (ii) any day on which banking institutions located in the City ofNew York, New York are required or authorized by law or executive order to close, (iii) any day on which banking institutions located in the city or cities in which the Principal Office of the Trustee or the Remarketing Agent is located are required or authorized by law or executive order to close, (iv) prior to the Fixed Rate Adjustment Date, a day on which the New York Stock Exchange is closed, (v) a day on which banking institutions located in the city in which the Principal Office of the Loan Servicer is located are required or authorized by law or executive order to close or (vi) so long as a Credit Facility is in effect, any day on which the Credit Provider is closed.

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"Capitalized Interest Account" means the Capitalized Interest Account of the Loan Fund.

"Closing Date" means the date on which the Bonds are issued and delivered to or upon the order of _ the Underwriter.

"Co-Bond Counsel" means (i) on the Closing Date, the law firm or law firms delivering the approving opinion(s) with respect to the Bonds.

"Code" means the Internal Revenue Code of 1986; each reference to the Code is deemed to include (i) any successor internal revenue law and (ii) the applicable regulations whether final, temporary or proposed under the Code or such successor law. Any reference to a particular provision of the Code is deemed to include any successor provision of any successor internal revenue law and applicable regulations whether final, temporary or proposed under such provision or successor provision.

"Conditional Redemption" means a redemption with respect to which a notice of redemption has been given to Bondholders and in which notice the Trustee has stated that the redemption is conditional upon a deposit of funds as further describe_d in Section 3 .4 of the Indenture.

"Construction Administrator" means, The Northwestern Mutual Life Insurance Co. subject to the provisions of Section 8.1 O( c) of the Indenture which provides for the termination of all references to the Construction Administrator.

"Conversion Date" means the effective date of Conversion pursuant to the terms and conditions of the Supplemental Financing Agreement.

"Conversion Notice" means a written notice by the Loan Servicer to the Issuer, the Trustee, the Borrower, the Construction Administrator, the Guarantor and the Credit Provider given on or before the Expiration Date (i) stating that each of the Conditions to Conversion has been satisfied on or before the Expiration Date or, if any Condition to Conversion has not been satisfied on or before the Expiration Date, has been waived in writing by the Credit Provider on or before the Expiration Date, (ii) specifying the Conversion Date, and (iii) providing the Schedule of Deposits for the Principal Reserve Fund provided for in the Reimbursement Agreement.

"Costs" means, with respect to the Mortgaged Property, the costs chargeable to the Mortgaged Property in accordance with generally accepted accounting principles, including, but not limited to, the costs of acquisition, rehabilitation, reconstruction, restoration, repair, alteration, improvement and extension (in any of such events, "rehabilitation") of any building, structure, facility or other improvement; stored materials for work in progress; the costs of machinery and equipment; the costs of the Mortgaged Property, rights-in lands, easements, privileges, agreements, franchises, utility extensions, disposal facilities, access roads and site development necessary or useful and convenient for the Mortgaged Property; financing costs, including, but not limited to, the Costs of Issuance, engineering and inspection costs; fees paid to the developerofthe Mortgaged Property; organization, administrative, insurance, legal, operating, letter of credit and other expenses of the Borrower actually incurred prior to and during rehabilitation; and all such other expenses as may be necessary or incidental to the financing, acquisition, rehabilitation or completion of the Mortgaged Property or any part of it, including, but not limited to, the amount of interest expense incurred with respect to the Loan prior to the completion date; insurance premiums payable by the Borrower and taxes and other governmental charges levied on the Mortgaged Property prior to the completion date.

B-4

"Costs of Issuance" means (a) the fees, costs and expenses(excluding ongoing fees, costs and expenses payable after the Closing Date) of (i) the Issuer, the Issuer's counsel and the Issuer's financial advisor, ifany, (ii) the Underwriter (including discounts to the Underwriter orother purchasers of the Bonds, other than original issue discount, incurred in the issuance and sale of the Bonds) and the Underwriter's counsel, (iii) Co-Bond Counsel, (iv) the Trustee and the Trustee's counsel, (v) the Loan Servicer and the Loan Servicer's counsel, if any, (vi) the Credit Provider and the Credit Provider's counsel, (vii) the Borrower's counsel and the Borrower's financial advisor, if any, and (viii) the Rating Agency, provided that ongoing fees payable after the Closing Date are not included in any of the foregoing; (b) costs of printing the offering documents relating to the sale of the Bonds; and ( c) all other fees, costs and expenses directly associated with the authorization, issuance, sale and delivery of the Bonds, including printing costs, costs ofreproducing documents, filing and recording fees, and any fees, costs and expenses required to be paid to the Loan Servicer in connection with the origination of the Loan.

"Costs of Issuance Deposit" means the deposit in the amount of $0.00 to be made by the Borrower with the. Trustee on the Closing Date, as required by the Financing Agreement, to be deposited into the Costs of Issuance Fund and applied to pay Costs of Issuance.

"Costs of Issuance Deposit Account" means the Costs of Issuance Deposit Account of the Costs of Issuance Fund.

"Costs of Issuance Fund" means the Costs oflssuance Fund created by the Indenture.

"Credit Facility" means the Direct Pay Irrevocable Transferable Credit Enhancement Instrument, dated November 30, 2001, issued by Fannie Mae to the Trustee, or any Alternate Credit Facility in effect at the time, as any such facility may be amended, supplemented or restated from. time to time.

"Credit Facility Account" means the Credit Facility Account of the Revenue Fund.

"Credit Facility Documents" means the Reimbursement Agreement, the Supplemental Financing Agreement, the Certificate of Borrower, all Collateral Agreements (as that term is defined in the Security Instrument), the Guaranty, the Hedge Documents, the Hedge Assignment, the Hedge Reserve Escrow Account Security Agreement, the Pledge Agreement and all other agreements and documents securing the Credit Provider or otherwise relating to the provision of the Credit Facility, as any such agreement may be amended, supplemented or restated from time to time.

"Credit Provider" means, so long as the initial Credit Facility is in effect, Fannie Mae, or so long as any Alternate Credit Facility is in effect, the Alternate Credit Provider then obligated under the Alternate Credit Facility.

"Custodian" means the custodian under the Pledge Agreement.

"Electronic Means" means a facsimile transmission or any other electronic means of communication approved in writing by the Credit Provider.

"Event of Default" means, as used in any Transaction Document, any event described in that document as an Event of Default. Any "Event ofDefault" as described in any Transaction Document is not an "Event of Default" in any other Transaction Document unless that other Transaction Document specifically so provides.

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"Excluded Bonds" means, collectively, any Bonds which are not Outstanding and any Bonds which at any time constitute Pledged Bonds or Obligor Bonds.

"Expiration Date" has the meaning given to that term in the Supplemental Financing Agreement.

"Extension Date" means, with respect to an Alternate Credit Facility, the date which is five Business Days prior to the expiration date of the Alternate Credit Facility.

"Extraordinary Items" means, with respect to the Trustee, reasonable compensation for extraordinary services and/or reimbursement for reasonable extraordinary costs and expenses.

"Facility Fee" means the monthly fee owed to the Credit Provider by the Borrower pursuant to the Reimbursement Agreement.

"Fees Account" means the Fees Account of the Revenue Fund.

"Fixed Rate" means the rate of interest borne by the Bonds as determined in accordance with the fudenture.

"Fixed Rate Adjustment Date" means the date on which the interest rate on the Bonds adjusts from the Weekly Variable Rate or a Reset Rate to the Fixed Rate pursuant to the Indenture.

"Fixed Rate Period'' means the period beginning on the Fixed Rate Adjustment Date and ending on the Maturity Date.

"Fund'' means any fund created under the Indenture.

"Government Obligations" means direct obligations of, and obligations on which the full and timely payment of principal and interest is unconditionally guaranteed by, the full faith and credit of the United States of America.

"Guarantor" means The Northwestern Mutual Life Insurance Co., a Wisconsin corporation, provided that an Alternate Risk Mitigation Instrument (as defined in the Supplemental Financing Agreement) is provided to Fannie Mae pursuant to the Supplemental Financing Agreement, "Guarantor" shall mean the Alternate Risk Mitigation Instrument Provider (as defined in the Supplemental Financing Agreement).

"Guaranty" means the Unconditional Guaranty issued by the Guarantor to and for the sole benefit of the Credit Provider, provided that an Alternate Risk Mitigation Instrument (as defined in the Supplemental Financing Agreement) is provided to Fannie Mae pursuant to the Supplemental Financing Agreement, "Guaranty" shall mean the Alternate Risk Mitigation fustrument.

"Hedge Assignment" means any Hedge Assignment and Security Agreement entered into among the Borrower, the Loan Servicer and Fannie Mae, as amended, supplemented or restated from time to time.

"Hedge Documents" has the meaning given that term in the Hedge Assignment.

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"Hedge Reserve Escrow Account Security Agreement" means any Hedge Reserve Escrow Account Security Agreement entered into among the Borrower, the Loan Servicer and Fannie Mae, as amended, supplemented or restated from time to time.

"Highest Rating Category" has, with respect to an lnvestment, the following meanings: If the Bonds are rated by a Rating Agency, the term "Highest Rating Category" means, with respect to an Investment, that the Investment is rated by each Rating Agency in the highest rating given by that Rating Agency for that general category of security. If at any time the Bonds are not rated (and, consequently, there is no Rating Agency), then the term "Highest Rating Category" means, with respect to an Investment, that the Investment is rated by S&P or Moody's in the highest rating given by that rating agency for that general category of security. By way of example, the Highest Rating Category for tax-exempt municipal debt established by S&P is "A-1+" for debt with a term of one year or less and "AAA" for a term greater than one year, with corresponding ratings by Moody's of "MIG-I" (for fixed rate) or "VMIG-1" (for variable rate) for one year or less and "Aaa" for greater than one year. If at any time (i) the Bonds are not rated, (ii) both S&P and Moody's rate an Investment and (iii) one of those ratings is below the Highest Rating Category, then such Investment will, nevertheless, be deemed to be rated in the Highest Rating Category if the lower rating is no more than one rating category below the highest rating category of that rating agency. For example, an Investment rated "AAA" by S&P and "Aa3" by Moody's is rated in the Highest Rating Category. If, however, the lower rating is more than one full rating category below the Highest Rating Category of that rating agency, then the Investment will be deemed to be rated below the Highest Rating Category. For example, an Investment rated "AAA" by S&P and "Al" by Moody's is not rated in the Highest Rating Category.

"Interest Account" means the Interest Account of the Revenue Fund.

"Interest Payment Date" means (i) during any Weekly Variable Rate Period, the 15th day of each calendar month commencing December 15, 2001; (ii) during any Reset Period and during the Fixed Rate Period each June 15 and December 15 following the Adjustment Date, provided that the first Interest Payment Date during any such period may only occur on a date which is at least 30 days after the Adjustment Date; (iii) each Adjustment Date; (iv) for Bonds subject to redemption in whole or in part on any date, the date of such redemption, (v) the Maturity Date and (vi) for all Bonds any date determined pursuant to the Indenture.

"Interest Requirement" means (i) during the Weekly Variable Rate Period, 35 days interest on the Bonds at the Maximum Rate on the basis of a 365-or 366-day year, as applicable, for the actual number of days elapsed, and (ii) during a Reset Period or the Fixed Rate Period, 210 days interest at, respectively, the Reset Rate or the Fixed Rate, as the case may be, on the basis ofa year of360 days of twelve 30-day months; or, in the case of either (i) or (ii), such other number of days as may be required by the Rating Agency in writing.

"Investment" means any Permitted Investment and any other investment held under the Indenture that does not constitute a Permitted Investment.

"Investment Income" means the earnings, profits and accreted value derived from the investment of moneys pursuant to the Indenture.

"Issuer" means The City of Los Angeles, a municipal corporation and charter city, and its successors and assigns.

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"Issuer's Fee" means the Issuer's initial fee of$37,500 and its ongoing annual fee equal to .125 percent of the outstanding principal amount of the Bonds payable by the Borrower under the Financing Agreement.

"Law" means Section 248 of the City Charter of the City and Article 6.3 of Chapter 1 of Division 11 of the Los Angeles Administrative Code, as supplemented and amended to the Closing Date.

"LJBOR" has the meaning given to the term "USD LIBOR-BBA" in the 1992 ISDA U.S. Municipal Counterparty Definitions, as published by the International Swap and Derivatives Associations, Inc.

"Loan" means the loan made by the Issuer to the Borrower pursuant to the Financing Agreement for the purpose of providing funds to the Borrower to finance costs of the acquisition, rehabilitation and equipping of the Mortgaged Property.

"Loan Documents" means, collectively, the Note, the Security Instrument and all other documents, agreements and instruments evidencing, securing or otherwise relating to the Loan, including the Supplemental Financing Agreement, as each such document, agreement or instrument may be amended, supplemented or restated from time to time. Neither the Financing Agreement nor the Regulatory Agreement is a Loan Document and neither document is secured by the Security Instrument.

"Loan Fund" means the Loan Fund created under the Indenture.

"Loan Servicer" means Berkshire Mortgage Finance Limited Partnership, a Massachusetts limited partnership, or the multifamily mortgage loan servicer designated from time to time by Fannie Mae.

''.Mandatory Tender Date" means any date on which Bonds are required to be tendered pursuant to the Indenture, including any Adjustment Date (including any proposed Adjustment Date), Substitution Date (including any proposed Substitution Date), Extension Date or date specified by the Trustee as provided therein.

"Maturity Date" means December 15, 2034 or in the event the Bonds are adjusted to the Fixed Rate Mode and a Sinking Fund Schedule is established, the maturity date of all serial Bonds, if any.

"Maximum Rate" means 12 percent per annum; provided, however, that the Maximum Rate may be increased if the Trustee receives (i) the written consent of the Credit Provider and the Borrower to a specified higher Maximum Rate not to exceed the lesser of the maximum rate permitted by law to be paid on the Bonds and the maximum rate chargeable on the Loan, (ii) an opinion of Bond Counsel to the effect that such higher Maximum Rate is permitted by law and will not adversely affect either the validity of the Bonds or the exclusion of the interest payable on the Series E Bonds (and, if the Tax-Exempt Conversion Date has occurred, the Series F Bonds) from gross income for federal income tax purposes, and (iii) a new or amended Credit Facility in an amount equal to the sum of (A) the then outstanding principal amount of the Bonds and (B) the new Interest Requirement calculated using the new Maximum Rate.

"Mode" means any of the Weekly Variable Rate, the Reset Rate and the Fixed Rate.

"Moody's" means Moody's Investors Service, Inc., a Delaware corporation, and its successors and assigns, or if it is dissolved or no longer assigns credit ratings, then any other nationally recognized statistical rating agency, designated by the Credit Provider, as assigns credit ratings.

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"Mortgaged Property" has the meaning given to that term in the Security Instrument.

"Net Bond Proceeds" means the total proceeds derived from the issuance, sale and delivery of the Bonds, representing the total purchase price of the Bonds, including any premium paid as part of the purchase price of the Bonds, but excluding the accrued interest, if any, on the Bonds paid by the initial purchaser(s) of the Bonds.

"Net Bond Proceeds Account" means the Net Bond Proceeds Account of the Costs ofissuance Fund.

"Note" means the Multifamily Note, dated as of November 1, 2001, executed by the Borrower in favor of the Issuer, as it may be amended, supplemented or restated from time to time or any mortgage note executed in substitution therefor in accordance with the Bond Documents, as such substitute note may be amended, supplemented or restated from time to time.

"Note Interest" has the meaning given to that term in the Note.

"Obligor Bonds" means any bonds registered in the name, or held for the account of the Issuer, any Affiliate of the Issuer, the Borrower, any Affiliate of the Borrower, or any guarantor or any Affiliate of any guarantor.

"Opinion of Counsel" means a written opinion oflegal counsel, acceptable to the recipient(s) of such opinion. If the opinion is with respect to an interpretation of federal tax laws or regulations or bankruptcy matters, such legal counsel also must be an attorney or firm of attorneys experienced in such matters.

"Outstanding" means, when used with reference to the Bonds at any date as of which the amount of Outstanding Bonds is to be determined, all Bonds which have been authenticated and delivered under the Indenture except:

(a) Bonds canceled or delivered for cancellation at or prior to such date;

(b) Bonds deemed to be paid in accordance with the defeasance provisions of the Indenture; and

( c) Bonds in lieu of which others have been authenticated under the Indenture.

In determining whether the owners of a requisite aggregate principal amount of Outstanding Bonds have concurred in any request, demand, authorization, direction, notice, consent or waiver under the provisions of the Indenture, Bonds which are owned or held by or for the account of the Borrower and Excluded Bonds will be disregarded and deemed not to be Outstanding under the Indenture for the purpose of any such determination unless all Bonds are Excluded Bonds. In determining whether the Trustee will be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Bonds which are registered in the nai:ne of or known by the Trustee to be Excluded Bonds will be disregarded. Upon request of the Trustee, the Borrower shall specify to the Trustee those Bonds disqualified pursuant to this section and the Trustee may conclusively rely on such specification.

"Permitted Investments" means, to the extent authorized by law for investment of moneys of the Issuer:

(a) Government Obligations.

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(b) Direct obligations of, and obligations on which the full and timely payment of principal and interest is unconditionally guaranteed by, any agency or instrumentality of the United States of America (other than the Federal Home Loan Mortgage Corporation) or direct obligations of the World Bank, which obligations are rated in the Highest Rating Category.

(c) Obligations, in each case rated in the Highest Rating Category, of (i) any state or territory of the United States of America, (ii) any agency, instrumentality, authority or political subdivision ofa state or territory or (iii) any public benefit or municipal corporation the principal of and interest on which are guaranteed by such state or political subdivision.

( d) Any written repurchase agreement entered into with a Qualified Financial Institution whose unsecured short-term obligations are rated in the Highest Rating Category.

( e) Commercial paper rated in the Highest Rating Category.

(f) Interest-bearing negotiable certificates of deposit, interest-bearing time deposits, interest-bearing savings accounts and bankers' acceptances, issued by a Qualified Financial Institution if either (i) the Qualified Financial Institution's unsecured short-term obligations are rated in the Highest Rating Category or (ii) such deposits, accounts or acceptances are fully insured by the Federal Deposit Insurance Corporation.

(g) An agreement held by the Trustee for the investment of moneys at a guaranteed rate with (i) the Credit Provider; or

(ii) a Qualified Financial Institution whose unsecured long-term obligations are rated in the Highest Rating Category or the Second Highest Rating Category, or whose obligations are unconditionally guaranteed or insured by a Qualified Financial Institution whose unsecured long-term obligations are rated in the Highest Rating Category or Second Highest Rating Category; provided that such agreement is in a form acceptable to the Credit Provider; and provided further that such agreement includes the following restrictions:

(1) the invested funds will be available for withdrawal without penalty or premium, at any time that (A) the Trustee is required to pay moneys from the Fund(s) established under the Indenture to which the agreement is applicable, or (B) any Rating Agency indicates that it will lower or actually lowers, .suspends or withdraws the rating on the Bonds on account of the rating of the Qualified Financial Institution providing, guaranteeing or insuring, as applicable, the agreement;

(2) the agreement, and if applicable the guarantee or insurance, is an unconditional and general obligation of the provider and, if applicable, the guarantor or insurer of the agreeme~t, and ranks pari passu with all other unsecured unsubordinated obligations of the provider, and if applicable, the guarantor or insurer of the agreement;

(3) the Trustee receives an Opinion of Counsel, which may be subject to customary qualifications, that such agreement is legal, valid, binding and enforceable upon the provider in accordance with its terms and, if applicable, an Opinion of Counsel that any guaranty or insurance policy provided by a guarantor or insurer is legal, valid, binding and enforceable upon the guarantor or insurer in accordance with its terms; and

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(4) the agreement provides that if during its term the rating of the Qualified Financial Institution providing, guaranteeing or insuring, as applicable, the agreement, is withdrawn, suspended by any Rating Agency or falls below the Second Highest Rating Category, the provider must, within 10 days, either: (A) collateralize the agreement (if the agreement is not already collateralized) with Permitted Investments described in paragraph (a) or (b) by depositing collateral with the Trustee or a third party custodian, such collateralization to be effected in a manner and in an amount sufficient to maintain the then current rating of the Bonds, or, if the agreement is already collateralized, increase the collateral with Permitted Investments described in paragraph (a) or (b) by depositing collateral with the Trustee or a third party custodian, so as to maintain the then current rating of the Bonds, (B) at the request of the Trustee or the Credit Provider, repay the principal of and accrued but unpaid interest on the investment, in either case with no penalty or premium unless required by law or (C) transfer the agreement, guarantee or insurance, as applicable, to a replacement provider, guarantor or insurer, as applicable, then meeting the requirements of a Qualified Financial Institution and whose unsecured Jong-term obligations are then rated in the Highest Rating Category or the Second Highest Rating Category. The agreement may provide that the down-graded provider may elect which of the remedies to the down-grade (other than the remedy set out in (B)) to perform.

Notwithstanding anything else in this paragraph (g) to·the contrary and with respect only to any agreement described in this paragraph or any guarantee or insurance for any such agreement which is to be in effect for any period after the Conversion Date, any reference in this paragraph to the "Second Highest Rating Category" will be deemed deleted so that the only acceptable rating category for such an agreement, guarantee or insurance will be the Highest Rating Category.

(h) Subject to the ratings requirements set forth in this definition, shares in any money market mutual fund (including those of the Trustee or any of its affiliates) registered under the Investment Company Act of 1940, as amended, that have been rated AAArn-G or AAAm by S&P or Aaa by Moody's so Jong as the portfolio of such money market mutual fund is limited to Government Obligations and agreements to repurchase Government Obligations. If approved in writing by the Credit Provider, a money market mutual fund portfolio may also contain obligations and agreements to repurchase obligations described in paragraphs (b) or ( c ). If the Bonds are rated by a Rating Agency, the money market mutual fund must be rated AAAm-G or AAAm by S&P, if S&P is a Rating Agency, or Aaa by Moody's, if Moody's is a Rating Agency. If at any time the Bonds are not rated (and, consequently, there is no Rating Agency), then the money market mutual fund must be rated AAAm-G or AAAm by S&P or Aaa by Moody's. If at any time (i) the Bonds are not rated, (ii) both S&P and Moody's rate a money market mutual fund and (iii) one of those ratings is below the level required by this paragraph, then such money market mutual fund will, nevertheless, be deemed to be rated in the Highest Rating Category if the lower rating is no more than one rating category below the highest rating category of that rating agency; and

(i) Any other investment authorized by the Jaws of the State, if such investment is approved in writing by the Credit Provider and each Rating Agency.

Permitted fuvestments will not include any ofthe following: ( 1) any investment with a final maturity or any agreement with a term greater than one year from the date of the investment (except (a) obligations that provide for the optional or mandatory tender, at par, by the holder of such obligation at least once within one year of the date of purchase, (b) Government Obligations irrevocably deposited with the Trustee for payment of Bonds pursuant to Article IX, and ( c) Permitted Investments listed in paragraphs (g) and (i); (2) except for any obligation described in paragraph (a) or (b), any obligation with a purchase price greater or less than the par value of such obligation; (3) any asset-backed security, including mortgage-backed

B-11

securities, real estate mortgage investment conduits, collateralized mortgage obligations, credit card receivable asset-backed securities and auto loan asset-backed securities; (4) any interest-only or principal­only stripped security; (5) any obligation bearing interest at an inverse floating rate; ( 6) any investment which may be prepaid or called at a price less than its purchase price prior to stated maturity; (7) any investment the interest rate on which is variable and is established other than by reference to a single index plus a fixed spread, if any, and which interest rate moves proportionately with that index; (8) any investment described in paragraph ( d) or (g) with, or guaranteed or insured by, a Qualified Financial Institution described in clause (iv) of the definition of Qualified Financial Institution if such institution does not agree to submit to jurisdiction, venue and service of process in the United States of America in the agreement relating to the investment; (9) any investment to which S&P has added an "r" or "t" highlighter.

"Person" means a natural person, estate, trust, corporation, partnership, limited liability company, association, public body or any other organization or entity (whether governmental or private).

"Pledge Agreement" means the Pledged Bonds, Custody and Security Agreement, dated as of November 1, 2001, among the Borrower, the Trustee, as collateral agent for the Credit Provider, and the Credit Provider, as amended, supplemented or restated from time to time, or any agreement entered into in substitution therefor.

"Principal Amount" means, in the case of the Series E Bonds, $23,600,000, and, in the case ofthe Series F Bonds, $6,400,000, the original principal amonut of each the respective series of the Bonds on the Closing Date.

"Principal Office" of the Trustee, the Tender Agent, the Remarketing Agent or the Loan Servicer means, respectively, the office of the Trustee, the Tender Agent, the Remarketing Agent or the Loan Servicer at the respective address set forth in the Indenture or at such other address as may be specified in writing by the Trustee, the Tender Agent, the Remarketing Agent or the Loan Servicer, as applicable, as provided in the Indenture except that with regard to the Trustee the presentation of Bonds for payment or for registration of transfer and exchange such terms shall mean the office or agency of the Trustee at which, at any particular time, its corporate trust agency business shall be conducted.

"Principal Reserve Amount" means, initially, an amonut equal to 20% of the principal amonut of the Series E Bonds Outstanding on the Conversion Date or, if the Tax-Exempt Conversion date has occurred, 20% of the Bonds Outstanding on the Conversion Date or ifa Tax-Exempt Conversion Date has not occurred with respect to all Series E Bonds, 20% of the sum of the Series E Bonds Outstanding on the Conversion Date and the Series F Bonds with respect to which a Tax-Exempt Conversion Date has occurred prior to the Conversion Date; thereafter, if Bonds Outstanding are redeemed pursuant to a mandatory redemption as described herein nuder "THE BONDS - Redemption Provisions - Mandatory Redemption Casualty or Condemnation; After an Event of Default nuder the Reimbursement Agreement; Determination of Final Permanent Phase Loan Amo nut; Excess Loan Fnuds," such lesser amount as shall be equal to 20% of the principal amount of the Tax-Exempt Bonds Outstanding following such redemption.

"Principal Reserve Fund" means the Principal Reserve Fund created by the Indenture.

"Principal Reserve Schedule" means the Schedule of Deposits to Principal Reserve Fnud attached to the Reimbursement Agreement, as such schedule may be amended, supplemented or restated from time to time.

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"Project Account" means the Project Account of the Loan Fwid.

"Qualified Financial Institution" means any of: (i) bank or trust company organized wider the laws of any state of the United States of America, (ii) national banking association, (iii) savings bank, a savings and loan association, or an insurance company or association chartered or organized wider the laws of any state of the United States of America, (iv) federal branch or agency pursuant to the International Banking Act of 1978 or any successor provisions of law or a domestic branch or agency of a foreign bank which branch or agency is duly licensed or authorized to do business wider the laws of any state or territory of the United States of America, (v) government bond dealer reporting to, trading with, and recognized as a primary dealer by the Federal Reserve Bank ofNew York, (vi) securities dealer approved in writing by the Credit Provider the liquidation of which is subject to the Securities Investors Protection Corporation or other similar corporation and (vii) any other entity which is acceptable to the Credit Provider. With respect to an entity which provides an agreement held by the Trustee for the investment of moneys at a guaranteed rate as set out in paragraph (g) of the definition of the term "Permitted Investments" or an entity which guarantees or insures, as applicable, the agreement, a "Qualified Financial Institution" may also be a corporation or limited liability company organized under the laws of any state of the United States of America.

"Rate Determination Date" means (i) with respect to the Weekly Variable Rate, Tuesday of each week, or if such Tuesday is not a Business Day, the first Business Day before such Tuesday; provided, however, that upon any adjustment to the Weekly Variable Rate Mode from a Reset Rate, the first Rate Determination Date will be the Business Day prior to the Adjustment Date, and (ii) with respect to any Reset Rate and the Fixed Rate, the date selected by the Remarketing Agent which date must be a Business Day not less than five Business Days prior to the Adjustment Date.

"Rating Agency" means any nationally recognized statistical rating agency then maintaining a rating on the Bonds.

"Rebate Analyst" means a Person that is (i) qualified and experienced in the calculation of rebate payments wider Section 148 of the Code and in compliance with the arbitrage rebate regulations promulgated under the Code, (ii) chosen by the Borrower and (iii) engaged for the purpose of determining the amount of required deposits, if any, to the Rebate Fwid.

"Rebate Fund" means the Rebate Fund created wider the Indenture.

"Record Date" means, with respect to any Interest Payment Date, (i) if the Bonds bear interest at the Weekly Variable Rate, the Business Day before the Interest Payment Date and (ii) if the Bonds bear interest at a Reset Rate or the Fixed Rate, the first day of the month in which the Interest Payment Date occurs.

"Redemption Account" means the Redemption Accowit of the Revenue Fwid.

"Redemption Date" means any date upon which Bonds are to be redeemed pursuant to the Indenture.

"Regulatory Agreement" means the Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants relating to the Mortgaged Property, dated as of November 1, 2001, by and among the Issuer, the Trustee and the Borrower, as amended, supplemented or restated from time to time.

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"Reimbursement Agreement" means the Reimbursement Agreement, dated as ofNovember I, 200 I, between the Credit Provider and the Borrower, as amended, supplemented or restated from time to time, or any agreement entered into in substitution therefor.

"Remarketing Agent" means Newman and Associates, Inc. or any successor as Remarketing Agent designated in accordance with the Indenture.

"Remarketing Agreement" means the Remarketing Agreement, dated as of November I, 2001, by and among the Issuer, the Borrower and the Remarketing Agent, as amended, supplemented or restated from time to time, or any agreement entered into in substitution therefor.

"Remarketing Notice Parties" means the Borrower, Issuer, Trustee, Tender Agent, Remarketing Agent, Credit Provider, the Guarantor and Loan Servicer.

"Reserved Rights" means those certain rights of the Issuer under the Financing Agreement to indemnification and to payment or reimbursement of fees and expenses of the Issuer, its right to receive notices and to enforce notice and reporting requirements, its right to inspect and audit the books, records and premises of the Borrower and of the Mortgaged Property, its right to collect attorneys' fees and related expenses, its right to specifically enforce the Borrower's covenant to comply with applicable federal tax law and State Jaw (including the Act and the rules and regulations of the Issuer, if any), and its rights to give or withhold consent to amendments, changes, modifications and alterations to the Financing Agreement relating to the Reserved Rights.

"Reset Date" means any date upon which the Bonds begin to bear interest at a Reset Rate for the Reset Period then beginning.

"Reset Period'' means each period of ten years or more selected by the Borrower, or such shorter period as may be selected by the Borrower with the prior written consent of the Credit Provider, during which the Bonds bear interest at a Reset Rate.

"Reset Rate" means the rate of interest borne by the Bonds as determined in accordance with the Indenture.

"Revenue Fund'' means the Revenue Fund created by the Indenture.

"Revenues" means all (i) payments made under the CreditFacility, (ii) Investment Income ( excluding Investment Income earned from moneys on deposit in the Principal Reserve Fund, the Rebate Fund, the Fees Account and the Costs oflssuance Fund, but including Investment Income earned on Net Bond Proceeds deposited into the Costs oflssuance Fund and Investment Income on such Investment Income) and (iii) payments made under the Note.

"Securities Depository" means, initially, The Depository Trust Company, New York, New York, and its successors and assigns, and any replacement securities depository appointed under the Indenture.

"Security" means the Trust Estate and the Credit Facility.

"Security Instrument" means the Multifamily Mortgage, Assignment of Rents, Security Agreement and Fixture Filing, dated as of November 1, 200 I, together with all riders and exhibits, securing the Note and

B-14

the obligations of the Borrower to the Credit Provider under the Credit Facility Documents, executed by the Borrower with respect to the Mortgaged Property, as amended, supplemented or restated from time to time, or any security instrument executed in substitution therefor, as such substitute security instrument may be amended, supplemented or restated from time to time.

"Series" means, individually or collectively, as the context requires, the Series E Bonds and/or the Series F Bonds.

"Series E Bonds" means the Issuer's Variable Rate Demand Multifamily Housing Revenue Bonds (San Regis Project) Series 2001E.

"Series F Bonds" means the Issuer's Variable Rate Demand Taxable Multifamily Housing Revenue Bonds (San Regis Project) Series 2001F.

"Sinking Fund Payment" means, as of any particular date of calculation, the amount required to be paid on a single future date for the retirement of Outstanding Bonds which mature after such future date, but excluding any amount payable by reason of the maturity of a Bond or by optional redemption of a Bond at the election of the Issuer.

"Sinking Fund Schedule" means the schedule of principal amounts of Bonds to mature or be subject to redemption through the application of Sinking Fund Payments on the specified dates and/or a schedule of principal amounts of Bonds maturing as serial Bonds.

"S&P" means Standard & Poor' s Credit Market Services, a division of The McGraw-Hill Companies, Inc., and its successors and assigns, or if it is dissolved or no longer assigns credit ratings, then any other nationally recognized statistical rating agency, designated by the Credit Provider, as assigns credit ratings.

"State" means the State of California.

"Substitution Date" means the date upon which an Alternate Credit Facility is substituted·for the Credit Facility then in effect, which date must be (i) an Interest Payment Date during a Weekly Variable Rate Period or an Adjustment Date which immediately follows a Reset Period and (ii) a date on which the Credit Facility for which substitution is being made is available to be accessed or drawn upon.

"Supplemental Financing Agreement" means the Supplemental Financing Agreement, dated as of November I, 2001, by and among the Credit Provider, the Loan Servicer, the Construction Administrator and the Guarantor, and the Borrower, as such agreement may be amended, modified, supplemented or restated from time to time.

"Tax Certificate" means the Tax Certificate as to Arbitrage and the Provisions of Sections I 03 and 141-151 of the Internal Revenue Code of 1986, dated the Closing Date, executed and delivered by the Issuer and the Borrower, as amended, supplemented or restated from time to time.

"Tax-Exempt Conversion Date" means the date upon which interest on the Series F Bonds (or a portion thereof) becomes excludible from gross income for purposes offederal income taxation as provided in the Indenture.

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"Tender Agent" means the Tender Agent or its successor as Tender Agent under the Indenture.

"Tender Agent Agreement" means any Tender Agent Agreement entered into by the Issuer, the Trustee and the Tender Agent in the event that the Trustee does not serve as Tender Agent under the Indenture, as such agreement may be amended, supplemented or restated from time to time.

"Tender Date" means any (i) Mandatory Tender Date or (ii) other date on which Bondholders are permitted to tender their Bonds for purchase.

"Tendered Bond" means any Bond which has been tendered for purchase pursuant to the Indenture.

"Trustee" means Chase Manhattan Bank and Trust Company, National Association, a national banking association, duly organized and existing under the laws of the United States of America, or its successors or assigns, or any other corporation or association resulting from or surviving any consolidation or merger to which it or its successors may be a party and any successor trustee at any time serving as successor trustee under the Indenture.

"Underwriter" means Newman and Associates, Inc.

"Weekly Variable Rate" means the variable rate of interest per annum for the Bonds determined from time to time during the Weekly Variable Rate Period in accordance with the Indenture.

"Weekly Variable Rate Period'' means the period commencing on the Closing Date or an Adjustment Date on which the interest rate on the Bonds is adjusted from the Reset Rate to the Weekly Variable Rate and ending on the day preceding the following Adjustment Date or the Maturity Date.

"Wrongful Dishonor" means an uncured failure by the Credit Provider to make an Advance to the Trustee upon proper presentation of documents which conform to the terms and conditions of the Credit Facility.

Funds and Accounts

The following Funds and Accounts are created with the Trustee under the Indenture.

(a) the Loan Fund and within the Loan Fund, the Project Account (and therein a "Series E Subaccount" and a "Series F Subaccount") and the Capitalized Interest Account (and therein a "Series E Subaccount" and a "Series F Subaccount");

(b) the Revenue Fund and within the Revenue Fund, the Interest Account, the Credit Facility Account, the Redemption Account and the Fees Account;

(c) the Costs ofissuance Fund (and within the Costs ofissuance Fund, the Costs ofissuance Deposit Account and the Net Bond Proceeds Account);

( d) the Rebate Fund;

( e) so long as any Bonds are Outstanding and have not been adjusted to the Fixed Rate, the Bond Purchase Fund; and

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(f) the Principal Reserve Fund.

The Trustee will hold and administer the Funds and Accounts in accordance with the Indenture.

Loan Fund

Disbursements; Earnings; Transfer. Amounts on deposit in (i) the Project Account of the Loan Fund will be disbursed by the Trustee from time to time in accordance with the Indenture for the sole purpose of paying Costs of the Mortgaged Property, first from the Series E Subaccount and then from the Series F Subaccount, and (ii) the relevant subaccount of the Capitalized Interest Account, if any, shall be transferred automatically by the Trustee to the Interest Account monthly in full for partial satisfaction of monthly interest payments payable by the Borrower under the Note until the relevant Capitalized Interest Account is depleted. Transfers from the Capitalized futerest Account to the Interest Account shall be made no later than three Business days prior to the respective dates on which such payments are due to the Bondholders. The Trustee shall immediately notify the Construction Administrator and the Guarantor if sufficient funds are not available to make the transfers as and when required by this subsection.

Requisitions. The Trustee will make disbursements from the Project Account only upon the receipt of Requisitions, each in the form of Exhibit B attached to the Indenture, signed by an Authorized Borrower Representative and countersigned by an Authorized Construction Administrator Representative, the Loan Servicer and the Issuer. The countersignature of the Authorized Construction Administrator Representative, the Loan Servicer and the Issuer on a Requisition will be deemed a certification and, insofar as the Trustee and the Issuer are concerned, constitute conclusive evidence, that all of the terms, conditions and requirements of the Loan Documents applicable to the disbursement have been fully satisfied or waived. The Trustee will, immediately upon each receipt of a completed Requisition signed by the Authorized Borrower Representative and countersigned by an Authorized Construction Administrator Representative, the Loan Servicer and the Issuer, initiate procedures with the provider of the Investment Agreement applicable to the Loan Fund, if any, to make withdrawals under that fuvestment Agreement as necessary to fund the Requisition.

Timing. If a Requisition signed by the Authorized Borrower Representative and countersigned by an Authorized Construction Administrator Representative, the Loan Servicer and the Issuer is received by the Trustee by noon, prevailing California Time, on any given Business Day, the Trustee will pay the requested disbursement within two Business Days (for this purpose, including in the definition of"Business Day" only clauses (i) and (iii) of such definition), or, if an Investment Agreement is in effect with respect to such funds, within two Business Days after funds are received by the Trustee from the provider of the relevant Investment Agreement. If a Requisition signed by the Authorized Borrower Representative and countersigned by an Authorized Construction Administrator Representative, the Loan Servicer and the Issuer is received by the Trustee after noon, prevailing California Time, on any given Business Day, the Trustee will pay the requested disbursement within three of the above counted Business Days. Upon final disbursement of all amounts on deposit in the Loan Fund, the Trustee will close the Loan Fund.

Transfers to Effect Certain Mandatory Redemptions of Bonds.

Conversion; Excess Loan Funds. On or before the Conversion Date (and, if applicable, from time to time after the Conversion Date) the Trustee will transfer to the Redemption Account any amounts remaining on deposit in the Loan Fund which are not required to pay Costs of the Mortgaged Property not yet due and payable or which are being contested in good faith, in the case

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of any such transfer on or before the Conversion Date, as determined in writing by the Construction Administrator and in the case of any such transfer after the Conversion Date, as determined in writing by the Loan Servicer. The Trustee will apply any amounts so transferred to the redemption of Bonds pursuant to the Indenture.

Failure of Conversion. If the Loan Servicer does not issue the Conversion Notice on or before the Expiration Date, the Trustee will, promptly following the Expiration Date, unless otherwise directed in writing by the Credit Provider, transfer any amounts remaining on deposit in the Loan Fund on the Expiration Date to the Redemption Account, provided that if the Trustee purchases the Bonds for the account of the Guarantor pursuant to the Indenture, such transfer will be made on such later date as will be specified by the Construction Administrator, but in any event not later then three years after the Closing Date. The Trustee will apply any amounts so transferred to the Redemption Account to the redemption of Bonds pursuant to the Indenture.

Certain Other Mandatory Redemptions. Immediately prior to any mandatory redemption of the Bonds in whole pursuant to the Indenture, any amounts then remaining in the Loan Fund will, at the written direction of the Credit Provider, be transferred to the Redemption Account to be applied to the redemption of Bonds pursuant to the applicable provision.

Revenue Fund's Interest Account

Deposits into the Interest Account. The Trustee will deposit each of the following amounts into the Interest Account:

(1) moneys provided by or on behalf of the Borrower relating to an interest payment, including any prepayment, under the Note or any payment of the Facility Fee;

(2) moneys transferred from the Capitalized InterestAccountpursuant to the Indenture;

(3) all Investment Income on the Funds and Accounts ( except that Investment Income earned on amounts on deposit in the Accounts of the Loan Fund, Rebate Fund, the Accounts of the Costs of Issuance Fund, and the Principal Reserve Fund will be credited to and retained in those respective Funds or Accounts, including the respective subaccounts therein); and

( 4) any other moneys made available for deposit into the Interest Account from any other source, including, but not limited to, any excess amounts in the Bond Purchase fund pursuant to the Indenture.

Disbursements from the Interest Account. The Trustee will disburse or transfer, as applicable, moneys on deposit in the Interest Account at the following times and apply such moneys in the following manner and in the following order of priority:

(1) On each (i) Interest Payment Date, (ii) Redemption Date, and (iii) date of acceleration of the Bonds, the Trustee shall disburse to the Credit Provider the amount of any Advance under the Credit Facility relating to the payment of interest on the Bonds unless the Loan Servicer has reimbursed the Credit Provider for the amount <>f such Advance;

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(2) In the event of a Wrongful Dishonor until such Wrongful Dishonor is cured, the Trustee will disburse to the Bondholders on each Interest Payment Date, an amount equal to the interest due on the Bonds on such date;

(3} On each Interest Payment Date on or before the Conversion Date, to the Credit Provider the amount of its Facility Fee, if received from the Borrower or transferred from the Capitalized Interest Account;

( 4) Unless (A) there is a deficiency in the Principal Reserve Fund, the Fees Account or the Rebate Fund or (B) an Event of Default under the Reimbursement Agreement or any Bond Document or a default under any Loan Document has occurred and is continuing, on each Interest Payment Date the Trustee will disburse to the Borrower the Investment Income earned on or transferred to the Interest Account from and after the preceding Interest Payment Date or the Closing Date, as applicable. If a deficiency exists in the Principal Reserve Fund, the Fees Account or the Rebate Fund, such Investment Income will be transferred to the Principal Reserve Fund, the Fees Account and/or the Rebate Fund, in that order of priority, prior to any payment to the Borrower.

The Revenue Fund's Redemption Account

Deposits into the Redemption Account. The Trustee will deposit each ofthefollowing amounts into the Redemption Account:

(!) Available Moneys provided by or on behalf of the Borrower to fund the premium, if any, payable on the Bonds, in connection with a redemption of such Bonds, which amounts will be held in a segregated subaccount in the Redemption Account;

(2) moneys transferred from the Loan Fund pursuant to the Indenture;

(3) moneys provided by or on behalf of the Borrower relating to a principal payment, including any prepayment under the Note;

(4) moneys transferred from the Principal Reserve Fund pursuant to the Indenture; and

(5) any other amount received by the Trustee and required by the terms of the Indenture or the Financing Agreement to be deposited into the Redemption Account.

Disbursements from the Redemption Account. On each Redemption Date, date of acceleration of the Bonds and Maturity Date, the Trustee will disburse from the Redemption Account (i) to the Credit Provider, the amount of any Advance under the Credit Facility relating to the payment of principal on the Bonds unless the Loan Servicer has reimbursed the Credit Provider for the amount of such Advance or (ii) in the event of a Wrongful Dishonor, to the Bondholders, an amount equal to the principal due on the Bonds on such date. In addition, on any date on which premium payable on Bonds in connection with a redemption of such Bonds is due, the Trustee will disburse to the Bondholders, from the segregated subaccount in the Redemption Account, Available Moneys in an amount sufficient to pay such premium.

Disbursements from theRedemptionAccountforSinking Fund Payments. Provided that no notice of optional redemption has been sent to Bondholders on or before the 45 th day preceding a Sinking Fund Payment Date, at the written instruction of an Authorized Officer of the Issuer, at the direction of the

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' Borrower and with the prior written consent of the Credit Provider, the Trustee will apply any moneys accumulated in the Redemption Account on or prior to the 45th day preceding such Sinking Fund Payment Date to the purchase of Bonds of the same series and maturity for which such Sinking Fund Payment was established at prices (including any brokerage and other charges) not exceeding the redemption price for such Bonds plus accrued and unpaid interest to the date of purchase, such purchase to be made in such manner as tbe Trustee (after consultation witb tbe Issuer, tbe Borrower and the Credit Provider) determines.

Upon tbe purchase of any Bond pursuant to tbe preceding paragraph, such Bonds will be canceled by the Trustee and an amount equal to the principal amount of the Bond so purchased will be credited toward the Sinking Fund Payment next due with respect to the Bonds of such maturity. In the event tbe Trustee is able to purchase Bonds at a price less than the redemption price at which such Bonds were to be redeemed, then, presuming no notice of redemption has been sent to Bondholders, after payment by tbe Trustee of the purchase price of such Bonds and after payment of any other amounts due on the due date of such Sinking Fund Payment, tbe Trustee will pay an amount not greater than the difference between the amount of such purchase price and tbe amount of such redemption price to, or at the written direction of, the Borrower.

As soon as practicable after the 45th day preceding the due date of any such Sinking Fund Payment, and otherwise as provided in the Indenture, the Trustee, pursuant to the Indenture, shall give notice of

· redemption on such due date of Bonds in such amount as is necessary to complete the retirement of a principal amount ofBonds equal to the unsatisfied balance of such Sinking Fund Payment. The Trustee shall so call such Bonds for redemption whether or not it then has moneys in the Redemption Account sufficient to pay the applicable redemption price of the Bonds to be redeemed on the Redemption Date. The Trustee shall pay the amount required for the redemption of the Bonds so called for redemption from the Funds specified in the Redemption Account, in the order of priority indicated, and such amount will be applied by tbe Trustee to such redemption.

Revenue Fnnd - Credit Facility Account

Deposits into the Credit Facility Account. The Trustee will deposit into the Credit Facility Account all Advances under the Credit Facility, except for (i) Advances on account of the Issuer's Fee and (ii) Pledged Bonds Advances. That portion ofany Advance on account of the Issuer's Fee will be deposited into the Fees Account. Pledged Bonds Advances will be deposited into the Bond Purchase Fund. No other moneys will be deposited into the Credit Facility Account and the Credit Facility Account will be maintained as a segregated account and moneys in it will not be co-mingled with any other moneys held under the Indenture. The Credit Facility Account will be closed at such time as the Credit Provider has no continuing liability under the Credit Facility.

Transfers from the Credit Facility Account. The Trustee will cause amounts deposited into the Credit Facility Account to be applied on the date payment is due to the payments for which the Advance was made pursuant to the Credit Facility. In no event will amounts in the Credit Facility Account be applied to the payment of principal of, interest on or any premium on any Excluded Bonds. Any amounts remaining in the Credit Facility Account after making the payment for which the Advance was made pursuant to the Credit Facility will be immediately refunded to the Credit Provider.

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Revenue Fnnd - Fees Acconnt

Deposits into the Fees Account. The Trustee will deposit into the Fees Account the (i) payments made by the Borrower under the Financing Agreement attributable to the Issuer's Fee, and the fees and expenses of the Trustee, the Tender Agent, the Remarketing Agent and the Rebate Analyst (collectively, "Third Party Fees"), and (ii) amounts, ifany, derived from the Credit Facility for the payment of the Issuer's Fee. No other moneys will be deposited into the Fees Account.

Disbursements from the Fees Account. On any date on which any amounts are required to pay any Third Party Fees, such amounts will be withdrawn by the Trustee from the Fees Account for payment of such Third Party Fees to the appropriate party, provided, however, that amounts derived from the Credit Facility and deposited into the Fees Account will be used only to pay the Issuer's Fee when due. In the event the amount in the Fees Account is insufficient to pay such Third Party Fees, the Trustee will make written demand on the Borrower for the amount of such insufficiency and, pursuant to the terms of the Financing Agreement, the Borrower will be liable to promptly pay the amount of such insufficiency to the Trustee within five Business Days after the date of the Trustee's written demand. Notice of the insufficiency will be provided by the Trustee to the Loan Servicer and the Guarantor.

Principal Reserve Fnnd

Deposits into the Principal Reserve Fund. The Trustee will deposit each of the following amounts into the Principal Reserve Fund:

(1) All of the monthly payments made by the Borrower in accordance with the Principal Reserve Schedule, as such schedule may be amended in writing in accordance with the provisions of the Reimbursement Agreement; and

(2) Investment Income earned on amounts on deposit in the Principal Reserve Fund.

Disbursements from the Principal Reserve Fund. The Trustee will pay or transfer amounts on deposit in the Principal Reserve Fund as follows:

(I) at the written direction of the Credit Provider, to the Credit Provider to reimburse the Credit Provider for any unreimbursed Advance under the Credit Facility and to pay any other amounts required to be paid by the Borrower under the Loan Documents, the Bond Documents or the Credit Facility Documents (including any amounts required to be paid to the Credit Provider);

(2) at the written direction of the Credit Provider, with the written consent of the Borrower (so long as an Event of Default has not occurred and is not continuing under any of the Credit Facility Documents), to the Credit Provider or the Borrower, as the Credit Provider elects, to make improvements or repairs to the Mortgaged Property;

(3) at the written direction of the Credit Provider, if a default has occurred under the Credit Facility Documents, any Loan Document or any Bond Document, to the Credit Provider for any use approved in writing by the General Counsel of the Credit Provider;

( 4) at the written direction of the Credit Provider, if a new mortgage and mortgage note have been substituted for the Security Instrument and the Note in accordance with the Loan

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Documents, or if the Borrower otherwise consents in writing, to any use approved in writing by the General Counsel of the Credit Provider;

(5) on each Adjustment Date, to the Redemption Account;

(6) Ifa Tax-Exempt Conversion Date has not occurred as to all Series F Bonds, then during a Weekly Variable Rate Period, if the aggregate amount on deposit in the Principal Reserve Fund ( excluding all Investment Income) on the tenth day of any month equals or exceeds $100,000, an amount equal to the amount on deposit in the Principal Reserve Fund (rounded downward to the nearest integral multiple of$100,000), shall be transferred to the Redemption Account to be used to redeem Series F Bonds with respect to which a Tax-Exempt Conversion Date has not occurred, and after all Series F Bonds with respect to which a Tax-Exempt Conversion Date has not occurred have been redeemed, then during a Weekly Variable Rate Period, on the tenth Business Day prior to each Interest Payment Date, all amounts on deposit in the Principal Reserve Fund (rounded downward to the nearest multiple of $100,000) in excess of the Principal Reserve Amount, shall be transferred to the Redemption Account to be used to redeem Series E Bonds and Series F Bonds with respect to which a Tax-Exempt Conversion Date has occurred, without distinction; ifa Tax-Exempt Conversion Date has occurred with respect to all of the Series F Bonds, then during a Weekly Variable Rate Period, on the tenth Business Day Prior to each Interest Payment Date, all amounts on deposit in the Principal Reserve Fund (rounded downward to the nearest multiple of $100,000) in excess of the Principal Reserve Amount, shall be transferred to the Redemption Account to be used to redeem Series E Bonds and Series F Bonds, without distinction;

(7) to the Borrower, Investment Income on moneys in the Principal Reserve Fund on the Interest Payment Date following receipt by the Trustee of such Investment Income; provided (i) there is no deficiency in the Interest Account, the Redemption Account, the Principal Reserve Fund, the Fees Account or the Rebate Fund, and (ii) no default exists under the Credit Facility Documents, any Loan Document or any Bond Document; if a deficiency exists in the Interest Account, the . Redemption Account, the Principal Reserve Fund, the Fees Account or the Rebate Fund, the Trustee will transfer such Investment Income to the Interest Account, the Redemption Account, the Principal Reserve Fund, the Fees Account and/or the Rebate Fund, in that order of priority, prior to any payment to the Borrower.

Bond Purchase Fund

The Trustee will deposit each of the following into the Bond Purchase Fund: (1) remarketing proceeds received upon the remarketing ofTendered Bonds to any person; (2) Pledged Bond Advances under the Credit Facility to enable the Trustee to pay the purchase price of Tendered Bonds to the extent that moneys obtained pursuant to subsection (1) are insufficient on any date to pay the purchase price of Tendered Bonds which amounts the Trustee will transfer to the Tender Agent on or before 3 :00 p.m. Eastern time on each Tender Date, and (3) Moneys from the Borrower to the extent that moneys obtained pursuant to subsections (I) and (2) are insufficient on any date to pay the purchase price of Tendered Bonds.

Subject to a provision within the Indenture permitting reimbursement of amounts owed to the Credit Provider, moneys in the Bond Purchase Fund will be held uninvested and exclusively for the payment of the purchase price of Tendered Bonds. Amounts held to pay the purchase price for more than two years will be applied in the same manner as provided under the Indenture with respect to unclaimed payments of principal and interest.

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Costs oflssuance Fund .

Deposits into the Costs of Issuance Fund. On or before the Closing Date the Borrower will deliver the Costs of Issuance Deposit to the Trustee. On the Closing Date, the Trustee will deposit or transfer, as applicable, the Costs oflssuance Deposit into the Costs of Issuance Deposit Account of the Costs oflssuance Fund. On the Closing Date, the Trustee will deposit any Net Bond Proceeds received to pay Costs ofissuance into the Net Bond Proceeds Account of the Costs ofissuance Fund.

Disbursements from the Costs of Issuance Fund. The Trustee will disburse moneys on deposit in the Costs ofissuance Fund, pursuant to requisitions in the form of Exhibit C attached to the Indenture, signed by an Authorized Borrower Representative, to pay Costs ofissuance. The Trustee may conclusively rely on such requisitions for purposes of making such disbursements. Moneys on deposit in the Costs of Issuance Fund will not be part of the Trust Estate and will be used solely to pay Costs of Issuance.

Disposition of Remaining Amounts. Any moneys remaining in the (A) Costs ofissuance Deposit Account six months after the Closing Date and not needed to pay still unpaid Costs of Issuance will be returned to the Borrower and/or (B) the Net Bond Proceeds Account six months after the Closing Date and not needed to pay still unpaid Costs of Issuance will be transferred to Series E Subaccount of the Project Account of the Loan Fund. Upon final disbursement and/or transfer, the Trustee will close the Costs of Issuance Fund.

Rebate Fund

The Trustee will hold the Rebate Fund and will apply the amounts held therein to the payment of any rebate that is required to be made as set forth in a certificate of the Rebate Analyst and as directed in writing by the Borrower in compliance with this Indenture and the Tax Certificate. The Trustee will conclusively be deemed to have complied with the provisions of this section if it follows the directions of the Borrower and will not be required to take any actions under the Indenture in the absence of written instructions from the Borrower. Within 30 days after the end of every fifth Bond Year (as defmed in the Tax Certificate), and within 55 days after the date on which no Bonds are Outstanding, the Borrower will cause the Rebate Analyst to deliver to the Trustee and the Issuer a certificate stating whether any rebate payment is required to be made, as set forth in the Tax Certificate, and the Borrower will deliver to the Trustee any amount so required to be paid. The Trustee shall immediately provide written notice to the Borrower, the Issuer and the Credit Provider if the Borrower fails to deliver such certificate.

Moneys to be Applied at the Direction of Credit Provider

Upon any default by the Borrower under any Bond Document, any Loan Document or any Credit Facility Document, all or a portion of the funds on deposit in the Funds and Accounts ( other than the Rebate Fund, the Costs ofissuance Fund and the Fees Account) shall be paid or applied in any manner and for any purpose directed in writing by the Credit Provider.

Nonpresentment of Bonds

In the event any Bond is not presented for payment when the principal of such Bond becomes due, either at maturity or at the date fixed for redemption of such Bond or otherwise, if amounts sufficient to pay such Bond have been deposited with the Trustee for the benefit of the owner of the Bond and have remained unclaimed for two years after such principal has become due and payable, such amounts, to the extent

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amounts are owed to the Credit Provider as set forth in a written statement of the Credit Provider addressed to the Trustee, will be paid to the Credit Provider, with any excess to be paid to the Borrower. Upon such payment, all liability of the Issuer and the Trustee to the holder of any Bond for the payment of such Bond will cease and be completely discharged, provided, however, that the Trustee, before being required to make any such payment to the Credit Provider or the Borrower, will cause to be published once in a financial newspaper or journal of general circulation in New York, New York, notice that such moneys remain unclaimed and that, after a date specified in such notice, which will not be less than 30 days from the date of such publication, any unclaimed balance of such moneys then remaining will be paid to the Credit Provider or the Borrower. The cost of such publication will be paid from the unclaimed amount so held by the Trustee. The obligation of the Trustee under the Indenture to pay any such amounts to the Credit Provider or the Borrower will be subject to any provisions of Jaw applicable to the Trustee or to such amounts providing other requirements for disposition of unclaimed property.

Investment Limitations

Moneys held as part of any Fund or Account will be invested and reinvested in Permitted Investments. Permitted Investments will have maturities corresponding to, or will be available for withdrawal without penalty no later than, the dates upon which such moneys will be needed for the purpose for which such moneys are held. Moneys on deposit in the (i) Interest Account will be invested only in investments described in paragraphs (a), (b), (c), and (h) of the definition of Permitted Investments, (ii) Redemption Account will be invested only in investments described in paragraph (a) of the definition of Permitted Investments, with a term not exceeding the earlier of 30 days from the date of investment of such moneys or the date or dates that such moneys are anticipated to be required for redemption, (iii) Credit Facility Account and Bond Purchase Fund will be held uninvested and (iv) Costs oflssuance Fund, until disbursed or returned to the Borrower, will be invested only in investments described in paragraph (h) of the definition of Permitted Investments. Permitted Investments will be held by or under the control of the Trustee. All Investment Income from moneys held in all Funds and Accounts other than the Loan Fund, the Rebate Fund, the Costs oflssuance Fund and the Principal Reserve Fund, upon receipt, will be deposited into the Interest Account. Investment Income from moneys held in the Loan Fund, the Rebate Fund, the Costs of Issuance Fund and the Principal Reserve Fund will remain in the respective Fund where earned.

Limitations on Liability

Notwithstanding any other provision of the Indenture to the contrary:

(a) the obligations of the Issuer with respect to the Bonds are not general obligations of the Issuer but are special, limited obligations of the Issuer payable by the Issuer solely from the Security.

(b) nothing contained in the Bonds or in the Indenture will be considered as assigning or pledging any funds or assets of the Issuer other than the Trust Estate.

( c) the Bonds are not and will not be a debt of the State, the Issuer or of any other political subdivision of the State, and neither the State, the Issuer nor any other political subdivision of the State is or will be liable "for the payment of the Bonds.

(d) neither the faith and credit of the Issuer, the State nor of any other political subdivision of the State are pledged to the payment of the principal of and interest and any premium on the Bonds.

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( e) no failure of the Issuer to comply with any term, condition, covenant or agreement in the Indenture or in any document executed by the Issuer in connection with the Mortgaged Property, or the issuance, sale and delivery of the Bonds will subject the Issuer to liability for any claim for damages, costs or other charges except to the extent that the same can be paid or recovered from the Trust Estate.

(f) the Issuer will not be required to advance any moneys derived from any source other than the Trust Estate for any of the purposes of the Indenture, any of the other Bond Documents or any of the Loan Documents, whether for the payment of the principal or redemption price of, or interest on, the Bonds, the payment of Third Party Fees or administrative expenses or otherwise.

Credit Facility; Alternate Credit Facility

Acceptance of the Credit Facility The Trustee will hold the Credit Facility and will enforce in its name all rights of the Trustee and all obligations of the Credit Provider under the Credit Facility for the benefit of the Bondholders. The Trustee will not assign or transfer the Credit Facility except (i) to the Credit Provider upon expiration or other termination of the Credit Facility in accordance with its terms, including expiration on its stated expiration date, or upon payment under the Credit Facility of the full amount payable under the Credit Facility, provided that the Amount Available under the Credit Facility is not subject to reinstatement or (ii) to a successor Trustee under the Indenture. The Issuer and the Trustee acknowledge that the obligations of Fannie Mae as the Credit Provider under the initial Credit Facility are not backed by the full faith and credit of the United States of America, but by the credit of Fannie Mae, a federally-chartered, stockholder owned corporation.

Alternate Credit Facility. Subject to the terms of the Credit Facility Documents, the Trustee will accept any Alternate Credit Facility delivered to the Trustee in substitution for the Credit Facility then in effect if: (a) the Alternate Credit Facility meets the requirements specified in the Indenture; (b) the Substitution Date for the Alternate Credit Facility is an Interest Payment Date during a Weel<ly Variable Rate Period or an Adjustment Date which inunediately follows a Reset Period; ( c) the Alternate Credit Facility is effective on and from the Substitution Date for such Alternate Credit Facility; and ( d) the Trustee receives on or prior to the effective date of the Alternate Credit Facility (i) an Opinion of Counsel to the Credit Provider issuing the Alternate Credit Facility, in form and substance satisfactory to the Issuer and the Trustee, relating to the due authorization and issuance of the Alternate Credit Facility and its enforceability and (ii) an opinion of Bond Counsel to the effect that the substitution of such Alternate Credit Facility will not adversely affect the exclusion from gross income, for federal income tax purposes, of the interest payable on the Series E Bonds (and if the Tax-Exempt Conversion Date has occurred, the Series F Bonds).

The Trustee will give notice to the Bondholders of the substitution of such Alternate Credit Facility for the Credit Facility then in effect as provided in the Indenture. On the Substitution Date, the Trustee will, if necessary, request an Advance under the Credit Facility being replaced and will not surrender such Credit Facility until all requests thereon have been honored.

Defeasance

Provision for Payment of Bonds. So long as the Bonds are in a Reset Mode or the Fixed Rate Mode, any Bond will be deemed paid if each of the conditions set out under the Indenture are satisfied. The Bonds may not be defeased if the Bonds are in the Weekly Variable Rate Mode. The conditions are:

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(!) The Issuer or the Borrower deposits with the Trustee (A) Available Moneys or (B) Government Obligations which are not subject to early redemption and which are purchased with Available Moneys, of such maturities and interest payment dates and bearing such interest as will be sufficient, without further investment or reinvestment of either the principal amount of such Government Obligations or the interest earnings on Government Obligations (the earnings to be held in trust also), together with any Available Moneys, for the payment on their respective maturity dates, or redemption dates prior to maturity, of the principal of such Bonds and redemption premium, if any, and interest to accrue on such Bonds to such maturity or redemption dates.

(2) The Trustee receives, at the expense of the Borrower, and may rely upon: (A) a verification report of an independent certified public accountant; and (B) an opinion of Bond Counsel to the effect that such deposit with the Trustee and consequent defeasance of the Bonds does not adversely affect the excludability from gross income for federal income tax purposes of the interest payable on the Series E Bonds (and if the Tax-Exempt Conversion Date has occurred, the Series F Bonds).

(3) All Third Party Fees due or to become due have been paid or sufficient additional moneys to make the required payments have been irrevocably deposited with the Trustee.

( 4) For any such Bonds to be redeemed on any date prior to their maturity, the Trustee has received in form satisfactory to it irrevocable instructions to redeem such Bonds on a date on which the Bonds are subject to redemption (which, if the Bonds are in a Reset Mode, must be a date prior to the expiration of the then applicable Reset Period), and either evidence satisfactory to the Trustee that all redemption notices required by the Indenture have been given or irrevocable power authorizing the Trustee to give such redemption notices.

The Trustee will redeem the Bonds specified by such irrevocable instructions on the date specified in such irrevocable instructions.

De/eased Bonds No Longer Outstanding. At such times as a Bond is deemed to be paid under the Indenture, it will no longer be secured by or entitled to the benefits of the Indenture, except for the purposes of payment in accordance with the Indenture.

Defaults and Remedies

Events of Default. Each of the following constitutes an Event of Default under the Indenture:

(1) default in the payment when due and payable of any interest due on any Bond ( other than an Excluded Bond) or unless the Guarantor specifies otherwise by written notice to the Trustee, on any Special Purchase Bond;

(2) default in the payment when due and payable of (A) the principal of or any redemption premium on any Bond ( other than an Excluded Bond) or unless the Guarantor specifies otherwise by written notice to the Trustee, Special Purchase Bond at maturity or upon any redemption, or (B) the purchase price of any Tendered Bond ( other than a Pledged Bond);

(3) written notice to the Trustee from the Credit Provider of a default by the Issuer in the observance or performance of any covenant, agreement, warranty or representation on the part

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of the Issuer included in the Indenture or in the Bonds ( other than an Event of Default set forth in subsection(!) or (2) above) and the continuance of such default for a period of 30 days after the Trustee receives such written notice from the Credit Provider;

( 4) written notice to the Trustee from the Credit Provider of an Event of Default under the Reimbursement Agreement;

(5) an Act of Bankruptcy; provided that the Credit Provider shall have consented in writing to the same constituting an Event of Default; provided further that the Credit Provider will not give such consent ofrelieffrom the automatic stay under Section 362(a) of the Bankruptcy Code is granted within sixty (60) days following the bankruptcy filing; or ·

(6) a Wrongful Dishonor.

Non-Default and Prohibition of Mandatory Redemption Upon Tax Event. The occurrence of any event ("Tax Event") which results in the interest payable on the Series E Bonds (and if the Tax-Exempt Conversion Date has occurred, the Series F Bonds) being includable, for federal income tax purposes, in the gross income of the Bondholders, including any violation of any provision of the Regulatory Agreement or any of the other Bond Documents, will not (i) directly or indirectly constitute an Event of Default under the Indenture or permit any party (other than the Credit Provider) to accelerate, or require acceleration of, the Loan or the Bonds, unless the Credit Provider provides written notice to the Trustee that such Tax Event constitutes a default under the Reimbursement Agreement, or (ii) give rise to a mandatory redemption of the Bonds, or (iii) give rise to the payment to the Bondholders of any amount, denoted as "supplemental interest," "additional interest," "penalty interest," "liquidated damages," "damages" or otherwise, in addition to the amounts payable to the owners of the Bonds prior to the occurrence of the Tax Event. Nothing contained in this subsection will be deemed to amend or supplement the terms of the Loan Documents. Promptly upon determining that a Tax Event has occurred, the Issuer or the Trustee, by notice in writing to the Credit Provider, the Loan Servicer, the Borrower, the Registered Owners of the Bonds and the Guarantor, will state that a Tax Event has occurred and whether the Tax Event is cured, curable within a reasonable period or incurable. Notwithstanding the availability of the remedy of specific performance to cure a Tax Event that is curable within a reasonable period, neither the Issuer nor the Trustee will have, upon the occurrence of a Tax Event, any right or obligation to cause or direct acceleration of the Bonds or the Loan, to enforce the Note or to foreclose the Security Instrument, to accept a deed to the Mortgaged Property in lieu of foreclosure, or to effect any other comparable conversion of the Loan.

Acceleration. Upon:

( 1) the occurrence and during the continuance of a Wrongful Dishonor, the Trustee may, and, upon the written request of Bondholders owning not less than 51 percent in aggregate principal amount of Bonds then Outstanding, must, by written notice to the Issuer, the Borrower, the Credit Provider, the Guarantor and the Loan Servicer, declare the principal of all Bonds and the interest accrued, and to accrue, on the Bonds to the date of acceleration immediately due and payable; or

(2) the occurrence of any other Event of Default under the Indenture, the Trustee may, upon receiving the prior written consent of the Credit Provider, and must, upon the written direction of the Credit Provider requiring that the Bonds be accelerated pursuant to this subsection, by written notice to the Issuer, the Borrower, the Credit Provider, the Guarantor and the Loan Servicer, declare

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-"~'-

the principal of all Bonds and the interest accrued, and to accrue, on the Bonds to the date of acceleration immediately due and payable.

Notice. Upon any decision to accelerate payment of the Bonds, the Trustee will notify the Bondholders of the declaration of acceleration, that, in the event of acceleration pursuant to the Indenture, interest on the Bonds will cease to accrue upon such declaration, and payment of the Bonds will be made upon presentment of the Bonds at the Principal Office of the Trustee. Such notice will be sent by registered mail or overnight delivery service, postage prepaid, or, at the Trustee's option, may be given by Electronic Means to each Registered Owner of Bonds at such Registered Owner's last address appearing in the Bond Register. Any defect in or failure to give notice of such declaration will not affect the validity of such declaration.

Advance Under Credit Facility. Immediately upon acceleration of the Bonds, the Trustee will request an Advance under the Credit Facility in accordance with its terms.

Other Remedies. Subject to the section entitled, "Events of Default; Preliminary Notice," upon the occurrence and continuance of an Event of Default, the Trustee may, with or without taking action to accelerate the Bonds, but only with the prior written consent of the Credit Provider, and must at the direction of the Credit Provider if the Event of Default occurs under paragraph (a)(3), (4) or (5) above, upon receipt of indemnity reasonably satisfactory to the Trustee, pursue any of the following remedies:

(1) an action in mandamus or other suit, action or proceeding at law or in equity (A) to enforce the payment of the principal of and interest and any premium on the Bonds, (B) for the specific performance of any covenant or agreement contained in the Indenture, the Financing Agreement or the Regulatory Agreement or (C) to require the Issuer to carry out any other covenant or agreement with Bondholders and to perform its duties under the Act;

(2) the liquidation of the Trust Estate; or

(3) an action or suit in equity to enjoin any acts or things which may be unlawful or in violation of the rights of the Bondholders and to execute any other papers and documents and do and perform any and all such acts and things as may be necessary or advisable in the opinion of the Trustee in order to have the respective claims of the Bondholders against the Issuer allowed in any bankruptcy or other proceeding.

Remedies Not Exclusive; Delay or Omission. No right or remedy conferred upon or reserved to the Trustee ( or to the Bondholders) is intended to be exclusive of any other right or remedy, but each and every such right and remedy will be cumulative and in addition to any other right or remedy given to the Trustee or to the Bondholders under the Indenture or under the Financing Agreement, the Regulatory Agreement or the Credit Facility or now or later existing at law or in equity. No delay or omission to exercise any right or remedy provided in the Indenture will impair any such right or remedy or be construed to be a waiver of any Event of Default or acquiescence in it. Every such right and remedy may be exercised from time to time as often as may be deemed expedient.

Waiver. Subject to the conditions precedent set out below, (i) the Trustee may waive, (ii) the Trustee will waive if directed to do so by the Credit Provider and the Guarantor in writing, and (iii) Bondholders owning not less than 51 percent in aggregate principal amount of Bonds then Outstanding may waive, by

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written notice to the Trustee, any Event of Default under the Indenture and its consequences and rescind any declaration of acceleration of maturity of principal. The conditions precedent to any waiver are:

(a) unless the waiver is directed by the Credit Provider and the Guarantor, the Credit Provider and the Guarantor must consent to such waiver in writing;

(b) the principal and interest on the Bonds in arrears, together with interest thereon (to the extent permitted by law) at the applicable rate or rates of interest borne by the Bonds must be paid or provided for by the Borrower in Available Moneys or by the Credit Provider and all fees and expenses of the Trustee have been paid or provided for by the Borrower or the Credit Provider; and

( c) after the waiver, the Credit Facility must remain in effect in an amount equal to the aggregate principal amount of the Bonds Outstanding (other than Excluded Bonds) plus the Interest Requirement; provided, however, that ifthere is no Credit Facility in effect, such waiver will be permitted if (i) the Issuer consents to the waiver, (ii) the Rating Agency then rating the Bonds is notified of the waiver and that the Credit Facility will not remain in effect, (iii) the Trustee gives written notice to the Bondholders that after the waiver the Credit Facility will not remain in effect and the ratings on the Bonds may be reduced or withdrawn upon the occurrence of such waiver and (iv) 100% of the Bondholders give their written consent to such waiver.

Upon any such waiver, the default or Event of Default will be deemed cured and will cease to exist for all purposes and the Issuer, the Borrower, the Trustee and the Bondholders will be restored to their former positions and rights under the Indenture. No waiver of any default or Event of Default will extend to or affect any subsequent default or Event of Default or will impair any right or remedy consequent thereto.

Rights to Direct Proceedings. Notwithstanding anything contained in the Indenture to the contrary, the Credit Provider itself or Bondholders owning not less than 51 percent in aggregate principal amount of Bonds then Outstanding, but only with the prior written consent of the Credit Provider, will 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 the Indenture or any other proceedings under the Indenture; provided, however, that such direction shall not be otherwise than in accordance with the provisions of law and of the Indenture, and provided that the Trustee will be indemnified to its reasonable satisfaction ( except as set forth in the Indenture).

Limitations on Bondholders' Rights. No Bondholder has or will have the right to enforce the provisions of the Indenture or the Financing Agreement, or to institute any proceeding in equity or at law for the enforcement of the Indenture or the Financing Agreement, or to take any action with respect to an Event of Default under the Indenture or an l;lvent of Default under the Financing Agreement, or to institute, appear in or defend any suit or other proceeding with respect to the Indenture or the Financing Agreement upon an Event of Default unless (i) such Event of Default is a Wrongful Dishonor, (ii) such Bondholder has given the Trustee, the Issuer, the Credit Provider, the Guarantor, the Loan Servicer and the Borrower written notice of the Event of Default, (iii) the holders of not less than 51 percent in aggregate principal amount of Bonds then Outstanding have requested the Trustee in writing to institute such proceeding, (iv) the Trustee has been afforded a reasonable opportunity to exercise its powers or to institute such proceeding, (v) the Trustee has been offered reasonable indemnity, where required, and (vi) the Trustee has thereafter failed or refused to exercise such powers or to institute such proceeding within a reasonable period of time. No Bondholder has or will have any right in any manner whatever to affect, disturb or prejudice the pledge ofrevenues or of any

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other moneys, Funds, Accounts or securities under the Indenture. Except as provided in this subsection, no Bondholder has or shall have the right, directly or indirectly, individually or as a group, to seek to enforce, collect amounts available under, or otherwise realize on, the Credit Facility.

Application of Moneys. Amounts derived from payments under the Credit Facility (other than amounts derived from an Advance to pay the Issuer's Fee) will be deposited into the Credit Facility Account and applied solely to pay the principal of and interest on the Bonds. Amounts on deposit in the Bond Purchase Fund will be applied solely to pay the purchase price of the Bonds. All other moneys received by the Trustee pursuant to any action taken following an Event of Default will be deposited into the Interest Account and the Redemption Account, as applicable, after payment of the fees, costs and expenses of the Trustee. The balance of such moneys, less such amounts as the Trustee determines may be needed for possible use in paying future fees and expenses and for the preservation and management of the Mortgaged Property (as identified by the Credit Provider), will be applied as set out in the following subsections.

Principal on Bonds Not Declared Due and Payable. Unless the principal on all Bonds has become or been declared due and payable, all such moneys will be applied:

FIRST - to the payment of all interest then due on the Bonds, in the order of the maturity of such interest and, if the amount available will not be sufficient to pay in full said amount, then to the payment ratably, of the amounts due on such payment, without any discrimination or privilege;

SECOND - to the payment of the unpaid principal of any of the Bonds which have become due ( other than Bonds matured or called for redemption for the payment of which moneys are held pursuant to the Indenture), in the order of due dates, with interest upon the principal amount of the Bonds from the respective dates upon which they become due at the rate or rates borne by the Bonds, to the extent permitted by law, and, if the amount available will not be sufficient to pay in full the principal of such Bonds due on any particular date, together with such interest, then to the payment ratably, according to the amount of principal due on such date, to the persons entitled to such payment without any discrimination or privilege;

THIRD - to the payment of amounts owed to the Credit Provider under the Credit Facility Documents and the Loan Documents, and then to any amounts due to the Trustee for Extraordinary Items, for this purpose including the costs and expenses of any proceedings resulting in the collection of such moneys and of advances incurred or made by the Trustee.

Principal of Bonds Declared Due and Payable. If the principal ofall the Bonds has become or been declared due and payable, all such moneys will be applied first, to the payment of the principal and interest then due and unpaid upon the Bonds, without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Bond over any other Bond, ratably according to the amounts due respectively for principal and interest to the persons entitled to payment, until all such principal and interest has been paid; second, to pay the Credit Provider amounts owed to it under the Credit Facility Documents and the Loan Documents; and third, to any other amounts due and payable under the Indenture.

Resignation or Removal of Trustee. The Trustee may resign only upon giving 60 days prior written notice to the Issuer, the Credit Provider, the Construction Administrator, the Guarantor, the Loan Servicer, the Borrower and to each Registered OwnerofBonds then Outstanding as shown on the Bond Register. The Trustee may be removed at any time upon 30 days prior written notice to the Trustee, (i) by the Issuer, with

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the prior written consent of the Credit Provider, (ii) by the owners of not less than 51 percent in aggregate principal amount of Bonds then Outstanding, which written instrument will designate a successor Trustee approved by the Credit Provider, or (iii) by the Credit Provider. Such resignation or removal will not be effective until a successor Trustee satisfying the requirements of the Indenture is appointed and has accepted its appointment.

Appointment of Successor Trustee. Upon the resignation or removal of the Trustee, a successor Trustee will be appointed by the Issuer with the prior written consent of the Borrower (provided the Borrower is not in default under any Loan Document, Credit Facility Document or Bond Document, and provided that no event has occurred that, with notice or the passage of time, or both, would constitute such a default) and the Credit Provider (unless appointed by the Bondholders as provided in the Indenture), provided, however, that if the Borrower is then in default under any Bond Document or any Loan Document or if an event has occurred and is continuing which, with notice or the passage of time or both, would constitute such a default, such appointment will be made by the Issuer with the prior written consent of the Credit Provider. If, in the case of resignation or removal of the Trustee, no successor is appointed within 30 days after the notice of resignation or within 30 days after removal, as the case may be, then, in the case of a resignation, the resigning Trustee will appoint a successor with the prior written consent of the Issuer, and the Borrower (provided the Borrower is not in default under any Loan Document, Credit Facility Document or Bond Document, and provided that no event has occurred that, with notice or the passage of time, or both, would constitute such a default) and the Credit Provider or apply to a court ofcompetent jurisdiction for the appointment of a successor Trustee and, in the case of a removal, the Credit Provider will have the right to appoint a successor Trustee or to apply to a court of competent jurisdiction for the appointment of a successor Trustee. The successor Trustee must accept in writing its duties and responsibilities under the Indenture, the Financing Agreement, the Assignment, the Regulatory Agreement and the other Bond Documents. The successor Trustee will give notice of such succession by first-class mail, postage prepaid, to each Bondholder, the Issuer, the Credit Provider, the Construction Administrator, the Guarantor, the Loan Servicer and the Borrower. Upon appointment of a successor Trustee, the resigning or removed Trustee, as the case may be, will assign all of its right, title and interest in the Security and the Indenture, to the successor Trustee.

Transfer of Rights and Mortgaged Property to Successor Trustee. The successor Trustee, without any further act, deed or conveyance, will become fully vested with all moneys, estates, properties, rights, powers, duties and obligations of the predecessor Trustee, but the former Trustee will nevertheless, at the written request of the Issuer, the Credit Provider or the successor Trustee, execute, acknowledge and deliver such instruments of conveyance and further assurance and do such other things as may be reasonably required for more fully and certainly vesting and confirming in the successor Trustee all the right, title and interest of the predecessor Trustee in and to any properties held by it under the Indenture, and will pay over, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions set forth in the Indenture. The former Trustee will execute and deliver a certificate of transfer or such other certificate or document as may be required by the Credit Facility for its transfer to a successor trustee and do such other things as may be reasonably required to transfer all of its right, title and interest in and to the Credit Facility to the successor Trustee. Should any deed, conveyance or instrument in writing from the Issuer be required by the successor Trustee for more fully and certainly vesting in and confirming to the successor Trustee any such moneys, estates, properties, rights, powers and duties, any and all such deeds, conveyances and instruments in writing, will, on request, and as may be authorized by law, be executed, acknowledged and delivered by the Issuer.

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Supplemental Indentures; Amendments

Supplemental Indentures Not Requiring Bondholder Consent The Issuer and the Trustee, without the consent of or notice to any Bondholder, may enter into an indenture or indentures supplemental to the Indenture for one or more of the following purposes:

(a) to cure any ambiguity or to correct or supplement any provision contained in the Indenture or in any supplemental indenture which may be defective or inconsistent with any other provision contained in the Indenture or in any supplemental indenture;

(b) to amend, modify or supplement the Indenture in any respect if, in the judgment of the Trustee, such amendment, modification or supplement is not materially adverse to the interests of the Bondholders;

( c) to grant to or confer upon the Trustee for the benefit of the Bondholders any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the Bondholders or the Trustee, or to grant or pledge to the Trustee for the benefit of the Bondholders any additional security other than that granted or pledged under the Indenture;

(d) to modify, amend or supplement the Indenture in such manner as to permit qualification under the Trust Indenture Act ofl939, as amended, or any similar federal statute then in effect, or to permit the qualification of the Bonds for sale under the securities laws of any of the States of the United States;

( e) to appoint a successor trustee, separate trustee or co-trustee, or a separate Tender Agent, Bond Registrar or Paying Agent;

(f) to make any change requested by the Credit Provider which, in the judgment of the Trustee, is not materially adverse to the interests of the Bondholders, including, but not limited to, provision of a Credit Facility other than or in substitution for the initial Credit Facility, provided that the provision of such other Credit Facility does not adversely affect the rating then in effect for the Bonds;

(g) to make any changes in the Indenture or in the terms of the Bonds necessary or desirable in order to maintain the rating of"AAN A-I+" or equivalent rating awarded to the Bonds by the Rating Agency or otherwise to comply with requirements of any Rating Agency then rating the Bonds;

(h) to comply with the Code and the regulations and rulings issued with respect to the Code, to the extent determined as necessary in the Opinion of Bond Counsel;

(i) to modify, alter, amend or supplement the Indenture in any other respect, including amendments which would require Bondholder consent, (A) if such amendments will take effect on a Mandatory Tender Date following the purchase of Tendered Bonds or (B) if notice of the proposed supplemental indenture is given to Bondholders (in the same manner as notices of redemption are given) at least 30 days before the effective date of such amendment, modification, alteration or supplement and, on or before such effective date, the Bondholders have the right to demand purchase of their Bonds pursuant to optional tender provisions of the Indenture; or

G) to change any of the time periods for provision ofnotice relating to the remarketing of Bonds or the determination of the interest rate on the Bonds.

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Supplemental Indentures Requiring Bondholder Consent. Exclusive of supplemental indentures described in the preceding paragraph and subject to the terms and provisions contained in this paragraph, the Issuer and the Trustee may, with the consent of Bondholders owning not less than 51 percent in aggregate principal amount of Bonds then Outstanding, from time to time, execute indentures supplemental to the Indenture for the purpose of modifying, amending any of the provisions of the Indenture; provided, however, that nothing in this paragraph will permit, or will be construed as permitting:

(a) an extension of the maturity of the principal of or interest on, or the mandatory redemption date of, any Bond, without the consent of the owners of all of the Bonds then Outstanding;

(b) a reduction in the principal amount of, or the rate of interest on, any Bond, without the consent of the owner of such Bond;

( c) a preference or priority of any Bond or Bonds over any other Bond or Bonds, without the consent of the owners of all such Bonds;

( d) the creation of a lien prior to or on parity with the lien of the Indenture, without the consent of the owners of all of the Bonds then Outstanding;

( e) a change in the percentage of Bondholders necessary to waive an Event of Default under the Indenture or otherwise approve matters requiring Bondholder approval under the Indenture, including consent to any supplemental indenture, without the consent of the owners ofall the Bonds then Outstanding;

(f) a transfer, assignment or release of the Credit Facility ( or modification of the provisions of the Indenture governing such transfer, assignment or release), other than as permitted by the Indenture or the Credit Facility, without the consent of the owners of all of the Bonds then Outstanding;

(g) a reduction in the aggregate principal amount of the Bonds required for consent to such supplemental indenture, without the consent of the holders of all of the Bonds then Outstanding;

(h) the creation of any lien other than a lien ratably securing all of the Bonds at any time Outstanding under the Indenture, without the consent of the holders of all of the Bonds then Outstanding; or

(i) the amendment of the provisions of the Indenture, without the consent of the holders of all of the Bonds then Outstanding.

No Bondholder Consent Required for Amendment to Loan Documents. Unless a Wrongful Dishonor has occurred and is continuing, the Credit Provider alone may consent to any amendment to the Loan Documents and no consent of the Bondholders is required; provided, however, that any amendment or substitution of the Note will occur only following written confirmation of the Rating Agency that such amendment or substitution will not result in a reduction or withdrawal of the rating on the Bonds.

Required Approvals. Subject to provisions of the Indenture, no amendment, supplement or modification may be made to any Transaction Document without the prior written consent of the Credit Provider. Anything in the Indenture to the contrary notwithstanding, a supplement or amendment or other document described amendatory of the Indenture which materially and adversely affects any rights or obligations of the Borrower will not become effective unless and until the Borrower (if the Borrower is not

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then in default under any Bond Document or any Loan Document and if no event which, with notice or the passage of time or both, would constitute such a default has occurred and is continuing) has consented in writing to the execution of such supplemental indenture, amendment or other document. The Trustee will not be required to enter into any supplement or amendment which adversely effects the Trustee's rights and duties under the Indenture.

Opinions of Counsel. The Trustee may obtain and will be fully protected in relying upon an Opinion of Counsel as conclusive evidence that any supplement or amendment to the Indenture is authorized and permitted by the Indenture and, if applicable, is not materially adverse to the interests of the Bondholders. No supplement or amendment with respect to the Indenture will be effective until the Issuer and the Trustee have received an opinion of Bond Counsel to the effect that such supplement or amendment will not adversely affect the exclusion from gross income, for federal income tax purposes, of the interest payable on the Series E Bonds (and, if the Tax-Exempt Conversion Date has occurred, the Series F Bonds).

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EXHIBITC

SUMMARY OF CERTAIN PROVISIONS OF THE FINANCING AGREEMENT

The following is a brief summary of certain provisions of the Financing Agreement. The summary does not purport to be complete or definitive and is qualified in its entirety by reference to the Financing Agreement, a copy of which is on file with the Trustee.

The Loan

The Issuer has authorized the issuance of the Bonds in the aggregate principal amount of $30,000,000. The Issuer agrees to make the Loan in the amount of$30,000,000 to the Borrower with the Net Bond Proceeds. Upon the issuance and delivery of the Bonds, the Issuer will deliver the Net Bond Proceeds to the Trustee. The Loan will be deemed made in full upon deposit of the Net Bond Proceeds into the Loan Fund. The Borrower accepts the Loan from the Issuer upon the terms and conditions set forth in the Financing Agreement and the Loan Documents, subject to the Indenture, the Regulatory Agreement and the Assignment. Disbursements will be made from the Loan Fund as provided in the Indenture. The Borrower agrees to apply the proceeds of the Loan to pay the costs of the acquisition, rehabilitation, equipping and permanent financing for the multifamily housing facility known as The San Regis Apartments (formerly known as Oakwood Apartments).

Payment of Fees, Costs and Expenses

The Financing Agreement requires the Borrower to pay, without duplication, the following fees and expenses:

(a) An initial fee in an amount equal to $37,500 at Closing and an ongoing fee (the "Issuer's Fee") in an amount equal to 0.125% of the outstanding principal amount of the Bonds Outstanding per annum payable annually, in arrears, on November 15, 2002 and each November 15 thereafter and all costs and expenses incurred by the Issuer at any time in connection with the Bonds.

(b) The Trustee's acceptance fee, if any, which will be paid on the Closing Date, the Trustee's annual fee, and all advances, out-of-pocket expenses, fees, costs and other charges reasonably and necessarily incurred by the Trustee under the Indenture and Extraordinary Items.

( c) The fees, costs and expenses of the Tender Agent, all advances, out-of-pocket expenses, fees, costs and other charges reasonably and necessarily incurred by the Tender Agent in performing its duties as Tender Agent under the Indenture and the Pledge Agreement.

( d) The fees, costs and expenses of the Remarketing Agent and the costs and expenses of the Remarketing Agent which the Borrower is obligated to pay under the Remarketing Agreement.

( e) The annual or other periodic fees of the Rebate Analyst and any amounts due to be paid as rebate payments to the goverrunent of the United States.

(f) The annual rating maintenance fee of each Rating Agency.

(g) All Costs oflssuance.

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(h) All costs of registering, printing, reprinting, preparing and delivering any replacement bonds required under the Indenture and in connection with the registration, printing, reprinting or transfer ofBonds.

(i) All fees, costs and expenses of any change in Mode or of any tender, purchase, remarketing or reoffering of any Bonds. The fees, costs and expenses of any tender, purchase, remarketing or reoffering of Bonds must be paid by the Borrower in advance in accordance with the Remarketing Agreement or other agreement relating to the remarketing or reoffering of the Bonds.

(j) All fees, costs and expenses in connection with Conversion.

The Borrower will agree to timely honor any demand for payment by the Trustee pursuant to certain provisions of the Indenture on account of any insufficiency in the Fees Account.

Personal Liability of Borrower

Except as provided in the Financing Agreement, the obligations of the Borrower under the Financing Agreement and the obligations of the Borrower under the Regulatory Agreement to pay money, including the obligations of the Borrower with respect to the Reserved Rights, will be (i) general obligations of the Borrower with recourse to the Borrower personally and (ii) subordinate and junior in priority, right of payment and all other respects to any and all obligations of the Borrower under the Loan Documents and to the Credit Provider under or in respect of the Credit Facility Documents. The aforesaid however will not apply to the obligations of the Borrower under any of the Loan Documents.

Credit Facility

The Borrower will agree to cause credit enhancement for the Loan or the Bonds and liquidity support for the Bonds to be in effect in the amounts and during the periods as required by the Indenture. From time to time, the Borrower may arrange for the delivery to the Trustee of one or more Alternate Credit Facilities meeting the requirements of the Indenture in substitution for the Credit Facility then in effect.

Events of Default

Each of the following constitutes an Event of Default under the Financing Agreement:

(a) The Borrower fails to pay when due any amount payable by the Borrower under the Financing Agreement.

(b) The Borrower fails to observe or perform any covenant or obligation in the Financing Agreement on its part to be observed or performed for a period of 30 days after receipt of written notice from the Issuer specifying such failure and requesting that it be remedied; provided, however, that if the failure cannot be corrected within such period, it will not constitute an Event of Default if the failure is correctable without material adverse effect on the validity or enforceability of the Bonds or on the exclusion from gross income, for federal income tax purposes, of the interest on the Series E Bonds (and if the Tax-Exempt Conversion Date has occurred, the Series F Bonds), and if corrective action is instituted by the Borrower within such period and diligently pursued until the failure is corrected, and provided further that any such failure is cured within 90 days of receipt of notice of such failure.

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( c) The Credit Provider provides written notice to the Trustee of an Event of Default under the Financing Agreement by reason of the occurrence of an Event of Default under the Reimbursement Agreement. No Event of Default under the Reimbursement Agreement will constitute a default under the Financing Agreement unless specifically declared to be so by the Credit Provider. The Credit Provider will make such declaration by written notice to the Trustee.

Remedies

Subject to the provisions described under the heading, "Remedies upon an Event of Default", whenever any Event of Default occurred and is continuing under the Financing Agreement, the Issuer may take one or any combination of the following remedial steps:

(a) by written notice to the Borrower, declare all amounts then due and payable on the Note to be immediately due and payable;

(b) exercise any of the rights and remedies provided in the Loan Documents; and

( c) take whatever action at law or in equity may appear necessary or desirable to collect the amounts then due and afterward to become due, or to enforce performance and observance of any obligation, agreement or covenant of the Borrower under the Financing Agreement.

Amendment

The Financing Agreement provides that no amendment will be binding upon the parties until such amendment is reduced to writing and executed by such parties; provided, however, that no amendment, supplement or other modification to the Financing Agreement or any other Bond Document will be effective withoutthe prior written consent of the Credit Provider, subject to the provisions as set forth in the Financing Agreement.

Limited Liability of the lssner

All monetary obligations of the Issuer under the Financing Agreement, the Regulatory Agreement and the Indenture will be limited obligations of the Issuer, payable solely and only from the Trust Estate. No owner or owners of any of the Bonds will ever have the right to compel any exercise of the taxing power of the State or any political subdivision or other public body for the payment of the Bonds, nor to enforce the payment of the Bonds against any property of the State or any such political subdivision or other public body, including the Issuer except as provided in the Indenture. No member, officer, agent, employee or attorney of the Issuer, including any person executing the Financing Agreement on behalfof the Issuer, will be liable personally under the Financing Agreement. No recourse will be had for the payment of the principal of or the interest on the Bonds, for any claim based on or in respect of the Bonds or based on or in respect of the Financing Agreement, against any member, officer, employee or agent, as such, of the Issuer or any successor whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance of the Financing Agreement and as part of the consideration for the issue of the Bonds, expressly waived and released.

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EXIIlBITD

SUMMARY OF CERTAIN PROVISIONS OF THE REGULATORY AGREEMENT

The following is a brief summary of certain provisions of the Regulatory Agreement. The summary does not purport to be complete or definitive and is qualified in its entirety by reference to the Regulatory Agreement, a copy of which is on file with the Trustee.

"Adjusted Income" means the adjusted income of a person (together with the adjusted income of all persons who intend to reside with such person in one residential unit) calculated pursuant to the Regulatory Agreement.

"Area" means the Los Angeles Primary Metropolitan Statistical Area.

"CDLAC'' means the California Debt Limit Allocation Committee or its successors.

"CDLAC Conditions" has the meaning set forth in the Regulatory Agreement.

"Housing Act" means the United States Housing Act of 1937, as amended, or its successor.

"Low Income Tenant" means a tenant whose Adjusted Income does not exceed limits determined in a manner consistent with determinations of lower-income families under Section 8 of the Housing Act, except that the percentage of median gross income that qualifies as lower income shall be 50% of median gross income for the Area with adjustments for family size. If all the occupants of a unit are students (as defined under Section 151 ( c) of the Code), no one of whom is entitled to file a joint return under Section 6013 of the Code, such occupants shall not qualify as Low Income Tenants. The determination of a tenant's status as a Low Income Tenant shall be made by the Borrower upon initial occupancy ofa unit in the Project by such Tenant and annually thereafter and at any time the Borrower has knowledge that the number of occupants in that unit has increased, on the basis of an Income Certification executed by the tenant.

"Low Income Units" means the units in the Project required to be rented to, or held available for occupancy by, Low Income Tenants pursuant to the Regulatory Agreement.

"1994 Bonds" means the Issuer's Variable Rate Demand Multifamily Housing Revenue Bonds (GNMA Collateralized-Oakwood Apartments Project) Series 1994.

"Project Costs" means, to the extent authorized by the Law and the Act, any and all costs incurred by the Borrower with respect to the acquisition and rehabilitation of the Project, whether paid or incurred prior to or after the date of the Regulatory Agreement, including, without limitation, costs for site preparation, the planning of housing and improvements, the acquisition of property, the removal or demolition of existing structures, the construction or rehabilitation of housing and related facilities and improvements, and all other work in connection therewith, and all costs of financing, including, without limitation, the costs of consultant, accounting and legal services, other expenses necessary or incident to determining the feasibility of the Project, contractors' and developer's overhead and supervisors' fees and costs directly allocable to the Project and administrative and other expenses necessary or incident to the Project and the financing thereof (including reimbursement to any municipality, county or other entity for expenditures made, with the approval of the Issuer, for the Project).

"Project Facilities" means the buildings, structures and other improvements on the Project Site to be reconstructed, constructed or improved by the Borrower, and all fixtures and other property owned by the

Borrower and located on, or used in connection with, such buildings, structures and other improvements constituting the Project. Project Facilities do not include retail sales facilities or recreational, fitness or business facilities available to members of the general public.

"Project Site" means the parcel or parcels ofreal property having the street address of 15434-15460 Sherman Way in the City of Los Angeles, California, and all rights and appurtenances thereunto appertaining.

"Qualified Project Costs" means the Project Costs incurred not earlier than the date 60 days prior to the fuducement Date which are chargeable to a capital account with respect to the Project for federal income tax and financial accounting purposes, or would be so chargeable either with a proper election by the Borrower or but for the proper election by the Borrower to deduct those amounts; provided, however, that only such portion of the interest accrued on the Bonds during, and the credit enhancement fees, if any, attributable to the period of, the rehabilitation of the Project shall constitute Qualified Project Costs as bear the same ratio to all such interest or fees, as applicable, as the Qualified Project Costs bear to all Project Costs; and provided further that interest accruing, and the Credit Enhancement fees attributable to the period, on or after the Completion Date shall not be Qualified Project Costs; and provided finally that if any portion of the Project is being rehabilitated by the Borrower or an Affiliated Party (whether as a general contractor or a subcontractor), "Qualified Project Costs" shall include only (a) the actual out-of-pocket costs incurred by the Borrower or such Affiliated Party in constructing or rehabilitating the Project ( or any portion thereof), (b) any reasonable fees for supervisory services actually rendered by the Borrower or such Affiliated Party (but excluding any profit component) and ( c) any overhead expenses incurred by the Borrower or such Affiliated Party which are directly attributable to the work performed on the Project, and shall not include, for example, intercompany profits resulting from members of an affiliated group (within the meaning of Section 1504 of the Code) participating in the construction of the Project or payments received by such Affiliated Party due to early completion of the Project (or any portion thereof). Qualified Project Costs do not include Costs oflssuance.

"Qualified Project Period'' means the period beginning on the first day on which 10% of the dwelling units in the Project are first occupied and ending on the latest of (a) the date which is 15 years after the later of(i) the date on which 50% of the dwelling units in the Project are first occupied or (ii) the Tax­Exempt Conversion Date, (b) the first date on which no tax-exempt private activity bond (as that phrase is used in Section 142(d)(2) of the Code) issued with respect to the Project is outstanding or (c) the date on which any assistance provided with respect to the Project under Section 8 of the Housing Act terminates.

"Qualified Rehabilitation Expenses" means any amount properly chargeable to capital account which is incurred no earlier than 60 days prior to the fuducement Date by the person acquiring the building or property ( or additions or improvements to property) or by the seller of the property under a sales contract

. between the Borrower and the seller of the Project to the Borrower in connection with the rehabilitation of a building. In the case of an integrated operation contained in a building before its acquisition, such term includes rehabilitating existing equipment in such building or replacing it with equipment having substantially the same function. "Qualified Rehabilitation Expenditures" does not include any amount which is incurred after the date two years after the later of the date on which the building was acquired by the Borrower or the date on which the Bonds were issued.

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Residential Rental Property

The Borrower has agreed in the Regulatory Agreement that the Project will be owned, managed and operated as a "qualified residential rental project" as such term is defined in Section 142( d) of the Code for a term equal to the Qualified Project Period. To that end, and for the Qualified Project Period, the Borrower has represented, warranted, covenanted and agreed therein as follows:

(a) The Project will be developed for the purpose of providing multifamily residential rental property, and the Borrower will own, manage and operate the Project as a project to provide multifamily residential rental property comprising a building or structure or several interrelated buildings or structures, together with any functionally related and subordinate facilities, and no other facilities in accordance with Section 142( d) of the Code and Section 1.103-8(b) of the Regulations, the Law and the Act, and in accordance with such requirements as may be imposed thereby on the Project from time to time.

(b) All of the dwelling units in the Project will be similarly constructed units, and each Low Income Unit in the Project will contain complete separate and distinct facilities for living, sleeping, eating, cooking and sanitation for a single person or a family, including a sleeping area, bathing and sanitation facilities and cooking facilities equipped with a cooking range, a sink and a refrigerator (whether or not provided by the Owner).

( c) None of the dwelling units in the Project will at any time be utilized on a transient basis or will ever be used as a hotel, motel, dormitory, fraternity house, sorority house, rooming house, nursing home, hospital, sanitarium, rest home or trailer court or park.

( d) No part of the Project will at any time be owned by a cooperative housing corporation, nor shall the Borrower take any steps in connection with a conversion to such ownership or uses. Other than filing a condominium map and a final subdivision map on the Project and obtaining a Final Subdivision Public Report from the California Department of Real Estate, the Borrower shall not take any steps in connection with a conversion of the Project to condominium ownership during the Qualified Project Period.

( e) All of the dwelling units will be available for rental on a continuous basis to members of the general public, and the Borrower will not give preference to any particular class or group in renting the dwelling units in the Project, except to the extent that dwelling units are required to be leased or rented to Low Income Tenants.

(f) The Project Site consists of a parcel or parcels that are contiguous except for the interposition of a road, street or stream, and all of the Project Facilities comprise a single geographically and functionally integrated project for residential rental property, as evidenced by the ownership, management, accounting and operation of the Project.

(g) No dwelling unit in the Project shall be occupied by the Borrower; provided, however, that if the Project contains five or more dwelling units, this subsection shall not be construed to prohibit occupancy of a reasonable number of dwelling units by one or more resident managers or maintenance personnel any of whom may be the Borrower.

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(h) The Project shall be maintained in conformity with the habitability and fire codes of the City of Los Angeles.

(i) The Project shall be managed in a manner consistent with prudent property management standards and in compliance with all state and local laws, ordinances and regulations relating thereto.

Low Income Tenants; Records and Reports

Pursuant to the requirements of the Code and the Issuer, the Borrower has represented, warranted and covenanted in the Regulatory Agreement as follows:

(a) Commencing on the first day of the Qualified Project Period, Low Income Tenants shall occupy at least 20% of all completed and occupied units in the Project ( excluding units occupied by property managers and/or maintenance personnel) before any additional units are occupied by persons who are not Low Income Tenants; and for the Qualified Project Period no less than 20% of the total number of completed units of the Project shall at all times be rented to and occupied by Low Income Tenants. For the purposes of this paragraph (b), a vacant unit which was most recently occupied by a Low Income Tenant is treated as rented and occupied by a Low Income Tenant until reoccupied, other than for a temporary period of not more than 31 days, at which time the character of such unit shall be redetermined. In determining whether the requirements described in this paragraph (a) have been met, fractions of units shall be treated as entire units.

(b) No tenant qualifying as a Low Income Tenant shall be denied continued occupancy of a unit in the Project because, after admission, such tenant's Adjusted Income increases to exceed the qualifying limit for Low Income Tenants; provided, however, that should a Low Income Tenant's Adjusted Income, as of the most recent determination thereof, exceed 140% of the then applicable income limit for a Low Income Tenant of the same family size, the next available unit of comparable or smaller size must be rented to (or held vacant and available for immediate occupancy by) a Low Income Tenant; and provided further that, until such next available unit is rented to a tenant who is not a Low Income Tenant, the former Low Income Tenant who has ceased to qualify as such shall be deemed to continue to be a Low Income Tenant for purposes of the 20% requirement described in paragraph (a) above (if applicable).

( c) The Borrower will obtain, complete and maintain on file Income Certifications from each Low Income Tenant, including (i) an Income Certification dated immediately prior to the initial occupancy of such Low Income Tenant in the Project and, in the case of tenants residing in the Project as of the date of acquisition thereof (if applicable), dated immediately prior to the disbursement of Bond proceeds to fund acquisition of the Project and (ii) thereafter, annual Income Certifications in the form dated as of the anniversary date of each initial Income Certification. The Borrower will obtain such additional information as may be required in the future by the State of California, by the Issuer and 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 rules, rulings, policies, procedures, Regulations or other official statements promulgated, proposed or made by the Department of the Treasury or the Internal Revenue Service with respect to obligations which are Tax-exempt under Section 142(d) of the Code. A copy of the most recent Income Certification for Low Income Tenants commencing or continuing occupation of a Low Income Unit (and not previously filed with the Issuer) shall be attached to the Certificate of Continuing Program

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Compliance which is to be filed with the Issuer no later than the fifteenth day of the first month of each calendar quarter until the end of the Qualified Project Period. The Borrower shall make a good­faith effort to verify that the income information provided by an applicant in an Income Certification is accurate by obtaining the acceptable forms of verification enumerated in Chapter 3 of the most current, amended edition ofHUD Handbook4350.3, or such instruction by HUD that may supersede such handbook, and any additional documentation that the Issuer shall deem relevant, such as the two most recent years' tax returns or other forms of independent verification satisfactory to the Issuer.

( d) The Borrower will use its best efforts to maintain complete and accurate records pertaining to the Low Income Units and will with reasonable notice permit any duly authorized representative of the Issuer, the Trustee, the Department of the Treasury or the Internal Revenue Service to inspect the books and records of the Borrower pertaining to the Project during regular business hours, including those records pertaining to the occupancy of the Low Income Units.

( e) The Borrower will prepare and submit to the Issuer and the Trustee, no later than the fifteenth day of the first month of each calendar quarter until the end of the Qualified Project Period, a Certificate of Continuing Program Compliance executed by the Borrower stating (i) the percentage of the dwelling units of the Project which were occupied or deemed occupied, pursuant to the requirements described in paragraph (b) above, by Low Income Tenants during such period; (ii) that either (A) no unremedied default has occurred under the Regulatory Agreement, or (B) a default has occurred, in which event the certificate shall describe the nature of the default in detail and set forth the measures being taken by the Borrower to remedy such default; and (iii) that, to the knowledge of the Borrower, no Determination of Taxability has occurred, or if a Determination of Taxability has occurred, setting forth all material facts relating thereto.

(f) On or before each February 15 during the Qualified Project Period, the Borrower will submit to the Issuer a draft of the completed Internal Revenue Code Form 8703 or such other annual certification required by the Code to be submitted to the Secretary of the Treasury as to whether the Project continues to meet the requirements ofSection 142(d) of the Code. On or before each March 31 during the Qualified Project Period the Borrower will submit such completed form to the Secretary of the Treasury, regardless of whether or not the Issuer has responded to such draft.

(g) Subject to the requirements of any Section 8 Housing Assistance Payments Contract with respect to the Project, each lease or rental agreement 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 or rental agreement. Each such lease or rental agreement shall also provide that the tenant's income is subject to annual certification in accordance with the Regulatory Agreement and to recertification if the number of occupants in the units changes for any reason ( other than the birth of a child to an occupant of such unit) and that ifuponany such certification such tenant's Adjusted Income exceeds 140% of the then applicable income limit for a Low Income Tenant of the same family size, such tenant may cease to qualify as a Low Income Tenant, and such tenant's rent is subject to increase. Notwithstanding anything described in this paragraph to the contrary, such tenant's rent may be increased only pursuant to specified provisions in the Regulatory Agreement.

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Tax-Exempt Status of the Bonds and the 1994 Bonds

The Borrower and the Issuer, as applicable, has represented, warranted and agreed in the Regulatory Agreement as follows:

(a) The Borrower and the Issuer will not lmowingly take or permit actions within their control, oromitto take or cause to be taken, as is appropriate, any action that would adversely affect, if such omission would adversely affect, the Tax-exempt nature of the interest on the Series E Bonds (and following the Tax-Exempt Conversion Date, the Series F Bonds) and the 1994 Bonds and, if either should take or permit, or omit to take or cause to be taken, any such action, it will take all lawful actions necessary to rescind or correct such actions or omissions promptly upon obtaining lmowledge thereof.

(b) The Borrower and the Issuer will take such action or actions as may be necessary, in the written opinion of Bond Counsel filed with the Issuer and the Trustee, with a copy to the Borrower, to comply fully with all applicable rules, rulings, policies, procedures, Regulations or other official statements promulgated, proposed or made by the Department of the Treasury or the Internal Revenue Service pertaining to obligations the interest on which is Tax-exempt under Section 142(d) of the Code.

( c) The Borrower and the Issuer will file or record such documents and take such other steps as are necessary, in the written opinion of Bond Counsel filed with the Issuer and the Trustee, with a copy to the Borrower, in order to insure that the requirements and restrictions of the Regulatory Agreement will be binding upon all owners of the Project, including, but not limited to, the execution and recordation of the Regulatory Agreement in the real property records of the County of Los Angeles.

( d) The Borrower will not lmowingly enter into any agreements which would result in the payment of principal or interest on the Series E Bonds being "federally guaranteed" within the meaning of Section 149(b) of the Code.

( e) Subject to the Regulatory Agreement, the Borrower covenants to include the requirements and restrictions contained in the Regulatory Agreement in any documents transferring any interest in the Project prior to the expiration of the Qualified Project Period to another person to the end that such transferee has notice of, and is bound by, such restrictions, and to obtain the agreement from any transferee to abide by all requirements and restrictions of the Regulatory Agreement; provided, however, that so long as the Borrower has no remaining interest in the Project, the Borrower shall have no obligation to monitor such transferee's compliance with such restrictions, and the Borrower shall incur liability if such transferee fails to comply with such restrictions only in proportion to the Borrower's then remaining interest.

Additional Requirements of the Act

In addition to the requirements described above, and without limiting any additional requirements in the Regulatory Agreement, during the Qualified Project Period, the Borrower and the Issuer have agreed to comply with each of the requirements of the Act, and, without limiting the foregoing, the Borrower has specifically agreed to comply with each of the requirements described below:

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(a) As provided in Section 52097.5(e) of the Act, notless than 20% of the total number of units in the Project shall be reserved for occupancy by tenants whose adjusted gross income does not exceed 50% of the median adjusted gross income for the Area, adjusted for family size, as determined pursuant to Section 8 of the Housing Act.

(b) The rents paid by the tenant for the units reserved pursuant to paragraph (a) above shall not exceed the amount derived by multiplying 30% times 50% of the median adjusted gross income for the Area, adjusted for family size, as determined pursuant to Section 8 of the Housing Act, assuming a family of one person in the case of a studio unit, two persons in the case of a one­bedroom unit, three persons in the case of a two-bedroom unit, four persons in the case of a three­bedroom unit, and five persons in the case of a four-bedroom unit.

(c) During the Qualified Project Period the Borrower shall file Certificates of Continuing Program Compliance in the form and at the time required by the Regulatory Agreement that shall contain sufficient information to allow the Issuer to file the annual report required by the Act to be filed pursuant to California Government Code Section 8855.5.

Additional Requirements of the lssner

In addition to, and not in derogation of, the requirements set forth in the Regulatory Agreement, each of which is incorporated in the Regulatory Agreement as a specific requirement of the Issuer, whether or not required by California or federal law, the Borrower has represented, warranted, covenanted and agreed as follows:

(a) The Low Income Units sha11 be of comparable quality to all other units in the Project, shalJ be dispersed throughout the Project, and shall offer a range of size and number of bedrooms comparable to those units which are available to other tenants; and Low Income Tenants shall have access to and enjoyment of all common areas and facilities of the Project on the same basis as tenants of other units.

(b) The Borrower agrees that it will not discriminate in the rental of units or in its employment practices against any employee or applicant for employment because of the applicant's race, creed, religion, national origin or ancestry, sex, age, sexual orientation or preference, marital status, color, physical disability, familial status and disability, mental condition or medical condition, including pregnancy, childbirth or related condition. All contracts entered into by the Borrower which relate to the Project shall contain a like provision. The Borrower shall comply with the provisions of Section 10.8.4 of the Administrative Code of the Issuer, a copy of which is incorporated by reference into the Regulatory Agreement.

( c) The Borrower shall comply with the conditions set forth in Exhibit A to CD LAC Resolution No. 01-185, adopted on August 22, 2001 (the "CDLAC Conditions"), as they may be modified or amended from time to time, which conditions are incorporated herein by reference and made a part of the Regulatory Agreement. The Borrower will prepare and submit to CD LAC, not later than each anniversary of the Closing Date, until the end of the Qualified Project Period, a Certificate of Continuing Program Compliance, in substantially the form attached to the Regulatory Agreement, executed by an authorized representative of the Borrower. The Issuer and the Trustee shall have no obligation to monitor the Borrower's compliance with the CDLAC Conditions.

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(d) For the Qualified Project Period, the Borrower will comply with the provisions of the Unruh Civil Rights Act, including, without limitation, Sections 51.2 and 51.3 of the Califomia Civil Code, as amended, and Sections 45.50 et seq. of the Los Angeles Municipal Code, as amended.

( e) The lease to be utilized by the Borrower in renting any residential units in the Project to Low Income Tenants shall provide for termination of the lease and consent by such person to immediate eviction, subject to applicable provisions of Califomia law, for failure to qualify as a Low Income Tenant as a result of any material misrepresentation made by such person with respect to the Income Certification. All such leases shall contain clauses, among others, wherein each individual lessee (i) certifies the accuracy of the statements made in the fucome Certification and (ii) agrees that the family income, family composition and other eligibility requirements shall be deemed substantial and material obligations of his tenancy; that he will comply promptly with all requests for information with respect thereto from the Borrower or the Issuer; and that his failure to provide accurate information in the Income Certification or refusal to comply with a request for information with respect thereto shall be deemed a violation ofa substantial obligation ofhis tenancy and shall be a default thereunder. Additionally, such lease shall contain provisions informing any tenant of the possibility ofrental payment increases in accordance with the terms of the Regulatory Agreement.

(f) All fucome Certifications will be maintained on file at the Project or, with the prior written consent of the Issuer, at the principal place of business of the Borrower or the property manager of the Project, so long as the Regulatory Agreement is in effect and for five years thereafter with respect to each Low fucome Tenant who occupied a residential unit in the Project during the Qualified Project Period.

(g) The Borrower will accept as tenants, on the same basis as all other prospective tenants, persons who are recipients of federal certificates for rent subsidies pursuant to the existing program under Section 8 of the Housing Act, or its successor. The Borrower shall not apply selection criteria to Section 8 certificate or voucher holders that are more burdensome than criteria applied to all other prospective tenants.

(h) The Borrower shall submit to the Issuer (i) at the times specified in the Regulatory Agreement, a Certificate of Continuing Program Compliance, which shall include the information called for therein, including occupancy records for all units in the Project, and (ii) within 15 days after receipt of a written request, any other information or completed forms requested by the Issuer, in each case, in order to comply with reporting requirements of the futernal Revenue Service or the State of California, including, without limitation, information necessary for the Issuer to file the annual report required by Section 8855.5 of the California Government Code, or any other information concerning the Project as the Issuer may reasonably request.

(i) All workers performing construction work for the Project employed by the Borrower or by any contractor or subcontractor shall be compensated in an amount no less than the greater of (i) general prevailing rate of per diem wages as determined by the U.S. Labor Department pursuant to the federal Davis-Bacon Act and implementing rules and regulations (if applicable to the Project) and (ii) the "Living Wage" as determined by the policies and procedures of the Issuer of Los Angeles. The Borrower shall comply with all reporting and record keeping requirements of the applicable prevailing wage statutes and regulations.

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(j) The Issuer may, at its option and at its expense, at any time appoint an administrator to administer the Agreement and to monitor performance by the Borrower of the terms, provisions and requirements thereof. Following any such appointment, the Borrower shall comply with any request by the Issuer to deliver to such administrator, in addition to or instead of the Issuer, any reports, notices or other documents required to be delivered pursuant thereto, and upon reasonable notice to the Borrower to make the Project and the books and records with respect thereto available for inspection during regular business hours by such administrator as an agent of the Issuer.

(k) If upon the annual certification or recertification required in the Regulatory Agreement a tenant's Adjusted Income exceeds 140% of the then applicable income limit for a Low Income Tenant of the same family size, all rental limits therein previously applicable to the unit occupied for such tenant shall continue to apply until the next available unit is rented to a tenant who is a Low Income Tenant.

(m) There are three points in time when the Borrower is required to give written notice to all tenants of Low Income Units:

(i) Upon initial move-in/lease execution, Borrower shall give written notice to all tenants of Low Income Units, of the duration of the rent restrictions under the Regulatory Agreement. Borrower must maintain, in its files, a copy of each notice containing each tenant's signed acknowledgment of the notice required hereunder. The notice shall, at the least, contain language that the rent restrictions under the Regulatory Agreement shall be for the term specified herein. Upon termination of the rent restriction period under the Regulatory Agreement, rents may be set at a market rates unless otherwise restricted by some other legal, regulatory, or contractual requirement.

(ii) Twelve months prior to the termination of the rent restriction period under the Regulatory Agreement, Borrower must give written notice to its tenants of the termination of the restrictions on the Low Income Units before their rents may be raised to market rent levels.

(iii) Ninety days prior to the termination of the rent restriction period under the Regulatory Agreement, Borrower must again give written notice to its tenants of the termination of the restrictions on the Low Income Units before their rents may be raised to market rent levels.

Any of the foregoing requirements of the Issuer ( except those described in paragraph ( c) above, which may be expressly waived by CDLAC) may be expressly waived by the Issuer in writing in the Issuer's sole discretion, but (a) no waiver by the Issuer of any requirement of the Regulatory Agreement shall, or shall be deemed to, extend to or affect any other provision of the Regulatory Agreement except to the extent the Issuer has received an opinion of Bond Counsel that any such provision is not required by the Act or the Law and may be waived without adversely affecting the exclusion from gross income of interest on the Series E Bonds for federal income tax purposes; and (b) any requirement of the Regulatory Agreement shall be void and of no force and effect if the Issuer and the Borrower receive a written opinion of Bond Counsel to the effect that compliance with any such requirement would cause interest on the Series E Bonds or the 1994 Bonds to become includable in gross income for federal income tax purposes, if such opinion is accompanied by a copy of a ruling from the futernal Revenue Service to the same effect, or to the effect that compliance with such requirement would be in conflict with the Act or the Law.

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Sale or Transfer of the Project

The Borrower has covenanted and agreed not to voluntarily (which term shall not be interpreted to include the granting by the Borrower of a deed in lieu of foreclosure) sell, transfer or otherwise dispose of the Project, or any portion thereof ( other than for individual tenant use as contemplated under the Regulatory Agreement), or (except as provided in the final sentence of this paragraph) limited partnership interests aggregating more than 50% of the equity interest in the Borrower, or any general partnership interest in the Borrower, during the term of the Regulatory Agreement, without obtaining the prior written consent of the Issuer and the Trustee, which consent shall not be unreasonably withheld by the Issuer or the Trustee and shall be given by the Trustee and the Issuer if (a) the Borrower shall not be in default under the Regulatory Agreement or under the Financing Agreement; (b) the purchaser or assignee shall not be in default under any obligations it may have to the Issuer and shall not be the subject of any legal or enforcement actions by the Issuer, and the purchaser or assignees shall certify that the continued operation of the Project shall comply with the provisions of the Regulatory Agreement; (c) evidence reasonably satisfactory to the Issuer that the purchaser or assignee shall be willing and capable of complying with the terms and conditions of the Regulatory Agreement; ( d) either (i) evidence satisfactory to the Issuer that the purchaser or assignee has at least three years' experience in the ownership, operation and management ofrental housing projects, without any record of material violations of discrimination restrictions or other state or federal laws or regulations applicable to such projects or (ii) the purchaser or assignee agrees to retain a property management firm which the Issuer determines has the experience and record described in subclause (i) above or (iii) the Issuer shall not have any reason to believe that the purchaser or assignee is incapable, financially or otherwise, of complying with, or may be unwilling to comply with, the terms of all agreements binding on such purchaser or assignee relating to the Project; ( e) the Issuer and the Trustee shall have received (i) reasonable evidence satisfactory to the Issuer and the Trustee that the Borrower's purchaser or transferee has assumed in writing and in full, the Borrower's duties and obligations under the Regulatory Agreement and the Financing Agreement, (ii) an opinion of counsel to the transferee that the transferee has duly assumed the obligations of the Borrower under the Regulatory Agreement and that such obligations and the Regulatory Agreement are binding on the transferee, (iii) unless waived by the Issuer, an opinion ofBond Counsel that such transfer shall not adversely affect the Tax-exempt nature of the interest on the Series E Bonds, (iv) a Certificate of Continuing Program Compliance (and a "bring-down" certificate, if necessary) current as of the date of transfer and (v) evidence satisfactory to the Issuer that the purchaser or assignee does not have pending against it, nor does it have a history of, building or fire code violations as identified by Issuer, the State of California or federal regulatory agencies; (f) the purchaser or assignee shall file with the Issuer an affirmative action plan and other affirmative action documents required by the Issuer, each acceptable to the Issuer; (g) the Borrower or the transferee shall pay all costs of the transfer of title, including, but not limited to, the cost of meeting the conditions described in this subsection; and (i) such other conditions are met as the Issuer and the Trustee may reasonably impose to assure compliance by the Project with the requirements of the Regulatory Agreement. It is expressly stipulated and agreed in the Regulatory Agreement that any sale, transfer or other disposition of the Project in violation of the provisions described in this subsection shall be null, void and without effect, shall cause a reversion of title to the Borrower, and shall be ineffective to relieve the Borrower of its obligations under the Regulatory Agreement. Upon any sale or other transfer which complies with the Regulatory Agreement, the Borrower shall be fully released from its obligations thereunder, to the extent such obligations have been assumed by the transferee of the Project, without the necessity of further documentation. Any transfer of the Project to any entity, whether or not affiliated with the Borrower, shall be subject to the provisions described in this paragraph.

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Term

The Regulatory Agreement and all and each of the provisions thereof shall become effective upon its execution and delivery, and shall remain in full force and effect for the periods provided therein and, except as otherwise provided in this subsection, shall, terminate in its entirety at the end of the Qualified Project Period, it being expressly agreed and understood that the provisions thereof are intended to survive the retirement of the Bonds, discharge of the Loan and termination of the Jndenture and the Financing Agreement.

Notwithstanding the foregoing, the provisions of the Regulatory Agreement shall, in the case of the Trustee, survive the term of the Regulatory Agreement or the replacement of the Trustee, but only as to claims arising from events occurring during the term of the Regulatory Agreement or the Trustee's tenure as Trustee under the Jndenture, and shall, in the case of the Issuer, survive the term of the Regulatory Agreement, but only as to claims arising from events occurring during the term of the Regulatory Agreement.

The terms of the Regulatory Agreement to the contrary notwithstanding, the Regulatory Agreement and all of the requirements set forth therein shall terminate and be ofno further force and effect in the event of involuntarily noncompliance with the provisions of the Regulatory Agreement caused by fire, seizure, requisition, change in a federal law or an action of a federal agency after the Closing Daie which prevents the Issuer or the Trustee from enforcing the provisions thereof, or condemnation, foreclosure or transfer of title by deed in lieu of foreclosure or a similar event, but only if, within a reasonable period thereafter, either the Bonds are retired or amounts received as a consequence of such event are used to provide a project which meets the requirements of the Code set forth in the Regulatory Agreement and provided that, in either case, an opinion of Bond Counsel (unless waived by the Issuer) is delivered to the Trustee that the exclusion from gross income for federal income tax purposes of interest on the Series E Bonds will not be adversely affected thereby. The provisions of the preceding sentence shall cease to apply and the requirements referred to therein shall be reinstated if, at any time during the Qualified Project Period after the termination of such requirements as a result of involuntary noncompliance due to foreclosure, transfer of title by deed in lieu of foreclosure or similar event, the Borrower or any related person (within the meaning of Section 147(a)(2) of the Code) obtains an ownership interest in the Project for tax purposes. The Borrower has agreed that, following any foreclosure, transfer of title by deed in lieu of foreclosure or similar event, neither the Borrower nor any related person as described above will obtain an ownership interest in the Project for tax purposes.

Upon the termination of the terms of the Regulatory Agreement, the parties thereto agree to execute, deliver and record appropriate instruments of release and discharge of the terms thereof; provided, however, that the execution and delivery of such instruments shall not be necessary or a prerequisite to the termination of the Regulatory Agreement in accordance with its terms.

Covenants To Run With the Land

The Borrower subjects the Project, including the Project Site, to the covenants, reservations and restrictions set forth in the Regulatory Agreement. The Issuer and the Borrower declare in the Regulatory Agreement their express intent that the covenants, reservations and restrictions set forth in the Regulatory Agreement will be deemed covenants runoing with the land and will pass to and be binding upon the Borrower's successors in title to the Project; provided, however, that on the termination of the Regulatory Agreement said covenants, reservations and restrictions will expire. Each and every contract, deed or other instrument thereafter executed covering or conveying the Project or any portion thereof will conclusively

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be held to have been executed, delivered and accepted subject to such covenants, reservations and restrictions, regardless of whether such covenants, reservations and restrictions are set forth in such contract, deed or other instrument.

Burden and Benefit

The Issuer and the Borrower declare in the Regulatory Agreement their understanding and intent that the burden of the covenants set forth in the Regulatory Agreement touch and concern the land in that the Borrower's legal interest in the Project is rendered less valuable thereby. The Issuer and the Borrower further declare in the Regulatory Agreement their understanding and intent that the 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.

Default; Enforcement

If the Borrower defaults in the performance or observance of any covenant, agreement or obligation of the Borrower set forth in the Regulatory Agreement and such default remains uncured for a period of 60 days after notice thereof is given by the Issuer to the Borrower, then the Issuer shall declare an "Event of Default" to have occurred under the Regulatory Agreement; provided, however, that if the default is of such a nature that it cannot be corrected within 60 days, such default shall not constitute an Event ofDefault under the Regulatory Agreement so long as (i) the Borrower institutes corrective action within said 60 days and diligently pursues such action until the default is corrected; and (ii) in the opinion of Bond Counsel, the failure to cure said default within 60 days will not adversely affect the Tax-Exempt status of interest on the Series E Bonds (and following the Tax-Exempt Conversion Date, the Series F Bonds) and the 1994 Bonds. The Trustee consents to any correction of the default by the Issuer on behalf of the Borrower.

Following the declaration of an Event of Default under the Regulatory Agreement, the Issuer or the Trustee may, at their respective option, take any one or more of the following steps, in addition to all other remedies provided by law or equity:

(a) by mandamus or other suit, action or proceeding at law or in equity, including injunctive relief, require the Borrower to perform its obligations and covenants under the Regulatory Agreement, or enjoin any acts or things that may be unlawful or in violation of the rights of the Issuer or the Trustee under the Regulatory Agreement;

(b) have access to, and inspect, examine and make copies of, all of the books and records of the Borrower pertaining to the Project;

( c) take such other action at Jaw or in equity as may appear necessary or desirable to enforce the obligations, covenants and agreements of the Borrower under the Regulatory Agreement.

The Borrower agrees in the Regulatory Agreement that specific enforcement of the Borrower's agreements described therein is the only means by which the Issuer may fully obtain the benefits of such agreements made by the Borrower therein and the Borrower therefore agrees to the imposition of the remedy of specific performance against it in the case of any Event of Default by the Borrower under the Regulatory Agreement.

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During the Qualified Project Period, the Borrower hereby grants to tbe Issuer the option, upon either (a) the expiration of 60 days after the giving of the notice to the Borrower of the Borrower's default under the Regulatory Agreement or (b) the vacancy of a Low Income Unit for more !ban six months and the submission by the Issuer to the Borrower during such six-month or longer period of at least five proposed tenants which meet the qualifications of Low Income Tenants and the qualifications of a reasonable landlord, to lease such unit in the Project for a rental of $1.00 per year for the sole purpose of subleasing such unit to a Low Income Tenant on a month-to-month basis, but only to the extent necessary to comply with provisions of the Regulatory Agreement and to insure full occupancy of the Low Income Units. The option granted in the preceding sentence shall be effective only if the Borrower or the Trustee has not instituted corrective action before the end of such 60-day period referenced in ( a) above, or the Borrower has not rented the unit during the six-month or longer period referenced in (b) above, to a qualified Low Income Tenant. The option and any leases to the Issuer under this provision shall terminate with respect to each default upon the achievement, by the Borrower, the Trustee or the Issuer, of compliance with the requirements of sections of the Regulatory Agreement, and any subleases entered into pursuant to the Issuer's option shall be deemed to be leases from the Borrower. The Issuer shall make every diligent effort, but shall not be required to rent Low Income Units to Low Income Tenants at the highest rents practicable, subject to the limits of sections of the Regulatory Agreement. Any rental paid under any such sublease shall be paid to the Borrower after the Issuer has been reimbursed for any reasonable expenses incurred in connection with such sublease, provided that, iftbe Borrower is in default under the Note, such rental shall be paid to the Loan Servicer (as defined in the Financing Agreement) to be applied to pay any amounts then due and payable with respect to or otherwise required to be paid by the Loan Documents (including, without limitation, debt service and operating and maintenance expenses), then, second, applied to pay any amounts then due and payable to Fannie Mae, and then, third, applied to pay any amounts due and payable under the Financing Agreement, the Indenture and the Regulatory Agreement to the Issuer and the Trustee, in that order of priority, with any remaining amounts then returned to the Borrower. The Trustee shall have the right, as directed by the Issuer, in accordance with this section and the provisions of the Indenture, to exercise any or all of the rights or remedies of the Issuer hereunder, provided !bat prior to taking any such action the Trustee shall give the Issuer written notice of its intended action. All reasonable fees, costs and expenses of the Issuer and the Trustee incurred in taking any action pursuant to this section shall be the sole responsibility of the Borrower. Any action taken or proposed to be taken by the Issuer or the Trustee with respect to management or operation of the Project as described in this paragraph shall be subject to approval of Fannie Mae.

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EXHIBITE

EXCERPT FROM THE REIMBURSEMENT AGREEMENT

The Credit Facility is issued pursuant to the Reimbursement Agreement which obligates the Borrower, among other things, to reimburse Fannie Mae for funds provided by Fannie Mae under the Credit Facility, and to pay various fees and expenses, in each case as provided in the Reimbursement Agreement.

The Reimbursement Agreement sets forth various affirmative and negative covenants of the Borrower, including certain financial and operational requirements, some of which are more restrictive with respect to the Borrower than similar covenants in the Financing Agreement. The Borrower's obligations to Fannie Mae under the Reimbursement Agreement are secured, in part, by the Security Instrument.

The following is an excerpt from the Reimbursement Agreement. Reference is made to the Reimbursement Agreement for a full and complete statement of its provisions.

ARTICLE XII EVENTS OF DEFAULT; REMEDIES

SECTION 12.1 Events of Default. The occurrence ofany one or more of the following events shall constitute an Event of Default under this Agreement:

(a) the Borrower fails to pay when due any amount payable by the Borrower under this Agreement, the Note, the Financing Agreement, the Security Instrument or any other Transaction Document; or

(b) the occurrence of a Borrower Default or a Guarantor Default Event under the Supplemental Financing Agreement or the occurrence of an Event of Default under the Guaranty or the Borrower's violation of the covenants contained in the Reimbursement Agreement;

( c) the occurrence of any Event of Default under any Transaction Document other than this Agreement beyond any cure period set forth in that Transaction Document; or

( d) fraud or material misrepresentation or material omission by Borrower, or any ofits officers, directors, trustees, general partners or managers, Key Principal or any guarantor:

(i) contained in this Agreement, the Certificate of Borrower or any other Borrower Document or any certificate delivered by the Borrower to Fannie Mae or to the Loan Servicer pursuant to this Agreement or any other Borrower Document; or

(ii) in connection with (A) the application for or creation of the Loan or the credit enhancement or liquidity for the Bonds provided by the Credit Facility, (B) any financial statement, rent roll, or other report or infonnation provided to Fannie Mae or the Loan Servicer during the term of this Agreement or the Loan, or (C) any request for Fannie Mae's consent to any proposed action, including a request for disbursement of funds under any Collateral Agreement or contained in this Agreement, the Certificate ofBorrower or any other Borrower Document or any certificate delivered by the Borrower to Fannie Mae or to the Loan Servicer pursuant to this Agreement or any other Borrower Document; or

( e) a Tax Event ( as that term is defined in the Indenture) occurs; or

(f) any failure by the Borrower to perform or observe any of its obligations under this Agreement (other than as set forth in subsections (a) through (d) above), as and when required, which continues for a period of 30 days after notice of such failure by Fannie Mae or the Loan Servicer to the Borrower, but no such notice or grace period shall apply in the case of any such failure which could, in Fannie Mae's or the Loan Servicer's judgment, absent immediate exercise by Fannie Mae of a right or remedy under this Agreement, result in harm to Fannie Mae, impairment of the Note, this Agreement, the Security Instrument or any other security given under any other Transaction Document.

SECTION 12.2Remedies; Waivers.

(a) Remedies. Upon the occurrence of an Event of Default under this Agreement, the Obligations and all amounts owing under this Agreement may be declared by Fannie Mae to become immediately due and payable, without presentment, demand, protest or notice of any kind, including notice of default, notice of intent to accelerate or notice of acceleration. In addition, Fannie Mae shall have the right to take such action at law or in equity, without notice or demand, as it deems advisable to protect and enforce the rights of Fannie Mae against the Borrower and/or in and to the Mortgaged Property, including, but not limited to, any one or more or all of the following actions:

(i) deliver to the Trustee written notice that an Event ofDefault has occurred under this Agreement and direct the Trustee to take such action pursuant to the Transaction Documents as Fannie Mae may determine, including a request that the Trustee declare the principal of all or a portion of the Bonds then outstanding and the interest accrued thereon to be immediately due and payable in accordance with the terms and conditions of the Indenture;

(ii) demand cash collateral or Permitted Investments in the full amount of the obligations under the Bonds whether or not then due and payable by Fannie Mae under the Credit Facility; and

(iii) Documents.

exercise any rights and remedies available to Fannie Mae under the Transaction

(b) Waivers. Fannie Mae shall have the right, in its discretion, to waive any Event of Default under this Agreement. Unless such-waiver expressly provides to the contrary, any waiver so granted shall extend only to the specific event or occurrence which gave rise to the Event of Default so waived and not to any other similar event or occurrence which occurs subsequent to the date of such waiver.

SECTION 12.3 No Remedy Exclusive. Unless otherwise expressly provided, no remedy conferred upon or reserved in this Agreement is intended to be exclusive of any other available remedy, but each remedy shall be cumulative and shall be in addition to other remedies given under the Transaction Documents or existing at law or in equity. No delay or omission to exercise any right or power accruing underany Transaction Document upon the happening of any event set forth in Section 12.1 shall impair any such right or power or shall be construed to be a waiver of such event, 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 Fannie Mae to exercise any remedy reserved to Fannie Mae in this Article, it shall not be necessary to give any notice, other than such notice as may be required under the applicable provisions of any of the other Transaction Documents. The rights and remedies of Fannie Mae specified in this Agreement are for the sole and

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exclusive benefit, use and protection of Fannie Mae, and Fannie Mae is entitled, but shall have no duty or obligation to the Borrower, the Trustee, the Bondholders or otherwise, (a) to exercise or to refrain from exercising any right or remedy reserved to Fannie Mae hereunder, or (b) to cause the Trustee or any other party to exercise or to refrain from exercising any right or remedy available to it under any of the Transaction Documents.

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EXHIBITF

FORM OF CREDIT FACILITY

-'-=-=--

DIRECT PAY IRREVOCABLE TRANSFERABLE

CREDIT ENHANCEMENT INSTRUMENT

$23,600,000 The City of Los Angeles Variable Rate Demand

Multifamily Housing Revenue Bonds (San Regis Project)

Series 200 lE

and

$6,400,000 The City of Los Angeles Variable Rate Demand

Taxable Multifamily Housing Revenue Bonds (San Regis Project)

Series 2001F

November 30, 2001

U.S. $30,382,706 Relating to Loan No. ---

Chase Manhattan Bank and Trust Company, National Association, as Trustee San Francisco, California

At the request of Green Room Properties, LLC, a Delaware limited liability company (the "Borrower"), Fannie Mae ("Fannie Mae") issues this Direct Pay Irrevocable, Transferable Credit Enhancement Instrument to Chase Manhattan Bank and Trust Company, National Association (the "Trustee"), not in its individual or corporate capacity, but solely as Trustee for the owners of $23,600,000 The City of Los Angeles Variable Rate Demand Multifamily Housing Revenue Bonds (San Regis Project) Series 200 IE and $6,400,000 The City of Los Angeles Variable Rate Demand Taxable Multifamily Housing Revenue Bonds (San Regis Project) Series 2001F (the "Bonds") issued pursuant to the Trust Indenture (the "Indenture"), dated as ofNovember 1,2001, between The City of Los Angeles (the "Issuer") and the Trustee.

1. Definitions. Capitalized terms used in this Credit Enhancement Instrument have the meanings given to those terms in this Section I or elsewhere in this Credit Enhancement Instrument.

"Advance" means a Principal Advance, Interest Advance, Pledged Bonds Advance or Issuer's Fee Advance, as such terms are defined in Section 3.

"Affiliate" as applied to any person, means any other person directly or indirectly controlling, controlled by, or under common control with, that person. For the purposes of this definition, "control" (including with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any person, means the possession, directly or indirectly, of the power to direct or cause

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the direction of the management and policies of that person, whether through the ownership of voting securities, partnership interests or by contract or otherwise.

"Amount Available" has the meaning given that term in Section 2.

"Business Day" means any day other than (i) a Saturday or a Sunday, (ii) any day on which banking institutions located in the City of New York, New York are required or authorized by law or executive order to close, (iii) any day on which banking institutions located in the city or cities in which the Principal Office (as that term is defined in the Indenture) of the Trustee or the Remarketing Agent is located are required or authorized by law or executive order to close, (iv) a day on which banking institutions located in the city in which the Principal Office of the Loan Servicer is located are required or authorized by law or executive order to close, (v) prior to the date upon which the interest rate on the Bonds adjusts to a fixed rate mode, a day on which the New York Stock Exchange is closed or (vi) any day on which Fannie Mae is closed.

"Certificate" means any written certificate in the form attached to this Credit Enhancement Instrument as an Exhibit signed by one who purports to be an authorized officer of the Trustee.

"Credit Enhancement Instrument" means this Direct Pay Irrevocable Transferable Credit Enhancement Instrument as the same may be amended, supplemented or restated from time to time.

"Exclude.d Bond" means any Bond which is not Outstanding (as that term is defined in the Indenture), any Bond registered in the name of or otherwise owned, directly or indirectly, by the Borrower or any Affiliate of the Borrower or any Pledged Bond.

"Expiration Date" means subject to Section 7(d), the date and time of day on which this Credit Enhancement fustrument expires in accordance with Section 7(a).

"Financing Agreement" means the Financing Agreement among the Issuer, the Trustee and the Borrower, dated as ofNovember 1, 2001.

"Interest Portion" has the meaning given that term in Section 2.

"Issuer's Fee" means the Issuer's regularly scheduled annual fee equal to 12.5 basis points of the outstanding principal amount of the Bonds, payable annually, in advance, on November 15 of each year.

"Issuer's Fee Portion" has the meaning given that term in Section 2.

"Loan" means the mortgage loan made by the Issuer to the Borrower pursuant to the Financing Agreement for the purpose of providing funds to the Borrower to finance costs of the acquisition, rehabilitation and equipping of the Mortgaged Property, as defined in the Indenture.

"Loan Servicer" means initially Berkshire Mortgage Finance Limited Partnership, a Massachusetts limited partnership, or any other entity approved by Fannie Mae in its discretion as the servicer of the Loan, and any permitted successors or assigns.

"Note" means the Multifamily Note (together with all addenda thereto), dated as of November 1, 200 I, executed by the Borrower in favor of the Issuer, as the same may be amended, supplemented or

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restated from time to time or any note executed in substitution therefor, as such substitute note may be amended, supplemented or restated from time to time.

"Pledged Bond" means any Bond during the period from and including the date of its purchase by the Trustee on behalf of and as agent for the Borrower with the proceeds of an Advance under this Credit Enhancement Instrument, to, but excluding, the date on which the Pledged Bonds Advance made by the Credit Provider on account of such Pledged Bond is reinstated under this Credit Enhancement Instrument or the Pledged Bond is cancelled.

"Principal Portion" has the meaning given that term in Section 2.

"Reimbursement Agreement" means the Reimbursement Agreement, dated as of November I, 2001, between Fannie Mae and the Borrower, as such agreement may be amended, supplemented orrestated from time to time.

"Remarketing Agent" means the rernarketing agent under the Indenture.

"Reset Rate" means the rate of interest borne by the Bonds for a period of ten or more years ( or such shorter period as consented to by Fannie Mae) as determined in accordance with the Indenture.

"Tender Agent" means the tender agent under the Indenture.

"Termination Date" means, subject to Section 7(d), the date on which this Credit Enhancement Instrument terminates in accordance with Section 7(b).

"Trnstee" means Chase Manhattan Bank and Trust Company, National Association, a national banking association, duly organized and existing under the laws of the United States of America, not in its individual or corporate capacity, but solely as trustee under the Indenture, or any permitted successor trustee under the Indenture.

2. Amonnt Available. Subject to the terms and conditions of this Credit Enhancement Instrument, Farrnie Mae irrevocably authorizes the Trustee to draw on Fannie Mae, from time to time, from and after the date of this Credit Enhancement Instrument to, and including, the earlier of the Expiration Date or the Termination Date, a maximum aggregate amount not exceeding $30,382,706 (as such amount may be· reduced or reinstated from time to time in accordance with Section 8, the "Amount Available"), of which:

(a) up to $30,000,000 (the "Principal Portion") may be drawn with respect to the unpaid principal of the Bonds or, as the case may be, the principal portion of the purchase price of the Bonds;

(b) up to $345,206 (the "Interest Portion"), or 35 days interest on the Bonds (calculated at an assumed rate on the Bonds ofl2% per annum on the basis of a year of365 days), maybe drawn with respect to interest actually accrued on the Bonds or, as the case may be, the interest portion of the purchase price of the Bonds; and

( c) up to $37,500 (the "Issuer's Fee Portion") may be drawn with respect to the Issuer's Fee.

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3. Advances. Each demand for an Advance shall be made by the Trustee's presentation to Fannie Mae of a Certificate:

(a) in the form of Exhibit A to pay principal of the Bonds (other than Excluded Bonds) due as a result of the acceleration, defeasance, optional or mandatory redemption or stated maturity (a "Principal Advance");

(b) in the form of Exhibit B to pay interest on the Bonds ( other than Excluded Bonds) on or prior to their stated maturity date (an "Interest Advance");

( c) in the form of Exhibit C to pay principal of, plus accrued interest on, Bonds tendered for purchase pursuant to the Indenture ( a "Pledged Bonds Advance"); and

(d) in the form of Exhibit D to pay the Issuer's Fee if not paid when due (an "Issuer's Fee Advance").

Any Certificate submitted to Fannie Mae by the Trustee shall have all blanks appropriately completed and shall be signed by one who states therein that he or she is an authorized officer of the Trustee. Fannie Mae's obligation to honor any demap.d for an Issuer's Fee Advance is a standby obligation, payable if the Issuer's Fee is not otherwise paid, and Fannie Mae's obligation to honor any demand for all other Advances is a direct pay obligation, without regard to whether the Borrower has made any such payment.

Neither demands for, nor Advances, may be made under this Credit Enhancement Instrument to pay (i) principal of, interest on or the purchase price of, any Excluded Bond, (ii) premium that may be payable upon the redemption ofany of the Bonds or (iii) interest that may accrue on any Bond on or after the maturity of such Bond.

4. Presentation of Certificates. Each Certificate must be given to Fannie Mae by:

(a) personal delivery at 3900 Wisconsin Avenue, Washington, D.C. 20016, Attention: Vice President, Multifamily Services; or

(b) telecopy to phone number 202-752-8374, immediately followed by telephonic notice to the Vice President, Multifamily Services at telephone number 202-752-7869.

Fannie Mae will notify the Trustee in writing of any change in address or telecopy number to which all Certificates must be delivered or of any change relating to the person to be called for telephonic notices confirmingtelecopy communications. Any such written notice shall be effective upon receipt by the Trustee.

5. Fannie Mae's Engagement. Upon due receipt by Fannie Mae of a Certificate conforming to the terms and conditions of this Credit Enhancement Instrument, Fannie Mae will honor payment of the amount specified in such Certificate if presented as specified below on or before the earlier of the Expiration Date or the Termination Date:

(a) Ifa presentation in respect ofa Principal Advance, an Interest Advance, or a Pledged Bonds Advance relating to a mandatory tender pursuant to Section 4.2(b) of the Indenture is made:

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(i) at or prior to 12:00 noon Eastern time on a Business Day, payment shall be made to the Trustee of the amount specified no later than 1 :00 p.m. Eastern time on the next foJlowing Business Day.

(ii) after 12:00 noon Eastern time on a Business Day, payment shall be made to the Trustee of the amount specified no later than 1:00 p.rn. Eastern time on the second foJiowing Business Day.

(b) If a presentation in respect of a Pledged Bonds Advance ( other than a Pledged Bonds Advance relating to a mandatory tender pursuant to Section 4.2(b) of the Indenture) is made:

(i) at or prior to 10:30 a.m. Eastern time on a Business Day, payment shaJI be made to the Trustee of the amount specified no later than 1 :30 p.m. Eastern time on the same Business Day.

(ii) after 10:30 a.m. Eastern time on a Business Day, payment shaJI be made to the Trustee of the amount specified no later than 1 :30 p.m. Eastern time on the next foJiowing Business Day.

( c) If a presentation in respect of an Issuer's Fee Advance is made:

(i) at or prior to 5:00 p.m. Eastern time on a Business Day, payment shall be made to the Trustee of the amount specified no later than 1 :00 p.m. Eastern time on the fifth Business Day following such presentation.

(ii) after 5:00 p.m. Eastern time on a Business Day, payment shall be made to the Trustee of the amount specified no later than 1:00 p.rn. Eastern time on the sixth Business Day foJlowing such presentation.

AJI Advances made under this Credit Enhancement Instrument wiJI be made with Fannie Mae's own funds in immediately available funds.

6. Nonconforming Tender. If a demand for payment under this Credit Enhancement Instrum.ent made by the Trustee does not conform to the terms and conditions oftlris Credit Enhancement Instrument, Fannie Mae will notify the Trustee of such Jack of conformity within a reasonable time after delivery of such demand for payment, such notice to be promptly confirmed in writing to the Trustee, and Fannie Mae shaJI hold all documents at the Trustee's disposal or, at the Trustee's option, return the same to the Trustee.

7. Expiration and Termination.

(a) Expiration. This Credit Enhancement Instrument shall expire at 4:00 p.m. Eastern time on December 20, 2034 ("Expiration Date").

(b) Termination Before Expiration Date. This Credit Enhancement Instrument shall automatically terminate prior to the Expiration Date on the first to occur of: (i) the honoring by Fannie Mae of an Advance which automatically and permanently reduces the Principal Portion to zero, (ii) 4:00 p.rn. Eastern time on the day following the last day of any period during which the Bonds bear interest at a Reset Rate unless Fannie Mae has notified the Trustee prior to such date that it elects to waive such termination, and (iii) Fannie Mae's receipt of a Certificate in the form of Exhibit G (which shaJI be conclusive evidence of the matters set forth therein). The date determined in the preceding sentence is the "Termination Date."

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( c) Delivery. Upon the Expiration Date or the Termination Date, whichever first occurs, this Credit Enhancement Instrument shall be delivered to Fannie Mae for cancellation.

( d) Business Day Convention. In the event that any date on which this Credit Enhancement Instrument would otherwise expire or terminate is not a Business Day, this Credit Enhancement Instrument shall continue in effect and shall not expire or terminate until 4:00 p.m. Eastern time on the next Business Day.

8. Reduction and Reinstatement of Amount Available. The Amount Available shall be reduced or reinstated from time to time in accordance with this Section.

(a) Automatic Reduction on Making any Advance. The Amount Available shall be reduced automatically by the amount of each Advance paid by Fannie Mae, notwithstanding any act or omission, whether authorized or unauthorized, of the Trustee or any officer, director, employee or agent of the Trustee in connection with any Advance or the proceeds of such Advance or otherwise in connection with this Credit Enhancement Instrument. Each reduction shall be permanent or subject to reinstatement as provided in this Section. Such reduction shall be applied to the Principal Portion, the Interest Portion and the Issuer's Fee Portion as appropriate for the Advance to which the reduction relates.

(b) Permanent Reduction for each Principal Advance. The Principal Portion, Interest Portion and Issuer's Fee Portion shall be reduced automatically and permanently upon the making of any Principal Advance as follows:

(i) the Principal Portion will be reduced by the amount of the Principal Advance;

(ii) the Interest Portion will be reduced by an amount equal to 35 days of interest ( calculated at the rate of 12% per annum on the basis of a year of 365 days) on the amount of the related permanent reduction of the Principal Portion; and

(iii) the Issuer's Fee Portion will be reduced in an amount equal to 0.125% multiplied by the amount of the related permanent reduction of the Principal Portion.

( c) Permanent Reduction on Notice from the Trustee. The Amount Available shall be reduced automatically by the amounts specified in any Certificate in the form ofExhibit E which is delivered to Fannie Mae. Such reduction shall be applied to the Principal Portion, the Interest Portion and the Issuer's Fee Portion as set out in the Certificate.

( d) Reinstatement of Interest Portion for Interest Advance. Except for a permanent reduction of the Interest Portion under subsection (b )(ii), the amount of the Interest Portion reduced by an Interest Advance shall be reinstated immediately and automatically.

( e) Reinstatement of Pledged Bonds Advance. The Principal Portion and the Interest Portion shall be reinstated after each Pledged Bonds Advance upon receipt by Fannie Mae of money equal to the amount by which the Trustee requests Fannie Mae to increase the Principal Portion and the Interest Portion in a Certificate of Reinstatement in the form of Exhibit F.

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(f) Reinstatement oflssuer's Fee Advance. Except for a permanent reduction of the Issuer's Fee Portion under subsection (b)(iii), the amount of the Issuer's Fee Portion reduced by an Issuer's Fee Advance shall be reinstated immediately and automatically.

Upon any permanent reduction of the Amount Available, Fannie Mae may deliver to the Trustee a substitute Credit Enhancement Instrument in exchange for this Credit Enhancement Instrument, in an amount available equal to the then current Amount Available, but otherwise having terms identical to this Credit Enhancement Instrument.

9. Discharge of Obligations. Only the Trustee may demand an Advance under this Credit Enhancement Instrument. Upon payment to the Trustee of the amount specified in any Certificate presented under this Credit Enhancement Instrument, Fannie Mae shall be fully discharged of its obligation under this Credit Enhancement Instrument with respect to such Certificate and Fannie Mae shall not thereafter be obligated to make any further payment to the Trustee or any other person (including the Issuer, with respect to payment of the Issuer's Fee) in respect of such Certificate for payment of principal of, purchase price of, or interest on any Bond, or payment of the Issuer's Fee.

10. Nature of Fannie Mae's Obligations. Fannie Mae's obligation to make Advances to the Trustee upon the proper presentation of documents which conform to the terms and conditions of this Credit Enhancement Instrument is absolute, unconditional and irrevocable, shall be fulfilled strictly in accordance with this Credit Enhancement Instrument, and shall not be affected by any right of set-off, recoupment or counterclaim Fannie Mae might otherwise have against the Issuer, the Trustee, the Tender Agent, the Remarketing Agent, the Borrower, the Loan Servicer or any other person.

Fannie Mae's obligations under this Credit Enhancement Instrument are primary obligations and shall not be affected by the performance or non-performance by the Issuer under the Indenture or the Bonds or by the Borrower under the Note or the Reimbursement Agreement or by the performance or non-performance of any party under any other agreement between or among any of the Issuer, the Trustee, the Borrower or Fannie Mae.

11. Transfer. This Credit Enhancement Instrument may be successively transferred in whole only, to each successor Trustee under the Indenture. Any such transfer shall be effective upon receipt by Fannie Mae of a signed copy of the instrument effecting such transfer signed by the transferor and by the transferee in the form attached as Exhibit H (which shall be conclusive evidence of such transfer). In each such case, the transferee instead of the transferor shall, without the necessity offurther action, be entitled to all the benefits of and rights under this Credit Enhancement Instrument in the transferor's place.

12. Notices and Deliveries. All documents, notices and other communications, other than Certificates, shall be in writing and personally delivered to Fannie Mae at the address (and to the attention of the party) set out in Section 4(a) or maybe sent to Fannie Mae by telecopy immediately followed by telephonic notice as set out in Section 4(b ), as such address, telephone numbers and parties to whom such notices are sent are changed by Fannie Mae pursuant to Section 4.

13. Governing Law. This Credit Enhancement Instrument shall be governed by the laws of the District of Columbia, including the Uniform Commercial Code as in effect in the District of Columbia.

F-8

14. Entire Credit Enhancement Instrument. This Credit Enhancement Instrument sets forth in full the terms of Fannie Mae's undertaking and shall not in any way be amended, amplified or limited by reference to any document, instrument or agreement referred to in this Credit Enhancement Instrument (including, without limitation, the Bonds) or in which this Credit Enhancement Instrument is referred to or to which this Credit Enhancement Instrument relates, except for the Exhibits referred to in this Credit Enhancement Instrument.

[The remainder of this page has been intentionally left blank.]

F-9

FANNIE MAE

By: Name: Title:

Signed ____ ,; effective as of the Closing Date.

F-10

Exhibit A

CERTIFICATE FOR "PRINCIPAL ADVANCE"

DIRECT PAY

Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016

Attention: Director, Multifamily Services

Re: Credit Enhancement Instrument relating to Loan No. Instrument")

("Credit Enhancement

$23,600,000 The City of Los Angeles Variable Rate Demand Multifamily Housing Revenue Bonds (San Regis Project) Series 2001E and $6,400,000 The City of Los Angeles Variable Rate Demand Taxable Multifamily Housing Revenue Bonds (San Regis Project) Series 2001F

San Regis Apartments

The undersigned, a duly authorized officer of the Trustee named below ("Trustee"), certifies to Fannie Mae, with reference to the direct pay Credit Enhancement Instrument, that:

(1) The Trustee is the Trustee under the Indenture for the holders of the Bonds.

(2) The Trustee demands an Advance in the amount of$ ____ under the Principal Portion of the Amount Available to be used to pay principal of the Bonds due as a result of the acceleration, defeasance, redemption or stated maturity of the Bonds pursuant to the Indenture.

(3) The principal of the Bonds ( other than Excluded Bonds) that is due on the first Business Day after the date of this Certificate is $ ____ . The amount of the Advance demanded in paragraph 2 does not exceed such amount of principal.

(4) The amount of the Advance (a) does not exceed the Principal Portion of the Amount Available on the date of this Certificate and (b) was computed in accordance with the Bonds and the Indenture.

(5) Upon receipt by the Trustee of the Advance, (a) the Trustee will apply the same directly for the purpose specified in paragraph 2, and (b) no portion of said amount shall be applied by the Trustee for any purpose other than as set forth in paragraph 2.

( 6) The proceeds of the Advance demanded by this Certificate will not be applied to any payment on any Excluded Bonds.

(7) The Advance demanded by this Certificate shall be paid to the Trustee at ___ [ specify account].

(8) Upon the payment referred to in paragraph 2, the aggregate principal amount of all Bonds outstanding (other than Excluded Bonds) will be$ ___ _

F-11

(9) The amount of interest (computed at the Maximum Interest Rate (as that term is defined in the Indenture), which currently is __ * percent per annum) on the basis of the actual number of days elapsed over a year of365 or 366 days, as applicable), accruing on the Bonds referred to in paragraph 8 above in any period of_** days is $ _____ _

* Trustee: Fill in current Maximum Interest Rate. ** Trustee: Fill in number of days of interest coverage required to be supplied by the Interest Portion.

(10) Upon the payment referred to in paragraph 2:

(a) Reduction of Amount Available. The Amount Available shall be reduced automatically and permanently by $[insert amount of reduction J of which:

(i)

(ii)

$ ____ is attributable to the Principal Portion;

$ ____ is attributable to the Interest Portion; and

(iii) $ ____ is attributable to the Issuer's Fee Portion ( computed at a rate of0.125% multiplied by the outstanding principal amount of the Bonds).

(b) New Amount Available. The Amount Available will be$ of which:

(i)

(ii)

$ ____ will be the Principal Portion;

$ will be the Interest Portion,· and ----

----

(iii) $ ____ will be the Issuer's Fee Portion (computed at a rate of 0.125% multiplied by the outstanding principal amount of the Bonds).

(11) The aggregate principal amount of all Excluded Bonds outstanding is $ ----

Any capitalized, but undefined, term used in this Certificate is used as defined in the Credit Enhancement Instrument.

IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the __ day of ____ , __ . Chase Manhattan Bank and Trust Company, National Association, a national banking association, as Trustee

By: Authorized Officer

F-12

Exhibit B

CERTIFICATE FOR "INTEREST ADVANCE"

DIRECT PAY

Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016

Attention: Director, Multifamily Services

Re: Credit Enhancement Instrument relating to Loan No. Instrument")

("Credit Enhancement

$23,600,000 The City of Los Angeles Variable Rate Demand Multifamily Housing Revenue Bonds (San Regis Project) Series 2001E and $6,400,000 The City of Los Angeles Variable Rate Demand Taxable Multifamily Housing Revenue Bonds (San Regis Project) Series 2001F

San Regis Apartments

The undersigned, a duly authorized officer of the Trustee named below ("Trustee), certifies to Fannie Mae, with reference to the Credit Enhancement Instrument, that: ·

(1) The Trustee is the Trustee under the Indenture for the holders of the Bonds.

(2) The Trustee demands an Advance in the amount of$ ____ under the Interest Portion of the Amount Available to be used to pay interest on the Bonds (other than Excluded Bonds) on or prior to their stated maturity date.

(3) The amount of the Advance referred to in paragraph (2) was computed in accordance with the Bonds and the Indenture and does not exceed the amount of interest that is (a) due on the Business Day following the date of this Certificate on the Bonds and (b) the Interest Portion of the Amount Available on the date of this Certificate.

( 4) Upon receipt by the Trustee of the amount demanded by this Certificate, (a) the Trustee will apply the same directly for the purpose specified in paragraph 2 and (b) no portion of said amount shall be applied by the Trustee for any purpose other than as set forth in paragraph 2.

(5) The proceeds of the Advance demanded by this Certificate will not be applied to any payment on any Excluded Bonds.

(6) Payment of the amount referred to in paragraph 2 shall be made to the Trustee at [specify account].

Any capitalized, but undefined, term used in this Certificate is used as defined in the Credit Enhancement Instrument.

F-13

IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the __ day of

Chase Manhattan Bank and Trust Company, National Association, a national banking association, as Trustee

By: Authorized Officer

F-14

Exhibit C

CERTIFICATE FOR "PLEDGED BONDS ADVANCE"

DIRECT PAY

Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016

Attention: Director, Multifamily Services

Re: Credit Enhancement Instrument relating to Loan No. Instrument")

("Credit Enhancement

$23,600,000 The City of Los Angeles Variable Rate Demand Multifamily Housing Revenue Bonds (San Regis Project) Series 2001E and $6,400,000 The City of Los Angeles Variable Rate Demand Taxable Multifamily Housing Revenue Bonds (San Regis Project) Series 2001F

San Regis Apartments

The undersigned, a duly authorized officer of the Trustee named below ("Trustee"), certifies to Fannie Mae, with reference to the Credit Enhancement Instrument, that:

(I) The Trustee is the Trustee under the Indenture for the holders of the Bonds.

(2) The Trustee demands an Advance in the amount of$ ____ , consisting of (a) $ ____ under the Principal Portion of the Amount Available to be used to pay the principal portion of the purchase price of Bonds and (b) $ ____ under the Interest Portion of the Amount Available to be used to pay the interest portion of the purchase price of Bonds purchased pursuant to Section 4.l(a), 4.2(a) or 4.2(b) of the Indenture ("Tendered Bonds").

(3) The amount demanded pursuant to Paragraph (2) does not exceed the amount necessary, at the time of the presentation of this Certificate to Fannie Mae, to pay the purchase price of the Tendered Bonds which the Remarketing Agent has not remarketed or for which the Remarketing Agent has not received sufficient remarketing proceeds to pay the purchase price of the Tendered Bonds.

(4) The principal component of the aggregate purchase price of the Tendered Bonds that is due on the date of this Certificate is$ ___ , and the amount of the Advance relating to the Principal Portion referred to in paragraph 2 does not exceed such amount of principal. The aggregate accrued interest component of the purchase price of the Tendered Bonds that is due on the date of this Certificate is $ ____ and the amount of the Advance relating to the Interest Portion referred to in paragraph 2 does not exceed such amount.

(5) On the date of this Certificate, (a) the principal portion of the Advance does not exceed the Principal Portion of the Amount Available and (b) the interest portion of the Advance does not exceed the Interest Portion of the Amount Available. The amount of the Advance was computed in accordance with the Bonds and the Indenture.

F-15

(6) Upon receipt by the Trustee of the Advance demanded by this Certificate, (a) the Trustee will apply the same directly for the purpose specified in paragraph 2 and (b) no portion of said amount shall be applied by the Trustee for any purpose other than as set forth in paragraph 2.

(7) The proceeds of the Advance demanded by this Certificate will not be applied to defease, redeem or pay (whether at stated maturity or by acceleration) any Excluded Bond.

(8) Bonds in a principal amount equal to the Principal Portion of the Advance made under this Certificate will be delivered to Chase Manhattan Bank and Trust Company, National Association or if, and only if, delivery of the Bonds is not possible, a written entitlement order will be delivered to the applicable financial intermediaries on whose records ownership of the Pledged Bonds is reflected directing the intermediaries to credit the security entitlement to the Pledged Bonds to the account of Chase Manhattan Bank and Trust Company, National Association for the benefit of Fannie Mae and a written confirmation of such credit will be delivered to Chase Manhattan Bank and Trust Company, National Association.

(9) Payment of the amount referred to in paragraph 2 shall be made to the Trustee at [specify account]. If this Certificate is dated the Business Day of its presentation and is presented in respect of an Advance ( other than a Pledged Bonds Advance relating to a mandatory tender under Section 4.2(b) of the Indenture) payment shall be made in accordance with Section 5(b) of the Credit Enhancement Instrument; accordingly, if presented before 10:30 a.m. Eastern time, payment must be made prior to 1:30 p.m. Eastern time on the same Business Day. If this Certificate is presented in respect of a Pledged Bonds Advance relating to a mandatory tender under Section 4.2(b) of the Indenture, payment shall be made in accordance with Section 5(a) of the Credit Enhancement Instrument.

Any capitalized, but undefined, term used in this Certificate is used as defined in the Credit Enhancement Instrument.

F-16

IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the __ day of ____ , __ .

Chase Manhattan Bank and Trust Company, National Association, a national banking association, as Trustee

By: Authorized Officer

F-17

ExhibitD

CERTIFICATE FOR "ISSUER'S FEE ADVANCE"

STAND-BY

Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016

Attention: Director, Multifamily Services

Re: Credit Enhancement Instrument relating to Loan No. ___ _ Instrument")

("Credit Enhancement

$23,600,000 The City of Los Angeles Variable Rate Demand Multifamily Housing Revenue Bonds (San Regis Project) Series 2001E and $6,400,000 The City of Los Angeles Variable Rate Demand Taxable Multifamily Housing Revenue Bonds (San Regis Project) Series 200 lF

San Regis Apartments

The undersigned, a duly authorized officer of the Trustee named below ("Trustee"), certifies to Fannie Mae, with reference to the Credit Enhancement Instrument, that:

(1) The Trustee is the Trustee under the Indenture for the holders of the Bonds.

(2) The Borrower has failed to pay the Issuer's Fee by November 15, ------

(3) The Trustee demands an Advance in the amount of$ ____ under the Issuer's Fee Portion of the Available Amount to be used to pay the Issuer's Fee.

(4) The amount of the Advance demanded (a) does not exceed the Issuer's Fee Portion of the Amount Available and (b) was computed in accordance with the terms and conditions of the Financing Agreement dated as of November 1, 2001, among the Issuer, the Trustee and the Borrower.

(5) Upon receipt by the Trustee of the Advance (a) the Trustee will apply the same directly for the purpose specified in paragraph 3 and (b) no portion of said amount shall be applied by the Trustee for any purpose other than as set forth in paragraph 3.

(6) Payment of the amount referred to in paragraph 3 shall be made to the Trustee at (specify account).

Any capitalized, but undefined, term used in this Certificate is used as defined in the Credit Enhancement Instrument.

F-18

IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the _ day of ____ , __ . Chase Manhattan Bank and Trust Company, NationalAssociation, a national banking association, as Trustee

By: Authorized Officer

F-19

Exhibit E

CERTIFICATE OF REDUCTION

Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016

Attention: Director, Multifamily Services

Re: Credit Enhancement Instrument relating to Loan No. Instrument")

("Credit Enhancement

$23,600,000 The City of Los Angeles Variable Rate Demand Multifamily Housing Revenue Bonds (San Regis Project) Series 2001E and $6,400,000 The City of Los Angeles Variable Rate Demand Taxable Multifamily Housing Revenue Bonds (San Regis Project) Series 2001F

San Regis Apartments

The undersigned, a duly authorized officer of the Trustee named below ("Trustee"), certifies to Fannie Mae, with reference to the Credit Enhancement Instrument, as follows:

(1) The Trustee is the Trustee under the Indenture for the holders of the Bonds.

(2) The aggregate principal amount of Bonds outstanding has been reduced to $ ___ _

(3) Effective on [insert date]:

(a) the Amount Available shall be reduced by $. ____ , of which (i) $ ____ is a reduction of the Principal Portion, (ii) $ ____ is a reduction of the Interest Portion and (iii)$ ___ _ is a reduction of the Issuer's Fee Portion;

(b) after such reduction, the Amount Available will be $ ____ , of which (i) $ ____ will be the Principal Portion, (ii) $ ____ will be the Interest Portion and (iii) $ will be the Issuer's Fee Portion; and

( c) after such reduction, the Amount Available will be not less than the aggregate unpaid principal amount of the Bonds Outstanding (as that term is defined in the Indenture).

By its execution of this Certificate, Green Room Properties, LLC (the "Borrower") certifies to Fannie Mae that the Trustee is authorized to deliver this Certificate to Fannie Mae. The Borrower and the Trustee further • certify that the amounts specified in paragraph 3 have been determined in accordance with the terms and conditions of the Indenture and the Reimbursement Agreement.

Any capitalized, but undefined, term used in this Certificate is used as defined in the Credit Enhancement Instrument.

F-20

IN WITNESS WHEREOF, the Trustee and the Borrower have executed and delivered this Certificate as of the_ day of ____ , .

TRUSTEE:

Chase Manhattan Bank and Trost Company, National Association, a national banking association, as Trustee

By: Authorized Officer

BORROWER:

Green Room Properties, LLC, a Delaware limited liability company

By: Its Authorized Representative

F-21

Exhibit F

CERTIFICATE OF REINSTATEMENT

Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attention: Director, Multifamily Services

Re: Credit Enhancement fustrument relating to Loan No. Instrument")

("Credit Enhancement

$23,600,000 The City of Los Angeles Variable Rate Demand Multifamily Housing Revenue Bonds (San Regis Project) Series 2001E and $6,400,000 The City of Los Angeles Variable Rate Demand Taxable Multifamily Housing Revenue Bonds (San Regis Project) Series 2001F

San Regis Apartments

The undersigned, a duly authorized officer of the Trustee named below ("Trustee"), certifies to Fannie Mae, with reference to the Credit Enhancement fustrument, as follows:

(1) The Trustee is the Trustee under the fudenture for the holders of the Bonds.

(2) The Trustee has received notification from the Tender Agent that Bonds pledged to Fannie Mac by the Borrower which were acquired with the proceeds of a Pledged Bonds Advance under the Credit Enhancement Instrument are to be remarketed or sold. The Trustee has received and is transferring to Fannie Mae the amount set forth in paragraph 3.

(3) Upon receipt by Fannie Mae of this Certificate and$ ____ ,, the Amount Available will be increased as follows:

(a) the Principal Portion of the Amount Available will be increased by$ ____ , but such increase shall not cause the Principal Portion to exceed the original Principal Portion less the sum of (i) all Principal Advances paid by Fannie Mae in accordance with the Credit Enhancement Instrument and (ii) the aggregate of all reductions of the Principal Portion pursuantto any Certificate of the Trustee in the form of Exhibit E; and

(b) the Interest Portion of the Amount Available will be increased by$ ____ , but such increase shall not cause the futerestPortion to exceed the original futerest Portion less the aggregate of (i) all Interest Advances for interest which have not been reinstated in accordance with the Credit Enhancement fustrument, subject to the reinstatement of such amounts as set forth in the Credit Enhancement fustrument, (ii) all reductions of the Interest Portion due to any permanent reduction of the Principal Portion of the Amount Available and (iii) to the extent not addressed in (ii), all reductions of the futerest Portion pursuant to any Certificate of the Trustee in the form of Exhibit E.

F-22

( 4) Fannie Mae shall promptly release or direct Fannie Mae's custodian in writing to release the Pledged Bonds to the Tender Agent in a principal amount corresponding to the Principal Portion identified in paragraph 3 or, if such release is not possible, Fannie Mae shall be deemed to consent to the delivery of a written entitlement order to the applicable financial intermediary on whose records ownership of such Pledged Bonds is reflected to credit the ownership entitlement to such Bonds to the account as directed by the Trustee. Such release or deemed consent shall be conclusive evidence of the reinstatement of the Principal Portion and Interest Portion as described in paragraph 3.

Any capitalized, but undefined, term used in this Certificate is used as defined in the Credit Enhancement Instrument.

IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the _ day of ____ , __ . Chase Manhattan Bank and Trust Company, National Association, a national banking association, as Trustee

By: Authorized Officer

F-23

Exhibit G

NOTICE OF TERMINATION

Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attention: Director, Multifamily Services

Re: Credit Enhancement Instrument relating to Loan No. __ ("Credit Enhancement Instrument")

$23,600,000 The City of Los Angeles Variable Rate Demand Multifamily Housing Revenue Bonds (San Regis Project) Series 2001E and $6,400,000 The City of Los Angeles Variable Rate Demand Taxable Multifamily Housing Revenue Bonds (San Regis Project) Series 2001F

San Regis Apartments

The undersigned, a duly authorized officer of the undersigned Trustee ("Trustee"), certifies to Fannie Mae, with respect to the Credit Enhancement Instrument, that the Trustee is authorized to file this notice pursuant to the Indenture. Any capitalized, but undefined, term used in this Certificate is used as defined in the Credit Enhancement Instrument.

The undersigned certifies to Fannie Mae: *

___ (a) None of the Bonds are Outstanding under the Indenture.

___ (b) The Trustee has received an Alternate Credit Facility (as such term is defmed in the Indenture) as permitted by the Indenture and the Reimbursement Agreement.

* Trustee: Check applicable paragraph

F-24

Pursuant to the Indenture we enclose the Credit Enhancement Instrument for cance11ation.

Very truly yours,

Chase Manhattan Bank and Trust Company, National Association, a national banking association, as Trustee

By: Authorized Officer

Dated:

By its execution of this Certificate, Green Room Properties, LLC (the "Borrower") certifies to Fannie Mae that al] conditions precedent to the cance11ation of the Credit Enhancement Instrument and substitution of an Alternate Credit Facility set forth in the Indenture and the Reimbursement Agreement have been satisfied and hereby joins in the Trustee's instructions to Fannie Mae may cancel the same.

Green Room Properties, LLC, a Delaware limited liability company

By: Its Authorized Representative

F-25

ExhibitH

CERTIFICATE FOR SUCCESSOR TRUSTEE

Fannie Mae 3900 Wisconsin Avenue Washington, D.C. 20016

Attention: Director, Multifamily Services

Re: Credit Enhancement Instrument relating to Loan No. Instrument")

_____ ("Credit Enhancement

$23,600,000 The City of Los Angeles Variable Rate Demand Multifamily Housing Revenue Bonds (San Regis Project) Series 2001E and $6,400,000 The City of Los Angeles Variable Rate Demand Taxable Multifamily Housing Revenue Bonds (San Regis Project) Series 2001F

San Regis Apartments

The undersigned is a duly authorized officer of the Trustee under the Indenture for the holders of the Bonds.

The Trustee transfers all rights in the Credit Enhancement Instrument to ___ _, subject to the terms and · conditions of the Credit Enhancement Instrument. The Trustee certifies that the transferee is the successor Trustee under the Indenture referred to in the Credit Enhancement Instrument and such successor Trustee has been approved in writing by Fannie Mae. The transferee acknowledges below that it is the successor Trustee. Such successor Trustee has entered into a written agreement to be bound by the Assignment and Intercreditor Agreement dated as ofNovember 1, 2001 by and among Fannie Mae, the Trustee and the Issuer.

By this transfer, all rights of the undersigned Trustee in the Credit Enhancement Instrument are transferred to the transferee and the transferee shall have the sole rights as the beneficiary, including sole rights relating to any amendments, whether increases or extensions or other amendments and whether now existing or hereafter made. All amendments are to be advised direct to the transferee without necessity of any consent of or notice to the undersigned.

Dated: -----------Chase Manhattan Bank and Trust Company, National Association, a national banking association, as Trustee

By: Authorized Officer

F-26

The above signature of an officer or other authorized representative conforms to that on file with us. That officer or representative is authorized to sign for the Trustee.

By: Authorized Officer

_________ acknowledges that it is the successor to ____ as Trustee under the Indenture.

By: Authorized Officer

F-27

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