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participation agreements between the Lead Lender and each of the Participants, which will be evidenced by one or more certificates of participation. Debt service payments for the Subordinate Note will be subordinate to the debt service payments for the Fridley Note and purchasers of the Subordinate Note will be fully informed of this fact. If the Subordinate Note is authorized to be issued by the City Council, they will be issued as conduit revenue bonds secured solely by the revenues derived from a loan agreement (the "Loan Agreement") to be executed by the City, the Borrower, and the Lead Lender, and from other security provided by the Borrower. The Subordinate Note will not constitute a general or moral obligation of the City and will not be secured by or payable from any property or assets of the City (other than the interests of the City in the Loan Agreement) and will not be secured by any taxing power of the City. The Subordinate Note will not be subject to any debt limitation imposed on the City and the issuance of the Subordinate Note will not have any adverse impact on the credit rating of the City, even in the event that Borrower encounters financial difficulties with respect to the Project to be financed with the proceeds of the Subordinate Note. The Subordinate Note is proposed to be issued as tax-exempt obligations, the interest on which is not includable in gross income for federal income tax purposes. Tax-exempt obligations are usually not eligible for purchase by banks and other financial institutions, but Section 265(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), permits each issuer of tax-exempt obligations to designate up to $10,000,000 of tax-exempt bonds as "qualified tax-exempt obligations" (sometimes referred to as "bank -qualified bonds") that are eligible for purchase by banks and other financial institutions. In order to issue bank -qualified bonds, the issuer must not expect to issue more than $10,000,000 of bonds (other than private activity bonds that are not qualified 501(c)(3) bonds) in a calendar year. The Borrower has requested that the City designate the Subordinate Note as a qualified tax-exempt obligation for purposes of Section 265(b)(3) of the Code. Under the terms of the Loan Agreement, the Borrower will pay all of the City's fees and expenses and pay the City its administrative fee required for bond issuance. Gina Fiorini, one of the bond attorneys in our office, will be attending the City Council meeting on October 28, 2013, and can answer any questions that may arise during the meeting. Please contact me with any questions you may have prior to the City Council meeting. Sincerely, Julie A. Eddington 4340270 JAE MU210-222