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together with the equity of the Borrower and the proceeds of the Series 2013 Note, if issued by the City of
<br /> Fridley,to finance the acquisition,construction, and equipping of the Project.
<br /> 1.11. From and after the date of issuance of the Subordinate Note, the proceeds of the
<br /> Subordinate Note are to be disbursed to the Borrower in accordance with the terms of a Disbursing
<br /> Agreement, dated on or after November 1, 2013 (the "Disbursing Agreement"), between the Borrower,
<br /> the Servicer, and a disbursing agent selected by the Borrower and acceptable to the Servicer, and applied
<br /> to the payment of the costs of the acquisition, construction and equipping of the Project.
<br /> 1.12. In consideration of the loan by the City of the proceeds of the Subordinate Note to the
<br /> Borrower and to secure the payment of its obligations under the Loan Agreement and the principal of,
<br /> premium, if any, and interest on the Subordinate Note when due, BHS, as the designated agent of the
<br /> Obligated Group consisting of St. Gertrude's Health Center, a Minnesota nonprofit corporation ("St.
<br /> Gertrude's"), Steeple Pointe Senior Living Community, a Minnesota nonprofit corporation ("Steeple
<br /> Pointe"), and City of Lakes Care Center, a Minnesota nonprofit corporation ("City of Lakes," and
<br /> collectively with St. Gertrude's and Steeple Pointe,the "Obligated Group"), will deliver to the Servicer a
<br /> Guaranty Agreement, dated on or after November 1, 2013 (the "Guaranty"),to guarantee the payment of
<br /> the principal of and the interest on the Subordinate Note.
<br /> 1.13. The Subordinate Note will be subordinate in right of repayment to the Series 2013 Note.
<br /> 1.14. The loan repayments required to be made by the Borrower under the terms of the Loan
<br /> Agreement will be assigned to the Servicer under the terms of the Loan Agreement and the Servicing
<br /> Agreement.
<br /> 1.15. The principal of, premium, if any, and interest on the Subordinate Note (i) shall be
<br /> payable solely from the revenues pledged and otherwise available therefor (i.e., excess revenues
<br /> generated by the Project not used to pay principal of and interest on the Series 2013 Note,as they become
<br /> due); (ii) shall not constitute a debt of the City within the meaning of any constitutional or statutory
<br /> limitation; (iii) shall not constitute nor give rise to a pecuniary liability of the City or a charge against its
<br /> general credit or taxing powers; and (iv) shall not constitute a charge, lien, or encumbrance, legal or
<br /> equitable, upon any property of the City other than the City's interest in the Loan Agreement and the
<br /> Servicing Agreement.
<br /> Section 2. The Subordinate Note.
<br /> 2.01. For the purposes set forth above, there is hereby authorized the issuance, sale and
<br /> delivery of the Subordinate Note in an aggregate principal amount not to exceed $3,000,000. The
<br /> Subordinate Note shall bear interest at rates designated by the terms of the Servicing Agreement and the
<br /> Subordinate Note, and shall be designated, shall be numbered, shall be dated, shall mature, shall be
<br /> subject to redemption prior to maturity, shall be in such form, and shall have such other terms,details, and
<br /> provisions as are prescribed in the Servicing Agreement, in the form now on file with the City, with the
<br /> amendments referenced herein. The City hereby authorizes the Subordinate Note to be issued as a
<br /> "tax-exempt bond" the interest on which is not includable in gross income for federal and State of
<br /> Minnesota income tax purposes.
<br /> 2.02. All of the provisions of the Subordinate Note, when executed as authorized herein, shall
<br /> be deemed to be a part of this resolution as fully and to the same extent as if incorporated verbatim herein
<br /> and shall be in full force and effect from the date of execution and delivery thereof. The Subordinate
<br /> Note shall be substantially in the form set forth in the Servicing Agreement, which form is hereby
<br /> approved,with such necessary and appropriate variations, omissions, and insertions(including changes to
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