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BRIGGS AND MORGAN April 17, 2017 Page 2 The Bonds, if and when issued, will not constitute a charge, lien or encumbrance upon any property of Eagan or Hugo, and such obligation will not be a charge against the general credit or taxing powers of Eagan or Hugo, but will be payable solely from sums to be paid by the Borrower pursuant to a revenue agreement. To obtain "bank qualification" for the Bonds, the Borrower and the purchaser of the Bonds, Wells Fargo Bank, requested that the Bonds be issued by Hugo. This is permissible under federal and State statutes if certain procedures are followed, including the approval by Eagan to the issuance of the Bonds by Hugo. Bank qualification gives the Borrower a lower interest rate and provides certain interest treatment advantages to the purchaser of the Bonds. However, each issuer may issue only $10,000,000 of bonds for its own governmental purposes and bonds for 501(c)(3) entities, like the Borrower, in each calendar year. Hugo has sufficient bank qualification capacity in 2017 to allow for the issuance of these Bonds as bank qualified. We look for an issuer of bonds for a project in an extraterritorial jurisdiction to have a nexus with the project being financed. In this case, there are residents of Hugo who attend the Existing Project as students. Thus, Hugo has a nexus with the Therapy Project. The Bonds will be issued in accordance with Minnesota Statutes, Sections 469.152 through 469.165. A city may not issue bonds for a project located outside of its jurisdiction, as is requested in this case. However, the city in which a project is located may give permission for the issuance of bonds by another city. This is commonly referred to as "host approval." Under Minnesota Statutes, Section 471.656, subdivision 2(2), host approval may be given for a project located in the host city, by resolution of the host city. Similarly, under the federal tax code, before a city can issue bonds for a project located outside of its jurisdiction, the host city must give its approval. Such approval can only be given following the holding of a public hearing. Eagan has agreed to provide such host approval and will hold its public hearing on June 6th. As the issuer of the Bonds, Hugo must also hold a public hearing. I will separately send you a resolution for consideration at Hugo's May 1st City Council meeting that approves scheduling a public hearing for Hugo's June 5tb City Council meeting. The public hearing notice, which will be attached to the resolution as an exhibit, must be published at least 14 days but not more than 30 days prior to the date set for the public hearing. Briggs and Morgan, as bond counsel to Hugo, will submit the notice to Hugo's paper for publication. It will be published in the May 1 Vh edition of the newspaper. 8278649v1