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Home My WebLink About1998 04-29 CCP Public Meeting on Senior Housing AGENDA CITY COUNCIL PUBLIC MEETING RE: SENIOR HOUSING PROPOSAL APRIL 29, 1998 CONSTITUTION HALL 7:00 P.M. 1. CALL TO ORDER 2. STAFF PRESENTATION OF CONCEPT 3. PRESENTATION BY DEVELOPER: SKLYLINE ENTERPRISES, INC. 4. PUBLIC QUESTIONS AND COMMENTS 5. ADJOURN SKYUNE ENTERPRI'SES NC. 3647 McKWEy Sr. N. E. MiNNEapo(is, MN 5 5418 April 13, 1998 N1r. Michael J. NleCaulev City Nlanayer City of Brooklyn Center 6301 Shingle Creek Parkwav Brooklyn Center, MN 65430 -2199 Dear Ntr. ivicCaulev: This letter is in response to letters from the Chair of the Riverwood Neighborhood Association to Mavor Kragness and Nlr. Blamev's letter addressed to you. Let me assure you that I too am concerned about the Lvn -River apartments. Based on discussions with city personnel, I have become aware of the history of this property and the concern that neighbors and the city have expressed over the years. From what I have been told, the situation has improved some as the result of the city's code enforcement activities and new on -site management. However. I agree with the Riverwood Neighborhood Association in that the city and other interested parties must make finding a solution to the Lyn-River situation a high priority. I commit to kyork with the city, the neighborhood group and other interested parties to assist in that effort. Cooperative living for seniors in excess of 62 years of age is a fairly new concept in the market place. This concept gives seniors a home - ownership alternative at very affordable rates. For those who want to sell their homes they can still own a cooperative community homestead and remain in their community. I believe that the elderly should be able to enjoy the low interest rate mortgages available throu_ah this new HUD program. Nlost seniors today live on a fixed income and their biggest concern is conserving income tlirouah their retirement years. Elderly adults have stated this as a reason for their interest in cooperative living programs. The program gives the elderly (62 years and older) a great deal of financial flexibility vet they still can be homeowners. Imag7e being able to sell a your home. invest only 25 of the equity to maintain a life style as a member homeowner of a cooperative living unit, and be able to retain 7 5% of one's equity to maintain a qualliv of life. The market place has shown that the choice of a retirement cooperative is very appealing to elderly adults who are accustomed to ownin_ their own homes. (61 2) 781-3184 s Fa\ (61 2) 78 i -3 670 1 The HUD document attached addresses the issues raised by Messrs. Blarney and Kouri regarding the nature of a cooperative. My attorney has reviewed these documents in depth and concludes that cooperative membership is limited to persons aged 62 or older under this HUD program. A surviving spouse of a cooperative member, however, may be younger than 62 years of age. With respect to the comment that the city may be caught in a situation where I would not build Phase II of the project, I commit to the following. In order to participate in the 221- (d)(3) program, 90% of all units must be s old rior to the t P start of construction see attached ( HUD document). I commit to build both buildings as a single project and follow the 90% pre -sale rule. Further, I will condition the sales effort to a time -line of 24 months after models are constructed. It is my intention to purchase a in property the area and build 2 models for purposes of marketing the project. If I cannot sell 90% of the total units within the 2 -year time frame, I will surrender the entire property back to the city. I want this project to make a quality impact on both the neighborhood and the city. Thus, I am willing to risk my front -end capital investment (e.g., architectural, engineering, legal, city fees, etc.) as a sign of my m willingness to be a good neighbor and a comitted property owner. Models will be built as soon as possible. I anticipate it will cost upwards of $75,000 to S100,000 to build these models off -site, not including cost of land and marketing and sales costs. With respect to the building height issue, if I were compelled to build to the 45 foot height limitation, this would impact negatively in the opinion of our architect and marketing people on the aesthetics and quality appearance of the building. We are prepared to work with the neighborhood Group on this subject. I'm confident that our neighbors want the project to be of the highest quality in all aspects, not only pleasing to the eye, but having the greatest functional design as well. So we are prepared to meet and discuss this subject with all interested parties. In terms of my business background I offer the following document entitled `Corporate Profile. ' For the past 40 years I have been a developer operating in the Twin Cities Metropolitan Area. At one time my former partner and I owned several hundred apartment units. In the early 70's we converted the vast majority of our rental property to condominium ownership. Another p part of our business involved ownership of nursing homes. In the late 60's and early 70's we sold these facilities. I believe there is a great need to create housing choices for people who want to shift from home ownership to cooperative living. I'm committed to build this project so that it will be of the highest quality in terms of end product. As well as putting a management team in place that is responsive to the needs of the cooperative community, the neighborhood and the city. k I pledge to the city, the neighborhood group and other interested parties that I will build a cooperative community living project that the neighborhood and the city can be proud of, and where seniors will have a quality living experience. Further, I'm committed to continuing a dialogue with the Riverwood Neighborhood Association and other interested parties. I will maWmvself available on a 24 to 48 hours notice basis. r Very truly yours, R. A. Stinski Skyline Enterprises. Inc. 3 What is Cooperative Housing Cooperative Housing means the ownership and operation of a housing development by those who live in it. It is a not - for - profit cooperative corporation with specially designed "Articles of Incorporation" and `By- Laws ". Financing of Cooperatives is provided by members' equity (through their share purchases) along with a HUD insured 40 -year blanket mortgage or conventional mortgage for the project. Cooperative members are in effect their own landlords, thereby enabling the Cooperative to be built and operated at an affordable cost. The mortgage program requires each project to conform to construction and operational standards established by HUD. A cooperative is a unique form of home ownership. The corporation holds title to the dwelling units and directly assumes the mortgage, tax and other obligations necessary to finance and operate the development. This relieves the individual members of any direct liability for those items. Members support the cooperative through their occupancy agreements. This eliminates the necessity fo reach member to be an individual mortgagee under the mortgage contract. The cooperative approach to housing has been successful largely because it provides a housing alternative very much like continuing home ownership. In cooperative ownership, the pride of its members results in a strong interest in maintaining the property and participating in shared management. A cooperative is operated on a democratic basis. Each shareholder gets one vote in electing the cooperative's Board of Directors, who control and direct the operations of the cooperative. Cooperative housing residents normally occupy their apartments longer than renters do. They become better acquainted with their neighbors and learn to work together for the general good of the people and the building. This working together makes for a better understanding and an active, viable community. I U: \SMC\TEMP2.DOC I Advantages of Membership, I AS A MEMBER of the Cooperative, your share purchase entitles you to own a membership certificate in the corporation. This entitles you to the exclusive right to occupy a dwelling unit and to participate in the operation of the corporation, directly as an elected board member or indirectly as a voter. Members pay their portion of an operating budget, which is adopted annually by the Board of Directors in monthly charges. A cooperative is operated on a not - for - profit basis; thus, any increase in the monthly housing costs is limited to actual increase in operating costs. Members are entitled to deduct the proportionate amount of the real estate taxes and mortgage interest paid by the corporation on their personal income tax statements. Monthly charges are allocated to each member to cover the cost of each member's portion of the mortgage payment, real estate taxes, building insurance, common area utilities and professional management, as well as a "service package ", which makes Cooperative living so desirable. By sharing costs, cooperative members have an attractive hedge against inflation. If a member decides to leave the cooperative, the membership certificate can be sold in accordance with a transfer value and rules set forth in the by -laws. The original share purchase price, plus any accrued annual increases, is returned to the member (or member's estate in the event of death) upon resale of the share. Generally, cooperative ownership allows for easy and inexpensive transfer, investment return, and considerable tax benefits. The purpose and goal of the ( ) program is to provide housing facilities and programs which support and foster independence, and provide a physical and social environment which enables and promotes a productive and fulfilling life for all residents. The physical and environmental needs of older persons constantly change. It is the plan of ( ) to provide a facility and program that can efficiently respond to these changing needs with innovation and flexibility. I WSMOTEMP l . DOC Information Bulletin Cooperative of TABLE OF CONTENTS I. INTRODUCTION 1 A. Nature of Transaction ................... ............................... 1 B. Features of C000erative Ownership ......... ............................... 1 C. Legal and Organizational Documents ........ ............................... 2 D. C000erative Method of Operation .......... ............................... 2 H. DESCRIPTION OF THE PROJECT ......... ............................... 4 A. Location of the Proiect ................... ............................... 4 B. Acquisition of the Proiect Site ............. ............................... 4 C. Structures to be Erected............ ........ ............................... 4 D. Construction of the Proiect ............... ............................... 4 III. FINANCING OF THE PROJECT .......... ............................... S IV. SCHEDULE OF SUBSCRIBER DOWNPAYMENTS AND MONTHLY CARRYING CHARGES FOR EACH TYPE OF DWELLING UNIT ........... 6 V. SUMMARY OF PRINCIPAL TERM OF OCCUPANCY AGREEMENT .......... 8 VI. FEDERAL INCOME TAX ASPECTS ....... ............................... 9 VII. FUNCTION OF HUD IN CONNECTION WITH THIS PROJECT ............. 10 VIII. PROCEDURE TO PURCHASE .......... ............................... 11 A . In General ............................. .............................11 B. Right of Subscriber to Withdraw After SianinQ Subscriotion Agreement ........... 11 C. Subscriotion Subiect to Acceptance by Cooperative and Credit Aporoval by HUD .... 12 IX. COOPERATIVE AGEVCI' .............. ............................... 12 X. HUD REQU IRE ENT FOR PRESALE ACHIEVE.NIE.NT ..................... 12 9/96 XI. GUARANTEE OF CARRYING CHARGES ALLOCATED TO UNSOLD UNITS . 12 XH. TRANSFERS FROM THE PROJECT ..... ............................... 13 XIII. THIS INFORMATION BULLETIN IS THE ONLY INFORMATIONAL MATERIAL WHICH HAS BEEN APPROVED BY HUD ................... 13 XIV. ADDITIONAL INFORMATION ......... ............................... 13 XV. EQUAL HOUSING OPPORTUNITY STATEMENT ........................ 13 9/96 I. INTRODUCTION A. Nature of Transaction. Cooperative of _ .. / the "Cooperative ") is a Minnesota cooperative association which / will acquire approximately acres of land in :, Minnesota, upon which it will build a ( ) unit apartment building (the "Project "). The Project will be financed with the assistance of a mortgage loan to be insured by the United States Department of Housing and Urban Development/Federal Housing Administration .( "HUD/FHA') under Section 221(d)(3) of the National Housing Act, as amended. The Project will, accordingly, be operated as a management -type cooperative under the HUD/FHA program. P p og am. B. Features of Cooperative Ownershio A subscription for membership in a housing cooperative is more than an application for a place to live. It leads to the member's participation in the cooperative ownership and operation of a housing project. There has been a sharp increase in cooperative ownership of housing in the United States during recent years. Much of this increase in cooperatively -owned apartment units has been attributed to cooperatives whose mortgages have been insured by HUD/FHA. The reasons for this increase in the popularity of cooperatives in the housing field are many and varied. The cooperative approach to housing instills a sense of pride of ownership resulting in a deeper interest in maintaining the property and participating in civic affairs. A cooperative is operated on a democratic basis. It gives the residents a greater insight and appreciation of the democratic process in general. Cooperative residents normally occupy the premises for longer terms than renters. The members thus become better acquainted with their fellow residents and learn to work tocrether for the I .7 overall betterment of the project and the community. T w his orlon a together er makes for better understanding between individuals of different back- rounds and income levels. Cooperative housing offers the following financial benefits: 1. Absence of the monthly housing cost of the owner's profit that is inherent in most rental projects. 2. Tax benefits as described later in this Bulletin. 3. Rental schedules usually include an allocation for vacancy loss. In a cooperative, the monthly charges include only such income losses, if any, as have actually been incurred. 4. Maintenance costs in a well- operated cooperative are minimized, since experience has shown that owners take better care of their property. Cooperative members frequently handle the redecoration of their units on a "do- it- vourself' basis. 9196 1 5. A cooperative is operated on a nonprofit basis. Thus, any increases in monthly housing costs are limited to actual increases in operating costs. 6. If a cooperative is successfully operated, equity accrual upon resale normally results, subject to limitations set forth in the Bylaws. C. Legal and Organizational Documents Copies of the followin described documents are being furnished to you with this Bulletin. Each subscriber is strongly urged to read these documents. 1. Subscription Agreement.. This is the documents pursuant to which a subscriber applies for membership in a Cooperative and which is used to sell a membership. A more detailed description of the terms of the Subscription Agreement are set forth below under the heading "Procedure to Purchase." 2. Occuoancv Agreement. This document describes the terms and conditions under which the member will occupy one of the apartment units in the Cooperative. A more detailed description of the Occupancy Agreement and the respective rights and obligations of the Cooperative, and each of its members, is summarized below under "Summary of Principle Terms of Occupancy Agreement." 3. Articles of Incomoration and Bvlaws. These documents govern the operation of the Cooperative and the rights, powers and duties of the officers, directors and members and methods of operation. 4. C000erative Agencv Agreement. This document sets forth the relationship between the Cooperative and ., the Technical Service Agents that are selling the Cooperative and the land constituting the project site. is also assisting the provisional Board of Directors of the Cooperative with the various organization and development services required to be performed by the Cooperative during its organizational period, and it also provides for the construction of the Project. 5. Regulatory Agreement. This is the agreement by the Cooperative to be regulated and restricted in certain respects as required by the rules and regulations of HUD/FHA. 6. Declaration of Common Interest Community. As required by the 6/1/94 Minnesota Common Interest Ownership Act. The Declaration is a document filed at the court house which outlines the major features of the Cooperative. D. C000erative ivlethod of Operation Cooperative of , has been incorporated as a Minnesota cooperative association for the purpose of acquiring, owning and operating a cooperative housing project consisting of a three- story apartment complex, permanent occupancy of which will be restricted .to members in the 9/96 2 Cooperative. If Subscriber's subscription is accepted by the Cooperative and approved as to credit, he/she will become a member of the Cooperative. The Cooperative will deliver to the member the Membership Certificate representing his /her interest in the Cooperative immediately after the time of the initial closing of the mortgage loan on the project, provided that the member's cash equity investment has been paid in full in accordance with the terms of the Subscription Agreement. A Membership Certificate is a certificate (like a share certificate for stock) showing evidence of ownership in a cooperative corporation. Each membership of the Cooperative, regardless of the amount of investment, will have one (1) vote at members' meetings. The affairs of the Cooperative will be conducted by a Board of Directors. A majority of directors must be members and all are required to serve without compensation. Until the first membership election, the Board of Directors will consist of the following named individuals: These three Directors (the "Provisional Board ") have been designated solely for organizational purposes. They will be subject to replacement at the first annual meeting of the members to be held sixty (60) days after Final Endorsement by HU - D/FHA for the Cooperative's mortgage loan for the Project mortgage insurance. One of the most important functions the members will be called upon to perform is the selection of qualified directors. The Cooperative functions through its Board of Directors which acts on behalf of its members. The Board performs important duties, such as entering into a contract with a management anent for the operation of the project; establishing eligibility standards for admission to membership; determining the degree and type of maintenance and service; promulgating rules and regulations pertaining to use and occupancy of the project and adopting the operating budget subject to the approval of HUD/FHA, which must reflect carrying charges adequate to meet the costs of the operation. Thus, voting rights mean that members participate through representatives in the management of the project's affairs. Each member should bear in mind that the management agent takes its assignments from the President of the Board of Directors, speaking for the Board, and not from individual members. The Board of Directors should receive full support of all members. Full support, however, does not preclude constructive criticism. If necessary, any Board member who 9/96 is not properly fulfilling his or her duties may be removed by vote of the members as prescribed in the Bylaws. It is contemplated that the Cooperative will engage a full -time resident Project Administrator who will, subject to the general direction of the Board of Directors, carry on the day -to -day management of the Project. II. DESCRIPTION OF THE PROJECT A. Location of the Proiect The Project will be located at - ty of Minnesota. The nearest transportation in the form of bus services is available on the premises by means of a mini -bus to be owned and operated by the Cooperative, and public bus service and taxi off the premises. Churches and schools, shopping, banks, and other community facilities available to members of the Cooperative are located within a mile radius of the Project site. B. Acquisition of the Proiect Site The land upon which the structures will be built consists of an area approximately acres, which the Cooperative will own in fee simple, subject to the HUD/FHA insured mortgage described below. Since this is a cooperative housing project, title to the property will be held by the Cooperative and not by the individuals who are members of the Cooperative. The Project site will be acquired by the Cooperative for a purchase price of: prior to the initial closing of the HUD/FHA insured mortgage loan. C. Structures to be Erected The Project is to be a three -story wood frame one -hour fire -rated construction, slab on grade, pre - finished building, with a total of apartment units. y of the apartment units will be one bedroom, and ; of the apartment units will include two bedrooms. In addition, there will be a storage room and a patio or balcony for each apartment unit. Underground parking will be provided for automobiles. There will also be laundry rooms, a workshop, craft room, library area, elevator, lobbv; secured vestibule, office, two `uest rooms and great room on the premises. D. Construction of the Proiect Construction of the Project will be performed by Minnesota, as General contractor. Project construction will be assured in such a manner as is acceptable to the Lender, the Cooperative and HUD/THA. Under the current HUD rules, assurance of construction completion must either be in the form of payment and performance bonds issued by a surety company acceptable to HUD, each in an amount equal to one hundred percent (100 0 /./0) of the construction contract price, or a completion assurance aureement secure b% either cash or an irrevocable, o; cti 4 unconditional bank letter of credit in an amount equal to fifteen percent (15 %) of the construction contract price. All construction must meet local building code requirements and be acceptable to the Cooperative, the Lender and HUD/FHA. It is anticipated that construction will be completed and occupancy commenced in the late summer of , absent any factors which may bring about construction delays. The Cooperative will give subscribers a thirty -day notice of the date when their respective dwelling units will be available for occupancy and their monthly charges begin. Subscribers will be kept informed through the Cooperative Service Agent of construction progress and occupancy projections on a regular basis prior to the thirty -day notification. Proceeds of the HUD/FHA insured mortgage loan will be disbursed monthly by the Lender to the contractor, on a percentage of completed basis. Advances of mortgage proceeds are not made until after a HUD/FHA field representative has inspected the construction work then completed to date and HUD/FHA has approved for mortgage insurance, the amount requested to be advanced. All mortgage loan proceeds will be disbursed on behalf of the Lender by ' itle Insurance Company, the title insurance company that will be insuring mortgage lien priority for the Lender and HUD/FHA. The officers and directors of the Cooperative will authorize and execute such agreements and documents as they find necessary or advisable for the construction of the Project and related facilities; purchase of the land; architectural supervision; mortgage notes and mortgages; building loan agreements; regulatory agreements; cost certification agreements; acceptance or granting of easements; and other instruments required to enable the Cooperative to obtain HUD/FFLA insured mortgage loans; completion of the Project and otherwise carry out the purposes of the Cooperative. III. FINANCI,'G OF THE PROJECT The funds provided by your subscription and the subscription of other members will constitute the equity investment and are intended to furnish the cost of acquiring the Project over and above the mortgage proceeds and to provide working capital funds in the amount of 1 required by HUD/FHA. It is anticipated that a mortgage loan in the approximate amount of will be obtained by the Cooperative from v Company, of Minneapolis, Minnesota, a mortgage lending institution, covering all of the property of the Cooperative and providing amortization over a period of 40 years with interest at At the option of the Cooperative, a mortgage loan may be secured which features a term of 10, 15, or 20 years. The estimated cost of the Project as indicated by the anticipated mortgage amount plus the amount scheduled to be collected from members (exclusive of working capital requirements) equals : HUD/FHA for its own purposes in determining the maximum insurable mortgage amount has estimated the replacement cost of this Project at -- - - The Cooperative's members are, in effect, their own landlord. They pay monthly carrying charges to the Cooperative in accordance «ith the Occupancy- Agreement. The Cooperative corporation holds title to the property and executes a blanket mortgage. The individual member signs no note or mortgage and has no personal obligation under the Cooperative's blanket mortgage. 9/96 IV. SCHEDULE OF SUBSCRIBER DOWNPAYMENTS AND MONTHLY CARRYING CHARGES FOR EACH TYPE OF DWELLING UNIT The following tables set forth the value allocated by the Project sponsor to each apartment unit/membership, the proportionate factor of unit value to total project value, each member's required cash payment for his/her membership based upon the type of apartment unit selected, and the estimated monthly charges to be paid by members pursuant to their Occupancy Agreements, to cover the Cooperative's operating expenses: 1. Dwelling Unit 2. Value Allocated to 3. Proportionate 4. Required Cash Designation Unit by Sponsorship Factor of Unit Downpayment Valuation to Total Valuation One Bedroom - B $ 54,833.00 0.7060% $20,500 /i One Bedroom - C $ 47,324.00 0.6093% $16,500 One Bedroom - D $ 51,527.00 0.6634% $19,000 Two Bedroom - E $ 80,596.00 1.0377% $26,500 Two Bedroom - EE S 69,781.00 0.8285% $21,000 Two Bedroom - F $100,298.00 1.2914% $31,500 Two Bedroom - G $ 77,290.00 0.9952% $24,500 Two Bedroom - H $104,362.00 1.3437% 533,500 Two Bedroom - I S 73,501.00 0.7060% 522,100 Two Bedroom - J S 81,630.00 1.0510% 524,800 TOTAL FOR ALL UNITS: 57,766,589.00 5. Estimated Monthly 6 Estimated mated Monthly 7. Estimated Total Charges to Be Paid Personal Benefit Expense Monthly Housing To Cooperative Expense 5590.00 $20.00 S 610.00 5485.00 S20.00 S 505.00 S565.00 S20.00 5 585.00 S615.00 S20.00 S 635.00 S740.00 S30.00 S 770.00 5915.00 S30.00 S 945.00 5730.00 S30.00 S 760.00 S9 530.00 S1,005.00 S660.00 S30.00 S 690.00 S740.00 530.00 S 770.00 S975.00 S30.00 51,005.00 9/96 6 ...has made a study of the foregoing projections and has submitted its written opinion to the effect that the estimated carrying charges, set forth above will be adequate to meet all expense for the first and subsequent years of operation based on costs reasonably foreseeable as o_' , the date of its opinion. The detailed operating budget on which these carrying charges are predicated may be examined by prospective members at the address listed at the end of this Bulletin. With respect to ., personal benefit expenses are defined by HUD/FHA to mean estimated expenses to be paid individually by the members for electricity, decorating and repairs with respect to their own dwelling units. In the case of the Cooperative will pay the monthly cost for gas and water, common area electricity, trash removal, water and gas, and accordingly, these represent operating costs for the Cooperative which are covered by the monthly carrying charges paid by the members. Each member, however, will be obligated to pay certain amounts periodically to maintain his/her own dwelling unit in proper state of repair. The amount required to maintain his /her dwelling unit depends to a degree upon the care and attention given by the member to his/her dwelling unit. Accordingly, the estimates set forth above are made to this category of expense. Replacement of the carpet, draperies, kitchen range, range hood, refrigerator, dishwasher and disposal is a responsibility of the Cooperative, and the monthly carrying charge paid to the Cooperative includes an allocation for this purpose which will be deposited by the Cooperative in a replacement reserve account. Carryina charges are estimated on the basis of full occupancy. Any vacancy or collection losses may require an increase in carrying charges. An increase may also be necessary in cases where taxes are raised, the costs of utilities furnished by the Cooperative are increased or where supplies and labor costs rise. The Cooperative will operate on a non - profit basis and will collect monthly carrying charges in an amount sufficient to meet all operating costs including payments on its mortgage. The cost of amortizing the mortgage will normally remain constant since the payments to principal and interest have been computed in equal monthly installments covering the full term of the mortgage. Part of the monthly carrying charge payment is deposited by the Cooperative in the Reserve Fund for Replacements for the purpose of defraying, at least in part, the costs of replacement, when it becomes necessary, of structural components and mechanical equipment. Three percent of the monthly carrying charge payment is deposited in another reserve known as the General Operating Reserve, which is intended to be available for unforeseen contingencies and finance resales of memberships, etc. By paying the monthly carrying charge promptly as they become due, the member will avoid the penalty for the late payment of his /her charges which will otherwise be assessed against him/her. 9/96 V. SUMMARY OF PRINCIPAL TERM OF OCCUPANCY AGREEMENT. The Occupancy Agreement will be for an initial term of three (3) years, automatically renewable thereafter for successive three (3) year periods. unless (1) the member serves written notice to the Cooperative of his/her election not to renew at least four (4) months prior to the expiration of the then current term, and (ii) the member terminates his /her membership in the Cooperative. Each member shall also have the following rights and obligations under the Occupancy Agreement: 1. Upon an election by a member. to terminate his/her Occupancy Agreement and membership in the Cooperative, the member will have no liability for payment of carrying charges after the effective date of termination, but will remain liable for any indebtedness owing prior to such effective date. 2. The member has the right to occupy his/her apartment unit for himself/herself and/or his/her immediate family and for no other purpose, and also has the right to the use and enjoyment in common with the other members of the Cooperative of all of the common facilities of the Cooperative. No member may sublet his/her apartment unit without first receiving the written consent of the Cooperative. The liability of the member under the Occupancy Agreement will continue, however, even if he/she sublets his/her apartment unit with the approval of the Cooperative, and the member will be responsible to the Cooperative for the conduct of the person(s) to whom the apartment unit was sublet. Unauthorized subleasing could result in the termination of the member's Occupancy Agreement and forfeiture of his/her rights thereunder. 3. The member will be responsible for the cost of interior repairs of his/her own apartment unit necessitated by the member's own negligence or misuse, any redecoration that the member chooses to perform to his/her own unit, and any repairs, maintenance or replacements required for items not furnished by the Cooperative, such as additional appliances, additional window treatments, etc. 4. The member may not, without the prior written consent of the Cooperative, make any structural alterations to his /her apartment unit. 5. On the happening of any of the following events of default, the Cooperative may, among other rights and remedies, terminate the Occupancy Agreement and dispossess the member of his /her right of occupancy: (a) The member ceases to be the owner and legal holder of a Membership of the Cooperative. The member attempts to transfer or assign his /her Membership in the Cooperative in a manner inconsistent with the provisions of the Bylaws, or the Occupancy Agreement. (b) The member is declared bankrupt under the laws of the United States at any time durin <, the continuance of the Occupancy Agreement. 9/96 S (c) A receiver of the member's property is appointed under any of the laws of the United States of any state at any time during the continuance of the Occupancy Agreement. (d) The member makes a general assignment for the benefit of creditors any time during the continuance of the Occupancy Agreement. (e) The Membership in the Cooperative owned by the member is duly levied upon and sold under the process of any court at any time during the continuance of the Occupancy Agreement. (fJ The member fails to effect and/or pay for repairs and maintenance as provided for in Section 13 of the Occupancy Agreement. (g) The member fails to pay any sum when due pursuant to the provisions of Sections 2, 12 or 21 of the Occupancy Agreement. (h) The member defaults in the performance of any of his/her obligations under the Occupancy Agreement. Each subscriber should review the form of Occupancy Agreement for the full details of the foregoing and other provisions thereof. VI. FEDERAL INCOME TAX ASPECTS For any taxable year during which the Cooperative qualifies as a "cooperative housing corporation" within the meaning of Section 216(b)(1) of the Internal Revenue Code (the "Code "), each member will be entitled, under Section 216(a) of the Code, to deduct from his /her adjusted gross income for federal income tax purposes, amounts paid to the Cooperative within the taxable year which represents his/her proportionate share of (a) real estate taxes paid or incurred by the Cooperative (before the close of the taxable year of such member), and (b) interest paid or incurred by the Cooperative (before close of the member's taxable year) on the HUD- insured mortgage. In effect, Section 216 makes available to an owner of a Cooperative membership interest substantially the same tax benefits available to other homeowners. Similarly, Section 1034(f) of the Code grants to "tenant - stockholders" of a "cooperative housing corporation" (as those terms are defined in Section 216 of the Code) the same tax- deferral benefits available to other home owners when they sell their principal residencies and purchase other residences. A "cooperative housing corporation" is defined in Section 216(b)(1) of the Code as: "a corporation - having one and only one class of stock outstanding, each of the stockholders of which is entitled, solely by reason of his ownership of stock in the corporation, to occupy for dwelling purposes a house or a unit in a building, owned or leased by such corporation, no stockholder of which is entitled (either conditionally or unconditionally) to receive any distribution not out of earning and profits of the 9/96 9 corporation except on a complete or partial liquidation of the corporation, and 80 percent or more of the gross income of which for the taxable year in which the taxes and interest described in subsection (a) are paid or incurred is derived from tenant - stockholders." A "tenant- stockholder" (referred to in this Information Bulletin as a "member ") is defined in Section 216(b)(2) of the Code as: " a person who is a stockholder in a cooperative housing corporation, and whose stock is fully paid -up in an amount of not less than an amount shown to the satisfaction of [the Internal Revenue Service] as bearing a reasonable relationship to the portion of the value of the corporation's equity in the houses or unit building and the land on which it is situated which is attributable to the houses or unit which such person is entitled to occupy." The Cooperative is organized as a Minnesota cooperative association on a nonstock, membership basis. The Internal Revenue Service has previously ruled that a nonstock corporation which issues membership of stock certificates can qualify under Section 216 as a cooperative corporation, provided that the members possess the usual rights of stockholders, such as, pro rata distribution of assets upon liquidation, participation in management by election of director, and transferability of their interests. Assuming that the Cooperative qualifies as a cooperative housing corporation under Section 216 of the Code, the actual tax benefits to any particular member will depend on the member's income tax bracket, and on other aspects of his /her income tax situation. Subscribers may wish to seek advice of their own tax advisors with regard to the federal income tax consequences of owning a membership interest in the Cooperative. At the end of each year, the Cooperative will advise each member of his or her proportionate share of the total amounts paid by the Cooperative for mortgage interest and real estate taxes. THE COOPERATIVE HAS NOT APPLIED FOR ANY PRIVATE RULNG FROM THE INTERNAL REVENUE SERVICE AS TO THE TAX CONSEQUENCES OF OWNERSHIP OF ANY MEMBERSHIP INTEREST OFFERED HEREBY, AND DOES NOT INTEND TO DO SO. ALTHOUGH THE COOPERATIVE BELIEVES IT SATISFIES THE TEST SET FORTH IN THE CODE FOR QUALIFICATION THEREUNDER AS A COOPERATIVE HOUSING CORPORATION, NO WARRANTIES OR REPRESENTATIONS ARE MADE AS TO WHETHER THE LtiTER.�tAL RE`s \'L'E SERVICE " 'IL ALLOW THE ABOVE- DESCRIBED INCOME TAX DEDUCTIONS OR THAT EXISTING TAX LAWS ALLOWING SUCH DEDUCTIONS WILL NOT CHANGE. VIT. FUNCTION OF HUD IN CONNECTION NN THIS PROJECT If the Cooperative complies with the terms of the HUD/FHA Firm Commitment, HUD/FHA will insure the lendinu, institution, under Section 1 _1(d)(3) of Title lI of the National Housing Act, against 9/96 10 loss by reason of any default of the Cooperative in its obligations under the mortgage. HUD/FHA as insurer of such mortgage loan does not insure a member of the Cooperative against loss. It is contemplated that the amounts paid by the subscriber for his membership subscription will be handled in accordance with the provisions of the Cooperative's Bylaws. Such funds will not be deposited with or be otherwise under the control or responsibility of HUD/FHA. While HUD/FHA is authorized to furnish technical advice and assistance to sponsoring groups in the organization of cooperatives, such advice and assistance are of an advisory nature only. HUD/FHA does not select the contractor, is not a party of the construction contract, and does not act as the architect of the Cooperative. During the construction period HUD/FHA will assign inspectors for the purpose of determining that the project is an acceptable security for the insurance liability assumed under the insurance with the lending institution. VIII. PROCEDURE TO PURCHASE A. In General. A person desiring to purchase a membership in the Cooperative is required to execute a Subscription q P Agreement in the form which is furnished in this Bulletin, and return it to the Cooperative together with a check in the amount of $200.00 representing the required cash downpayment for the type of dwelling unit to be occupied by him/her. Pending initial closing of the HUD insured mortgage loan and subject to the cancellation provisions ca e on o st ons � p described below, the cash downpayment of each subscriber shall be deposited by the Cooperative in an interest bearing trust account in a depository institution whose deposits are insured by an Agency of the Federal Government, as required by Article III, Section 5, of the Bylaws. B. Right of Subscriber to Withdraw After Signing Subscription Agreement A subscriber may withdraw and obtain a return of his /her deposit at any time prior to the issuance date of the HUD mortgage insurance commitment. If a Subscription Agreement is signed by the applicant after the issuance date of the HUD mortgage insurance commitment, the applicant may withdraw and obtain a return of his /her deposit for a period of five (5) days after signing the Subscription Agreement provided he /she notifies the Cooperative in writing to this effect. In addition to the foregoing, if upon issuance of the HU'D mortgage insurance commitment, it is determined that (i) either an equity contribution greater than that projected in this Bulletin would be required by the Cooperative, or (ii) the estimated monthly carrying charges will be greater than as projected in this Bulletin by any amount, the applicant will have the right to withdraw his/her Subscription Agreement within fourteen (14) days after written notice by the Cooperative of such occurrence, and thereupon receive a return of his/her deposit. Reference is made to the Subscription Agreement for a detailed description of an applicant's rights of withdrawal. 9/96 1 1 C. Subscription Subiect to Acceptance by Cooperative and Credit Approval by HUD. A subscriber's membership in the Cooperative is not assured and until his /her application and subscription has been accepted by the Cooperative and his /her credit has been found acceptable by HUD/FHA. Lt. COOPERATIVE AGENCY The provisional Board of Directors of the Cooperative is responsible for arranging for and coordinating the legal, organizational, marketing and development services activities in connection with the Project development, with qualified professionals and organizations. This is accomplished through a Cooperative Agency Agreement The Cooperative has entered into a Cooperative Agency Agreement with' to provide these services. Under the Cooperative Agency Agreement, will provide such services as assisting the Cooperative in organizing its sales program, arranging for obtaining the HUD- insured mortgage loan, advising and assisting in the selection of a project architect, advising and assisting in organizing membership for the first annual meeting and the election of the first member - controlled Board of Directors, educating the Cooperative's staff and members with respect to, and assisting in the implementation of, the Cooperative's life -style programs. The Cooperative Agency Agreement also provides for necessary legal and organizational services to be provided to the Cooperative by the law firm of _ _._ . Such services include legal consultation and advice in connection with federal regulations applicable to the HUD cooperative housing program, and in the preparation and review of the Cooperative's organizational documents to assure compliance with HUD/FHA administrative rules and regulations, and legal representation in connection with the closing of the HUD/FHA insured loan. X. HUD REOUIREN•IENT FOR PRESALE ACHIEV "EMENT HUD/FHA has required that ninety percent (90 %) of the unit memberships must be sold as a condition to initial closing of the HUD/FHA insured mortgage loan. Presale in this context means execution of a Subscription Agreement by the subscriber and credit approval by HUD/FHA. HUD/FHA will permit a lesser presale achievement if the cash deficiency resulting from a lesser presale is guaranteed in a manner acceptable to HUD/FHA. In this case, ;. shall enter into an agreement with the Cooperative at the time of initial closing of the HUD/FHA insured mortgage loan, agreeing to fund any cash deficiency in the event that less than one hundred percent (100 %) of the subscriber cash equity is in place at the time of initial loan closing. Such sums as are funded by will be reimbursed, without interest, only from the proceeds of the sale of the remaining unit memberships upon a when as, and if made basis. Xi. GUARANTEE OF CARRYING CHARGES ALLOCATED TO UNSOLD UNITS unless one hundred percent (10090) of the unit memberships are subscribed for prior to initial loan closing, shall enter into an agreement v ith the Cooperative, satisfactory to HUD/FHA, to pay the caning charges allocated to any unit memberships remaining unsubscribed as of the date 9/96 I of final mortgage loan closing (which occurs following Project completion), for a period of time which shall be lesser of three years from the date of final loan closing or until the last of such unit memberships are sold. XII. TRANSFERS FROM THE PROJECT If, after taking occupancy, a member wishes to move from the Project, he/she may sell his/her interest, giving the Cooperative the first option to purchase his/her Membership in accordance with the terms of the Bylaws. If the Cooperative fails to exercise its option, the member may sell his/her membership and right of occupancy to a purchaser approved by the Cooperative. XM. THIS INFORMATION BULLETIN IS THE ONLY INFORMATIONAL MATERIAL WHICH HAS BEEN APPROVED BY HUD The other documents identified in the "Introduction" section of this Bulletin are also subject to the review and approval as to form by HUD/FHA. These documents, until the mortgage loan is endorsed for insurance by HUD/FHA, are subject to change to reflect policies and requirements adopted or approved by HUD/FHA. HUD/FHA has not examined nor approved any advertising or other informational material in connection with the Project. XIV. ADDITIONAL INFORMATION In this Information Bulletin the Cooperative has endeavored to summarize the material facts concerning its undertaking. Any subscriber desiring to obtain additional information should feel free to communicate with: XV. EOUAL HOUSING OPPORTUNITY STATEyIENT Cooperative of shall of discriminate against any person because of race, color, reliai n o ,sex, handicap, familial status, or national origin. /4014;9 9/96 1 ; SA*AP BYLAWS OF TABLE OF CONTENTS ARTICLE I NAME AND LOCATION OF COOPERATIVE; PURPOSE .................. 1 Section 1. Name. . : .......... ................. 1 Section 2. Purpose ..................... ............................... 1 ARTICLE II DEFINITIONS ........................ ..............................1 Section 1. "Board of Directors" ............ ............................... 1 Section 2. "Cooperative" ................. ............................... 1 Section 3. "Dwelling tinit" ............... ............................... 1 Section 4. "Final Endorsement" ............ ............................... 1 Section 5. "FHA Commitment" ............ ............................... 1 Section 6. "HUD/FHA" .... 1 Section 7. "Initial Endorsement" ........... ............................... 1 Section S. "Initial Subscribers" ............. ............................... 1 Section 9. "Membership" . 1 ................ ............................... Section 10. "Occupancy Agreement" ........ ............................... 2 Section 11. "Occupant" .................... ............................... Section 12. "Pr ' oect" 2 ........... Section 13. "Regulatory Agreement" ........ ............................... 2 Section 14. "Security Interest" .. . Section 15. "Subscription Avreement" ....... ............................... 2 Section 16. "Subsequent Subscribers" ....... ............................... 2 Section 17. "Transfer Value" .............. ............................... 2 ARTICLE III MEMBERSHIP AND MEMBERS ........ ............................... 2 Section 1. Eligibility ..................... ............................... 2 Section 2. Waiver of Eligibility Requirements in Certain Cases ................... 2 Section 3. Application for Membership ...... ............................... 3 Section 4. Voting ...................................................... Section 5. Subscription Funds ............. ............................... 3 Section 6. Members, Authorized Memberships and Occupancy Agreements ......... 4 Section 7. Authorized Membership ......... ............................... 4 Section S. Membership Certificates ......... ............................... 4 Section 9. Lost Certificates ............... ............................... 5 Section10. Lien ......................... ..............................5 Section 11. Transfer of Membership ........ ............................... 5 Section 12. Termination of ',Membership Cause ............................... 7 Section 13. Non- Speculation on Sales of ivlemberships ......................... 7 ARTICLE IV OCCUPANCY AGREEiNIENTS .......... ............................... 8 Section 1. Form of Occupancy Agreement .... ............................... 8 Section 2. Assignment of Occupancy Agreement .............................. 8 Section 3. Lost Occupancy Agreements ..... ............................... 8 ARTICLE V MEETINGS OF MEMBERS ............ ............................... 8 Section 1. Place of i\vtectin;s .............. ............................... 8 Section 2. Annual iVfeetings ............... ............................... 8 Section 3. Special Meetings ............... ............................... 9 Section 4. Action without a Meeting ........ ............................... 9 Section 5. Notice of Meetings ... 9 Section 6. Quorum ..................... ............................... 9 Section 7. Adjourned Meetings ............ ............................... 9 Section S. Proxies ..................... ............................... 10 Section 9. Order of Business ............. ............................... 10 ARTICLE VI DIRECTORS .......................... .............................10 Section 1. Number and Qualification ....... ............................... 10 Section 2. Powers and Duties ......... 11 .................. Section 3. Election and Term of Office ..... ............................... 11 Section 4. Vacancies ................... ............................... 11 Section 5. Removal of Directors .......... ............................... 11 Section 6. Compensation ................ ............................... 12 Section 7. Organization Meeting .......... ............................... 12 Section S. Regular Meetings ............. ............................... 12 Section 9. Written Action ............... ............................... 12 Section 10. Waiver of Notice ....................... . ................... 12 Section 11. Quorum 2 Section 12, Fidelity Bonds ............... ............................... 13 Section 13. Safegiiardin`; Subscription Funds .............. I ................ 13 Section 14. Committee .................. ............................... 13 ARTICLE VII OFFICERS ............................ .............................13 Section I. Designation ................. ............................... 13 Section 2. Election of Officers ............ ............................... 13 Section 3. Removal of Officers ........... ............................... 13 Section 4. President ................... ............................... 13 Section 5. Vice President ............... ............................... 13 Section 6. Secretary ................... ............................... 14 Section 7. Treasurer . 14 ARTICLE VIII REGULATORY AGREEMENT ........ ............................... 14 Rights of HUDIFHA .............. 14 ........................... ARTICLE E1 AMENDMENTS ....................... .............................14 ARTICLE X FISCAL MANAGEMENT ............. ............................... 14 Section 1. Fiscal Year .................. ............................... 14 Section 2. Books and Accounts .......................................... 14 .................. Section 3. Auditing.. .................... ............................... 15 Section 4. Inspection of Books ........... ............................... 15 Section 5. Execution of Cooperative Documents ............................. 15 Section 6. Reserves ................................................... 15 I ARTICLE I NANTE AND LOCATION OF CO OPERATIVE: PU RPOSE Sect ion 1. Name., The name of the Cooperative (the "Cooperative ") is . (the "Cooperative "). Its principal office is located in the City of . County, 'I'vSinnesota. Section 2. Pumose. The purpose of this Cooperative is to provide its members with housing and common facilities, if any (herein called the "Project "), on a nonprofit basis consonant with the provisions set forth in its Articles of Incorporation. _ARTICLE IT DEFTNITTONS As used in these Bylaws, unless the content other requires, the following terms tivill have the following meanings ascribed to them: Section 1. "Board of Directors " The Board of Directors of the Cooperative, whose election and functions are more particularly described in Article VI hereof. Section 2. " Cooperative" a Nfinnesota cooperative corporation. Section 3. "Dwe!Gnu1 Unit ",: An individual residential apartment in the Project. Section A. "Final Endorsement" The final endorsement of the Project mortgage note for insurance by HL-D. Section 5. "FHA Commitment ": The written commitment by the United States Department of Housing and Urban Deve!opment, Federal Housing Administration, to insure the Project mortgage note for mortgage insurance under and pursuant to Section 221(d) (3) et the National Housing Act, as amended. Section 6. "I-HUD17H ".: The United States Department of Housing and Urban Development. Section 7. "Initial Endorsement ": The initial endorsement of the Preiect rnor aaae note for insurance by HL J v Section S "Initial Subscribers ", Any person: or persons who execute a Subscription Agreement prior to the first annual meeting of the initial Board of Directors. Sec 9. r^ „ snip fe aer� n Ccope tt ve, as more pa c l y describe,: in A, ,icle III, Section 6 hereof: 9/96 i Section 10. " Occupancv Agreement ".: The instrument granting a leasehold interest in a Dwelling Unit, to which each member of the Cooperative is entitled, and whose form and function are more particularly described in Article IV hereof. Section 11. "Occupant ": Any person legally entitled to occupy a Dwelling Unit, whether a member or a permitted sublessee of a member, or a spouse or family member of any of the foregoing. Section 12. "Project ": The real property and improvements thereon owned by the Cooperative containing up to Dwelling Units and appurtenant facilities. Section 13. "Reeulatory Agreement ": the Regulatory Agreement, FHA Form No. 3225, in effect by and between the Cooperative and HUD/FHA. Section 14. "Security Interest ": The lien on and security interest in a Membership and/or Occupancy Agreement created pursuant to Article III, Section 10. Section 15. "Subscription Agreement ": The contract of purchase of a Membership in the Cooperative between a prospective member and the Cooperative. Section 16. "Subsequent Subscribers ": Any person or persons who execute a Subscription Agreement subsequent to the first annual meeting of the initial Board of Directors. Section 17. "Transfer Value ": The formula price at which the Board of Directors may purchase the Membership of a deceased or departing member, as more particularly defined in Article III, Section I1 (d). Any use of the word "his" with regard to members of the Cooperative will be read and interpreted to include and mean a reference to the word "her" in the event that the member is female, and as a reference to the word "their" in the event the member is a couple. ARTICLE ITI ivIEMBERSHTP AND MEMBERS Section 1. Eligibility. Any natural person age 62 and over, except as to married couples, only one spouse need be age 62 or over, approved by the Board of Directors will be eligible for Membership, if such person executes a Subscription Agreement, pays the Subscription fee in full and executes an Occupancy Agreement in the usual form used by the Cooperative covering a specific Dwelling Unit of the Project. Section 2. Waiver o Eligibility Require in Certain Cases. Subject to the approval of HUD/FHA, the eligibility requirements for Membership in the Cooperative may, in a particular instance, be modified or waived by the Board of Directors in writing in its discretion. No modification or waiver, however, will be ;ranted that will have the effect of disqualifying the Cooperative as a cooperative housing corporation under Section 216 of the Internal Revenue Code of 1920 and corresponding regulations. 9/96 2 Section 3. Application for Membership, Application for i✓iembership will be presented in person on a form prescribed by the Board of Directors. All Membership applications will be acted upon promptly by the Board of Directors. Section 4. Votin?.. Each Dwelling Unit in the Project will be issued a Membership. Each Membership will have one vote, regardless of the number of persons owning any interest in the Membership. If the persons having an interest in a Membership do not agree who will cast the vote for the Membership the vote will not be cast. The spouse of a member may vote on behalf of the member, as authorized under Minnesota Statute 308.635, Subd. 2, unless the member has indicated otherwise to the Secretary of the Cooperative prior to the meeting. The vote of the majority of those present, either in person or by a proper mailed ballot, will decide any question brought before such meeting, unless the question is one upon which, by express provision of statute or the Articles of Incorporation or these Bylaws, a different vote is required. No member will be eligible to vote or to be elected to the Board of Directors who is shown on the books or management accounts of the Cooperative to be more than thirty (30) days delinquent in payments due the Cooperative under his or her Occupancy Agreement or the Bylaws. Section 5. Subscription Funds.. All subscription funds received from applicants prior to the Initial Endorsement will be deposited promptly without deduction in a special account or accounts (savings or checking) of the Cooperative, as escrowee or trustee for the subscribers of the Membership, which monies will not be corporate funds, but will be held solely for the benefit of the subscribers until transferred to the account of the Cooperative as hereinafter provided. Such special account or accounts will be established with a bank or banks whose deposits are insured by an agency of the Federal Government. Such account or accounts may be interest - bearing, in which event interest earnings with respect to subscription funds returned to a subscriber pursuant to a terminated subscription will be disbursed to the withdrawing subscriber. Such funds will be subject to withdrawal, or transfer to the account of the Cooperative only upon certification (which certification will appear on the face of any check, if such funds have been deposited in a checkinz account) by the President or Vice President and Secretary or any Assistant Secretary of the Cooperative to the above -named institution or institutions that: (a) The Subscription Agreement of a named applicant has been terminated pursuant to its terms and such withdrawal is required to repay the amount paid by him under such agreement; or (b) Applicants for at least 90% of the Dwelling Units to be covered by the mortgage have not been procured within the effective period of the FHA Commitment, or any extension thereof, and such withdrawal is required to repay to the applicants the amount paid by them; or (c) Applicants for at least 90% of the Dwelling Units to be covered by the mortgage (or such lesser number as may be approved by HUDIFHA) have signed subscription agreements, have been approved as to their credit by HUDIFHA, and have paid the subscription price in full. If these requirements have been met and the mortgage loan has been scheduled for closing %with the approval of HUD /FHA, the entire amount of the funds in the 9/96 ; subscription escrow account may be transferred to the Cooperative, at which time the cooperative will issue and deliver certificates of ownership to all members. Section 6. Meinhers. Autho \•Iemberships and Occupancy Ag reements. (a) Initial Board of Directors., The members will consist of the individuals comprising the initial Board of Directors, as identified in the Articles of Incorporation, or their successors. The Nembership of the initial members of the Board of Directors named in the Articles of Incorporation (or their successors elected by them) will terminate at the first annual Membership meeting; unless they have executed Subscription Agreements and, where required by HUD/FHA, Occupancy Agreements. (b) Initial Subscribers. An Initial Subscriber will be admitted as a member of the Cooperative upon the initial Board of Directors' approval of the Initial Subscriber's application for Membership, payment in full of the subscription fee, execution of an Occupancy Agreement, and approval of the Occupancy Agreement by the initial Board of Directors. (c) Subsequent Subscribers. A Subsequent Subscriber will be admitted as a member upon payment in ill of the subscription fee, execution of the Occupancy Agreement, and the Board of Directors' approval of the subsequent subscriber's application of Membership. Section 7. Authorized Membership.. The authorized Membership of the Cooperative will consist of up to : Memberships. A Membership will be issued by the Cooperative for each Dwelling Unit in the Project, such that the number of memberships outstanding at all times will be equal to the number of Dwelling Units in the Project. Section S. NIembershin Certificates. Membership in the Cooperative will be evidenced by a Membership Certificate. Each membership certificate will: (1) state that the Cooperative is organized under Chapter 302A and 515 of the Minnesota Statutes: (ii) identiF the name of the registered holder of the membership represented thereby, and (iii) bear a legend as follows: The rights of any holder of the Nfernbership evidenced by this Certificate are subject to the provisions of the Articles of Incorporation and Bylaws of and to all the terms, covenants, conditions and provisions of a certain Occupancv Agreement between of )vGnnesota and the Member, which limit and restrict the title and rights of anv transferee of such Membership and this Certificate. The Membership represented by this Certificate is, except as between spouses, transferable only as an entirety and only to an approved assignee of the aforementioned Occupancy Agreement. Any transfer of the Membershic is also subject to an option in favor of the Cooperative, described in the Bylaws. Copies of the Articles of Incorporation, Bvlaxs and the Occupancy .-agreement are on file and available for inspection at the ot'ice of 9/96 -c Pursuant to the Bylaws, : has a lien on the Membership and Dwelling Unit represented by this Certificate for all sums due and to become due under the Occupancy Agreement; The Board of Directors of Cooperative of may refuse consent to the transfer of the Membership represented by the member to the Cooperative until all outstanding sums due under the Occupancy Agreement are paid or for other reasonable cause described in the Bylaws. Membership Certificates will be consecutively numbered, bound in one or more books, and will be issued upon certification of full payment. Every Membership Certificate will be signed by the President or Vice President, and the Secretary or Treasurer. The Cooperative will have no seal. Section 9, Lost Certificates. The Board of Directors may direct a new Certificate or Certificates to be issued in place of any Certificate or Certificates previously issued by the Cooperative and alleged to have been destroyed or lost, upon the making of an affidavit of that fact by the person claiming the Certificate to be lost or destroyed. Wien authorizing such issuance of a new Certificate or Certificates, the Board of Directors may, in its discretion, and as a condition precedent to the issuance of the new Certificate, require the registered owner of the lost or destroyed Certificate or Certificates, or his legal representative, to advertise the Certificate in such manner as the Board of Directors will require and to give the Cooperative a bond for an amount the Board of Directors may require as indemnity against any claim that may be made against the Cooperative. Section 10. Lien. The Cooperative «ill have a lien and security interest (as such term is defined in the Minnesota Uniform Commercial Code) on each outstanding Membership in order to secure payment of any sums which %,,iII be due or become due from the holder of the membership for any reason whatsoever, including any sums due under any Occupancy agreement appurtenant thereto. Section 11. Transfer of L'tembershiD. Except as provided herein, Membership will not be transferable and in any event, no transfer of Membership will be made upon the books of the Cooperative within twenty (20) days following the annual meeting of the `Members. In all transfers or'Memberships, the Cooperative will be entitled to such fees as it deems appropriate to compensate it for the processing of the transfer. (a) Death ofMember. If, upon the death of a member, the Membership has not transferred to a joint tenant or spouse of a member, the Cooperative will have an option to purchase the `Membership from the deceased Member's estate in the manner provided in paragraph (b) of this Section, written notice of the death being equivalent to notice of intention to withdraw. If the Cooperative does not exercise it's option to purchase the Membership, the provisions of paragraph (c) of this Section will be applicable, the references to "member" therein to be construed as references to the legal representative of the deceased member. (b) Oration of Cooperative to Purc'rase_ If the Mem,ber desires to leave the Project, he will notify the Cooperative in writin`_ of such intention and the Cooperative will have an option for a period of sixty (60) days bezinning the first day of the calendar month follo«in�_ its receipt ofsuch notice, but not the ouhU1.1tl0n, to purchase the Membership, 9/96 together with all of the member's rights with respect to the Dwelling Unit, at an amount to be determined by the Cooperative as representing the Transfer Value thereof, less: (i) any amounts due by the member to the Cooperative under the Occupancy Agreement, and (it) the cost of maintenance, including painting, redecorating, floor finishing, and such repairs and replacements as are deemed necessary by the Cooperative to place the Dwelling Unit in suitable condition for another occupant. The purchase by the Cooperative of the Membership will immediately terminate the member's rights and upon such termination the member shall forthwith vacate the premises. (c) Procedure Where Coopt -ptive Does Not Exercise Option. If the Cooperative waives in writing its right to purchase the Membership under the foregoing option, or if the Cooperative fails to exercise such option within the sixty (60) day period, the member may sell his Membership to any qualified person who has been duly approved by the Cooperative as a member and Occupant. If the Cooperative agrees, at the request of the member, to assist the member in finding a purchaser, the Cooperative is entitled to charge the member such administrative service charge as it deems reasonable for this service. When the transferee has been approved for Membership, paid the Membership fee in full, and executed the prescribed Occupancy Agreement, the retiring member will be released of his obligations under his Occupancy Agreement, provided the retiring Member has paid all amounts due the Cooperative to date. (d) Transfer Value. Whenever the Board of Directors elects to purchase a Membership, the term "Transfer Value" will mean the sum of the following: (1) The consideration (i.e., down payment) paid for the Membership by the first occupant of the Dwelling Unit as shown on the books of the Cooperative: and (ii) The amount computed in accordance with the following table of increases applicable to the Membership and to the Occupancy Agreement appurtenant to such N-Iembership. Such increase is shown for each full calendar year commencing after Initial Endorsement of the Project mortgage as follows: Membership and Designation of Occupancy « « 1' a Agreement and Initial D e lin Dwelling= Unit. Unit Value Increase Per Year -- B S 5=1,533.00 S 548.00 C S 47,324.00 S 473.00 D S 51,527.00 S 515.00 E S 80,596.00 S 806.00 EE S 69,781-00 S 698.00 F S 100,298.00 S1,003.00 G S 77.290.00 S 773.00 1-1 S 104,362.00 S1,044.00 I S 73,501.00 S 735.00 J S 81,630.00 S 816.00 9196 6 Section 12. Termination of Membership: Cause.. If the Cooperative terminates the rights of a member under the Occupancy Agreement, the member will be required to deliver promptly to the Cooperative his/her Membership Certificate and his /her Occupancy Agreement, both endorsed in such manner as may be required by the Cooperative. The Cooperative will at its election either: (a) Repurchase the terminated Member's Membership at its Transfer Value (as hereinabove defined) or the amount the terminated member originally paid for the acquisition of his/her Membership, whichever is less, or (b) Proceed with reasonable diligence to sell the Membership to a purchaser, at a sales price acceptable to the Cooperative. The terminated member will be entitled to receive an amount equal to the sale price of the Membership determined, less the sum of the following amounts (the determination of such amounts by the Cooperative to be conclusive): (i) Any amounts due to the Cooperative from the member under his/her Occupancy Agreement; (ii) The cost or estimated cost of all deferred maintenance, including, but not limited to, painting, redecorating, floor finishing, and such repairs and replacements as are deemed necessary by the Cooperative to place the Dwelling Unit in suitable condition for another occupant: and (iii) Legal and other expenses incurred by the Cooperative in connection with the default of such member and the resale of his Membership. If the retiring member for any reason fails for a period of ten (10) days after demand to deliver to the Cooperative his endorsed Membership Certificate the terminated member's Membershi p Certificate will be deemed to be canceled and can be reissued by the Cooperative to a new purchaser. Section 13. Non - Speculation on Sales of . Membershios. (a) The Cooperative will observe the basic cooperative principle that purchase and sales of Memberships and rights under Occupancy Agreements are not for speculative purposes and that investments in the Cooperative by members are for the purpose of securing homes for their use and benefit. To this end, the polices established by the Cooperative will be designated to discouraze and avoid speculation both in the sale and resale of Memberships and rights under Occupancy Agreements by members or by the Cooperative. (b) The Cooperative may establish from time -to -time the amount which it deems necessary as a service fee for resale of `Memberships and Occupancy Agreements in Dwelling Units. Such service fee , ,will be uniform in its application to all withdrawing members except that 9/96 7 it may take into account varying price and types of Dwelling Units; provided that such service fee will be computed on a basis which is calculated to reimburse the Cooperative for its costs in handling resale generally, without realizing profits from its operations. The determination by the Cooperative will be conclusive as to service fees charged. ARTICLE IV OCCUPANCY AGREEMENTS Section 1. Form of Occuoancv Agreement. The Board of Directors will adopt the Occupancy Agreement to be used by the Cooperative for the. occupancy of all Dwelling Units by members. The Occupancy Agreement will be for such terms, with or without provisions for renewals, and will contain such restrictions, limitations and provisions with respect to the assignment of the Occupancy Agreement, the leasing of the Dwelling Unit,'and the other terms, provisions, conditions and covenants, as the Board of Directors may determine (and HUD/FHA may approve). After an Occupancy Agreement in the form adopted by the Board of Directors has been executed and delivered by the Cooperative, further Occupancy Agreements may be subsequently executed and delivered in the same form, except with respect to the date of commencement of the term and the monthly charges payable under the subsequent Occupancy Agreements. Section 2. Assignment of Occuoancv Agreement. Occupancy Agreements will be assigned or transferred only in compliance with terms, conditions and provisions of these Bylaws and such Occupancy Agreements. Without limiting the foregoing, no assignment of any Occupancy Agreement will take place except in conjunction with the sale or transfer of a Membership in the Cooperative nor will the assignment be effective unless and until: (i) the assignee has assumed and agreed to perform and comply with all the covenants and conditions contained in the Occupancy Agreement; (ii) the Membership to which the Occupancy Agreement is appurtenant has been transferred to the assignee; (iii) all sums required to be paid by the assignor to the Cooperative have been paid; and (iv) all necessary consents have been obtained. Section 3. Lost Occuoancv Agreements. In the event that any Occupancy Agreement is lost, stolen, destroyed or mutilated, the Board of Directors may direct a new Occupancy Agreement to be issued, in the same form and upon the same terms and provisions. ARTICLE 'v' l- TEETINGS OF NMEMBERS, Section 1. Place of Meetinas. `feetinas of the Xernbership will be held at the principal office or place of business of the Cooperative or at such other suitable place convenient to the Membership as may be designated by the Board of Directors from time -to -time. Section 2. Annual Meetinus. The first annual meeting of the Cooperative will be held within sixty (60) days after the Final Endorsement. Thereafter, the annual meeting_ of the Cooperative will be held on the fourth Thursday of April of each subsequent year. The Cooperative will prepare an annual report and will provide a copy of the report to each member at or prior to the annual meeting. The annual report will contain the items specified in Minnesota Statute 51513.3- 106(c). At such meeting 9/96 S there will be: (1) elected by ballot of the members a Board of Directors in accordance with the requirements of Section 3 of Article VI of these Bylaws; (ii) a report of the Cooperatives activities and financial condition; and (iii) consideration of and action on any other matters included in the notice of meeting. The members may also transact such other business of the Cooperative as may properly come before them. Section 3. Soecial Meetings. It is the duty of the President to call a special meeting of the members as directed by resolution of the Board of Directors or upon a petition signed by twenty -five percent (25 %) of the members having been presented to the Secretary, or at the request of the Federal Housing Commissioner or his duly authorized representative, and as provided by Minnesota law. The notice of any special meeting must state the time and place of such meeting and the purpose of the meeting. No business may be transacted at a special meeting except as stated in the notice unless by consent of four -fifths of the members present. Special meetin may not be called by the members until after the first annual meeting except as directed by resolution of the Board of Directors, or by HUD/FHA. Section 4. Action -.vithout a Meeting. Any action required or permitted to be taken at a meeting of the Membership may be taken without a meeting by written action signed by two- thirds (2/3) of the members. The written action is effective when signed by the required number of members, unless a different effective date is provided in the written action. When written action is taken by less than all of the members, all members will be notified immediately of its text and effective date, except that failure to provide such notice does not invalidate the written action. Section 5. Notice of Z It will be the duty of the Secretary to cause a notice to be sent postage prepaid by U.S. Mail to each member of each Annual or Special Meeting. The notice must state the purpose of the meeting as well as the time and place where the meeting is to be held. The notice of meeting may also be delivered to each member of record, at his address as it appears on the Membership book of the Cooperative, or if no such address appears, at his last known address. Notices must be sent or delivered not less than twenty -one (21) nor more than thirty (30) days in advance of the annual meeting and not less than seven (7) nor more than thirty (30) days in advance of any Special Meeting. If proxies are permitted, the notices will also state the procedures for appointing proxies. Notice by either such method will be considered as notice served. So Iona as a mortgage on the Project is insured by HUD/FHA, notices of all meetings must also be mailed to the manager of the local HUD/FHA insuring office. Section 6. Quorum. The presence, either in person or by proxy, of at least twenty -five percent (25'/'o) of the members of record of the Cooperative will be requisite for, and will constitute a quorum for, the transaction of business at all meetings of the members. If the number of members at a meeting drops below the quorum and the question of a lack of quorum is raised, no business may thereafter be transacted. No votes allocated to a Dwelling Unit owned by the Cooperative may be counted toward a quorum. Section 7 Adjourned 'vleetin< =s. If anv meeting of members cannot be organized because a quorum has not attended, or a meeting has been ended because the number of members at said meeting has dropped below a quonIm, the members «ho are present may, except as otherwise provided by law, 9/96 9 adjourn the meeting to a time not less than forty -eight (48) hours from the time the original meeting was called, at which subsequent meeting the quorum requirement will remain twenty -five percent (25 %). Section 8. Proxies. A member may not vote at any meeting by proxy except for the right of the spouse of a member to vote on behalf of the member, pursuant to Minnesota Statute 308A.635, Subd. 2. Section 9. Order of Business. The order of business at all regularly scheduled meetings of the members will be as follows: i. Determination of quorum. ii. Proof of notice of meeting or waiver of notice. ill. Reading of minutes of preceding meeting. iv. Reports of officers. V. Reports of committees. Vi. Report of manager or managing agent. vii. Election of inspectors of election. viii. Election of directors. ix. Unfinished business. X. New business. In the case of special meetings, items (1) through (iv) will be applicable and thereafter the agenda will consist of the items specified in the notice of meeting. ARTICLE VI DIRECTORS Section 1. Number and Oualification. Prior to the first annual meeting of members, the affairs of the Cooperative will be governed by the initial Board of Directors consisting of five up to (5) persons (the "Initial Board "), as provided in the Articles of Incorporation. After the first annual meeting of members, the affairs of the Cooperative will be governed by a Board of Directors composed of seven (7) persons, all of whom will hold a membership interest in the Cooperative. Provided, however, that no two (2) persons who reside in the same Dwellina Unit and hold an interest in the same membership will serve on the Board of Directors at the same time. 9/96 10 Section 2. Powers and Duties. The Board of Directors will have all the powers and duties necessary for the administration of the affairs of the Cooperative and may do all such acts and things as are not by law or by these Bylaws directed to be exercised and done by the members. The powers of the Board of Directors will include, but not be limited to: (a) Accepting or rejecting all applications for N/femberships and admission to occupancy of a Dwelling Unit in the Project, either directly or through an authorized representative; (b) Subject to the approval of HUD/FHA, establishing monthly housing charges as provided for in the Occupancy Agreement, based on the operating budget formally adopted by such a Board; (c) Subject to the' approval of HUD/FHA, engaging an agent or employees for the management of the Project under such terms as the Board may determine; (d) Authorizing in their discretion patronage refunds from the residual receipts when and as reflected in the annual report; (e) Terminating Membership and occupancy rights for cause; and (f) Promulgating such riles and regulations pertaining to the use and occupancy of the Project as may be deemed proper and which are consistent with these Bylaws and the Articles of Incorporation and the Regulatory Agreement. Section 3. Election and Term of Office. The term of the Initial Board of Directors will expire when their successors have been elected at the first annual meeting or any special meetings called for that purpose. At the first annual meeting of the members, seven (7) directors will be elected for staggered terms as follows: the term of office of two (2) directors will be fixed for three (3) years; the term of office of rivo (2) directors will be fixed at two (2) years; and the term of office of three (3) directors will be fixed at one (1) year. At the expiration of the initial term of office of each respective director, his/her successor will be elected to serve a term of three (3) years. The directors will hold office until their successors have been elected and hold their first meeting. Section 4. Vacancies. Vacancies in the Board of Directors caused by any reason other than the removal of a director by a vote of the Membership will be filled by vote of the majority of the remaining directors even though they may constitute less than a quorum; and each person so elected will be a director until a successor is elected by the members at the next annual meeting to serve out the unexpired portion of the term. Section 5. Removal of Directors. , At anv re� or special meeting duly called, any director elected by the members may be removed with or without cause by the affirmative vote of the majority of the entire Membership of record and a successor may then and there be elected to fill the vacancy thus created. Any director whose removal has been proposed by the members will be given an opportunity to be heard at the meetin The te«» of any director who becomes more than thirty (30) days delinquent in payment of his Carrying Charges %vill be automatically terminated and the remaining directors will 9/96 1 t appoint his successor as provided in Section 4 above. Section 6. Compensation. No compensation will be paid to directors or officers for their services as directors or officers. No remuneration will be paid to a director or officer for services performed by him for the Cooperative in any other capacity, unless a resolution authorizing such remuneration will be unanimously adopted by the Board of Directors before the services are undertaken. No remuneration or compensation will in any case be paid to a director or officer without the approval Of HUD/FHA. A director or officer may not be an employee of the Cooperative. Section 7. Organization Meetine. The first meeting of a newly elected Board of Directors will be held within ten (10) days of election at such place as will be fixed by the directors at the meeting at which such directors were elected, and no notice will be necessary to the newly elected directors in order legally to constitute such meeting, providing a majority of the whole Board will be present. Section S. Rea-ular MeetinQs.. Regular meetings of the Board of Directors may be called by the President on three days notice to each director, given personally or by mail, telephone or telegraph, which notice will state the time, place (as hereinabove provided) and purpose of the meeting. Special meetings ofthe Board of D" will be called by the President or Secretary in like manner and on like notice on the written request of at least three (3) directors. Meetin of the Board of Directors must be open to members except as permitted in Minnesota Statute 515B . To the extent practical, the Board of Directors will give reasonable notice to the members of the date, time and place of a board meeting. A conference among the Board of Directors by any means of communication through which the Directors may simultaneously hear each other during the conference constitutes a meeting of the Board of Directors if the number of Directors participating in the conference would be sufficient to constitute a quorum at a meeting, and if the same notice is given of the conference as would be required for a meeting. Section 9. Written Action., Any action required or permitted to be taken at a meeting of the Board of Directors may be taken without a meeting by written action signed unanimously by all of the Directors on the Board of Directors. The written action is effective when signed by all of the Directors, unless a different effective date is provided in the written action. Section 10. Waiver of Notice., Before or at anv meeting of the Board of Directors, any director may, in writing, waive notice of such meeting, and such waiver will be deemed equivalent to the giving of such notice. Attendance by a director at any meetim-, of the Board will be a waiver of notice by him of the time and place thereof If all the directors are present at any meeting of the Board, no notice will be required and any business may be transacted at such meeting. Where all of the directors unanimously approve and sign a corporate resolution or authorization (which is to be included in the minute book), this will be recognized as proper corporate action taken at a duly authorized meeting, with our proceeding under the provisions thereof that would otherwise be applicable for calling and holding directors meetings. Section 11. Ouorum. At all meetings of the Board of Directors, a majority of the directors will constitute a quorum for the transaction of business, and the acts of the majority of the directors present at a mectin- at which a quorum is present will be the acts oft lie Board oED] rectors. If there is less than 9/96 1-, a quorum present, the majority of those present may adjourn the meeting from time -to -time. At any such adjourned meeting, any business which might have been transacted at the meeting as originally called may be transacted without further notice. Section 12. Fidelity Bonds., The Board of Directors will require that all officers and employees of the Cooperative handling or responsible for corporate or trust funds will furnish adequate fidelity bonds. The premiums on such bonds will be paid by the Cooperative. Section 13. Safe2uardine Subscriotion Funds. It will be the duty of the Board of Directors to see to it that all sums received in connection with the Membership subscriptions prior to the closing of the mortgage transaction covering the housing project of the Cooperative, are deposited and withdrawn only in the manner provided for in Article III, Section 5, of these Bylaws. Section 14. Committee.. The Board of Directors, by the affirmative vote of a majority of the Board of Directors, may establish one or more committees. A committee may consist of one or more natural persons, who need not be Directors, appointed by the affirmative vote of a majority of the Directors present at the meeting. ARTICLE VII OFFICERS Section 1. Designation. The principal officers of the Cooperative will be a President, one or more Vice Presidents, a Secretary, and a Treasurer, all of whom will (1) be members of the Cooperative, and (ii) be elected by the Board of Directors. The Directors may appoint assistant treasurers and assistant secretaries, and such other officers as in theirjudgment may be necessary. Section 2. Election of Officers., The officers of the Cooperative will be elected annually by the Board of Directors at the organizational meeting of each new board and will hold office at the pleasure of the Board. Section 3. Removal of Officers., upon an affirmative vote of a majority of the members of the Board of Directors, any officer may be removed, either with or without cause, and his successor selected at any regular meeting of the Board of Directors, or at any special meeting of the Board called for such purpose. Section 4. t President., The President will be the chief executive officer of the Cooperative. He will preside at all meetings of the members and of the Board of Directors. He will have all the general powers and duties which are usually vested in the office of.president of a corporation, including, but not limited to, the power to appoint committees from among the membership from time -to -time as he may in his discretion decide is appropriate to assist in the conduct of the affairs of the Cooperative. Section 5. Vice President. The Vice President will take the place of the President and perform his duties whenever the President will be absent or unable to act. If neither the President nor the Vice President is able to act, the Board of Directors will appoint some other member of the Board to do so on an interim basis. The Vice President «ill also perform such other duties as will from time to time be 9/96 13 imposed upon him by the Board of Directors. Section 6. Secretary.. The Secretary will keep the minutes of all meetings of the Board of Directors and the minutes of all meetings of the members of the Cooperative. He will have charge of the Membership transfer books and of such other books and papers as the Board of Directors may direct; and he will, in general, perform all the duties incident to the office of Secretary. Section 7. Treasurer.. The Treasurer will have responsibility for corporate funds and securities and will be responsible for keeping full and accurate accounts of all receipts and disbursements in books belonging to the Cooperative. He will be responsible for the deposit of all monies and other valuable effects in the name and to the credit of the Cooperative in such depositories as may from ' be designated y o time to time mated b the Board Y of Directors. ARTICLE VTTI REGULATORY AGREEMENT Rishts of HUD/FHA. The management, operation and control of the affairs of the Cooperative will be subject to the rights, powers and privileges of the Secretary of HUD/FHA pursuant to a Regulatory Agreement between the Cooperative and HUD/FHA. The Cooperative is bound by the provisions of the Regulatory Agreement which is a condition precedent to the insurance by HUD/FHA of a mortgage of the Cooperative on the Project. ARTICLE IX ANIENDiti1ENTS These Bylaws may be amended by the affirmative vote of the majority of the entire regular Membership of record at any regular or special meeting, provided that no amendment will become effective unless and until it has received the written approval of HUD/FHA. Amendments may be proposed by the Board of Directors or by petition signed by at least twenty (20) percent of the members. A description of any proposed amendment will accompany the notice of any regular or special meeting at which such proposed amendment is to be voted upon. Subject to Article 10 of the Articles of Incorporation the Initial Board of Directors will have the right to amend the Articles and Bylaws as prescribed therein. ARTICLE X FISCAL MANAGEMENT Section 1. Fiscal Year., The fiscal year of the Cooperative will begin on the first day of January of each year, except that the first fiscal year of the Cooperative will begin at the date of incorporation. The commencement date of the fiscal year herein established will be subject to change by the Board of Directors should corporate practice SLibsequently dictate, but not without the prior written approval of HTJ to the extent such approval is requited pursuant to HL - D/FHA rules and regulations. Section 2. Books and ACCOUnts. Books and accounts of the Cooperative will,be kept under the direction of the Treasurer and in accordance with the Uniform System of Accounts prescribed by the 9/96 14 Secretary of HUD/FHA. That amount of the monthly carrying charges required for payment on the principal of the mortgage of the Cooperative or any other capital will be credited upon the books of the Cooperative to the "Paid -in Surplus" account as a capital contribution by the members. Section 3. AtiditinR. At the closing of each fiscal year, the books and records of the Cooperative will be audited by a licensed independent Certified Public Accountant as defined in Minnesota Statute 515B.3 -121, whose report will be prepared and certified in accordance with the principals of the American Institute of Certified Public Accountant and requirements of HUD/FHA. Based on such reports, the Cooperative will furnish its members with an annual financial statement including the income and disbursements of the Cooperative. The Cooperative will also supply the members: (i) as soon as practicable after the end each calendar year, with a statement showing each member's pro rata share of the real estate takes and mort gage interest paid by the Cooperative during the preceding calendar year; (ii) within 120 days after the erid off the fiscal years with a copy of the reviewed financial statements. Section 4. Insoection of Books. Financial reports such as are required by the Regulatory Agreement to be furnished to HUD/FHA and the Membership records of the Cooperative will be available at the principal office of the Cooperative for inspection at reasonable times by any member. Section 5. Execution of Cooperative Documents.. With the prior authorization of the Board of Directors, all notes and contracts, including Occupancy Agreements, will be executed on behalf of the Cooperative by any officer of the Cooperative, and all checks will be executed of the Cooperative by any two ofricers of the Cooperative. Section 6. Reserves. The annual budget of the cooperative will provide from year -to -year, on a cumulative basis, for adequate reserve funds to cover the replacement of the parts of the Project which the Cooperative is obligated to maintain, repair or replace. The aforesaid Bylaws gave been adopted this day of 199 by the Board of Directors of 1 Cooperative President Secretary 3 9%96 l ; OCCUPANCY AGREEMENT THIS AGREEMENT, made and entered into this day of , 199 , by and between and Cooperative (hereinafter referred to as the "Cooperative "), a cooperative association having its principal office and place of business at _ _ , Minnesota and (hereinafter referred to as "Member "); WHEREAS, the Cooperative - has been formed for the purpose of acquiring, owning, and operating a cooperative housing project to be located at Minnesota, _ . with the intent that its members shall have the right to occupy the dwelling units thereof under the terms and conditions hereinafter set forth; and WHEREAS, the Member is the owner and holder of a Certificate of Membership in the Cooperative and has a bona fide intention to reside in the Project. NOW, THEREFORE, and in consideration of the mutual promises contained herein, the Cooperative hereby lets to the Member, and the Member hereby hires and takes from the Cooperative, Dwelling Unit No. (the "Dwelling Unit ") located in _ Minnesota; TO HAVE AND TO HOLD the Dwelling Unit unto the Member, his/her executors, administrators and authorized assigns, on the terms and conditions set forth herein and in the Articles of Incorporation and By -Laws of the Cooperative and any rules and regulations of the Cooperative now or hereafter adopted pursuant thereto, from the date of this Agreement, for a term terminating on , 199 , renewable thereafter for successive three (3) year periods under the conditions provided herein. ARTICLE 1. MONTHLY CARRYING CHARGES, Commencing at the time indicated in Article 2 thereof, the Member agrees to pay to the Cooperative a monthly sum referred to herein as "Carrying Charges" equal to one - twelfth (1 /12th) of the Member proportionate share of the sum required by the Cooperative, as estimated by its Board of Directors to meet its annual expenses pertaining to the Project and to the community or other facilities which the Member is entitled to utilize, including, but not limited to, the following items: (a) The costs of all operating expenses of the Project and services furnished. (b) The cost of necessary management and administration. (c) The amount of all taxes and assessments levied against the Project of the Cooperative or which it is required to pay. 1 (d) The cost of fire and extended coverage insurance on the Project and such other insurance as the Cooperative may effect or as may be required by an mortgage on the Project. (e) The cost of furnishing water, sewer, trash removal, heat, common area electricity and common area air conditioning. (f) All reserves set up by the Board of Directors pertaining to the Project, including the general operating reserve and the reserve for replacements. (g) The estimated cost of repairs, maintenance and replacements of the Project property to be made by the Cooperative. (h) The amount of principal, interest, mortgage insurance premiums, if any, and other required payments on the hereinafter mentioned insured mortgage. (i) Any other expenses of the Cooperative approved by the Board of Directors, including operating deficiencies, if any, for prior periods. The Board of Directors shall determine the amount of the Carrying Charges annually, but may do so at more frequent intervals should circumstances so require. No member shall be charged with more than his/her proportionate share thereof as determined by the Board of Directors. That amount of the Carrying Charges required for payment on the principal of the mortgage of the Cooperative or any other capital expenditures shall be credited upon the books of the Cooperative to the "Paid -in- Surplus" account as a capital contribution by the members. Until further notice from the Cooperative, the monthly Carrying Charges for the Dwelling Unit shall be $ ARTICLE 2. WHEN F PAYMENT O CARRYING CHARGES ARE TO COMMENCE - _ . After thirty (30) days notice by the Cooperative to the effect that the Dwelling Unit is or will be available for occupancy, or upon acceptance of occupancy, whichever is earlier, the Member shall make a payment for Carrying Charges covering the unexpired balance of the month. Thereafter, the Member shall pay Carrying Charges in advance of the first day of each month. ARTICLE 3. PATRONAGE REFUND The Cooperative agrees on its part that it will refund for credit to the ivMember, within ninety (90) days after the end of each fiscal year, his/her proportionate share of such sums as 2 have been collected in anticipation of expenses which are in excess of the amount needed for expenses of all kinds, including reserves in the discretion of the Board of Directors. ARTICLE 4. MEMBER'S OPTION FOR AUT OMATIC RENEWAL It is covenanted and agreed that the term herein granted shall be extended and renewed from time to time by and against the parties hereto for further periods of three (3) years from the expiration of the term herein granted and upon the same covenants and agreements as herein contained unless: (1) notice of the Member's election not to renew shall have been given to the Cooperative in writing at least four (4) months prior to the expiration of the then current term, and (2) the Member shall have on or before the expiration of said term (a) endorsed his/her Membership Certificate for transfer in blank and deposited same with the Cooperative, and (b) met all his/her obligations and paid all amounts due under this agreement up to the time of said expiration, and (c) vacated the Dwelling Unit, leaving the same in good state of repair. Upon compliance with the provisions of clauses (1) and (2) of this Article, the Member shall have no further liability under this Agreement and shall be entitled to no payment from the Cooperative. ARTICLE 5. PREMISES TO BE USED FOR RESIDENTIAL PURPOSES ONLY _ . The Member shall occupy the Dwelling Unit as a private dwelling unit for himself/herself and/or his/her immediate family and for no other purpose, and may enjoy the use of all community property and facilities of the Project so long as the Member continues to own a membership in the Cooperative, occupies his/her Dwelling Unit, and abides by the terms of this Agreement. Any sublessee of the Member, if approved pursuant to Article 7 hereof, may enjoy the occupancy rights to which the Member is entitled under this Article 5. The Member shall not permit or suffer anything to be done or kept upon the premises of the Dwelling Unit which will increase the rate of insurance on the building, or on the contents thereof, or which will obstruct or interfere with the rights of other occupants, or annoy them by unreasonable noises or otherwise, nor will he /she commit or permit any nuisance on the premises or commit or suffer any immoral or illegal act to be committed thereon. The Member shall comply with all of the requirements of the Board of Health and of all other governmental authorities with the respect to the said premises. If by reason of the occupancy or use of the Dwelling Unit by the Member the rate of insurance on the building shall be increased, the Member shall become personally liable for the additional insurance premiums. ARTICLE 6, MEMBFR'S RIGHT TO PEACEABLE POSSESSION In return for the Member's continued fulfillment of the terms and conditions of this Agreement, the Cooperative covenants that the Member may, at all times while this Agreement remains in effect, have and enjoy the Member's sole use and benefit the Dwelling Unit hereinabove described, after obtaining occupancy, and may enjoy in common with all 3 i other members of the Cooperative the use of all community property and facilities of the entire cooperative community. ARTICLE 7. NO SUBLEASING WITHOUT CONSENT OF THE COOPERATIVE The Member hereby agrees not to assign this Agreement nor to sublet his/her Dwelling Unit to any person without the written consent of the Cooperative on a form approved by the United States Department of Housing and Urban Development ("HUD"). The liability for the Member under this Occupancy Agreement shall continue notwithstanding the fact that the Member may have sublet the Dwelling Unit with the approval to the Cooperative for the roval of the Cooperative, and the Member shall be responsible p PP P P conduct of the sublessee. Any unauthorized leasing shall, at the option of the Cooperative, result in the termination and forfeiture of the Members' rights under this Occupancy Agreement. Nonpaying guests of the member may occupy the Member's Dwelling Unit under such conditions as may be prescribed by the Board of Directors in the rules and regulations. ARTICLE S. TRANSFERS Neither this Agreement nor the Member's rights of occupancy shall be transferable or assignable except in the same manner as may now or thereafter be provided for the transfer of memberships in the By -Laws of the Cooperative. The Member hereby certified that neither he /she nor anyone authorized to act for him/her will refuse to sell his/her membership, after the making of a bona fide offer, or refuse to negotiate the sale of, or otherwise make unavailable or deny the membership to any person because of race, color, religion, or national origin. Any restrictive covenant on Cooperative property relating to race, color, religion, or national origin is recognized as being illegal and void and hereby specifically disclaimed. Civil action for preventive relief may be brought by the Attorney eneral in an appropriate U.S. District Court against any person responsible Y Y g for a violation of this certification. ARTICLE 9. MANAGEMENT. TAXES AND INSURANCE The Cooperative shall provide necessary management, operation and administration g authori ty a b of the Project; a or provide for the payment, to the extent not billed by the taxing J PY P directly to the Member, of all taxes or assessments levied against the Project; procure and pay or provide for the payment of fire insurance and extended coverage, and other insurance as Y an required b a e Project, and such other insurance as the Y mo on property in the ProJ Cooperative may deem advisable on the property in the Project. The Cooperative will not, however, provide insurance on the Member's interest in the Dwelling Unit or on the Member's personal property. ARTICLE 10. UTILITIES 4 The Cooperative shall provide water, sewer, trash removal, heat and common area electricity, in amounts which it deems reasonable. The Member shall pay directly to the supplier for telephone and Dwelling Unit electricity. ARTICLE Il. REPAIRS (a) By Member: The Member agrees to repair and maintain his/her Dwelling Unit at his/her own expense as follows: (1) Any repairs or maintenance necessitated by the Member's own negligence or misuse; (2) Any redecoration of the Member's own Dwelling Unit over and above replacements covered by the reserve for replacements maintained by the Cooperative pursuant to the FHA Regulatory Agreement; and (3) Any repairs, maintenance or replacements required on the following items: Appliances that are in addition to the range and hood, refrigerator, disposal and dishwasher furnished by the Cooperative, additional window treatments, wall coverings, additional floor coverings, furnishings, household goods and personal property. (b) By Cooperative: The Cooperative shall provide and pay for all necessary repairs, maintenance and replacements except as specified in clause (a) of this Article. The officers and employees of the Cooperative shall have the right to enter the Dwelling Unit of the Member in order to effect necessary repairs, maintenance and replacements, and to authorize entrance for such purposes by employees of any contractor, utility company, municipal agency or others, at any reasonable hour of the day with reasonable notice and, in the event of emergency, at any time. (c) Right of Cooperative to Make Repairs at Member's Exnense: In case the Member shall fail to effect the repairs, maintenance or replacements specified in clause (a) of this Article in a manner satisfactory to the Cooperative and pay for same, the latter may do so and add the cost thereof to the Member's next month Carrying Charge payment. ARTICLE 12. ALTERATIONS AND ADDITIONS The Member shall not, without the written consent of the Cooperative, make any structural alterations in the Dwelling Unit or in the water, gas or heat pipes, electrical conduits, communications conduits, plumbing or other fixtures connected therewith, or remove any additions, improvements of fixtures from the premises. 5 If the Member for any reason shall cease to be an occupant of the Dwelling Unit, he/she shall surrender to the Cooperative possession thereof, including any alterations, additions, fixtures and improvements. The Member shall not, without the prior written consent of the Cooperative, install or use in his/her Dwelling Unit any air conditioning equipment, washing machine, clothes dryer, electric heater, or power tools. The Member agrees that the Cooperative may require the prompt removal of any such equipment at any time, and that his/her failure to remove such equipment upon request shall constitute a default within the meaning of Article 13 of this Agreement. ARTICLE 13. DEFINITION Of DEFAULT BY MEMBER AND EFFECT THEREOF 13.1. Events of Default. The occurrence of any one of the following events shall constitute an Event of Default hereunder: (a) In case the Member attempts to transfer or assign his/her membership in the Cooperative and this Agreement in a manner inconsistent with the provisions of the By -Laws. (b) In case at any time during the continuance of this Agreement the Member shall be declared bankrupt under the laws of the United States. (c) In case at any time during the continuance of this Agreement a receiver of the Member's property shall be appointed under any of the laws of the United States of any state. (d) In case of any time during the continuance of this Agreement the Member shall make a general assignment for the benefit of creditors. (e) In case of any time during the continuance of this Agreement the membership in the Cooperative owned by the Member shall by duly levied upon and sold under the process of any court. (f) In case the Member fails to effect and/or pay for repairs and maintenance as provided for in Article 1 I hereof. (g) In case the Member shall fail to pay any sum when due pursuant to the provisions of Article I or Article 10 hereof. (h) In case the Member shall default in the performance of any of his/her obligations under this Agreement. 13.2 Remedies. Upon the happening of an Event of Default as hereinabove described, the Cooperative may: (i) terminate this Agreement upon not less than ten (10) 6 days prior written notice to the Member, upon which event the Cooperative may (unless the default is cured within such ten (10) day period in a manner deemed satisfactory by the Cooperative) reenter the Dwelling Unit and remove all persons and personal property therefrom, either by unlawful detainer proceeding or by other suitable action or proceeding at law, in equity or by other proceedings which may apply to the eviction of tenants, and to repossess the Dwelling Unit in its former state as if this Agreement had not been made; or (ii) proceed to protect and enforce its rights by a suit or suits in equity or at law, either for specific performance of any covenant or agreement contained herein, or for the enforcement of any other appropriate remedy. (a) The Member hereby expressly waives any and all right of redemption in the case the Member shall be dispossessed by judgment or warrant of any court of competent jurisdiction. The words "enter," "reenter" and "reentry," as used in this Agreement, are not restricted to their technical legal meaning and, in the event of breach or threatened breach by the Member of any of the covenants or provisions hereof, the Cooperative shall have the right of injunction and the right to invoke any remedy allowed at law or in equity, as if reentry, summary proceedings or other remedies were not herein provided for. WITHOUT LIMITING ANY OTHER PROVISIONS HERE SET FORTH, THE MEMBER EXPRESSLY WAIVES ANY RIGHT TO WRITTEN NOTICE OF CANCELLATION AND TERMINATION UNDER SECTION 504.02 OF THE MINNESOTA STATUTES AND EXPRESSLY WAIVES ANY RIGHT OF REDEMPTION UNDER MINNESOTA STATUTES. BY ACCEPTANCE OF THIS OCCUPANCY AGREEMENT, THE MEMBER ACKNOWLEDGES THAT HE /SHE HAS READ AND UNDERSTOOD THE FOREGOING PROVISION AND HAS HAD THE SAME EXPLAINED BY INDEPENDENT COUNSEL. (b) The Member expressly agrees that there exists, under this Occupancy Agreement, a landlord -tenant relationship and that in the event of a breach or threatened breach by the member of any covenant or provision of this Agreement, there shall be available to the Cooperative such legal remedy or remedies as are available to a landlord for the breach or threatened breach under the law by a tenant of any provision of a lease or rental agreement. (c) The failure on the part of the Cooperative to avail itself of any of the remedies given hereunder shall not waive or destroy the right of the Cooperative to avail itself of such remedies for similar or other Events of Default on the part of the Member. ARTICLE 1 .. SiJRRF.NDER OF MEMBERSHIP Upon the termination of the Occupancy Agreement pursuant to Article 13 hereof, the Member shall forthwith surrender to the Cooperative his/her Membership Certificate, duly endorsed in blank. Whether or not the Membership Certificate is surrender, the Cooperative 7 may, at any time after membership termination, execute and deliver a new Occupancy Agreement for the Dwelling Unit and issue a new Membership Certificate in the Cooperative allocated thereto.. Upon the issuance of a new Membership Certificate, the Membership Certification owned by the terminated Member shall be automatically canceled and rendered null and void. ARTICLE 15. MEMBER TO COMPLY WITH ALL CORPORATE REGULATIONS The Member covenants that he /she will preserve and promote the cooperative ownership principles on which the Cooperative has been founded, abide by the Articles of Incorporation, By -Laws, rules and regulations of the Cooperative and any amendments thereto and, by his/her acts of cooperation with its other members, bring about for himself/herself and his/her co- members a high standard in home and community conditions. The Cooperative agrees to make its rules and regulations known to the Member by delivery of same to him/her or by promulgating them in such other manner as constitute adequate notice. ARTICLE 16. EFFECT OF FIRE LOSS ON INTERESTS OR MEMBER. In the event of loss or damage by fire or other casualty to the above - mentioned Dwelling Unit without the fault or negligence of the member, the Cooperative shall determine whether to restore the damaged premises and shall further determine, in the event such premises shall not be restored, the amount which shall be paid to the Member to redeem the membership of the Member and to reimburse him/her for such loss as he /she may have sustained. If, under such circumstances, the Cooperative determines to restore the premises, Carrying Charges shall abate wholly or partially as determined by the Cooperative until the premises have been restored. If, on the other hand, the Cooperative determines not to restore the premises, the Carrying Charges shall cease from the date of such loss or damage. ARTICLE 17. INSPECTION OF DWELLING UNIT The Member agrees that the representatives of any mortgagee holding a mortgage on the property of the Cooperative, the officers and employees of the Cooperative and, with the approval of the Cooperative, the employees of any contractor, utility company, municipal agency or others, shall have the right to enter the Dwelling Unit of the Member and make inspections thereof at any reasonable hour of the day with reasonable notification and at any time in the event of emergency. ARTICLE 18. SUBORDINATION CLAUSE The Project, of which the Dwelling Unit is a part, was or is to be constructed by the Cooperative with the assistance of a mortgage loan advanced to the Cooperative by a private lending institution with the understanding between the Cooperative and the lender that the 8 latter would apply for mortgage insurance under the provisions of the National Housing Act. Therefore, it is specifically understood and agreed by the parties hereto that this Agreement and all rights, privileges and benefits hereunder are and shall be at all times subject to and subordinate to the lien of a first mortgage and the accompanying documents executed or to be executed by the Cooperative and/or its Trustee and insured or to be insured under the provisions of the National Housing Act, and any and all modifications, extensions and renewals thereof and to any mortgage or deed of trust made in replacement thereof, and to any mortgage or deed of trust which may at any time hereafter be placed on the property of the Cooperative or any part thereof. The Member hereby agrees to execute, at the Cooperative's request and expense, any instrument which the Cooperative or any lender may deem necessary or desirable to effect the subordination of this Agreement and to any such mortgage or deed of trust, and the member hereby appoints the Cooperative and each and every officer thereof, and any future officer, his/her irrevocable attorney -in -fact during the term hereof to execute any such instrument on behalf of the Member. The Member does hereby expressly waive any and all notices of default and notices of foreclosure of said mortgage which may be required by law. In the event a waiver of such notices is not legally valid, the Member does hereby constitute the Cooperative his/her agent to receive and accept such notices on the Member's behalf. ARTICLE 19. LATE CHARGES AND OTHER COSTS IN CASE OF, DEFAULT The Member covenants and agrees that, in addition to the other sums that have become or will become due, pursuant to the terms of this Agreement, the Member shall pay to the Cooperative a late charge in an amount to be determined from time to time by the Board of Directors for each payment of Carrying Charge, or part thereof, more than ten (10) days in arrears: If a Member defaults in making a p ay m ent of Ca Cha or in the performance P Ym an"Y g g or observance of any provision of this Agreement and the Cooperative has obtained the services of any attorney with respect to the defaults involved, the Member covenants and agrees to pay to the Cooperative any costs of fees involved, including reasonable attorneys' fees, notwithstanding the fact that a suit has not yet been instituted. In case a suit is instituted, the member shall also pay the costs of the suit in addition to other aforesaid costs and fees. ARTICLE 20. NOTICES Whenever the provisions of the law or the By -Laws of the Cooperative or this Agreement require notice to be given to the other party hereto, any notice by the Cooperative to the Member shall be deemed to have been duly given, and any demand by the Cooperative upon the Member shall be deemed to have been duly made, if the same is delivered to the Member at his/her unit or to the Member's last known address; and any notice or demand by the Member to the Cooperative shall be deemed to have been duly given if delivered to an 9 office of the Cooperative. Such notice may also be given by depositing the same in the United States Mail addressed to the Member as shown in the books of the Cooperative, or to the President of the Cooperative, as the case may be, and the time of mailing shall be deemed to be the time of giving of such notice. ARTICLE 21. ORAL REPRESENTATION NOT BINDING No representations other than those contained in this Agreement, the Articles of Incorporation and the By -Laws of the Cooperative shall be binding upon the Cooperative. ARTICLE 22. GENDER REFERENCE Any reference to the word "his" herein shall be interpreted to read and mean the word "her" in the event the Member is female, and the word "their" in the even the Member is a couple. ARTICLE 23. EOUAL HOIJSING STATEMENT Cooperative of. . shall not discriminate against any person because of race, color, religion, sex, handicap, familial status, or national origin. IN WITNESS THEREOF, the parties hereto have caused this Agreement to be signed the day and year first above written. COOPERATIVE By: Its: Member Member 10 SUBSCRIPTION AGREEMENT COOPERATIVE Application No: Dwelling Unit No: Date: 1. Subscription Amount, I/We , a legal resident of the State of Minnesota, hereinafter called the "Subscriber," in consideration of the mutual promises of other subscribers and other good and valuable considerations; hereby subscribe for membership in ' COOPER.ATIVE ___, a Minnesota cooperative housing association hereinafter called the "Cooperative," for a subscription price of S , which constitutes the initial value of my /our membership. I/We hereby agree to pay the subscription price as follows: upon signing•this Agreement which sum shall be deposited in an interest bearing trust account in a depository institution whose deposits are insured by the Federal Deposit Insurance Corporation, pending HUD Initial Endorsement of the Cooperative's Project mortgage note for insurance, and subject to cancellation provisions of Section 5 below. The unpaid balance of S shall be due on written demand by the Cooperative. (Such demand will constitute notification of subscribers acceptability for membership; provided that_ if full payment is made of the subscription price, without a written demand therefore, the Subscriber's acceptability for membership shall not occur until written notification thereof is sent to the Subscriber.) 2. Ratification of Other Provisions, VWe ratify the provisions contained in the Articles of Incorporation, By o of Common Interest Information Bulletin. Cooperative Agency Agreement, ec Community, Regulatory Agreement, and Occupancy Agreement, copies of which are attached hereto and receipt of which is hereby acknowledged. 3. Priority of �IortaaQe Lien This Agreement and all rights hereunder are and at all times shall be subject to and subordinate to the lien of the mortgage and accompanying documents to be executed by the Cooperative to a lending institution and to be insured under Section 221(d)(3) of the National Housinv Act; and to any and all modifications, extensions, and renewals 1 thereof; and to any mortgage or de time thereafter d be placed on property t a of the rtoaDe or deed of trust which may at any Cooperative or any part thereof. 4. Occunancv Agreement, The Subscriber, if approved for membership, will be entitled to occupancy of the above numbered dwelling unit under the terms of the Occupancy Agreement. It is estimated that the initial monthly carrying charge for said unit wil nn to fluctuations as but it is emphasized that this is only an estimate, subje provided for in the Occupancy Agreement. I/We agree to execute the Occupancy Agreement on demand and to comply with all terns hereof. 5. Cancellation Provisions, (a) By Cooperative The Cooperative reserves the right at any time before it has notified the Subscriber of his/her acceptability for membership, for reasons deemed sufficient by the Cooperative, to return the amount paid by the Subscriber under this Agreement, or in the event the Subscriber shall have died prior to becoming a member, the Cooperative reserves the right to return same to Subscribe cease es nd t 1p withou tl furtherliability thereupon all rights of the Subscribers shall on the part of the Cooperative. If the Subscriber shall default in any of the obligations called for in this Agreement, and such default shall continue for fifteen (15) days after notice sent by registered mail by the Cooperative to the Subscriber - at the address given below, t at the option of the Cooperative, the Subscriber shall lose any and all rights under this Agreement, and any am ount aid e s toward the price may be retained by the P o Cooperative as liquidated damages, or may at the option of the Cooperative be returned less the Subscriber's proportionate share of expens elease the oblations of the Subscriber Cooperative. The Cooperative may, at its option, under this Agreement in the event the Subscriber shall secure an assignee of this Agreement-who has assumed the obligations herein conk ; an s Aeament is of Cooperative and the Federal Housing Administration ("FHA") s otherwise assignable. (b) By Federal Housing Administration, the FHA. In it is understood that the Subscriber`s credit is subject to approval FH��1 credit the event the FHA determines that the Subscriber does not meet led to a requirements for participation in this projectri e� his Agreement shall be null return of all sums paid hereunder. Upon such and void and all of the Subscriber's rights shall cease and terminate without further liability on the part of the Cooperative. (c) By Subscriber The Subscriber may withdraw from this Agreement, thereby terminating all riahts and liabilities hereunder, upon which event all amounts paid by him/her hereunder together with the interest earned thereon shall forthwith be refunded, as follows: (1) At any time prior to the date of issuance of the HUD commitment for insurance of advances in connection with Project mortgage loan ("Firm Commitment "), provided written notice of withdrawal is delivered to the Cooperative prior to the issuance date of such Firm Commitment. (2) If this Subscription Agreement is executed by the Subscriber after the date of the Firm Commitment, the Subscriber shall have the right to withdraw from this Agreement for a period of five (5) days after the execution date of this Subscription Agreement, provided written notice of withdrawal is delivered to the Cooperative within such five (5) day period. (3) If, within one (1)year after the date of execution of this Agreement, (a) membership in the Cooperative is not achieved to the extent required by either HUD or the HUD- approved Project mortgage lender. and (b) construction of the Project has not commenced, the Subscriber shall have the right at any time thereafter to withdraw from this Agreement by delivering written notice of withdrawal to the Cooperative. (4) If, upon issuance of the Firm. Commitment, it is determined that either an equity contribution greater than that projected in the Information Bulletin of the Cooperative would be required in order to qualify for such mortgage loan financing, or the monthly carrying'charges will be greater that those projected in the Information Bulletin by any amount, the Subscriber shall have the right to withdraw from this Agreement within fourteen (14) days after. written notice by the Cooperative of such occurrence (which notice the Cooperative hereby agrees to serve in a timely manner), provided the Subscriber delivers written notice of withdrawal to the Cooperative within such fourteen (14) day period. If the Subscriber elects not to so withdraw his /her subscription, the Subscriber shall, in such event, execute and deliver to the Cooperative an amended Subscription Agreement agreeing to pay the adjusted subscription price. 6. Notices Any notice provided for in this Agreement shall be in writing and shall be deemed to have been sufficient if and when delivered personally or when deposited in the United States Lfail, certified return receipt requested, postage, prepaid, addressed as follows: To the Subscriber: To the Cooperative: 7. Oral Representations Not To Be Relied Upon This Agreement will supersede any prior understandings - and agreements and constitutes the entire agreement between us, and no oral representations or statements shall be considered a part hereof. WITNESS: Subscriber Subscriber I . Address Telephone 4 CORPORATE PROFILE SKYLINE BUILDERS, INC. 3647 McKINLEY STREET N.E. MINNEAPOLIS, MINNESOTA 55418 (612) 781 -3184 THE COMPANY Skyline Builders, Inc. is a Minnesota based contractor - developer firm. Since its inception in September 1957, the principal of this privately held corporation has owned 100% of the stock, with its headquarters in the greater metropolitan area. The corporation formed for the purpose of acquiring undeveloped real estate, planning, zoning, engineering and building single family, multi - family and commercial structures. The services of the firm have also been made available and sold to other builders, engineers and developers. The firm also manages income properties for outside entities on a fee basis. Skyline Builders, Inc. is presently focused on buying and /or managing troubled properties, enabling them to become profitable real estate ventures. The strength of Skyline Builders, Inc. is the balance of its business, sales, management and marketing, which gives the company its solid base by which its plans to serve and prosper in the changing real estate environment of today. 1 PRINCIPAL OF THE CORPORATION Roland A. Stinski - President and Chairman of the Board. Mr. Stinski has been active in the corporation since 1961. He has extensive background in sales and marketing with forty -two years of experience in the real estate industry. His other areas of concern are production, research and development. Mr. Stinski and his family reside in the Metropolitan area. 2 HISTORY OF THE COMPANY During the growth years of 1962 -1988, Skyline Builders, Inc. achieved rapid production of 4,500 rental apartment units; it financed and built projects in good housing markets, with an antiquated (1980) value close to $90,000,000. Skyline had the visionary ability to anticipate the housing needs that ignited business development. From 1967 to 1980 the conception of Trevilla of New Brighton, a 189 bed nursing home; Trevilla of Robbinsdale, a 259 bed nursing home; and Trevilla of Golden Valley, a 287 bed nursing home, were completed. Market feasibility studies, building and operation of health care facilities were accomplished through Skyline's subsidiaries, which employed in excess of 600 persons. Subsequently, the corporation sold the nursing homes, producing substantial profits. 3 CORPORATE PORTFOLIO Presently, the corporate portfolio consists of several hundred apartment units developed, built, managed and owned by Skyline Builders, Inc. and /or one of its affiliates. As contractors, the company has built close to 1,000 apartment units for clients. In addition, the firm manages some of these complexes through an experienced building management staff. The portfolio is highly concentrated in income producing properties. The basic functions of the firm are property purchases, property development, property management and the creation of condominiums in existing properties. The functions are combined in one division so that a high degree of flexibility in structuring new potentials can be maintained. The company looks for developments that are well- conceived to fill a definite market need. Every investment is carefully evaluated on its individual merits in an effort to obtain a yield consistent with risk and prevailing investment alternatives. All investments are evaluated, regardless of how large or small. 4 LAND HOLDINGS Land is purchased only when it is expected to be developed immediately. Frequently, the design and development of a project is a joint venture with a land owner. At other times, it is built on Skyline land holdings in desirable areas. Skyline Builders' design and development of construction is unique in its speculative nature and reflects a venturesome spirit in today's changing, growing and business -hungry commerce. 5 RECENT ACQUISITIONS AND DEVELOPMENTS Broadmoor of Eden Prairie is a 240 unit complex with a very extensive common area facility and 80 garages. The complex is located in Eden Prairie, Minnesota, at the intersection of Prairie Center Drive and Highways 1691212 across the street from the Eden Prairie Shopping Mall. The 240 units were designed in two "Y" shaped buildings with 120 units in each "Y" building; four stories in height and separated by a two story central care area containing all the recreational and common area facilities. When purchased, there were 120 units finished and partially occupied in the 1st Phase. The 120 unit 2nd Phase was framed in, but not complete. The final 120 units were completed by Skyline Builders, Inc. and ready for leasing in the fall of 1990 . This property was purchased out of a foreclosure and managed back to financial health. The project has gone from a mismanaged financial disaster to a successful real estate venture through Skyline's quick and decisive action. Hillwind Centre is a 37,000 square foot, three -story, Class A office building which began occupancy on December 1, 1989. The building is located on the corner of 1 -694 and Central Avenue. Hillwind is 100% occupied with one -third of the space being leased to Burnet Real Estate. Burnsville. Minnesota is the site of construction for a mixed use development which will commence in 1999. This 6.5 acre tract is located in an excellent development area. 6 3M Distribution Center was purchased by R. A. Stinski at the end of 1989. It encompasses one million (1,000,000) square feet of office /industrial warehouse space in St. Paul, Minnesota. 3M Distribution Center is located approximately 3 1/2 miles northeast of the St. Paul central business district. The property totals 81.56 acres and consists of two modern warehouse structures of 645,000 SF, and 102,000 SF. There are twelve smaller storage buildings that total 239,000 SF. All buildings are located on 59.92 acre Parcel A. This parcel has paved access roads throughout, with broad paved areas at delivery and receiving locations. Parking areas adequate for employee needs are located throughout the property adjacent to each structure. The northern 20% of Parcel A is vacant, and presently used for trailer storage. Parcel B is a 21.63 acre undeveloped site at the northeast corner of the property. The property is an L- shaped 81.56 acre parcel bordered on the west by Hazel Street (2,200 feet); along the north by the Chicago & Northwestern Railroad Company (1,618 feet); the Maryland Avenue right -of -way extension; on the west lot line (2,058 feet); and by Ruth Street (800 feet). The property is completely serviced by municipal utilities - gas, water (including fire suppression needs), storm drainage, and sewer. 900,000 SF of the property is leased to Minnesota Mining and Manufacturing (3M) and 40,000 SF is leased to Metz Baking Co. for their St. Paul area distribution. Metz Baking Co. is a huge company with annual sales of approximately one -half billion dollars. This is an exceptional property. 7 The Preferred Products Buildinq was purchased by R. A. Stinski in September of 1995. It is a 300,000 SF high -bulk warehouse area and is located in the Crosby Business Park in Chaska, Minnesota. It is in the heart of one of the industrial parks that has expanded into one of the fastest growing industrial areas of the Twin Cities. The building was built in 1974 by Rauenhorst Corporation for Super Valu. The property was designed for their private label food products, such as peanut butter. Some of the products were actually produced and shipped from the site, while other were just warehoused and shipped. The building 1 PP 9 was used for this function until the Preferred Products division was sold to R. A. Stinski. The building was kept very clean and in good shape because it had food processing in it. The 28' clear heights of the warehouse and the production area make it very functional for a wide variety of users. There are 3 tenants occupying 100% of the space. The 3 tenants are Sanofi, FSI and Fluoroware. Adjoining the property are 15 acres which can be used for expanding the building. Approximately 200,000 SF of industrial space can be built either onto the existing building or as a stand alone facility. 8 5201 Winnetka Avenue North, was purchased by Mr. Stinski in 1996. The building is a 292,000 SF office and warehouse building located in New Hope, Minnesota. The building consists of 278,000 SF of warehouse and 14,000 SF of office space. The building is located on 12.61 acres of land. The property was designed and built for the Ben Franklin stores. The building was used as a storage and shipping distribution center for Ben Franklin stores and was occupied for this function until purchased by Mr. Stinski in 1996. The warehouse has a building ceiling height of 20 feet. There are 20 dock doors consisting of 12 enclosed docks and 8 regular docks. Rail access is also available and serviced by the Soo Line Railroad. There is a 125 car surface parking area for employees. 9 RELATIONSHIP WITH FINANCIAL INSTITUTIONS Skyline Builders, Inc. and its subsidiaries have exceptional rapport with financial institutions and have obtained loans from Bank Windsor, TCF Bank, fsb, Marquette Bank, Norwest Bank Central, N.A. and Miller & Schroeder Financial, Inc. The corporation has banked with Norwest Bank Central, N.A. since 1961, where it has an excellent line of credit. 10 PROFESSIONAL STAFF The company has a staff of 18 persons, not including commission personnel, resident managers, and caretakers. The job function of employees is to maintain the properties in an attractive manner in an effort to regulate demand and desirability for years to come. It should be noted, however, that all properties are serviced in- house. 11 ACCOMPLISHMENTS The following is a list of selected developments to show the size and type of investments the firm has participated in the past years. Developer /Builder 189 bed nursing home Owner /Manager Trevilla of New Brighton 825 - 1st Avenue N.W. New Brighton, Minnesota Developer /Builder 259 bed nursing home Owner /Manager Trevilla of Robbinsdale 3131 France Avenue North Robbinsdale, Minnesota Developer /Builder 287 bed nursing home Owner /Manager Trevilla of Golden Valley 7505 Country Club Drive Golden Valley, Minnesota Developer /Builder 72 unit apartment Owner /Manager Skyline Villa Financed, converted to condos 9141/9147 West Highway 55 Marketed end product Golden Valley, Minnesota Developer /Builder 198 unit apartment Owner /Manager Driftwood Apartments 101/135 East 59th Street Minneapolis, Minnesota Developer /Builder 96 unit apartment Owner /Manager Hazelwood Park East 1264/1288 Hazelwood Street St. Paul, Minnesota Developer /Builder 102 unit apartment Contract Holder /Manager Labore Ridge Apartments 1015/1075 E. County Rd. D Vadnais Heights, Minnesota 12 PROPERTIES DEVELOPED / OWNED / MANAGED BY SKYLINE BUILDERS, INC. Developer /Builder 117 unit apartment Contract Holder /Manager Pleasant Acres 200/218 West 62nd Street Minneapolis, Minnesota Developer /Builder 81 unit apartment Contract Holder /Manager Villa Cortina Apartments 2900/08 Bryant & 2919 Colfax South Minneapolis, Minnesota Developer /Builder 14 unit townhouse Owner /Manager Skyline Plaza Townhouses 7430/7462 West Highway 55 Golden Valley, Minnesota Developer /Builder 364 unit apartment Owner /Manager Polynesian Village 1201/1497-10th Street N W New Brighton, Minnesota Developer /Builder 113 unit apartment Owner /Manager Hazelwood Park West 1263/1293 Hazelwood Street St. Paul, Minnesota Purchaser /Manager 264 unit apartment Refinanced, converted to condos Greensboro Square Marketed end product Franklin at Louisiana St. Louis Park, Minnesota Developer /Builder 68 unit apartment Re- Purchaser /Manager Hidden Park Refinanced, converted to condos 6000 West Broadway Marketed end product New Hope, Minnesota 13 i OVERVIEW OF DEVELOPMENT CONCEPT Development: I Two 3 -story senior cooperative buildings with approximately 58 units in each building, for a total of approximately 116 units. The units would be 1 and 2 bedroom units owned individually by members of the cooperative. The developer would be obligated, under the terms of his financing, to have 90% of the units pre -sold before beginning construction. The Developer would have 24th months from the execution of an agreement with the City to pre - sell the units and begin construction of both buildings. The Developer has re- configure the placement to push the building back a bit closer to highway 252 and turned them slightly. Eligibility to Own: Ownership in the buildings would be limited to persons 62 years of age and older, along with their spouses. A surviving spouse under 62 years of age would be permitted to remain. If a person was unable to sell or wanted to sell to the cooperative, the cooperative can buy units back. Ownership would continue to be restricted to persons 62 and over after the initial sale. There was some discussion earlier on whether the project could be limited as to age after the initial purchaser. The Developer has researched and advised that the by -laws can be and would be drafted to limit subsequent purchasers to persons over 62 Height: The buildings would be between 50 and 54 feet tall. The Devloper would need permission to exceed the 45 foot limitation in this area. The Developer has re- designed the roof line to reduce the height of the proposed building. Materials: The City would specify minimum quality standards for the exterior materials such as brick and stucco, shingle weight, and window quality. The City would also specify compliance with a landscaping plan and storm water run -off requirements. (A pond would be required for the development's storm water run -off.) Additionally, HUD would specify many conditions regarding the quality of the materials used in the project. Relation to Future Redevelopment: Originally, there were discussions of granting an exclusive right to re- develop along Willow Lane. The current proposal would be limited to the land being used for the proposed senior cooperative. Financing: The Developer proposes to use HUD financing with a 40 year mortgage. This will restrict the use of the property for at least the life of the mortgage, in addition to the restrictions that would be contained in the by -laws of the cooperative. City Involvement: The City would sell the property to the Developer for $255,000. This price represents a value based on the range of estimated values for property in this area of the City. City Investment: The City has spent approximately $1.6 Million on acquisition, relocation, asbestos abatement, and demolition to assemble the land. Traffic: It is anticipated that the nature of the housing development would result in some increased traffic at non -rush hour times. The traffic would be anticipated to be less than that generated by the businesses that were acquired and removed by the City. Developer: The City has researched the Developer's ability to perform and has found that the Developer's previous and current holdings indicate an ability to successfully meet the obligations of a development agreement and deliver a quality project.