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Ordinance 2004-61 21113401:11)=: 7`1 Filed t or Record in KENDALL COUNTYP ILLINOIS PAUL ANDERSON 12•-02-2004 At 112:06 Rm. ORDINANCE 244.00 UNITED CITY OF YORKVILLE KENDALL COUNTY STATE OF ILLINOIS ORDINANCE NUMBER 2004-61 AN ORDINANCE PROVIDING FOR ISSUANCE OF UNITED CITY OF YORKVILLE, KENDALL COUNTY, ILLINOIS SPECIAL SERVICE AREA NUMBER 2004-104 CENTRAL GRANDE RESERVE SPECIAL TAX BONDS, SERIES 2004 (MPI GRANDE RESERVE PROJECT) ADOPTED BY THE CITY COUNCIL OF THE UNITED CITY OF YORKVILLE KENDALL COUNTY STATE OF ILLINOIS The 26th day of October, 2004 Published in pamphlet form by authority of the City Council of the United City of Yorkville, Kendall County, Illinois this day of 52004. 011.561091.4 ORDINANCE NO. 2004-61 AN ORDINANCE PROVIDING FOR ISSUANCE OF UNITED CITY OF YORKVILLE, KENDALL COUNTY, ILLINOIS SPECIAL SERVICE AREA NUMBER 2004-104 CENTRAL GRANDE RESERVE SPECIAL TAX BONDS, SERIES 2004 (MPI GRANDE RESERVE PROJECT) BE IT ORDAINED BY THE CITY COUNCIL OF THE UNITED CITY OF YORKVILLE, KENDALL COUNTY, ILLINOIS, AS FOLLOWS: Section 1. Findings and Declarations. It is found and declared by the City Council of the United City of Yorkville, Kendall County, Illinois (the "City") as follows: a. The City has previously established Special Service Area Number 2004-104 Central Grande Reserve described more fully in Exhibit A to this Ordinance (the "Special Service Area") pursuant to Ordinance Number 2004-49 adopted on September 14, 2004 (the "Establishing Ordinance") as amended by Ordinance No. 2004-60 adopted on October 26, 2004, the provisions of the Special Service Area Tax Law, 35 ILCS 200/27-5 et seq., as amended (the "Special Service Area Act") and the provisions of Section 7 of Article VII of the 1970 Constitution of the State of Illinois, and has otherwise complied with all other conditions precedent required by the Special Service Area Act. b. It is necessary and in the best interests of the City to provide at this time special services benefiting the Special Service Area consisting of the acquisition, construction and installation of public improvements including, but not limited to, engineering, soil testing and appurtenant work, mass grading and demolition, storm water management facilities, storm drainage systems and storm sewers, site clearing and tree removal, public water facilities, sanitary sewer facilities, erosion control measures, roads, streets, curbs, gutters, street lighting, traffic controls, sidewalks, equestrian paths and related street improvements, and equipment and materials necessary for the maintenance thereof, public parks, park improvements, bicycle paths, landscaping, wetland mitigation and tree installation, costs for land and easement acquisitions relating to any of the foregoing improvements, required tap-on and related fees for water or sanitary sewer services and other eligible costs. The City presently estimates the total cost of these Special Services to be funded through the issuance of bonds at this time together with costs of borrowing money for that purpose, funding administrative expenses and providing for necessary debt service reserves and capitalized interest (collectively, the "Costs of the Special Services") to not exceed $14,000,000. c. The City does not have sufficient funds on hand or available from other sources with which to pay the costs of the Special Services. d. It is in the best interests of the City to issue not to exceed $14,000,000 principal amount of its Special Service Area Number 2004-104 Central Grande Reserve 011.561091.4 Special Tax Bonds, Series 2004 (MPI Grande Reserve Project) (the "Bonds") as provided in this Ordinance, to pay or provide funds for a portion of the Costs of the Special Services. e. The borrowing of the sum of not to exceed $14,000,000 and the issuance of the Bonds in that amount are for purposes constituting special services in the Special Service Area under the Special Service Area Act. f. After due publication of a notice as required by the Special Service Area Act, a public hearing to consider the establishment of the Special Service Area, the issuance of the Bonds for the purpose of paying the costs of the Special Services and the manner in which the Bonds are proposed to be retired and the proposed tax levy, was held on March 23, 2004 at 7:00 p.m. No objection petition has been filed with respect to the establishment of the Special Service Area or the issuance of the Bonds within the period of time allowed pursuant to the Special Service Area Act. Section 2. Issuance of Bonds. The City shall borrow the sum of not to exceed $14,000,000 by issuing the Bonds as provided in this Ordinance. The Bonds which shall be designated "United City of Yorkville, Kendall County, Illinois Special Service Area Number 2004-104 Central Grande Reserve Special Tax Bonds, Series 2004 (MPI Grande Reserve Project)," and shall be issued for the purpose of providing a portion of the funds needed for the Costs of the Special Services. The Bonds shall be issued pursuant to the powers of the City pursuant to Section 7 of Article VII of the 1970 Constitution of the State of Illinois; the Special Service Area Act; and the Local Government Debt Reform Act, 30 ILCS 350/1 et seq. (the "Debt Act"). Section 3. Approval of Documents. There have been submitted to the City Council forms of the following documents relating to the issuance of the Bonds: a. a form of Trust Indenture (the "Indenture") between the City and LaSalle Bank National Association, as Trustee, to be dated as of November 1, 2004, which form of Indenture is attached as Exhibit B to this Ordinance; b. a form of Bond Purchase Agreement (the "Bond Purchase Agreement") among the City, ABN AMRO Financial Services, Inc. and William Blair & Company, L.L.C., as Underwriters (collectively, the "Underwriter"), and MPI-2 Yorkville Central LLC (the "Developer") to be dated as of the date the offer of the Underwriter to purchase the Bonds is accepted by the City, which form of Bond Purchase Agreement is attached as Exhibit C to this Ordinance; c. a form of Public Improvement Agreement between the City and the Developer, which form of Public Improvement Agreement is attached as Exhibit D to this Ordinance; d. a form of the preliminary Limited Offering Memorandum (the "Limited Offering Memorandum") used by the Underwriter in its initial offering of the Bonds, which form of Limited Offering Memorandum is attached as Exhibit E to this Ordinance; 2 011.561091.4 e. a form of the Agreement for Consulting Services by and between the Developer, David Taussig & Associates, Inc. ("Taussig") and the City which form of Agreement for Consulting Services is attached as Exhibit F to this Ordinance; and f. a form of the Agreement for Administration Services between David Taussig & Associates, Inc. and the City which form of Agreement for Administration Services is attached as Exhibit G to this Ordinance. Such documents are approved as to form and substance and the Mayor and the City Clerk of the City are authorized and directed to execute and deliver and/or authorize the use of such documents on behalf of the City in the forms submitted with such additions, deletions and completions of the same (including the establishment of the terms of the Bonds within the parameters set forth in this Ordinance) as the Mayor and the City Clerk deem appropriate; and when each such document is executed, attested, sealed and delivered on behalf of the City, as provided herein, each such document will be binding on the City; from and after the execution and delivery of each such document, the officers, employees and agents of the City are hereby authorized, empowered and directed to do all such acts and things and to execute all such additional documents as may be necessary to carry out, comply with and perform the provisions of each such document as executed; and each such document shall constitute, and hereby is made, a part of this Ordinance, and a copy of each such document shall be placed in the official records of the City, and shall be available for public inspection at the office of the City Clerk. Either the Mayor or City Clerk is authorized and directed, subject to the terms of the Bond Purchase Agreement as executed, to execute the final Limited Offering Memorandum in substantially the form of the preliminary Limited Offering Memorandum presented hereto with such changes, additions or deletions as they deem appropriate to reflect the final terms of the Bonds, the Indenture and other matters. Section 4. Bond Terms. The Bonds shall be issued as provided in the Indenture and shall be issued in the principal amount of not to exceed $14,000,000, shall be dated, shall mature, shall bear interest at the rates (not to exceed in any year eight percent (8%) per annum) and shall be subject to redemption at the times and prices as set forth in the Indenture, and shall be sold to the Underwriter at a purchase price of not less than 98% of the principal amount of the Bonds with an original issue discount of not to exceed 2% of the principal amount of the Bonds, all as set forth in the Bond Purchase Agreement. The execution and delivery of the Bond Purchase Agreement by the Mayor and the City Clerk shall evidence their approval of the terms of the Bonds set forth above. Section 5. Execution and Delivery of Bonds. The Mayor and the City Clerk are authorized and directed to execute and deliver the Bonds and, together with other Authorized Officers (as defined in the Indenture), to take all necessary action with respect to the issuance, sale and delivery of the Bonds, all in accordance with the terms and procedures specified in this Ordinance and the Indenture. The Bonds shall be delivered to the Trustee who is directed to authenticate the Bonds and deliver the Bonds to the Underwriter upon receipt of the purchase price for the Bonds. The Bonds shall be in substantially the form set forth in the Indenture. Each Bond shall be executed by the manual or facsimile signature of the Mayor and the manual or facsimile 3 011.561091.4 signature of the City Clerk and shall have the corporate seal of the City affixed to it (or a facsimile of that seal printed on it). The Mayor and the City Clerk (if they have not already done so) are authorized and directed to file with the Illinois Secretary of State their manual signatures certified by them pursuant to the Uniform Facsimile Signatures of Public Officials Act, as amended, which shall authorize the use of their facsimile signatures to execute the Bonds. Each Bond so executed shall be as effective as if manually executed. In case any officer of the City whose signature or a facsimile of whose signature shall appear on the Bonds shall cease to be such officer before authentication and delivery of any of the Bonds, that signature or facsimile signature shall nevertheless be valid and sufficient for all purposes, the same as if the officer had remained in office until delivery. No Bond shall be valid for any purpose unless and until a certificate of authentication on that Bond substantially in the form set forth in the bond form in the Indenture shall have been duly executed by the Trustee. Execution of that certificate upon any Bond shall be conclusive evidence that the Bond has been authenticated and delivered under this Ordinance. Section 6. Bonds are Limited Obligations-, Levy of Special Tax; Pledge. The Bonds shall constitute limited obligations of the City, payable from the Special Taxes (as defined below) to be levied on all taxable real property within the Special Service Area as provided below. The Bonds shall not constitute the general obligations of the City and neither the full faith and credit nor the unlimited taxing power of the City shall be pledged as security for payment of the Bonds. There are hereby levied Special Taxes upon all taxable real property within the Special Service Area in accordance with the Special Tax Roll and Report (as defined below) sufficient to pay and discharge the principal of and interest on the Bonds at maturity or mandatory sinking fund redemption dates and to pay interest on the Bonds for each year at the interest rates set forth in Section 2.4 of the Indenture and to pay for the estimated Administrative Expenses (as defined in the Indenture) of the City and Kendall County, if any, for each year including specifically the following amounts for the following years (the "Special Taxes"): An Amount Sufficient Year of Levy to Produce the Sum of: 2005 $2,334,285 2006 2,369,078 2007 2,404,594 2008 2,440,334 2009 2,477,095 2010 2,513,856 2011 2,551,564 2012 2,589,570 2013 2,628,523 2014 2,667,476 2015 2,707,450 2016 2,748,371 2017 2,789,590 4 011.561091.4 An Amount Sufficient Year of Levy to Produce the Sum of: 2018 2,831,756 2019 2,873,922 2020 2,917,333 2021 2,960,744 2022 3,005,400 2023 3,050,779 2024 3,096,382 2025 3,143,006 2026 3,189,854 2027 3,237,723 2028 3,286,539 2029 3,335,653 2030 3,385,714 2031 3,436,796 2032 3,488,102 Pursuant to the Special Tax Roll established by the Special Tax Roll and Report prepared for the Special Service Area (the "Special Tax Roll and Report"), the Special Taxes shall be computed, extended and collected in accordance with the Special Tax Roll and Report, and divided among the taxable real property within the Special Service Area in accordance with the terms of the Establishing Ordinance and the Special Tax Roll and Report. It shall be the duty of the City and the City hereby covenants, annually on or before the last Tuesday of December for each of the years 2004 through 2032 to calculate or cause the Consultant appointed pursuant to the Indenture to calculate the Special Tax Requirement (as defined in the Indenture) for each Series of Bonds issued pursuant to the Indenture; to amend the Special Tax Roll pursuant to Section VIII of the Special Tax Roll and Report; to adopt an ordinance approving the amount of the current calendar year's Special Tax Requirement and to abate the Special Taxes levied pursuant to this Ordinance to the extent the taxes levied pursuant to this Ordinance exceed the Special Tax Requirement as calculated by the City pursuant to the Establishing Ordinance and the Special Tax Roll and Report; and provide the County tax collector of Kendall County the amended Special Tax Roll. On or before the last Tuesday of January for each of the years 2005 through 2033 the City shall notify the Trustee and the Notice Beneficial Owners (as defined in the Indenture) of the amount of the Special Tax Requirement for each Series of Bonds issued pursuant to the Indenture and the amount of the Special Taxes to be abated. The City shall take all actions which shall be necessary to provide for the levy, extension, collection and application of the taxes levied by this Ordinance, including enforcement, of such taxes as provided by law but only as set forth in Section 7(a)below. The Special Taxes levied as provided above shall be deposited in the Bond and Interest Fund created pursuant to the Indenture and are appropriated to and are irrevocably pledged to and shall be used only for the purposes set forth in Section 7.1 of the Indenture. Section 7. Special Covenants. The City covenants with the holders of the Bonds from time to time outstanding that it (i) will take all actions which are necessary to be taken (and 5 011.561091.4 avoid any actions which it is necessary to avoid being taken) so that interest on the Bonds will not be or become included in gross income for federal income tax purposes under existing law, including without limitation the Internal Revenue Code of 1986, as amended (the "Code"); (ii) will take all actions reasonably within its power to take which are necessary to be taken (and avoid taking any actions which are reasonably within its power to avoid taking and which are necessary to avoid) so that the interest on the Bonds will not be or become included in gross income for federal income tax purposes under the federal income tax laws as in effect from time to time; and (iii) will take no action or permit any action in the investment of the proceeds of the Bonds, amounts held under the Indenture or any other funds of the City which would result in making interest on the Bonds subject to federal income taxes by reason of causing the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code, or direct or permit any action inconsistent with the regulations under the Code as promulgated and as amended from time to time and as applicable to the Bonds. The Mayor, City Clerk, City Treasurer and other Authorized Officers of the City are authorized and directed to take all such actions as are necessary in order to carry out the issuance and delivery of the Bonds including, without limitation, to make any representations and certifications they deem proper pertaining to the use of the proceeds of the Bonds and other moneys held under the Indenture in order to establish that the Bonds shall not constitute arbitrage bonds as so defined. The City further covenants with the holders of the Bonds from time to time outstanding that: a. it will take all actions, if any, which shall be necessary in order further to provide for the levy, extension, collection and application of the Special Taxes imposed by or pursuant to this Ordinance or the Establishing Ordinance, including enforcement of the Special Taxes by providing the County of Kendall with such information as is deemed necessary to enable it to include the property subject to the delinquent tax in the County Collector's annual tax sale and in the event the tax lien is forfeited at such tax sale by instituting foreclosure proceedings all in the manner provided by law; provided, however, that the obligation to institute any foreclosure action shall only arise in the event the City makes the determination that the proceeds from each foreclosure action have a commercially reasonable expectation of exceeding the costs thereof, b. it will not take any action which would adversely affect the levy, extension, collection and application of the Special Taxes, except to abate the Special Taxes to the extent permitted by the Special Tax Roll and Report and as provided in this Ordinance; and c. it will comply with all present and future laws concerning the levy, extension and collection of the Special Taxes; in each case so that the City shall be able to pay the principal of and interest on the Bonds as they come due and replenish the Reserve Fund to the Reserve Requirement and it will take all actions necessary to assure the timely collection of the Special Taxes, including without limitation, the enforcement of any delinquent Special Taxes as described in paragraph(a) above. Section 8. Additional Authority. The Mayor, the City Clerk and the other officers of the City are authorized to execute and deliver on behalf of the City such other documents, 6 011.561091.4 agreements and certificates and to do such other things consistent with the terms of this Ordinance as such officers and employees shall deem necessary or appropriate in order to effectuate the intent and purposes of this Ordinance, including without limitation to make any representations and certifications they deem proper pertaining to the use of the proceeds of the Bonds in order to establish that the Bonds shall not constitute arbitrage bonds as defined in Section 7 above. Section 9. Filing of Ordinance. The City Clerk is directed to file a certified copy of this Ordinance, and an accurate map of the Special Service Area, with the County Clerk of Kendall County. Section 10. Severability. If any section, paragraph, clause or provision of this Ordinance (including any section, paragraph, clause or provision of any exhibit to this Ordinance) shall be held invalid, the invalidity of such section, paragraph, clause or provision shall not affect any of the other sections, paragraphs, clauses or provisions of this Ordinance (or of any of the exhibits to this Ordinance). Section 11. Repealer; Effect of Ordinance. All ordinances, resolutions and orders or parts of ordinances, resolutions and orders in conflict with this Ordinance are repealed to the extent of such conflict. The City Clerk shall cause this Ordinance to be published in pamphlet form. This Ordinance shall be effective upon its passage and publication as provided by law. PASSED BY THE CITY COUNCIL OF THE UNITED CITY OF YORKVILLE, KENDALL COUNTY, ILLINOIS this day oC)tAmrQx–,, , 2004. PAUL JAMES MARTY MUNNS `- RICHARD STICKA WANDA OHARE VALERIE BURD _ ROSE SPEARS LARRY KOT JOSEPH BESCO PASSED AND APPROVED this,-.-J,,day n jCm-2�--- , 2004 Mayor ATTEST: [SEAL] i er 7 011.561091.4 EXHIBIT A GRANDE RESERVE CENTRAL REGION THAT PART OF THE SOUTHEAST QUARTER OF SECTION 11, THAT PART OF SECTION 14, AND THAT PART OF THE NORTH HALF OF SECTION 23, TOWNSHIP 37 NORTH, RANGE 7 EAST OF THE THIRD PRINCIPAL MERIDIAN DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF KENNEDY ROAD WITH THE SOUTHERLY LINE OF THE BURLINGTON NORTHERN RAILROAD RIGHT-OF-WAY THROUGH SAID SECTION 14; THENCE NORTH 73 DEGREES 14 MINUTES 21 SECONDS EAST ALONG SAID SOUTHERLY LINE 1239.61 FEET TO THE NORTH LINE OF THE NORTHWEST QUARTER OF SAID SECTION 14; THENCE NORTH 88 DEGREES 04 MINUTES 00 SECONDS EAST, ALONG SAID NORTH LINE, 610.29 FEET TO THE NORTHEAST CORNER OF SAID NORTHWEST QUARTER; THENCE NORTH 87 DEGREES 54 MINUTES 03 SECONDS EAST ALONG THE SOUTH LINE OF SAID SOUTHEAST QUARTER OF SECTION 11, A DISTANCE OF 1329.33 FEET TO THE WEST LINE OF THE SOUTHEAST QUARTER OF SAID SOUTHEAST QUARTER; THENCE NORTH 01 DEGREES 21 MINUTES 20 SECONDS WEST ALONG SAID WEST LINE, 511.01 FEET TO SAID SOUTHERLY LINE OF THE BURLINGTON NORTHERN RAILROAD; THENCE NORTH 73 DEGREES 14 MINUTES 21 SECONDS EAST, ALONG SAID SOUTHERLY LINE, 837.66 FEET TO THE CENTERLINE OF MILL ROAD; THENCE SOUTH 74 DEGREES 18 MINUTES 13 SECONDS EAST ALONG SAID CENTERLINE 546.02 FEET TO THE EAST LINE OF SAID SOUTHEAST QUARTER OF SECTION 11; THENCE SOUTH 01 DEGREE 19 MINUTES 08 SECONDS EAST ALONG SAID EAST LINE, 556.17 FEET TO THE SOUTHEAST CORNER OF SAID SOUTHEAST QUARTER; THENCE SOUTH 01 DEGREE 19 MINUTES 08 SECONDS EAST ALONG THE EAST LINE OF THE NORTHEAST QUARTER OF SAID SECTION 14, A DISTANCE OF 1122.0 FEET; THENCE SOUTH 87 DEGREES 45 MINUTES 51 SECONDS WEST, 438.0 FEET TO THE NORTHEAST CORNER OF LYNWOOD SUBDIVISION, EXTENSION FOUR; THENCE SOUTH 87 DEGREES 45 MINUTES 51 SECONDS WEST, ALONG THE NORTHERLY LINE OF SAID LYNWOOD SUBDIVISION, EXTENSION FOUR, 1168.80 FEET TO THE NORTHWEST CORNER THEREOF; THENCE SOUTH 01 DEGREE 46 MINUTES 18 SECONDS EAST, ALONG THE WESTERLY LINE OF LYNWOOD SUBDIVISION, EXTENSIONS FOUR AND FIVE, 1173.80 FEET TO AN IRON STAKE; THENCE SOUTH 01 DEGREE 47 MINUTES 49 SECONDS EAST, ALONG THE WESTERLY LINE OF LYNWOOD SUBDIVISION, EXTENSION FIVE, 376.25 FEET TO AN IRON STAKE; THENCE SOUTH 02 DEGREES 01 MINUTES 46 SECONDS EAST ALONG THE WESTERLY LINES OF LYNWOOD SUBDIVISION, EXTENSIONS FIVE AND SIX, 1950.62 FEET TO AN IRON STAKE; THENCE SOUTH 01 DEGREE 51 MINUTES 08 SECONDS EAST, ALONG THE WESTERLY LINE OF LYNWOOD SUBDIVISION, EXTENSION SIX, 879.29 FEET TO THE CENTERLINE OF U. S. ROUTE NO. 34; THENCE SOUTH 45 DEGREES 14 MINUTES 47 SECONDS WEST ALONG SAID CENTERLINE 878.60 FEET; THENCE NORTH 37 DEGREES 07 MINUTES 26 SECONDS WEST, 2106.30 FEET;THENCE NORTH 47 DEGREES 17 MINUTES 26 SECONDS WEST, 1500.85 FEET TO THE CENTERLINE OF KENNEDY ROAD AND THE EASTERNMOST CORNER OF A TRACT DESCRIBED IN A QUIT CLAIM DEED TO GEORGE AND GLENNA PATTERSON, HUSBAND AND WIFE, RECORDED AS DOCUMENT NO. 72- 375 ON JANM..l.ARY 25, 1972; THENCE NORTH 25 DEGREES 56 MINUTES 49 SECONDS EAST ALONG SAID CENTERLINE 236.34 FEET; THENCE NORTHEASTERLY AND NORTHERLY, A RADIUS OF 800.0 FEET; AN ARC DISTANCE OF 419.10 FEET; THENCE NORTH 04 DEGREES 04 MINUTES 07 SECONDS WEST ALONG SAID CENTERLINE 531.06 FEET; THENCE NORTH 05 DEGREES 06 MINUTES 07 SECONDS WEST ALONG SAID CENTERLINE 1866.0 FEET TO THE POINT OF BEGINNING IN BRISTOL TOWNSHIP, KENDALL COUNTY, ILLINOIS AND CONTAINING 372.223 ACRES. ALSO: THAT PART OF SECTIONS FOURTEEN (14), FIFTEEN (15) AND TWENTY- THREE (23), ALL IN TOWNSHIP THIRTY-SEVEN (37) NORTH, RANGE SEVEN (7) EAST OF THE THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS: COMMENCING AT THE SOUTHERLY CORNER OF STRUKEL'S PARADISE LAKE UNIT NO. 1, (SAID POINT ALSO BEING THE INTERSECTION OF THE CENTERLINE OF BRISTOL ROAD AND THE CENTERLINE OF KENNEDY ROAD), AS SHOWN ON THE SUBDIVISION PLAT OF STRUKEL'S PARADISE LAKE UNIT NO. 1 RECORDED AS DOCUMENT#71-215; THENCE NORTH 60 DEGREES 17 MINUTES 26 SECONDS EAST, 724.86 FEET ALONG THE CENTERLINE OF KENNEDY ROAD TO THE POINT OF CURVATURE OF A 1094.72 FOOT RADIUS CURVE TO THE LEFT; THENCE NORTHEASTERLY 631.18 FEET ALONG SAID CURVE WHOSE CHORD BEARS NORTH 43 DEGREES 46 MINUTES 24 SECONDS EAST 622.47 FEET TO THE POINT OF TANGENCY OF SAID CURVE; THENCE NORTH 27 DEGREES 15 MINUTES 21 SECONDS EAST 11.57 FEET ALONG SAID CENTERLINE TO A POINT; THENCE SOUTH 37 DEGREES 39 MINUTES 00 SECONDS EAST 1776.45 FEET TO A POINT; THENCE SOUTH 52 DEGREES 21 MINUTES 00 SECONDS WEST 1343.89 FEET TO A POINT IN THE CENTERLINE OF BRISTOL ROAD; THENCE NORTH 37 DEGREES 39 MINUTES 00 SECONDS WEST 1778.85 FEET ALONG SAID CENTERLINE TO THE POINT OF BEGINNING. ALSO: THAT PART OF SECTIONS FOURTEEN (14) AND TWENTY-THREE (23), ALL IN TOWNSHIP THIRTY-SEVEN (37) NORTH, RANGE SEVEN (7) EAST OF THE THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS: COMMENCING AT THE SOUTHERLY CORNER OF STRUKEUS PARADISE LAKE UNIT NO. 1, (SAID POINT ALSO BEING THE INTERSECTION OF THE CENTERLINE OF BRISTOL ROAD AND THE CENTERLINE OF KENNEDY ROAD), AS SHOWN ON THE SUBDIVISION PLAT OF STRUKEL'S PARADISE LAKE UNIT NO. 1, RECORDED AS DOCUMENT#71-215; THENCE SOUTH 37 DEGREES 39 MINUTES 00 SECONDS EAST 1778.85 FEET A[ ONG THE CENTERLINE OF BRISTOL ROAD FOR THE POINT OF BEGINNING;THENCE NORTH 52 DEGREES 21 MINUTES 00 SECONDS EAST 1343.89 FEET TO A POINT; THENCE SOUTH 37 DEGREES 39 MINUTES 00 SECONDS EAST 1645.23 FEET TO A POINT IN THE CENTERLINE OF ILLINOIS ROUTE 34; THENCE SOUTH 46 DEGREES 33 MINUTES 17 SECONDS WEST 1350.80 FEET ALONG SAID CENTERLINE OF ILLINOIS ROUTE 34 TO THE INTERSECTION OF THE CENTERLINE OF BRISTOL ROAD; THENCE NORTH 37 DEGREES 39 MINUTES 00 SECONDS WEST 1781.63 FEET ALONG SAID CENTERLINE OF BRISTOL ROAD TO THE POINT OF BEGINNING. ALSO: THAT PART OF SECTIONS FOURTEEN (14) AND TWENTY-THREE (23), ALL IN TOWNSHIP THIRTY-SEVEN (37) NORTH, RANGE SEVEN (7) EAST OF THE THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS: COMMENCING AT THE SOUTHERLY CORNER OF STRUKEL'S PARADISE LAKE UNIT NO. 1, (SAID POINT ALSO BEING THE INTERSECTION OF THE CENTERLINE OF BRISTOL ROAD AND THE CENTERLINE OF KENNEDY ROAD), AS SHOWN ON THE SUBDIVISION PLAT OF STRUKEL'S PARADISE LAKE UNIT NO. 1, RECORDED AS DOCUMENT#71-215; THENCE NORTH 60 DEGREES 17 MINUTES 26 SECONDS EAST 724.86 FEET ALONG THE CENTERLINE OF KENNEDY ROAD TO THE POINT OF CURVATURE OF A 1094.72 FOOT RADIUS CURVE TO THE LEFT; THENCE NORTHEASTERLY 631.18 FEET ALONG SAID CURVE WHOSE CHORD BEARS NORTH 43 DEGREES 46 MINUTES 24 SECONDS EAST 622.47 FEET TO THE POINT OF TANGENCY OF SAID CURVE; THENCE NORTH 27 DEGREES 15 MINUTES 21 SECONDS EAST 11.57 FEET ALONG SAID CENTERLINE FOR THE POINT OF BEGINNING; THENCE CONTINUE NORTH 27 DEGREES 15 MINUTES 21 SECONDS EAST 551.92 FEET ALONG SAID CENTERLINE TO A POINT; THENCE SOUTH 45 DEGREES 56 MINUTES 15 SECONDS EAST 1501.96 FEET ALONG AN EXISTING FENCE LINE TO A POINT; THENCE SOUTH 35 DEGREES 48 MINUTES 56 SECONDS EAST 2104.69 FEET ALONG SAID FENCE LINE TO A POINT IN THE CENTERLINE OF ILLINOIS ROUTE 34; THENCE SOUTH 46 DEGREES 33 MINUTES 17 SECONDS WEST 652.28 FEET ALONG SAID CENTERLINE TO A POINT; THENCE NORTH 37 DEGREES 39 MINUTES 00 SECONDS WEST 3421.68 FEET TO THE POINT OF BEGINNING. ALSO: THAT PART OF THE SOUTH HALF OF SECTION 11 AND PART OF THE NORTHWEST QUARTER OF SECTION 14, TOWNSHIP 37 NORTH, RANGE 7 EAST OF THE THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS: BEGINNING AT THE SOUTHWEST CORNER OF SECTION 11; THENCE SOUTH 0 DEGREES 57 MINUTES 0 SECONDS WEST 442 FEET TO THE NORTH LINE OF THE RIGHT OF WAY OF THE CHICAGO, BURLINGTON AND QUINCY RAILROAD; THENCE NORTH 75 DEGREES 17 MINUTES 0 SECONDS EAST 1728 FEET ALONG SAID RIGHT OF WAY LINE TO THE SOUTH LINE OF SECTION 11; THENCE SOUTH 89 DEGREES 53 MINUTES 0 SECONDS EAST 1001.25 FEET ALONG THE SOUTH LINE OF SAID SECTION 11 TO THE SOUTHEAST CORNER OF THE WEST HALF OF SAID SECTION 11; THENCE NORTH 89 DEGREES 54 MINUTES 0 SECONDS EAST 1339.5 FEET ALONG THE SOUTH LINE OF SAID SECTION 11 TO THE SOUTHEAST CORNER OF THE WEST HALF OF THE SOUTHEAST QUARTER OF SAID SECTION 11; THENCE NORTH 0 DEGREES 40 MINUTES 0 SECONDS EAST 977.5 FEET TO THE CENTERLINE OF THE HIGHWAY; THENCE NORTH 74 DEGREES 15 MINUTES 0 SECONDS WEST 727.2 FEET ALONG SAID CENTERLINE; THENCE NORTH 79 DEGREES 10 MINUTES 0 SECONDS WEST 2877.4 FEET ALONG SAID CENTERLINE TO THE CENTERLINE OF A NORTH AND SOUTH HIGHWAY; THENCE SOUTH 7 DEGREES 7 MINUTES 0 SECONDS EAST 364.8 FEET ALONG THE CENTER OF SAID NORTH AND SOUTH HIGHWAY; THENCE NORTH 89 DEGREES 47 MINUTES 0 SECONDS WEST 503.33 FEET TO THE WEST LINE OF SAID SECTION 11; THENCE SOUTH 0 DEGREES 52 MINUTES 0 SECONDS WEST ALONG SAID WEST LINE 1327.6 FEET TO THE POINT OF BEGINNING; EXCEPT THAT PART LYING NORTHERLY OF THE SOUTHERLY RIGHT OF WAY LINE OF THE CHICAGO, BURLINGTON AND QUINCY RAILROAD AFORESAID IN THE TOWNSHIP OF BRISTOL, KENDALL COUNTY, ILLINOIS. PIN: 02-11-300-005 02-14-352-001 02-11-400-005 02-15-477-001 02-14-100-007 02-23-126-001 02-14-100-009 02-23-201-001 02-14-201-001 EXHIBIT B TRUST INDENTURE Between UNITED CITY OF YORKVILLE, ILLINOIS and LASALLE BANK NATIONAL ASSOCIATION, as Trustee Dated as of December 1, 2004 UNITED CITY OF YORKVILLE, KENDALL COUNTY, ILLINOIS SPECIAL SERVICE AREA NUMBER 2004— 104 CENTRAL GRANDE RESERVE SPECIAL TAX BONDS, SERIES 2004 (MPI GRANDE RESERVE PROJECT) 011.553839.8 Table of Contents Page ARTICLE I STATUTORY AUTHORITY AND DEFINITIONS .................................................3 Section 1.1 Authority for this Indenture.........................................................................3 Section 1.2 Agreement for Benefit of Owners of the Bonds..........................................3 Section1.3 Definitions. ..................................................................................................3 ARTICLEII BOND DETAILS.....................................................................................................11 Section 2.1 Purpose of Issuance; Amount of Series 2004 Bonds.................................11 Section 2.2 Form; Denominations;Numbers. ..............................................................11 Section 2.3 Date of Series 2004 Bonds; CUSIP Identification Numbers.....................12 Section 2.4 Maturities; Interest Rates...........................................................................12 Section2.5 Interest. ......................................................................................................12 Section 2.6 Form of Series 2004 Bonds; Execution; Authentication...........................12 Section 2.7 Payment of the Bonds................................................................................13 Section 2.8 Appointment of Trustee.............................................................................13 Section 2.9 Registration of Bonds; Persons Treated as Owners...................................13 Section 2.10 Global Form; Securities Depository..........................................................14 ARTICLE III ADDITIONAL BONDS.........................................................................................15 Section 3.1 Authority to Issue Additional Bonds.........................................................15 Section 3.2 Conditions to Issuance of Additional Bonds. ............................................16 Section 3.3 Limitation on Use of Proceeds. .................................................................17 ARTICLE IV REDEMPTION OF SERIES 2004 BONDS ..........................................................17 Section 4.1 Mandatory Sinking Fund Redemption. .....................................................17 Section 4.2 Optional Redemption.................................................................................18 Section 4.3 Mandatory Redemption Upon Condemnation, Completion Date andChange in Density...............................................................................19 Section 4.4 Special Mandatory Redemption from Optional Prepayment of SpecialTaxes.............................................................................................20 Section 4.5 Redemption Provisions;Notice of Redemption. .......................................20 Section 4.6 Purchase in Lieu of Redemption. ..............................................................21 ARTICLE V APPLICATION OF PROCEEDS............................................................................21 Section 5.1 Application of Proceeds.............................................................................21 ARTICLE VI SECURITY FOR THE BONDS ............................................................................22 Section 6.1 Limited Obligations...................................................................................22 Section 6.2 Levy of Special Taxes. ..............................................................................22 ARTICLE VII FUNDS AND ACCOUNTS .................................................................................23 Section 7.1 Bond and Interest Fund..............................................................................23 Section7.2 Reserve Fund.............................................................................................25 011.553839.8 Section 7.3 Improvement Fund. ...................................................................................26 Section 7.4 Administrative Expense Fund. ..................................................................27 Section7.5 Rebate Fund...............................................................................................27 Section 7.6 Investment of Funds. .................................................................................27 ARTICLE VIII COVENANTS AND AGREEMENTS OF THE CITY ......................................28 Section8.1 Tax Covenants...........................................................................................28 Section 8.2 Levy and Collection of Taxes....................................................................29 Section 8.3 Proper Books and Records. .......................................................................30 Section 8.4 Against Encumbrances. .............................................................................30 Section 8.5 No Continuing Disclosure Undertaking. ...................................................30 Section 8.6 Additional Information..............................................................................30 Section 8.7 Public Improvement Agreement................................................................30 ARTICLE IX DEFAULTS AND REMEDIES.............................................................................31 Section 9.1 Events of Default.......................................................................................31 Section9.2 Remedies. ..................................................................................................32 Section 9.3 Notice of Default. ......................................................................................32 Section 9.4 Termination of Proceedings by Trustee.....................................................32 Section 9.5 Right of Bondholders to Control Proceedings...........................................32 Section 9.6 Right of Bondholders to Institute Suit.......................................................33 Section9.7 Suits by Trustee. ........................................................................................33 Section 9.8 Remedies Cumulative................................................................................33 Section 9.9 Waiver of Default. .....................................................................................33 Section 9.10 Application of Moneys After Default........................................................34 ARTICLEX TRUSTEE................................................................................................................35 Section 10.1 Appointment of the Trustee.......................................................................35 Section 10.2 Performance of Duties...............................................................................35 Section 10.3 Instruments Upon Which Trustee May Rely.............................................36 Section 10.4 Trustee not Responsible for Recitals and Other Matters...........................37 Section 10.5 Trustee May Acquire Bonds......................................................................37 Section 10.6 Qualification of Trustee.............................................................................37 Section 10.7 Resignation or Removal of Trustee and Appointment of Successor.........37 Section 10.8 Concerning the Successor Trustee.............................................................38 Section 10.9 Monthly Statements...................................................................................39 ARTICLE XI SUPPLEMENTAL INDENTURES.......................................................................40 Section 11.1 Supplemental Indentures Not Requiring Consent of Bondholders. ..........40 Section 11.2 Supplemental Indentures Requiring Consent of Bondholders. .................41 Section 11.3 Supplemental Indenture to Modify this Indenture.....................................41 Section 11.4 Trustee May Rely Upon Opinion of Counsel Re: Supplemental Indenture....................................................................................................42 Section11.5 Notation. ....................................................................................................42 Section 11.6 Opinion of Bond Counsel..........................................................................42 ii 011.553839.8 ARTICLEXII DEFEASANCE.....................................................................................................42 Section12.1 Defeasance.................................................................................................42 ARTICLEXIII MISCELLANEOUS............................................................................................44 Section13.1 Severability................................................................................................44 Section13.2 Notices.......................................................................................................44 Section13.3 Holidays.....................................................................................................45 Section 13.4 Execution of Counterparts.........................................................................45 Section13.5 Applicable Law..........................................................................................45 Section 13.6 Immunity of Officers, Employees, Elected Officials of City....................45 EXHIBITS Exhibit A Legal Description of Special Service Area Exhibit B Form of Series 2004 Bond Exhibit C Form of Satisfaction of Tax Lien Exhibit D Form of Disbursement Request Exhibit E Form of Continuing Disclosure Agreement 011.553839.8 TRUST INDENTURE THIS TRUST INDENTURE (the "Indenture") is made and entered into as of December 1, 2004, by and between the United City of Yorkville, Illinois, a municipal corporation organized and existing under and by virtue of the Constitution and laws of the State of Illinois (the "City"), and LaSalle Bank National Association, a national banking association, as Trustee (the "Trustee"). WITNESSETH: WHEREAS, by Ordinance Number 2004-49 adopted on September 14, 2004 as amended by Ordinance 2004-60 adopted on October 26, 2004 (collectively, the "Establishing Ordinance") the City has established the "United City of Yorkville Special Service Area Number 2004-104 Central Grande Reserve" as further described in Exhibit A to this Indenture (the "Special Service Area"); and WHEREAS, pursuant to Ordinance Number 2004-61 adopted on October 26, 2004 (the "Bond Ordinance") and pursuant to the Special Service Area Tax Law, 35 ILCS 200/27-5 et se q. (the "Special Service Area Act") it was determined in the best interests of the City to issue not to exceed $14,000,000 principal amount of the United City of Yorkville Special Service Area Number 2004-104 Special Tax Bonds, Series 2004 (MPI Grande Reserve Project) (the "Series 2004 Bonds") for the purpose of providing a portion of the funds needed for costs of the Special Services (defined below); and WHEREAS, the Bond Ordinance authorized the Mayor and City Clerk to establish certain specific terms of the Series 2004 Bonds by executing and delivering a Bond Purchase Agreement with the Purchaser(defined below); and WHEREAS, pursuant to the terms so established the City will issue $ principal amount of Series 2004 Bonds upon the terms specified in this Indenture; and WHEREAS, this Indenture also authorizes the issuance of certain Additional Bonds (as defined herein) to complete the Special Services, which Additional Bonds will have a series designation, will be in an aggregate principal amount and shall have such other terms as are set forth in a Supplemental Indenture (as defined herein); and WHEREAS, it is in the public interest and for the benefit of the City, the Special Service Area and the owners of the Bonds that the City enter into this Indenture to provide for the issuance of the Bonds, the disbursement of proceeds of the Bonds, the deposit of the special taxes levied pursuant to the Bond Ordinance securing the Bonds, and the administration and payment of the Bonds; and WHEREAS, all things necessary to cause the Bonds, when executed by the City and issued as provided in the Special Service Area Act, the Local Government Debt Reform Act (as defined below), the Bond Ordinance and this Indenture, to be legal, valid and binding and special obligations of the City in accordance with their terms, and all things necessary to cause the creation, authorization, execution and delivery of this Indenture and the creation, authorization, 011.553839.8 execution and issuance of the Bonds, subject to the terms of this Indenture, have in all respects been duly authorized; NOW, THEREFORE, THIS TRUST INDENTURE WITNESSETH: GRANTING CLAUSES That the City in consideration of the premises, the acceptance by the Trustee of the trusts created hereby and the purchase and acceptance of the Bonds by the owners thereof, and of the sum of one dollar, lawful money of the United States of America, to it duly paid by the Trustee at or before the execution and delivery of these presents, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, in order to secure the payment of the principal of, premium, if any, and interest on the Bonds according to their tenor and effect, and to secure the performance and observance by the City of all the covenants expressed or implied herein and in the Bonds, does hereby pledge and assign, and grant a security interest in, the following (the "Trust Estate") to LaSalle Bank National Association, as Trustee, and its successors in trust and assigns forever, for the securing of the performance of the obligations of the City hereinafter set forth; GRANTING CLAUSE FIRST All right, title and interest of the City in and to the Special Taxes and any monies held under this Indenture by the Trustee, including the proceeds of the Bonds and the interest, profits and other income derived from the investment thereof other than amounts held by the Trustee in the Administrative Expense Fund and the Rebate Fund; GRANTING CLAUSE SECOND All funds, monies, property and security and any and all other rights and interests in property whether tangible or intangible from time to time hereafter by delivery or by writing of any kind, conveyed, mortgaged, pledged, assigned or transferred as and for additional security hereunder for the Bonds by the City or by anyone on its behalf or with its written consent to the Trustee, which is hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms hereof, TO HAVE AND TO HOLD, all and singular the Trust Estate, whether now owned or hereafter acquired, unto the Trustee and its respective successors in said trust and assigns forever; IN TRUST NEVERTHELESS, upon the terms and trust herein set forth for the equal and proportionate benefit, security and protection of all present and future owners of the Bonds from time to time issued under and secured by this Indenture without privilege, priority or distinction as to the lien or otherwise of any of the Bonds over any of the other Bonds (except as otherwise provided herein); PROVIDED, HOWEVER, that if the City, its successors or assigns, shall pay, or cause to be paid, the principal of, premium, if any, and interest on the Bonds due or to become due 2 011.553839.8 thereon, at the times and in the manner mentioned in the Bonds according to the true intent and meaning thereof, and shall cause the payments to be made on the Bonds as required under this Indenture, or shall provide, as permitted hereby, for the payment thereof by depositing with the Trustee the entire amount due or to become due thereon and shall cause to be kept, performed and observed all of its covenants and conditions pursuant to the terms of this Indenture, and shall pay or cause to be paid all sums of money due or to become due in accordance with the terms and provisions hereof, then upon the final payment thereof, this Indenture and the rights hereby granted shall cease, determine and be void; otherwise this Indenture is to be and remain in full force and effect. THIS INDENTURE OF TRUST FURTHER WITNESSETH, and it is expressly declared, that all Bonds issued and secured hereunder are to be issued, authenticated and delivered and all said property, rights and interests, and amounts hereby assigned and pledged are to be dealt with and disposed of under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes as herein expressed, and the City has agreed and covenanted, and does hereby agree and covenant with the Trustee and with the respective owners of the Bonds as follows: ARTICLE I STATUTORY AUTHORITY AND DEFINITIONS Section 1.1 Authority for this Indenture. This Indenture is entered into pursuant to the powers of the City pursuant to Part 6 of Section 7 of Article VII of the 1970 Constitution of the State of Illinois and pursuant to the respective provisions of the Special Service Area Act, the Local Government Debt Reform Act and the Bond Ordinance. Section 1.2 Agreement for Benefit of Owners of the Bonds. The provisions, covenants and agreements to be performed by or on behalf of the City under this Indenture shall be for the equal benefit, protection and security of the Bondholders except as otherwise expressly provided herein. All of the Bonds, without regard to the time or times of their issuance or maturity, shall be of equal rank without preference, priority or distinction of any of the Bonds over any other of the Bonds, except as expressly provided in or permitted by this Indenture. The Trustee may become the owner of any of the Bonds in its own or any other capacity with the same rights it would have if it were not the Trustee. Section 1.3 Definitions. Unless the context otherwise requires, the terms defined in this Section 1.3 shall, for all purposes of the Indenture, of any Supplemental Indenture, and of any certificate, opinion or other document mentioned in this Indenture, have the meanings specified below. All references in this Indenture to "Articles," "Sections" and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Indenture, and the words "herein," "hereof," "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or subdivision of this Indenture. "Additional Bonds" means any series of Bonds other than the Series 2004 Bonds issued under this Indenture pursuant to Article III. 3 011.553839.8 "Administrative Expenses" means the following actual or reasonably estimated costs permitted in accordance with the Special Service Area Act and directly related to the administration of the Special Service Area and the Bonds as determined by the City or the Consultant on its behalf. the costs of computing the Special Taxes and of preparing the annual Special Taxes collection schedules; the costs of collecting the Special Taxes (whether by the City, the County or otherwise), the costs of remitting the Special Taxes to the Trustee; the costs of the Trustee and any fiscal agent (including its legal counsel) in the discharge of the duties required of it under this Indenture or any trustee or fiscal agent agreement; the costs of the Rebate Consultant; the costs of the City or its designee in complying with disclosure requirements of applicable federal and state securities laws and of the Special Service Area Act, including, but not limited to, public inquiries regarding the Special Taxes; any termination payments owed by the City in connection with any guaranteed investment contract, forward purchase agreement or other investment of funds held under this Indenture; the costs of obtaining or maintaining a rating on the Bonds; the costs associated with the release of funds from any escrow account or fund held under this Indenture; and amounts advanced by the City for any other administrative purposes of the Special Service Area, including the costs of computing Special Tax prepayment amounts, recordings related to the prepayment, discharge or satisfaction of Special Taxes; the costs of commencing foreclosure and pursuing collection of delinquent Special Taxes and the reasonable fees of legal counsel of the City or the Trustee incurred in connection with any of the foregoing. "Administrative Expense Fund" means the fund by that name established pursuant to Section 7.4 of this Indenture. "Authorized Denomination" means (i) initially denominations of $100,000 and integral multiples of$1,000 in excess thereof and (ii) denominations of$5,000 and integral multiples of $1,000 in excess thereof from and after such time as the conditions set forth in Section 2.2 of this Indenture have been complied with for the conversion of the Authorized Denominations of the Bonds to minimum denominations of$5,000 and integral multiples of$1,000 in excess thereof. "Authorized Newspaper" means a financial newspaper of general circulation in the Borough of Manhattan, City and State of New York (including, at such times as they are published, The New York Times, The Wall Street Journal and The Bond Buyer) which is customarily published at least once a day for at least five (5) days (other than legal holidays) in each calendar week, printed in the English language. "Authorized Officer" means the Mayor, the Finance Director, the City Treasurer or any other officer designated as such pursuant to a certificate of the Mayor delivered to the Trustee. "Beneficial Owner" means, when the Bonds are in a book-entry system, any person who acquires a beneficial ownership interest in a Bond held by DTC. For purposes of the Sections of this Indenture requiring notice to or communications with Beneficial Owners (including, without limitation, Section 10.9) the Trustee, the Bond Registrar and the City shall be entitled to treat as Beneficial Owners only such persons or entities that provide notice of their beneficial ownership of the Bonds in writing to the Trustee and the City at least three Business Days prior to the date upon which any notice or communication must be given by the Trustee, the Bond Registrar or the City under this Indenture. Such notice shall be in form together with evidence of beneficial 4 011.553839.8 ownership satisfactory to the Trustee, the Bond Registrar and the City and shall include the name of the Beneficial Owner, the address of the Beneficial Owner (which shall also include a delivery address if a post office box is given) and the principal amount of Bonds in which the Beneficial Owner has a beneficial ownership interest. The Trustee, the Bond Registrar and the City may rely on any notice so given until such time as it is revoked or amended by subsequent written notice to the Trustee and the City. The Beneficial Owners of the Bonds are acknowledged to be the Notice Beneficial Owners until the Trustee, the Bond Registrar and the City are notified to the contrary. "Bond and Interest Fund" means the fund by that name established pursuant to Section 7.1 of this Indenture. "Bond Registrar"means LaSalle Bank National Association and its successors or assigns. "Bondholder" means the person in whose name such Bond is registered in the bond register maintained by the Bond Registrar. "Bonds" means the Series 2004 Bonds and any Additional Bonds authorized to be issued by Article III hereof and issued pursuant to a Supplemental Indenture. "Business Day" means a day on which banks in Chicago, Illinois, and New York, New York are open to transact business. "City" means the United City of Yorkville, Kendall County, Illinois. "Code" means the Internal Revenue Code of 1986, as amended. "Completion Date" has the meaning set forth in Section 7.3 of this Indenture. "Concept Plan" has the meaning set forth in the Special Tax Report. "Consultant" means David Taussig & Associates, Inc. and its successors and assigns or any other firm selected by the City to assist it in administering the Special Service Area and the extension and collection of Special Taxes pursuant to the Special Tax Report. "Consulting Services Agreement" means the Agreement For Consulting Services between the City and the Consultant. "Corporate Authorities" means the City Council of the City. "County" means Kendall County, Illinois. "Defeasance Securities" means any bond or other obligations which, as to both principal and interest, constitute direct obligations of, or the timely payment of which are unconditionally guaranteed by, the United States of America, and any certificates or any other evidences of an ownership interest in obligations or in specified portions thereof(which may consist of specified portions of the interest thereon) of the character described in this definition. 5 011.553839.8 "Depository Participant" shall have the meaning given that term in Section 2.10 of this Indenture. "Developer" means MPI-2 — Central LLC, an Illinois limited liability company and its successors and assigns. "Disbursement Request" means a request from the City signed by an Authorized Officer requesting a disbursement of amounts held in the Improvement Fund. "DTC" means The Depository Trust Company,New York,New York. "Establishing Ordinance" means Ordinance Number 2004-49 adopted on September 14, 2004 as amended by Ordinance No. 2004-60 adopted on October 26, 2004 by the Corporate Authorities. "Event of Default" shall have the meaning given that term in Section 9.1 of this Indenture. "First Series Property" has the meaning set forth in the Special Tax Report and is defined as lots 344-427 of the final plat recorded on August 17, 2004 and lots 91-177, lots 1-90, lots 178- 227, lots 228-343 and lots 428-490 of the final plat recorded on July 7, 2004. "Foreclosure Proceeds" means the proceeds of any redemption or sale of property in the Special Service Area sold as the result of a foreclosure action of the lien of the Special Taxes. "Government Securities" means bonds, notes, certificates of indebtedness, treasury bills or other securities constituting direct obligations of the United States of America and all securities and obligations, the prompt payment of principal of and interest on which is guaranteed by a pledge of the full faith and credit of the United States of America. "Improvement Fund" means the fund by that name established pursuant to Section 7.3 of this Indenture. "Indenture" means this Trust Indenture dated as of December 1, 2004 between the City and the Trustee, as amended and supplemented from time to time. "Indirect Participant" shall have the meaning given that term in Section 2.10 of this Indenture. "Interest Payment Date" means, with respect to the Bonds, March 1 and September 1 of each year, commencing, with respect to the Series 2004 Bonds, on March 1, 2005. "Letter of Representations" means the Blanket Issuer Letter of Representations dated from the City to DTC, as amended from time to time. "Local Government Debt Reform Act" means the Local Government Debt Reform Act, 30 ILCS §350/1 et seq., as amended. 6 011.553839.8 "Maximum Parcel Special Tax" shall have the meaning given that term in the Special Tax Report. "Notice Beneficial Owners" means any Beneficial Owners of the Bonds owning $500,000 or more aggregate principal amount of the Bonds who have given written notice to the Trustee that they are a Notice Beneficial Owner. "Parcel" shall have the meaning given that term in the Special Tax Report. "Penalty" shall have the meaning given that term in Section 8.1(c) of this Indenture. "Preliminary Plat"has the meaning set forth in the Special Tax Report. "Public Improvement Agreement" means the Public Improvement Agreement between the Developer and the City. "Purchase Contract" means the Bond Purchase Agreement dated , 2004 among the Purchaser, the City and the Developer. "Purchaser" means LaSalle Capital Markets, A Division of ABN AMRO Financial Services, Inc. and William Blair& Company, L.L.C. "Qualified Investments" means, to the extent permitted by then applicable Illinois law, the following: (a) bonds, notes, certificates of indebtedness, treasury bills or other securities which are guaranteed by the full faith and credit of the United States of America as to principal and interest; (b) bonds, notes, debentures, or other similar obligations of the United States of America or its agencies, including (i) federal land banks, federal intermediate credit banks, banks for cooperative, federal farm credit banks, or any other entity authorized to issue debt obligations under the Farm Credit Act of 1971 (12 U.S.C. 2001 et se .); (ii)the federal home loan banks and the federal home loan mortgage corporation; and (iii) any other agency created by Act of Congress; (c) interest bearing obligations of any county, township, city, village, incorporated town, municipal corporation or school district, which obligations are registered in the name of the City or held under a custodial agreement at a bank, if such obligations at the time of purchase are in one of the two highest general classifications established by a rating service of nationally recognized expertise in rating bonds of states and their political subdivisions; (d) interest bearing certificates of deposit, interest bearing savings accounts, interest bearing time deposits, or other investments constituting direct obligations of any bank as defined by the Illinois Banking Act which are insured by the Federal Deposit Insurance Corporation; 7 011.553839.8 (e) repurchase agreements of government securities which are subject to the Government Securities Act of 1986. The government securities, unless registered or inscribed in the name of the City, shall be purchased through banks or trust companies authorized to do business in the State of Illinois; (f) repurchase agreements (other than those described in clause (e) of the definition of"Qualified Investments") meeting the following requirements: (i) the securities, unless registered or inscribed in the name of the City, are purchased through banks or trust companies authorized to do business in the State of Illinois; (ii) an Authorized Officer after ascertaining which firm will give the most favorable rate of interest, directs the custodial bank to "purchase"' specified securities from a designated institution. The "custodial bank" is the bank or trust company, or agency of government, which acts for the City in connection with repurchase agreements involving the investment of funds by the City. The State Treasurer may act as custodial bank for the City; (iii) a custodial bank must be a member bank of the Federal Reserve System or maintain accounts with member banks. All transfers of book-entry securities must be accomplished on a Reserve Bank's computer records through a member bank of the Federal Reserve System. These securities must be credited to the City on the records of the custodial bank and the transaction must be confirmed in writing to the City by the custodial bank; (iv) trading partners shall be limited to banks or trust companies authorized to do business in the State of Illinois or to registered primary reporting dealers; (v) the security interest must be perfected; (vi) the City must enter into a written master repurchase agreement which outlines the basic responsibilities and liabilities of both buyer and seller; (vii) the repurchase agreement shall be for periods of 330 days or less; (viii) the Authorized Officer must inform the custodial bank in writing of the maturity details of the repurchase agreement; (ix) the custodial bank must take delivery of and maintain the securities in its custody for the account of the City and confirm the transaction in writing to the City. The custodial undertaking shall provide that the custodian takes possession of the securities exclusively for the City; that the securities are free of any claims against the trading partner; and any claims by the custodian are subordinate to the City's claims to rights to those securities; 8 011.553839.8 (x) the obligations purchased by the City may only be sold or presented for redemption or payment by the fiscal agent bank or trust company holding the obligations upon the written instruction of the City or Authorized Officer; and (xi) the custodial bank shall be liable to the City for any monetary loss suffered by the City due to the failure of the custodial bank to take and maintain possession of such securities; (g) short-term obligations of corporations organized in the United States with assets exceeding $500,000,000 if(i) such obligations are rated at the time of purchase in one of the three highest rating categories by at least two standard rating services and which mature not later than 180 days from the date of purchase, (ii) such purchases do not exceed 10% of the corporation's outstanding obligations and (iii) no more than one- third of the City's funds are invested in short-term obligations of such corporation as evidenced by a certificate from an Authorized Officer; and (h) money market mutual funds registered under the Investment Company Act of 1940 as amended invested solely in obligations listed in paragraph (a) and (b) above and in agreements to repurchase such obligations; together with such other investments as shall from time to time be lawful for the investment of City funds and shall be approved by the holders of fifty-one percent (51%) of aggregate principal amount of Bonds outstanding. "Rebate Consultant" means an entity selected by the City expert in the calculation of rebate amounts pursuant to Section 148 of the Internal Revenue Code of 1986, as amended. If at any time the Rebate Consultant resigns or is removed, and the City shall not have appointed a successor within 30 days, the Rebate Consultant shall be an entity selected by the Trustee. "Rebate Fund" means the fund by that name established pursuant to Section 7.5 of this Indenture. "Rebate Requirement" shall have the meaning given that term in Section 8.1(b) of this Indenture. "Record Date" means the fifteenth day of the month preceding an Interest Payment Date. "Reserve Fund" means the fund by that name created pursuant to Section 7.2 of this Indenture. "Reserve Fund Credit" shall have the meaning given that term in Exhibit C to the Special Tax Report. "Reserve Requirement" means as of any particular date of calculation, an amount equal to the sum of all amounts established as Series Reserve Requirements in this Indenture and any Supplemental Indenture authorizing Additional Bonds. The Trustee may rely on a certificate 9 011.553839.8 from the City or the Consultant which states the Reserve Requirements as of the date of this certificate. "Second Series Property" has the meaning set forth in the Special Tax Report and includes those lots in neighborhoods 6-9 and 16 as set forth in the Concept Plan attached as Exhibit D to the Special Tax Report. "Series Reserve Requirements" means with respect to the Series 2004 Bonds the Series 2004 Reserve Requirement and with respect to Additional Bonds the amount established by a Supplemental Indenture as the reserve requirement for such Additional Bonds while the Bonds are outstanding and which shall equal the lesser of(i) 10% of the stated principal amount of the issue, (ii) the maximum annual principal and interest requirements on the issue or (iii) 125% of the average annual principal and interest requirements on the issue, as adjusted for prepayments as set forth in Section 7.1 of this Indenture. "Series 2004 Bonds" means the City's Special Service Area Number 2004-104 Central Grande Reserve Special Tax Bonds, Series 2004 (MPI Grande Reserve Project) in the aggregate principal amount of$ "Series 2004 Capitalized Interest Account" means the account by that name established pursuant to Section 7.1 of this Indenture. "Series 2004 Costs of Issuance Account" means the account by that name established pursuant to Section 7.3 of this Indenture. "Series 2004 Improvement Account" means the account by that name established pursuant to Section 7.3 of this Indenture. "Series 2004 Reserve Requirement" shall have the meaning given that term in Section 7.2 of this Indenture. "Special Redemption Account" means the account by that name established pursuant to Section 7.1 of this Indenture. "Special Service Area" means United City of Yorkville Special Service Area Number 2004-104 Central Grande Reserve, described more fully in Exhibit A to this Indenture. "Special Service Area Act" means the Special Service Area Tax Law, 35 ILCS §200/27-5 et se q., as amended. "Special Services" means the improvements benefiting the Special Service Area consisting of engineering, soil testing and appurtenant work, mass grading and demolition, storm water management facilities, storm drainage systems and storm sewers, site clearing and tree removal, public water facilities, sanitary sewer facilities, erosion control measures, roads, streets, curbs, gutters, street lighting, traffic controls, sidewalks, equestrian paths and related street improvements, and equipment and materials necessary for the maintenance thereof, public parks, park improvements, bicycle paths, landscaping, wetland mitigation and tree installation, costs for land and easement acquisitions relating to any of the foregoing improvements, required tap-on 10 011.553839.8 and related fees for water or sanitary sewer services and other eligible costs to serve the Special Service Area. Special Services are referred to as the Public Improvements in the Public Improvement Agreement. "Special Taxes" means the taxes levied by the City on all taxable real property within the Special Service Area pursuant to the Special Tax Roll and this Indenture. "Special Tax Report" means the United City of Yorkville Special Service Area Number 2004-104 Central Grande Reserve Special Tax Roll and Report prepared by the Consultant. "Special Tax Requirement" means the "Special Tax Requirement" as defined in the Special Tax Report, provided that credit may be given for any amounts on deposit in the Funds and Accounts created by this Indenture and available to pay the Special Tax Requirement. "Special Tax Roll" means the special tax roll for the payment of the Bonds established and amended from time to time pursuant to the Special Tax Report. "Supplemental Indenture" means an indenture adopted by the Corporate Authorities of the City as provided in Article XI hereof which amends or supplements this Indenture. "Tax Agreement" or "Tax Agreements" means the Tax Compliance Certificate and Agreement of the City dated the date of issuance and delivery of the Series 2004 Bonds, as amended from time to time. "Trustee" means LaSalle Bank National Association, Chicago, Illinois and its successors and assigns. ARTICLE II BOND DETAILS Section 2.1 Purpose of Issuance• Amount of Series 2004 Bonds. The sum of $ shall be borrowed by the City pursuant to the Special Service Area Act and the Local Government Debt Reform Act for the purpose of funding a portion of the costs of the Special Services, including the costs of the City in connection with the issuance of the Series 2004 Bonds, deposits to the Reserve Fund and the Administrative Expense Fund and interest on the Series 2004 Bonds through March 1, 2007. In evidence of such borrowing, Series 2004 Bonds in the aggregate principal amount of $ shall be issued as provided in this Indenture. The total principal amount of bonds that may be issued pursuant to this Indenture is Section 2.2 Form; Denominations; Numbers. The Series 2004 Bonds shall be issued only in fully registered form without coupons initially in the denominations of $100,000 and integral multiples of $1,000 in excess of that sum. At such time as the Developer certifies in writing to the City and the Trustee that (i) not less than a combined total of 1,121 of single family homes, townhomes and duplexes have been sold and conveyed to homeowners, or (ii) a total of 441 single family homes have been sold and conveyed to homeowners and no Additional 11 011.553839.8 Bonds have been issued, the Authorized Denomination of the Bonds may be converted to, and if the Bonds are not registered in a book entry only system, Bonds may be exchanged for new Bonds of the same aggregate principal amount and maturity in minimum Authorized Denominations of$5,000 and integral multiples of$1,000 in excess thereof. Prior to any such conversion or exchange the City shall have executed a Continuing Disclosure Agreement substantially in the form of Exhibit E hereto with such changes thereto as are deemed necessary by the City and its counsel in order to comply with federal securities laws including Rule 15c2- 12 promulgated by the Securities and Exchange Commission as in effect on the date of such conversion or exchange or any successor thereto. The Series 2004 Bonds shall be designated "Special Service Area Number 2004-104 Central Grande Reserve Special Tax Bonds, Series 2004 (MPI Grande Reserve Project)" and shall be numbered consecutively from R-1 upward but need not be authenticated or delivered in consecutive order. Section 2.3 Date of Series 2004 Bonds; CUSIP Identification Numbers. The Series 2004 Bonds shall be dated as of the date of delivery of the Series 2004 Bonds to the Purchaser upon original issuance. CUSIP identification numbers shall be imprinted on the Series 2004 Bonds, provided that any failure on the part of the City or the Trustee to use such CUSIP numbers in any notice to any Bondholders shall not constitute an Event of Default or any violation of the City's contract with such Bondholders and shall not impair the effectiveness of such notice. Section 2.4 Maturities; Interest Rates. The Series 2004 Bonds shall mature and become payable on March 1 in the years and in the amounts and shall bear interest at the rates set forth below: Year Amount Interest Rate 2034 $ % Section 2.5 Interest. The Series 2004 Bonds shall bear interest at the rate set forth in Section 2.4 payable on the Interest Payment Dates in each year with the first Interest Payment Date being March 1, 2005. Interest on the Series 2004 Bonds shall be calculated on the basis of a 360 day year composed of twelve 30-day months. Each Bond shall bear interest from the Interest Payment Date next preceding the date of authentication of such Bond unless (i) it is authenticated on an Interest Payment Date, in which event it shall bear interest from such date of authentication, or (ii) it is authenticated prior to an Interest Payment Date and after the close of business on the Record Date preceding such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (iii) it is authenticated prior to the Record Date preceding the first Interest Payment Date, in which event it shall bear interest from its dated date; provided, however, that if at the time of authentication of a Bond, interest is in default on such Bond, such Bond shall bear interest from the Interest Payment Date to which interest had previously been paid or made available for payment on such Bond. Section 2.6 Form of Series 2004 Bonds; Execution; Authentication. The Series 2004 Bonds shall be in substantially the form set forth in Exhibit B to this Indenture. Each Bond shall be executed by the manual or facsimile signature of the Mayor and the manual or facsimile signature of the City Clerk and shall have the corporate seal of the City affixed to it (or a 12 011.553839.8 facsimile of that seal printed on it). The Mayor and the City Clerk (if they have not already done so) are authorized and directed to file with the Illinois Secretary of State their manual signatures certified by them pursuant to the Uniform Facsimile Signatures of Public Officials Act, as amended, which shall authorize the use of their facsimile signatures to execute the Bonds. Each Bond so executed shall be as effective as if manually executed. In case any officer of the City whose signature or a facsimile of whose signature shall appear on the Bonds shall cease to be such officer before authentication and delivery of any of the Bonds, that signature or facsimile signature shall nevertheless be valid and sufficient for all purposes, the same as if the officer had remained in office until delivery. No Bond shall be valid for any purpose unless and until a certificate of authentication on that Bond substantially in the form set forth in the bond form in Exhibit B to this Indenture shall have been duly executed by the Trustee appointed by this Indenture as authenticating agent of the City. Execution of that certificate upon any Bond shall be conclusive evidence that the Bond has been authenticated and delivered under this Indenture. Section 2.7 Payment of the Bonds. The Bonds shall be payable in lawful money of the United States at the office of the Trustee. The principal of each Bond shall be payable at maturity upon presentment of the Bond at the office of the Trustee. Interest on each Bond shall be payable on each Interest Payment Date by check or draft of the Trustee mailed to the person in whose name that Bond is registered on the books of the Bond Registrar at the close of business on the Record Date. During such time as the Bonds are registered so as to participate in a securities depository system with DTC, principal of and interest and redemption premium on each Bond shall be payable by wire transfer pursuant to instructions from DTC. Section 2.8 Appointment of Trustee. LaSalle Bank National Association is appointed Trustee and Bond Registrar for the Bonds. Section 2.9 Registration of Bonds; Persons Treated as Owners. The Bonds shall be negotiable, subject to the following provisions for registration and registration of transfer. The City shall maintain books for the registration of the Bonds at the office of the Bond Registrar. Each Bond shall be fully registered on those books in the name of its owner, as to both principal and interest. Transfer of each Bond shall be registered only on those books upon surrender of that Bond to the Bond Registrar by the registered owner or his or her attorney duly authorized in writing together with a written instrument of transfer satisfactory to the Bond Registrar duly executed by the registered owner or his or her duly authorized attorney. Upon surrender of a Bond for registration of transfer, the City shall execute, the Trustee shall authenticate, and the Bond Registrar shall deliver, in the name of the transferee, one or more new Bonds of the same aggregate principal amount and of the same maturity as the Bond surrendered. Bonds may be exchanged, at the option of the registered owner, for an equal aggregate principal amount of Bonds of the same maturity of any other Authorized Denominations, upon surrender of those Bonds at the office of the Bond Registrar with a written instrument of transfer satisfactory to the Bond Registrar duly executed by the registered owner or his or her duly authorized attorney. 13 011.553839.8 In all cases in which the privilege of exchanging or transferring Bonds is exercised, the City shall execute, the Trustee shall authenticate, and the Bond Registrar shall deliver, Bonds in accordance with the provisions of this Indenture. All Bonds surrendered in any exchange or transfer shall be canceled immediately by the Bond Registrar. For every exchange or registration of transfer of Bonds, the City or the Bond Registrar may make a charge sufficient to reimburse it for any tax, fee or other governmental charge, other than one imposed by the City, required to be paid with respect to that exchange or registration of transfer, and payment of that charge by the person requesting exchange or registration of transfer shall be a condition precedent to that exchange or registration of transfer. No other charge may be made by the City or the Bond Registrar as a condition precedent to exchange or registration of transfer of any Bond. The Bond Registrar shall not be required to exchange or register the transfer of any Bond following the close of business on the 15th day of the month preceding any Interest Payment Date on such Bond, nor to transfer or exchange any Bond after notice calling such Bond for redemption has been mailed, nor during a period of 15 days next preceding mailing of a notice of redemption of any Bonds. The City, the Trustee and the Bond Registrar may treat the registered owner of any Bond as its absolute owner, whether or not that Bond is overdue, for the purpose of receiving payment of the principal of or interest on that Bond and for all other purposes, and neither the City, the Bond Registrar nor the Trustee shall be affected by any notice to the contrary. Payment of the principal of and interest on each Bond shall be made only to its registered owner, and all such payments shall be valid and effective to satisfy the obligation of the City on that Bond to the extent of the amount paid. Section 2.10 Global Form; Securities Depository. It is intended that the Bonds be registered so as to participate in a securities depository system with DTC, as set forth herein. The Bonds shall be initially issued in the form of a single fully registered Bond for each of the maturities as established in Section 2.4 of this Indenture with respect to the Series 2004 Bonds and as established in a Supplemental Indenture with respect to any Additional Bonds. Upon initial issuance, the ownership of the Bonds shall be registered in the name of Cede & Co., or any successor thereto, as nominee for DTC. The City and the Trustee are authorized to execute and deliver such letters to or agreements with DTC as shall be necessary to effectuate the securities depository system of DTC, including the Letter of Representations. With respect to Bonds registered in the name of Cede & Co., as nominee of DTC, the City, the Bond Registrar and the Trustee shall have no responsibility or obligation to any broker-dealer, bank or other financial institution for which DTC holds Bonds from time to time as securities depository (each such broker-dealer, bank or other financial institution being referred to herein as a "Depository Participant") or to any person on behalf of whom such a Depository Participant holds an interest in the Bonds (each such person being herein referred to as an "Indirect Participant"). Without limiting the immediately preceding sentence, the City, the Bond Registrar and the Trustee shall have no responsibility or obligation with respect to (a) the accuracy of the records of DTC, Cede & Co., or any Depository Participant with respect to the ownership interest in the Bonds, (b) the delivery to any Depository Participant or any Indirect Participant or any other person, other than a registered owner of a Bond, of any notice with respect to the Bonds, including any notice of 14 011.553839.8 redemption or (c) the payment to any Depository Participant or Indirect Participant or any other person, other than a registered owner of a Bond, of any amount with respect to principal of, premium, if any, or interest on, the Bonds. Notwithstanding the foregoing, the City, the Bond Registrar and the Trustee shall have those obligations and responsibilities set forth in this Indenture with respect to Beneficial Owners and Notice Beneficial Owners who have provided notice of their beneficial ownership to the City, the Bond Registrar and the Trustee as set forth in the definition of Beneficial Owner. While in the securities depository system of DTC, no person other than Cede & Co., or any successor thereto, as nominee for DTC, shall receive a Bond certificate with respect to any Bond. Upon delivery by DTC to the Trustee of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions of this Indenture with respect to the payment of interest by the mailing of checks or drafts to the registered owners of Bonds at the close of business on the record date applicable to any interest payment date, the name "Cede & Co." in this Indenture shall refer to such new nominee of DTC. In the event that (a) the Trustee determines that DTC is incapable of discharging its responsibilities described herein and in the Letter of Representations, (b) the Letter of Representations shall be terminated for any reason or (c) the City determines that it is in the best interests of the Beneficial Owners of the Bonds that they be able to obtain certificated Bonds, the City shall notify DTC of the availability through DTC of Bond certificates and the Bonds shall no longer be restricted to being registered in the name of Cede & Co., as nominee of DTC. At that time, the City may determine that the Bonds shall be registered in the name of and deposited with a successor depository operating a securities depository system, as may be acceptable to the City or such depository's agent or designee, and if the City does not select such alternate securities depository system then the Bonds may be registered in whatever name or names registered owners of Bonds transferring or exchanging Bonds shall designate, in accordance with the provisions hereof. Notwithstanding any other provisions of this Indenture to the contrary, so long as any Bond is registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of, premium, if any, and interest on the Bonds and all notices with respect to the Series shall be made and given, respectively, in the manner provided in the Letter of Representations. ARTICLE III ADDITIONAL BONDS Section 3.1 Authority to Issue Additional Bonds. The City may issue Additional Bonds in an amount not to exceed $ , to be established in a Supplemental Indenture, to pay for additional special services as permitted by the Special Service Area Act. Any Additional Bonds shall be on a parity with the Series 2004 Bonds with respect to the Special Taxes and the amounts on deposit in the Bond and Interest Fund, the Reserve Fund and the Improvement Fund; provided, that nothing herein shall prevent payment of principal of and interest on any series of Additional Bonds from being otherwise secured and protected from sources or by property or instruments not applicable to the Series 2004 Bonds. 15 011.553839.8 Section 3.2 Conditions to Issuance of Additional Bonds. Before the Trustee shall authenticate and deliver any Additional Bonds, the Trustee shall receive the following items: (a) Original executed counterparts of any amendments or supplements to this Indenture entered into in connection with the issuance of the Additional Bonds, which are necessary or advisable, in the opinion of bond counsel, to provide that the Additional Bonds will be issued in compliance with the provisions of this Indenture and which shall set forth the following information: (i) the Series Reserve Requirement for such series of Additional Bonds; (ii) the authorized principal amounts; (iii) interest rates or method of determining the interest rates; (iv) the denominations; (v) the redemption provisions and prices, (vi) the amounts to be deposited from the proceeds of such Additional Bonds in the Funds and Accounts created and established by this Indenture and any Supplemental Indenture; and (vii) any other provisions deemed advisable by the City not in conflict with the provisions of this Indenture. The principal payment dates for any series of Additional Bonds shall be March 1 of the year or years set forth in the applicable Supplemental Indenture. (b) A bond ordinance of the City with respect to the Additional Bonds. (c) A request and authorization to the Trustee on behalf of the City, signed by the Mayor or other authorized official, to authenticate and deliver the Additional Bonds to, or on the order of, the purchaser thereof upon payment to the Trustee of the amount specified therein (including without limitation, any accrued interest), which amount shall be deposited as provided in the applicable Supplemental Indenture. (d) The written opinion of counsel, who may be counsel for the City, reasonably satisfactory to the Trustee, to the effect that: (i) the documents submitted to the Trustee in connection with the request then being made comply with the requirements of this Indenture; (ii) the issuance of the Additional Bonds has been duly authorized; and (iii) all conditions precedent to the delivery of the Additional Bonds have been fulfilled. (e) A written opinion of bond counsel (who also may be the counsel to which reference is made in paragraph (d)), to the effect that: (i) when executed for and in the name and on behalf of the City and when authenticated and delivered by the Trustee, those Additional Bonds will be valid and legal special limited obligations of the City in accordance with their terms and will be secured hereunder equally and on a parity with all other Bonds at the time outstanding hereunder as to the Special Taxes and amounts on deposit in the Bond and Interest Fund, the Reserve Fund and the Improvement Fund; and (ii) the issuance of the Additional Bonds will not result in the interest on the Series 2004 Bonds or any other Bonds outstanding immediately prior to that issuance the interest on which is excluded from gross income of the owners thereof, becoming includable in gross income for purposes of federal income taxation. (f) A certificate from the Consultant demonstrating that after giving effect to the issuance of the Additional Bonds there shall have been levied Special Taxes in an amount at least equal to 110% of the principal of and interest on the Bonds plus estimated 16 011.553839.8 Administrative Expenses less estimated investment earnings on the Reserve Fund for all Bonds outstanding for each calendar year through the final maturity of the Bonds. (g) A certificate from each of the City and the Developer (i) certifying that it has no knowledge of any Default under this Indenture and (ii) certifying that either (a) not less than a total of 300 single family homes, are under contract to be sold to parties unrelated to the Developer and that a non-refundable deposit of not less than $5,000 of the purchase price of each such home that is under contract has been deposited with the homebuilder; or (b) a national homebuilder whose securities are traded on a national securities exchange has purchased 70% of the property within the Area and received the transfer of title to at least 70% of the available lots within the Area and has requested the issuance of the Additional Bonds to finance the development of such Area; or (c) the Bondholders shall have consented to the issuance of the Additional Bonds. The certificate of the City with respect to clause (ii) above may be based on representations from the Developer. (h) Evidence, satisfactory to the Purchaser and the City, which may be in the form of financial statements, equity commitments, or loan commitments, demonstrating that the Developer has cash, marketable securities, outside equity or bank loans in an amount sufficient to complete the remaining improvements within the Area which amount shall be certified by an inspecting engineer. When (i) the documents listed above have been received by the Trustee, and (ii) the Additional Bonds have been executed and authenticated, the Trustee shall deliver the Additional Bonds to or on the order of the purchaser thereof, but only upon payment to the Trustee of the specified amount (including without limitation, any accrued interest) set forth in the request and authorization to which reference is made in paragraph (c) above. Section 3.3 Limitation on Use of Proceeds. No proceeds of Additional Bonds shall be disbursed pursuant to Section 7.3 hereof until such time as all Parcels within the Special Service Area are the subject of a plat of subdivision properly recorded with the County of Kendall. ARTICLE IV REDEMPTION OF SERIES 2004 BONDS Section 4.1 Mandatory Sinking Fund Redemption. The Series 2004 Bonds are subject to mandatory sinking fund redemption and final payment at a price of par plus accrued interest, without premium, on March 1, of the years and in the amounts as follows: Year Amount 2007 $ 2008 2009 2010 2011 17 011.553839.8 Year Amount 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 The City covenants that it will redeem the Series 2004 Bonds pursuant to the mandatory sinking fund redemption requirements for the Series 2004 Bonds to the extent amounts are on deposit in the Bond and Interest Fund. If the full amount of the sinking fund requirement as set forth in the chart above is not on deposit in the Bond and Interest Fund on the date set forth in the chart above, Bonds shall only be redeemed in an amount equal to the amount on deposit in the Bond and Interest Fund (provided that after any such redemption Bonds shall only be in an Authorized Denomination unless the outstanding principal amount of the Bonds is less than an Authorized Denomination) with the remaining amounts to be redeemed once moneys are on deposit in the Bond and Interest Fund. Proper provision for mandatory redemption having been made, the City covenants that the Series 2004 Bonds so selected for redemption shall be payable upon redemption and taxes have been levied and will be collected as provided herein and in the Bond Ordinance for such purposes. Section 4.2 Optional Redemption. The Series 2004 Bonds are subject to optional redemption prior to maturity at the option of the City, in whole or in part, on any date on or after March 1, 2014, at a redemption price (expressed as a percentage of the principal amount of the Series 2004 Bonds to be redeemed), as set forth below, plus accrued and unpaid interest to the date of redemption: 18 011.553839.8 Redemption Dates Redemption Prices March 1, 2014 through February 28, 2015 102% March 1, 2015 through February 29, 2016 101 March 1, 2016 and thereafter 100 Any optional redemption of Series 2004 Bonds in part shall be applied, to the extent possible, to reduce pro rata the amount of Series 2004 Bonds required to be redeemed by mandatory sinking fund redemption pursuant to Section 4.1 of this Indenture, and so as to maintain the proportion of principal maturing in each year to the total original principal amount of Series 2004 Bonds. Section 4.3 Mandatory Redemption Upon Condemnation Completion Date and Change in Density. (a) The Bonds, are subject to mandatory redemption on any Interest Payment Date, in part, at a redemption price equal to the principal amount to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from amounts in the Bond and Interest Fund consisting of the proceeds received by the City in connection with a condemnation of any of the Special Services or any other property dedicated to, or owned by, the City within the Area and allocable to the Bonds as determined by the Consultant and which proceeds are not used by the City to rebuild the Special Services. (b) The Series 2004 Bonds are subject to redemption on any Interest Payment Date, in part, at a redemption price equal to the principal amount to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from amounts transferred from the Series 2004 Improvement Account of the Improvement Fund to the Bond and Interest Fund as described in Section 7.3 hereof. (c) The Bonds are subject to mandatory redemption on any Interest Payment Date, in whole or in part, at a redemption price equal to the principal amount to be redeemed, together with accrued interest to the date fixed for redemption, without premium, in the event of a mandatory prepayment of the Special Taxes upon a reduction in the Maximum Parcel Special Tax as a result of a change in the expected number of single family dwelling units, townhomes or duplexes to be built within the Area as set forth in the final plat or plots of subdivision approved by the City or any other event that reduces the total of the Maximum Parcel Special Tax as described in, and in the amounts set forth in, Section B of Exhibit D to the Special Tax Report; provided however that a change in density relating to Second Series Property shall not be applied to the redemption of the Series 2004 Bonds until such time as the Additional Bonds are issued. Any mandatory redemption of the Bonds pursuant to this Section 4.3 shall be applied, to the extent possible, to reduce pro rata the amount of the Bonds required to be redeemed by 19 011.553839.8 mandatory sinking fund redemption pursuant to Section 4.1 of this Indenture and so as to maintain the proportion of principal maturing in each year to the total original principal amount of the Bonds. Section 4.4 Special Mandatory Redemption from Optional Prepayment of Special Taxes. The Bonds are also subject to mandatory redemption at any time, in part, from amounts available for disbursement from the Special Redemption Account pursuant to Section 7.1(e) and from amounts transferred from the Reserve Fund to the Special Redemption Account pursuant to Section 7.1(e), at a redemption price (expressed as a percentage of the principal amount of the Bonds to be redeemed), as set forth below, together with accrued interest on such Bonds to the date fixed for redemption: Redemption Dates Redemption Prices On or prior to February 28, 2014 103% March 1, 2014 through February 28, 2015 102 March 1, 2015 through February 29, 2016 101 March 1, 2016 and thereafter 100 Any special mandatory redemption of the Bonds pursuant to this Section 4.4 shall be applied, to the extent possible, to reduce pro rata the amount of Bonds required to be redeemed by mandatory sinking fund redemption pursuant to Section 4.1 of this Indenture and so as to maintain the proportion of principal maturing in each year to the total original principal amount of Bonds. Section 4.5 Redemption Provisions; Notice of Redemption. If less than all the Series 2004 Bonds of any maturity are to be redeemed on any redemption date, the Bond Registrar appointed in this Indenture shall assign to each Series 2004 Bond of the maturity to be redeemed a distinctive number for each $1,000 of principal amount of that Series 2004 Bond. The Bond Registrar shall then select by lot from the numbers so assigned, using such method as it shall deem proper in its discretion, as many numbers as, at $1,000 per number, shall equal the principal amount of Series 2004 Bonds of that maturity to be redeemed; provided that following any redemption, no Series 2004 Bond shall be outstanding in an amount less than the minimum Authorized Denomination except (a) as necessary to effect the mandatory sinking fund redemption of Series 2004 Bonds as provided in Section 4.1 hereof or (b) to effect a special mandatory redemption from optional prepayments when the total aggregate principal amount of Bonds Outstanding is less than the minimum Authorized Denomination. Notice of the redemption of any Series 2004 Bonds, which by their terms shall have become subject to redemption, shall be given to the Notice Beneficial Owners and the registered owner of each Series 2004 Bond or portion of a Series 2004 Bond called for redemption not less 20 011.553839.8 than 30 or more than 60 days before any date established for redemption of Series 2004 Bonds, by the Bond Registrar, on behalf of the City, by first class mail sent to the registered owner's last address, if any, appearing on the registration books kept by the Bond Registrar. All notices of redemption shall include at least the designation, date and maturities of Series 2004 Bonds called for redemption, CUSIP Numbers, if available, and the date of redemption. In the case of a Series 2004 Bond to be redeemed in part only, the notice shall also specify the portion of the principal amount of the Series 2004 Bond to be redeemed. The mailing of the notice specified above to the Notice Beneficial Owners and the registered owner of any Series 2004 Bond shall be a condition precedent to the redemption of that Series 2004 Bond, provided that any notice which is mailed in accordance with this Indenture shall be conclusively presumed to have been duly given whether or not the owner received the notice. The failure to mail notice to the owner of any Series 2004 Bond, or any defect in that notice, shall not affect the validity of the redemption of any other Series 2004 Bond for which notice was properly given. Any notice of optional redemption may also state (and shall state if the City shall so direct) that the redemption is conditioned on receipt of moneys for such redemption by the Trustee on or prior to the redemption date; if such moneys are not received, the redemption of the Bonds for which notice was given shall not be made. In the event of any revocation of notice of optional redemption, the Trustee shall send notice of such revocation to the registered owners of the Bonds within three (3) Business Days after such proposed redemption date. Section 4.6 Purchase in Lieu of Redemption. In lieu of redemption as provided in this Article IV or as provided in a Supplemental Indenture with respect to Additional Bonds, moneys in the Bond and Interest Fund may be used and withdrawn by the City for the purchase of outstanding Series 2004 Bonds, at public or private sale as and when, and at such prices (including brokerage and other charges) as the City may provide, but in no event may Series 2004 Bonds be purchased at a price in excess of the principal amount of such Series 2004 Bonds, plus interest accrued to the date of purchase and any premium which would otherwise be due if such Series 2004 Bonds were to be redeemed in accordance with this Indenture. ARTICLE V APPLICATION OF PROCEEDS Section 5.1 Application of Proceeds. The proceeds of the sale of the Series 2004 Bonds in the amount of$ , which is net of underwriter's discount in the amount of$ , shall be applied as follows immediately upon receipt of the purchase price: (a) Capitalized interest in the amount of$ shall be deposited in the Series 2004 Capitalized Interest Account of the Bond and Interest Fund. (b) The amount of$ shall be deposited in the Reserve Fund. (c) The amount of$25,000 shall be deposited in the Administrative Expense Fund. 21 011.553839.8 (d) The amount of$ shall be deposited in the Series 2004 Costs of Issuance Account of the Improvement Fund. (e) The balance of the proceeds of sale of the Series 2004 Bonds ($ ) shall be deposited in the Series 2004 Improvement Account of the Improvement Fund and applied at the direction of the City to the payment of a portion of the costs of the Special Services. All amounts received upon the sale of the Series 2004 Bonds, together with all interest and other investment earnings on those amounts, are appropriated and set aside for the purposes for which the Series 2004 Bonds are being issued as set forth in this Indenture. ARTICLE VI SECURITY FOR THE BONDS Section 6.1 Limited Obligations. The Bonds shall constitute limited obligations of the City, payable from the Special Taxes and other moneys deposited in the Funds and Accounts established pursuant to Article VII other than the Administrative Expense Fund and the Rebate Fund. The Bonds shall not constitute general obligations of the City and neither the full faith and credit nor the unlimited taxing power of the City shall be pledged as security for payment of the Bonds. Section 6.2 Levy of Special Taxes. (a) Pursuant to the Bond Ordinance there have been levied Special Taxes upon all taxable real property within the Special Service Area subject to the Special Taxes in accordance with the Special Tax Report sufficient to pay and discharge the principal of the Bonds at maturity or mandatory sinking fund redemption dates and to pay interest on the Bonds for each year at the interest rates set forth in Section 2.4 of this Indenture, to pay the estimated Administrative Expenses of the City for each year and to replenish the Reserve Fund to an amount equal to the Reserve Requirement. (b) The City Clerk has been directed to file a certified copy of the Bond Ordinance, and an accurate map of the Special Service Area, with the County Clerk of the County of Kendall. The Special Taxes shall be computed, extended and collected in accordance with the Special Tax Report and the Special Tax Roll, and divided among all taxable real property within the Special Service Area in accordance with the terms of the Establishing Ordinance and the Special Tax Report. It shall be the duty of the City and the City hereby covenants, annually on or before the last Tuesday of December for each of the years 2005 through 2032 to calculate or cause the Consultant to calculate the Special Tax Requirement; to amend the Special Tax Roll pursuant to Section VII E of the Special Tax Report and provide the County tax collector with the amended Special Tax Roll; to adopt an ordinance approving the amount of the current calendar year's Special Tax Requirement for each Series of Bonds and abating the Special Taxes levied pursuant to the Bond Ordinance to the extent the taxes levied pursuant to the Bond Ordinance exceed the Special Tax Requirement as calculated by the City pursuant to the 22 011.553839.8 Establishing Ordinance and the Special Tax Report. On or before the last Tuesday of January for each of the years 2006 through 2033 the City shall notify the Trustee who shall notify the Notice Beneficial Owners of the amount of the Special Tax Requirement and the amount of the Special Taxes to be abated. The City shall take all actions which shall be necessary to provide for the levy, extension, collection and application of the taxes levied by the Bond Ordinance, including enforcement of such taxes by providing the County with such information as is deemed necessary to enable the County to include any property subject to delinquent Special Taxes in the County Collector's annual tax sale and in the event the tax lien is forfeited at such tax sale, by institution of foreclosure proceedings as provided by law; provided, however, that the obligation to institute any foreclosure action against any taxpayer, other than a taxpayer owning at least 5% of the property in the Special Service Area, shall only arise in the event the City makes the determination that the proceeds from the foreclosure action have a commercially reasonable expectation of exceeding the costs thereof. The City covenants that to the extent necessary to enforce a prepayment it will adopt a supplemental levy ordinance in the event of a mandatory prepayment of the Special Taxes due to a change in density pursuant to Section VII G of the Special Tax Report caused by a change in the expected number of single family lots or townhome lots or duplex lots as set forth in the Concept Plan, Preliminary Plat or final plat of subdivision approved by the City, to the extent that the mandatory prepayment amount calculated pursuant to the terms of Exhibit B to the Special Tax Report exceeds the Special Taxes levied for the year in which the prepayment is due pursuant to the Bond Ordinance. (c) Upon receipt by the Trustee of any prepayment of Special Taxes in an amount calculated by the Consultant as being required pursuant to the Special Tax Report to satisfy the lien on a Parcel within the Special Service Area, the City and the Trustee shall execute a Satisfaction of Tax Lien substantially in the form of Exhibit C hereto, appropriately completed and the Trustee shall deliver the Satisfaction of Tax Lien to the City for filing with the Recorder of Deeds of Kendall County, Illinois. The City shall deliver a copy of each such Satisfaction of Tax Lien to the property owner of record and a copy of the recorded Satisfaction of Tax Lien to the Trustee. ARTICLE VII FUNDS AND ACCOUNTS Section 7.1 Bond and Interest Fund. (a) There is hereby created and established with the Trustee a separate and special fund of the City established exclusively for paying principal of, interest on and redemption premium on the Bonds and which shall be designated as "The Special Service Area Number 2004-104 Central Grande Reserve Special Tax Bonds, Bond and Interest Fund" (the "Bond and Interest Fund"). When collected, the Special Taxes and the Foreclosure Proceeds, including any interest and penalties collected in connection with such Special Taxes or Foreclosure Proceeds, shall be placed in the Bond and Interest 23 011.553839.8 Fund. The City may provide for the County to transmit directly to the Trustee for deposit to the Bond and Interest Fund any Special Taxes collected by the County. In addition, proceeds received by the City in connection with a condemnation of any of the Special Services or any other property owned by or dedicated to the City within the Special Service Area and allocable to the Bonds as determined by the Consultant which is not used to rebuild the Special Services shall be deposited in the Bond and Interest Fund. Moneys deposited in the Bond and Interest Fund and investments of the Bond and Interest Fund shall never be commingled with or loaned to any other funds of the City. All interest and other investment earnings on the Bond and Interest Fund shall become, when received, a part of the Bond and Interest Fund. When the amount of condemnation proceeds deposited to the Bond and Interest Fund equals $5,000 or more, such amount shall be used to redeem Bonds pursuant to Section 4.3 of this Indenture on the next Interest Payment Date. Any amounts representing condemnation proceeds which remain on deposit in the Bond and Interest Fund for a continuous period of thirty (30) months and which will not be used to redeem the Bonds on the next Interest Payment Date in accordance with Section 4.3 and this section shall be used to pay debt service on the Bonds on the next Interest Payment Date. (b) Amounts deposited in the Bond and Interest Fund are appropriated for and irrevocably pledged to, and shall be used solely for the purpose of, paying the principal of and interest and redemption premium on the Bonds, or for transfers to the Reserve Fund or the Administrative Expense Fund as permitted by paragraph (c) of this Section 7.1 and by Section 7.2. (c) At any time after September 1 but in no event later than December 1 of each year, the Trustee shall determine the amount needed to pay principal of and interest and redemption premium on the Bonds on the next succeeding Interest Payment Date. After the Trustee has determined that sufficient amounts are on deposit in the Bond and Interest Fund to pay principal of, interest on and redemption premium due on the Bonds on the next succeeding Interest Payment Date, the Trustee shall notify the City and the Consultant of any excess amounts on deposit in the Bond and Interest Fund, and, at the written direction of the City, shall transfer an amount from the Bond and Interest Fund to the Administrative Expense Fund which the City has determined will be adequate, together with other amounts in the Administrative Expense Fund or reasonably expected to be transferred to or deposited in such Fund, to pay all Administrative Expenses during the succeeding calendar year. After making such transfer to the Administrative Expense Fund any excess amounts on deposit in the Bond and Interest Fund shall be transferred to the Reserve Fund to the extent necessary to replenish the Reserve Fund to the Reserve Requirement and thereafter any remaining excess shall be retained in the Bond and Interest Fund and applied to pay principal and interest coming due on the Bonds on the second succeeding Interest Payment Date; provided, however, that investment earnings on amounts on deposit in the Bond and Interest Fund on or prior to March 1, 2007 shall be transferred to the Series 2004 Improvement Account of the Improvement Fund and thereafter retained in the Bond and Interest Fund. Written notice of each such transfer shall promptly be given to the Notice Beneficial Owners. 24 011.553839.8 (d) There is hereby created within the Bond and Interest Fund established with the Trustee a separate account designated the "Series 2004 Capitalized Interest Account." Amounts deposited in the Series 2004 Capitalized Interest Account shall be used and shall be applied for such purpose without any further authorization or direction solely for the purpose of paying interest on the Series 2004 Bonds first coming due and shall be applied by the Trustee for such purpose without any further authorization or direction. Investment earnings on amounts on deposit in the Series 2004 Capitalized Interest Account shall be transferred to the Series 2004 Improvement Account of the Improvement Fund. (e) There is hereby created within the Bond and Interest Fund established with the Trustee a separate account designated the "Special Redemption Account." Amounts deposited in the Special Redemption Account shall be applied to the redemption of Bonds pursuant to Section 4.4 or 4.3(c) of this Indenture as applicable. All prepayments of the Special Taxes made in accordance with the Special Tax Report shall be deposited in the Special Redemption Account. Moneys in the Special Redemption Account shall be used exclusively to redeem Bonds pursuant to Section 4.4 or Section 4.3 c , as applicable, or to pay debt service on the Bonds pursuant to this Section 7.1. In the event of any prepayment of the Special Taxes, prior to giving notice of the redemption of Bonds in accordance with Section 4.4 or Section 4.3(c) of this Indenture, as applicable, the Trustee shall transfer from the Reserve Fund to the Special Redemption Account an amount equal to the Reserve Fund Credit upon the direction of the Consultant in accordance with the Special Tax Report. When the amount on deposit in the Special Redemption Account equals or exceeds $1,000, such amount shall be used to redeem Bonds on the next Interest Payment Date in accordance with Section 4.4 or Section 43(c), as applicable. On each such Interest Payment Date, the Trustee shall withdraw from the Special Redemption Account and pay to the owners of the Bonds the amounts to redeem the Bonds pursuant to Section 4.4 or Section 4.3(c). Notwithstanding the foregoing, any amounts contained in the Special Redemption Account for a continuous period of thirty (30) months and which will not be used to redeem Bonds on the next Interest Payment Date in accordance with the immediately preceding sentence and Section 4.4 or Section 4.3(c), as applicable, shall be used to pay debt service on the Bonds on the next Interest Payment Date. Any amounts contained in the Special Redemption Account on the final maturity date of the Bonds shall be used to pay outstanding debt service on the Bonds. Section 7.2 Reserve Fund. There is hereby created and established with the Trustee a separate and special fund of the City which shall be designated as "The Special Service Area Number 2004-104 Central Grande Reserve Special Tax Bonds, Reserve Fund" (the "Reserve Fund"), which must be maintained in an amount equal to the Reserve Requirement. The Series 2004 Reserve Requirement shall be an amount equal to $ as adjusted for prepayments pursuant to Section 7.1(e). Amounts deposited in the Reserve Fund shall be used solely for the purpose of(i) making transfers to the Bond and Interest Fund to pay the principal of, including mandatory sinking fund payments, and interest and any premium on, all Bonds when due, in the event that moneys in the Bond and Interest Fund are insufficient therefor, (ii) making any transfers to the Bond and Interest Fund if the balance in the Reserve Fund exceeds the amount required to redeem all Bonds then outstanding, or (iii) if the amount then on deposit 25 011.553839.8 in the Reserve Fund is at least equal to the Reserve Requirement, for transfer in accordance with the next paragraph, provided that no moneys shall be transferred from the Reserve Fund pursuant to clause (i) of this sentence without the written consent of the Notice Beneficial Owners owning a majority of the beneficial interests in the Bonds, if such Notice Beneficial Owners exist. On the Business Day prior to each Interest Payment Date, moneys in the Reserve Fund in excess of the Reserve Requirement shall be transferred by the Trustee from the Reserve Fund to the Series 2004 Improvement Account of the Improvement Fund on or prior to March 1, 2007 and thereafter to the Bond and Interest Fund to be used for the payment of interest on Bonds on the next following Interest Payment Date. Section 7.3 Improvement Fund. There is hereby created and established with the Trustee a separate and special fund of the City which shall be designated as "The Special Service Area Number 2004-104 Central Grande Reserve Special Tax Bonds, Improvement Fund" (the "Improvement Fund") and a separate account within the Improvement Fund designated the "Series 2004 Improvement Account"). Moneys in the Improvement Fund shall be disbursed solely for the payment of the cost of acquiring, constructing, installing and performing the Special Services. Subject to Section 3.3 hereof, disbursements from the Improvement Fund shall be made by the Trustee upon receipt of a Disbursement Request of the City substantially in the form attached as Exhibit D to this Indenture executed by an Authorized Officer which shall (i) set forth the amount required to be disbursed, the purpose for which the disbursement is to be made, that such Special Services have been completed in accordance with the terms of the Public Improvement Agreement, that the disbursement is for the payment of a Special Service, and payment instructions to the Trustee for the amount to be disbursed; and (ii) certify that no portion of the amount then being requested to be disbursed was set forth in any previous request for disbursement. A copy of each Disbursement Request shall be delivered by the Trustee to the Consultant. Each Disbursement Request together with all previously submitted Disbursement Requests, shall not exceed those amounts set forth in the Special Tax Report for Single Family Homes, Townhomes and Duplexes. In the event a Disbursement Request seeks payment of amounts in excess of such amounts, the City shall only authorize disbursement of funds for such excess amounts upon receipt of the Special Tax Consultant's certificate approving the disbursement and stating that the disbursements for payment of the Special Services have been in substantial conformity with the Special Tax Report. On the date on which a certificate of an Authorized Officer of the City is delivered certifying that the Special Services have been completed (the "Completion Date"), the Trustee shall transfer all amounts remaining in the Series 2004 Improvement Account of the Improvement Fund to the Bond and Interest Fund to be applied to the redemption of the Series 2004 Bonds pursuant to Section 4.3(b) hereof provided, however, that any amounts transferred to be applied to the redemption of Series 2004 Bonds which do not equal $1,000 or an integral multiple of$1,000 may be applied to pay interest owing on the Series 2004 Bonds on the next succeeding Interest Payment Date; and provided further, however, that upon written direction of an Authorized Officer an amount specified by the City may be transferred to the Series 2004 Capitalized Interest Account upon delivery to the Trustee of an opinion of Bond Counsel to the effect that the transfer of such amounts will not adversely affect the exclusion from gross income of interest on the Bonds for federal income tax purposes and is permitted under Illinois law. All investment earnings on amounts on deposit in the Series 2004 Improvement Account of the 26 011.553839.8 Improvement Fund prior to the Completion Date shall be retained therein to pay the costs of the Special Services. There is hereby created within the Improvement Fund established with the Trustee a separate account designated the "Series 2004 Costs of Issuance Account." Amounts deposited in the Series 2004 Costs of Issuance Account shall be used solely for the purpose of paying costs incurred in connection with the issuance of the Series 2004 Bonds. Disbursements from the Series 2004 Costs of Issuance Account shall be made by the Trustee upon receipt of a request of the City which shall (i) set forth the amount required to be disbursed, the purpose for which the disbursement is to be made, that the disbursement is a proper expenditure from the Series 2004 Costs of Issuance Account, and payment instructions to the Trustee for the amount to be reimbursed; and (ii) certify that no portion of the amount then being requested to be disbursed was set forth in any previous request for disbursement. On the date which is six (6) months after the date of issuance of the Series 2004 Bonds, the Trustee shall transfer all amounts remaining in the Series 2004 Costs of Issuance Account to the Series 2004 Improvement Account of the Improvement Fund. Section 7.4 Administrative Expense Fund. There is hereby created and established with the Trustee a separate and special fund of the City which shall be designated as "The Special Service Area Number 2004-104 Central Grande Reserve Special Tax Bonds, Administrative Expense Fund" (the "Administrative Expense Fund"). Amounts in the Administrative Expense Fund shall be withdrawn by the Trustee and paid to the City or its order upon receipt by the Trustee of a written request from an Authorized Officer stating the amount to be withdrawn, that such amount is to be used to pay an Administrative Expense, and the nature of such Administrative Expense. On or prior to March 1, 2007 investment earnings on amounts on deposit in the Administrative Expense Fund shall be transferred by the Trustee to the Improvement Fund and thereafter shall be retained in the Administrative Expense Fund. Section 7.5 Rebate Fund. There is hereby created and established with the Trustee a separate and special fund of the City which shall be designated as "The Special Service Area Number 2004-104 Central Grande Reserve Special Tax Bonds, Rebate Fund" (the "Rebate Fund"), into which there shall be deposited as necessary investment earnings in the Bond and Interest Fund and the Reserve Fund to the extent required so as to maintain the tax exempt status of interest on the Bonds. All rebates, special impositions or taxes for such purpose payable to the United States of America (Internal Revenue Service) shall be payable from the Rebate Fund. Section 7.6 Investment of Funds. Moneys on deposit in Funds and Accounts established hereunder may be invested from time to time in Qualified Investments pursuant to directions from the City to the Trustee provided that moneys on deposit in the Special Redemption Account shall be invested in Qualified Investments having a maturity of 180 days or less. Except as otherwise expressly provided herein, earnings or losses on such investments shall be attributed to the Fund or Account for which the investment was made. In the event that the Trustee does not receive directions from the City to invest funds held hereunder, the Trustee shall invest such funds in a money market fund which invests in (i) short-term securities issued or guaranteed by the United States Government, its agencies or instrumentalities and/or (ii) repurchase agreements relating to such securities. The Trustee is hereby authorized to execute purchases and sales of Qualified Investments through the facilities of its own trading or capital 27 011.553839.8 markets operations or those of any affiliated entity. The Trustee shall send statements to the City on a monthly basis reflecting activity in the account for the preceding month. Although the City recognizes that it may obtain a broker confirmation or written statement containing comparable information at no additional cost, the City hereby agrees that confirmations of Qualified Investments are not required to be issued by the Trustee for each month in which a monthly statement is rendered. ARTICLE VIII COVENANTS AND AGREEMENTS OF THE CITY Section 8.1 Tax Covenants. (a) The City covenants with the holders of the Bonds from time to time outstanding that it (i) will take all actions which are necessary to be taken (and avoid any actions which it is necessary to avoid being taken) so that interest on the Bonds will not be or become included in gross income for federal income tax purposes under existing law, including without limitation the Code; (ii) will take all actions reasonably within its power to take which are necessary to be taken (and avoid taking any actions which are reasonably within its power to avoid taking and which are necessary to avoid) so that interest on the Bonds will not be or become included in gross income for federal income tax purposes under the federal income tax laws as in effect from time to time; and (iii) will take no action or permit any action in the investment of the proceeds of the Bonds, amounts in the Bond and Interest Fund or any other funds of the City which would result in making interest on the Bonds subject to federal income taxes by reason of causing the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code, or direct or permit any action inconsistent with the regulations under the Code as promulgated and as amended from time to time and as applicable to the Bonds. The Mayor, City Clerk and City Treasurer are authorized and directed to take such action as is necessary in order to carry out the issuance and delivery of the Bonds including, without limitation, to make any representations and certifications they deem proper pertaining to the use of the proceeds of the Bonds and moneys in the Funds and Accounts established hereunder in order to establish that the Bonds shall not constitute arbitrage bonds as so defined. (b) The City further covenants as follows with respect to the requirements of Section 148(f) of the Code, relating to the rebate of "excess arbitrage profits" (the "Rebate Requirement")to the United States: (c) Unless an applicable exception to the Rebate Requirement is available to the City, the City will meet the Rebate Requirement. (i) Relating to applicable exceptions, the City shall make such elections under the Code as it shall deem reasonable and in the best interests of the City. If such election may result in a"penalty in lieu of rebate" as provided in the Code, and such penalty is incurred (the "Penalty"), then the City shall pay such Penalty. 28 011.553839.8 (ii) The City shall cause to be established, at such time and in such manner as it shall deem necessary or appropriate hereunder, the Rebate Fund for the Bonds, and the City shall further, not less frequently than annually, cause to be transferred to the Rebate Fund the amount determined to be the accrued liability under the Rebate Requirement or Penalty. The City shall cause to be paid to the United States, without further order or direction from the Corporate Authorities, from time to time as required, amounts sufficient to meet the Rebate Requirement or to pay the Penalty. (iii) Interest earnings in the Bond and Interest Fund and the Reserve Fund are hereby authorized to be transferred, without further order or direction from the Corporate Authorities, from time to time as required, to the Rebate Fund for the purposes herein provided; and proceeds of the Bonds, investment earnings or amounts on deposit in any of the other funds and accounts created hereunder and any other funds of the City are also hereby authorized to be used to meet the Rebate Requirement or to pay the Penalty, but only if necessary after application of investment earnings as aforesaid and only as appropriated by the Corporate Authorities. Section 8.2 Levy and Collection of Taxes. The City covenants with the holders of the Bonds from time to time outstanding that: (a) it will take all actions, if any, which shall be necessary, in order further to provide for the levy, extension, collection and application of the taxes levied by this Indenture and the Bond Ordinance including enforcement of the Special Taxes as described in clause (c) below; (b) it will not take any action which would adversely affect the levy, extension, collection and application of the taxes levied by this Indenture and the Bond Ordinance, except to abate those taxes to the extent permitted by this Indenture and the Special Tax Report; (c) it will comply with all requirements of the Special Service Area Act, the Bond Ordinance and other applicable present and future laws concerning the levy, extension and collection of the taxes levied by this Indenture and the Bond Ordinance; in each case so that the City shall be able to pay the principal of and interest on the Bonds as they come due and replenish the Reserve Fund to the Reserve Requirement and it will take all actions necessary to assure the timely collection of the Special Taxes, including without limitation, the enforcement of any delinquent Special Taxes by providing the County of Kendall with such information as is deemed necessary to enable the County to include any property subject to delinquent Special Taxes in the County Collector's annual tax sale and in the event the tax lien is forfeited at such tax sale, by the commencement and maintenance of an action to foreclose the lien of any delinquent Special Taxes all in the manner provided by law; provided, however, that the obligation to institute any foreclosure action against any taxpayer other than a taxpayer owning at least five percent (5%) of the property in the Special Service Area shall only arise in the event the City 29 011.553839.8 makes the determination that the proceeds from the foreclosure action have a commercially reasonable expectation of exceeding the costs thereof; and (d) in the event the City approves any change in the plat of subdivision which changes the density of the Special Service Area or otherwise becomes aware of a change in density, it will provide prompt written notice to the Consultant of such fact and the circumstances resulting in the change in density. Section 8.3 Proper Books and Records. The City will keep, or cause the Trustee to keep, proper books of record and accounts, separate from all other records and accounts of the City, in which complete and correct entries shall be made of all transactions relating to the deposits to and expenditure of amounts disbursed from the Funds and Accounts created hereunder and the Special Taxes. Such books of record and accounts shall at all times during business hours be subject to the inspection of the holders of not less than ten percent (10%) of the principal amount of the Bonds then outstanding, or their representatives authorized in writing. The City, or the Trustee on behalf of the City, upon written request will mail to the Purchaser, the Developer and any Notice Beneficial Owner any information relating to the Bonds, the Special Service Area or the Special Services, including, but not limited to, the annual audits of the Funds and Accounts established under this Indenture for each and every year. Section 8.4 Against Encumbrances. The City will not encumber, pledge or place any charge or lien upon any of the Special Taxes or other amounts pledged to the Bonds superior to, on a parity with, or junior to, the pledge and lien created in this Indenture for the benefit of the Bonds, except as permitted by, or specifically set forth in, this Indenture. Section 8.5 No Continuing Disclosure Undertaking. Based upon the fact that the Series 2004 Bonds are being initially issued in minimum denominations of$100,000 and that the Purchaser has advised the City of its intention (as further described in the Limited Offering Memorandum dated , 2004, relating to the Series 2004 Bonds) to offer the Series 2004 Bonds to 35 or fewer sophisticated investors, the offering and sale of the Series 2004 Bonds is exempt from the provisions of Rule 15c2-12, in effect as of the date of this Indenture, promulgated under the Securities and Exchange Act of 1934, as amended. Section 8.6 Additional Information. The City agrees to provide to the Trustee (i) each of the reports, certificates and other information required to be delivered by the Developer to the City pursuant to Section 6.1 of the Public Improvement Agreement, (ii) a report or reports not later than December 31 in each year commencing December 31, 2005, which may be prepared by the Consultant, setting forth the Special Tax Requirement for the current year and the immediately succeeding year and the amount of taxes to be abated for the current year, the current year's collection of taxes, delinquencies, tax sales, foreclosures, the Special Service Area's equalized assessed valuation, the estimated new value-to-lien ratio and the current ad valorem property tax rate(s), and (iii) a copy of the annual audited financial statements of the City. Section 8.7 Public Improvement Agreement. The City agrees to take all actions which are necessary to be taken to enforce the City's rights and to satisfy the City's obligations under the Public Improvement Agreement. 30 011.553839.8 ARTICLE IX DEFAULTS AND REMEDIES Section 9.1 Events of Default. "Events of Default" under this Indenture are as follows: (a) Default shall be made by the City in the payment of the principal of or premium, if any, on any Bond when and as the same shall become due and payable, either at maturity or by proceedings for redemption or otherwise. (b) Default shall be made by the City in the payment of any installment of interest on any Bond when and as such installment of interest shall become due and payable. (c) The City shall (1) commence a voluntary case under the Federal bankruptcy laws, as now or hereafter constituted, or any other applicable Federal or state bankruptcy, insolvency or other similar law, (2) make an assignment for the benefit of its creditors, (3) consent to the appointment of a receiver of itself or of the whole or any substantial part of its property, or (4) be adjudicated a bankrupt or have entered against it any order for relief in respect of any involuntary case under the Federal bankruptcy laws, as now or hereafter constituted, or any other applicable Federal or state bankruptcy, insolvency or other similar law and such order shall continue in effect for a period of 60 days without stay or vacation. (d) A court of competent jurisdiction shall enter an order,judgment or decree appointing a receiver of the City, or of the whole or any substantial part of its property, or approving a petition seeking reorganization of the City under the Federal bankruptcy laws or any other applicable Federal or state law or statute and such order,judgment or decree shall not be vacated or set aside or stayed within 60 days from the date of the entry thereof. (e) Under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of the City or of the whole or any substantial part of its property, and such custody or control shall not be terminated or stayed within 60 days from the date of assumption of such custody or control. (f) The City shall default in the due and punctual performance of any other of the covenants, conditions, agreements and provisions contained in the Bonds, the Bond Ordinance or in this Indenture on the part of the City to be performed, and such default shall continue for 30 days after written notice specifying such default and requiring the same to be remedied shall have been given to the City by the Trustee (which may give such notice whenever it reasonably determines that such a default exists and shall give such notice at the written request of the holders of not less than 25% in principal amount of the Bonds then outstanding). 31 011.553839.8 Section 9.2 Remedies. Upon the occurrence of an Event of Default the Trustee may, and upon the written request of the holders of 25% in principal amount of the outstanding Bonds affected by the Event of Default and upon being indemnified as provided in Section 10.2(i) hereof shall, proceed to protect and enforce its rights and the rights of the holders of the Bonds by a suit, action or special proceeding in equity or at law, by mandamus or otherwise, either for the specific performance of any covenant or agreement contained herein or in aid or execution of any power herein granted or for any enforcement of any proper legal or equitable remedy as the Trustee, being advised by counsel, shall deem most effective to protect and enforce the rights aforesaid. During the continuance of an Event of Default, all moneys received by the Trustee under this Indenture from the City or from any other source shall be applied by the Trustee in accordance with the terms of Section 9.10 hereof. Upon the occurrence of an Event of Default described in Section 9.1(a) or fh) of this Indenture, which occurs during such time as amounts remain on deposit in the Improvement Fund, upon the written request of the holders of 25% in principal amount of the outstanding Bonds, the Trustee shall transfer any amounts on deposit in the Improvement Fund to the Bond and Interest Fund to be applied by the Trustee in accordance with Section 9.10 hereof; provided that such transfer may only occur in the event the City has provided written notice to the Trustee that the Developer has abandoned construction of the Special Services and the City has elected not to complete the Special Services. Any judgment against the City shall be enforceable only against the amounts pledged pursuant to this Indenture. There shall not be authorized any deficiency judgment against any assets of, or the general credit of, the City. The Bonds shall not be subject to acceleration upon the occurrence of an Event of Default. Section 9.3 Notice of Default. The Trustee shall, within 10 days after the Trustee receives notice or obtains knowledge of the occurrence of an Event of Default, mail to the City, the Developer, the Notice Beneficial Owners and the Bondholders at the address shown on the registration books of the City maintained by the Bond Registrar, notice of all Events of Default known to the Trustee unless such Events of Default shall have been cured before the giving of such notice. Section 9.4 Termination of Proceedings by Trustee. In case any proceedings taken by the Trustee on account of any Event of Default shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee, then and in every such case the City, the Trustee and the Bondholders shall be restored to their former positions and rights hereunder, respectively, and all rights, remedies and powers of the Trustee shall continue as though no such proceeding had been taken. Section 9.5 Right of Bondholders to Control Proceedings. Anything in this Indenture to the contrary notwithstanding, the holders of a majority in principal amount of the Bonds then outstanding shall have the right, by an instrument in writing executed and delivered to the Trustee, to direct the method and place of conducting all remedial proceedings to be taken by the Trustee hereunder in respect of the Bonds; provided that such direction shall not be otherwise 32 011.553839.8 than in accordance with law and the Trustee shall be indemnified to its satisfaction against the costs, expenses and liabilities to be incurred therein or thereby. Section 9.6 Right of Bondholders to Institute Suit. No holder of any of the Bonds shall have any right to institute any suit, action or proceeding in equity or at law for the execution of any trust hereunder, or for any other remedy hereunder or on the Bonds unless such holder previously shall have given to the Trustee written notice of an Event of Default as hereinabove provided, and unless also the holder, or holders, of 25% in principal amount of the outstanding Bonds affected by the Event of Default shall have made written request of the Trustee after the right to exercise such powers, or right of action, as the case may be, shall have accrued, and shall have afforded the Trustee a reasonable opportunity either to proceed to exercise the powers hereinbefore granted, or to institute such action, suit, or proceeding in its name; and unless, also, there shall have been offered to the Trustee security and indemnity satisfactory to it against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee shall have refused or neglected to comply with such request within a reasonable time; and such notification, request and offer of indemnity are hereby declared in every such case, at the option of the Trustee, to be conditions precedent to the execution of the powers and trusts of this Indenture or for any other remedy hereunder; it being understood and intended that no one or more holders of the Bonds shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the security of this Indenture, or to enforce any right hereunder, except in the manner herein provided, and that all proceedings at law or in equity shall be instituted, had and maintained in the manner herein provided and for the equal benefit of all holders of the outstanding Bonds. Nothing in this Section 9.6 contained shall, however, affect or impair the right of any Bondholder, which is absolute and unconditional, to enforce the payment of the principal of and interest on the Bondholder's Bonds out of the Bond and Interest Fund, or the obligation of the City to pay the same, out of the Bond and Interest Fund, at the time and place in the Bonds expressed. Section 9.7 Suits by Trustee. All rights of action under this Indenture, or under any of the Bonds, enforceable by the Trustee, may be enforced by it without the possession of any of the Bonds or the production thereof at the trial or other proceeding relative thereto, and any such suit, or proceeding, instituted by the Trustee shall be brought in its name for the ratable benefit of the holders of the Bonds affected by such suit or proceeding, subject to the provisions of this Indenture. Section 9.8 Remedies Cumulative. No remedy herein conferred upon or reserved to the Trustee or to the Bondholders is intended to be exclusive of any other remedy or remedies, and each and every remedy shall be cumulative, and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Section 9.9 Waiver of Default. No delay or omission of the Trustee or of any Bondholder to exercise any right or power shall be construed to be a waiver of any such default, or an acquiescence therein; and every power and remedy given by this Article IX to the Trustee and the Bondholders, respectively, may be exercised from time to time, and as often as may be deemed expedient. 33 011.553839.8 Section 9.10 Application of Moneys After Default. The City covenants that if an Event of Default shall happen and shall not have been remedied, the Trustee shall apply moneys, securities and funds on deposit in the Funds and Accounts established pursuant to Article VII or received by the Trustee pursuant to any right given or action taken under the provisions of this Section as follows and in the following order: (a) To the payment of the reasonable and proper charges, expenses and liabilities of the Trustee, the Bond Registrar and any paying agent, including the fees and expenses of outside counsel for the Trustee, the Bond Registrar and any paying agent and the payment of Administrative Expenses owed to the City or the Consultant. (b) To the payment of the principal and interest then due on the Bonds as follows: (i) first, to the payment to the persons entitled thereto of all interest then due or payable on the Bonds in the order of the maturity of such installments; and (ii) second, to the payment to the persons entitled thereto of the unpaid installments of principal of any of the Bonds which have become due in the order of the maturity of such installments. Whenever moneys are to be applied by the Trustee pursuant to the provisions of this paragraph, such moneys shall be applied by the Trustee at such times, and from time to time, as the Trustee in its sole discretion shall determine, having due regard for the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. The deposit of such moneys with the paying agent, or otherwise setting aside such moneys, in trust for the proper purpose, shall constitute proper application by the Trustee; and the Trustee shall incur no liability whatsoever to the City, to any Bondholder or to any other person for any delay in applying any such funds, so long as the Trustee acts with reasonable diligence, having due regard to the circumstances, and ultimately applies the same in accordance with such provisions of this Indenture as may be applicable at the time of application by the Trustee. Whenever the Trustee shall exercise such discretion in applying such funds, it shall fix the date (which shall be an Interest Payment Date unless the Trustee shall deem another date more suitable) upon which such application is to be made and upon such date interest on the amounts of principal paid on such date shall cease to accrue. The Trustee shall give such notice as it may deem appropriate of the fixing of any such date and of the endorsement to be entered on each Bond on which payment shall be made, and shall not be required to make payment to the holder of any unpaid Bond until such Bond shall be presented to the Trustee for appropriate endorsement, or some other procedure deemed satisfactory by the Trustee. 34 011.553839.8 ARTICLE X TRUSTEE Section 10.1 Appointment of the Trustee. The Trustee hereunder is hereby constituted and appointed as the trustee of an express trust hereby created for the Bondholders. The further rights and duties of the Trustee are set forth in this Article X. Section 10.2 Performance of Duties. The Trustee shall perform such duties and only such duties as are specifically set forth in this Indenture, using such care as a corporate trustee ordinarily would use in performing trusts under a corporate indenture or trust or depositary agreement. No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (a) The duties and obligations of the Trustee shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee. (b) In the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificate or opinion furnished to the Trustee conforming to the requirements of this Indenture; but in the case of any such certificate or opinion which by any provision hereof is specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not it conforms to the requirements of this Indenture. (c) The Trustee shall not be liable for any error of judgment made in good faith by a responsible officer or officers of the Trustee unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts. (d) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the holders of not less than a majority (or such larger percentage as is otherwise specifically required by the terms hereof) in aggregate principal amount of all the Bonds at the time outstanding. (e) None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur individual financial liability in the exercise of any of its rights or powers. (f) At any and all reasonable times, upon first providing 48 hours' notice to the City, the Trustee, and its duly authorized agents, attorneys, experts, engineers, accountants and representatives, shall have the right fully to inspect any and all of the 35 011.553839.8 books, papers and records of the City pertaining to the Special Services and the Bonds, and to take such memoranda from and in regard thereto as may be desired. (g) The Trustee shall not be required to give any bond or surety in respect of the execution of the trusts and powers granted by this Indenture or otherwise in respect of the premises. (h) Notwithstanding anything elsewhere in this Indenture contained, the Trustee shall have the right, but shall not be required, to demand, in respect of the withdrawal of any cash or any action whatsoever within the purview of this Indenture, any showings, certificates, opinions, appraisals or other information or corporate action or evidence thereof, in addition to that by the terms hereof required as a condition of such action by the Trustee, reasonably necessary to establish the right of the City to the withdrawal of any cash or the taking of any other action by the Trustee. (i) Before taking any action under Section 9.2, the Trustee may require that a satisfactory indemnity bond or other security satisfactory to it be furnished by the party requesting that the Trustee take such action for the reimbursement of all expenses to which it may be put and to protect it against all liability, except liability which is adjudicated to have resulted from the negligence or willful default of the Trustee in connection with any action so taken. 0) All moneys received by the Trustee or any paying agent shall, until used or applied or invested as herein provided, be held in trust for the purposes for which they were received. (k) The Trustee may execute any of the trusts or powers hereof and perform any of its duties by or through attorneys, agents, receivers, or employees and shall not be answerable for the conduct of the same if appointed with due care hereunder. Section 10.3 Instruments Upon Which Trustee May Rely. Except as otherwise provided in paragraph (b) hereof: (a) The Trustee may rely and shall be protected in acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties. (b) Any notice, request, direction, election, order or demand of the City mentioned herein shall be sufficiently evidenced by an instrument signed in the name of the City by its Mayor or its City Clerk (unless other evidence in respect thereof be herein specifically prescribed); and any resolution of the Corporate Authorities may be evidenced to the Trustee by a copy thereof certified by the City Clerk under the City seal. (c) The Trustee may consult with reputable counsel (who may but need not be counsel for the City) and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance with the opinion of such counsel. 36 011.553839.8 (d) Whenever in the administration of the trusts under this Indenture, the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or bad faith on the part of the Trustee, be deemed to be conclusively proved and established by a certificate of the City; and such certificate of the City shall, in the absence of negligence or bad faith on the part of the Trustee, be full warranty to the Trustee for any action taken or suffered by it under the provisions of this Indenture upon the faith thereof. Section 10.4 Trustee not Responsible for Recitals and Other Matters. The Trustee shall not be responsible in any manner whatsoever for the correctness of the recitals herein or in the Bonds (except the Trustee's certificate of authentication thereon), all of which are made by the City solely; and the Trustee shall not be responsible or accountable in any manner whatsoever for or with respect to the validity or execution or sufficiency of this Indenture, or of any indenture supplemental hereto, or of the Bond Ordinance or the Bonds, or the sufficiency of the taxes levied to pay the principal of and interest on the Bonds, or for the security afforded hereby or for the validity of any securities at any time held hereunder, and the Trustee makes no representation with respect thereto. The Trustee shall not be accountable for the use or application by the City of the proceeds of any Bonds authenticated and delivered hereunder, or for the use or application of any moneys paid over by the Trustee in accordance with any provision of this Indenture. Section 10.5 Trustee May Acquire Bonds. The Trustee and its officers and directors may acquire and hold, or become the pledgee of, Bonds and may otherwise deal with the City in the manner and to the same extent and with like effect as though it were not Trustee hereunder. Section 10.6 _Qualification of Trustee. There shall at all times be a Trustee hereunder which shall be a corporation organized and doing business under the laws of the United States or any state thereof, authorized under such laws to exercise corporate trust powers, having a combined capital, surplus and undivided profits of at least $50,000,000, and subject to supervision or examination by federal or state authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this paragraph the combined capital, surplus and undivided profits of such corporation shall be deemed to be its combined capital, surplus and undivided profits as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this paragraph, the Trustee shall resign immediately in the manner and with the effect specified in Section 10.7. Section 10.7 Resignation or Removal of Trustee and Appointment of Successor. (a) The Trustee may at any time resign by giving written notice to the City, the Developer, each Notice Beneficial Owner, and the Bondholders by first class mail to the names and addresses shown on the list maintained by the Bond Registrar. Upon receiving such notice of resignation, the City shall promptly appoint a successor Trustee by an instrument in writing executed by order of the City. If no successor Trustee shall have been so appointed and have accepted appointment within 30 days after the giving of 37 011.553839.8 such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee, or any Bondholder who has been a bona fide holder of a Bond or Bonds for at least six months may, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor Trustee. (b) In case at any time any of the following shall occur: (i) The Trustee shall cease to be eligible in accordance with the provisions of Section 10.6 and shall fail to resign after written request therefor by the City, by any Notice Beneficial Owner or by any Bondholder who has been a bona fide holder of a Bond or Bonds for at least six months, or (ii) The Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, the City may remove the Trustee and appoint a successor Trustee by an instrument in writing executed by order of the City or any Bondholder may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor Trustee. (c) The holders of a majority in aggregate principal amount of all the Bonds at the time outstanding may at any time remove the Trustee and appoint a successor Trustee by an instrument or concurrent instruments in writing signed by such Bondholders. Such successor Trustee shall be a corporation authorized under applicable laws to exercise corporate trust powers, may be incorporated under the laws of the United States or of any State within the United States. Such successor Trustee shall satisfy the minimum combined capital, surplus and undivided profits requirement set forth in Section 10.6. (d) The City, subject to the approval of the holders of a majority in aggregate principal amount of all the Bonds at the time outstanding, may at any time remove the Trustee and appoint a successor Trustee by an instrument in writing signed by the City and accompanied by an instrument or concurrent instruments in writing signed by such Bondholders approving such removal and appointment. (e) Any resignation or removal of the Trustee and appointment of a successor Trustee pursuant to any of the provisions of this Section 10.7 shall become effective upon acceptance of appointment by the successor Trustee as provided in Section 10.8. Section 10.8 Concerning the Successor Trustee. Any successor Trustee appointed as provided in Section 10.7 shall execute, acknowledge and deliver to the City and to its predecessor Trustee an instrument accepting such appointment hereunder, and thereupon the 38 011.553839.8 resignation or removal of the predecessor Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts, duties and obligations of its predecessor in the trusts hereunder, with like effect as if originally named as Trustee herein; but nevertheless on the written request of the City or the request of the successor Trustee, the Trustee ceasing to act shall execute and deliver an instrument transferring to such successor Trustee, upon the trusts herein expressed, all the rights, powers and trusts of the Trustee so ceasing to act. Upon request of any such successor Trustee, the City shall execute any and all instruments in writing more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and duties. Any Trustee ceasing to act shall nevertheless be entitled to receive the amounts due it as compensation, reimbursement, expenses and indemnity afforded to it by this Article X. No successor Trustee shall accept appointment as provided in this Section 10.8 unless at the time of such acceptance such successor Trustee shall be eligible under the provisions of Section 10.6. Upon the acceptance of appointment by a successor Trustee as provided in this Section 10.8, the City shall mail a copy of such notice to each person whose name appears as an owner of Bonds on the list maintained by the Bond Registrar and each Notice Beneficial Owner. If the City fails to mail such notice within 10 days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the City. Any banking association or corporation into which the Trustee may be merged, converted or with which the Trustee may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any banking association or corporation to which all or substantially all of the corporate trust business of the Trustee shall be transferred, shall succeed to all the Trustee's rights, obligations and immunities hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. Section 10.9 Monthly Statements. The Trustee shall provide the Purchaser, the Consultant, the Developer and the City, or their designees, a monthly statement, commencing on 1, 2005, itemizing all moneys received by it and all payments made by it under this Indenture during the preceding monthly period and annual reports relating to the Funds and Accounts created under this Indenture and such other information relating to the Bonds and the Funds and Accounts maintained by the Trustee under this Indenture as the Purchaser, the Developer and the City shall reasonable request. The Trustee shall also provide to (i) each Notice Beneficial Owner (until such time as it is not a Beneficial Owner) and (ii) each other Beneficial Owner upon written request the following: (a) copies of the monthly statements described above; (b) Copies of all notices or reports given to the City by the Trustee under this Indenture; (c) Copies of all notices given by the Trustee to, or requests for consent requested by the Trustee from, the Bondholders; 39 011.553839.8 (d) Notices or reports given by the City to the Trustee pursuant to this Indenture and the audited financial statements delivered to the Trustee pursuant to Section 8.6 of this Indenture; (e) Any report, notice or communication given by the Developer to the City pursuant to the Public Improvement Agreement, if any, and pursuant to this Indenture including, but not limited to, information delivered to the Trustee pursuant to Section 8.6 of this Indenture; (f) Any notice required to be given to the Beneficial Owners under this Indenture; (g) Copies of all amendments and supplements to this Indenture; and (h) The name and telephone number of the officer of the Trustee who will provide information required to be delivered pursuant to this Section 10.9, if different than the name and telephone number set forth in Section 13.2 hereof. ARTICLE XI SUPPLEMENTAL INDENTURES Section 11.1 Supplemental Indentures Not Requiring Consent of Bondholders. The City by the Corporate Authorities, and the Trustee from time to time and at any time, subject to the conditions and restrictions in this Indenture contained, may pass and accept an indenture or indentures supplemental hereto, which indenture or indentures thereafter shall form a part hereof, for any one or more of the following purposes: (a) To add to the covenants and agreements of the City in this Indenture contained, other covenants and agreements thereafter to be observed or to surrender, restrict or limit any right or power herein reserved to or conferred upon the City; (b) To provide for the issuance of Additional Bonds as set forth in Article III of this Indenture; (c) To grant to or confer upon the Trustee for the benefit of the owners of the Bonds any additional rights, remedies, powers, authority or security that may lawfully be granted to or conferred upon the owners or the Trustee; (d) To modify, amend or supplement this Indenture in such manner as to permit, if presented, the qualification of this Indenture under the Trust Indenture Act of 1939 or any similar federal statute then in effect or under any state blue sky law; and (e) To surrender any right, power or privilege reserved to or conferred upon the City by the terms of this Indenture, provided that the surrender of such right, power or privilege is not contrary to or inconsistent with the covenants and agreements of the City contained in this Indenture. 40 011.553839.8 Any supplemental indenture authorized by the provisions of this Section 11.1 may be executed by the City, by the Corporate Authorities, and by the Trustee without the consent of any Notice Beneficial Owners or the registered owners of any of the Bonds at the time outstanding, but only upon receipt of an opinion of bond counsel if requested pursuant to the provisions of Section 11.6, notwithstanding any of the provisions of Section 11.2, but the Trustee shall not be obligated to accept any provision of such supplemental indenture to the extent that it affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Section 11.2 Supplemental Indentures Requiring Consent of Bondholders. With the consent (evidenced as provided herein) of the Notice Beneficial Owners and the registered owners of not less than a majority in aggregate principal amount of the Bonds, respectively, at the time outstanding, but only upon receipt of an opinion of bond counsel if requested pursuant to the provisions of Section 11.6, the City, by the Corporate Authorities may pass, and the Trustee may accept from time to time and at any time an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this indenture or of any supplemental indenture; provided that no such modification or amendment shall extend the maturity or reduce the principal of or the interest rate on or otherwise alter or impair the obligation of the City to pay the principal, interest or redemption premium, if any, at the time and place and at the rate and in the currency provided therein of any Bond without the express consent of the registered owner of such Bond or permit the creation of a preference or priority of any Bond or Bonds over any other Bond or Bonds, except as otherwise provided in Article III with respect to Additional Bonds, or reduce the percentage of Bonds, respectively, required for the affirmative vote or written consent to an amendment or modification, or deprive the registered owners of the Bonds (except as aforesaid) of the right to payment of the Bonds, from the Special Taxes and the Foreclosure Proceeds without the consent of the registered owners of all the Bonds (as the case may be) then outstanding. Upon receipt by the Trustee of a certified copy of such Indenture and upon the filing with the Trustee of evidence of the consent of Bondholders as aforesaid, the Trustee shall accept such supplemental indenture, but the Trustee shall not be obligated to accept any provision of such supplemental indenture to the extent that it affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. It shall not be necessary for the consent of the Bondholders under this paragraph to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the passage by the City and the acceptance by the Trustee of any supplemental indenture pertaining to the Bonds pursuant to the provisions of this paragraph, the City shall mail a notice by first class mail to the Bondholders, setting forth in general terms the substance of such supplemental indenture, and that the supplemental indenture has been consented to by the requisite percentage of the Bondholders. Any failure of the City to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. Section 11.3 Supplemental Indenture to Modify this Indenture. Upon the execution of any supplemental indenture pursuant to the provisions of this Article XI, and upon receipt of the opinion of bond counsel if required by the provisions of Section 11.6, this Indenture shall be 41 011.553839.8 modified and amended in accordance therewith and the respective rights, duties and obligations under this Indenture of the City, the Trustee and all registered owners of Bonds, outstanding thereunder shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modification and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. Section 11.4 Trustee May Rely Upon Opinion of Counsel Re: Supplemental Indenture. The Trustee may receive an opinion of counsel as conclusive evidence that any supplemental indenture executed pursuant to the provisions of this Article XI complies with the requirements of this Article XI. Section 11.5 Notation. Bonds authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article XI may bear a notation, in form approved by the Trustee, as to any matter provided for in such supplemental indenture, and if such supplemental indenture shall so provide, new Bonds, so modified as to conform, in the opinion of the Trustee and the Corporate Authorities, to any modification of this Indenture contained in any such supplemental indenture, may be prepared by the City, authenticated by the Trustee and delivered without cost to the registered owners of the Bonds then outstanding, upon surrender for cancellation of such Bonds in equal aggregate principal amounts. Section 11.6 Opinion of Bond Counsel. Prior to the adoption of a supplemental indenture executed pursuant to the provisions of this Article XI the Trustee shall give written notice by mail to the Developer, the Notice Beneficial Owners and the registered owners of all Bonds Outstanding at the addresses as set forth in the Register of the Bonds held by the Bond Registrar of the substance of the proposed supplemental indenture. If within 10 days of the Trustee's mailing such notice any Notice Beneficial Owner or registered owner of the Bonds requests that an opinion of bond counsel be delivered to the effect that such supplemental indenture will not adversely affect the exclusion from gross income of interest on the Bonds for federal income tax purposes, such supplemental indenture shall not become effective until such opinion has been delivered to the Trustee. ARTICLE XII DEFEASANCE Section 12.1 Defeasance. (a) If the City shall pay or cause to be paid, or there shall otherwise be paid, to the Bondholders of all Bonds the principal or redemption price, if applicable, and interest due or to become due thereon, at the times and in the manner stipulated therein and in this Indenture, then the pledge of the Trust Estate, and all covenants, agreements and other obligations of the City to the Bondholders, shall thereupon cease, terminate and become void and be discharged and satisfied. In such event, the Trustee shall cause an accounting for such period or periods as shall be requested by the City to be prepared and filed with the City and, upon the request of the City, shall execute and deliver to the City all such instruments as may be desirable to evidence such discharge and satisfaction, and 42 011.553839.8 the Trustee shall pay over or deliver to the City all moneys or securities held pursuant to this Indenture which are not required for the payment of principal or redemption price, if applicable, of and interest on the Bonds. If the City shall pay or cause to be paid, or there shall otherwise be paid, to the Bondholders of all Outstanding Bonds of a particular series or maturity within a series the principal or redemption price of and interest due or to become due thereon, at the times and in the manner stipulated therein and in this Indenture, such Bonds shall cease to be entitled to any lien, benefit or security under this Indenture, and all covenants, agreements and obligations of the City to the Bondholders of such Bonds shall thereupon cease, terminate and become void and be discharged and satisfied. (b) Bonds or interest installments for the payment or redemption of which moneys shall have been set aside and shall be held in trust by the Trustee (through deposit by the City of funds for such payment or redemption or otherwise) at the maturity or redemption date thereof shall be deemed to have been paid within the meaning and with the effect expressed in subsection (a) of this Section 12.1. In addition, any Outstanding Bonds shall, prior to the maturity or redemption date thereof, be deemed to have been paid within the meaning and with the effect expressed in subsection (a) of this Section 12.1 upon compliance with the provisions of subsection (c) of this Section 12.1. (c) Subject to the provisions of subsection (d) of this Section 12.1, any Outstanding Bonds shall, prior to the maturity or redemption date thereof, be deemed to have been paid within the meaning and with the effect expressed in subsection (a) of this Section 12.1 if- (i) in case any of said Bonds are to be redeemed on any date prior to their maturity, the City shall have given to the Trustee irrevocable instructions accepted in writing by the Trustee to give as provided in Section 4.5 notice of redemption of such Bonds on said date; (ii) there shall have been deposited with the Trustee either moneys in an amount which shall be sufficient or Defeasance Securities, the principal of and the interest on which when due will provide moneys which, together with the moneys, if any, deposited with the Trustee at the same time, shall be sufficient, to pay when due the principal or redemption price, if applicable, and interest due and to become due on said Bonds on or prior to the redemption date or maturity date thereof, as the case may be; and (iii) in the event said Bonds do not mature, are not by their terms subject to redemption or, under the plan of refunding applicable thereto, are not to be redeemed, in each case, within the next succeeding ninety (90) days, the City shall have given the Trustee in form satisfactory to it irrevocable instructions to give, as soon as practicable, by first-class mail, postage prepaid, to the owners of such Bonds at their last addresses appearing on the books of the City kept at the office of the Bond Registrar a notice that the deposit required by (ii) above has been made with the Trustee and that said Bonds are deemed to have been paid in accordance with this Section 12.1 and stating such maturity or redemption date 43 011.553839.8 upon which moneys are to be available for the payment of the principal or redemption price, if applicable, on said Bonds. (d) Anything in this Indenture to the contrary notwithstanding, any moneys held in trust for the payment and discharge of any of the Bonds which remain unclaimed for one year after the date when such Bonds have become due and payable, either at their stated maturity dates or by call for earlier redemption shall be repaid to the City, as its absolute property and free from trust, and the Trustee shall thereupon be released and discharged, with respect thereto and the Bondholders shall look only to the City for the payment of such Bonds; provided, however, that before being required to make any such payment to the City, the Trustee shall, at the expense of the City, (i) give to the owners of such Bonds as to which any moneys remain unclaimed, by first class mail, postage prepaid, at the last address of such owners appearing on the books of the City kept at the office of the Bond Registrar and (ii) cause to be published one time in an Authorized Newspaper, a notice that said moneys remain unclaimed and that, after a date named in said notice, which date shall be not less than thirty (30) days after the date of the publication of such notice, the balance of such moneys then unclaimed will be returned to the City. (e) Upon the payment or defeasance of all outstanding Bonds as provided in this Article XII, the Trustee and the City shall execute a Satisfaction of Tax Lien substantially in the form of Exhibit C hereto for all Parcels for which a satisfaction of tax lien has not previously been delivered and the City shall file or cause to be filed such Satisfaction of Tax Lien with the Recorder of Deeds of Kendall County, Illinois. ARTICLE XIII MISCELLANEOUS Section 13.1 Severability. If any provision of this Indenture shall be held or deemed to be illegal, inoperative or unenforceable under applicable law or interpreted in such manner as to be prohibited by or be held invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Indenture. Section 13.2 Notices. Except as otherwise provided in this Indenture, all notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed given when personally delivered or mailed by certified mail, postage prepaid, or when sent by telecopy (receipt confirmed by telephone) or telegram, addressed as follows: If to the City: United City of Yorkville 800 Game Farm Road Yorkville, Illinois 60560 Attention: Mayor Telephone: (630) 553-4350 44 011.553839.8 Telecopier: (630) 553-7575 If to the Trustee: LaSalle Bank National Association 135 South LaSalle Street, Suite 1960 Chicago, Illinois 60674-9135 Attention: Corporate Trust Telephone: (312) 904-2571 Telecopier: (312) 904-2236 If to the Developer: MPI-2 Yorkville Central LLC 6880 North Frontage Road Suite #100 Burr Ridge, Illinois 60527 Attention: Anthony Pasquinelli Telephone: (630) 455-5400 Telecopier: (630) 455-2591 If to the Purchaser: LaSalle Capital Markets, A Division of ABN AMRO Financial Services, Inc. 181 West Madison Street, Suite 3200 Chicago, Illinois 60602 Attention: Public Finance Telephone: 312-904-5752 Telecopier: 312-904-7727 Section 13.3 Holidays. If any date for the payment of an amount hereunder or the taking of any other action required or permitted to be taken hereunder, is not a Business Day, then such payment shall be due, or such action shall or may be taken, as the case may be, on the first Business Day thereafter with the same force and effect as if done on the nominal date provided in this Indenture. Section 13.4 Execution of Counterparts. This Indenture may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 13.5 Applicable Law. This Indenture shall be governed by and construed in accordance with the internal laws of the State of Illinois. Section 13.6 Immunity of Officers Employees Elected Officials of City. No recourse shall be had for the payment of the principal of or premium, if any, or interest on any of the Bonds or for any claim based thereon or upon any obligation, covenant or agreement contained 45 011.553839.8 in this Indenture or any agreement supplemental hereto, against any past, present or future president, trustee or other officer, director, member, employee, attorney or agent of the City, or any incorporator, officer, director, member, trustee, employee or agent of any successor corporation or body politic, as such, either directly or through the City or any successor corporation or body politic, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such incorporators, officers, directors, trustees, members, employees or agents, as such, is hereby expressly waived and released as a condition of and consideration for the execution of this Indenture and the issuance of any of the Bonds. 46 011.553839.8 IN WITNESS WHEREOF, the United City of Yorkville, Illinois has caused these presents to be signed in its name and on its behalf by its Mayor and its corporate seal to be hereunto affixed and attested by its City Clerk and to evidence its acceptance of the trusts hereby created LaSalle Bank National Association has caused these presents to be signed in its name and on its behalf by its Authorized Officer, its official seal to be hereunto affixed and the same to be attested by its Authorized Officer, all as of the day and year first above written. UNITED CITY OF YORKVILLE, ILLINOIS By: Mayor [SEAL] Attest: By: City Clerk LASALLE BANK NATIONAL ASSOCIATION, as trustee By: Authorized Officer [SEAL] Attest: By: Authorized Officer 47 011.553839.8 EXHIBIT A UNITED CITY OF YORKVILLE SPECIAL SERVICE AREA NUMBER 2004-104 CENTRAL GRANDE RESERVE LEGAL DESCRIPTION A-1 011.553839.8 EXHIBIT B UNITED STATES OF AMERICA STATE OF ILLINOIS COUNTY OF KENDALL UNITED CITY OF YORKVILLE KENDALL COUNTY, ILLINOIS SPECIAL SERVICE AREA NUMBER 2004-104 CENTRAL GRANDE RESERVE SPECIAL TAX BOND SERIES 2004 (MPI GRANDE RESERVE PROJECT) Bond No. Principal Amount: $ Date of Bond: 52004 Interest Rate: % CUSIP: Date of Maturity: Registered Owner: Cede & Co. The United City of Yorkville, Kendall County, Illinois (the "City"), for value received, promises to pay to the Registered Owner specified above or registered assigns, upon presentation and surrender of this bond at the office of LaSalle Bank National Association, Chicago, Illinois, as Trustee (the "Trustee") the Principal Amount of this bond specified above on the Date of Maturity specified above and to pay the Registered Owner of this bond interest on that sum at the Interest Rate per year specified above from the Date of Bond specified above to the Date of Maturity specified above, payable semiannually on March 1 and September 1, with the first interest payment date being March 1, 2005. Interest shall be computed on the basis of a 360-day year of twelve 30-days months. Interest on this bond shall be payable on each interest payment date by check or draft of the Trustee mailed to the person in whose name this bond is registered at the close of business on the 15th day of the month preceding such interest payment date. During such time as this bond is registered so as to participate in a securities depository system with The Depository Trust Company ("DTC"), principal of and interest on this Bond shall be payable by wire transfer pursuant to instructions from DTC. The principal of, interest on and redemption premium on this bond are payable in lawful money of the United States of America. No interest shall accrue on this bond after its Date of Maturity unless this bond shall have been presented for payment at maturity and shall not then have been paid. This bond is one of an authorized issue of bonds in the aggregate principal amount of $ . This bond and the issue of which it is a part (together, the "Series 2004 Bonds") are issued pursuant to the provisions of the "Special Service Area Tax Law," 35 ILCS §200/27-5 et secl., as amended, and the provisions of the Local Government Debt Reform Act, 30 ILCS §350/1 et sue., as amended, and the principal of and interest on the Series 2004 Bonds are payable from special taxes (the "Special Taxes") levied on all taxable real property within the B-1 011.553839.8 United City of Yorkville Special Service Area Number 2004-104 Central Grande Reserve (the "Special Service Area") pursuant to a special tax roll. Additional Bonds on a parity with the Series 2004 Bonds may be issued as provided in the Indenture (as defined below) which shall also be secured by the Special Taxes. The Series 2004 Bonds and any Additional Bonds issued pursuant to the Indenture are hereinafter referred to as the "Bonds". The Series 2004 Bonds are being issued for the purpose of paying a portion of the costs of special services to be provided to the Special Service Area, all as more fully described in an ordinance adopted by the Mayor and Board of Trustees of the City on October 26, 2004 (the "Bond Ordinance") and a Trust Indenture dated as of December 1, 2004 between the City and the Trustee (the "Indenture"), to all the provisions of which the holder by the acceptance of this bond assents. Terms not otherwise defined herein shall have the meanings ascribed to such terms in the Indenture. The Series 2004 Bonds, together with the interest thereon, are limited obligations of the City, payable solely from the collection of the Special Taxes and other moneys deposited in certain Funds and Accounts established pursuant to the Indenture. For the prompt payment of the principal of and interest on this bond the Special Taxes are hereby irrevocably pledged. THE SERIES 2004 BONDS DO NOT CONSTITUTE GENERAL OBLIGATIONS OF THE CITY AND NEITHER THE FULL FAITH AND CREDIT NOR THE UNLIMITED TAXING POWER OF THE CITY SHALL BE PLEDGED AS SECURITY FOR THE PAYMENT OF THE SERIES 2004 BONDS. The Series 2004 Bonds are subject to mandatory sinking fund redemption and final payment at a price of par plus accrued interest, without premium, on March 1, of the years and in the amounts as follows: Year Amount 2007 $ 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 B-2 011.553839.8 Year Amount 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 The City covenants that it will redeem the Series 2004 Bonds pursuant to the mandatory sinking fund redemption requirements for the Series 2004 Bonds to the extent amounts are on deposit in the Bond and Interest Fund. The Series 2004 Bonds are also subject to optional redemption prior to maturity at the option of the City, in whole or in part, on any date on or after March 1, 2014, at a redemption price (expressed as a percentage of the principal amount of the Bonds to be redeemed), as set forth below, plus accrued and unpaid interest to the date of redemption: Redemption Dates Redemption Prices March 1, 2014 through February 28, 2015 102% March 1, 2015 through February 29, 2016 101 March 1, 2016 and thereafter 100 Any optional redemption of Series 2004 Bonds shall be applied, to the extent possible, to reduce pro rata the amount required to be redeemed by mandatory sinking fund redemption pursuant to the Indenture, and so as to maintain the proportion of principal maturing in each year to the total original principal amount of Series 2004 Bonds. The Bonds, are also subject to mandatory redemption on any interest payment date, in part, at a redemption price equal to the principal amount to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from amounts in the Bond and Interest Fund consisting of the proceeds received by the City in connection with a condemnation of any of the special services or any other property owned by or dedicated to the City within the Special Service Area and allocable to the Bonds as determined by the Consultant and which proceeds are not used by the City to rebuild the Special Services. The Series 2004 Bonds are subject to redemption on any Interest Payment Date, in part, at a redemption price equal to the principal amount to be redeemed, together with accrued B-3 011.553839.8 interest to the date fixed for redemption, without premium, from amounts transferred from the Series 2004 Improvement Account of the Improvement Fund to the Bond and Interest Fund. The Bonds are subject to mandatory redemption on any Interest Payment Date, in whole or in part, at a redemption price equal to the principal amount to be redeemed, together with accrued interest to the date fixed for redemption, without premium, in the event of a mandatory prepayment of the Special Taxes upon a reduction in the Maximum Parcel Special Tax as a result of a change in the expected number of single family lots, townhome lots or duplexes to be built within the Special Service Area or any other event that reduces the total of the Maximum Parcel Special Tax as described in, and in the amounts set forth in, Section C.1 of the Special Tax Report (as defined in the Indenture); provided however that a change in density relating to Second Series Property shall not be applied to the redemption of the Series 2004 Bonds until such time as the Additional Bonds are issued. The Bonds are also subject to mandatory redemption on any interest payment date, in part, from amounts available for disbursement from the Special Redemption Account and from amounts transferred from the Reserve Fund to the Special Redemption Account in connection with prepayments of the Special Taxes, at a redemption price (expressed as a percentage of the principal amount of the Bonds to be redeemed), as set forth below, together with accrued interest on such Bonds to the date fixed for redemption: Redemption Dates Redemption Prices On or prior to February 28, 2014 103% March 1, 2014 through February 28, 2013 102 March 1, 2015 through February 29, 2016 101 March 1, 2016 and thereafter 100 Any mandatory redemption of the Bonds in part from proceeds from condemnation, proceeds transferred from the Improvement Fund to the Bond and Interest Fund or prepayments of the Special Taxes shall be applied to reduce pro rata the amount of Bonds required to be redeemed by mandatory sinking fund redemption pursuant to the Indenture, and so as to maintain the proportion of principal maturing in each year to the total original principal amount of Bonds. If less than all the Series 2004 Bonds of any maturity are to be redeemed on any redemption date, the Bond Registrar named below will assign to each Series 2004 Bond of the maturity to be redeemed a distinctive number for each $1,000 of principal amount of that Series 2004 Bond. The Bond Registrar will then select by lot from the numbers so assigned, using such method as it shall deem proper in its discretion, as many numbers as, at $1,000 per number, shall equal the principal amount of Series 2004 Bonds of that maturity to be redeemed; provided that following any redemption, no Series 2004 Bonds shall be outstanding in an amount less than the B-4 011.553839.8 minimum Authorized Denomination except as necessary to effect the mandatory sinking fund redemption of Series 2004 Bonds as provided in the Indenture. Notice of the redemption of any Series 2004 Bonds, which by their terms shall have become subject to redemption, will be given to the Notice Beneficial Owners, as defined in the Indenture, and the registered owner of each Series 2004 Bond called for redemption in whole or in part not less than 30 or more than 60 days before any date established for redemption of Series 2004 Bonds, by the Bond Registrar, on behalf of the City, by registered or certified mail sent to the registered owner's last address, if any, appearing on the registration books kept by the Bond Registrar. All notices of redemption shall include at least the designation, date and maturities of Series 2004 Bonds called for redemption, CUSIP Numbers, if available, and the date of redemption. In the case of a Series 2004 Bond to be redeemed in part only, the notice will also specify the portion of the principal amount of the Series 2004 Bond to be redeemed. The mailing of the notice specified above to the registered owner of any Series 2004 Bond will be a condition precedent to the redemption of that Series 2004 Bond, provided that any notice which is mailed in accordance with the Indenture will be conclusively presumed to have been duly given whether or not the owner received that notice. The failure to mail notice to the owner of any Series 2004 Bond, or any defect in that notice, shall not affect the validity of the redemption of any other Series 2004 Bonds. This bond is negotiable, subject to the following provisions for registration and registration of transfer. The City maintains books for the registration and registration of transfer of Series 2004 Bonds at the office of the Trustee, as Bond Registrar. This bond is fully registered on those books in the name of its owner, as to both principal and interest, and transfer of this bond may be registered on those books upon surrender of this bond to the Bond Registrar by the registered owner or his or her attorney duly authorized in writing together with a written instrument of transfer satisfactory to the Bond Registrar duly executed by the registered owner or his or her duly authorized attorney. Upon surrender of this bond for registration of transfer, a new bond or bonds in the same aggregate principal amount and of the same maturity will be issued to the transferee as provided in the Indenture. This bond may be exchanged, at the option of the Registered Owner, for an equal aggregate principal amount of bonds of the same maturity of any other Authorized Denominations, upon surrender of this bond at the office of the Bond Registrar with a written instrument of transfer satisfactory to the Bond Registrar duly executed by the Registered Owner or his or her duly authorized attorney. For every exchange or registration of transfer of this bond, the City or the Bond Registrar may make a charge sufficient to reimburse it for any tax, fee or other governmental charge, other than one imposed by the City, required to be paid with respect to that exchange or registration of transfer, and payment of that charge by the person requesting exchange or registration of transfer shall be a condition precedent to that exchange or registration of transfer. No other charge may be made by the City or the Bond Registrar as a condition precedent to exchange or registration of transfer of this bond. The Bond Registrar shall not be required to exchange or register the transfer of any Series 2004 Bond following the close of business on the 15th day of the month preceding any interest B-5 011.553839.8 payment date on such Series 2004 Bond, nor to transfer or exchange any Series 2004 Bond after notice calling such Series 2004 Bond for redemption has been mailed, nor during a period of 15 days next preceding mailing of a notice of redemption of any Series 2004 Bonds. The City, the Trustee and the Bond Registrar may deem and treat the registered owner of this bond as its absolute owner, whether or not this bond is overdue, for the purpose of receiving payment of the principal of or interest on this bond and for all other purposes, and neither the City, the Bond Registrar nor the Trustee shall be affected by any notice to the contrary. Payment of the principal of and interest on this bond shall be made only to its registered owner, and all such payments shall be valid and effective to satisfy the obligation of the City on this bond to the extent of the amount paid. All conditions which by law must have existed or must have been fulfilled in the issuance of this bond existed and were fulfilled in compliance with law. Provision has been made for the levy, collection and segregation of the Special Taxes sufficient to pay and discharge the principal of this bond at maturity and to pay interest on this bond as it falls due. The issuance of the Series 2004 Bonds by the City will not cause the City to exceed or violate any applicable limitation or condition respecting the issuance of bonds imposed by the law of the State of Illinois or by any indenture, ordinance or resolution of the City. The Series 2004 Bonds are issued for purposes for which the City is authorized by law to issue bonds including but not limited to the payment of a portion of the costs of the special services to be provided to the Special Service Area, making deposits to a reserve fund, administrative expense fund and a capitalized interest account, and paying costs of the City in connection with the issuance of the Series 2004 Bonds. This bond shall not be valid for any purpose unless and until the certificate of authentication on this bond shall have been duly executed by the Trustee. B-6 011.553839.8 IN WITNESS WHEREOF, the United City of Yorkville, Kendall County, Illinois, by its City Council, has caused this bond to be executed by the manual or facsimile signature of its Mayor and attested by the manual or facsimile signature of its City Clerk and has caused its corporate seal to be affixed to this bond (or a facsimile of its seal to be printed on this bond), all as of the Date of Bond specified above. UNITED CITY OF YORKVILLE, ILLINOIS By: Mayor (SEAL) ATTEST: City Clerk B-7 011.553839.8 Date of Authentication: This bond is one of the bonds described in the Indenture authorizing the issuance of $ United City of Yorkville, Kendall County, Illinois Special Service Area Number 2004-104 Central Grande Reserve Special Tax Bonds, Series 2004 (MPI Grande Reserve Project). LASALLE BANK NATIONAL ASSOCIATION, as Trustee By: Authorized Signatory For Value Received, the undersigned sells, assigns and transfers to this bond and all rights and title under this bond, and irrevocably constitutes and appoints attorney to transfer this bond on the books kept for registration of this bond. Dated: B-8 011.553839.8 EXHIBIT C (The Above Space For Recorder's Use Only) This Document was prepared by and after recording return to: [Insert name of person preparing the special tax] SATISFACTION OF TAX LIEN The undersigned duly elected and acting Mayor of the United City of Yorkville, Kendall County, Illinois (the "City"), in consideration of the receipt of the sum of $ , hereby acknowledges and certifies that special taxes levied and to be extended in accordance with the Special Tax Roll approved by the Mayor and City Council of the City pursuant to Ordinance No. (the "Establishing Ordinance") are paid and the lien of such taxes satisfied with respect to the following lots in the City's Special Service Area Number 2004-104 Central Grande Reserve (the "SSA") legally described on Exhibit A attached hereto: Lot PIN The undersigned further certifies that pursuant to Section — of the Special Tax Roll and Report of attached to and incorporated in the Establishing Ordinance as Exhibit E (the "Special Tax Report"), upon payment of the prepayment amount as calculated pursuant to the Special Tax Report, the Special Taxes which were prepaid shall not be levied on the Parcel for which the prepayment was made. Pursuant to Section — of the Special Tax Report, the City shall amend the Special Tax Roll each calendar year to reflect the Maximum Parcel Special Tax. Dated: UNITED CITY OF YORKVILLE By: Title: C-1 011.553839.8 Approved by: DAVID TAUSSIG & ASSOCIATES, INC. By: Title: The Trustee hereby acknowledges receipt of the sum of$ LASALLE BANK NATIONAL ASSOCIATION, as trustee By: Title: C-2 011.553839.8 STATE OF ILLINOIS ) SS. COUNTY OF ) I, , a Notary Public in and for such County and State aforesaid, do hereby certify that , personally known to me to be the Mayor of the United City of Yorkville, Illinois, whose name is subscribed to the foregoing Satisfaction, appeared before me this day in person and acknowledged that as such officer he signed and delivered the foregoing Satisfaction as such officer of the United City of Yorkville, Illinois, as his free and voluntary act, and as the free and voluntary act and deed of such City, for the uses and purposes therein set forth. Given under my hand and notarial seal, this day of , Notary Public Commission expires: C-3 011.553839.8 EXHIBIT D DISBURSEMENT REQUEST T0: LaSalle Bank National Association, Trustee Chicago, Illinois Attention: Corporate Trust RE: $ United City of Yorkville Kendall County, Illinois Special Service Area Number 2004-104 Central Grande Reserve Special Tax Bonds, Series 2004 (MPI Grande Reserve Project) Amount Requested: Total Disbursements to Date: 1. Each obligation for which a disbursement is hereby requested is described in reasonable detail in Schedule I hereto together with the name and address of the person, firm, or corporation to whom payment is due, which may include the Developer for reimbursement of amounts expended, and any other payment instructions. 2. The bills, invoices, or statements of account for each obligation referenced in Schedule I are attached hereto as Schedule II. 3. The Issuer hereby certifies that: a. This written requisition is for payment of costs in connection with the issuance of the above-referenced Series 2004 Bonds and the specific purpose for which this request is made is described in Schedule I. b. The disbursement is for payment of a Special Service. C. Such Special Service has been completed in accordance with the terms of the Public Improvement Agreement. d. Payment instructions sufficient to make the requested payment are set forth in Schedule I. e. No portion of the amount being requested to be disbursed was set forth in any previous request for disbursement. D-1 011.553839.8 4. All capitalized terms herein shall have the meanings assigned to them in the Trust Indenture for the above-referenced Series 2004 Special Tax Bonds dated as of December 1, 2004 by and between the United City of Yorkville, Kendall County, Illinois and LaSalle Bank National Association, as Trustee. By: Authorized Officer D-2 011.553839.8 EXHIBIT E CONTINUING DISCLOSURE AGREEMENT UNITED CITY OF YORKVILLE KENDALL COUNTY, ILLINOIS SPECIAL SERVICE AREA NUMBER 2004-104 CENTRAL GRANDE RESERVE SPECIAL TAX BONDS, SERIES 2004 (MPI GRANDE RESERVE PROJECT) This Continuing Disclosure Agreement (the "Agreement") is executed and delivered by the United City of Yorkville, Kendall County, Illinois (the "City") and with its principal office at as Dissemination Agent (the "Dissemination Agent") in connection with the issuance by the City of $ aggregate principal amount of Special Service Area Number 2004-104 Central Grande Reserve Special Tax Bonds, Series 2004 (MPI Grande Reserve Project) (the "Bonds"). The Bonds are being issued pursuant to a Trust Indenture dated as of December 1, 2004 between the City and LaSalle Bank National Association, as trustee (the "Indenture"). The City and the Dissemination Agent covenant and agree as follows: Section 1. Purpose of the Agreement. This Agreement is being executed and delivered by the City and the Dissemination Agent for the benefit of the holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2-12(b)(5). Section 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Agreement unless otherwise defined in this Section,the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Annual Report provided by an Obligated Person pursuant to, and as described in, Sections 3 and 4 of this Agreement. "Beneficial Owner" shall mean any person which (a)has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes. "Disclosure Representative" shall mean the City Administrator or his or her designee, or such other officer or employee as the City shall designate in writing to the Dissemination Agent from time to time. "Dissemination Agent" shall mean initially or any successor Dissemination Agent appointed by the City pursuant to Section 7 of this Agreement to serve as Dissemination Agent and which has filed with the City a written acceptance of such designation. "Listed Events" shall mean any of the events listed in Section 5 of this Agreement. 011.553839.8 "National Repository" or "NRMSIR" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule, The National Repositories currently approved by the Securities and Exchange Commission are set forth in Exhibit A. "Obliged Person" shall mean the City. "Participating`Underwriter" shall mean any of the original underwriters of the Bonds and any remarketing agent approved in writing by the City who is retained by the City to remarket the Bonds and who is required to comply with the Rule in connection with the remarketing of the Bonds. "Repository" shall mean each National Repository and each State Repository. "Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "State Repository" shall mean any public or private repository or entity designated by the State of Illinois as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Agreement, there is no State Repository. Section 3. Provision of Annual Reports. (a) Within 210 days after the end of each fiscal year of the Obligated Person (which currently ends ), commencing with the first fiscal year after the Rule becomes applicable to the Bonds, the Obligated Person shall, or shall cause the Dissemination Agent to, provide to each Repository, an Annual Report which is consistent with the requirements of Section 4 of this Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Agreement, provided that the audited financial statements of the Obligated Person may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. If the Obligated Person's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5 of this Agreement. (b) Not later than ten (10) business days prior to the date required in subsection (a), the Obligated Person shall provide the Annual Report to the Dissemination Agent. If the Obligated Person is unable to provide to the Repositories an Annual Report by the date required in subsection (a), the Dissemination Agent shall send a notice to the State Repository, if any, and to each National Repository or the Municipal Securities Rulemaking Board in substantially the form attached as Exhibit B. E-2 011.553839.8 (c) The Dissemination Agent shall: (i) determine each year, prior to the date for providing the Annual Report the name and address of each National Repository and State Repository, if any, and (ii) file a report with the Obligated Person certifying that the Annual Report has been provided pursuant to this Agreement, stating the date it was provided and listing all the Repositories to which it was provided. Section 4. Content of Annual Reports. The City's Annual Report shall contain or incorporate by reference the following items: (a) The City's audited financial statements for the prior fiscal year, prepared in accordance with generally accepted auditing standards and the standards for financial audits contained in Government Auditing Standards (1988 Revision), issued by the Comptroller General of the United States. The City may from time to time, in order to comply with federal or State legal requirements, modify the basis upon which its financial statements are prepared. Notice of any such modification shall be provided to (i) either each NRMSIR or the Municipal Securities Rulemaking Board and (ii) the State Repository, if any, and shall include a reference to the specific federal or State law or regulation describing such accounting basis. If the City's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3.(a, the Annual Report shall contain unaudited financial statements and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. If a change is made to the basis on which financial statements are prepared, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Such comparison shall include a qualitative and, to the extent reasonably feasible, quantitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information. (b) The Annual Report shall include financial information and operating data relating to the City updating the financial information and operating data presented in the Limited Offering Memorandum dated , 2004 relating to the Bonds (the "Offering Memorandum") under the following captions (provided, however, that the updating information may be provided in such format as the City deems appropriate; and provided further, that if a new disclosure document is prepared at or prior to the time the Rule becomes applicable to the Bonds, the City and the Participating Underwriters, who are subject to the Rule, may select such other financial information and operating data presented in such disclosure document in addition to, or in lieu of, the information described below): E-3 011.553839.8 "DEBT SERVICE REQUIREMENTS — Expected Special Taxes and Debt Service Coverage" [adjusted to reflect actual debt service and debt service reserve earnings] "SECURITY AND SOURCE OF PAYMENT FOR THE BONDS — Representative Property Taxes" "THE CITY— — Number of Residential Building Permits" Equalized Assessed Value" If the City changes its fiscal year, the City shall send, or cause to be sent, notice of such change to (A) either each NRMSIR or the Municipal Securities Rulemaking Board and (B)the National Repository, if any. (c) The Annual Report shall include a copy of the Trustee's annual report pursuant to Section 10.9 of the Indenture showing the Special Taxes received, and all disbursements from the Funds and Accounts administered by the Indenture, including the balances in all Funds and Accounts relating to the Bonds and the Special Services as of the end of such fiscal year. (d) The Annual Report shall include a copy of the semi-annual reports regarding collection of taxes, delinquencies, tax sales and foreclosures delivered by the Consultant pursuant to Section 4.1 of the [Consulting Services Agreement] for the prior fiscal year. Any or all of the items listed above may be incorporated by specific reference to other documents, including official statements of debt issues of the City or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document incorporated by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The City shall clearly identify each such other document so incorporated by reference. The City will also provide, or cause to be provided, in a timely manner, to (i) either each NRMSIR or the Municipal Securities Rulemaking Board and (ii) the National Repository, if any, notice of a failure to satisfy the requirements of this Section. Section 5. Reporting_of Significant Events. (a) Pursuant to the provision of this Section 5, the Dissemination Agent shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: E-4 011.553839.8 (i) Principal or interest payment delinquencies, (ii) Non-payment related defaults, (iii) Modification to rights of owners of the Bonds, (iv) Optional, contingent or unscheduled calls of the Bonds, (v) Defeasances, (vi) Rating Changes, (vii) Adverse tax opinions or events affecting the tax-exempt status of the Bonds, (viii) Unscheduled draws on any reserve fund for the Bonds reflecting financial difficulties, (ix) Unscheduled draws on any credit enhancements reflecting financial difficulties, (x) Substitution of any credit or liquidity facility providers or their failure to perform, (xi) Release, substitution or sale of property (other than the sale of homes in the ordinary course) securing repayment of the Bonds. (b) The Dissemination Agent shall, within one business day of obtaining actual knowledge of the occurrence of any of the Listed Events, contact the Disclosure Representative, inform such person of the event and request that the City promptly notify the Disseminating Agent in writing whether or not to report the event pursuant to subsection (f). (c) Whenever the Obligated Person obtains knowledge of the occurrence of a Listed Event, whether because of notice from the Dissemination Agent pursuant to subsection (b) or otherwise, the Obligated Person shall as soon as possible determine if such event would be material under applicable federal securities laws. (d) If the Obligated Person determines that knowledge of the occurrence of a Listed Event would be material under applicable federal securities laws, the Obligated Person shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection(f). (e) If in response to a request under subsection (b), the City determines that the Listed Event would not be material, the City shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence pursuant to subsection (f). E-5 011.553839.8 (f) If the Dissemination Agent has been instructed by the City to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with the State Repository, if any, and the Municipal Securities Rulemaking Board or each National Repository. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(4) and (5) need not be given under this subsection any earlier than the notice, if any, of the underlying event is given to holders of affected Bonds pursuant to the Indenture. Section 6. Termination of Reporting Obligation. The Obligated Person's obligations under this Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Obligated Person shall give notice of such termination in the same manner as for a Listed Event under Section 5. Section 7. Dissemination Agent. The Obligated Person may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Agreement and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by an Obligated Person pursuant to this Agreement. Section 8. Amendment; Waiver. Notwithstanding any other provision of this Agreement, the Obligated Person and the Dissemination Agent may amend this Agreement (and the Dissemination Agent shall agree to any amendment so requested by the Obligated Person), and any provision of this Agreement may be waived, provided that the following conditions are satisfied: (a) If the amendment or waiver relates to the provisions of Section 3(a), 4, or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Bonds; (b) The undertaking, as amended or taking into account such waiver, would not in the opinion of nationally recognized bond counsel or counsel expert in federal securities law in and of itself cause the undertakings therein to violate the Rule, taking into account any subsequent change in or official interpretation of the Rule. In the event of any amendment or waiver of a provision of this Agreement, the Obligated Person shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the Obligated Person. Section 9. Additional Information. Nothing in this Agreement shall be deemed to prevent the Obligated Person from disseminating any other information, using the means of dissemination set forth in this Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in E-6 011.553839.8 addition to that which is required by this Agreement. If the Obligated Person chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Agreement, the Obligated Person shall have no obligation under this Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 10. Default. If the Obligated Person or the Dissemination Agent fails to comply with any provision of this Agreement, the Dissemination Agent or any holder or Beneficial Owner of Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Obligated Person or the Dissemination Agent to comply with its obligations under this Agreement. A default under this Agreement shall not be deemed a default under the Indenture and the sole remedy under this Agreement in the event of any failure of the Obligated Person or the Dissemination Agent to comply with this Agreement shall be an action to compel performance. Section 11. _Duties Immunities and Liabilities of Dissemination Agent, The Dissemination Agent shall have only such duties as are specifically set forth in this Agreement and the Obligated Person, to the extent permitted by law, agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may occur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The obligations of the Obligated Person under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. Section 12. Beneficiaries. This Agreement shall inure solely to the benefit of the Obligated Person, the Dissemination Agent, the Participating Underwriter and the holders and Beneficial Owners of the Bonds, and shall create no rights in any other person or entity. Section 13. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but such counterparts shall together constitute but one and the same instrument. [The rest of this page is intentionally left blank.] E-7 011.553839.8 Date: , 200_. UNITED CITY OF YORKVILLE By: Title: as Dissemination Agent By: Title: E-8 011.553839.8 EXHIBIT A Nationally Recognized Municipal Securities Information Repositories approved by the Securities and Exchange Commission as of the date of this Agreement: Bloomberg Municipal Repository P.O. Box 940 Princeton,New Jersey 08542-0940 Internet address: MUNIS @bloomberg.doc (609) 279-3200 FAX (609) 279-5962 Thomson NRMSIR Attn.: Municipal Disclosure 395 Hudson Street; 3rd Floor New York, New York 10014 Internet address: Disclosure @muller.com (212) 807-3814 FAX (212) 989-9292 Kenny Information Systems, Inc. 65 Broadway, 16th Floor New York, New York 10006 (212) 770-4595 FAX (212) 797-7994 DPC Data, Inc. One Executive Drive Fort Lee,NJ 07024 (201) 346-0701 FAX (201) 947-0107 011.553839.8 EXHIBIT B NOTICE OF FAILURE TO FILE ANNUAL REPORT Name of Obligated Person: United City of Yorkville, Kendall County, Illinois Name of Bond Issue: $ Special Service Area Number 2004-104 Central Grande Reserve Special Tax Bonds, Series 2004 (MPI Grande Reserve Project) Date of Issuance: , 2004 NOTICE IS HEREBY GIVEN that as an Obligated Person under Rule 15c2- 12(b)(5) has not provided an Annual Report with respect to the above-named Bonds as required by the Indenture authorizing the issuance of the Bonds. The Obligated Person anticipates that the Annual Report will be filed by Dated: Dissemination Agent By: Title: 011.553839.8 EXHIBIT C BOND PURCHASE AGREEMENT ,2004 United City of Yorkville Kendall County, Illinois Special Service Area Number 2004-104 Central Grande Reserve Special Tax Bonds, Series 2004 (MPI Grande Reserve Project) United City of Yorkville MPI-2 Yorkville Central LLC 800 Game Farm Road c/o Moser Enterprises, Inc. Yorkville, Illinois 60560 300 East 5`h Avenue, Suite 430 Naperville, Illinois 60563 Ladies and Gentlemen: The undersigned, LaSalle Capital Markets, A Division of ABN AMRO Financial Services, Inc. and William Blair & Company, L.L.C. (the "Original Purchasers"), offer to enter into the following agreement (this "Contract") with the United City of Yorkville, Illinois (the "City"), which upon acceptance by the City of this offer, and approval of this Contract by the Developer (as hereinafter defined) will be binding upon the City, the Developer and upon the Original Purchasers. Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Series 2004 Indenture (as hereinafter defined) and the Series 2004 Offering Memorandum (as hereinafter defined). This offer is made subject to your mutual acceptance on or before 11:00 P.M., Chicago time, on the date hereof, and, if not so accepted, will be subject to withdrawal by the Original Purchasers upon notice delivered to the City and the Developer at the addresses set forth above at any time prior to the acceptance hereof by the City and the Developer. This offer is also subject to the following provisions: 1. Definitions For purposes of this Contract, the following terms have the meanings specified in this section, unless another meaning is plainly intended: (A) "Act" means the Special Service Area Tax Law of the State of Illinois, 35 ILCS 200/27-5 et seq., as amended. xxx.xxxxxx.XA (B) "Ancillary Agreements" means the Series 2004 Bond Ordinance, the Administrative Services Agreement,the Series 2004 Tax Compliance Certificate and Agreement, the Series 2004 Offering Memorandum, the Public Improvement Agreement, the Annexation Agreement, the Declaration of Consent, the Series 2004 Indenture, and all other agreements and certificates executed and delivered in connection with the issuance and sale of the Series 2004 Bonds. (C) "Annexation Agreement" means the Annexation Agreement and Planned Unit Development Agreement dated August 7, 2003 among the City, MPI-2 Yorkville North LLC, MPI-2 Yorkville South I LLC and MPI-2 Yorkville South II LLC. (D) "Appraisal" means the Market Value Appraisal dated , 2004 prepared by Frank John Karth& Associates. (E) "Area" means the United City of Yorkville Special Service Area Number 2004-104 Central Grande Reserve created pursuant to the Establishing Ordinance. (F) "Business Day" means any day other than a Saturday, Sunday, legal holiday or a day on which banking institutions are required or authorized by law to be closed in the City of Chicago or the State of Illinois or a day on which the New York Stock Exchange is closed. (G) "Closing" means the Closing as defined in Section 2(B) herein held on the Closing Date. (H) "Closing Date" means , 2004, or such earlier or later date as the City, the Developer and the Original Purchasers shall mutually agree upon and refers to the date on which the transaction by which the City causes the Trustee to deliver the Series 2004 Bonds to the Original Purchasers and the Series 2004 Bonds are paid for by the Original Purchasers pursuant to this Contract. (1) "Code" means the Internal Revenue Code of 1986, as amended. (J) "Contract" means this Bond Purchase Agreement. (K) "Developer" means MPI-2 Yorkville Central LLC, an Illinois limited liability company, and its respective successors and assigns. (L) "Developer Information" means the information in the Series 2004 Offering Memorandum under the captions "INTRODUCTORY STATEMENT"; "THE BONDS"; "PLAN OF FINANCE"; "ESTIMATED SOURCES AND USES OF FUNDS"; "SECURITY AND SOURCE OF PAYMENT FOR THE BONDS"; "SUMMARY OF THE PUBLIC IMPROVEMENT AGREEMENT"; "SUMMARY OF THE ANNEXATION AGREEMENT"; "THE DEVELOPER"; "PROPOSED DEVELOPMENT"; "RISK FACTORS"; "NO LITIGATION -- The Developer" and "CONTINUING IFNORMATION—The Developer." (M) "Establishing Ordinance" means Ordinance No. 2004--, adopted by the corporate authorities of the City on September 14, 2004, as amended by Ordinance No. 2004-_ 2 adopted by the Corporate Authorities on October 26, 2004 establishing the United City of Yorkville, Illinois Special Service Area Number 2004-104 Central Grande Reserve. (N) "Market Absorption Study" means the study entitled "Market Support Analysis" dated , 2004, prepared by (0) "Governmental Body" means any Federal, state, municipal, or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign. (P) "Plans" means the plans and specifications pursuant to which the Project will be constructed. (Q) "Pledged Funds" means the Special Tax and the moneys and funds pledged to the payment of the Series 2004 Bonds pursuant to the Series 2004 Indenture. (R) "Proposing Ordinance" means Ordinance No. 2004-13 adopted by the corporate authorities of the City on February 24, 2004 proposing to establish the Area. (S) "Project" means the development of up to 490 detached single-family homes proposed by the Developer for the Area. (T) "Public Improvement Agreement" means the Public Improvement Agreement and all schedules and exhibits thereto dated , 2004 by and between the City and the Developer. (U) "Series 2004 Bond Ordinance" means Ordinance No. 2004-_ adopted by the corporate authorities of the City on October 26, 2004 relating to the Series 2004 Bonds. (V) "Series 2004 Bonds" means the interest-bearing, tax exempt obligations issued by the City pursuant to the Series 2004 Bond Ordinance and called the United City of Yorkville, Illinois Special Service Area Number 2004-104 Central Grande Reserve Special Tax Bonds, Series 2004 (MPI Grande Reserve Project). (W) "Series 2004 Indenture" means the Trust Indenture between the City and the Trustee dated as of November 1, 2004 and any amendments thereof and supplements thereto. (X) "Series 2004 Offering Memorandum" means the Limited Offering Memorandum of the City (including each Appendix thereto) relating to the Series 2004 Bonds dated 92004. (Y) "Series 2004 Tax Compliance Certificate and Agreement" means the Tax Compliance Certificate and Agreement dated the Closing Date, executed by the City and the Trustee in connection with the Series 2004 Bonds. (Z) "Special Services" means the construction of certain public improvements to be constructed by the Developer and dedicated to the City consisting of engineering, soil testing and appurtenant work, mass grading and demolition, storm water management facilities, 3 storm drainage systems and storm sewers, site clearing and tree removal, public water facilities, sanitary sewer facilities, erosion control measures, roads, streets, curbs, gutters, street lighting, bicycle paths, traffic controls, sidewalks, equestrian paths and related street improvements, and equipment and materials necessary for the maintenance thereof, public parks, park improvements, landscaping, wetland mitigation and tree installation, costs for land and easement acquisitions relating to any of the foregoing required tap-on fees and related fees for water or sanitary sewer services and other eligible costs to serve the Area, as further described in the Series 2004 Offering Memorandum. (AA) "Trustee" means LaSalle Bank National Association, Chicago, Illinois, as Trustee under the Series 2004 Bond Ordinance. 2. Purchase and Sale of the Bonds. (A) Sale of Bonds. Upon the terms and conditions and upon the basis of the representations, warranties and agreements herein, the Original Purchasers hereby agree to purchase from the City for a limited offering, and the City hereby agrees to sell to the Original Purchasers for such purpose, all, but not less than all, of the $ aggregate principal amount of Series 2004 Bonds, at a purchase price equal to $ . The Original Purchasers shall be paid a fee on the Closing Date of $ The Series 2004 Bonds shall be issued pursuant to the Series 2004 Bond Ordinance and the Series 2004 Indenture. The Series 2004 Bonds shall be dated, shall mature on such dates and in such amounts, shall bear interest at such rates, shall be offered at the initial offering prices and shall be subject to such other terms and conditions, all as described in the Series 2004 Offering Memorandum and the Series 2004 Indenture. (B) Closing. The purchase and sale of the Series 2004 Bonds shall take place on the Closing Date at the offices of Foley & Lardner LLP, Chicago, Illinois. At the Closing, as defined below, the Original Purchasers will accept the delivery of the Series 2004 Bonds duly executed by the City, together with other documents herein mentioned, and will make payment therefor as provided herein by immediately available funds payable to the order of the Trustee for the account of the City. The payment for the Series 2004 Bonds and delivery of the Series 2004 Bonds, as herein described, is herein called the "Closing." 3. City's Pre-Closing Deliveries. (A) Prior to the Closing Date, the City shall have delivered or caused to be delivered to the Original Purchasers an executed copy of the Series 2004 Offering Memorandum, executed on behalf of the City by its Mayor. (B) Prior to the Closing Date, the City shall have delivered or caused to be delivered to the Original Purchasers a certified copy of the Establishing Ordinance, the Series 2004 Bond Ordinance, and such other ordinances of the City which shall include the authorization of the execution, delivery and performance of this Contract, the Series 2004 Bonds and the other Ancillary Agreements to which the City is a party, among other things, together 4 with such reasonable number of copies of each of the foregoing as the Original Purchasers shall request. (C) The City hereby authorizes any and all of the material described above in Subsections A and B of this Section 3 and the Ancillary Agreements, the information contained in the Series 2004 Offering Memorandum and the Series 2004 Bond Ordinance and all other instruments, documents and agreements delivered pursuant to Section 8 of this Contract or in connection with the transactions contemplated hereby, for use in connection with the offering and sale of the Series 2004 Bonds. The City hereby ratifies, approves, and consents to the use and distribution by the Original Purchasers, prior to or after the date hereof, of the Series 2004 Offering Memorandum in connection with the offering of the Series 2004 Bonds. The City hereby agrees to furnish such information, execute such instruments and take such other action at the expense of and in cooperation with the Original Purchasers as the Original Purchasers may deem reasonably necessary in order to qualify the Series 2004 Bonds for offering and sale under the "Blue Sky" or other securities laws and regulations of such states and other jurisdictions of the United States as the Original Purchasers may designate; provided, however, that the City shall not be required to execute a special or general consent to service of process or qualify as a foreign corporation in connection with any such qualification in any jurisdiction. 4. Representations and Warranties of the City. The City represents and warrants to and agrees with the Original Purchasers that: (A) City. The City is a non-home rule unit, municipal corporation duly organized and validly existing and is in good standing under the laws and the Constitution of the State of Illinois. The City is authorized and empowered by the Act and the Series 2004 Bond Ordinance and such other ordinances of the City as have been duly adopted by the City, to enter into the transactions contemplated by this Contract, the Series 2004 Bond Ordinance, the Series 2004 Offering Memorandum, and the Ancillary Agreements to which the City is or is to be a party. The adoption of each of the Series 2004 Bond Ordinance and the Establishing Ordinance and the execution, delivery and performance by the City of this Contract, the Ancillary Agreements to which the City is or is to be a party and the issuance of the Series 2004 Bonds are within the legal right, power and authority of the City, have been duly and validly authorized by all necessary proceedings of the City, and such execution, delivery and performance by the City as of the date of this Contract and as of the Closing Date do not and will not contravene, or constitute a breach of or default (with due notice or the passage of time or both) under, any provision of law, ordinance or regulation applicable to the City, or any provision of the municipal code or other rules and procedures of the City, or any judgment, order, decree, agreement or instrument binding on it or, except as described in the Series 2004 Offering Memorandum, result in the creation of any lien or other encumbrance on any asset of the City. This Contract and the Series 2004 Bond Ordinance each constitutes, and the Ancillary Agreements to which the City is or is to be a party, when executed and delivered by the City and any other parties thereto, will constitute valid and binding agreements of the City enforceable against the City in accordance with their respective terms, except to the extent limited by bankruptcy, reorganization, or other similar laws affecting creditors' rights generally and by the availability of equitable remedies, and the Series 2004 Bonds, when issued and delivered by the City in accordance with this Contract and the Series 2004 Bond Ordinance will have been duly 5 authorized and issued and will constitute valid and binding obligations of the City enforceable against the City in accordance with their terms, except to the extent limited by bankruptcy, reorganization, or other similar laws affecting the enforcement of creditors' rights generally and by the availability of equitable remedies. When delivered to and paid for by the Original Purchasers at the Closing in accordance with the provisions of this Contract, the Series 2004 Bonds will conform in all material respects to the description thereof contained in the Series 2004 Offering Memorandum. (B) Use of Proceeds. The City will not take or omit to take any action which will in any way cause or result in the proceeds from the sale of the Series 2004 Bonds being applied other than as provided in the Series 2004 Bond Ordinance and as described in the Series 2004 Offering Memorandum. Such proceeds will not be used by the City in a manner that would cause the Series 2004 Bonds to be "arbitrage bonds" within the meaning of the Code, or any successor thereto, and the applicable regulations promulgated or proposed thereunder. (C) Governmental Authorization. All authorizations, consents and approvals of any Governmental Body required in connection with the execution and delivery by the City of, or in connection with the performance by the City of its obligations under, the Series 2004 Bonds, the Series 2004 Bond Ordinance, the Establishing Ordinance, this Contract, or the Ancillary Agreements to which the City is or is to be a party, have been obtained and are in full force and effect, or will be obtained prior to Closing and will be in full force and effect as of the Closing Date. To the best knowledge of the City, all authorizations, consents and approvals of any Governmental Body required in connection with the construction or operation of the Project by the City have been obtained and are in full force and effect as of the Closing Date. (D) Series 2004 Offering Memorandum. The descriptions and information contained in the Series 2004 Offering Memorandum under the captions "INTRODUCTORY STATEMENT"; "THE BONDS" (other than information under the subcaptions "Optional Prepayment of Special Tax" and "Mandatory Prepayment of Special Tax"); "PLAN OF FINANCE"; "SECURITY AND SOURCE OF PAYMENT FOR THE BONDS"; "SUMMARY OF THE PUBLIC IMPROVEMENT AGREEMENT"; "SUMMARY OF THE ANNEXATION AGREEMENT"; "THE CITY"; "RISK FACTORS"; "CONTINUING INFORMATION -- The City"; "NO LITIGATION -- The City"; and "AUTHORIZATION" (collectively, the "City Information") are, and as of the date of the Closing, will be, true and correct in all material respects and such descriptions and information in the Series 2004 Offering Memorandum, as of its date and as of the Closing Date will not contain an untrue, incorrect or misleading statement of a material fact; and such descriptions and information in the Series 2004 Offering Memorandum do not, as of its date and as of the Closing Date will not omit to state a material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading. (E) No Liens or Encumbrances. Other than as specifically set forth in the Series 2004 Offering Memorandum, there are no existing liens, claims, charges or encumbrances on or rights to any funds, revenues or interests pledged pursuant to the Series 2004 Bond Ordinance which are senior to, or on a parity with, the claims of the holders of the Series 2004 Bonds. Other than as specifically disclosed in the Series 2004 Offering Memorandum, the City has not entered into any contract or arrangements of any kind, and there is no existing, pending, 6 threatened, or anticipated event or circumstance that might give rise to any lien, claim, charge or encumbrance on or right to the assets, properties, funds, or interests pledged pursuant to the Series 2004 Bond Ordinance which would be prior to, or on a parity with, the claims of the holders of the Series 2004 Bonds. The City is lawfully entitled to receive, pledge and assign all amounts or revenues which have been pledged or assigned as security for the payment of the principal of and interest on the Series 2004 Bonds. (F) No Litigation. Except as described in the Series 2004 Offering Memorandum, as of the date of this Contract and as of the Closing Date (i) there is no action, suit, proceeding or investigation, at law or in equity, before or by any court or any governmental agency or public board or body, pending against the City or, to the knowledge of the City, threatened against the City, to restrain or enjoin, or threatening or seeking to restrain or enjoin, the issuance, sale or delivery of the Series 2004 Bonds or the delivery by the City of any of the Ancillary Agreements to which the City is a party, or the collection of Pledged Funds, or in any way contesting or affecting the validity of the Series 2004 Bonds, or any of the Ancillary Agreements to which the City is a party, or in any way questioning or affecting (a) the proceedings under which the Series 2004 Bonds are to be issued, (b) the validity or enforceability of any provision of the Series 2004 Bonds, the Series 2004 Bond Ordinance, the Establishing Ordinance or this Contract, (c) the authority of the City to collect the Pledged Funds, or to perform its obligations hereunder or with respect to the Series 2004 Bonds, or to consummate any of the transactions set forth in the Ancillary Agreements to which it is or is to be a party as contemplated hereby or by the Series 2004 Bond Ordinance, or the Series 2004 Offering Memorandum, (d) the legal existence of the City, or the title of its City Council or officers to their offices, and (ii) there is no action, suit, proceeding or investigation, at law or in equity, before or by any court or any governmental agency or public board or body, pending against the City or, to the knowledge of the City, threatened against the City, involving any of the property or assets within the City which may result in any material adverse change in the Pledged Funds, assets or the financial condition of the City or the proposed construction or operation of the Project by the Developer pursuant to the Public Improvement Agreement. (G) Certificates. Any certificate signed by an authorized officer of the City and delivered to the Original Purchasers and/or the Trustee shall be deemed a representation and covenant by the City to the Original Purchasers and/or the Trustee as to the statements made therein. (H) Annexation Agreement and the Ordinances. Each of Annexation Agreement, the Series 2004 Bond Ordinance, the Establishing Ordinance and Proposing Ordinance is in full force and effect, and has not been amended, modified, revoked or repealed. 5. Representations and Warranties of the Developer. The Developer represents and warrants to and agrees with the Original Purchasers and the City that: (A) Organization and Power. The Developer is a duly organized and validly existing limited liability company under the laws of the State of Illinois, and has all powers and authority and all governmental licenses, authorizations, consents and approvals required to carry 7 on its businesses as now conducted and to enter into and perform its obligations under this Contract, and all Ancillary Agreements to which it is or is to be a party. (B) Authorization of Agreements, etc. This Contract and the Ancillary Agreements to which the Developer is or is to be a party have each been duly authorized, executed and delivered by the Developer and constitute the legal, valid and binding agreement of the Developer enforceable against the Developer in accordance with their respective terms; provided that the enforceability of such Agreements may be limited by bankruptcy, reorganization, insolvency and similar laws affecting the enforcement of creditor's rights and remedies generally, as applied in the event of bankruptcy, reorganization or insolvency of the Developer and to equitable remedies. The Developer has duly authorized all necessary action to be taken by it for(i) approval of the Developer Information and (ii) the execution and delivery of this Contract and the Ancillary Agreements to which the Developer is or is to be a party, and any and all other agreements and documents as may be required to be executed or delivered by the Developer in order to effectuate the transactions contemplated herein and therein. (C) Public Improvement Agreement. Except for certain normal permitting issues (including an IDOT permit for Route 34 and an outfall sewer permit from Fox Metro and an operating permit for the water system) the final platting and engineering approvals to be completed as part of the Project, any and all of the conditions precedent to the obligations of the Developer arising under the Public Improvement Agreement have been satisfied. (D) Noncontravention. The execution, delivery and performance by the Developer of its obligations under this Contract and the Ancillary Agreements to which Developer is a party do not and will not contravene, or constitute a default under, any provision of applicable law or regulation or organizational documents of the Developer or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Developer and will not result in the creation of any lien or other encumbrance upon any asset of the Developer except as set forth in the Series 2004 Offering Memorandum. (E) No Material Change. Other than as disclosed in the Series 2004 Offering Memorandum, (i) the Developer has not incurred any material liabilities or entered into any material transactions other than in the ordinary course of business and (ii) there has been no material adverse change in the business, financial position, prospects or results of operations of the Developer which would affect the Developer's ability to perform its obligations pursuant to this Contract or the Ancillary Agreements, to the extent to which the Developer is or is to be a party to such agreement. (F) Governmental or Corporate Consents. No consent or approval is required to be obtained from, and no action need be taken by, or document filed with, any Governmental Body or corporate entity in connection with the execution or delivery by the Developer of this Contract or any Ancillary Agreement to which the Developer is or is to be a party, or, if any such action is required, the same has been duly taken, is in full force and effect and constitutes valid and sufficient consent or approval therefor, except for those which are customarily obtained during construction of the Project. The Developer has no reason to believe any such consent or approval will not be obtained in due course. 8 (G) No Litigation. Except as described in the Series 2004 Offering Memorandum, there is no action, suit, proceeding or investigation, at law or in equity, before or by any court or any governmental agency or public board or body, pending against the Developer in which the Developer is a party or, to the knowledge of the Developer, threatened against the Developer (i) contesting or in any way relating to (a) the construction and development of the Project, (b) the generation of Pledged Funds or the transactions contemplated by the issuance of the Series 2004 Bonds or as otherwise described in the Series 2004 Offering Memorandum or (ii) which in any way contests the existence or power of the Developer or the validity or enforceability of the Series 2004 Bonds, the Ancillary Agreements, this Contract or the Series 2004 Offering Memorandum or which if adversely determined could have a material adverse effect on the Developer. (H) Series 2004 Offering Memorandum. The Developer Information contained in the Series 2004 Offering Memorandum (i) is true and correct in all material respects as of the date hereof and (ii) as of the date hereof does not contain any untrue statement of a material fact or omit to state a material fact necessary to be stated therein in order to make the statements therein, in light of the circumstances under which they were made, not misleading. (1) Use of Proceeds. The Developer will not take or omit to take any action which will in any way cause or result in the proceeds of the sale of the Series 2004 Bonds being applied in a manner other than as provided in the Series 2004 Bond Ordinance and as described in the Series 2004 Offering Memorandum. Such proceeds will not be used by the Developer in a manner that would cause the Series 2004 Bonds to be "arbitrage bonds" within the meaning of the Code, or any successor thereto, and the applicable regulations promulgated or proposed thereunder. (J) No Default. No default or event of default has occurred and is continuing, and no event has occurred and is continuing which with the lapse of time or the giving of notice, or both, would constitute a default or an event of default on the part of the Developer under this Contract, the Ancillary Agreements to which the Developer is a party, or any other material agreement or material instrument to which the Developer is a party or by which the Developer is or may be bound. (K) Approvals. Except for certain normal permitting issues (including an IDOT permit for Route 34 and an outfall sewer permit from Fox Metro), the Developer has received and is in good standing with respect to all certificates, licenses, inspections, franchises, consents, immunities, permits, authorizations and approvals, governmental or otherwise, necessary to conduct and to continue to conduct its business as heretofore conducted by it and to own or lease and operate its properties as now owned or leased by it. Except for certain normal permitting issues (including an IDOT permit for Route 34 and an outfall sewer permit from Fox Metro and an operating permit for the water system), the Developer has obtained all certificates, licenses, inspections, franchises, consents, immunities, permits, easements, authorizations and approvals, governmental or otherwise, necessary to construct the Project, except for: final platting and engineering to be completed as part of the Project; and those approvals the nature of which cannot be given until construction of the Special Services themselves are sufficiently under way. 9 (L) Certificates. Any certificate signed by an authorized representative of the Developer and delivered to the City or the Original Purchasers shall be deemed a representation and warranty by the Developer to the City and the Original Purchasers as to the statements made by Developer therein. (M) Environmental Representation. To the best of the Developer's knowledge, without independent investigation except as disclosed by the Phase I Environmental Site Assessments prepared by Testing Services Corporation and Schrack Environmental Consulting, Inc., no toxic or hazardous substances, including without limitation, asbestos and the group of organic compounds known as polychlorinated biphenyls, have been generated, treated, stored or disposed of, or otherwise deposited in or located on the site which includes the Area and no activity has been undertaken at the site which includes the Area, other than those activities which are customary and usual for the development of the Project, which activities are in material conformity with all state and Federal laws, which could: (i) cause the Project or any part thereof to become a hazardous waste treatment, storage or disposal facility within the meaning of, or otherwise bring such property within the ambit of, the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et. seq. (the "RCRA"), or any other similar state law or local ordinance; (ii) cause a release or threatened release of hazardous materials, wastes or substances from the site or any part thereof within the meaning of, or otherwise bring such property or any part thereof within the ambit of, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C., Sections 9601-9657 (the "CERCLA"), or any similar state law or ordinance or any other environmental law; (iii) cause the discharge of pollutants or effluents into any water source or system, or the discharge into the air of any emissions, which would require a permit under the Federal Water Pollution Control Act, 33 U.S.C., Section 1251 et seq., or the Clean Air Act, 41 U.S.C., Section 7401 et seq., or any similar state law or local ordinance; or (iv) support a claim or cause of action under RCRA, CERCLA or any other Federal, state or local environmental statutes, regulations, ordinances or other environmental regulatory requirements. (N) No Challenges. The Developer agrees that it will not bring any suit, action or proceeding which challenges the establishment of the Area, the levy, extension and collection of the Special Tax, the validity of the Series 2004 Bonds or the proceedings relating to the Series 2004 Bonds. (0) Annexation Agreement. Developer is not in default of any of its obligations under the Annexation Agreement, and has no knowledge of any event or fact which, 10 with the passage of time, would constitute a default by Developer under the Annexation Agreement. 6. Representations and Warranties and Agreements of the Original Purchasers. (A) Limited Offering. The Original Purchasers agree to make a limited offering of the Series 2004 Bonds to a limited number of institutional investors at a price or prices (or yield or yields) not in excess of the offering price or prices (or not lower than the yield or yields) set forth on the cover page of the Series 2004 Offering Memorandum. (B) Series 2004 Offering Memorandum. The descriptions and information contained in the Series 2004 Offering Memorandum under the caption "UNDERWRITING" are, and as of the date of the Closing will be, true and correct in all material respects and such descriptions and information in the Series 2004 Offering Memorandum, as of its date and as of the Closing Date will not contain an untrue, incorrect or misleading statement of a material fact; and such descriptions and information in the Series 2004 Offering Memorandum do not, as of its date and as of the Closing Date will not omit to state a material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading. 7. Termination of the Purchase Contract. The Original Purchasers shall have the right to cancel their respective obligations to purchase the Series 2004 Bonds, if, between the date hereof and the date of Closing, (i) legislation shall be enacted, or actively considered for enactment, by the Congress or recommended by the President of the United States to the Congress for passage, or favorably reported for passage to either House of the Congress by any committee of such House to which such legislation has been referred for consideration, a decision by a court of the United States or the United States Tax Court shall be rendered, or a ruling, regulation or official statement by or on behalf of the Treasury Department of the United States, the Internal Revenue Service or other agency or department of the United States shall be made or proposed to be made which has the purpose or effect, directly or indirectly, of imposing Federal income taxes upon interest on the Series 2004 Bonds; (ii) any other action or event shall have transpired which has the purpose or effect, directly or indirectly, of materially adversely affecting the Federal income tax consequences of any of the transactions contemplated in connection herewith or contemplated by the Series 2004 Offering Memorandum, or, in the reasonable opinion of the Original Purchasers, such action or event pertaining to the Federal income tax consequences referenced above materially adversely affects the market for the Series 2004 Bonds or the sale, at the contemplated offering price or prices (or yield or yields), by the Original Purchasers of the Series 2004 Bonds; (iii) legislation shall be enacted, or actively considered for enactment by the Congress, with an effective date on or prior to the date of Closing, or a decision by a court of the United States shall be rendered, or a ruling or regulation by the Securities and Exchange Commission or other governmental agency having jurisdiction over the subject matter shall be made, the effect of which is that (A) the Series 2004 Bonds are not exempt from the registration, qualification or other requirements of the Securities Act of 1933, as amended and as then in effect, or the Securities Exchange Act of 1934, as amended and as then in effect, or (B) the Series 2004 Bond Ordinance is not exempt from the registration, qualification or other requirements of the Trust 11 Indenture Act of 1939, as amended and as then in effect; (iv) a stop order, ruling or regulation by the Securities and Exchange Commission shall be issued or made, the effect of which is that the issuance, offering or sale of the Series 2004 Bonds, as contemplated herein and in the Series 2004 Offering Memorandum, is in violation of any provision of the Securities Act of 1933, as amended and as then in effect, the Securities Exchange Act of 1934, as amended and as then in effect, or the Trust Indenture Act of 1939, as amended and as then in effect; (v) there shall occur any event which in the reasonable judgment of the Original Purchasers either (A) makes untrue, incorrect or misleading in any material respect any statement or information contained in the Series 2004 Offering Memorandum or (B) is not reflected in the Series 2004 Offering Memorandum but should be reflected therein in order to make the statements and information contained therein not misleading in any material respect and, in either such event, the City refuses to permit the Series 2004 Offering Memorandum to be supplemented to correct or supply such statement or information, or the effect of the Series 2004 Offering Memorandum as so corrected or supplemented is such as, in the reasonable judgment of the Original Purchasers, would materially adversely affect the market for the Series 2004 Bonds or the sale, at the contemplated offering price or prices (or yield or yields), by the Original Purchasers of the Series 2004 Bonds; (vi) there shall occur any outbreak of hostilities or any regional, national or international calamity or crisis or a financial crisis and the effect is such as, in the reasonable judgment of the Original Purchasers, would materially adversely affect the market for or the marketability of the Series 2004 Bonds or obligations of the general character of the Series 2004 Bonds; (vii) a general suspension of trading on the New York Stock Exchange is in force; (viii) a general banking moratorium is declared by Federal or state authorities; (ix) there occurs any material adverse change in the affairs, operations or financial conditions of the City, except as set forth or contemplated in the Series 2004 Offering Memorandum or in the affairs, operations or financial condition of the Developer; (x) the Series 2004 Offering Memorandum is not executed, approved and delivered in accordance with Section 3 above; (xi) in the reasonable judgment of the Original Purchasers, the market price of the Series 2004 Bonds, or the market price generally of obligations of the general character of the Series 2004 Bonds, might be adversely affected because: (A) additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority or by any national securities exchange, or (B) the New York Stock Exchange or other national securities exchange, or any governmental authority, shall impose, as to the Series 2004 Bonds or similar obligations, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by, or the charge to the net capital requirements of, underwriters; (xii) a war involving the United States of America shall have been declared, or any conflict involving the armed forces of any country shall have escalated, or any other international, national or regional emergency relating to or affecting the effective operation of government or the financial community shall have occurred, which, in the reasonable judgment of the Original Purchasers, materially adversely affects the market for the Series 2004 Bonds or of obligations of the general character of the Series 2004 Bonds; (xiii) any litigation shall be instituted, pending or threatened to restrain or enjoin the issuance, sale or delivery of the Series 2004 Bonds or in any way protesting or affecting any authority for or the validity of the Series 2004 Bonds, the Series 2004 Bond Ordinance, the existence or powers of the City, or any event described or contemplated by the Series 2004 Offering Memorandum; (xiv) there shall have occurred a default with respect to the debt obligations of, or the institution of proceedings under any Federal bankruptcy laws by or against, any state of the United States or any city or political subdivision of any state, the effect 12 of which, in the reasonable judgment of the Original Purchasers, would materially adversely affect the ability of the Original Purchasers to market the Series 2004 Bonds. 8. Conditions of Closing. The Original Purchasers' obligation to purchase the Series 2004 Bonds under this Contract is subject to the performance by the City and the Developer of their respective obligations hereunder at and prior to the Closing Date, to the accuracy in the reasonable commercial discretion of the Original Purchasers, of the representations and warranties of the City and the Developer contained herein as of the Closing Date, and, in the reasonable discretion of the Original Purchasers, to the following conditions, including the delivery of such documents as are enumerated herein in form and substance satisfactory to the Original Purchasers and its counsel as of the Closing Date: (A) Ordinances in Effect and City in Compliance Therewith. At the time of the Closing (i) each of the Series 2004 Bond Ordinance, the Establishing Ordinance and the Proposing Ordinance shall be in full force and effect, and shall not have been amended, modified or supplemented since the date hereof, except as may have been agreed to in writing, by the Original Purchasers, and the City shall have duly adopted and there shall be in full force and effect such additional ordinances or agreements as shall be, in the opinion of Bond Counsel, necessary in connection with the transactions contemplated hereby and (ii) the City shall perform or have performed all of its obligations required under or specified in this Contract with regard to the Series 2004 Bonds or the Series 2004 Bond Ordinance to be performed at, simultaneously with or prior to the Closing. (B) Opinions of Bond Counsel. The Original Purchasers shall have received an unqualified approving legal opinion dated the Closing Date as to the Series 2004 Bonds, addressed to each of the Original Purchasers, Developer and the Trustee, from Foley & Lardner, LLP, Bond Counsel, satisfactory to the Original Purchasers in its reasonable discretion. (C) Opinion of Original Purchasers' Counsel. The Original Purchasers shall have received a favorable opinion dated the Closing Date, addressed to each of the Original Purchasers, from Ungaretti & Harris LLP, satisfactory to the Original Purchasers in its reasonable discretion. (D) Opinion of Counsel to the City. The Original Purchasers shall have received a favorable opinion dated the Closing Date, addressed to each of the Original Purchasers, Developer, Bond Counsel and the Trustee, from Daniel J. Kramer, Esq., counsel to the City, satisfactory to the Original Purchasers in its reasonable discretion. (E) Opinion of Counsel to the Developer. The Original Purchasers shall have received favorable opinions dated the Closing Date, addressed to each of the Original Purchasers, the City and Bond Counsel, from Moss and Bloomberg, Ltd. and KB Legal, counsel to the Developer, satisfactory to the Original Purchasers in its reasonable discretion. (F) Performance: No Default. Each of the City and the Developer shall have performed and complied with all agreements and conditions herein required to be performed or complied with by each of them prior to or on the Closing Date, and at the time of the Closing no 13 event of default or default shall have occurred and be continuing with respect to the Ancillary Agreements or the Series 2004 Bonds. (G) Ancillary Agreements. At the Closing Date, (i) all of the Ancillary Agreements shall be in full force and effect, shall have been duly executed and copies delivered to the Original Purchasers by, and shall constitute valid and binding agreements of, the parties thereto, shall not have been amended, modified or supplemented except as may have been agreed to in writing by the Original Purchasers and there shall be no defaults or events of default thereunder and (ii) the proceeds of the sale of the Series 2004 Bonds shall be applied or deposited with the Trustee for application as described in the Series 2004 Bond Ordinance and the Series 2004 Offering Memorandum. (H) Closing Certificate of Mayor of the City. The City shall have delivered to the Original Purchasers a certificate dated the Closing Date, addressed to each of the Original Purchasers and the Trustee signed by the Mayor of the City in form and substance reasonably satisfactory to the Original Purchasers. (I) Officer's Certificate of the Developer. The Developer shall have delivered to the Original Purchasers a certificate dated the Closing Date, addressed to each of the Original Purchasers signed by an authorized officer of the managing member of the Developer in form and substance reasonably satisfactory to the Original Purchasers. (J) The Bonds. The Series 2004 Bonds shall have been duly authorized, executed, authenticated, delivered, and the proceeds from the sale thereof applied, in accordance with the provisions of the Series 2004 Bond Ordinance. (K) Trustee's Certificate. The Original Purchasers shall have received a certificate dated the Closing Date of an authorized officer of the Trustee, addressed to the Original Purchasers reasonably acceptable in form and substance to the Original Purchasers. (L) Form 8038-G. The Original Purchasers shall have received a copy of the completed Form 8038-G of the Internal Revenue Service executed by the City: (M) Officers' Certificates. The Original Purchasers shall have received any and all certificates required to be furnished by the provisions of any Ancillary Agreement to be obtained or furnished by the City and the Developer at or prior to Closing. (N) Specimen Bonds. The Original Purchasers shall have received specimen Series 2004 Bonds. (0) Certified Copies of Ordinances. The Original Purchasers shall have received certified copies of the Series 2004 Bond Ordinance and the Establishing Ordinance. The Series 2004 Bond Ordinance shall include authorization for execution and delivery of this Contract. (P) Special Tax Roll and Report. The Original Purchasers shall have received a copy of the Special Service Area Special Tax Roll and Report substantially in the form attached to the Series 2004 Offering Memorandum (the "Special Tax Report"). 14 (Q) Special Tax Report Consent. The Original Purchasers shall have received from the preparers of the Special Tax Report a letter dated the Closing Date, addressed to the Original Purchasers regarding such preparer's qualifications and the preparer's consent to the inclusion of the Special Tax Report in the Series 2004 Offering Memorandum. (R) Title Insurance. The Original Purchasers shall have received copies of(i) a title insurance policy or policies (or commitments therefore) issued by a title insurance company with respect to the Area, and which policy, policies or commitments and company shall be acceptable to the Original Purchasers in their reasonable discretion and (ii) any usual and customary affidavits, certificates and documents required for the closing of the Series 2004 Bonds. (S) Market Absorption Study. The City shall have received a certified copy of the Market Absorption Study, together with any other evidence required by the Original Purchasers in connection therewith or the information contained therein. (T) Market Absorption Study Consent. The City shall have received from the preparer of the Market Absorption Study a letter dated the Closing Date, addressed to the Original Purchasers regarding such preparer's qualifications and the preparer's consent to include the Market Absorption Study in the Series 2004 Offering Memorandum. (U) Environmental Audit. The Original Purchasers shall have received from the Developer copies of the Phase I Environmental Site Assessments prepared by Testing Services Corporation and Schraek Environmental Consulting, Inc. (V) Land Survey. The Original Purchasers shall have received from the Developer the land survey depicting the Area. (W) Appraisal. The City shall have received a certified copy of the Appraisal, together with any other evidence required by the Original Purchasers in connection therewith or the information contained therein. (X) Appraisal Consent. The City shall have received from the preparer of the Appraisal a letter dated the Closing Date, addressed to the Original Purchasers regarding such preparer's qualifications and the preparer's consent to include the Appraisal in the Series 2004 Offering Memorandum. (Y) Engineer's Certificate. The Original Purchasers shall have received a certificate from the Developer's engineer dated the Closing Date in a form and substance satisfactory to the Original Purchasers stating that the costs reflected in the Series 2004 Offering Memorandum will be sufficient to complete the Special Services, as proposed, and such other matters as Original Purchasers shall reasonably require. (Z) Preliminary Plat of Subdivision. The Preliminary Plat of Subdivision for the Area shall have been approved by the City. (AA) Letters of Commitment, Insurance Policies. The Developer shall have delivered to the City any and all of the items currently due as required pursuant to the terms of 15 the Public Improvement Agreement, as requested by the City. The Developer shall have delivered adequate evidence of insurance naming the City as an additional insured. (BB) Loan Facilities. Evidence of Loan Facilities from Lenders. (CC) Additional Opinions, Certificates, etc. The Original Purchasers shall have received such additional legal opinions, certificates, proceedings, instruments and other documents as the Original Purchasers, the City or their respective counsel may reasonably deem necessary or desirable. All of the opinions, letters, certificates, instruments and other documents mentioned in this Contract shall be deemed to be in compliance with the provisions of this Contract only if in the reasonable judgment of the Original Purchasers, they are satisfactory in form and substance. If there shall be a failure to satisfy the conditions of the Original Purchasers' obligations contained in this Contract or if the Original Purchasers' obligations to purchase the Series 2004 Bonds shall be terminated for any reason permitted by this Contract, this Contract shall terminate, and the Original Purchasers, the City and the Developer shall not have any further obligations hereunder, except for the obligations set forth in Section 10 hereof which shall remain in full force and effect. 9. Changes Affecting the Series 2004 Offering Memorandum. At any time prior to the Closing, the City agrees to supplement or amend the Series 2004 Offering Memorandum whenever requested by the Original Purchasers when, in the reasonable judgment of the Original Purchasers and the City, such supplement or amendment is required. No amendment or supplement to the Series 2004 Offering Memorandum shall be made without the approval of the Original Purchasers. After the Closing and so long as the Original Purchasers or any participating dealer shall be offering Series 2004 Bonds, but not later than 90 days after the date of this Contract if any event shall occur as a result of which it is necessary to amend or supplement the Series 2004 Offering Memorandum in order to make the statements therein, in light of the circumstances under which they are made, not misleading, the City will so advise the Original Purchasers. In any such case, the City and the Developer shall cooperate in the preparation, execution and delivery of either amendments to the Series 2004 Offering Memorandum or supplemental information so that the statements in the Series 2004 Offering Memorandum, as so amended, or supplemented will not, in light of the circumstances under which such statements were made, be misleading. The cost of providing such amendments or supplements shall be paid by the City which costs may be reimbursed from amounts made available under the Series 2004 Bond Ordinance as Administrative Costs. 10. Payment of Expenses. All reasonable fees, costs and expenses associated with the issuance of the Series 2004 Bonds, including without limitation, the reasonable fees and disbursements of the Original Purchasers' legal counsel, shall be disbursed and paid by the Trustee from the proceeds of the Series 2004 Bonds. 16 11. Notices. Except as otherwise provided in this Contract, whenever notice is required to be given pursuant to the provisions of this Contract, such notice shall be in writing and shall be mailed by first class mail postage prepaid. 12. Law Governing. This Contract shall be construed in accordance with and governed by the laws of the State of Illinois. 13. Headings. The headings of the paragraphs and subparagraphs of this Contract are inserted for convenience only and shall not be deemed to constitute a part of this Contract. 14. Counterparts. This Contract may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 15. Parties and Interests. This Contract is made solely for the benefit of the City, the Original Purchasers and the Developer, including the successors and assigns of the Original Purchasers, and no other person, partnership, association or corporation shall acquire or have any rights hereunder or by virtue hereof 16. Indemnification. (A) The City agrees to indemnify and hold harmless the Original Purchasers, each director, trustee, member, officer, partner, employee or agent of the Original Purchasers and each person, if any, who has the power, directly or indirectly, to direct or cause the direction of the management and policies of the Original Purchasers, pursuant to the Original Purchasers' regulations or Bylaws, or who controls the Original Purchasers within the meaning of Section 20 of the Exchange Act or Section 15 of the Securities Act, from and against any and all losses, claims, damages, liabilities or expenses whatsoever caused by any untrue or misleading, or allegedly untrue or misleading, statement of a material fact contained in that portion of the Series 2004 Offering Memorandum constituting the City Information, or in any amendment or supplement thereto with regard to that portion of the Series 2004 Offering Memorandum, or caused by any omission or alleged omission to state in that portion of the Series 2004 Offering Memorandum constituting the City Information a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; the City shall not be liable under this paragraph if the person asserting any such loss, claim, damage or liability purchased Series 2004 Bonds from the Original Purchasers, if delivery to such person of the Series 2004 Offering Memorandum, or any amendment or supplement thereto, would have been a valid defense to the action from which such loss, claim, damage or liability arose and if the Series 2004 Offering Memorandum, amendment of or supplement was not delivered to such person by or on behalf of the Original Purchasers. 17 In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to the preceding paragraph, such person (the "indemnified party") shall promptly notify the City in writing, and the City shall promptly assume the defense thereof, including the employment of counsel chosen by the City and approved by the Original Purchasers and shall pay the fees and disbursements of such counsel related to such proceeding. If any of the indemnified parties is advised by counsel that there may be legal defenses available to such indemnified party which are adverse to or in conflict with those available to the City or another indemnified party, the City shall not have the right to assume the defense of such indemnified party, but the City shall be responsible for the fees and expenses of counsel retained by such indemnified party in assuming its own defense, and provided also that if the City shall have failed to assume the defense of such action or to retain counsel satisfactory to the Original Purchasers within a reasonable time after notice of the commencement of such action, the reasonable fees and expenses of counsel retained by the indemnified parties shall be paid by the City. Notwithstanding, and in addition to, any of the foregoing, any one or more of the indemnified parties shall have the right to retain its own counsel, but the reasonable fees and expenses of such counsel shall be at the expense of such indemnified party unless the City and the indemnified party shall have mutually agreed to the retention of such counsel. Such firm shall be designated in writing by the indemnified party. The City shall not be liable for any settlement of any proceeding effected without its written consent, but, if settled with such written consent of the City or if there shall be a final judgment for the plaintiff, the City agrees to indemnify the indemnified party from. and against any loss, damage, cost, expense or liability by reason of such settlement or judgment. (B) The Developer agrees to indemnify, defend and hold harmless (a) each of the Original Purchasers, each director, trustee, member, officer, agent or employee and each person, if any, who has the power, directly or indirectly, to direct or cause the direction of the management and policies of either of the Original Purchasers, pursuant to the Original Purchasers' respective regulations or Bylaws, or who controls either of the Original Purchasers within the meaning of Section 20 of the Exchange Act or Section 15 of the Securities Act, by contract or otherwise and (b) the City, each director, trustee, member, officer, agent or employee (not including Bond Counsel) and each person, if any, who has the power, directly or indirectly, to direct or cause the direction of the management and policies of the City (collectively called the "Section 16(b) Indemnified Parties"), from and against any and all losses, claims, damages, liabilities or expenses to the extent caused by or arising out of any untrue statement or misleading statement or alleged untrue statement or alleged misleading statement of a material fact(unless such allegation is (i) made by the Original Purchasers or the City, as the case may be, and (ii) such allegation is proven or otherwise determined to be false) contained in the Series 2004 Offering Memorandum in any of the Developer Information, or caused by any omission or alleged omission to state in the Developer Information a material fact required to be stated in the Developer Information or necessary to make the statements in the Developer Information, in the light of the circumstances under which they were made, not misleading. In case any claim shall be made or any action shall be brought against one or more of the Section 16(b) Indemnified Parties desiring to seek indemnification pursuant to this Section 16(b), the Section 16(b) Indemnified Parties seeking indemnity shall promptly notify the Developer in writing, and the Developer shall promptly assume the defense thereof, including 18 the employment of counsel chosen by the Developer and approved by the Original Purchasers and the City which approval shall not be unreasonably withheld, and the payment of all reasonable expenses and disbursements of such counsel related to such defense. If any of the Section 16(b) Indemnified Parties is advised by counsel that there may be legal defenses available to it which are adverse to or in conflict with those available to the Developer or any other Section 16(b) Indemnified Party, or that the defense of such Section 16(b) Indemnified Party should be handled by separate counsel, the Developer shall not have the right to assume the defense of such Section 16(b) Indemnified Party, but shall be responsible for the reasonable fees and expenses of counsel retained by such Section 16(b) Indemnified Party in assuming its own defense, and provided also that if the Developer shall have failed to assume the defense of such action or to retain counsel satisfactory to the Original Purchasers and the City within a reasonable time after notice of the commencement of such action, the reasonable fees and expenses of counsel retained by the Section 16(b) Indemnified Parties shall be paid by the Developer. Notwithstanding, and in addition to, any of the foregoing, any one or more of the Section 16(b) Indemnified Parties shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the reasonable fees and expenses of such counsel shall be at the expense of such Section 16(b) Indemnified Party or Parties unless the employment of such counsel has been specifically authorized, in writing, by the Developer, or unless such retention is specifically authorized herein. Developer shall not be liable for any settlement of any proceeding effected without its written consent, but, if settled with such written consent or if there shall be a final judgment for the plaintiff, Developer agrees to indemnify the Section 16(b) Indemnified Parties from and against any loss, damage, cost, expense or liability by reason of such settlement or judgment. The Developer shall have the right, but not the obligation, to appeal to courts with appellate jurisdiction any such judgment taken against the Section 16(b) Indemnified Parties, and the Section 16(b) Indemnified Parties shall join in such appeal. 17. Further Financial Reports. The City agrees to provide the financial reports and information described in the Series 2004 Indenture which it has covenanted to provide to the Trustee, if any, to the Original Purchasers and any Bondholder upon written request. 18. Amendment or Assignment. This Contract may not be amended except through the written consent of all of the parties hereto and is not assignable. 19. Survival of Representations, Warranties, Agreements and Obligations. Each respective representation, warranty and agreement of the City, the Developer and the Original Purchasers shall remain operative and in full force and effect, regardless of any investigations made by or on behalf of the Original Purchasers, the Developer, and the City and shall survive the Closing. This Section 19 and the obligations of the City under Sections 9, 10 16 and 17 hereof and the obligations of the Original Purchasers under Section 16 hereof, the obligations of the Developer under Section 16 hereof shall survive any termination of this Contract pursuant to its terms. 19 20. Severability. If any provision of this Contract shall be held or deemed to be or shall, in fact, be inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions, or in all cases because it conflicts with any other provision or provisions or any constitution or statute or rule of public policy, or for any other reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions herein contained invalid, inoperative, or unenforceable to any extent whatever. The invalidity of any one or more phrases, sentences, clauses or sections in this Contract shall not affect the validity of the remaining portions of this Contract, or any part hereof. Very truly yours, LASALLE CAPITAL MARKETS, WILLIAM BLAIR & COMPANY, L.L.C. A Division of ABN AMRO Financial Services, Inc. By: By: Approved and agreed to by the undersigned as of the date first above written. UNITED CITY OF YORKVILLE, ILLINOIS By: Mayor Accepted and agreed to by the undersigned as of the date first above written. MPI-2 YORKVILLE CENTRAL LLC, An Illinois Limited Liability Company By: MPI Development Manager, Inc., Its Manager By: John P. Zediker, President \IDOCS 6476040 C/M 4781600-006 20 EXHIBIT D PUBLIC IMPROVEMENT AGREEMENT THIS PUBLIC IMPROVEMENT AGREEMENT (this "Agreement") entered into this day of , 2004 is between the UNITED CITY OF YORKVILLE, Illinois, a municipal corporation (hereinafter referred to as the "City"), and MPI-2 YORKVILLE CENTRAL LLC, an Illinois limited liability company (hereinafter collectively referred to as the "Developer"). The City and the Developer are sometimes hereinafter referred to individually as a"Party" and collectively as the "Parties." RECITALS A. The Developer owns fee simple title to that certain real estate consisting of approximately 590 acres, more or less, all in the City and commonly known as Central Grande Reserve and legally described and shown in Exhibits A and A-1 attached hereto (the "Developer's Property" or"Property"). B. The Developer desires to develop, and has been approved for the development of, the Developer's Property with 490 single family dwelling units for Phase One and no more than 755 dwelling units (single family, duplex and townhome units) for Phase Two in a subdivision to be known as "Grande Reserve" (hereinafter referred to as the "Development"). The Development shall be constructed in accordance with the Annexation Agreement dated August 7, 2003 and recorded September 11, 2003 in the Kendall County real property records as Document 4200300032963, hereinafter referred to as the "MPI Agreement," including any amendments thereto that the City and Developer may approve (collectively referred to as the "Annexation Agreement"). C. Pursuant to the Annexation Agreement, the Developer is obligated to construct or contribute to the construction of certain improvements on the Developer's Property and dedicate rights-of-way or easements which, upon completion thereof, would be dedicated, conveyed, or otherwise become the property of, or subject to the maintenance and control of, the City. D. The City has authority to enter into this Agreement upon the Special Service Tax Law, 35 ILCS 200/27 et seq., and the Illinois Constitution, Article VII, Section 7. E. The Public Improvements (as hereinafter defined) are unique and special services within the meaning of 35 ILCS 200/27-5 that benefit the Developer's Property (all to be located in either publicly dedicated rights-of-way, on public lands, or in publicly dedicated easements) and shall generally consist of and include the costs of engineering, soil testing and appurtenant work, excavating, paving, mass grading and demolition, storm water management facilities, storm drainage systems and storm sewers, site clearing and tree removal, public water facilities, sanitary sewer facilities, erosion control measures, roads, streets, curbs, gutters, street lighting and signalization, equestrian paths, sidewalks and related street improvements, and equipment and materials necessary for the maintenance thereof, public parks, park improvements, bicycle paths, landscaping, wetland mitigation and tree installation, costs for land and easement acquisitions relating to any of the foregoing improvements, required tap-on and related fees for xxx.xxxxxx.xA water and sanitary sewer services, the proposed special service area's proportionate share of public works facilities and equipment needed for providing services for the benefit of the proposed special service area, and other eligible costs, including legal fees (collectively, the "Public Improvements"). The Developer desires that the City issue tax-exempt bonds, the proceeds of which will be used to finance the Public Improvements; to pay capitalized interest; to establish a reserve fund; to pay issuance costs; to pay the Special Service Area Number 2004-104 administrative expenses; and to reimburse the City for its expenses, including but not limited to legal fees relating to the Bonds (as defined below). The Public Improvements are described in more detail on Exhibit B attached hereto, as well as in the Annexation Agreement, and are intended to benefit the Development. Without limiting the foregoing, Public Improvements shall include land which is dedicated or conveyed to the City or easements in favor of the City for public purposes which are created by plats of subdivision, plats of dedication or otherwise granted to the City. F. In order to pay for the Public Improvements, the Mayor and City Council of the City (the "Corporate Authorities") adopted Ordinance No. 2004- on , 2004 (the "Proposing Ordinance") initiating the process to designate the Developer's Property as "Special Service Area Number 2004-104 Central Grande Reserve" (the "Special Service Area") pursuant to Section 6 of Article VII of the 1970 Constitution of the State of Illinois and the Illinois Special Service Area Tax Law, 35 ILCS 200/27-5 et seq. and to authorize the levy of special service area taxes (the "Special Tax") upon the taxable real property within the Special Service Area. The Corporate Authorities have adopted Ordinance No. 2004-32 on June 22, 2004 designating the Developer's Property as a special service area and authorizing the levy of a Special Tax (the "Establishing Ordinance"). G. On , 2004, the Corporate Authorities of the City adopted Ordinance No. 2004- , drafted by the City's Bond Counsel (the "SSA Bond Ordinance"), authorizing (i) the issuance by the City, under a Trust Indenture dated as of , 2004 (the "Trust Indenture") between the City and LaSalle Bank National Association (the "Trustee"), of not to exceed $13,200,000.00 Special Service Area Number 2004-104 Central Grande Reserve Special Tax Bonds, Series 2004 (MPI Grande Reserve Project (the "Bonds"). The Bonds are being issued to pay a portion of the cost for the Public Improvements and the costs and expenses described in Paragraph E above. H. The Developer proposes to construct the Public Improvements on behalf of the City in accordance with the terms and provisions of this Agreement and the Annexation Agreement. The proceeds from the sale of the Bonds shall be under the control of the City and shall be used to pay for the Public Improvements. I. The proceeds from the sale of the Bonds (the "Bond Proceeds") to be used by the City to pay for the Public Improvements shall be held by the Trustee, in the "Improvement Fund" created under the Trust Indenture. -2- J. The Corporate Authorities shall issue Bonds for Special Service Area No. 2004- 104 Central Grande Reserve for the Development as set forth in this Agreement and contemplate one or more additional issuances of Bonds under Special Service Area No. 2004-104 Central Grande Reserve for the Development, the proceeds of which will be used to pay a portion of the cost for the Public Improvements, including the financing and other costs associated with the funding of the Public Improvements. There shall not be more than sixty million dollars ($60,000,000) in the aggregate in bonds outstanding at any one time. K. The Corporate Authorities have determined that the Development is in the vital and best interest of the City and the health, safety, morals, and welfare of its residents, and the financing of the Public Improvements by the City is in accordance with the public purposes and provisions of applicable state and local laws. L. This Agreement has been submitted to the Corporate Authorities for consideration and review, and the Corporate Authorities have taken all actions required to be taken prior to the execution of this Agreement in order to make the same binding upon the City according to the terms hereof. The Developer has taken all actions necessary and adopted the proper resolutions to make this Agreement binding upon the Developer according to the terms hereof. NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the City and the Developer hereby agree as follows: ARTICLE ONE Recitals Part of Agreement The representations, covenants, and recitations set forth in the foregoing recitals are material to this Agreement and are hereby incorporated into and made a part of this Agreement as though they were fully set forth in this Article One. ARTICLE TWO Mutual Assistance The Developer and City agree to take such actions, including the execution and delivery of such documents, instruments, petitions, certifications (and in the City's case, the adoption of such ordinances and resolutions), as may be necessary or appropriate from time to time to carry out the terms, provisions, and intent of this Agreement and to aid and assist each other in carrying out said terms, provisions, and intent. The Developer and City recognize that a change in economic circumstances and interest rates as they currently exist may cause the payment of special service area taxes contemplated in this Agreement to be an undue burden upon future homeowners within the special service area. If current interest rates change to an extent that the Developer in its sole discretion decides that the -3- special service area taxes would be an undue burden upon future homeowners, then the Developer shall not be obligated to close on any bonds for the Special Service Area, and this Agreement shall terminate. However, in such an event, the Developer shall be obligated to reimburse the City for all out of pocket costs, including, but not limited to, fees for the trustee, attorneys, underwriters and consultants assisting in the creation and establishment of the Special Service Area, with such obligation to survive the termination of this Agreement. ARTICLE THREE Construction of the Public Improvements 3.1 Construction of Public Improvements by the Developer. Because the Public Improvements benefit the Developer's Property and will be essential to the Development, the Developer shall construct the Public Improvements for the benefit of and on behalf of the City as provided in this Article Three. Construction of the Public Improvements to be financed by any series of Bonds shall commence within six months after the sale of such series of Bonds. With respect to the Public Improvements to be constructed with the Bond Proceeds, such proceeds shall be fully expended on the Public Improvements within thirty-six months after the sale of the series of Bonds from which such Bond Proceeds were derived, provided that all necessary approvals and permits have been granted by the City. With respect to all Public Improvements, they shall be dedicated or conveyed to the City pursuant to the Annexation Agreement as soon as practicable after the sale of the series of Bonds financing such Public Improvements, provided that all necessary approvals and permits have been granted by the City. The Public Improvements shall be paid for as provided in Section 5.2 of Article Five of this Agreement and shall be guaranteed for one (1) year by the Developer, pursuant to the Municipal Code. 3.1.1. Transfers of Ownership to City of Property Relating to Public Improvements. Portions of the Public Improvements are to be constructed on property currently owned by Developer. Such property is required to be dedicated or conveyed to the City in accordance with this Agreement. The City agrees that Developer may convey certain necessary rights-of-way and other public improvements such as stormwater management and detention facilities, by plat of dedication or plat of easement, prior to the construction of the Public Improvements to be constructed on such lands, even if these lands are referenced later in subdivision plats, provided the Developer, as a condition of said conveyance, constructs the Public Improvements pursuant to this Agreement. As aforesaid, such dedications or conveyances shall not relieve the Developer of any of its obligations to construct the applicable Public Improvements on such property. 3.2 Duty of the Developer to Construct. (a) The Developer, on behalf of the City, shall cause the Public Improvements to be constructed for the benefit of the Developer's Property in accordance with this Agreement (all to be located in either publicly dedicated rights-of-way, on public lands, or in publicly dedicated easements) and in the public right-of-way in accordance with this Agreement and the Annexation Agreement. The City acknowledges that it does not intend to design, bid, or construct the Public Improvements. The City agrees in as much as the Public Improvements are to be paid for in part -4- by special taxation that the Developer shall construct the Public Improvements using subcontractors and materialmen selected from time to time by the Developer in the Developer's sole discretion without advertising for bids as permitted by the provisions of Section 65 ILCS 5/8-9-1 of the Illinois Municipal Code and the Establishment Ordinance. All Public Improvements to be constructed hereunder shall be constructed in substantial accordance with the Annexation Agreement and all applicable laws, ordinances, rules, and regulations (as modified by the terms of the Annexation Agreement which governs the Developer's Property) and shall be constructed in a good workmanlike and commercially reasonable manner. The Developer and the City agree that the Public Improvements shall be constructed in substantial compliance with the Annexation Agreement and that the Annexation Agreement sets forth and represents the Developer's full and complete obligations with respect to the construction of the Public Improvements, and the City shall have no right to impose additional obligations therefor. The Developer shall employ and/or contract with at all times adequate staff, consultants, and contractors with the requisite experience necessary to administer and coordinate the construction of the Public Improvements. The City agrees to accept the Public Improvements, provided the Developer follows the provisions contained in Section 5.1 of this Agreement. (b) The Developer shall receive payment for the construction, conveyance, dedication or grant of easement of the Public Improvements in an amount equal to the amount or amounts shown on the budget or budgets attached hereto as Exhibit C, which amounts include a factor for the Developer's construction administration and supervisory expenses (the "Budgeted Amount"). The Budgeted Amount may be amended prior to the issuance of the Bonds by the Developer with the consent of the City in accordance with the Establishing Ordinance and the Special Tax Report (as defined below). The Developer and the City shall cooperate with each other and shall each use their best efforts to cause the cost of constructing the Public Improvements to be no more than the Budgeted Amount. The City shall comply with reasonable requests of Developer to cause the cost of constructing the Public Improvements to be no more than the Budgeted Amount. However, it is understood that if despite the parties' best efforts the cost of constructing the Public Improvements exceeds the Budgeted Amount, then the Developer shall be required to complete construction of the Public Improvements, and to the extent that the amounts available from the Improvement Funds are not sufficient to pay for all costs of constructing the Public Improvements, the difference shall be paid by the Developer. In making such payments, however, the Developer does not waive any cause of action it may have against the City for such cost overruns. In the event that the actual cost of constructing a particular Public Improvement exceeds the cost budgeted for that Public Improvement, the Developer shall be permitted to utilize funds allocated to other Public Improvements to pay such excess cost, and such utilization of funds shall be in accordance with Paragraph IV(D) of the United City of Yorkville Special Service Area No. 2004-104 Central Grande Reserve Special Tax Roll and Report(the "Special Tax Report") generated by David Taussig & Associates, Inc. dated , 2004. ( c) Subject to Section 8.1 of this Agreement, if the Developer fails to complete the Public Improvements within the times specified herein, or any extensions of time granted by the City (which extension shall not be unreasonably withheld) or the Developer abandons the project -5- (ceases all work for a period of twelve (12) consecutive months without reasonable cause for delay), and, if as a result, a breach of this Agreement shall have occurred (subject to the terms of Section 8.3 of this Agreement), the City has the right, but not the obligation, to complete the Public Improvements using the remaining Bond Proceeds on deposit in the Improvement Fund to pay for the completion of the Public Improvements and the Developer shall be responsible for reimbursing the City for any deficiencies. Notwithstanding the foregoing, a cessation of work shall not be considered an abandonment if it is caused by inclement weather, material shortages, acts of God, acts of war, insurrection or terror, or other conditions beyond Developer's control. The City shall notify Developer in writing of any perceived abandonment, and Developer shall have thirty(30) days thereafter to respond or cure. (d) Both the City and the Developer agree to abide by the terms of the Annexation Agreement. 3.3 Submission and Approval of Plans All work with respect to the construction of the Public Improvements by the Developer shall be performed in conformity with the Annexation Agreement and the terms of this Agreement. The Developer shall prepare and submit to the City for approval by the City, which approval shall not be unreasonably delayed or withheld, a final Plat or Plats of Subdivisions, Final Engineering for the Development, for each phase of the Development (collectively, the "Construction Plans") in accordance with the Annexation Agreement. 3.4 Public Improvements Constructed on City's Right-of-Way and Public Lands. The City shall grant or cause to be granted to the Developer easements and/or licenses with respect to the City's right-of-way and public lands and private property (over which the City has acquired easements) for which some or all of the on-site or off-site Public Improvements are required and which are necessary to permit the Developer to construct the Public Improvements in a form and substance acceptable to the Developer and the City. All such easements and licenses shall be duly executed and, if necessary, recorded, prior to the commencement of construction. Notwithstanding the foregoing, the Developer agrees that all Public Improvements shall be constructed within publicly dedicated rights-of-way, on public lands, or in publicly dedicated easements or in private easements granted to the City by owners of real estate, provided, however, all such dedications shall occur on or before the earlier of (i) final platting for such portion of the Public Improvements or (ii) disbursement from the Improvement Funds of the cost of such portion of the Public Improvements. 3.5 Conformance to Federal State and Local Requirements. All work with respect to the Public Improvements shall conform to all applicable federal, state, and local laws, regulations, codes, rules and ordinances as set forth in the Annexation Agreement; provided, however, that the City may not enforce against the Developer any ordinances, rules, or regulations which discriminate against the Developer or which cause the cost of the Public Improvements to significantly increase, provided the Public Improvements to be financed by any series of Bonds shall be completed within three years after the sale of the applicable series of Bonds. -6- 3.6 Insurance. Prior to commencement of construction of the Public Improvements, the Developer shall cause to be procured and delivered to the City, at the Developer's sole cost and expense, and shall maintain in full force and effect until construction of the Public Improvements has been completed, a policy or policies of commercial liability insurance and, during any period of construction, contractors' liability insurance and worker's compensation insurance, with liability coverage under the commercial liability insurance of not less than One Million Dollars per occurrence and Two Million Dollars in the aggregate (which may be in the form of umbrella coverage) and limits under the other policies of insurance in accordance with statute, and such policies to be in such form and issued by such companies as shall be reasonably acceptable to the City, to protect the City and the Developer against any liability incidental to the use of, or resulting form, any accident occurring on or about the Public Improvements or the construction of an improvement thereof. Each such policy shall name the City as an additional named insured party. 3.7 Rights of Inspection. During construction of the Public Improvements, the City or its designee shall have the right to enter upon the Developer's Property and the Public Improvements for the purpose of conducting such inspections as the City may deem appropriate. In the event that the City or its designee discovers a defect or deficiency in the construction of the Public Improvements, the City or its designee shall promptly notify the Developer in writing thereof. Any such inspection by the City of the Public Improvements shall not be construed as a representation by the City that there has been compliance with the Construction Plans or that the Public Improvements will be or are free of faulty materials or workmanship, or as a waiver of any right that the City or any other party may have against the Developer or any other party for failure to comply with the Construction Plans or the provisions of this Agreement. 3.8 Security. The City hereby agrees that no security shall be required for that portion of the cost of the Public Improvements that are paid, or to be paid, from the Bond Proceeds. The Developer shall adhere to the requirements for security instruments as set forth in the Annexation Agreement. 3.9 Density. In no event shall the Annexation Agreement be amended nor shall any subdivision plat be required to be drawn in such a way as to result in the Central Grande Reserve Special Service Area being less than one thousand two hundred forty-five (1,245) dwelling units (723 single family, 224 duplexes, and 298 townhomes), and in neighborhoods 10-15, not less than 490 single family dwelling units, being permitted to be constructed on the Developer's Property unless agreed in writing by the Developer and the Consultant (David Taussig & Associates, Inc., its successor or assigns). 3.10 Administration of SSA. Subject to the terms of the Special Tax Report, dated , 2004, and prepared by David Taussig & Associates and any subsequent amendments thereto, the City shall contract with an administrator or consultant to administer the Special Service Area , including, without limitation, calculation, levy, abatement, administration, -7- and collection of the special tax for said Special Service Area, on such terms as shall be reasonably agreed to between the parties. 3.11 Additional Issuance of Bonds. The City shall issue, at the request of the Developer or its nominee, the following additional bonds: Additional Bonds (one or more issues) for Special Service Area No. 2004-104 issued pursuant to the terms of the Trust Indenture securing such bonds in an amount not to exceed $21,800,000 upon satisfaction of the conditions set forth in Article III of the Trust Indenture. It is anticipated that Additional Bonds will be issued in 2006. See Article III of the Trust Indenture (Additional Bonds) for the terms and conditions applicable to the issuance of Additional Bonds. These additional bonds, issued by the City, shall be exclusive of Bonds issued to refund outstanding Bonds and variable rate Bonds. There shall not be more than sixty million dollars ($60,000,000) in the aggregate in Bonds outstanding at any one time. ARTICLE FOUR Developer Indemnification The Developer agrees to indemnify, defend, and hold the City Council and officers, employees, and agents of the City, including attorneys, engineers, and consultants, harmless from and against any claim, action, suit, proceeding, loss, cost, damage, liability, deficiency, fine, penalty, punitive damage, or expense (including, without limitation, reasonable attorneys' fees), to the extent resulting from, arising out of, or based upon: (i) any breach as defined pursuant to Section 8.3 and as determined by a court of law on the part of the Developer in the performance of any of its material obligations under this Agreement not resulting from the negligent conduct of the City; or (ii) any act of negligence of the Developer or any of its agents, contractors, servants or employees; or (iii) any violation by the Developer of any easements, law, ordinances, or codes affecting the Developer's Property, the Development, or the Public Improvements. In case any such claim shall be made or action brought based upon any such claim in respect of which indemnity may be sought against the Developer, upon timely receipt of notice in writing from the City setting forth the particulars of such claim or action, the Developer shall assume the defense thereof including the employment of counsel subject to approval of the City, which approval shall not be unreasonably withheld, and the payment of all judgments, costs and expenses. The Developer shall have the right, but not the obligation, to appeal to courts with appellate jurisdiction any such judgment taken against the City, and the City shall join in any such appeal. The City shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the City. ARTICLE FIVE Payment for Public Improvements -8- 5.1 Improvements to be Constructed. 5.1.1 Requests for Payment. The Developer may submit to the City Engineer or his designee and send a copy to the Consultant not more frequently than once each calendar month, a written request for payment ("Request for Payment") of the Developer's costs of constructing those portions of the Public Improvements which have been completed to date and/or for the payment or reimbursement of those costs that are identified on the Construction Plans and Exhibit B, as well as enumerated in Recital D, including the cost of the acquisition of title to, or easements with respect to, land on which Public Improvements are located or to be located. The City shall inspect each portion of the Public Improvements for which payment is requested and shall, within ten (10) business days after receipt of a Request for Payment, make its inspection and, if the City Engineer confirms that the work for which payment is requested has been done, the Authorized Officer (as hereinafter defined) shall, within three (3) business days of the inspection (1) execute and deliver to the Developer a Certificate of Completion and Acceptance ("Acceptance Certificate") indicating the City's acceptance of such work and (2) execute and deliver to the Developer and to the Trustee a written statement ("Disbursement Request") approving the payment of funds as provided therein. As used herein"Authorized Officer" means the Mayor, the City Administrator, the City Treasurer, the Finance Director, or any other officer designated as such pursuant to a certificate of the Mayor delivered to the Developer and the Trustee for the Bonds. 5.1.2. Denial of Compliance. If, in the City Engineer's reasonable opinion, any portion of the work is not in compliance with the Construction Plans, the City shall within five (5) business days after submission of a Request for Payment notify the Developer in writing ("Noncompliance Notice") of (1) the specific improvements which it believes are not in compliance with the Construction Plans, (2) the reasons why it believes that the work is not in compliance with the Construction Plans and (3) the reasons why it is not approving a portion or all of the requested disbursement together with reasonably detailed explanations thereof. Developer shall have five (5) business days after receipt of such Noncompliance Notice to remedy such work, subject to the Unavoidable Delay provisions of Section 8.1 and further provided that, in the event such work cannot be remedied within such five (5) day period, and Developer is diligently pursuing such remedy, developer shall have a period of thirty (30) days after receipt of such Noncompliance Notice to remedy such work. However, to the extent that the Request for Payment relates to multiple Public Improvements and the City Engineer confirms that some of the Public improvements addressed by the Request for Payment are complete, the Authorized Officer shall (1) execute and deliver to the Developer an Acceptance Certificate for that portion of the Public Improvements which are accepted by the City, and (2) execute and deliver to the Developer, the Consultant and the Trustee a Disbursement Request for the Public Improvements which have been completed. 5.1.3 Release of Funds. At such time as work covered by a Request for Payment is approved by the City Engineer, subject to the provisions of the Trust Indenture and any tax -9- certificates delivered by the City in connection with the Bonds, the Authorized Officer shall deliver a Disbursement Request to the Trustee directing the Trustee to disburse to the Developer the amount of funds provided for in the Disbursement Request to the extent that funds are available in the Improvement Fund. 5.1.4 Failure to Inspect. Should the City, upon written request by the Developer, fail to inspect any portion of the Public Improvements within the time period designated above or to send either an Acceptance Certificate or a Noncompliance Notice, subject to the Unavoidable Delay provisions identified herein, at that time such portion of the Public Improvements shall be deemed accepted by the City. 5.1.5 Conditions Precedent to Payment. The City Engineer or his designee shall authorize the distribution of funds by the Trustee to the Developer to pay for those portions of the Public Improvements which have been completed upon satisfaction of the following conditions: (a) The Developer shall have submitted to the City Engineer, with a copy to the Consultant, a Request for Payment with respect to such portions of the Public Improvements and the City Engineer has issued, or is required to issue, a Disbursement Request to the Trustee with respect thereto; (b) The Developer shall have caused a title insurance company licensed to do business in Illinois ("Title Company") to issue to the Trustee and the City Engineer a letter or commitment whereby the Title Company insures the Trustee and the City from any and all mechanics' lien claims with respect to work covered by the Disbursement Request. Alternatively, the Developer may request that the City Engineer direct the Trustee to disburse the funds into a construction escrow account with the Title Company with directions that the Title Company shall not release any funds to any subcontractor or materialmen unless and until appropriate lien waivers and supporting affidavits to the satisfaction of the Title Company have been received by the Title Company; and ( c) The Developer shall not be in default under this Agreement if the Unavoidable Delay provisions of Section 8.1 hereof apply. Further, the Notice and Cure provisions of Section 8.3 of this Agreement are a condition precedent to the declaration of any default under this Agreement. 5.2 Bond Proceeds. (a) The Bond Proceeds shall be deposited, held, invested, reinvested, and disbursed as provided in the Trust Indenture. Bond Proceeds shall be deposited in the Improvement Fund, which, together with anticipated interest earnings, are anticipated to be sufficient to fully fund the Budgeted Amounts set forth in Exhibit C for the Public Improvements. The Developer reserves the right to shift costs from one line item in the Budgeted Amounts to another line item in the event that actual costs are more or less than Budgeted Amounts, provided, the total amount budgeted is not increased, and to the extent allowed and upon satisfaction of the conditions set -10- forth in the Special Tax Report. Monies in the Improvement Fund shall be withdrawn therefrom in accordance with the provisions of the Trust Indenture and the applicable provisions of this Agreement for payment of all or a portion of the cost of constructing the Public Improvements. (b) As long as the City invests the Bond Proceeds pursuant to the Trust Indenture and except in the event of fraud or gross negligence, the City shall have no responsibility whatsoever to the Developer with respect to any investment of funds made by the Trustee under the Trust Indenture, including any loss of all or a portion of the principal invested or any penalty for liquidation of investment. Any such loss may diminish the amounts available in the Improvement Funds to pay the cost of constructing the Public Improvements. The Developer further acknowledges that the obligation of any owner of real property in the Development, including the Developer to the extent it owns any property in the Development, to pay Special Taxes is not in any way dependent on the availability of amounts in the Improvement Fund to pay for all or any portion of Public Improvements. The Developer acknowledges that any lack of availability of amounts in the Improvement Funds to pay the cost of constructing the Public Improvements shall in no way diminish any obligation of the Developer with respect to the construction of the Public Improvements in accordance with this Agreement or any other agreement to which the Developer is a party. ( c) The City shall not initiate or approve any amendment to the Trust Indenture that relates to or affects the Improvement Fund or the purposes for which the Improvement Fund may be expended without the express written consent of Developer. 5.3 Limited Liabilfty of City. The Developer agrees that any and all obligations of the City arising out of or related to this Agreement are special and limited obligations of the City and the City's obligations to make any payments under this Agreement are restricted entirely to the monies, if any, in and available for disbursement from the Improvement Funds and from no other source. Except in the event of fraud or gross negligence, no member of the corporate authorities, or any City staff member, employee or agent, including attorneys and engineers, shall incur any liability under this Agreement to the Developer or any other party in their individual capacities by reason of their actions under this Agreement or the execution of this Agreement. ARTICLE SIX Other Agreements 6.1 Continuing Disclosure. The Developer agrees to provide to the underwriter of the Bonds and the Consultant (as defined in the Trust Indenture) certain continuing information concerning the development of the Developer's Property until such time as 90% of the Parcels are sold to homeowners as verified in writing by the Developer to the Underwriter of the Bonds. This information includes (i) annual financial statements of the Developer to the Underwriter and (ii) quarterly reports from the Developer to the Underwriter and the Consultant, setting forth: the number of single family homes, single family villas, townhomes and duplex sales and/or bulk property sales; the number of single family homes, single family villas, townhomes and/or duplexes constructed on the Subject Property; a description of the type of such homes and the -11- range of sale prices for such homes; the number of sales of single family homes, single family villas, townhomes and/or duplexes closed; any pending litigation which would adversely affect the ability of the Developer to develop the Subject Property or to pay Special Taxes; any material change in the structure or ownership of the Developer; any failure of the Developer, or any affiliate of the Developer, to pay by the date due general ad valorem property taxes or special taxes, or any other governmental charge on the Subject Property as and when due; any denial or termination of credit; any denial or termination of, or default under, any line of credit or loan or any other loss of a source of funds that Developer has reason to believe is likely to have a material adverse effect on the ability of the Developer to cause the Subject Property to be developed; the occurrence of any event of Bankruptcy with respect to the Developer, or any affiliate of the Developer; any significant amendments to land use entitlements for the Development, if such amendments are likely to prevent or delay the implementation of the Development; any previously undisclosed governmentally-imposed preconditions to commencement or continuation of development on the Subject Property, if such preconditions are likely to prevent or delay the Development; any previously undisclosed legislative, administrative or judicial challenges to development of the Subject Property or the collection of special taxes; any changes of which the Developer is aware, if material, in the alignment, design or likelihood of completion of significant public improvements affecting the Development, including major thoroughfares, sewers, water conveyance systems and similar facilities. Quarterly reports shall be delivered within thirty (30) days after the end of each calendar quarter. In addition, the Developer shall use its best efforts to provide prompt notice of any of the events described above. 6.2 City Acceptance of Public Improvements, The City shall accept the Public Improvements pursuant to the Annexation Agreement and this Agreement. The Developer agrees to make donations and contributions to the appropriate school district and appropriate park district as provided in the Annexation Agreement. 6.3 Covenant: Rider to Sales Contracts. The Developer and its successors and assigns covenant and agree, unless the Special Tax has been prepaid, to attach the Rider or one substantially similar to it, attached hereto as Exhibit D, to all sales contracts for the sale of dwelling units or for the sale of all or a portion of Developer's Property. Said Rider fully explains the responsibilities of the Owner of Developer's Property or of a Dwelling Unit for the payment of a Special Service Area Tax, that this responsibility runs with the land, that each subsequent owner of Developer's Property (home builder) or of a Dwelling Unit shall be responsible for the payment of said tax, and that each owner shall be responsible for disclosing same in any sales contract. Developer and each subsequent owner of Developer's Property (home builder) shall have available in its sales office (i) a pamphlet entitled "Special Service Area Questions and Answers" and (ii) home buyer prepayment amounts. 6.4 Sale of Developer's Property. The City agrees that the Developer shall have the right to either build on the Developer's Property or to sell developed lots to other builders, or to convey any or all of the Developer's Property at any time after the date of this Agreement. The -12- Developer shall notify the Underwriter, the City and the Consultant prior to the sale of any portion of Developer's Property other than the sale of an individual dwelling unit. ARTICLE SEVEN Authority 7.1 Powers. Each Party hereby represents and warrants to the other Parties that the Party making such representation and warranty has full constitutional and lawful right, power, and authority, under currently applicable law, to execute, and deliver, and perform the terms and obligations of this Agreement, and all of the foregoing have been or will be duly and validly authorized and approved by all necessary City proceedings, findings, and actions and all necessary Developer actions. Accordingly, this Agreement constitutes the legal, valid, and binding obligation of the City and the Developer, enforceable in accordance with its terms and provisions and does not require the consent of any other governmental authority. 7.2 Authorized Parties. Whenever under the provisions of this Agreement and other related documents and instruments or any supplemental agreements, any request, demand, approval, notice, or consent of the City or the Developer is required, or the City or the Developer is required to agree or to take some action at the request of the other party, such request, demand, approval, notice, or consent, or agreement shall be given for the City, unless otherwise provided herein, by the City Administrator or his or her written designee and for the Developer by its Manager or its written designee; and either party shall be authorized to act on any, such request, demand, approval, notice, or consent, or agreement or other action and neither party hereto shall have any complaint against the other party as a result of any such action taken. ARTICLE EIGHT General Provisions 8.1 Unavoidable Delays. The time for performance by Developer shall be extended by a period of time equal to the time of delay caused by any of the following reasons (herein called "Unavoidable Delays"): Acts of God, acts of the public enemy, or acts of fire, strikes, flood, governmental orders or edicts, governmental rationing or allocation of materials, adverse weather conditions, lockouts, riots, strikes, or any other cause beyond the reasonable control of the Developer. 8.2 Time of Essence. Time is of the essence of this Agreement. 8.3 Breach. A party shall be in "breach of this Agreement" if it shall fail to substantially perform any of its respective obligations under this Agreement, barring an Unavoidable Delay. Upon breach of this Agreement, any of the parties, in a court of competent jurisdiction, by an action or proceeding in law or in equity, may exercise any remedy available at law or in equity. -13- Before any failure of any party to this Agreement to perform its obligations under this Agreement shall be deemed to be a breach of this Agreement, the party claiming such failure shall notify, in writing, by certified mail, return receipt requested, the party alleged to have failed to perform, state the obligation allegedly not performed and the performance demanded and the party failing to perform shall not have commenced performance and diligently prosecuted same to completion within thirty (30) days after such notice. 8.4 Amendment. This Agreement, and any exhibits attached hereto, may be amended only by the agreement of all of the Parties evidenced by a written amendment, with the adoption of an ordinance or resolution of the City approving the written amendment. 8.5 Entire Agreement. This Agreement sets forth all agreements, understandings, and covenants between the Parties relative to the matters herein contained, except for the Annexation Agreement This Agreement supersedes all prior agreements, other than the Annexation Agreement, negotiations and understandings, written and oral, and shall be deemed a full integration of the entire agreement of the Parties. 8.6 Severability. If any provisions, covenants, agreements, or portions of this Agreement, or its application to any person, entity, or property, is held invalid, such invalidity shall not affect the application or validity of any other provisions, covenants, agreements, or portions of this Agreement and, to that end, all provisions, covenants, agreements, or portions of this Agreement are declared to be severable. 8.7 Illinois Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois. 8.8 Notice. Any notice to be given or served hereunder or under any document or instrument executed pursuant hereto shall be in writing and shall be: (i) delivered personally, with a receipt requested therefor; or (ii) sent by facsimile; or (iii) sent by a recognized overnight courier service; or (iv) delivered by United States registered or certified mail, return receipt requested, postage prepaid. All notices shall be addressed to the Parties at their respective addresses set forth below, and the same shall be effective: (a) upon receipt or refusal if delivered personally or by facsimile; (b) one (1) business day after depositing with such an overnight courier service; or ( c) two (2) business days after deposit in the mails, if mailed. A Party may change its address for receipt of notices by service of a notice of such change in accordance herewith. If to the City: United City of Yorkville 800 Game Farm Road Yorkville, Illinois 60560 Attention: City Clerk -14- Phone: (630) 553-4350 Fax: (630) 553-7575 with a copy to: Law Offices of Daniel J. Kramer 11075 Bridge St. Yorkville, Illinois 60560 Phone: (630)553-9500 Fax: (630) 553-5764 If to Developer: MPI-2 Yorkville Central LLC 6880 North Frontage Road, Suite 100 Burr Ridge, Illinois 60527 Attention: Anthony R. Pasquinelli Fax: (630) 455-2591 with a copy to: Moser Enterprises, Inc. Fifth Avenue Station 300 East Fifth Avenue, Suite 430 Naperville, Illinois 60563 Attention: John P. Zediker Fax: (630) 420-8930 and to: Moss and Bloomberg, Ltd. 305 West Briarcliff Road Bolingbrook, Illinois 60440 -15- Attention: Barry L. Moss, Esq. Fax: (630) 759-8504 8.9 Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same agreement. 8. 10 Consent or Approval. Except as otherwise provided in this Agreement, whenever consent or approval of a Party is required, such consent or approval shall not be unreasonably withheld. 8.11 Assignment. At its sole cost and expense, the Developer may collaterally assign its interest in the payments to be received hereunder to a third-party lender who is advancing funds for the payment of the costs of the Public Improvements. The Developer shall notify the City of its intent to collaterally assign its interest in the payment received and said assignment is subject to the reasonable approval of the City. No assignment shall result in any increased costs to the City, unless the City is reimbursed for such increased costs. 8.12 Third Party Beneficiary. Nothing contained herein, whether expressed or implied, is intended to give or shall be construed as giving anyone other than the parties hereto (and their respective representatives, successors and assigns) any rights under this Agreement. 8.13 Effective Date. This Agreement shall become effective upon the date first above written by each of the parties. UNITED CITY OF YORKVILLE a Municipal Corporation ATTEST: Mayor City Clerk MPI-2 YORKVILLE CENTRAL LLC an Illinois Limited Liability Company By: MPI Development Manager Inc., Its Manager John P. Zedicker, Its President 123303\REV 10/15/04 Dated: -16- EXHIBIT A LEGAL DESCRIPTION GRANDE RESERVE CENTRAL REGION THAT PART OF THE SOUTHEAST QUARTER OF SECTION 11, THAT PART OF SECTION 14, AND THAT PART OF THE NORTH HALF OF SECTION 23, TOWNSHIP 37 NORTH, RANGE 7 EAST OF THE THIRD PRINCIPAL MERIDIAN DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF KENNEDY ROAD WITH THE SOUTHERLY LINE OF THE BURLINGTON NORTHERN RAILROAD RIGHT-OF-WAY THROUGH SAID SECTION 14; THENCE NORTH 73 DEGREES 14 MINUTES 21 SECONDS EAST ALONG SAID SOUTHERLY LINE 1239.61 FEET TO THE NORTH LINE OF THE NORTHWEST QUARTER OF SAID SECTION 14; THENCE NORTH 88 DEGREES 04 MINUTES 00 SECONDS EAST, ALONG SAID NORTH LINE, 610.29 FEET TO THE NORTHEAST CORNER OF SAID NORTHWEST QUARTER; THENCE NORTH 87 DEGREES 54 MINUTES 03 SECONDS EAST ALONG THE SOUTH LINE OF SAID SOUTHEAST QUARTER OF SECTION 11, A DISTANCE OF 1329.33 FEET TO THE WEST LINE OF THE SOUTHEAST QUARTER OF SAID SOUTHEAST QUARTER; THENCE NORTH 01 DEGREES 21 MINUTES 20 SECONDS WEST ALONG SAID WEST LINE, 511.01 FEET TO SAID SOUTHERLY LINE OF THE BURLINGTON NORTHERN RAILROAD; THENCE NORTH 73 DEGREES 14 MINUTES 21 SECONDS EAST, ALONG SAID SOUTHERLY LINE, 837.66 FEET TO THE CENTERLINE OF MILL ROAD; THENCE SOUTH 74 DEGREES 18 MINUTES 13 SECONDS EAST ALONG SAID CENTERLINE 546.02 FEET TO THE EAST LINE OF SAID SOUTHEAST QUARTER OF SECTION 11; THENCE SOUTH 01 DEGREE 19 MINUTES 08 SECONDS EAST ALONG SAID EAST LINE, 556.17 FEET TO THE SOUTHEAST CORNER OF SAID SOUTHEAST QUARTER; THENCE SOUTH 01 DEGREE 19 MINUTES 08 SECONDS EAST ALONG THE EAST LINE OF THE NORTHEAST QUARTER OF SAID SECTION 14, A DISTANCE OF 1122.0 FEET; THENCE SOUTH 87 DEGREES 45 MINUTES 51 SECONDS WEST, 438.0 FEET TO THE NORTHEAST CORNER OF LYNWOOD SUBDIVISION, EXTENSION FOUR; THENCE SOUTH 87 DEGREES 45 MINUTES 51 SECONDS WEST, ALONG THE NORTHERLY LINE OF SAID LYNWOOD SUBDIVISION, EXTENSION FOUR, 1168.80 FEET TO THE NORTHWEST CORNER THEREOF; THENCE SOUTH 01 DEGREE 46 MINUTES 18 SECONDS EAST, ALONG THE WESTERLY LINE OF LYNWOOD SUBDIVISION, EXTENSIONS FOUR AND FIVE, 1173.80 FEET TO AN IRON STAKE; THENCE SOUTH 01 DEGREE 47 MINUTES 49 SECONDS EAST, ALONG THE WESTERLY LINE OF LYNWOOD SUBDIVISION, EXTENSION FIVE, 376.25 FEET TO AN IRON STAKE; THENCE SOUTH 02 DEGREES 01 MINUTES 46 SECONDS EAST ALONG THE WESTERLY LINES OF LYNWOOD SUBDIVISION, EXTENSIONS FIVE AND SIX, 1950.62 FEET TO AN IRON STAKE; THENCE SOUTH 01 DEGREE 51 MINUTES 08 SECONDS EAST, ALONG THE WESTERLY LINE OF LYNWOOD SUBDIVISION, EXTENSION SIX, 879.29 FEET TO THE CENTERLINE OF U. S. ROUTE NO. 34; THENCE SOUTH 45 DEGREES 14 MINUTES 47 SECONDS WEST ALONG SAID CENTERLINE 878.60 FEET; THENCE NORTH 37 DEGREES 07 MINUTES 26 SECONDS WEST, 2106.30 FEET; THENCE NORTH 47 DEGREES 17 MINUTES 26 SECONDS WEST, 1500.85 FEET TO THE CENTERLINE OF KENNEDY ROAD AND THE EASTERNMOST CORNER OF A TRACT DESCRIBED IN A QUIT CLAIM DEED TO GEORGE AND GLENNA PATTERSON, HUSBAND AND WIFE, RECORDED AS DOCUMENT NO. 72375 ON JANUARY 25,1972; THENCE NORTH 25 DEGREES 56 MINUTES 49 SECONDS EAST ALONG SAID CENTERLINE 236.34 FEET; THENCE NORTHEASTERLY AND NORTHERLY, A RADIUS OF 800.0 FEET; AN ARC DISTANCE OF 419.10 FEET; THENCE NORTH 04 DEGREES 04 MINUTES 07 SECONDS WEST ALONG SAID CENTERLINE 531.06 FEET; THENCE NORTH 05 DEGREES 06 MINUTES 07 SECONDS WEST ALONG SAID CENTERLINE 1866.0 FEET TO THE POINT OF BEGINNING IN BRISTOL TOWNSHIP, KENDALL COUNTY, ILLINOIS AND CONTAINING 372.223 ACRES. ALSO: THAT PART OF SECTIONS FOURTEEN (14), FIFTEEN (15) AND TWENTY-THREE (23), ALL IN TOWNSHIP THIRTY-SEVEN (37) NORTH, RANGE SEVEN (7) EAST OF THE THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS: COMMENCING AT THE SOUTHERLY CORNER OF STRUKEL'S PARADISE LAKE UNIT NO. 1, (SAID POINT ALSO BEING THE INTERSECTION OF THE CENTERLINE OF BRISTOL ROAD AND THE CENTERLINE OF KENNEDY ROAD), AS SHOWN ON THE SUBDIVISION PLAT OF STRUKEL'S PARADISE LAKE UNIT NO. 1 RECORDED AS DOCUMENT #71-215; THENCE NORTH 60 DEGREES 17 MINUTES 26 SECONDS EAST, 724.86 FEET ALONG THE CENTERLINE OF KENNEDY ROAD TO THE POINT OF CURVATURE OF A 1094.72 FOOT RADIUS CURVE TO THE LEFT; THENCE NORTHEASTERLY 631.18 FEET ALONG SAID CURVE WHOSE CHORD BEARS NORTH 43 DEGREES 46 MINUTES 24 SECONDS EAST 622.47 FEET TO THE POINT OF TANGENCY OF SAID CURVE; THENCE NORTH 27 DEGREES 15 MINUTES 21 SECONDS EAST 11.57 FEET ALONG SAID CENTERLINE TO A POINT; THENCE SOUTH 37 DEGREES 39 MINUTES 00 SECONDS EAST 1776.45 FEET TO A POINT; THENCE SOUTH 52 DEGREES 21 MINUTES 00 SECONDS WE ST 1343.89 FEET TO A POINT IN THE CENTERLINE OF BRISTOL ROAD; THENCE NORTH 37 DEGREES 39 MINUTES 00 SECONDS WEST 1778.85 FEET ALONG SAID CENTERLINE TO THE POINT OF BEGINNING. ALSO: THAT PART OF SECTIONS FOURTEEN (14) AND TWENTY-THREE (23), ALL IN TOWNSHIP THIRTY-SEVEN (37) NORTH, RANGE SEVEN (7) EAST OF THE THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS: COMMENCING AT THE SOUTHERLY CORNER OF STRUKEL'S PARADISE LAKE UNIT NO. 1, (SAID POINT ALSO BEING THE INTERSECTION OF THE CENTERLINE OF BRISTOL ROAD AND THE CENTERLINE OF KENNEDY ROAD), AS SHOWN ON THE SUBDIVISION PLAT OF STRUKEL'S PARADISE LAKE UNIT NO. 1, RECORDED AS DOCUMENT #71-215; THENCE SOUTH 37 DEGREES 39 MINUTES 00 SECONDS EAST 1778.85 FEET ALONG THE CENTERLINE OF BRISTOL ROAD FOR THE POINT OF BEGINNING; THENCE NORTH 52 DEGREES 21 MINUTES 00 SECONDS EAST 1343.89 FEET TO A POINT; THENCE SOUTH 37 DEGREES 39 MINUTES 00 SECONDS EAST 1645.23 FEET TO A POINT IN THE CENTERLINE OF ILLINOIS ROUTE 34; THENCE SOUTH 46 DEGREES 33 MINUTES 17 SECONDS WEST 1350.80 FEET ALONG SAID CENTERLINE OF ILLINOIS ROUTE 34 TO THE INTERSECTION OF THE CENTERLINE OF BRISTOL ROAD; THENCE NORTH 37 DEGREES 39 MINUTES 00 SECONDS WEST 1781.63 FEET ALONG SAID CENTERLINE OF BRISTOL ROAD TO THE POINT OF BEGINNING. ALSO: THAT PART OF SECTIONS FOURTEEN (14) AND TWENTY-THREE (23), ALL IN TOWNSHIP THIRTY-SEVEN (37) NORTH, RANGE SEVEN (7) EAST OF THE THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS: COMMENCING AT THE SOUTHERLY CORNER OF STRUKEL'S PARADISE LAKE UNIT NO. 1, (SAID POINT ALSO BEING THE INTERSECTION OF THE CENTERLINE OF BRISTOL ROAD AND THE CENTERLINE OF KENNEDY ROAD), AS SHOWN ON THE SUBDIVISION PLAT OF STRUKEL'S PARADISE LAKE UNIT NO. 1, RECORDED AS DOCUMENT #71-215; THENCE NORTH 60 DEGREES 17 MINUTES 26 SECONDS EAST 724.86 FEET ALONG THE CENTERLINE OF KENNEDY ROAD TO THE POINT OF CURVATURE OF A 1094.72 FOOT RADIUS CURVE TO THE LEFT; THENCE NORTHEASTERLY 631.18 FEET ALONG SAID CURVE WHOSE CHORD BEARS NORTH 43 DEGREES 46 MINUTES 24 SECONDS EAST 622.47 FEET TO THE POINT OF TANGENCY OF SAID CURVE; THENCE NORTH 27 DEGREES 15 MINUTES 21 SECONDS EAST 11.57 FEET ALONG SAID CENTERLINE FOR THE POINT OF BEGINNING; THENCE CONTINUE NORTH 27 DEGREES 15 MINUTES 21 SECONDS EAST 551.92 FEET ALONG SAID CENTERLINE TO A POINT; THENCE SOUTH 45 DEGREES 56 MINUTES 15 SECONDS EAST 1501.96 FEET ALONG AN EXISTING FENCE LINE TO A POINT; THENCE SOUTH 35 DEGREES 48 MINUTES 56 SECONDS EAST 2104.69 FEET ALONG SAID FENCE LINE TO A POINT IN THE CENTERLINE OF ILLINOIS ROUTE 34; THENCE SOUTH 46 DEGREES 33 MINUTES 17 SECONDS WEST 652.28 FEET ALONG SAID CENTERLINE TO A POINT; THENCE NORTH 37 DEGREES 39 MINUTES 00 SECONDS WEST 3421.68 FEET TO THE POINT OF BEGINNING. ALSO: THAT PART OF THE SOUTH HALF OF SECTION 11 AND PART OF THE NORTHWEST QUARTER OF SECTION 14, TOWNSHIP 37 NORTH, RANGE 7 EAST OF THE THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS: BEGINNING AT THE SOUTHWEST CORNER OF SECTION 11; THENCE SOUTH 0 DEGREES 57 MINUTES 0 SECONDS WEST 442 FEET TO THE NORTH LINE OF THE RIGHT OF WAY OF THE CHICAGO, BURLINGTON AND QUINCY RAILROAD; THENCE NORTH 75 DEGREES 17 MINUTES 0 SECONDS EAST 1728 FEET ALONG SAID RIGHT OF WAY LINE TO THE SOUTH LINE OF SECTION 11; THENCE SOUTH 89 DEGREES 53 MINUTES 0 SECONDS EAST 1001.25 FEET ALONG THE SOUTH LINE OF SAID SECTION 11 TO THE SOUTHEAST CORNER OF THE WEST HALF OF SAID SECTION 11; THENCE NORTH 89 DEGREES 54 MINUTES 0 SECONDS EAST 1339.5 FEET ALONG THE SOUTH LINE OF SAID SECTION 11 TO THE SOUTHEAST CORNER OF THE WEST HALF OF THE SOUTHEAST QUARTER OF SAID SECTION 11; THENCE NORTH 0 DEGREES 40 MINUTES 0 SECONDS EAST 977.5 FEET TO THE CENTERLINE OF THE HIGHWAY; THENCE NORTH 74 DEGREES 15 MINUTES 0 SECONDS WEST 727.2 FEET ALONG SAID CENTERLINE; THENCE NORTH 79 DEGREES 10 MINUTES 0 SECONDS WEST 2877.4 FEET ALONG SAID CENTERLINE TO THE CENTERLINE OF A NORTH AND SOUTH HIGHWAY; THENCE SOUTH 7 DEGREES 7 MINUTES 0 SECONDS EAST 364.8 FEET ALONG THE CENTER OF SAID NORTH AND SOUTH HIGHWAY; THENCE NORTH 89 DEGREES 47 MINUTES 0 SECONDS WEST 503.33 FEET TO THE WEST LINE OF SAID SECTION 11; THENCE SOUTH 0 DEGREES 52 MINUTES 0 SECONDS WEST ALONG SAID WEST LINE 1327.6 FEET TO THE POINT OF BEGINNING; EXCEPT THAT PART LYING NORTHERLY OF THE SOUTHERLY RIGHT OF WAY LINE OF THE CHICAGO, BURLINGTON AND QUINCY RAILROAD AFORESAID IN THE TOWNSHIP OF BRISTOL, KENDALL COUNTY, ILLINOIS. EXHIBIT A-1 PLATTED LOTS A portion of the Grande Reserve Central Region has been platted. A copy of that Plat is attached. EXHIBIT A-2 DIAGRAM OF PROPERTY EXHIBIT E PRELIMINARY LIMITED OFFERING MEMORANDUM DATED ,2004 s U NEW ISSUE—BOOK ENTRY ONLY NOT RATED cr In the opinion of Foley& Lardner LLP, Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court adecisions and, assuming among other matters, compliance with certain covenants, interest on the Series 2004 Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended. In the opinion of Bond Counsel, interest on the Series 2004 Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum a w taxes, although such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. Interest aon the Series 2004 Bonds is not exempt from present State of Illinois income taxes. Bond Counsel expresses no opinion regarding any other tax E c consequences related to the ownership or disposition of or the accrual or receipt of interest on, the Series 2004 Bonds. See the heading "TAX 0 MATTERS." s $13,200,000* 5i o UNITED CITY OF YORKVILLE KENDALL COUNTY,ILLINOIS ,y SPECIAL SERVICE AREA NUMBER 2004-104 CENTRAL GRANDE RESERVE o= SPECIAL TAX BONDS,SERIES 2004 (MPI GRANDE RESERVE PROJECT) a Dated: Date of Delivery % Due: March 1,2034 N This Limited Offering Memorandum is being furnished solely for consideration by prospective sophisticated purchasers of the United C City of Yorkville, Kendall County, Illinois Special Service Area Number 2004-104 Central Grande Reserve Special Tax Bonds, Series 2004 (MPI Grande Reserve Project) (the "Series 2004 Bonds") with substantial financial resources and the experience and financial expertise to L:o understand and evaluate the high degree of risk inherent in this investment. Purchase of the Series 2004 Bonds will constitute an investment 3 secured solely by a pledge of Special Tax(as defined herein)and certain other amounts held in funds established pursuant to the Trust Indenture w between United City of Yorkville,Illinois and LaSalle Bank National Association,as trustee(the"Trustee"),dated as of November 1,2004(the L "Indenture"). The purchase of the Series 2004 Bonds is an investment subject to a high degree of risk, including the risk of non-payment of y principal and interest. See"RISK FACTORS"herein. '=U ° The Series 2004 Bonds are issuable only as fully registered bonds without coupons and,when issued,will be registered in the name of 0 3 c.__ Cede&Co., as nominee of The Depository Trust Company,New York,New York("DTC"). Individual purchases will be made in book-entry 4.2 form only, in principal amounts of$100,000 or integral multiples of$1,000 in excess thereof; provided, however, that from and after the sale and conveyance of a combined total of not less than(i) 1,121 of the single family homes,townhomes and duplexes within the Area or(ii)441 of M the single family homes within the Area and further provided that no Additional Bonds have been sold,and in either case satisfaction of certain o requirements set forth in the Indenture,the Authorized Denominations of the Series 2004 Bonds may be converted to denominations of$5,000 o.g or integral multiples of$1,000 in excess thereof, as further described herein. Beneficial Owners of the Series 2004 Bonds will not receive physical certificates representing their interest in the Series 2004 Bonds purchased. Principal of, premium, if any, and interest (payable on U s March I and September 1 of each year, commencing March 1, 2005)on the Series 2004 Bonds are payable by the Trustee to DTC, which will remit such principal, premium, if any, and interest to DTC's Participants, who in turn will be responsible for remitting such payments to the Beneficial Owners of the Series 2004 Bonds,as described herein. ° The Series 2004 Bonds are subject to optional, mandatory and special mandatory redemption prior to maturity as set forth herein. THE SERIES 2004 BONDS ARE BEING ISSUED PURSUANT TO THE SPECIAL SERVICE AREA TAX LAW OF THE STATE „ OF ILLINOIS,AS AMENDED,AND,IN THE OPINION OF FOLEY&LARDNER LLP,CHICAGO,ILLINOIS,BOND COUNSEL, WILL e CONSTITUTE VALID AND LEGALLY BINDING LIMITED OBLIGATIONS OF THE UNITED CITY OF YORKVILLE,ILLINOIS(THE g s "CITY")PAYABLE SOLELY AND ONLY FROM THE SPECIAL TAX AND AMOUNTS ON DEPOSIT IN CERTAIN OF THE FUNDS ESTABLISHED AND MAINTAINED PURSUANT TO THE INDENTURE, AS SET FORTH HEREIN. THE SERIES 2004 BONDS ARE NOT GENERAL OBLIGATIONS OF THE CITY AND NEITHER THE FULL FAITH AND CREDIT NOR THE GENERAL TAXING i; POWER OF THE CITY, THE COUNTY OF KENDALL, THE STATE OF ILLINOIS OR ANY POLITICAL SUBDIVISION THEREOF IS -5 ° PLEDGED TO THE PAYMENT OF THE SERIES 2004 BONDS. NO HOLDER OF ANY BOND SHALL HAVE THE RIGHT TO o COMPEL THE EXERCISE OF ANY TAXING POWER OF THE CITY (OTHER THAN THE LEVY OF THE SPECIAL TAX AS g DESCRIBED HEREIN)FOR PAYMENT OF THE PRINCIPAL AMOUNT OF,PREMIUM,IF ANY,OR INTEREST ON THE SERIES 2004 BONDS. s.s E1§ a_ Price—100% m o The Series 2004 Bonds are offered when, as and if issued,subject to prior sale, withdrawal or modification of the offer without notice, C)° the approving legal opinion of Foley& Lardner LLP, Chicago, Illinois, Bond Counsel, and certain other conditions. See "TAX MATTERS" Ec o herein and Appendix F hereto. Certain legal matters will be passed upon for the Underwriters by Ungaretti&Harris LLP, Chicago, Illinois, a Z for the Developer by Moss and Bloomberg, Ltd., Bolingbrook, Illinois, and KB Legal, Dyer, Indiana, and for the City by the Law Offices of o c Daniel Kramer, Yorkville, Illinois. It is expected that the Series 2004 Bonds will be available for delivery to DTC in New York, New York on or 9 about 2004. LASALLE CAPITAL MARKETS,A Division of c ABN AMRO FINANCIAL SERVICES,INC. WILLIAM BLAIR&COMPANY,L.L.C. Dated: 12004 * Preliminary,subject to change. LIMITED OFFERING MEMORANDUM This Limited Offering Memorandum is being furnished by the United City of Yorkville, Kendall County, Illinois(the "City")to a limited number(35 or less)of sophisticated investors or registered investment companies under the Investment Company Act of 1940 solely for the purpose of each investor's consideration of the purchase of the Series 2004 Bonds described herein, and is not to be used for any other purpose or made available to anyone not directly concerned with the decision regarding such purchase. This Limited Offering Memorandum does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Series 2004 Bonds by any person, in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. Interested investors are being provided the opportunity to ask such questions and examine such documents and records as they may desire, and are advised to contact the Underwriters to secure further information concerning the Series 2004 Bonds. No dealer, broker, salesman or other person has been authorized to give any information or to make any representation other than as contained in this Limited Offering Memorandum in connection with the placement described herein, and, if given or made, such information or representation must not be relied upon as having been authorized. Certain information contained herein has been obtained from the City, the Developer and other sources which are believed by the Underwriters to be reliable. In accordance with, and as part of, its responsibilities to investors under the federal securities laws, as applied to the facts and circumstances of this transaction, the Underwriters have reviewed the information in this Limited Offering Memorandum, but does not guarantee the accuracy or completeness of such information. Neither the delivery of this Limited Offering Memorandum nor the sale of any of the Series 2004 Bonds shall imply that the information herein is correct as of any time subsequent to the date hereof. This Limited Offering Memorandum should be considered in its entirety and no one factor should be considered more or less important than any other by reason of its position in this Limited Offering Memorandum. Where statutes, reports, agreements or other documents are referred to herein, reference should be made to such statutes, reports, agreements or other documents for more complete information regarding the rights and obligations of parties thereto,facts and opinions contained therein and the subject matter thereof. THE SERIES 2004 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR HAS THE INDENTURE BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. THE REGISTRATION OR QUALIFICATION OF THE SERIES 2004 BONDS IN ACCORDANCE WITH THE APPLICABLE PROVISIONS OF SECURITIES LAWS OF THE STATES IN WHICH THE SERIES 2004 BONDS HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN OTHER STATES CANNOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE STATES NOR ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THE SERIES 2004 BONDS OR THE ACCURACY OR COMPLETENESS OF THIS LIMITED OFFERING MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE. THE SERIES 2004 BONDS HAVE RISK CHARACTERISTICS WHICH REQUIRE CAREFUL ANALYSIS AND CONSIDERATION BEFORE A DECISION TO PURCHASE IS MADE. THE SERIES 2004 BONDS SHOULD BE PURCHASED BY INVESTORS WHO HAVE ADEQUATE EXPERIENCE TO EVALUATE THE MERITS AND RISKS OF THE SERIES 2004 BONDS. PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE THE CONTENTS OF THIS LIMITED OFFERING MEMORANDUM OR ANY PRIOR OR SUBSEQUENT COMMUNICATION FROM THE UNDERWRITERS, THEIR AFFILIATES, OFFICERS AND EMPLOYEES OR ANY PROFESSIONAL ASSOCIATED WITH THIS OFFERING AS INVESTMENT OR LEGAL ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN COUNSEL, ACCOUNTANT AND OTHER ADVISORS AS TO FINANCIAL, LEGAL AND RELATED MATTERS CONCERNING THE INVESTMENT DESCRIBED HEREIN. There can be no guarantee that there will be a secondary market for the Series 2004 Bonds or, if a secondary market exists, that it would continue to exist or that the Series 2004 Bonds could in any event be sold for any particular price. UNITED CITY OF YORKVILLE,ILLINOIS MAYOR Arthur Prochaska CITY ALDERMEN Paul James Richard Sticka Valerie Burd Larry Kot Marty Munns Wanda Ohare Rose Spears Joe Besco TREASURER William Powell CITY ADMINISTRATOR Anton Graff FINANCE DIRECTOR Traci Pleckham CITY CLERK Jackie Milschewski PROFESSIONAL SERVICES BOND COUNSEL APPRAISER Foley&Lardner LLP Frank John Karth&Associates Chicago, Illinois Chicago,Illinois SPECIAL SERVICE AREA ADMINISTRATOR AND SPECIAL TAX CONSULTANT TRUSTEE David Taussig&Associates, Inc. LaSalle Bank National Association Newport Beach,California Chicago, Illinois CITY'S COUNSEL Daniel Kramer,Esq. Yorkville, Illinois TABLE OF CONTENTS Page INTRODUCTORYSTATEMENT.............................................................................................................1 THEBONDS ...............................................................................................................................................4 General Description of the Series 2004 Bonds...............................................................................4 Redemption.....................................................................................................................................5 Optional Prepayment of Special Tax..............................................................................................8 Mandatory Prepayment of Special Tax...........................................................................................8 AdditionalBonds............................................................................................................................8 BOOK-ENTRY-ONLY SYSTEM.............................................................................................................10 PLANOF FINANCE.................................................................................................................................12 General 12 BankFinancing.............................................................................................................................13 DeveloperFunds...........................................................................................................................13 TheSpecial Services.....................................................................................................................13 ESTIMATED SOURCES AND USES OF FUNDS..................................................................................14 DEBTSERVICE REQUIREMENTS........................................................................................................15 SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2004 BONDS....................................17 General 17 SpecialTax....................................................................................................................................17 PledgedFunds...............................................................................................................................18 Security for the Series 2004 Bonds...............................................................................................22 Covenantsof the City....................................................................................................................22 Enforcement of Payment of Special Tax ......................................................................................23 MarketAbsorption Study..............................................................................................................25 Summaryof the Appraisal............................................................................................................26 Valueto Lien Ratio.......................................................................................................................26 Tax Assessment, Collection and Representative Property Taxes.................................................26 SUMMARY OF THE PUBLIC IMPROVEMENT AGREEMENT.........................................................28 SUMMARY OF THE ANNEXATION AGREEMENT...........................................................................29 THEDEVELOPER....................................................................................................................................29 Developer......................................................................................................................................29 PROPOSEDDEVELOPMENT.................................................................................................................30 AreaDescription...........................................................................................................................30 Location........................................................................................................................................30 Transportation/Access...................................................................................................................31 School 31 Environmental...............................................................................................................................31 i Page OpenSpace ...................................................................................................................................32 Zoning/Land Use...........................................................................................................................32 Infrastructure.................................................................................................................................32 DevelopmentPlan and Timing......................................................................................................33 Builders.........................................................................................................................................34 Consultants....................................................................................................................................3 5 SitePlan........................................................................................................................................36 THECITY..................................................................................................................................................3 7 General 37 City Government and Services......................................................................................................37 Transportation...............................................................................................................................3 7 CommunityLife............................................................................................................................37 Education......................................................................................................................................38 SocioeconomicInformation..........................................................................................................38 Housing.........................................................................................................................................41 Income 43 WealthIndicators..........................................................................................................................45 RetailActivity...............................................................................................................................45 THE SPECIAL SERVICE AREA AND SPECIAL TAX.........................................................................45 TheSpecial Service Area Act.......................................................................................................45 Establishmentof the Area.............................................................................................................46 Levy, Abatement and Collection of Special Tax..........................................................................46 Special Service Area Special Tax Roll and Report.......................................................................47 Administrative Services................................................................................................................49 RISKFACTORS........................................................................................................................................49 LimitedSource of Funds...............................................................................................................49 Concentrationof Ownership.........................................................................................................49 Information Not Verified..............................................................................................................50 Failureto Develop Properties........................................................................................................50 Failure to Achieve Market Projections .........................................................................................50 AppraisedValues..........................................................................................................................50 Local, State and Federal Land Use Regulations...........................................................................51 Competition...................................................................................................................................51 LandDevelopment Costs..............................................................................................................51 OverlappingIndebtedness.............................................................................................................52 Dependence on Unimproved Property..........................................................................................52 ZoningApprovals .........................................................................................................................53 Permits 53 TaxDelinquencies.........................................................................................................................53 Potential Delay and Limitations in Foreclosure Proceedings .......................................................54 Bankruptcy....................................................................................................................................54 MaximumSpecial Taxes...............................................................................................................55 Disclosureto Future Purchasers....................................................................................................55 LimitedSecondary Market............................................................................................................55 Secondary Market and Prices........................................................................................................55 Lossof Tax Exemption.................................................................................................................56 ii Page Risk of Legislative and Judicial Changes.....................................................................................56 Changein Density.........................................................................................................................56 Limitation on Remedies;No Acceleration....................................................................................56 UNDERWRITING.....................................................................................................................................56 LEGALOPINIONS...................................................................................................................................57 TAXMATTERS........................................................................................................................................57 CONTINUINGINFORMATION..............................................................................................................58 TheCity.........................................................................................................................................58 TheDeveloper...............................................................................................................................59 LIMITEDOFFERING...............................................................................................................................59 NOLITIGATION......................................................................................................................................60 TheCity.........................................................................................................................................60 TheDeveloper...............................................................................................................................60 NORATING..............................................................................................................................................60 MISCELLANEOUS ..................................................................................................................................60 AUTHORIZATION...................................................................................................................................62 APPENDIX A—Special Service Area Special Tax Roll and Report APPENDIX B—Indenture APPENDIX C—Market Absorption Study APPENDIX D—Appraisal APPENDIX E—Public Improvement Agreement APPENDIX F—Bond Opinion iii $13,200,000* United City of Yorkville Kendall County,Illinois Special Service Area Number 2004-104 Central Grande Reserve Special Tax Bonds, Series 2004 (MPI Grande Reserve Project) INTRODUCTORY STATEMENT This Limited Offering Memorandum, which includes the cover page and all Appendices attached hereto, is provided to furnish information in connection with the issuance and sale by the United City of Yorkville, Kendall County, Illinois (the "City") of $ aggregate principal amount Special Service Area Number 2004-104 Central Grande Reserve Special Tax Bonds, Series 2004 (MPI Grande Reserve Project) due March 1, 2034 (the "Series 2004 Bonds"). The Series 2004 Bonds, if and when issued, will be issued by the City pursuant to (i)the Illinois Constitution of 1970; (ii)the Special Service Area Tax Law of the State of Illinois (the "Special Service Area Act"); (iii)the Illinois Local Government Debt Reform Act of the State of Illinois; (iv)Ordinance No. 2004-_of the City adopted on , 2004 (the 'Bond Ordinance") providing for the issuance of the Bonds; and (v)the Trust Indenture dated as of November 1, 2004 (the "Indenture") between the City and LaSalle Bank National Association, as trustee (the "Trustee"). The Bonds will be secured primarily by the proceeds of the Special Tax(as defined in the Special Service Area Special Tax Roll and Report attached hereto as APPENDIX A and hereafter referred to as the "Special Tax Report") levied on certain property within the United City of Yorkville Special Service Area Number 2004-104 Central Grande Reserve (the "Area" or the "Central Grande Reserve Special Service Area"). In addition, the Series 2004 Bonds will be payable from and secured by certain funds established pursuant to the Indenture. See "THE BONDS." Capitalized terms used but not defined herein shall have the meaning given such terms in the Indenture. See APPENDIX B. Grande Reserve Subdivision is a master planned community of 2,646 homesites featuring 19 unique neighborhoods with a broad mix of housing types and price points. Grande Reserve Subdivision will be developed in three phases: North, Central and South. The Area constitutes only a portion of the Grande Reserve Subdivision. The Grande Reserve Subdivision is comprised of four separate special service areas: the Total Grande Reserve Special Service Area (which encompasses the entire area being developed and is coterminous with the other three special service areas), the North Grande Reserve Special Service Area (consisting of Neighborhoods 1-5), the Central Grande Reserve Special Service Area(consisting of Neighborhoods 6-16) and the South Grande Reserve Special Service Area(consisting of Neighborhoods 17-19). The proceeds of the Series 2004 Bonds are intended to be used by the City, or by the Developer on its behalf, to construct the Special Services benefiting a portion of the Area, which will enable the Developer or other builders to complete construction of, and ultimately to obtain certificates of occupancy from the City for, up to 490 Single Family Homes in the Area within Neighborhoods 10-15 (the "First Series Property"). The City has covenanted in the Public Improvement Agreement to issue Additional Bonds to the extent not prohibited by applicable laws or ordinances and subject to the conditions set forth in the Indenture. The Developer or other builder will use proceeds of the Additional Bonds to complete the Special Services benefiting Neighborhoods 6-9 and 16 (the "Second Series Property") enabling the *Preliminary,subject to change. Developer to obtain certificates of occupancy for the remaining 233 Single Family Homes, 298 Townhomes and 224 Duplexes to be built in the Area. See "SITE PLAN." MPI-2 Yorkville Central LLC (the "Developer") proposes to develop the Area with finished lots for up to 723 detached single family detached homes ("Single Family Homes"), up to 298 townhomes ("Townhomes") and up to 224 single family attached dwellings ("Duplexes"). The development of such Single Family Homes, Townhomes and Duplexes within the Area is hereinafter referred to as the "Project." A finished lot for a Single Family Home shall sometimes be referred to herein as a "Single Family Home Parcel," a finished lot for a Townhome shall sometimes be referred to herein as a "Townhome Parcel" and a finished lot for a Duplex shall sometimes be referred to herein as a "Duplex Parcel." The Single Family Home Parcels, Townhome Parcels and Duplex Parcels are sometimes collectively referred to as the "Parcels." See "PROPOSED DEVELOPMENT—Developer." While the Developer currently owns all of the property within the Area, the Developer is under contract to sell a significant portion of the property within the Area to other builders for development as described under "PROPOSED DEVELOPMENT—Builders." Upon such sale and transfer, the payment of the Special Tax levied against such property shall be the responsibility of the subsequent owner of such property. The proceeds of the Series 2004 Bonds will be used to: (i) make a deposit to the Reserve Fund for the Series 2004 Bonds in the amount of the Reserve Requirement equal to $ ; (ii)fund capitalized interest through March 1, 2007; (iii)make an initial deposit to an Administrative Expense Fund; (iv) fund certain costs of issuing the Series 2004 Bonds; and (v)make a deposit to the Series 2004 Improvement Account of the Improvement Fund in an amount sufficient to fund certain public improvements for the First Series Property. See "THE BONDS." Approximately $ , consisting of a portion of the proceeds from the sale of the Series 2004 Bonds, will be deposited into the Improvement Fund, and, together with interest earnings thereon, will be used to finance the cost of design, construction, installation and performing of certain Special Services within the Area(as described below)to be constructed on behalf of the City by the Developer and dedicated or conveyed to the City, or such other governmental entity as directed by the City, which consist of engineering, soil testing and appurtenant work, mass grading and demolition, storm water management facilities, storm drainage systems and storm sewers, site clearing and tree removal, public water facilities, sewer lines, erosion control measures, roads, streets, curbs, gutters, street lighting, traffic controls, sidewalks, equestrian paths and related street improvements, and equipment and materials necessary for the maintenance thereof, landscaping, wetland mitigation, utility relocation and tree installation, costs for land and easement acquisitions relating to any of the foregoing improvements, required tap-on and related fees for water or sanitary sewer services, and other eligible costs of improvements to serve the Area (collectively, the "Special Services") that are required in connection with the development of the Project. The amounts held in the Improvement Fund will be available for disbursement as hereinafter described. In connection with the development of the Grande Reserve Subdivision, the City contemplates issuing one series of fixed-rate bonds for the North Grande Reserve Special Service Area, two series of fixed-rate bonds for the Area (the Series 2004 Bonds are the first series of such bonds) and one series of fixed-rate bonds for the South Grande Reserve Special Service Area. Each series of such bonds will be secured by separate special taxes to be levied solely on the property within the special service area benefiting from the issuance of such bonds. THIS LIMITED OFFERING MEMORANDUM DESCRIBES ONLY THE SERIES 2004 BONDS TO FUND PUBLIC IMPROVEMENTS WITHIN THE CENTRAL GRANDE RESERVE SPECIAL SERVICE AREA AND DOES NOT DESCRIBE ANY ADDITIONAL BONDS THAT MAY BE ISSUED IN THE FUTURE. See "SECURITY AND SOURCE OF PAYMENT OF THE BONDS." 2 In July 2004, the City issued $12,205,000 aggregate principal amount of its Special Service Area Number 2004-106 Total Grande Reserve Variable Rate Demand Special Tax Bonds, Series 2004 (MPI Grande Reserve Project) (the "Variable Rate Bonds"). The Variable Rate Bonds are funding improvements benefiting the entire Grande Reserve Subdivision and are secured by special taxes which have been levied on property within the Total Grande Reserve Special Service Area which includes the property within the North,Central and South special service areas. The Series 2004 Bonds are secured by separate Special Taxes levied within the Area which are in addition to taxes levied for the Variable Rate Bonds and certain other amounts held in funds established pursuant to the Bond Ordinance and the Indenture. In addition to the Series 2004 Bonds, the City may issue Additional Bonds (as provided for and defined in the Indenture) which will be on a parity with the Series 2004 Bonds with respect to the Special Taxes and certain funds held under the Indenture in an amount not to exceed $21,800,000,* which Additional Bonds, if any, may be established pursuant to a Supplemental Indenture (as defined in the Indenture) and if so established shall be used to pay for additional special services within the Area as permitted by the Special Service Area Act. See "THE BONDS—Additional Bonds." The Series 2004 Bonds together with any Additional Bonds issued pursuant to the Indenture are sometimes referred to herein as the 'Bonds." The Series 2004 Bonds will be issued as fully registered bonds without coupons in book-entry only form in Authorized Denominations of$100,000 or any integral multiple of$1,000 in excess thereof, provided, however, that from and after the sale and conveyance of a combined total of(i) 1,121 of the single family homes, townhomes and duplexes within the Area or (ii) 441 of the single family homes within the Area and further provided that no Additional Bonds have been sold, and in either case satisfaction of certain requirements set forth in the Indenture, the Authorized Denomination of the Series 2004 Bonds may be converted to, and if the Bonds are held in a book-entry system Bonds may be exchanged for, Bonds of the same aggregate principal amount and maturity in Authorized Denominations of$5,000 or integral multiples of$1,000 in excess thereof, as further described herein. Certain of these other amounts held in funds established pursuant to the Bond Ordinance and the Indenture may be condemnation proceeds arising from the taking of Special Services. The amount of any such condemnation proceeds so arising shall be allocated between the Series 2004 Bonds and the Variable Rate Bonds as determined by the special tax consultant retained by the City (the "Special Tax Consultant") depending upon the extent to which the proceeds of the Series 2004 Bonds and the Variable Rate Bonds were used to construct the Special Services so condemned, all as provided in the Bond Ordinance and the Indenture and the Total Grande Reserve Bond Ordinance and the Total Grande Reserve Trust Indenture. IN THE OPINION OF BOND COUNSEL, THE SERIES 2004 BONDS WILL CONSTITUTE VALID AND LEGALLY BINDING LIMITED OBLIGATIONS OF THE CITY, PAYABLE SOLELY AND ONLY FROM THE SPECIAL TAXES (AS PROVIDED IN THE BOND ORDINANCE, THE SPECIAL TAX REPORT AND THE INDENTURE)AND AMOUNTS ON DEPOSIT IN CERTAIN OF THE FUNDS AND ACCOUNTS ESTABLISHED AND MAINTAINED UNDER THE INDENTURE, AS SET FORTH HEREIN. THE SERIES 2004 BONDS ARE NOT GENERAL OBLIGATIONS OF THE CITY AND NEITHER THE FULL FAITH AND CREDIT NOR THE GENERAL TAXING POWER OF THE CITY, THE COUNTY OF KENDALL, THE STATE OF ILLINOIS, OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE SERIES 2004 BONDS. NO HOLDER OF ANY BOND SHALL HAVE THE RIGHT TO COMPEL THE EXERCISE OF ANY TAXING POWER OF THE CITY (OTHER THAN THE LEVY OF THE SPECIAL TAX) * Preliminary,subject to change. 3 FOR PAYMENT OF THE PRINCIPAL AMOUNT OF, PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2004 BONDS. The Series 2004 Bonds and any Additional Bonds are secured solely by Special Taxes levied within the Area(together with certain other amounts held under the Indenture) and will not be entitled to any other taxes levied within the Total Grande Reserve, North Grande Reserve or South Grande Reserve Special Service Areas. A copy of any document or agreement referred to herein may be obtained upon request from LaSalle Capital Markets, A Division of ABN AMRO Financial Services, Inc. or William Blair& Company,L.L.C. (collectively,the "Underwriters"). THE BONDS General Description of the Series 2004 Bonds The Series 2004 Bonds will be issued in the aggregate principal amount of $13,200,000*, will bear interest at the rate set forth on the cover page of this Limited Offering Memorandum and will mature on the date set forth on the cover page of this Limited Offering Memorandum. The Series 2004 Bonds will be subject to optional or mandatory redemption as described herein. The Depository Trust Company,New York,New York("DTC"), will act as securities depository for the Series 2004 Bonds. Principal of, premium, if any, and interest on the Series 2004 Bonds will be paid by the Trustee directly to DTC, which will remit such principal, premium, if any, and interest to DTC's Participants, who, in turn will be responsible for remitting such payments to the Beneficial Owners of the Series 2004 Bonds. See "THE BONDS—Book-Entry-Only System." Interest on the Series 2004 Bonds will be paid in lawful money of the United States of America semiannually on March 1 and September 1 of each year (each, an "Interest Payment Date"), commencing March 1, 2005. Interest on the Series 2004 Bonds shall be calculated on the basis of a 360-day year composed of twelve 30-day months. The sum of$13,200,000* shall be borrowed by the City for the purpose of paying a portion of the costs of the Special Services, including the costs of the City in connection with the issuance of the Series 2004 Bonds, deposits to the Reserve Fund, the Improvement Fund, the Administrative Expense Fund and the Capitalized Interest Account to fund interest to accrue on the Series 2004 Bonds through March 1, 2007. The Series 2004 Bonds shall be issued only in fully registered form without coupons in the denominations of $100,000 and integral multiples of $1,000 in excess thereof. At such time as the Developer certifies in writing to the City and the Trustee that not less than a combined total of(i) 1,121 of the Single Family Homes, Townhomes and Duplexes have been sold and conveyed to homeowners or (ii)441 Single Family Homes have been sold and conveyed to homeowners and further provided that no Additional Bonds have been issued, the Authorized Denomination of the Series 2004 Bonds may be converted to, and if the Series 2004 Bonds are not registered through a book-entry-only system, Series 2004 Bonds may be exchanged for Series 2004 Bonds of the same aggregate principal amount and maturity in, minimum Authorized Denominations of$5,000 and integral multiples of$1,000 in excess thereof. Prior to any such conversion or exchange, the City shall have executed a Continuing Disclosure Agreement substantially in the form attached to the Indenture, with such changes thereto as are deemed necessary by the City and its counsel in order to comply with federal securities laws, including Rule 15c2- *Preliminary,subject to change. 4 12 promulgated by the Securities and Exchange Commission as in effect on the date of such conversion or exchange or any successor thereto(the "Rule"). Redemption Mandatory Sinking Fund Redemption. The Series 2004 Bonds are subject to mandatory sinking fund redemption and final payment at a price of par plus accrued interest, without premium, on March 1, of the years and in the principal amounts as follows: Year Amount* 2008 $ 46,000 2009 62,000 2010 80,000 2011 100,000 2012 121,000 2013 143,000 2014 168,000 2015 194,000 2016 222,000 2017 252,000 2018 285,000 2019 320,000 2020 357,000 2021 397,000 2022 440,000 2023 486,000 2024 536,000 2025 589,000 2026 646,000 2027 707,000 2028 772,000 2029 841,000 2030 916,000 2031 996,000 2032 1,081,000 2033 1,173,000 2034(final maturity) 1,270,000 The City covenants that it will redeem the Series 2004 Bonds pursuant to the mandatory sinking fund redemption requirements for the Series 2004 Bonds to the extent amounts are on deposit in the Bond and Interest Fund. If the full amount of the sinking fund requirement as set forth in the chart above is not on deposit in the Bond and Interest Fund on the date set forth above, Series 2004 Bonds shall only be redeemed in an amount equal to the amount on deposit in the Bond and Interest Fund (provided that after any such redemption Series 2004 Bonds shall only be in an Authorized Denomination unless the outstanding principal amount of Series 2004 Bonds is less than an Authorized Denomination). Proper provision for mandatory redemption having been made, the City covenants that the Series 2004 Bonds so *Preliminary,subject to change. 5 selected for redemption shall be payable upon redemption and taxes have been levied and will be collected as provided in the Indenture and in the Bond Ordinance for such purpose. Optional Redemption. The Series 2004 Bonds are also subject to optional redemption prior to maturity at the option of the City, in whole or in part, and if in part on any date on or after March 1, 2014 at a redemption price (expressed as a percentage of the principal amount of the Series 2004 Bonds to be redeemed), as set forth below,plus accrued and unpaid interest to the date of redemption: Redemption Dates Redemption Prices March 1,2014 through February 28,2015 .............. 102% March 1,2015 through February 29,2016.............. 101 March 1,2016 and thereafter................................... 100 Any optional redemption of the Series 2004 Bonds in part will be applied, to the extent possible, to reduce pro rata the amount of Series 2004 Bonds required to be redeemed by mandatory sinking fund redemption, and so as to maintain the proportion of principal maturing in each year to the total original principal amount of Series 2004 Bonds. Mandatory Redemption Upon Condemnation, Completion of Construction and Change in Density. The Bonds are also subject to mandatory redemption on any Interest Payment Date, in part, at a redemption price equal to the principal amount to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from amounts in the Bond and Interest Fund consisting of the proceeds received by the City in connection with a condemnation of any of the Special Services or any other property dedicated to, or owned by, the City within the Special Service Area and allocable to the Bonds as determined by the Special Tax Consultant retained by the City in connection with the Special Service Area (the "Special Tax Consultant") and which proceeds are not used by the City to rebuild the Special Services. The Series 2004 Bonds are subject to redemption on any Interest Payment Date, in part, at a redemption price equal to the principal amount to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from amounts transferred from the Series 2004 Improvement Account of the Improvement Fund, if any,to the Bond and Interest Fund, as described in the Indenture. The Bonds are subject to mandatory redemption on any Interest Payment Date, in whole or in part, at a redemption price equal to the principal amount to be redeemed, together with accrued interest to the date fixed for redemption, without premium, in the event of a mandatory prepayment of the Special Tax upon a reduction in the Maximum Parcel Special Tax (as defined in the Special Tax Report) as a result of a change in the expected number of single family dwelling units, townhome dwelling units or duplex dwelling units to be built within the Special Service Area as set forth in the final plat or plots of subdivision approved by the City, or any other event that reduces the total of the Maximum Parcel Special Tax as described in, and in the amounts set forth in, the Special Tax Report; provided, however, that a change in density relating to Second Series Property shall not be applied to the redemption of the Series 2004 Bonds until such time as Additional Bonds are issued. Any mandatory redemption of the Bonds as described in the preceding three paragraphs will be applied, to the extent possible, to reduce pro rata the amount of Bonds required to be redeemed by mandatory sinking fund redemption so as to maintain the proportion of principal maturing in each year to the total original principal amount of the Bonds. Special Mandatory Redemption from Optional Prepayment of Special Tax. Property owners may prepay the Special Tax at any time. See "THE BONDS—Optional Prepayment of Special Tax." The proceeds received from any such prepayments will be used to redeem the Bonds in part. Consequently, 6 the Bonds are also subject to mandatory redemption at any time, in part, from amounts available for disbursement from the Special Redemption Account(which includes optional prepayments of the Special Tax and amounts transferred from the Reserve Fund to the Special Redemption Account) pursuant to the Indenture, at a redemption price (expressed as a percentage of the principal amount of the Bonds to be redeemed), as set forth below, together with accrued interest on such Bonds to the date fixed for redemption: Redemption Dates Redemption Prices On or prior to February 28,2014........................................ 103% March 1,2014 through February 28,2015.......................... 102 March 1,2015 through February 29,2016.......................... 101 March 1,2016 and thereafter.............................................. 100 Any special mandatory redemption of the Bonds pursuant to the previous paragraph will be applied, to the extent possible, to reduce pro rata the amount of the Bonds required to be redeemed by mandatory sinking fund redemption so as to maintain the proportion of principal maturing in each year to the total original principal amount of Bonds. Redemption Provisions; Notice of Redemption. If less than all the Bonds of any maturity are to be redeemed on any redemption date, the Bond Registrar appointed in the Indenture shall assign to each Bond of the maturity to be redeemed a distinctive number for each $1,000 of principal amount of that Bond. The Bond Registrar shall then select by lot from the numbers so assigned, using such method as it shall deem proper in its discretion, as many numbers as, at $1,000 per number, shall equal the principal amount of Bonds of that maturity to be redeemed; provided that following any redemption, no Bond shall be outstanding in an amount less than the minimum Authorized Denomination, except(i) as necessary to effect the mandatory sinking fund redemption of Bonds as set forth above or (ii) to effect a special mandatory redemption from optional prepayments when the total aggregate principal amount of the Bonds outstanding is less than the minimum Authorized Denomination. Notice of the redemption of any Bonds, which by their terms shall have become subject to redemption, shall be given to the Notice Beneficial Owners (as defined in the Indenture) and the registered owner of each Bond or portion of a Bond called for redemption not less than 30 or more than 60 days before any date established for redemption of Bonds, by the Bond Registrar, on behalf of the City, by first-class mail sent to the registered owner's last address, if any, appearing on the registration books kept by the Bond Registrar. All notices of redemption shall include at least the designation, date and maturities of Bonds called for redemption, CUSIP Numbers, if available, and the date of redemption. In the case of a Bond to be redeemed in part only, the notice shall also specify the portion of the principal amount of the Bond to be redeemed. The mailing of the notice specified above to the Notice Beneficial Owners and the registered owner of any Bond shall be a condition precedent to the redemption of that Bond, provided that any notice which is mailed in accordance with the Indenture shall be conclusively presumed to have been duly given whether or not the owner received the notice. The failure to mail notice to the owner of any Bond, or any defect in that notice, shall not affect the validity of the redemption of any other Bond for which notice was properly given. Any notice of optional redemption may also state (and shall state if the City shall so direct) that the redemption is conditioned on receipt of moneys for such redemption by the Trustee on or prior to the redemption date; if such moneys are not received, the redemption of the Bonds for which notice was given shall not be made. In the event of any revocation of notice of optional redemption,the Trustee shall send notice of such revocation to the registered owners of the Bonds within three (3) Business Days after such proposed redemption date. 7 Purchase in Lieu of Redemption. In lieu of redemption as provided in the Indenture, moneys in the Bond and Interest Fund may be used and withdrawn by the City for the purchase of outstanding Bonds, at public or private sale as and when, and at such prices (including brokerage and other charges) as the City may provide, but in no event may Bonds be purchased at a price in excess of the principal amount of such Bonds, plus interest accrued to the date of purchase and any premium which would otherwise be due if such Bonds were to be redeemed in accordance with the Indenture. Optional Prepayment of Special Tax The manner in which Special Tax may be prepaid is described in the Special Tax Report. Generally, the Special Tax may be prepaid with respect to any Parcel of property (as defined in the Special Tax Report) at any time and the obligation to pay the Special Tax permanently satisfied by the payment of(i) an amount equal to all delinquent Special Tax on such Parcel, including any applicable penalties and related costs as required by law, and Special Tax due on such Parcel but not yet paid for the Calendar Year in which such prepayment is made, plus (ii)an amount equal to the amount of prepayment determined in accordance with the formula set forth in the Special Tax Report. See APPENDIX A hereto for a more complete discussion of the calculation of the amount of prepayment of Special Tax. Mandatory Prepayment of Special Tax The Bonds are subject to mandatory redemption on any Interest Payment Date, in whole or in part, at a redemption price equal to the principal amount to be redeemed, together with accrued interest to the date fixed for redemption, without premium, in the event of a mandatory prepayment of the Special Taxes ("Mandatory Prepayment") upon a reduction in the Maximum Parcel Special Tax as a result of a change in the expected number of single family,townhome or duplex dwelling units to be built within the Area as set forth in the final plat or plots of subdivision approved by the City or any other event that reduces the total of the Maximum Parcel Special Tax as described in, and in the amounts set forth in the Special Tax Report; provided however that a change in density relating to Second Series Property shall not be applied to the redemption of the Series 2004 Bonds until such time as the Additional Bonds are issued. The amount of the Mandatory Prepayment is determined in accordance with the formula set forth in the Special Tax Report. A Mandatory Prepayment of the Maximum Parcel Special Tax does not reduce the Special Tax that has been levied on any Parcel as described in the Special Tax Report. See APPENDIX A hereto for a more complete discussion of Mandatory Prepayment. Additional Bonds The City may issue Additional Bonds in an amount not to exceed $21,800,000,* to be established in a Supplemental Indenture, to pay for additional special services as permitted by the Special Service Area Act. Any Additional Bonds shall be on a parity with the Series 2004 Bonds with respect to the Special Taxes and the amounts on deposit in the Bond and Interest Fund, the Reserve Fund and the Improvement Fund; provided, that nothing herein shall prevent payment of principal of and interest on any series of Additional Bonds from being otherwise secured and protected from sources or by property or instruments not applicable to the Series 2004 Bonds. * Preliminary,subject to change. 8 Before the Trustee shall authenticate and deliver any Additional Bonds, the Trustee shall receive the following items: (a) Original executed counterparts of any amendments or supplements to the Indenture entered into in connection with the issuance of the Additional Bonds, which are necessary or advisable, in the opinion of bond counsel, to provide that the Additional Bonds will be issued in compliance with the provisions of the Indenture and which shall set forth the following information: (i) the Series Reserve Requirement for such series of Additional Bonds; (ii) the authorized principal amounts; (iii) interest rates or method of determining the interest rates; (iv) the denominations; (v) the redemption provisions and prices, (vi) the amounts to be deposited from the proceeds of such Additional Bonds in the Funds and Accounts created and established by the Indenture and any Supplemental Indenture; and (vii) any other provisions deemed advisable by the City not in conflict with the provisions of the Indenture. The principal payment dates for any series of Additional Bonds shall be March 1 of the year or years set forth in the applicable Supplemental Indenture. (b) A bond ordinance of the City with respect to the Additional Bonds. (c) A request and authorization to the Trustee on behalf of the City, signed by the Mayor or other authorized official, to authenticate and deliver the Additional Bonds to, or on the order of, the purchaser thereof upon payment to the Trustee of the amount specified therein (including without limitation, any accrued interest), which amount shall be deposited as provided in the applicable Supplemental Indenture. (d) The written opinion of counsel, who may be counsel for the City, reasonably satisfactory to the Trustee, to the effect that: (i) the documents submitted to the Trustee in connection with the request then being made comply with the requirements of this Indenture; (ii) the issuance of the Additional Bonds has been duly authorized; and (iii) all conditions precedent to the delivery of the Additional Bonds have been fulfilled. (e) A written opinion of bond counsel (who also may be the counsel to which reference is made in paragraph (d)), to the effect that: (i) when executed for and in the name and on behalf of the City and when authenticated and delivered by the Trustee, those Additional Bonds will be valid and legal special limited obligations of the City in accordance with their terms and will be secured under the Indenture equally and on a parity with all other bonds at the time outstanding under the Indenture as to the Special Taxes and amounts on deposit in the Bond and Interest Fund, the Reserve Fund and the Improvement Fund; and (ii) the issuance of the Additional Bonds will not result in the interest on the Series 2004 Bonds or any other Bonds outstanding immediately prior to that issuance the interest on which is excluded from gross income of the owners thereof, becoming includable in gross income for purposes of federal income taxation. (f) A certificate from the Consultant demonstrating that after giving effect to the issuance of the Additional Bonds there shall have been levied Special Taxes in an amount at least equal to 110% of the principal of and interest on the Bonds plus estimated Administrative Expenses less estimated investment earnings on the Reserve Fund for all Bonds outstanding for each calendar year through the final maturity of the Bonds. (g) A certificate from each of the City and the Developer (i) certifying that it has no knowledge of any Default under the Indenture and (ii) certifying that either (a) not less than a total of 300 single family homes, are under contract to be sold to parties unrelated to the Developer and that a non-refundable deposit of not less than $5,000 of the purchase price of each 9 such home that is under contract has been deposited with the homebuilder; or (b) a national homebuilder whose securities are traded on a national securities exchange has purchased property within the Area and has requested the issuance of the Additional Bonds to finance the development of a portion of such Area; or (c)the Bondholders shall have consented to the issuance of the Additional Bonds. The certificate of the City with respect to clause (ii) above may be based on representations from the Developer. (h) Evidence, satisfactory to the Purchaser and the City, which may be in the form of financial statements, equity commitments, or loan commitments, demonstrating that the Developer has cash, marketable securities, outside equity or bank loans in an amount sufficient to complete the remaining improvements within the Area which amount shall be certified by an inspecting engineer. When (i) the documents listed above have been received by the Trustee, and (ii) the Additional Bonds have been executed and authenticated, the Trustee shall deliver the Additional Bonds to or on the order of the purchaser thereof, but only upon payment to the Trustee of the specified amount (including without limitation, any accrued interest) set forth in the request and authorization to which reference is made in paragraph (c)above. No proceeds of Additional Bonds shall be disbursed until such time as all Parcels within the Special Service Area are the subject of a plat of subdivision properly recorded with the County of Kendall. BOOK-ENTRY-ONLY SYSTEM THE INFORMATION PROVIDED IMMEDIATELY BELOW CONCERNING DTC AND THE BOOK-ENTRY-ONLY SYSTEM, AS IT CURRENTLY EXISTS, IS BASED SOLELY ON INFORMATION PROVIDED BY DTC AND IS NOT GUARANTEED AS TO ACCURACY OR COMPLETENESS BY, AND IS NOT TO BE CONSTRUED AS A REPRESENTATION BY, THE UNDERWRITERS, THE CITY OR THE DEVELOPER. The Depository Trust Company("DTC"),New York,NY, will act as securities depository for the Series 2004 Bonds. The Series 2004 Bonds will be issued as fully-registered securities registered in the name of Cede& Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond will be issued in the aggregate principal amount of such issue, and will be deposited with DTC. DTC, the world's largest depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 85 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust& Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Government 10 Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation, (NSCC, GSCC, MBSCC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non- U.S. securities brokers and dealers,banks,trust companies,and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard& Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of the Series 2004 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2004 Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2004 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Series 2004 Bonds, except in the event that use of the book-entry system for the Series 2004 Bonds is discontinued. To facilitate subsequent transfers, all Series 2004 Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the Series 2004 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2004 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Series 2004 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Series 2004 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2004 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Series 2004 Bonds documents. For example, Beneficial Owners of the Series 2004 Bonds may wish to ascertain that the nominee holding the Series 2004 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Series 2004 Bonds within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Series 2004 Bonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to issuers as soon as possible after the record date. The Omnibus Proxy assigns Cede& Co.'s consenting or voting rights to those Direct Participants to 11 whose accounts the Series 2004 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Series 2004 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from issuer or its Trustee, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC nor its nominee, Trustee, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Series 2004 Bonds at any time by giving reasonable notice to the City or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Series 2004 Bonds are required to be printed and delivered. The City may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Series 2004 Bonds will be printed and delivered as described in the Indenture. NEITHER THE CITY, THE UNDERWRITER, THE TRUSTEE, NOR THE DEVELOPER WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT WITH RESPECT TO (1)THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY SUCH DIRECT PARTICIPANT OR INDIRECT PARTICIPANT; (2)THE PAYMENT BY ANY PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL OF OR INTEREST OR PREMIUM ON THE SERIES 2004 BONDS; (3)THE DELIVERY BY ANY SUCH DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER THAT IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE INDENTURE TO BE GIVEN TO BONDHOLDERS; (4)THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF THE SERIES 2004 BONDS; OR (5)ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS BONDHOLDER. PLAN OF FINANCE General The Area is being developed by the Developer. Other than the proceeds of the Series 2004 Bonds, any Additional Bonds and the Variable Rate Bonds, the Developer shall provide all the funds necessary to complete the Special Services. In addition, the Developer intends to provide all funds necessary to complete private improvements to develop the Area and the Project. See "PROPOSED DEVELOPMENT—Developer" and"PLAN OF FINANCE—Development Financing." The Public Improvement Agreement For United City of Yorkville Special Service Area Number 2004-104: Central Grande Reserve (the "Public Improvement Agreement") provides that all Public 12 Improvements (referred to herein as Special Services) not financed with proceeds of the Series 2004 Bonds, any Additional Bonds or the Variable Rate Bonds will be paid for or financed by the Developer. See "SUMMARY OF THE PUBLIC IMPROVEMENT AGREEMENT." Bank Financing The main sources of Developer financing, in addition to the proceeds of the Bonds, include initially committed bank financing from LaSalle Bank National Association ("LaSalle") (as to $23,700,000), Oak Brook Bank ("Oak Brook") (as to $11,600,000) and Citizens Financial Services, FSB ("Citizens") (as to $9,700,000) (collectively, the 'Banks"), and Developer equity. See "Developer Funds." The Banks have provided a $45,000,000 Revolving Line of Credit (the "Revolver") with aggregate draws totaling$134,000,000, issued a Direct Pay Letter of Credit in the amount of$12,310,331 in connection with the issuance of the Variable Rate Bonds and provided a Replacement Promissory Note (Letter of Credit) in the aggregate amount of$24,310,331 evidencing draws under the Letter of Credit, of which no more than$12,000,000 can be outstanding at any one time. Developer Funds Upon issuance of the Series 2004 Bonds, the Developer will have posted Letters of Credit for the benefit of the City in the aggregate outstanding amount of approximately $ for construction of public infrastructure improvements. In addition, the Developer previously committed approximately $15,395,595 for the acquisition of the land within the Area. The Special Services The Special Services consist of engineering, soil testing and appurtenant work, mass grading and demolition, storm water management facilities, storm drainage systems and storm sewers, site clearing and tree removal, public water facilities, sewer lines, erosion control measures, roads, streets, curbs, gutters, street lighting, traffic controls, sidewalks, equestrian and related street improvements, and equipment and materials necessary for the maintenance thereof, landscaping, wetland mitigation, utility relocation and tree installation, costs for land and easement acquisitions relating to any of the foregoing improvements, required tap-on and related fees for water or sanitary sewer services, and other eligible costs of improvements to serve the Area. The Special Services to be paid for with the proceeds of the Series 2004 Bonds include the following: Sanitary Sewer $2,553,550 Water 1,963,936 Storm Sewer 3,832,694 Roads,Paving,Curbs&Gutter 1,126,220 Total $9,476,400 Pursuant to the Public Improvement Agreement and the Special Tax Report, the Bond proceeds may be shifted from one of the foregoing line items to any other Special Service as set forth in the Public Improvement Agreement and the Special Tax Report (subject to confirmation by the Special Tax Consultant that the ratio of the Bond proceeds expended on Single Family Homes, Townhomes and Duplexes as set forth in the Special Tax Report remains consistent) and the Allocation results in the same ratio of funded Eligible Improvements among land use types as shown in Section VII of the Special Tax Report. Pursuant to the Indenture, the amount of the Bond proceeds to be used to construct, acquire, install and dedicate the Special Services benefiting the Project will be placed in the Improvement Fund. The amounts held in the Improvement Fund will be available for disbursement upon receipt by the 13 Trustee of a Disbursement Request from the City as required by, and in accordance with, the terms of the Public Improvement Agreement and the Indenture. ESTIMATED SOURCES AND USES OF FUNDS* Variable Series 2004 Rate Bond Bond Developer Project Proceeds Proceeds(') Funds(2) Total Sources: Par Amount $13,200,000 $13,200,000 Variable Rate Bonds $14,925,471 14,925,471 $22,545,279 22,545,279 Developer Funds 168,000 Interest Earnings 168,000 Total $13,368,000 $14,925,471 $22,545,279 $50,838,750 Uses: Public Improvements Soft Costs $1,715,939 $1,715,939 1,289,246 1,289,246 Parks Earthwork (0) (0) Sewer $2,553,550 $95,841 2,649,391 Water 1,963,936 4,326,235 811,403 7,101,574 Stormwater 3,832,694 1,922,868 2,667,598 8,423,160 Roads 1,126,220 5,671,183 3,574,842 10,372,245 Sub-Total 9,476,400 14,925,471 7,149,684 31,551,555 Land 15,395,595 15,395,595 Capitalized Interest 2,018,600 2,018,600 Debt Service Reserve 1,320,000 1,320,000 Administrative Fund 25,000 25,000 Costs of Issuance 528,000 528,000 Total $13,368,000 $14,925,471 $22,545,279 $50,838,750 (1) Represents the portion of the Variable Rate Bonds allocable to the Central Grand Reserve including prepayments which can be recycled into additional Public Improvements. (2) Represents the land plus the estimated funds necessary to complete the Public Improvements for 490 Single Family Homes. May include Developer funds and bank financing. * Preliminary,subject to change. 14 DEBT SERVICE REQUIREMENTS* The following table sets forth the debt service schedule for the Series 2004 Bonds based on the maturity, and interest rate set forth on the cover of this Limited Offering Memorandum, assuming no redemptions other than mandatory sinking fund redemptions are made: Bond Year Ending Annual Debt (March 1) Principal Interest Service 2005 $ - $ 269,638 $ 269,638 2006 - 874,500 874,500 2007 874,500 874,500 2008 46,000 874,500 920,500 2009 62,000 871,453 933,453 2010 80,000 867,345 947,345 2011 100,000 862,045 962,045 2012 121,000 855,420 976,420 2013 143,000 847,404 990,404 2014 168,000 837,930 1,005,930 2015 194,000 826,800 1,020,800 2016 222,000 813,948 1,035,948 2017 252,000 799,240 1,051,240 2018 285,000 782,545 1,067,545 2019 320,000 763,664 1,083,664 2020 357,000 742,464 1,099,464 2021 397,000 718,813 1,115,813 2022 440,000 692,511 1,132,511 2023 486,000 663,361 1,149,361 2024 536,000 631,164 1,167,164 2025 589,000 595,654 1,184,654 2026 646,000 556,633 1,202,633 2027 707,000 513,835 1,220,835 2028 772,000 466,996 1,238,996 2029 841,000 415,851 1,256,851 2030 916,000 360,135 1,276,135 2031 996,000 299,450 1,295,450 2032 1,081,000 233,465 1,314,465 2033 1,173,000 161,849 1,334,849 2034 1,270.000 84,138 1,354,138 Total 13.200.000 $1 1 7 24 $ 2 5 248 *Preliminary,subject to change. 15 The following table sets forth expected Special Tax and Debt Service Coverage: EXPECTED SPECIAL TAX AND DEBT SERVICE COVERAGE* Capitalized Interest& Maximum Bond Year Trustee and Debt Service Parcel Ending Administrative Reserve Adjusted Special Debt Service (March 1) Debt Service Fees' Earnmgs2 Debt Service Taxes3 Coverage 2005 $ 269,638 $ - ($269,638) $ - $ - NA 2006 874,500 - (874,500) - - NA 2007 874,500 (874,500) - NA 2008 920,500 25,000 (39,600) 905,900 1,043,700 1.15% 2009 933,453 25,375 (39,600) 919,228 1,059,380 1.15 2010 947,345 25,756 (39,600) 933,501 1,075,060 1.15 2011 962,045 26,142 (39,600) 948,587 1,091,230 1.15 2012 976,420 26,534 (39,600) 963,354 1,107,400 1.15 2013 990,404 26,932 (39,600) 977,736 1,124,060 1.15 2014 1,005,930 27,336 (39,600) 993,666 1,140,720 1.15 2015 1,020,800 27,746 (39,600) 1,008,946 1,157,870 1.15 2016 1,035,948 28,162 (39,600) 1,024,510 1,175,020 1.15 2017 1,051,240 28,585 (39,600) 1,040,225 1,192,660 1.15 2018 1,067,545 29,014 (39,600) 1,056,959 1,210,790 1.15 2019 1,083,664 29,449 (39,600) 1,073,512 1,228,920 1.14 2020 1,099,464 29,890 (39,600) 1,089,754 1,247,540 1.14 2021 1,115,813 30,339 (39,600) 1,106,551 1,266,160 1.14 2022 1,132,511 30,794 (39,600) 1,123,705 1,285,270 1.14 2023 1,149,361 31,256 (39,600) 1,141,017 1,304,380 1.14 2024 1,167,164 31,725 (39,600) 1,159,288 1,323,980 1.14 2025 1,184,654 32,201 (39,600) 1,177,254 1,344,070 1.14 2026 1,202,633 32,684 (39,600) 1,195,716 1,364,160 1.14 2027 1,220,835 33,174 (39,600) 1,214,409 1,384,740 1.14 2028 1,238,996 33,671 (39,600) 1,233,068 1,405,320 1.14 2029 1,256,851 34,176 (39,600) 1,251,428 1,426,390 1.14 2030 1,276,135 34,689 (39,600) 1,271,224 1,447,950 1.14 2031 1,295,450 35,209 (39,600) 1,291,059 1,469,510 1.14 2032 1,314,465 35,738 (39,600) 1,310,603 1,491,560 1.14 2033 1,334,849 36,274 (39,600) 1,331,522 1,514,100 1.14 2034 1,354,138 36,818 (39,600) 1,351,355 1,536,640 1.14 1 Assumes Administrative and Trustee Fees increase at 1.50%per year. 2 Assumes an investment rate of 1.00%on the Capitalized Interest Account and 3.0%on the Reserve Fund. 3 Maximum Parcel Special Taxes escalate annually at rate of 1.50% based on 490 Single Family Homes for First Series Property. See "INTRODUCTORY STATEMENT." 4 Debt service and costs are capitalized through March 1,2007. *Preliminary,subject to change. 16 SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2004 BONDS General The Bonds and the interest thereon are limited obligations of the City secured and payable from (i)the Special Tax to be levied, extended and collected on all the taxable real property within the Area subject to the Special Tax, including, without limitation, the Parcels, (ii)amounts deposited in the Bond and Interest Fund, the Reserve Fund, and the Improvement Fund, including a portion of the proceeds of the Series 2004 Bonds and the interest, profits and other income derived from the investment thereof. When collected, the Special Tax and any Foreclosure Proceeds shall be placed in the Bond and Interest Fund. In addition, proceeds received by the City from a condemnation of any of the Special Services or any other property owned by or dedicated to the City within the Special Service Area and allocable to the Bonds, provided such proceeds are not used to rebuild the Special Services, shall be deposited in the Bond and Interest Fund as security for the Bonds. The amount of Special Tax that the City may levy in the Area in any year is strictly limited by the maximum rates approved by the Corporate Authorities at the time of formation of the Area. The City is legally authorized under the Special Service Area Act, and has covenanted in the Indenture, to extend and collect the Special Tax in an amount determined according to the Special Tax Report. Pursuant to the Bond Ordinance the City has levied the Special Tax in the amounts set forth in the Total Levy From Bond Ordinance column in the Table set forth below in "THE SPECIAL SERVICE AREA AND SPECIAL TAX—Special Service Area Special Tax Roll and Report," and will abate such tax each year to the extent it is not required to pay Administrative Expenses and principal of, redemption premium on, or interest on the Series 2004 Bonds and any Additional Bonds. See "SECURITY AND SOURCE OF PAYMENT FOR THE BONDS—Special Tax" below. The Special Tax Report apportions the total amount of Special Tax to be collected among the Parcels in the Area and among First Series Property and Second Series Property as more particularly described therein. Any Mandatory Prepayment of the Special Tax shall be levied against the Parcels that result in application of the prepayment provisions. The Maximum Parcel Special Tax will remain unchanged for the Parcels that did not result in the application of the prepayment provisions. See "THE SPECIAL SERVICE AREA AND SPECIAL TAX—Special Service Area Special Tax Roll and Report" and "APPENDIX A—Special Service Area Special Tax Roll and Report." Special Tax The levying of the Special Tax was authorized by the Corporate Authorities in Ordinance No. 2004-49, adopted at a meeting held on September 14, 2004, as amended by Ordinance No. adopted at a meeting held on October 26, 2004 (collectively, the "Establishing Ordinance"). Pursuant to the Establishing Ordinance,the City caused(i)the Establishing Ordinance to be recorded on or before the date of delivery of the Series 2004 Bonds with the Recorder of Deeds of Kendall County, Illinois, and (ii)the Declaration of Consent of the Developer to be recorded on or before such date of delivery with the Recorder of Deeds of Kendall County, Illinois. The Series 2004 Bonds are secured by, among other things, a pledge of the Special Tax including all scheduled payments of Special Tax received by the City, interest thereon, and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of Special Tax. Pursuant to the Bond Ordinance the City has levied the Special Tax in the amounts set forth in the Total Levy From Bond Ordinance column in the Table set forth below in "THE SPECIAL SERVICE AREA AND SPECIAL TAX—Special Service Area Special Tax Roll and Report", and will abate such tax each year to the extent it exceeds the Special Tax Requirement for the Series 2004 Bonds and any Additional Bonds issued pursuant to the Indenture as calculated by the Special Tax Consultant on its behalf. The City has covenanted in the Bond Ordinance and the Indenture annually on or before the last Tuesday of December for each of the years 2005 through 2032 to calculate or cause the Special Tax Consultant to 17 calculate the Special Tax Requirement for Bonds issued pursuant to the Indenture or any Supplemental Indenture; to amend the Special Tax Roll and provide the county tax collector with the amended Special Tax Roll; to adopt an ordinance approving the amount of the current calendar year's Special Tax Requirement for Bonds issued pursuant to the Indenture or any Supplemental Indenture; and abating the Special Tax levied pursuant to the Bond Ordinance to the extent the taxes levied pursuant to the Bond Ordinance exceed the Special Tax Requirement as calculated by the City pursuant to the Establishing Ordinance and the Special Tax Report. On or before the last Tuesday of January for each of the years 2006 through 2033 the City shall notify the Trustee who shall notify the Notice Beneficial Owners of the amount of the Special Tax Requirement for Bonds issued pursuant to the Indenture or any Supplemental Indenture and the amount of the Special Tax to be abated. The City shall take all actions which shall be necessary to provide for the levy, extension, collection and application of the taxes levied by the Bond Ordinance, including enforcement of such taxes by providing the County Collector with such information as is deemed necessary to enable the County Collector to include any property subject to delinquent Special Taxes in the County Collector's annual tax sale and in the event the tax lien is forfeited at such tax sale,by institution of foreclosure procedures as provided by law; provided, however,that the obligation to institute any foreclosure action against any taxpayer other than a taxpayer owning at least five percent of the property in the Special Service Area shall only arise in the event the City makes the determination that the proceeds from the foreclosure action have a commercially reasonable expectation of exceeding the costs thereof. See "THE SPECIAL SERVICE AREA AND SPECIAL TAX—Special Service Area Special Tax Roll and Report." The levy of the Special Tax is subject to certain limitations. The levy of the Special Tax on each Parcel within the Area is constrained by the Maximum Parcel Special Tax amount applicable to such Parcel; if there is an event that reduces the total of the Maximum Parcel Special Tax (such as a reduction in the anticipated number of Single Family Homes, Townhomes and Duplexes below 723, 298 and 224, respectively, as may be amended by the Special Tax Report) the City would levy a Mandatory Prepayment thereby reducing the Maximum Parcel Special Tax levied upon the Area as a whole; the Maximum Parcel Special Tax (i.e., the maximum per-parcel Special Tax) would not increase. See "THE SPECIAL SERVICE AREA AND SPECIAL TAX—Special Service Area Special Tax Roll and Report" and "RISK FACTORS—Maximum Special Taxes" herein. The amount set forth in the heading Bond Levy under the chart "Maximum Special Tax for Levy Years 2005-2032" has been levied pursuant to the Bond Ordinance. Pursuant to the Indenture, the City covenants that, to the extent necessary to enforce a prepayment, it will adopt a supplemental levy ordinance within the Area in the event of a mandatory prepayment of the Special Tax pursuant to the Special Tax Report caused by a change in the expected number of Single Family Homes, Townhomes or Duplexes as set forth in the final plat of subdivision approved by the City, to the extent the mandatory prepayment amount calculated pursuant to the terms of the Special Tax Report exceeds the Special Tax levied for the year in which the prepayment is due pursuant to the Bond Ordinance. Although the Special Tax, when levied, will constitute a lien on Parcels within the Area, it does not constitute a personal indebtedness of the owners of such Parcels within the Area. There is no assurance that the owners of such Parcels in the Area will be financially able to pay the annual Special Tax or that they will pay such tax even if financially able to do so. See "RISK FACTORS" herein. Pledged Funds Bond and Interest Fund. The Indenture creates and establishes with the Trustee a separate and special fund of the City established exclusively for paying principal of, interest on and redemption premium on the Bonds and which is designated as "The Special Service Area Number 2004-104 Central Grande Reserve Special Tax Bonds, Bond and Interest Fund" (the "Bond and Interest Fund"). When collected, the Special Tax and the Foreclosure Proceeds, including any interest and penalties collected in 18 connection with such Special Tax or Foreclosure Proceeds shall be placed in the Bond and Interest Fund. The City may provide for the County to transmit directly to the Trustee for deposit to the Bond and Interest Fund any Special Taxes collected by the County. In addition, proceeds received by the City in connection with a condemnation of any of the Special Services or any other property dedicated to or owned by the City within the Special Service Area and allocable to the Bonds as determined by the Special Tax Consultant which is not used to rebuild the Special Services shall be deposited in the Bond and Interest Fund. Moneys deposited in the Bond and Interest Fund and investments of the Bond and Interest Fund shall never be commingled with or loaned to any other funds of the City. All interest and other investment earnings on the Bond and Interest Fund shall become, when received, a part of the Bond and Interest Fund. When the amount of condemnation proceeds deposited to the Bond and Interest Fund equals $5,000 or more, such amount shall be used to redeem Bonds on the next Interest Payment Date. Any amounts representing condemnation proceeds which remain on deposit in the Bond and Interest Fund for a continuous period of thirty(30)months and which will not be used to redeem the Bonds on the next Interest Payment Date will be used to pay debt service on the Bonds on the next Interest Payment Date. Amounts deposited in the Bond and Interest Fund are appropriated for and irrevocably pledged to, and shall be used solely for the purpose of, paying the principal of and interest and redemption premium on the Bonds, or for transfers to the Reserve Fund or the Administrative Expense Fund as permitted in the Indenture. At any time after September 1 but in no event later than December 1 of each year, the Trustee will determine the amount needed to pay principal of and interest and redemption premium on the Bonds on the next succeeding Interest Payment Date. After the Trustee determines that sufficient amounts are on deposit in the Bond and Interest Fund to pay principal of, interest on and redemption premium due on the Bonds on the next succeeding Interest Payment Date, the Trustee shall notify the City and the Special Tax Consultant of any excess amounts on deposit in the Bond and Interest Fund, and, at the written direction of the City, shall transfer an amount from the Bond and Interest Fund to the Administrative Expense Fund which the City has determined will be adequate, together with other amounts in the Administrative Expense Fund or reasonably expected to be transferred to or deposited in such Fund, to pay all Administrative Expenses during the succeeding calendar year. After making such transfer to the Administrative Expense Fund any excess amounts on deposit in the Bond and Interest Fund will be transferred to the Reserve Fund to the extent necessary to replenish the Reserve Fund to the Reserve Requirement (as defined below under the subcaption "Reserve Fund") and thereafter any remaining excess shall be retained in the Bond and Interest Fund and applied to pay principal and interest coming due on the Bonds on the second succeeding Interest Payment Date; provided, however, that investment earnings on amounts on deposit in the Bond and Interest Fund on or prior to March 1, 2007 shall be transferred to the Series 2004 Improvement Account of the Improvement Fund and thereafter retained in the Bond and Interest Fund. Written notice of each such transfer to the Reserve Fund shall promptly be given to the Notice Beneficial Owners. Capitalized Interest Account. A separate account designated the "Series 2004 Capitalized Interest Account" exists within the Bond and Interest Fund established with the Trustee. Amounts deposited in the Series 2004 Capitalized Interest Account shall be used solely for the purpose of paying interest on the Series 2004 Bonds first coming due and shall be applied by the Trustee for such purpose without any further authorization or direction. Investment earnings on amounts on deposit in the Series 2004 Capitalized Interest Account shall be transferred to the Series 2004 Improvement Account of the Improvement Fund. Special Redemption Account. A separate account designated the "Special Redemption Account" exists within the Bond and Interest Fund established with the Trustee. All prepayments of Special Tax 19 made in accordance with the Special Tax Report shall be deposited in the Special Redemption Account. Amounts deposited in the Special Redemption Account representing optional prepayments of Special Tax in accordance with the Special Tax Report shall be applied to the redemption of Bonds pursuant to the Indenture and as described under the caption THE BONDS—Redemption—Special Mandatory Redemption from Optional Prepayment of Special Tax." Amounts deposited in the Special Redemption Account representing mandatory prepayments of Special Tax in accordance with the Special Tax Report shall be applied to the redemption of Bonds in accordance with the Indenture and as described under the caption "THE BONDS—Redemption—Mandatory Redemption Upon Condemnation, Completion of Construction and Change in Density." Moneys in the Special Redemption Account shall be used exclusively to redeem Bonds pursuant to the Indenture or to pay debt service on the Bonds pursuant to the Indenture. In the event of any prepayment of Special Tax, prior to giving notice of the redemption of the Bonds in accordance with the Indenture, the Trustee will transfer from the Reserve Fund to the Special Redemption Account an amount equal to the Reserve Fund Credit (as defined in the Special Tax Report) upon the direction of the Special Tax Consultant. When the amount on deposit in the Special Redemption Account equals or exceeds $1,000, such amount shall be used to redeem the Bonds on the next Interest Payment Date in accordance with the Indenture. On each such Interest Payment Date, the Trustee shall withdraw from the Special Redemption Account and pay to the owners of the Bonds to be redeemed the amounts required to redeem such Bonds. Notwithstanding the foregoing, any amounts contained in the Special Redemption Account for a continuous period of thirty (30) months and which will not be used to redeem the Bonds on the next Interest Payment Date in accordance with the immediately preceding sentence and the Indenture shall be used to pay debt service on the Bonds on the next Interest Payment Date. Any amounts contained in the Special Redemption Account on the final maturity date of the Series shall be used to pay outstanding debt service on the Bonds. Reserve Fund. A separate and special fund of the City exists with the Trustee which is designated as "The Special Service Area Number 2004-104 Central Grande Reserve Special Tax Bonds, Reserve Fund" (the 'Reserve Fund"), and which must be maintained in an amount equal to the Reserve Requirement. The Reserve Requirement is, as of any particular date of calculation, an amount equal to the sum of all amounts established as Series Reserve Requirements in the Indenture and any Supplemental Indenture with respect to Additional Bonds. The Series 2004 Reserve Requirement and the Series Reserve Requirement for any Additional Bonds shall equal the lesser of (i) 10% of the stated principal amount of the issue, (ii)the maximum annual principal and interest requirements on the issue,or (iii) 125% of the average annual principal and interest requirements on the issue, as adjusted for prepayments pursuant to the Indenture and as described in the preceding paragraph hereof. The Series 2004 Reserve Requirement will be $1,320,000* as adjusted for prepayments pursuant to the Indenture. Amounts deposited in the Reserve Fund shall be used solely for the purpose of(i)making transfers to the Bond and Interest Fund to pay the principal of, including mandatory sinking fund payments, and interest and any premium on, all Bonds when due, in the event that moneys in the Bond and Interest Fund are insufficient therefor, (ii)making any transfers to the Bond and Interest Fund if the balance in the Reserve Fund exceeds the amount required to redeem all Bonds then outstanding, or (iii) if the amount then on deposit in the Reserve Fund is at least equal to the Reserve Requirement, for transfer in accordance with the Indenture, and as described in the next paragraph, provided that no moneys shall be transferred from the Reserve Fund pursuant to clause (i) above without the written consent of the Notice Beneficial Owners owning a majority of the beneficial interests in the Bonds, if such Notice Beneficial Owners exist. On the Business Day prior to each Interest Payment Date, moneys in the Reserve Fund in excess of the Reserve Requirement shall be transferred by the Trustee from the Reserve Fund to the Series 2004 * Preliminary,subject to change. 20 Improvement Account of the Improvement Fund until March 1, 2007, and thereafter to the Bond and Interest Fund to be used for the payment of interest on Bonds on the next following Interest Payment Date. Improvement Fund. A separate and special fund of the City which is designated as "The Special Service Area Number 2004-104 Central Grande Reserve Special Tax Bonds, Improvement Fund" (the "Improvement Fund") and a separate account within the Improvement Fund designated the "Series 2004 Improvement Account" exists with the Trustee. Moneys in the Improvement Fund shall be disbursed solely for the payment of the cost of acquiring, constructing, installing and performing the Special Services. Subject to the restrictions summarized in the last paragraph under this caption with respect to proceeds of Additional Bonds, disbursements from the Improvement Fund shall be made by the Trustee upon receipt of a Disbursement Request of the City executed by an Authorized Officer of the City which shall (i)set forth the amount required to be disbursed, the purpose for which the disbursement is to be made, that such Special Services (or portions thereof) have been completed in accordance with the terms of the Public Improvement Agreement,that the disbursement is for the payment of a Special Service, and payment instructions to the Trustee for the amount to be disbursed; and (ii)certify that no portion of the amount then being requested to be disbursed was set forth in any previous request for disbursement. A copy of each Disbursement Request shall be delivered by the Trustee to the Special Tax Consultant. Each Disbursement Request, together with all previously submitted Disbursement Requests, shall not exceed those amount set forth in the Special Tax Roll and Report for Single Family Homes, Townhomes and Duplexes. In the event a Disbursement Request seeks payment of amounts in excess of such amounts, the City shall only authorize the disbursement of funds for such excess amounts upon receipt of the Special Tax Consultant's certificate approving the disbursement and stating that the disbursements for payment of the Special Services have been in substantial conformity with the Special Tax Roll and Report. On the date on which a certificate of an Authorized Officer of the City is delivered certifying that the Special Services have been completed (the "Completion Date"),the Trustee shall transfer all amounts remaining in the Series 2004 Improvement Account of the Improvement Fund to the Bond and Interest Fund to be applied to the redemption of Series 2004 Bonds; provided that any amounts so transferred which do not equal $1,000 or an integral multiple of$1,000 may be applied to pay interest owing on the Series 2004 Bonds on the next succeeding Interest Payment Date; and provided further that upon written direction of an Authorized Officer of the City, an amount specified by the City may be transferred to the Series 2004 Capitalized Interest Account upon delivery to the Trustee of an opinion of Bond Counsel to the effect that the transfer of such amounts will not adversely affect the exclusion from gross income of interest on the Series 2004 Bonds for federal income tax purposes and is permitted under Illinois law. All investment earnings on accounts on deposit in the Series 2004 Improvement Account of the Improvement Fund prior to the Completion Date shall be retained therein to pay the costs of the Special Services. The Indenture provides that no proceeds of Additional Bonds shall be disbursed until such time as all Parcels within the Area are the subject of a plat of subdivision properly recorded with Kendall County. Costs of Issuance Account. A separate account designated the "Series 2004 Costs of Issuance Account exists within the Improvement Fund established with the Trustee. Amounts deposited in the Series 2004 Costs of Issuance Account shall be used solely for the purpose of paying costs incurred by the City in connection with the issuance of the Series 2004 Bonds and shall be administered according to the Indenture. On the date which is six months after the date of issuance of the Series 2004 Bonds, the Trustee will transfer all amounts remaining in the Series 2004 Costs of Issuance Account to the Series 2004 Improvement Account of the Improvement Fund. 21 Administrative Expense Fund. A separate and special fund of the City which is designated as "The Special Service Area Number 2004-104 Central Grande Reserve Special Tax Bonds, Administrative Expense Fund" (the "Administrative Expense Fund") exists with the Trustee. Amounts in the Administrative Expense Fund shall be withdrawn by the Trustee and paid to the City or its order upon receipt by the Trustee of a written request of an Authorized Officer stating the amount to be withdrawn, that such amount is to be used to pay an Administrative Expense, and the nature of such Administrative Expense. On or prior to March 1, 2007 investment earnings on amounts on deposit in the Administrative Expense Fund shall be transferred by the Trustee to the Improvement Fund and thereafter shall be retained in the Administrative Expense Fund. Rebate Fund. A separate and special fund of the City exists with the Trustee which is designated as The Special Service Area Number 2004-104 Central Grande Reserve Special Tax Bonds, Rebate Fund" (the "Rebate Fund"), into which there shall be deposited as necessary investment earnings in the Bond and Interest Fund and the Reserve Fund or other moneys provided by the City or the Developer to the extent required so as to maintain the tax exempt status of interest on the Series 2004 Bonds. All rebates, special impositions or taxes for such purpose payable to the United States of America (Internal Revenue Service) shall be payable from the Rebate Fund. Investments of Funds. Moneys on deposit in Funds and Accounts established under the Indenture may be invested from time to time in Qualified Investments pursuant to written directions from an Authorized Officer the City to the Trustee provided that moneys on deposit in the Special Redemption Account shall be invested in Qualified Investments having a maturity of 180 days or less. See 11 APPENDIX B—Indenture for the definition of"Qualified Investments." Subject to the requirements of the Indenture, earnings or losses on such investments shall be attributed to the Fund or Account for which the investment was made. In the event the Trustee does not receive written directions from the City to invest funds held under the Indenture, the Trustee shall invest such funds in a money market fund which invests in short-term securities issued or guaranteed by the United States Government or instrumentalities and/or repurchase agreements relating to such securities. Security for the Series 2004 Bonds The Series 2004 Bonds, together with any Additional Bonds, and the interest thereon are secured and payable solely from (i)the Special Tax levied, and to be extended and collected on all taxable property within the Area subject to the Special Tax (including, without limitation, the Parcels), including interest on such Special Tax and the proceeds of the redemption or sale of property sold as a result of any actions to foreclose the lien of Special Tax and any interest accrued thereon, brought following a delinquency in the payment of the Special Tax (the "Special Tax"), (ii) any amounts transferred by the City to the Bond and Interest Fund including the allocable portion of condemnation proceeds received by the City not used to rebuild the Special Services, and (iii) amounts deposited in the Bond and Interest Fund,the Reserve Fund and the Improvement Fund. Covenants of the City Pursuant to the Indenture,the City has covenanted for the benefit of the owners of the Series 2004 Bonds (the "Bondowners")that, among other things,the City will: (a) take all actions, if any, which shall be necessary, in order further to provide for the levy, extension, collection and application of the Special Tax including enforcement of the Special Tax as described in(c)below; (b) not take any action which would adversely affect the levy, extension, collection and application of the Special Tax levied pursuant to the Bond Ordinance and the Indenture, 22 except to abate the Special Tax to the extent permitted by the Indenture and the Special Tax Report; (c) comply with all requirements of the Special Service Area Act, the Bond Ordinance and other applicable present and future laws concerning the levy, extension and collection of the Special Tax levied pursuant to the Bond Ordinance and the Indenture, in each case so that the City shall be able to pay the principal of and interest on the Series 2004 Bonds, together with any Additional Bonds, as they come due and replenish the Reserve Fund to the Reserve Requirement and it will take all actions necessary to assure the timely collection of the Special Taxes, including without limitation, the enforcement of any delinquent Special Tax by providing the County of Kendall with such information as is deemed necessary to enable the County to include any property subject to a delinquent Special Tax in the County Collector's annual tax sale and, in the event that a tax lien is forfeited at such sale, the commencement and maintenance of an action to foreclose the lien of any delinquent Special Taxes, all in the manner provided by law; provided, however,that the obligation to institute any foreclosure action against any taxpayer other than a taxpayer owning at least five percent(5%) of the property in the Special Service Area shall only arise in the event the City makes the determination that the proceeds from the foreclosure action have a commercially reasonable expectation of exceeding the costs thereof; (d) not encumber, pledge or place any charge or lien upon any of the Special Tax or other amounts pledged to the Bonds superior to, or on a parity with, or junior to, the pledge and lien created in the Indenture for the benefit of the Bonds, except as permitted by, or specifically set forth in,the Indenture; (e) take all actions which are reasonably and necessary to be taken (and avoid any actions which it is necessary to avoid being taken) so that interest on the Bonds will not be or become included in gross income for federal income tax purposes under existing law; (f) keep, or cause the Trustee to keep, proper books of record and accounts, separate from all other records and accounts of the City, in which complete and correct entries will be made of all transactions relating to the deposits to and expenditure of amounts disbursed from the Funds and Accounts created under the Indenture and the Special Tax; and (g) take all actions within its control which are necessary to be taken to enforce the City's rights and satisfy its obligations under the Public Improvement Agreement. Enforcement of Payment of Special Tax The Kendall County Clerk has stated that it intends to incorporate the Special Tax bill into the regular ad valorem property tax bill. In Illinois, general ad valorem property taxes are levied in one year and become payable during the following year. At the end of each collection year, the Kendall County Treasurer applies to the Circuit Court of Kendall County for a judgment for all unpaid general ad valorem property taxes. The Circuit Court of Kendall County order resulting from that application for judgment provides for a sale of all property with unpaid general ad valorem property taxes. A public sale is held,at which time successful bidders pay the unpaid general ad valorem property taxes plus penalties (i.e., interest penalties and certain other costs). The annual tax sale is usually held during October of any given year in Kendall County. Unpaid general ad valorem property taxes accrue penalties at the rate of 1-1/2% per month from their due date until the date of sale. Taxpayers can redeem their property by paying the purchaser of the delinquent taxes on the property at the general tax sale the amount paid at the sale, plus a penalty. If redemption does not occur within two and one half years and certain procedural requirements are met, the purchaser of the property at the tax sale may petition for, and receive a deed to the property which has been sold for delinquent taxes. Any delinquent Special Tax for any given year would be 23 included in this general tax sale. In addition to using the annual tax sale as an enforcement mechanism, as discussed below, a municipality may seek enforcement of unpaid Special Tax through commencement of foreclosure proceedings pursuant to the Special Service Area Act. If a delinquency in the payment of the Special Tax occurs, the City is authorized by the Special Service Area Act to order institution of an action pursuant to Article 9 of the Illinois Municipal Code (65 ILCS 5/9-1-1, et seq.) to foreclose any lien therefor securing the Special Tax. In such an action a court having jurisdiction would enter a foreclosure decree authorizing the sale of the property subject to the lien of the Special Tax, and the real property subject to the lien of the Special Tax would be sold at a judicial foreclosure sale. The ability of the City to foreclose the lien of delinquent unpaid Special Tax may be limited in certain instances and may require prior consent of the property owner in the event that the property is owned by any receivership of the Federal Deposit Insurance Corporation (the "FDIC"). See "RISK FACTORS—Bankruptcy" and "RISK FACTORS—Tax Delinquencies." Such judicial foreclosure proceedings are not mandatory under the Special Service Area Act. However, in the Indenture, the City has covenanted with the holders of the Bonds to take all actions, if any, which shall be necessary to provide for the levy and extension, collection and application of the Special Tax, and to assure the timely collection of Special Tax, including without limitation, the enforcement of any delinquent Special Tax by providing to the County of Kendall such information as is deemed necessary to enable the County to include any property subject to delinquent Special Taxes in the County Collector's annual tax sale and in the event the tax lien is forfeited at such tax sale, by the commencement and maintenance of an action to foreclose the lien of any delinquent Special Tax in the manner provided by law, provided, however, that the obligation to institute any foreclosure action against any taxpayer other than a taxpayer owning at least 5% of the property in the Area shall only arise in the event the City makes the determination that the proceeds from the foreclosure action have a commercially reasonable expectation of exceeding the costs thereof. For a description of this covenant, as well as other events of default and remedies under the Indenture, see "APPENDIX B—Indenture." No assurances can be given that a judicial foreclosure action, once commenced, will be completed or that it will be completed in a timely manner. See "RISK FACTORS—Potential Delay and Limitation in Foreclosure Proceedings" below. Article 9 of the Illinois Municipal Code provides that the municipality or its assignee may file a complaint to foreclose a special service area tax lien in the same manner that foreclosures are permitted by law in case of delinquent general taxes. The "law in case of delinquent general taxes" to which the Illinois Municipal Code refers is the Illinois Revenue Code. Under such foreclosure proceedings, the court adjudicates the existence of a default in the payment obligation and authorizes a foreclosure sale; the sale is conducted and the proceeds distributed according to the respective priorities; the successful bidder is given a certificate of sale; and, if the redemption period expires without a redemption of the special service area taxes,the certificate of sale may be converted to a deed. Although the municipality holds the lien for the local improvement and is therefore the proper party to commence foreclosure procedures, bondholders with bonds secured by special service area taxes may compel the municipality to perform its duty and use all lawful means, including foreclosure, to collect the taxes out of which the bondholders are to be paid. Special service area taxes create a lien that is superior to other liens and encumbrances, and when general property taxes and Special Tax are both delinquent, the proceeds of any foreclosure action, if insufficient to pay each in full, are divided between them on a pro rata basis. If special service area taxes are not paid in full at a foreclosure sale, and the lien amounts are bid in at such foreclosure sale, then unless the special service area taxes are then redeemed through payment of the amount of the special service area taxes plus interest,the certificate of sale can be converted into a deed to the property only after expiration of the applicable redemption period. The Illinois Constitution prescribes certain minimum redemption periods for unpaid taxes on property, including special service area taxes, but the Illinois General Assembly may create longer redemption periods. For residential property with less than seven dwelling units,the Illinois Constitution provides for 24 a minimum two-year redemption period. The corresponding statute, however, permits the delinquent owner of such property to redeem it for two and a half years (35 ILCS 200/21-350). Additionally, in certain circumstances the redemption period may be extended for a period which will expire no later than 3 years from the date of the sale (35 ILCS 200/21-385). If the property can also be considered "vacant non-farm real estate,"the Constitution authorizes a reduction of the redemption period to one year, but the statute applicable to special service area taxes contains no such exception. No assurances can be given that the real property subject to sale or foreclosure and sale will be sold or, if sold, that the proceeds of sale will be sufficient to pay any delinquent installment of special service area taxes. Neither the Special Service Area Act nor Article 9 of the Illinois Municipal Code requires the City to purchase or otherwise acquire any lot or parcel of property offered for sale or subject to foreclosure if there is no other purchaser at such sale. Article 9 of the Illinois Municipal Code does specify that the special service area taxes will have the same lien priority in the case of delinquency as the priority of the lien of ad valorem property taxes. If the Reserve Fund is depleted and delinquencies in the payment of Special Tax exist, there could be a default or delay in payments to the Bondowners pending prosecution of foreclosure proceedings and receipt by the City of foreclosure sale proceeds, if any. However,within the limits of the Special Tax Report and the Special Service Area Act, the City may adjust through abatement the Special Tax levied on all property within the Area in future calendar years to provide an amount, taking into account such delinquencies, required to pay debt service on the Series 2004 Bonds and to replenish the Reserve Fund. The amounts of the Maximum Parcel Special Tax are sufficient to pay the amounts required by the Indenture to be paid on the Series 2004 Bonds (except with respect to a Mandatory Prepayment); however, there are no assurances that the taxes levied will always be collected in their entirety. Market Absorption Study Tracy Cross & Associates, Inc. (the "Market Consultant") performed a market analysis of the Area as reported in the Market Support Memorandum dated 2004 (the "Market Absorption Study") attached as APPENDIX C hereto. Neither the Underwriters, the Developer nor the City makes any representation as to the accuracy of the conclusions drawn by the Market Consultant in the Market Absorption Study. Based upon its analysis of the expected demographic and economic trends, the market supply and demand condition, conditions in the United City of Yorkville and other factors, and assuming the proposed average prices listed below are adhered to, the Market Consultant estimated that annual sales of Single Family Homes will be absorbed by end users as follows: Average Suggested Number of Benchmark Base Programs/ Sales Price(1) Annual Sales Potential Builders Average Total to Market Plan size without with Per Program/ Neighborhoods Units Concurrently (Sq.Ft.) SSA SSA Builder Total 10 & 11 171 2 2,100 $256,000 $244,800 42 84 12 & 13 140 2 2,500 282,000 270,800 42 84 14 & 15 179 2 3,000 313,000 301,800 36 72 Base sales prices,under each scenario,are presented in current dollars not inclusive of upgrades,options,or premiums. 25 While the Market Consultant has endeavored to estimate the rate of sales of Single Family Homes in the Area, there can be no assurance that such rate can be obtained. Failure to achieve these market projections could result in a higher Special Tax burden on the Developer and on individual Parcels in the Area than expected and, consequently, the failure of owners of property within the Area and the Developer to pay the Special Tax and thereby cause a default on the Series 2004 Bonds. It is anticipated that the Developer will sell property within the Area to various builders and that those builders will construct and sell such Single Family Homes. The subsequent construction and sale of Single Family Homes will be outside of the control of the Developer. Prospective purchasers should not assume that the rate of sales of Single Family Homes will occur as estimated and should review the Market Absorption Study in its entirety in order to make an informed decision whether to purchase the Series 2004 Bonds. See "APPENDIX C—Market Absorption Study." While the Market Consultant has estimated two builders marketing concurrently in each neighborhood,the actual number of builders per neighborhood is yet to be determined. See "PROPOSED DEVELOPMENT—Builders." Summary of the Appraisal A market value appraisal of the Parcels was performed by Frank John Karth & Associates (the "Appraiser") as of October_, 2004. It is the opinion of the Appraiser that the prospective market value of the Parcels to a single purchaser is $26,450,000 (based on 490 fully-improved Single Family Home sites and subject to the satisfactory completion of the Special Services). It is also the opinion of the Appraiser that the market value of a Single Family Home Parcel ranges from $55,955 to $68,375 depending on the size. See "APPENDIX D—Appraisal." Value to Lien Ratio The following table sets forth the appraised value-to-lien ratio with respect to the Project, based on $26,450,000 aggregate principal amount of the Series 2004 Bonds: Appraised Value of Parcels improved with On-Site Special Services (based on 490 Single Family Homes) $26,450,000 Series 2004 Bonds Outstanding................................................................... 13,200,000 Value-to-Lien Ratio..................................................................................... 2.0: 1 This value-to-lien ratio is based on the Appraisal. No assurance can be given that the foregoing ratio can or will be maintained during the period of time the Series 2004 Bonds are outstanding both because property values could drop and because other public entities, over which the Area has no control, could issue additional indebtedness secured by a lien on a parity with the lien securing payment of the Special Tax or payable through the levy or imposition of a tax on a parity with the Special Tax. Tax Assessment, Collection and Representative Property Taxes Under state law, local assessment officers are responsible for determining the assessed valuation of taxable real property including railroad property not used for transportation purposes. Certain other types of taxable property including railroad property used for transportation purposes and pollution control equipment, are assessed by the Illinois Department of Revenue (the "Department"). Valuations determined by local assessment officers are subject to appeal and review at the county level and then, in general, to equalization by the Department. Such equalization is achieved by applying to each county's assessments a multiplier determined by the Department. The purpose of equalization is to provide a common basis of assessments among counties by adjusting assessments toward the statutory standard of 26 33-1/3% of fair market value. Farmland is assessed according to a statutory formula which takes into account factors such as productivity and crop mix. Taxes are extended against the assessed values after equalization. Certain statutory exemptions provide for reductions in assessed valuation or for limitations upon increases in assessed valuation to qualifying taxpayers. Property tax levies of each taxing body, such as the City, are filed in the office of the county clerk of each county in which territory of the taxing body is located. The county clerk computes the rates and amounts of taxes applicable to taxable property subject to the tax levies of each taxing body and determines the dollar amount of taxes attributable to the respective parcels of taxable property. The county clerk then supplies to the appropriate collecting officials within the county the information needed to bill the taxes in respect to the various parcels therein. After the taxes have been collected, the collecting officials distribute to the various taxing bodies their respective shares of the taxes collected. Taxes levied in one calendar year are due and payable in two installments during the next calendar year. Taxes not paid when due are subject to a penalty of 1'/z% per month until paid. Unpaid property taxes constitute a lien against the property subject to the tax. The following table sets forth a statement of general ad valorem taxes, based on current rates,that would be expected to be assessed against Parcels improved with detached Single Family Homes in the Area based on the assessed values for such property set forth below and the most recent tax bill received by the Developer as owner of property in the Area. Ad Valorem Taxes United City of Yorkville Single Family Home Market Value................................................................... $275,000 Assessed Value................................................................ $91,667 Multiplier......................................................................... 1.0 Average Homeowner's Exemption................................... ($3,500.00) Taxable Valuation............................................................ $88,167 Single Family Home Taxing Agency Tax Rate(%)' Countyof Kendall............................................................ 0.5796 Mental Health.................................................................. 0.0341 CountyHealth.................................................................. 0.0344 Kendall County Forest Preserve ...................................... 0.0403 BristolTownship.............................................................. 0.3879 Oswego Fire Protection District...................................... 0.5505 Unit School District Number 115 .................................... 4.2383 Community College Dist.Number 516........................... 0.4105 City of Yorkville.........................................I.................... 0.6395 Total Tax Rate................................................................. 6.9151 Representative Ad Valorem Tax...................................... $6,097 Maximum Special Tax Levy Year 2005.......................... $2,099 Tax rates are for 2003 and assume a Parcel improved with a Single Family Home or Duplex in the United City of Yorkville, Kendall Township,Kendall County,Illinois. . Some Parcels are in the Bristol Kendall Fire District. 27 The City has no control over the amount of additional debt payable from taxes or assessments on all or a portion of the property within the Area, that may be issued in the future by other governmental entities or districts. Nothing prevents the owners of land within the Area from consenting to the issuance of additional debt by other public agencies which would be secured by taxes or assessments on the same property subject to the Special Tax. To the extent such indebtedness is payable from assessments, and other special taxes levied pursuant to the Special Service Area Act or other taxes, such assessments, special taxes and other taxes may have a lien on the property within the Area in addition to and on a parity with the lien of the Special Tax. Accordingly, the liens on the property within the Area could increase without any corresponding increase in the value of the property within the Area and thereby reduce the ratio that exists at the time the Series 2004 Bonds are issued between the value of the property and the debt secured by the taxes and assessments thereon. The imposition of such additional indebtedness could also reduce the willingness and ability of the property owners within the Area to pay the Special Tax when due. See "RISK FACTORS—Overlapping Indebtedness." Moreover, in the event of a delinquency in the payment of a Special Tax, no assurance can be given that the proceeds of any foreclosure sale would be sufficient to pay the delinquent Special Tax and any other delinquent special taxes, assessments or taxes. See "RISK FACTORS—Appraised Value". SUMMARY OF THE PUBLIC IMPROVEMENT AGREEMENT Introduction. Set forth below is a brief description of the Public Improvement Agreement. Such description does not purport to be comprehensive or definitive and is qualified in its entirety by reference to the complete form of the Public Improvement Agreement, which is included as APPENDIX E to this Limited Offering Memorandum. Agreement to Construct Special Improvements. The City and the Developer have entered into the Public Improvement Agreement. Pursuant to the Public Improvement Agreement, all Public Improvements ("Public Improvements" as defined in the Public Improvement Agreement are the same as the Special Services as defined in this Official Statement) shall be designed and constructed by or at the direction of the Developer, on behalf of the City, in accordance with the Annexation Agreement (as described in the Public Improvement Agreement) and all applicable laws, ordinances, rules and regulations. The Developer is obligated to construct and convey to the City the Public Improvements, and use its own funds to pay all costs in excess of the Budgeted Amount defined in the Public Improvement Agreement and if the completion is performed by the City, the cost of the completion in excess of the Budgeted Amount shall be paid by the Developer. Payment Procedures. The Developer may submit to the City, not more often than once in any calendar month, a written request for payment for the Budgeted Amount related to the portion of the Public Improvements that has been completed. The City will inspect the Public Improvements or portion thereof to determine if they are in compliance with the Construction Plans (as defined in the Public Improvement Agreement). For all Public Improvements or portions thereof in compliance, the City will, within ten (10) Business Days after receipt of a written request for payment, make its inspection and, if the City Engineer confirms the work for which payment is requested has been done, shall within three (3) Business Days of the inspection execute and deliver to the Developer a Certificate of Completion and Acceptance indicating the City's acceptance of such work and execute and deliver to the Trustee a written request for payment which shall entitle the Developer to receive a disbursement from the Bond Proceeds of the Series 2004 Bonds for the Budgeted Amount (as defined in the Public Improvement Agreement) for the completed portion of the Public Improvements. If, in the City's reasonable opinion, the Public Improvements or portion thereof are not in compliance with the Construction Plans, the City, within five business days of the Request for Payment, will notify the Developer in writing of the reasons that the Public Improvements or portion thereof are not in compliance with the Construction Plans. Such notice 28 will contain a reasonably detailed explanation of the reasons the Public Improvements or portion thereof are not in compliance. The Developer shall proceed to cure any defect, and shall then resubmit the Request for Payment pursuant to the procedure described above. The Developer is entitled to receive payment for the actual costs incurred up to the total Budgeted Amount for the Public Improvements. Security. Pursuant to Section 3.8 of the Public Improvement Agreement, no security shall be required for that portion of the cost of the Public Improvements that are paid, or to be paid, from the proceeds from the sale of the Series 2004 Bonds. Continuing Disclosure. Pursuant to the Public Improvement Agreement, the Developer will make available certain information on an on-going basis. See "CONTINUING INFORMATION—The Developer." Sales Contract Rider. Pursuant to the Public Improvement Agreement, the Developer and any subsequent builders are obligated to attach a rider to each sales contract(the "Rider") describing the Area, the Maximum Special Tax and the levy and collection process for the Special Tax. The Rider discloses the frequency, duration and maximum amount of special tax payments to which the purchased Parcel will be subject, and notifies the purchaser of the ability to prepay the Special Tax. SUMMARY OF THE ANNEXATION AGREEMENT The Grande Reserve Subdivision is subject to an Annexation and Planned Unit Development Agreement(the "Annexation Agreement")among the City, MPI-2 Yorkville North LLC, MPI-2 Yorkville South I LLC and MPI-2 Yorkville South II LLC dated August 7, 2003, and recorded in the Kendall County Real Property Records on September 11, 2003, as Document Number 200300032963. Pursuant to the Annexation Agreement, the Grande Reserve Subdivision was annexed into the City and approved for commercial and residential use (including the development of 2,646 dwelling units consisting of single family, single family villas, duplex, townhome and apartment units). The Area constitutes only a portion of the Grande Reserve Subdivision. The foregoing description is not and does not purport to be comprehensive or definitive and is qualified in its entirety by reference to the complete form of the Annexation Agreement. THE DEVELOPER Developer MPI-2 Yorkville Central LLC is the owner of the property included within the Area. The owners of the Developer are Moser Enterprises, Inc. ("Moser"), Pasquinelli Futures 1, LLC ("Pasquinelli") and Melvin Isenstein ("Isenstein"), whose combined experience in acquisition, zoning, development and sales, exceeds 100 years in total. 29 The Moser,Pasquinelli and Isenstein partnerships("MPI") began in 1999 with the acquisition and annexation of 884-acres into the Village of Plainfield known as the Grande Park Community. This Master Planned Community of 2,036 homesites features 17 unique neighborhoods and a 100-acre central park. From this first partnership, eight (8) MPI entities have been formed and whose status as of 2004 is as follows: {,T©wn/Cour ty `T: Comri unit -Acres Approved Sold Closed.` Plainfield Grande Park 884 2,036 0 Yorkville Grande Reserve 1,036 2,646 0 0 Plainfield Prairie Knoll 120 210 210 210 Oswego Blackberry Knoll 83 536 316 316 Plainfield Prairie Ponds 74 114 114 Sugar Grove Windsor West 120 250 250 250 Sugar Grove Bliss Woods 18 0 0 0 Kendall Tuttle/Burkhart/Kuhn farms 690 0 0 0 Kendall Davis farm 55 0 0 0 Will Schoger farm 24 54 0 0 TOTALS 3,104 PROPOSED DEVELOPMENT The information in this section has been provided by the Developer and has not been independently verified or relied upon by the United City of Yorkville. The United City of Yorkville makes no representation as to its accuracy or completeness. The Developer intends to develop a park, a school site and residential and other structures as well as other improvements in the Area(the "Project"). No assurance can be given that the Project will occur as described below or that it will occur in a timely manner or in the configuration described herein. The Series 2004 Bonds and the Special Tax are not personal obligations of the Developer. The Series 2004 Bonds are secured solely by the Special Tax and certain other amounts on deposit with the Trustee. See "SECURITY AND SOURCE OF PAYMENT FOR THE BONDS." Area Description The Area consists of approximately 550 acres with 70' of topographic relief, influenced by the Fox River to the south and the Blackberry Creek to the west. The acreage included within the Grande Reserve Subdivision was assembled starting in 1998 with five (5) separate land owners. Substantially, all the acreage was farm land. Location The Grande Reserve Subdivision has regional visibility from well traveled east/west roads, including Galena Road to the north and Route 34 to the south. The Grande Reserve Subdivision is bisected by Kennedy Road,Bristol Ridge Road and Mill Road, which provides excellent local visibility. 30 The Grande Reserve Subdivision is one-mile west of Orchard Road and forms the municipal boundary between the United City of Yorkville and the Village of Oswego to the east. Also, the Grande Reserve Subdivision borders the Village of Montgomery to the north of Galena Road. Blackberry Oaks Golf Club is located on Kennedy Road across from the Grande Reserve Subdivision. Transportation/Access ❖ I-88, 5.5 miles from Galena and Orchard Roads, 7.5 miles from Route 34 and Orchard Road. ❖ New bridge across Fox River at Route 34 and Orchard Road provides access to Route 71, which runs parallel to Route 34 on the South Side of the Fox River. ❖ Route 47, 3.5 miles to the west for the business district of the United City of Yorkville. ❖ Route 31, 3.5 miles to the east for the business district of the Village of Oswego. ❖ New Park 'n Ride shuttle for the Aurora METRA station, 1.0-mile east at the northwest corner of Mill and Orchards Roads. (Possible future METRA station location.) School The Grande Reserve Subdivision is in the Yorkville Community School District 115. A 12-acre elementary school site is to be located in the northern one-third of the Central Grande Reserve Area, between Neighborhoods 9 and 16. The Yorkville Community School District 115 has an option to locate a school campus on a 65- acre, triangular tract, bounded by Mill Road, Kennedy Road and the BSNF railroad tracks. This 65-acre tract includes 300 apartments in Neighborhood 4 and 164 townhomes in Neighborhood 5. If the option is exercised by 2006, the Developer will owe the Yorkville Community School District 115 approximately $600,000 for the balance of the land/cash donation. If the option is not exercised,the Developer will pay the Yorkville Community School District 115 approximately $4,350,000 for the 75f acres owed, per the land/cash donation formula. Environmental Testing Services Corporation ("TSC") conducted Phase I Environmental Site Assessments ("ESA") on November 20, 2000 and March 14, 2002, and Schrack Environmental Consulting, Inc. ("SECI") conducted an ESA on September 14, 1998 for the Developer of certain property within the Grande Reserve Subdivision, including the Area. The ESA conducted by SECI recommended a Phase II Environmental Site Assessment ("ESA II") for certain parcels within the North and South portions of the Grande Reserve Subdivision but not for any parcels located within the Area. SECI conducted an ESA II on October 8, 2003 and made further recommendations for certain parcels within the North and South portions of the Area but not for any parcels located within the Area. The remediation work for such parcels was performed by TSC and has been completed as recommended by SECI's ESA and ESA II. Information available to TSC and SECI indicated that the Grande Reserve Subdivision has been used only for cultivation of crops and other agricultural purposes. TSC concluded that their ESA revealed no evidence of recognized environmental conditions in connection with the Area. With the exception of an asbestos survey, which, under federal and state regulations, is required to be performed prior to demolition or renovation activities, TSC made no recommendations for further testing, studies or analysis for hazardous substances, petroleum products or pesticides in the Area. 31 Open Space In addition to the 55-acre Regional Park located west of Kennedy Road and south of Galena Road, there are seven (7) Public Parks (A-G) within the Grande Reserve Subdivision to be developed jointly with the Parks Department of the United City of Yorkville. Two (2) larger parks (D and E) are designated as community parks and five (5) smaller parks (A, B, C, F and G) are designated as neighborhood parks. All of these Parks will be linked via public sidewalks or public paved trails and available to the residents of the Grande Reserve Subdivision. Private amenities within the Grande Reserve Subdivision will include a 5,900 square feet Clubhouse featuring three (3)outdoor pools to be located northeast of Neighborhood 12. Zoning/Land Use The Area is zoned as a Planned Unit Development (PUD) under the R-2 One Family Residence District of the United City of Yorkville Zoning Ordinance. There are 11 separate neighborhoods,yielding 1,245 homesites to provide a broad mix of housing types and price points as follows: Sin le Neihborhood Area r Famil r a Duplex Townlome 6 Central 156 7 Central 142 8 Central 224 9 Central 135 10 Central 84 11 Central 87 12 Central 90 13 Central 50 14 Central 116 15 Central 63 16 Central 98 _ _ 723 224 29 Of the eight (8) single-family neighborhoods, there are three (3) different minimum lot sizes as follows: Neighborhood Area 10.000 11:000 't; 12,000 9 Central 135 10 Central 84 11 Central 87 12 Central 90 13 Central 50 14 Central 116 15 Central 63 16 Central 98 3066 23S 17 Infrastructure The development of the Grande Reserve Subdivision will provide a water loop with connections to existing water systems approximately 1.2-miles from the southwest corner of the Area along Route 34 32 and approximately 2.5-miles from the northwest corner of the Area along Galena Road. The Developer will provide two (2) municipal wells on-site along with a radium treatment facility to comply with new Federal Standards. The Developer has also constructed a 1,500,000 gallon water storage facility on-site. The wells, treatment facility and water storage facility are expected to be operational by , 2004. For the Area there are two (2) sources of sanitary sewer services from Fox Metro Water Reclamation District (FMRD). The Mill Street interceptor, from FMRD, is planned to provide services for Neighborhoods 1-8 and the Route 34 interceptor is planned to provide services for Neighborhoods 9- 16. The Route 34 interceptor requires an offsite easement. The easement has not been obtained at this time. Accordingly, the Developer will install a lift station and force main to connect to the Mill Street interceptor. Pursuant to an agreement with the City, the Developer will pay for operation and maintenance of this lift station and force main and provide a surety bond to cover costs related to the future abandonment of the lift station and connection to the Route 34 interceptor. Perimeter roads improvements vary by jurisdictions and specifications. The Developer will coordinate such improvements with the Illinois Department of Transportation (IDOT) for Route 34, Kendall County for Kennedy Road, Bristol Township for Galena Road and the United City of Yorkville for Mill and Bristol Ridge Roads. These road improvements are scheduled to coincide with the development of adjacent land. Development Plan and Timing Grande Reserve Subdivision is a master planned community of 2,646 homesites featuring 19 unique neighborhoods with a broad mix of housing types and price points. Grande Reserve Subdivision will be developed in three phases: North, Central and South. The Area constitutes only a portion of the Grande Reserve Subdivision. The Grande Reserve Subdivision is comprised of four separate special service areas: the Total Grande Reserve Special Service Area (which encompasses the entire area being developed and is coterminous with the other three special service areas), the North Grande Reserve Special Service Area (consisting of Neighborhoods 1-5), the Central Grande Reserve Special Service Area(consisting of Neighborhoods 6-16) and the South Grande Reserve Special Service Area(consisting of Neighborhoods 17-19). Dwelling Area Neighborhood Units Acres North 1 - 5 1,125 311 Central 6 - 16 1,245 550 South 17 -19 276 175 1 M The Central area will be developed first from the south to the north, consistent with the topographic relief for the stormwater system. Neighborhoods 10 and 11 (171 SF lots),Neighborhoods 12 and 13 (140 SF lots) and Neighborhoods 14 and 15 (179 SF lots) will be the first homesites produced. Thereafter, development will proceed in the Central Area as sales contracts dictate. A private clubhouse and three (3)outdoor pools will be started in late 2004 and targeted to open on Memorial Day 2005. The North area has a northerly parcel (Neighborhoods 1-3) and southerly parcel (Neighborhoods 4 and 5), the latter is subject to the Yorkville Community School District 115 option, referred to above. 33 Accordingly, Neighborhoods 1-3 are likely to be developed earlier, possibly as an age targeted, maintenance free lifestyle type of community. The South areas development of Neighborhoods 17-19 are dependent upon a new sanitary sewer interceptor, which will be over 2-miles in length. The YBSD is processing the design and permitting of same for a late 2005 completion to service the South area. Builders Contracts have been signed with four (4) builders for 490 single-family homesites in Neighborhoods 10-15. It is anticipated that the builders will build homes in accordance with the Market Absorption Study. The base house sizes are targeted from 1,700 sf to 3,600 sf with a targeted base price of$236,000 to $343,000. Closings are scheduled in one-third increments in the Fall of 2004, 2005 and 2006. The Builders are as follows: Pasquinelli-Grande Reserve LLC is the contract purchaser of 171 single-family homesites (minimum 10,000 sf) in Neighborhoods 10 and 11. Pasquinelli-Grande Reserve LLC, Pasquinelli Homes LLC and their prior affiliate, Pasquinelli Inc., have built approximately 20,000 homes in the Chicago metropolitan area since 1958 and anticipate an annual volume of 600 home closings in 2004. The Pasquinelli family of companies, under the umbrella of Pasquinelli Homebuilding LLC, anticipates an annual volume of 2700 home closings in 2004 outside the Chicago metropolitan area. Richmond American Homes of Illinois, Inc. is the contract purchaser of 140 single-family homesites (minimum 11,000 sf) in Neighborhoods 12 and 13. Richmond American Homes of Illinois, Inc. entered the Chicago metropolitan area in 2004 as a subsidiary of MDC Holdings, Inc. (a New York Stock Exchange listing company --- Symbol: MDC). Since 1972,the Company has built 82,000 homes in numerous U.S. markets. Kensington Development Group, Inc., an affiliate of Kensington Homes, Inc., is the contract purchasers of 90 single-family homesites (minimum 12,000 sf), in Neighborhoods 14 and 15. Kensington Homes has built approximately homes in the Chicago metropolitan area since 1993 and anticipates an annual volume of home closings in 2004. Gladstone Acquisitions, LLC, an affiliate of Gladstone Builders & Developers, Inc., is the contract purchaser of 89 single-family homesites (minimum 12,000 sf) in Neighborhoods 14 and 15. Gladstone Builders has built approximately 750 homes in the Chicago metropolitan area since 1989 and anticipates an annual volume of 150 home closings in 2004. 34 Consultants Following is a list of the consultants who have performed work on the Development to date: Land Planner: JEN Land Design,Inc. Civil Engineer: Cowhey Gudmundson Leder, Ltd. General Contractor: Pasquinelli Development Group, Inc. Construction Estimates: Pasquinelli Development Group,Inc. Environmental Consultant: Testing Service Corporation and Schrack Environmental Consulting,Inc. Geotechnical Consultant: Testing Service Corporation Landscape Architect: Rolf Campbell &Associates Surveyor: Midwest Technical Consultants, Inc. Traffic Consultant: Tracy Cross &Associates Zoning Counsel: Dommermuth,Brestal, Cobine and West, Ltd. 35 THE CITY General The United City of Yorkville was established in 1836 and originally consisted of two towns north and south of the Fox River with separate governments. In 1957, the two towns were combined and one government was formed. The government is a Mayor/City Council structure with the Mayor and eight Aldermen each elected to four-year terms. The City is located on the Fox River approximately 45 miles southwest of downtown Chicago. It is located near Interstate 88, which provides access to Chicago, and can also be reached via Interstate 55. The City is the county seat in Kendall County, Illinois and is comprised of approximately 6,100 citizens. City Government and Services The Mayor, Aldermen, City Clerk and City Treasurer are each elected to a four-year term. The City Council consists of the Mayor and eight Alderman. Two Alderman are elected from each of the City's four wards. The City is served by the Bristol/Kendall Fire Protection District which carries a Protection Class 6 and maintains a 24 hour paramedic unit. The Police Department has eighteen full-time officers (including 1 chief, 1 lieutenant, and 4 sergeants), and emergency medical service is available 24 hours a day. Transportation The City is close to many highways. The three Interstate highways are Interstate 55 (I-55), Interstate 80(I-80) and Interstate 88(I-88). The City is intersected by Illinois Routes 47 and 34 and 71 and 126. O'Hare and Midway Airports are approximately 40 miles northeast from the City. The closest airport, Aurora Municipal Airport, is approximately ten miles north in Sugar Grove. Their longest runway is 5,100 feet. The runway is lighted. Additionally, the airport has aircraft tiedowns, hangar, power plant repair, air frame repair and navigator aids. They also have freight, charter and helicopter services. The nearest railroad that serves the City is the Burlington Northern Santa Fe, part of the Metra commuter line, located in nearby Aurora. Community Life The City contains approximately 500 acres of parks with amenities like picnic areas, a gazebo, recreational fields, golf and forest preserves. Programs offered include aerobics, basketball, bus trips, bowling, Country/Western dance, crafts, dance, fishing, golf, soccer, sports club, street hockey, tee ball, tennis and tumbling. Yorkville Public Library has over 22,000 volumes and is one of the 40 members of the Heritage Trail Library System. They provide recreational reading and information requests. The library has recently improved its ability to research current topics through the addition of a CD-ROM full-text magazine index, with more than 10,000 articles of interest published over the past three years. 37 Two hospitals and several clinics in Aurora serve the City. The two hospitals, Rush/Copley Medical Center and Sandwich Community Hospital, are approximately 15 miles away. There are a total of 25 doctors and 3 dentists in the community. Education The educational facilities in the area include a community unit school district comprising two elementary schools, one junior high school, one high school; one community college; and one university. Yorkville High School has a staff of some 48 teachers and some 675 students. There is a two-year junior college in Sugar Grove (Waubonsee Community College District Number 516), a four-year university in Aurora(Aurora University) and a four-year university in DeKalb(Northern Illinois University). Waubonsee Community College District Number 516 (the "College") offers a wide variety of transfer, vocational, continuing and community education, children's and corporate development and training classes. It also offers a comprehensive educational program designed to serve all college district residents at a modest cost. In addition to 24 programs designed to transfer to senior institutions, the college offers occupational-oriented programs ranging in length from one semester to two years. The College has recently opened a state-of-the-art academic computing center that houses eight classrooms and a 120 personal computer work station open lab. The open lab is available for use by community members for a small user fee. Community Unit School District Number 115 has just implemented a new computer curriculum, innovative interdisciplinary projects and advanced team building and support programs for students and staff. Socioeconomic Information Following are lists of large employers located in the City and in the surrounding area. Major City Employers(l) Approximate Name Product/Service Employment Amurol Confections Co............................. Sugar Confections,Bubble Gum,&Candy 500 Yorkville School District........................... Education 250 Kendall County.......................................... County Government 130 Menard's Retail Super Store...................... Retail Stores 120 Newly Weds Foods.................................... Food Seasonings,Cures and Binders 115 F.E. Wheaton............................................. Window and Door Manufacturing 80 Jewel Food Store....................................... Grocery 80 Brenart Eye Clinic..................................... Eyeglasses 50 Old Second Bank/Yorkville National Bank........................................ Banking and Financial Services 50 Castle Bank................................................ Banking and Financial Services 40 Cascade Water Works Mfg. Co.,Inc......... Sewer&Piping Systems Repair Products 40 C.J. Insulation,Inc..................................... Insulation Installation 40 Bristol Equipment Company..................... Fluid Sampling Valves,Tank Car Automatic Cleaners 25 G.H.Haws&Assocs................................. Plastic Molding Parts 25 Alpha Precision, Inc.................................. Photographic Equipment&Supplies 20 Waste Technology, Inc.............................. Environmental Investigators 20 Note: (1) Source: 2004 Illinois Manufacturers Directory,2004 Illinois Services Directory and a selective telephone survey. 38 Major Area Employers(l) Approximate Name Location Business or Product Employment Harper-Wyman Co.,Appliance Control Group....... Sugar Grove Thermostatic Controls&Gas Combustion Products 1,400 Waubonsee Community College#516.................... Sugar Grove Education 750 Lyon Metal Products............................................... Montgomery Steel Storage Equipment 600 Chicago Bridge&Iron Company........................... Oswego Engineering&Technical Center 450 Eby-Brown Co........................................................ Montgomery Wholesale Tobacco&Confectionery 400 The Dial Corp......................................................... Montgomery Soap,Glycerin,&Fatty Acids 400 CBI Insulation Betterment...................................... Plainfield Storage Tank Insulation Equipment 300 Plano Molding Co................................................... Plano Plastic Injection Molding Headquarters 300 Processed Plastic Co............................................... Montgomery Plastic Toys 300 Fox Valley Press Inc............................................... Plainfield Newspaper Printing 230 Computype............................................................. Oswego Bar Coding Solutions&Products 201 Fox River Foods Inc............................................... Montgomery Wholesale Food 200 General American Door Co.................................... Montgomery Garage Doors 200 Oak Grigsby,Inc..................................................... Sugar Grove Electronic Switches 200 R.A.Bright Construction,Inc................................. Plainfield Concrete,Excavating,Underground Utilities 200 Note: (1) Source: 2004 Illinois Manufacturers Directory,2004 Illinois Services Directory and a selective telephone survey. The following tables show employment by industry and by occupation for the City, Kendall County(the "County")and the State of Illinois (the "State")as reported by the 2000 Census. Employment By Industry([) The City Kendall County State of Illinois Classification Number Percent Number Percent Number Percent Agriculture,Forestry,Fishing,Hunting,and Mining........ 47 1.45 380 1.32 66,481 1.14 Construction...................................................................... 332 10.23 2,586 8.97 334,176 5.73 Manufacturing................................................................... 564 17.38 5,337 18.50 931,162 15.96 Wholesale Trade................................................................ 145 4.47 1,187 4.12 222,990 3.82 Retail Trade....................................................................... 434 13.37 3,416 11.84 643,472 11.03 Transportation and Warehousing,and Utilities................. 201 6.19 1,657 5.75 352,193 6.04 Information........................................................................ 67 2.06 774 2.68 172,629 2.96 Finance,Insurance,Real Estate,and Rental and Leasing.. 216 6.65 2,463 8.54 462,169 7.92 Professional, Scientific, Management, Administrative, and Waste Management Services................................. 287 8.84 2,369 8.21 590,913 10.13 Educational,Health and Social Services........................... 443 13.65 4,691 16.26 1,131,987 19.41 Entertainment and Recreation Services, Accommodation and Food Services............................. 244 7.52 1,740 6.03 417,406 7.16 Other Services(except Public Administration)................. 118 3.64 1,246 4.32 275,901 4.73 Public Administration........................................................ 148 4.56 996 3.45 231.706 3.97 Total..................................................................... 3,246 100.00 28,842 100.00 5,833,185 100.00 Note: (1) Source: U.S.Bureau of the Census. 39 Employment By Occupation(l) The City Kendall County State of Illinois Classification Number Percent Number Percent Number Percent Management and Professional................................ 1,140 35.12 9,817 34.04 1,993,671 34.18 Service Occupations............................................... 416 12.82 3,216 11.15 813,479 13.95 Sales and Office Occupations................................. 858 26.43 8,310 28.81 1,609,939 27.60 Farming,Forestry and Fishing................................ 0 0.00 66 0.23 17,862 0.31 Construction,Extraction,and Maintenance............ 300 9.24 2,997 10.39 480,418 8.24 Production,Transportation,and Material Moving. 532 16.39 4,436 15.38 917,816 15.73 Total................................................................... 3,246 100.00 28,842 100.00 5,833,185 100.00 Note: (1) Source: U.S.Bureau of the Census. Annual Average Unemployment Rates(t) Calendar Year The City Kendall County State of Illinois 1993 ................... 7.7% 5.2% 7.5% 1994 ................... 6.6 4.5 5.7 1995 ................... 5.8 3.9 5.2 1996 ................... 5.9 3.9 5.3 1997 ................... 4.7 3.1 4.7 1998 ................... 4.3 2.9 4.5 1999 ................... 4.1 2.8 4.3 2000................... 4.1 2.8 4.4 2001 ................... 5.9 4.0 5.4 2002 ................... 8.2 5.6 6.5 2003 ................... 8.9 5.7 6.8 2004(2)................ N/A 5.9 6.1 Notes: (1) Source:Illinois Department of Employment Security. (2) Preliminary rates for the month of August 2004. 40 Housing The 2000 Census reported that the median value of the City's owner-occupied homes was $157,700, which compares with $154,900 for the County and $130,800 for the State. The 2000 market value of specified owner-occupied units for the City,the County and the State was as follows: Specified Owner-Occupied Units(l) The City Kendall County State of Illinois Value Number Percent Number Percent Number Percent Less than$50,000........... 0 0.00 93 0.65 230,049 9.31 $50,000 to$99,999......... 150 9.35 1,137 7.90 651,605 26.38 $100,000 to$149,999..... 520 32.40 5,485 38.12 583,409 23.62 $150,000 to$199,999..... 657 40.93 4,168 28.97 429,311 17.38 $200,000 to$299,999..... 260 16.20 2,873 19.97 344,651 13.95 $300,000 to$499,999..... 18 1.12 492 3.42 163,254 6.61 $500,000 to$999,999..... 0 0.00 128 0.89 55,673 2.25 $1,000,000 or more......... 0 0.00 12 0.08 12,386 0.50 Total........................... 1,605 100.00 14,388 100.00 2,470,338 100.00 Note: (1) Source: U.S.Bureau of the Census. 41 The following tables show the representative property tax rates for the City from 1998 through 2002 and the amount of tax extensions and collection for the levy year 1997 through 2003. Representative Tax Rates(i) (Per$100 EAV) Levy Year The City 1999 2000 2001 2002 2003 Corporate.......................................................... $0.2893 $0.3155 $0.2205 $0.1990 $0.1012 IMRF................................................................ 0.1159 0.0918 0.0481 0.0480 0.0612 Police Protection............................................... 0.0748 0.0750 0.0750 0.0713 0.0750 Police Pension.................................................. 0.0000 0.0000 0.1302 0.1083 0.1028 Garbage............................................................ 0.1504 0.1411 0.1211 0.1151 0.1228 Audit................................................................. 0.0150 0.0128 0.0119 0.0113 0.0098 Liability Insurance............................................ 0.0662 0.0551 0.0520 0.0613 0.0562 Social Security.................................................. 0.1049 0.1043 0.0970 0.0982 0.1000 School Cross Guard.......................................... 0.0037 0.0036 0.0035 0.0034 0.0047 Unemployment Insurance................................. 0.0388 0.0500 0.0000 0.0426 0.0058 Library.............................................................. - - IMRF-Library .0070 0.0037 0.0032 y................................................ 0.0039 0.0069 0.0068 - - SS-Library...................................................... Total City Rates�Z�......................................... $0.9817 $0.9713 $0.9286 $0.8674 $0.7895 Kendall County................................................. $0.8692 $0.8518 $0.7433 0.6920 0.6481 Kendall County Forest Preserve....................... 0.0255 0.0245 0.0243 0.0219 0.0403 Kendall Township ............................................ 0.4535 0.4576 0.4436 0.4253 0.3886 Bristol-Kendall Fire District.......................... 0.4500 0.4523 0.4450 0.4231 0.4011 Yorkville-Bristol Sanitary District................. 0.0781 0.0776 0.0711 0.0631 0.0547 Unit School District Number 115..................... 4.2995 4.3253 4.7168 4.4780 4.2383 Community College District Number 516........ 0.4386 0.4287 0.4239 0.4043 0.4105 Total Tax Rates�3�......................................... $7.5961 $7.5891 $7.7966 $7.3751 $6.9711 (1) Source: Kendall County Clerk (2) Statutory tax rate limits for the City are as follows: Corporate ($0.3300); Police Protection ($0.0750); Garbage ($0.2000);School Cross Guard($0.0200);and Library($0.1500). (3) Representative tax rates for other government units are from Bristol Township tax code 005. Tax Extensions and Collections(i) (Excludes Road and Bridge Levy) Taxes Collected(3) Taxes Levy Year Coll.Year Extended(2) Amount Percent 1998 1999 $1,027,363 $1,021,520 99.43% 1999 2000 1,083,917 1,087,444 100.33 2000 2001 1,142,869 1,144,706 100.16 2001 2002 1,255,485 1,251,975 99.72 2002 2003 1,429,114 1,424,626 99.69 2003 2004 1,589,368 815,404 N/A(4) (1) Source: Kendall County Treasurer (2) Tax extensions have been adjusted for abatements. (3) Total collections include back taxes,taxpayer refunds,interest,etc. (4) Collections as of August 27,2004. 42 Income The following table shows the Illinois counties with the highest per capita personal income for the year 2000. Kendall County ranked fourth among all counties in the state. Per Capita Personal Income for the Ten Highest Income Counties in the State(l) 2000 Rank Lake County.................... $32,102 1 DuPage County................ 31,315 2 McHenry County............. 26,476 3 Kendall County................ 25,188 4 Will County..................... 24,613 5 Kane County.................... 24,315 6 Cook County.................... 23,227 7 Sangamon County............ 23,173 8 Monroe County................ 22,954 9 Grundy County................ 22,591 10 Note: (1) Source: U.S.Bureau of the Census. The following shows a ranking of median family income for the Chicago metropolitan area among 102 Illinois counties from the 2000 Census. Ranking of Median Family Income(t) Family Ill. County Ill.Income Rank DuPage County......................... $79,314 1 Lake County.............................. 76,424 2 McHenry County....................... 71,553 3 Will County............................... 69,608 4 Kendall County......................... 69,383 5 Kane County.............................. 66,558 6 Cook County............................. 53,784 14 Note: (1) Source: U.S.Bureau of the Census. 43 According to the 2000 Census, the City had a median family income of$67,521. This compares to $69,383 for the County and $55,545 for the State. The following table represents the distribution of family incomes for the City,the County and the State at the time of the 2000 Census. Median Family Income(t) The City Kendall County State of Illinois Income Number Percent Number Percent Number Percent Under$10,000................ 7 0.42 117 0.78 156,205 5.00 $10,000 to$14,999......... 0 0.00 169 1.13 105,747 3.38 $15,000 to$24,999......... 79 4.79 609 4.07 273,712 8.76 $25,000 to$34,999......... 131 7.94 966 6.45 331,907 10.62 $35,000 to$49,999......... 284 17.21 2,226 14.86 506,429 16.20 $50,000 to$74,999......... 536 32.48 4,492 29.99 736,897 23.58 $75,000 to$99,999......... 328 19.88 3,215 21.46 445,390 14.25 $100,000 to$149,999..... 206 12.48 2,372 15.84 356,068 11.39 $150,000 to$199,999..... 35 2.12 506 3.38 101,955 3.26 $200,000 or more............ 44 2.67 306 2.04 111,008 3.55 Total........................... 1,650 100.00 14,978 100.00 3,125,318 100.00 Note: (1) Source: U.S.Bureau of the Census. According to the 2000 Census, the City had a median household income of $60,391. This compares to $64,625 for the County and $46,590 for the State. The following table represents the distribution of household incomes for the City,the County and the State at the time of the 2000 Census. Median Household Income(l) The City Kendall County State of Illinois Income Number Percent Number Percent Number Percent Under$10,000................ 70 3.10 435 2.32 383,299 8.35 $10,000 to$14,999......... 54 2.39 378 2.01 252,485 5.50 $15,000 to$24,999......... 175 7.76 1,308 6.96 517,812 11.27 $25,000 to$34,999......... 193 8.55 1,553 8.27 545,962 11.89 $35,000 to$49,999......... 405 17.95 2,771 14.75 745,180 16.23 $50,000 to$74,999......... 652 28.90 5,234 27.86 952,940 20.75 $75,000 to$99,999......... 382 16.93 3,635 19.35 531,760 11.58 $100,000 to$149,999..... 246 10.90 2,567 13.66 415,348 9.04 $150,000 to$199,999..... 35 1.55 563 3.00 119,056 2.59 $200,000 or more............ 44 1.95 345 1.84 128,898 2.81 Total........................... 2,256 100.00 18,789 100.00 4,592,740 100.00 Note: (1) Source: U.S.Bureau of the Census. 44 Wealth Indicators The private publication "Sales & Marketing Management" has developed a wealth indicator termed "effective buying income" (EBI) defined as money income less personal tax and non-tax payments, which is considered by the publication to be a bulk measurement of market potential. At December 31, 2001 (the latest data available), the County reportedly had a total EBI of$1,176,402,000 and a median household EBI of$52,516. The trend in median household EBI relative to the State and Kendall County, is shown below. Data for the City is not available. Effective Buying Income(l) 1996 1997 1998 1999 2000 2001 Kendall County......................... $44,275 $46,917 $49,065 $53,302 $53,508 $52,516 State of Illinois.......................... 38,177 39,875 40,691 43,169 45,381 41,976 County as Percent of State......... 115.97% 117.66% 120.58% 123.47% 117.91% 125.11% Note: (1) Source: "Sales&Marketing Management". Retail Activity Following is a summary of the City's sales tax receipts as collected and disbursed by the State. Retailers' Occupation, Service Occupation and Use Tax(t) State Fiscal Year State Sales Tax Annual Percent Ending June 30 Distributions(2) Change+(-) 1994......................................... $ 411,191 5.59 ) 1995......................................... 443,140 7.77 1996......................................... 472,289 6.58 1997......................................... 453,818 (3.91) 1998......................................... 850,072 87.32 1999......................................... 936,217 10.13 2000......................................... 1,024,813 9.46 2001......................................... 1,003,021 (2.13) 2002......................................... 1,203,279 19.98 Growth from 1994 to 2002...... 192.63 Notes: (1) Source: Illinois Department of Revenue. (2) Tax distributions are based on records of the Illinois Department of Revenue relating to the 1%municipal portion of the Retailers' Occupation, Service Occupation and Use Tax, collected on behalf of the City, less a State administration fee. The municipal 1%includes tax receipts from the sale of food and drugs which are not taxed by the State. (3) The 1994 percentage is based on a 1993 sales tax of$389,412. THE SPECIAL SERVICE AREA AND SPECIAL TAX The Special Service Area Act Section 7(6) of Article VII of the Illinois Constitution of 1970 permits a non-home rule unit to levy or impose additional taxes upon areas within its boundaries to provide special services to those areas and to pay debt incurred in order to provide those special services in the manner provided by law. Such areas are established pursuant to the provisions of the Special Service Area Act. Under the Special 45 Service Area Act,the Corporate Authorities of the municipality within which the special service area lies constitute the governing body of such special service area. The Special Service Area Act provides that bonds may be issued to provide for the special services. Such bonds do not constitute indebtedness of the municipality in which the special service area is situated for the purpose of any limitation imposed by any law. Such bonds shall be retired by a tax which may be either an ad valorem property tax, a special tax, or a combination of an ad valorem property and a special tax. A special tax may be levied or imposed on any basis that provides a rational relationship between the amount of special tax levied or imposed against each lot or parcel within the special service area and the special service benefit conferred. The Special Service Area Act further provides that the lien and foreclosure remedies provided in Article 9 of the Illinois Municipal Code shall apply on non-payment of any special tax. The Special Service Area Act contains a provision that allows residents of a special service area to petition the circuit court having jurisdiction to disconnect territory from the special service area if, among other things, such territory was not, is not, and is not intended by the corporate authorities which created the special service area to be benefited or served by services then existing or authorized, and that such territory constitutes less than 1 1/2% of the special service area's total equalized assessed valuation. The Developer and the City have represented that no parcel within the Area meets this test. Establishment of the Area Pursuant to the Special Service Area Act, the Corporate Authorities of the City adopted Ordinance No. 2004-13 on February 24, 2004, proposing to establish the Area. Pursuant to notice given by publication at least once not less than 15 days prior to the hearing, and pursuant to notice by mail to each person in whose name general taxes for the last proceeding year were paid on each parcel of land within the Area, a public hearing was held on March 23, 2004 to further consider establishment of the Area. On Septemberl4, 2004 the Corporate Authorities of the City adopted Ordinance No. 2004-49 , as amended by Ordinance No. adopted on October 26, 2004 (collectively, the "Establishing Ordinance"), which established the Area to provide certain special services, and authorized the City to levy and collect Special Taxes in the manner set forth in the Special Tax Report, to pay principal of and interest on the bonds secured by the Special Taxes in an aggregate principal amount not to exceed $35,000,000 to be retired over a period not to exceed 30 years from their date of issuance at an interest rate not to exceed 9% per annum or 125% of the rate for the most recent date shown in the 20 G.O. Bonds Index of average municipal bond yields as published in the most recent edition of the Bond Buyer at the time the contract is made for sale of the Bonds and the Bonds shall mature within not more than thirty (30)year from their issue date; the proceeds of the sale of the Bonds would be used to (a)construct such Special Services; and (b)to pay administrative expenses, pay costs of issuance, fund capitalized interest and fund a reserve fund. Pursuant to the Special Service Area Act, if a petition signed by at least 51% of the electors residing within the Area and by at least 51% of the owners of record of land included within the boundaries of the Area is filed with the municipal clerk within 60 days following the final adjournment of the public hearing objecting to the creation of the Area, the issuance of the Bonds or the provision of the Special Services, then the Area may not be created. No such petition was filed objecting to the creation of the Area. The sole owner of the property has waived its right to file an objection petition pursuant to the Special Service Area Act. The City has caused the Declaration of Consent and the Establishing Ordinance to be recorded in the Office of the Recorder of Deeds of Kendall County. Levy,Abatement and Collection of Special Tax In Illinois, property taxes levied in one year become payable during the following year as provided in said levy. See "SECURITY AND SOURCE OF PAYMENT FOR THE BONDS—Tax Assessment, Collection and Representative Property Taxes." Pursuant to the Bond Ordinance the City 46 has levied the Maximum Parcel Special Tax for all parcels within the Area. Pursuant to the Indenture and the Special Tax Report, the City has covenanted that prior to the last Tuesday of December of each year the Mayor and City Council of the City shall determine the Special Tax Requirement for Bonds then outstanding and due as provided in the Special Tax Report,taking into account other amounts that may be available to pay principal of and interest on the Bonds and administrative expenses, to amend the Special Tax Roll pursuant to the Special Tax Report and shall, by ordinance, approve the amount of the Special Tax Requirement for Bonds then outstanding and direct the County Clerk of Kendall County to extend the Special Tax for collection on the tax books in the amounts so determined pursuant to the Special Tax Report against all parcels of taxable property in the Area subject to such tax in accordance with the Special Tax Report. The Kendall County Clerk must receive the Special Tax roll by the last Tuesday in December. The Kendall County Clerk intends, to the extent possible, to incorporate the Special Tax bill into the regular ad valorem property tax bill which will be payable in two equal installments. The first installment is payable in June and the second installment is payable in September. The Special Tax levied by the Bond Ordinance shall be abated each year to the extent the taxes levied pursuant to such Bond Ordinance exceed the Special Tax Requirement as calculated by the City. At the end of each collection year, the Kendall County Treasurer applies to the Circuit Court of Kendall County, for a judgment for all unpaid taxes. The Circuit Court of Kendall County order resulting from that application for judgment provides for a sale of all property with unpaid taxes. A public sale is held, at which time successful bidders pay the unpaid taxes plus penalties. The annual tax sale is usually held during October in Kendall County. Unpaid taxes accrue penalties at the rate of 1 1/2% per month from their due date until the date of sale. Taxpayers can redeem their property by paying the purchaser of the property at the tax sale the amount paid at the sale, plus a penalty. If redemption does not occur within two and one half years and certain procedural requirements are met, the purchaser of the property at the tax sale can receive a deed to the property which has been sold for delinquent taxes. In addition, a municipality may seek enforcement of unpaid Special Tax through foreclosure proceedings by seeking in a court an adjudication of the existence of a lien and a finding of a failure to pay Special Tax when due. Upon making such a finding, a court having jurisdiction would enter a foreclosure decree authorizing the sale of the property subject to the lien of the Special Tax. See "SECURITY AND SOURCE OF PAYMENT FOR THE BONDS—Enforcement of Payment of Special Tax" herein. Special Service Area Special Tax Roll and Report The following description of the Special Service Area Special Tax Roll and Report prepared by David Taussig & Associates, Inc., Newport Beach, California, Special Tax Consultant, is qualified in its entirety by reference to the complete form of the Special Tax Report set forth in APPENDIX A hereto. Capitalized terms used in this section but not defined shall have the meaning given to such terms in the Special Tax Report. The Special Service Area Special Tax Roll and Report was prepared on the basis of 723 Single Family Homes, 298 Townhomes and 224 Duplexes. However, the Series 2004 Bonds will be financing special services to benefit only 490 Single Family Homes, and the Special Tax is to be spread only against the First Series Property until such time as Additional Bonds are issued. See "INTRODUCTORY STATEMENT." The Special Tax Report sets forth the provisions for apportioning and levying the Special Tax in the Area. The Special Tax has been levied in the Area each Calendar Year from 2005 to 2032 and will be collected each Calendar Year from 2006 to 2033. The amount of Special Tax to be levied pursuant to the Special Tax Report has been calculated to provide an amount equal to at least 110% of the annual debt service on the Bonds taking into account estimated interest earnings and after deduction of the Administrative Expenses. 47 The Maximum Parcel Special Tax levied by the City within the Area in 2006 shall be $2,334,285 and each year thereafter shall be increased by 1.50% per year rounded to the nearest dollar for each Parcel; provided, however, that in no event shall the Maximum Parcel Special Tax levied exceed $3,488,102 in 2032,the final year the Maximum Parcel Special Tax shall be levied. Subject, however, to the mandatory prepayment provisions set forth in the Special Tax Report, the Special Tax Bond Prepayment amount shall not exceed the principal amount of the Bonds issued pursuant to the Indenture or any Supplemental Indenture, plus any Premium, Defeasance and Fees as such terms are defined in the Special Tax Report, less the Reserve Fund Credit, plus any delinquent Special Taxes on the Parcel for which the prepayment is being made, including any applicable penalties and related costs. See "THE BONDS—Optional Prepayment of Special Tax" and "—Mandatory Prepayment of Special Tax." The following table sets forth certain information concerning the Special Tax, including the aggregate Maximum Special Tax to be collected in 2006 through 2033 and the Maximum Parcel Special Tax which has been levied pursuant to the Bond Ordinance: MAXIMUM SPECIAL TAX FOR LEVY YEARS 2005-2032 Maximum Parcel Special Tax per Maximum Single Family Parcel Levy Year(l) Home Special Tax(Z) Bond Levy t'� 2005 $2,099.00 $1,028,510 $2,334,285 2006 2,130.00 1,043,700 2,369,078 2007 2,162.00 1,059,380 2,404,594 2008 2,194.00 1,075,060 2,440,334 2009 2,227.00 1,091,230 2,477,095 2010 2,260.00 1,107,400 2,513,856 2011 2,294.00 1,124,060 2,551,564 2012 2,328.00 1,140,720 2,589,570 2013 2,363.00 1,157,870 2,628,523 2014 2,398.00 1,175,020 2,667,476 2015 2,434.00 1,192,660 2,707,450 2016 2,471.00 1,210,790 2,748,371 2017 2,508.00 1,228,920 2,789,590 2018 2,546.00 1,247,540 2,831,756 2019 2,584.00 1,266,160 2,873,922 2020 2,623.00 1,285,270 2,917,333 2021 2,662.00 1,304,380 2,960,744 2022 2,702.00 1,323,980 3,005,400 2023 2,743.00 1,344,070 3,050,779 2024 2,784.00 1,364,160 3,096,382 2025 2,826.00 1,384,740 3,143,006 2026 2,868.00 1,405,320 3,189,854 2027 2,911.00 1,426,390 3,237,723 2028 2,955.00 1,447,950 3,286,539 2029 21999.00 1,469,510 3,335,653 2030 3,044.00 1,491,560 3,385,714 2031 3,090.00 1,514,100 3,436,796 2032 3,136.00 1,536,640 3,488,102 Taxes to be collected in year after Levy Year. (z) Based on 490 Single Family Homes. (3) Based on 723 Single Family Homes,224 Duplexes and 298 Townhomes. 48 Administrative Services David Taussig & Associates, Inc. (the "Administrator") will provide administrative services for the Special Service Area for the City pursuant to an Administrative Services Agreement. The Administrator prepared the Special Tax Report. Under the Administrative Services Agreement, the Administrator will (i) maintain a Parcel database necessary to extend, bill and collect the Special Taxes, (ii) calculate the amount of Special Tax to be abated for the Area, (iii) prepare an annual report for the Area, (iv) facilitate billing of the Special Tax, (v) monitor tax receipts and collections, (vi) track Special Tax prepayment amounts, (vii) field taxpayer inquiries, (viii) monitor sales practices and disclosure materials, and(ix) calculate any rebate on the Bonds. RISK FACTORS Investment in the Series 2004 Bonds involves risks which may not be appropriate for certain investors. The following is a discussion of certain risk factors which should be considered, in addition to other matters set forth in this Limited Offering Memorandum, in evaluating the Series 2004 Bonds which are not rated by a recognized rating agency. This discussion does not purport to be comprehensive or definitive. The occurrence of one or more of the events discussed herein could adversely affect the ability or willingness of property owners in the Area to pay their Special Tax when due. Such failures to pay Special Tax could result in the inability of the Area to make full and punctual payments of debt service on the Series 2004 Bonds. In addition, the occurrence of one or more of the events discussed herein could adversely affect the value of the property in the Area. Limited Source of Funds The Series 2004 Bonds, together with the interest thereon, are limited obligations of the City, payable solely from the Special Tax and the amounts on deposit in the various funds and accounts established and maintained under the Indenture, all as more fully set forth therein. The Series 2004 Bonds are not general obligations of the City or the Developer and do not constitute an indebtedness of the City within the meaning of any constitutional or statutory limitation. No holder of the Series 2004 Bonds or the Developer shall have the right to compel the exercise of any taxing power of the City for payment of principal thereof or interest or premium, if any,thereon(other than the levy of the Special Tax as provided in the Bond Ordinance and the Indenture). See "SECURITY AND SOURCE OF PAYMENT FOR THE BONDS—General' herein. Concentration of Ownership The Developer currently intends to develop the land within the Area as described in this Limited Offering Memorandum. There are expected to be subsequent transfers of ownership of the property within the Area to other builders prior to completion of the Project. In addition, any number of factors, including an increase in interest rates, may result in slower sales of property in the Area by the Developer. Until transfers to homeowners occur, the timely payment of the Series 2004 Bonds depends on the willingness and ability of the Developer or the then current owner to pay the Special Tax when due. A failure to make payments when due could result in the rapid, total depletion of the Reserve Fund prior to replenishment from the resale of property upon a foreclosure or otherwise. In that event,there could be a default in payments of the principal of, and interest on, the Series 2004 Bonds. See "THE DEVELOPER" above and "RISK FACTORS—Potential Delay and Limitations in Foreclosure Proceedings" below. 49 Information Not Verified Information concerning the Area and the proposed development has been obtained from the City, the Developer and other sources believed to be reliable, but much of that information involves predictions of future events, such as sales and ability of homeowners and other property owners to pay their share of the Special Tax; such information is, by its nature, not subject to verification. Failure to Develop Properties Development of land is subject to economic considerations affecting the Developer and prospective purchasers of developed property including interest rates and the general economic climate of the region surrounding the Area. The failure to complete development of the required infrastructure or substantial delays in the completion of the Project due to litigation, the inability to obtain required funding, the inability to sell homes or other causes may reduce the value of the property within the Area and increase the length of time during which Special Tax will be payable by the Developer as owner of taxable property within the Area. Such failure or delay may affect the willingness and ability of the owners of property within the Area to pay the Special Tax when due. Bondowners should assume that any event that significantly impinges on the ability to develop the Area would cause the property values within the Area to decrease substantially from those estimated by the Appraiser and could affect the willingness and ability of the owners of land within the Area to pay the Special Tax when due. See SECURITY AND SOURCE OF PAYMENT FOR THE BONDS—Market Absorption Study" and "PROPOSED DEVELOPMENT." The City may terminate the Public Improvement Agreement if the Developer does not comply with its terms and provisions. There can be no assurance that the Developer will comply with the terms of the Public Improvement Agreement or that the City will not terminate such agreement if the Developer fails to comply with its terms. See "SUMMARY OF THE PUBLIC IMPROVEMENT AGREEMENT." Failure to Achieve Market Projections The Market Absorption Study has reached certain conclusions, based upon market trends and the perceived demand for housing in the United City of Yorkville area. While the Market Consultant believes the assumptions with respect to historical market conditions are accurate, there can be no assurances that such a level of Single Family Home, Townhome or Duplex absorption can be obtained in the Project. Failure to achieve these market projections will adversely affect the estimated value of the Parcels, could impair the economic viability of the Project and could reduce the ability or desire of the property owners to pay the Special Tax. In that event,there could be a default in the payment of principal of, and interest on, the Series 2004 Bonds. See "PROPOSED DEVELOPMENT." It should not be assumed that the absorption of Single Family Homes, Townhomes or Duplexes will occur as estimated and prospective purchasers should review the Market Absorption Study in its entirety in order to make an informed decision whether to purchase the Series 2004 Bonds. See "APPENDIX C—Market Absorption Study." Appraised Values The Appraiser has estimated the value of all property in the Area on the basis of certain assumptions and limiting conditions contained in the Appraisal, including the assumed completion of the Project. See "SECURITY AND SOURCE OF PAYMENT FOR THE BONDS—Summary of Appraisal' and "APPENDIX D—Appraisal." The City makes no representation as to the accuracy of the Summary of Appraisal. The Appraisal assumes that the Series 2004 Bonds will be issued for the purpose of constructing the Special Services and that development will occur as outlined therein. There can be no assurance that 50 the construction of the Special Services will be completed in a timely manner or that they will be completed at all. The Appraisal does not specifically address any possible negative impact which could occur by reason of failure to timely complete the Special Services, any future litigation, the obtaining of future permits or approvals or other similar situations. It should not be assumed that the land within the Area could be sold for the appraised amount described herein at a foreclosure sale for delinquent Special Tax. See "SECURITY AND SOURCE OF PAYMENT FOR THE BONDS—Summary of Appraisal" and "APPENDIX D—Appraisal." Development within the Area is contingent upon the construction and acquisition of the Special Services as well as the necessary local improvements. A slow down or stoppage of the development process could adversely affect land values and reduce the ability or desire of property owners to pay the Special Tax. In that event, there could be a default in the payment of principal of, and interest on, the Series 2004 Bonds. See "RISK FACTORS—Failure to Develop Properties." Local, State and Federal Land Use Regulations There can be no assurance that land development operations within the Area will not be adversely affected by future government policies, including, but not limited to, governmental policies which directly or indirectly restrict or control development. The Public Improvement Agreement cannot limit the application of state or federal laws and regulations which have preemptive effect on local land use regulations. During the past several years, state and federal regulatory agencies have significantly expanded their involvement in local land use matters through increased regulatory enforcement of various environmental laws, including the Endangered Species Act, the Clean Water Act and the Clear Air Act, among others. Such regulations can substantially impair the rate and amount of development without requiring just compensation unless the effect of the regulation is to deny all economic use of the affected property. Bondowners should assume that any event that significantly impairs the ability to develop land in the Area could cause the land values within the Area to decrease substantially and could affect the willingness and ability of the owners of land to pay the Special Tax when due or to proceed with development of land in the Area. See "RISK FACTORS—Failure to Develop Properties" herein. Competition The United City of Yorkville has approved over housing units with approximately units actively being marketed. Developers for these projects include Wiseman-Hughes Enterprises, Inc., Kimball Hill Homes, Lennar/Concord Homes and various other small builders. In addition, the surrounding communities of Oswego, Montgomery and Plano have numerous projects that are competitive with the proposed Development. This competition could have an adverse impact on the future value of the property in the Area and the rate at which the Single Family Homes, Townhomes or Duplexes are sold and absorbed. See "APPENDIX C—Market Absorption Study" and "APPENDIX D— Appraisal." In addition, competing projects may not be within a special service area, and therefore may not have the additional special tax burden, which could also affect absorption. Land Development Costs Development of land within the Area is contingent upon construction or acquisition of major special services such as arterial streets, water distribution facilities, sewage collection and transmission facilities, drainage and flood protection facilities, gas, telephone, other communication and electrical facilities, and lighting, as well as local improvements and on-site grading and related improvements. There can be no assurance that the Special Services will be constructed or will be constructed in time for development to proceed as currently expected. See "PROPOSED DEVELOPMENT." 51 The cost of the Special Services plus the public and private on-site and off-site improvements can be expected to increase the public and private debt encumbering the land within the Area. The Special Tax has priority over all existing and future private liens, imposed on property in the Area except, possibly, for liens or security interests held by the Federal Deposit Insurance Corporation. See "RISK FACTORS—Bankruptcy," and "—Potential Delay and Limitations in Foreclosure Proceedings." Although liens securing private debt are subordinate to the lien of the Special Tax securing the Series 2004 Bonds, this increased private debt could reduce the ability or desire of the property owners to pay the Special Tax imposed against their property. See SECURITY AND SOURCE OF PAYMENT FOR THE BONDS—Special Tax " and "SECURITY AND SOURCE OF PAYMENT FOR THE BONDS— Summary of the Appraisal." If property owners in the Area fail to pay the Special Tax, and if the Reserve Fund is depleted prior to collection of such delinquent Special Tax through foreclosure sale or otherwise, there could be a default in the payment of principal of,and interest on,the Series 2004 Bonds. See "RISK FACTORS—Bankruptcy" herein. Overlapping Indebtedness The Special Tax and any penalties assessed for failure to pay such taxes will constitute a lien against the parcels of land on which they will be levied until such taxes are paid. Such lien will be on a parity with all special taxes and special assessments which may be levied by other agencies and is co- equal to and independent of the lien for general ad valorem real property taxes regardless of when they are imposed upon the same property. The City, however, has no control over the ability of other entities and districts to issue indebtedness secured by special taxes or assessments payable from all or a portion of the property within the Area. The ability of an owner of land within the Area to pay the Special Tax could be adversely affected if additional debt is issued or additional taxes or assessments are levied which are payable by the owners of land within the Area. The imposition of additional liens, whether public or private, may reduce the ability or willingness of the landowners to pay the Special Tax and increases the possibility that foreclosure proceeds will not be adequate to pay delinquent Special Tax. Dependence on Unimproved Property Initially,payment of the Series 2004 Bonds will be partially dependent upon, among other things, receipt of Special Tax imposed on certain Parcels not improved with Single Family Homes, Townhomes or Duplexes for a number of years in the future. See "THE SPECIAL SERVICE AREA AND SPECIAL TAX" and "PLAN OF FINANCE—Expected Tax Revenues and Debt Service Coverage" herein. Parcels not improved with Single Family Homes, Townhomes or Duplexes are less valuable per Parcel than Parcels improved with Single Family Homes, Townhomes or Duplexes. Parcels not improved with Single Family Homes, Townhomes or Duplexes also provide less security to the Bondowners should it be necessary for the City to foreclose on such Parcels due to the nonpayment of the Special Tax. Because of the current concentration of ownership in the Developer, the timely payment of the Series 2004 Bonds depends upon the willingness and ability of the Developer and future owners to pay the Special Tax levied on the Parcels not improved with Single Family Homes, Townhomes or Duplexes when due. See "RISK FACTORS—Concentration of Ownership" above. A slowdown or stoppage in the continued improvement of Parcels with Single Family Homes, Townhomes or Duplexes could reduce the willingness and ability of the Developer to make Special Tax payments on Parcels not improved with Single Family Homes, Townhomes or Duplexes and could greatly reduce the value of such property in the event it has to be foreclosed. See "RISK FACTORS—Appraised Values" above. 52 Zoning Approvals The City has adopted ordinances approving the Preliminary Plat of Subdivision for the Project, the Final Engineering Plans, and approval of the Final Plat of Subdivision for First Series Property. The Developer has applied for final plat approval for the remaining phases. Final plat approval is required for the remainder of the area pursuant to the covenants regarding the Area zoning contained in the Annexation Agreement and the Public Improvement Agreement. Consideration and approval by the City may not always be exercised in a manner that is favorable to the Developer. Permits The Developer has applied for but not yet obtained construction permits from the Illinois Environmental Protection Agency for the sanitary sewer and water main construction and the U.S. EPA (NPDES) for general storm water discharge for the Project. Permits have been obtained from the Illinois Department of Natural Resources and the Illinois Historic Preservation Agency. The Developer is in the process of obtaining permits, if required, from the Army Corps of Engineers. The Illinois Department of Transportation has provided a permit of accessibility to the site, but no permit has been provided to work on the highway abutting the site. A Permit from the City for the on-site sanitary sewer permit is in process. The Developer has not, as of the date hereof, applied for all building permits necessary to construct the Special Services and the other improvements that make up the Project. Failure to obtain the necessary permits on a timely basis will adversely affect the completion of the Project. The Fox Metro Reclamation District has not, as of the date hereof, received an easement which is necessary to provide for off-site sanitary sewer service (the Route 34 interceptor) for the Area, although the Developer and the City are negotiating an alternative means of providing sewer service for the Area for an interim period and as a backup therefore. A permit has been received for the construction of the water system but a permit has not been obtained to operate the water system. Tax Delinquencies In order to pay debt service on the Series 2004 Bonds, it is necessary that the Special Tax within the Area be paid in a timely manner. The Special Tax, from which funds necessary for the payment of principal of, and interest on, the Series 2004 Bonds are derived, will be billed to the property owners within the Area on the regular general ad valorem property tax bills sent to owners of such properties or on a special tax bill delivered at the same time as the regular ad valorem property tax bills. Such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do general ad valorem property tax installments. The unwillingness or inability of a property owner to pay ad valorem property tax bills as evidenced by general ad valorem tax delinquencies may also indicate an unwillingness or inability to make general ad valorem tax payments and Special Tax installment payments in the future. If the Developer or future owners fail to pay the Special Tax when due there could be significant special tax delinquencies. See "RISK FACTORS—Concentration of Ownership." Also,the Kendall County Collector may not be willing to bill the property owners in the Area the Special Tax on their regular ad valorem property tax bills,or, if the Kendall County Collector is willing to bill the property owners in the Area the Special Tax on their regular ad valorem property bills today, the Kendall County Collector may not be willing to do so in the future. In that event,the responsibility to bill and collect Special Tax would become the City's responsibility under the Special Tax Report. See "SECURITY AND SOURCE OF PAYMENT FOR THE BONDS—Enforcement of Payment of Special Tax" for a discussion of the provisions which apply, and procedures which the City is obligated to follow under the Indenture, in the event of delinquencies in the payment of Special Tax. See "RISK FACTORS—Potential Delay and Limitation in Foreclosure Proceedings" and "—Bankruptcy" below, for 53 a discussion of limitations on the City's ability to foreclose the lien of delinquent unpaid Special Tax in certain circumstances. Potential Delay and Limitations in Foreclosure Proceedings The payment of Special Tax and the ability of the City to foreclose the lien of a delinquent unpaid Special Tax may be limited by bankruptcy, insolvency and other laws generally affecting creditors' rights or by the laws of the State of Illinois relating to judicial foreclosure. See "RISK FACTORS— Bankruptcy." In addition, the prosecution of a foreclosure could be delayed due to many reasons, including crowded local court calendars or lengthy procedural delays. The ability of the City to foreclose the lien of a delinquent unpaid Special Tax payment may be limited with regard to properties in which the Federal Deposit Insurance Corporation ("FDIC") or any successor to the FDIC may acquire an interest. The FDIC currently does not have an interest in the land within the Area. However, if a lender takes a security interest in property in the Area and becomes insolvent, such a lender could fall under the jurisdiction of the FDIC. The FDIC could assert federal preemptive power to challenge any prior taxes, special taxes and assessments where it is in their interest to do so, including the requirement that local agencies obtain the consent of the FDIC in order to foreclose the lien of delinquent unpaid special taxes. If the City is required to obtain the consent of the FDIC to foreclose on property located in the Area, such consent could be denied and the City might be unable to pursue foreclosure proceedings. Additionally, obtaining such consent could delay the foreclosure proceedings. Any delay in foreclosure proceedings or the inability of the City to foreclose on property in the Area in which the FDIC has an interest could result in a delay or default in payment of the Series 2004 Bonds. In addition, potential investors should be aware that judicial foreclosure proceedings are not summary remedies and can be subject to significant procedural and other delays caused by crowded court calendars and other factors beyond the control of the Area or the City. In addition, the Illinois Constitution prescribes certain minimum redemption periods, which may be as long as three years, in the event of foreclosure. See "SECURITY AND SOURCE OF PAYMENT FOR THE BONDS— Foreclosure of Liens." It should be assumed that, under current conditions, it is estimated that a judicial foreclosure of the lien of the Special Tax could take several years from initiation of litigation to the lien foreclosure sale. Delays and uncertainties in the Special Tax lien foreclosure process create significant risks for Bondowners. High rates of Special Tax payment delinquencies which continue during the pendency of protracted Special Tax lien foreclosure proceedings, could result in the rapid, total depletion of the Reserve Fund prior to replenishment from the resale of Parcels in the Area upon foreclosure. In that event, there could be a default in payments of the principal of, and interest on, the Series 2004 Bonds. See "RISK FACTORS—Concentration of Ownership" above. Bankruptcy The various legal opinions to be delivered concurrently with the delivery of the Series 2004 Bonds (including Bond Counsel's approving legal opinion) will be qualified, as to the enforceability of the various legal instruments, by moratorium, bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally. Although a bankruptcy proceeding would not cause the Special Tax to become extinguished, the amount and priority Tax lien could be deli , excess the property below treated value of the lien. If the value of the P roperty is e than the ensuch amoun could be as 54 an unsecured claim by a bankruptcy court having jurisdiction. In addition, bankruptcy of a property owner could result in a delay in commencement and completion of tax sale or foreclosure proceedings. Such delay would increase the likelihood of a delay or default in payment of the principal of, and interest on,the Series 2004 Bonds and the possibility of delinquent tax Special Tax installments not being paid in full. Maximum Special Taxes Pursuant to the Bond Ordinance, the City has levied the Special Tax in the maximum amounts permitted by the Special Tax Report. However, there is no assurance that the maximum amounts will at all times be sufficient to pay the amounts required to be paid by the Indenture. See "SECURITY AND SOURCE OF PAYMENT FOR THE BONDS—Tax Revenues" and "THE SPECIAL SERVICE AREA AND SPECIAL TAX--Special Service Area Special Tax Roll and Report." Disclosure to Future Purchasers The City has recorded the Establishing Ordinance for the property included in the Area in the Office of the Recorder of Deeds of Kendall County on or prior to the Date of Delivery, and will record the Declaration of Consent in the Office of the Recorder of Deeds of Kendall County on or prior to the Date of Delivery. While title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such Special Tax obligation in the purchase of Parcels or the lending of money thereon. The Developer has agreed to include the Rider with the purchase contract that initial purchasers will sign disclosing and explaining the Special Tax obligation. There can be no guarantee that the Rider will be included with all of Developer's purchase contracts, or, if the Rider is included, that a prospective purchaser will consider the Special Tax obligation in the purchase of Parcels. A purchaser's failure to be aware of or consider the Special Tax obligation may negatively affect such purchaser's willingness and ability to pay the Special tax when due. Limited Secondary Market There can be no guarantee that there will be a secondary market for the Series 2004 Bonds or, if a secondary market exists, that such Series 2004 Bonds can be sold for any particular price. Except as set forth in the Public Improvement Agreement and as described below under the caption "CONTINUING DISCLOSURE", neither the City nor the Developer has committed to provide any financial or and operating information on a going forward basis. See "APPENDIX B—Indenture." Occasionally, because of general market conditions, lack of current information, the absence of a credit rating for the Series 2004 Bonds or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. In addition, prices of issues for which a market is being made will depend on then prevailing circumstances. Such prices could be substantially different from the original purchase price. Secondary Market and Prices The Underwriters presently do not intend to engage in secondary market trading of the Series 2004 Bonds. The Underwriters are not obligated to engage in secondary trading or to repurchase any of the Series 2004 Bonds at the request of the Owners thereof. No assurance can be given that a secondary market for any of the Series 2004 Bonds will be available and no assurance can be given that the initial offering prices for the Series 2004 Bonds will continue for any period of time. 55 Loss of Tax Exemption Interest on the Series 2004 Bonds could become includible in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2004 Bonds as a result of a failure of the City to comply with certain provisions of the Code. Should such an event of taxability occur, the Series 2004 Bonds are not subject to early redemption and will remain outstanding to maturity or until redeemed under the optional redemption or mandatory redemption provisions of the Indenture. Risk of Legislative and Judicial Changes Future legislation, regulations, governmental or judicial interpretation of regulations or legislation or practices and procedures related to property tax assessment, levy, collections or distribution could have a material effect on the calculation or availability of the Special Tax. There is no assurance that legislation will not be considered or enacted in the future, and unless provision is made in such legislation for special service areas generally in Illinois, the generation of the Special Tax could be materially adversely affected. Change in Density As set forth in this Limited Offering Memorandum, the Developer intends to develop the Area with Single Family Homes, Townhomes and Duplexes. The Special Tax Report allocates the Special Tax on the basis of said 723 Single Family Homes, 298 Townhomes and 224 Duplexes. However, in the event of a reduction in the number of Single Family Homes, Townhomes or Duplexes below 723, 298 and 224, respectively, the Special Tax allocated to the lost Single Family Homes, Townhomes or Duplexes cannot be recovered by increasing the Special Tax on the remaining Single Family Homes, Duplexes or any other property within the Area. The Special Tax Report calls for a mandatory prepayment of the Special Tax in the event of a reduction in the number of Single Family Homes, Townhomes or Duplexes below the expected amounts. Pursuant to the Special Tax Report, if the mandatory prepayment is not paid, such prepayment amount may be levied on any and all of the resulting Parcels. The levy of such mandatory prepayment amount shall have the same sale and lien priorities as are provided for general ad valorem property taxes. In the event such levy is not paid, the City may collect the same through a tax sale proceeding, which may result in a delay in collection of that portion of the Special Tax. Limitation on Remedies; No Acceleration Remedies available to Bondholders may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the Bonds or to preserve the tax-exempt status of the Bonds. Bond Counsel has limited its opinion to the extent that enforceability may be limited by bankruptcy, insolvency or similar laws affecting generally the enforcement of creditors' rights. Additionally, the Bonds are not subject to acceleration in the event of the breach of any covenant or duty under the Indenture, including payment default. Lack of remedies may entail risks of delay, limitation or modification of Bondholders' rights. Judicial remedies, such as foreclosure and enforcement of covenants, are subject to exercise of judicial discretion. UNDERWRITING The Underwriters, LaSalle Capital Markets, A Division of ABN AMRO Financial Services, Inc. and William Blair & Company, L.L.C., have agreed to purchase the Series 2004 Bonds from the City for reoffering, subject to certain conditions, at an aggregate purchase price of$ , which reflects an underwriting discount of $ . Under the bond purchase agreement among the City, the Developer, and the Underwriters (the "Bond Purchase Agreement"), the Underwriters are obligated to 56 purchase all of the Series 2004 Bonds if any are purchased. The obligation of the Underwriters to make such purchase is subject to certain conditions set forth in the Bond Purchase Agreement. The Underwriters may change the prices and other terms with respect to the offer and sale of the Series 2004 Bonds from time to time after the Series 2004 Bonds are released for sale, and the Series 2004 Bonds may be offered and sold at prices other than the initial offering price set forth on the cover page of this Limited Offering Memorandum, including sales to dealers. LEGAL OPINIONS Legal matters incident to the authorization, issuance and sale of the Series 2004 Bonds are subject to the approving legal opinion of Foley& Lardner LLP, Chicago, Illinois, Bond Counsel. The proposed form of the opinion of Bond Counsel is included herein as APPENDIX F. Certain legal matters will be passed upon for the Underwriters by their counsel, Ungaretti & Harris LLP, Chicago, Illinois; for the City, by its counsel, Daniel Kramer, Esq., Yorkville, Illinois, and for the Developer by its counsel, Moss and Bloomberg, Ltd.,Bolingbrook, Illinois,and KB Legal, Dyer, Indiana. TAX MATTERS In the opinion of Foley& Lardner LLP, Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, compliance with certain covenants, interest on the Series 2004 Bonds is excluded from gross income for federal income tax purposes under the Code and is not a specific preference item for purposes of determining an individual's or corporation's federal alternative minimum taxable income. However, Bond Counsel observes that interest on the Series 2004 Bonds is included in adjusted current earnings in calculating federal corporate alternative minimum taxable income. Interest on the Series 2004 Bonds is not exempt from State of Illinois income taxes. Series 2004 Bonds purchased, whether at original issuance or otherwise, for an amount greater than their principal amount payable at maturity (or, in some cases, at their earlier call date) ("Premium Bonds") will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax exempt interest received, and a purchaser's basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such purchaser. Thus, the amortization of Bond premium may have an effect on a bondholder's recognition of gain or loss when a Premium Bond is sold or paid off. Beneficial Owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances. To the extent the issue price of any maturity of the Series 2004 Bonds is less than the amount to be paid at maturity of such Series 2004 Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Series 2004 Bonds), the difference constitutes "original issue discount," the accrual of which, to the extent properly allocable to each Bondholder, is treated as interest on the Series 2004 Bonds which is excluded from gross income for federal income tax purposes. For this purpose, the issue price of a particular maturity of the Series 2004 Bonds is the first price at which a substantial amount of such maturity of the Series 2004 Bonds is sold to the public (excluding bond houses, brokers, or persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Series 2004 Bonds accrues daily over the term to maturity of such Bond on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Bond to determine taxable gain or loss upon disposition 57 (including sale, redemption, or payment on maturity) of Series 2004 Bonds. Beneficial Owners of the Series 2004 Bonds should consult their own tax advisors with respect to the tax consequence of ownership of Series 2004 Bonds with original issue discount, including the treatment of purchasers who do not purchase such Series 2004 Bonds in the original offering to the public at the first price at which a substantial amount of such Bond was sold to the public. Section 103 of the Code imposes various restrictions, conditions and requirements relating to exclusion from gross income for federal income tax purposes of interest on obligations such as the Series 2004 Bonds. The City has covenanted to comply with certain restrictions designed to insure that interest on the Series 2004 Bonds will not be included in a bondholder's gross income for federal income tax purposes. Failure to comply with these covenants may result in interest on the Series 2004 Bonds being included in gross income for federal income tax purposes, possibly from the original issue date of the Series 2004 Bonds. The opinion of Foley & Lardner LLP assumes compliance with these covenants. Foley & Lardner LLP has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Series 2004 Bonds may adversely affect the value of or the tax-exempt status of interest on the Series 2004 Bonds. Further, Foley&Lardner does not give assurance that pending or further legislation or amendments to the Code, if enacted into law, will not adversely affect the value of or the tax exempt status of interest on the Series 2004 Bonds. Beneficial Owners are encouraged to consult their own tax advisors with respect to proposals to restructure the federal income tax. Certain requirements and procedures contained or referred to in the Indenture, the Bond Ordinance, the Tax Agreement and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the Series 2004 Bonds) may be taken or omitted under the circumstance subject to the terms and conditions set forth in such documents. Foley & Lardner LLP expresses no opinion as to any Bond or the interest thereon if any such change occurs or action is taken or omitted upon advice or approval of bond counsel other than Foley &Lardner LLP. Although Foley & Lardner LLP is of the opinion that interest on the Series 2004 Bonds is excluded from gross income for federal income tax purposes, the ownership or disposition of, or the accrual or receipt of interest on, the Series 2004 Bonds may otherwise affect a Beneficial Owner's federal or state tax liability. The nature and extent of these other tax consequences will depend upon the particular tax status of the Beneficial Owner or the Beneficial Owner's other items of income or deduction. Foley &Lardner LLP express no opinion regarding any such other tax consequences. No assurance can be given that any future legislation or clarifications or amendments to the Code, if enacted into law, will not cause the interest on the Series 2004 Bonds to be subject, directly or indirectly, to federal or state income taxation, or otherwise prevent the Bondholders from realizing the full current benefit of the tax status of the interest thereon. Further, no assurance can be given that any such future legislation, or any actions of the IRS, including, but not limited to, selection of the Series 2004 Bonds for audit examination, or the course or result of any examination of the Series 2004 Bonds, or other bonds which present similar tax issues,will not affect the market price for the Series 2004 Bonds. CONTINUING INFORMATION The City The Trust Indenture requires the City to make available to the Trustee (i) each of the reports, certificates and other information required to be delivered by the Developer to the City pursuant to Section 6.1 of the Public Improvement Agreement(discussed below), (ii) a report or reports not later than December 31st each year commencing with December 31, 2005, which may be prepared by the Special 58 Tax Consultant, setting forth the Special Tax Requirement for the current year and the immediately succeeding year and the amount of taxes to be abated for the current year, the current year's collection of taxes, delinquencies, tax sales, foreclosures, the Special Service Area's equalized assessed valuation, the estimated new value-to-lien ratio and current ad valorem property tax rate(s) and (iii)a copy of the annual audited financial statements of the City. The Developer Section 6.1 of the Public Improvement Agreement requires the Developer to provide to the City, the Underwriters, the Notice Beneficial Holders and the Special Tax Consultant, certain continuing information concerning the Area and the Project until such time as a combined total of_(90 percent) of the Single Family Homes, Townhomes and Duplexes are sold to home owners. This information includes (i) annual financial statements of the Developer to the Underwriters and (ii) quarterly reports from the Developer to the Underwriters, the Notice Beneficial Holders and the Special Tax Consultant, setting forth: (A)the number of Single Family Home, Townhome and Duplex sales and the range of sales prices for such homes and/or bulk property sales; (B) a description of the type of such homes; (C)the number of Single Family Homes, Townhomes and Duplexes constructed within the Area; (D)the number of sales of Single Family Homes, Townhomes and Duplexes closed; (E)any bulk property sales; (F)any pending litigation which would adversely affect the ability of the Developer to develop the Area or to pay Special Tax; (G)any material change in the structure or ownership of the Developer; (H)any failure of the Developer, or any affiliate of the Developer, to pay by the date due general ad valorem property taxes or Special Tax, or any other governmental charge in the Area; (I) any denial or termination of credit; (J) any denial or termination of, or default under, any line of credit or loan or any other loss of a source of funds that Developer has reason to believe is likely to have a material adverse affect on the ability of the Developer to cause the Area to be developed; (K)the occurrence of any event of Bankruptcy with respect to the Developer, or any affiliate of the Developer; (L) any significant amendments to land use entitlements for the Area, if such amendments are likely to prevent or delay the implementation of the Area; (M)any previously undisclosed governmentally-imposed preconditions to commencement or continuation of development on the Area, if such preconditions are likely to prevent or delay the development of the Area; (N) any previously undisclosed legislative, administrative or judicial challenges to development of the Area or the collection of Special Tax; (0)any changes of which the Developer is aware, if material, in the alignment, design or likelihood of completion of significant public improvements affecting the Area, including major thoroughfares, sewers, water conveyance systems and similar facilities. Quarterly reports shall be delivered within thirty (30) days after the end of each calendar quarter. In addition, the Developer shall use its best efforts to provide prompt notice of any of the events listed in (F) through (0) above. Until such time as _ (90 percent) of the Single Family Homes, Townhomes and Duplexes are subject to contracts for sales as verified in writing by the Developer to the City and the Underwriters, upon prior written notice to the Developer by the Notice Beneficial Holders, the Developer shall make its current annual financial statements available for review by the Notice Beneficial Holders. See "APPENDIX E—Public Improvement Agreement." Subsequent purchasers of the Series 2004 Bonds who notify the Trustee in writing that they are Notice Beneficial Holders will be entitled to receive the information described under "CONTINUING DEVELOPER INFORMATION" herein. Prospective purchasers of the Series 2004 Bonds can obtain the continuing Developer information described herein from the Underwriters. LIMITED OFFERING The Series 2004 Bonds are being offered only to a limited number (35 or less) of sophisticated investors. Each prospective purchaser of the Series 2004 Bonds is being furnished a copy of this Limited Offering Memorandum, together with any supplements to this Limited Offering Memorandum. In 59 addition, each prospective purchaser is hereby offered the opportunity, prior to purchasing any Series 2004 Bonds and at any time the Series 2004 Bonds are outstanding, to ask questions of, and receive answers from the Underwriters, the City and the Developer concerning the terms and conditions of the offering, and to obtain any additional relevant information, to the extent either possesses the same or can acquire it without unreasonable effort or expense. Inquiries concerning additional information should be directed in writing to the Underwriters at LaSalle Capital Markets, A Division of ABN AMRO Financial Services, Inc., 181 West Monroe Street, Chicago, Illinois 60602, Attention: Municipal Bond Department or William Blair& Company, L.L.C., 222 West Adams Street, Chicago, Illinois 60606, Attention: Municipal Bond Department. NO LITIGATION The City At the time of delivery of and payment for the Series 2004 Bonds, the City will certify that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body, pending with respect to which the City has been served with process or is otherwise aware, or, to the knowledge of the officer of the City executing such certificate, threatened against the City affecting the existence of the City, the Area or the titles of its officers to their respective offices or seeking to restrain or to enjoin the sale or delivery of the Series 2004 Bonds, the application of the proceeds thereof in accordance with the Bond Ordinance and/or the Indenture, or the collection or application of the Special Tax, or in any way contesting or affecting the validity or enforceability of the Series 2004 Bonds, the Bond Ordinance, the Indenture, the Public Improvement Agreement, or any action of the City contemplated by any of the said documents, or the collection or application of the Special Tax, or in any way contesting the completeness or accuracy of the Bond Ordinance, the Indenture or any amendments or supplements hereto, or contesting the powers of the City contemplated by any of said documents, nor, to the knowledge of the officer of the City executing such certificate, is there any basis therefor. The Developer At the time of delivery of and payment for the Series 2004 Bonds,the Developer will certify that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body, pending or threatened by or against the Developer: (i) in any way questioning the due formation and valid existence of the Developer; (ii) in any way questioning or affecting the validity of the Public Improvement Agreement or the consummation of the transactions contemplated thereby; (iii) in any way questioning or contesting the validity of any governmental approval of the Project or any aspect thereof, or(iv)which would have a material adverse effect upon the financial condition of the Developer or the ability of the Developer to develop the Project. NO RATING The City has not made, and does not currently contemplate making, an application to any rating agency for the assignment of a rating to the Series 2004 Bonds. MISCELLANEOUS The references, excerpts, and summaries of documents and statutes contained in this Limited Offering Memorandum do not purport to be complete statements of the provisions of such documents and 60 statutes, and reference is made to all such documents and statutes for full and complete statements of their terms and provisions. The estimates, assumptions, statistical and financial information, and all other information contained in this Limited Offering Memorandum have been compiled from official and other sources believed by the underwriter to be reliable; however, none of such estimates, assumptions, or information is guaranteed by the City, the Developer, the Special Tax Consultant, or the Underwriters as to completeness or accuracy. Any statement made in this Limited Offering Memorandum involving matters of opinion or of estimates, whether or not so expressly stated, is set forth as such and not as a representation of fact; no representation is made that any of the estimates contained herein will be realized. The information and expressions of opinion contained herein are subject to change without notice, and neither the delivery of this Limited Offering Memorandum nor any offer or sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or the Area since the date hereof. 61 AUTHORIZATION Both the City and the Developer have authorized the execution and distribution of this Limited Offering Memorandum. UNITED CITY OF YORKVILLE, an Illinois municipal corporation By: Mayor MPI-2-YORKVILLE CENTRAL LLC, an Illinois limited liability company By: MPI Development Manager Inc., Its Manager By: President 62 APPENDIX A Special Service Area Special Tax Roll and Report APPENDIX B Indenture APPENDIX C Market Absorption Study APPENDIX D Appraisal APPENDIX E Public Improvement Agreement APPENDIX F Bond Opinion UHDOCS 620492v8 C/M 4781600-006 EXHIBIT F AGREEMENT FOR CONSULTING SERVICES THIS AGREEMENT(the "Agreement")is made and entered into as of this_day of February 2004,by and between the United City of Yorkville (herein called "Yorkville");MPI-2 Yorkville Central LLC, an Illinois limited liability company (herein called "MPI Central"), and David Taussig and Associates, Inc., a California corporation (herein called "Consultant"). RECITALS A. The Consultant desires to perform certain services as described herein with respect to the proposed MPI Central Special Service Area (as such terms are defined in Exhibit"A" attached hereto). B. Yorkville and MPI Central desire that Consultant perform such services. C. MPI Central will be responsible for payment of the Consulting Services(as that term is defined below) and Consultant's expenses and the execution of this Agreement indicates MPI Central's agreement to pay Consultant's professional fees for the services provided hereunder and expenses, as provided in this Agreement and the exhibits attached hereto. AGREEMENT Yorkville, MPI Central, and the Consultant in consideration of the mutual promises and conditions herein contained agree as follows: ARTICLE I TERM OF CONTRACT Section 1.1 This Agreement shall become effective on the date stated above and will continue in effect until the earlier of(i) the date of the closing of the second series of bonds for the MPI Central Special Service Area or(ii) until terminated as provided in Article VI below. ARTICLE II SERVICES TO BE PERFORMED BY CONSULTANT Section 2.1 Consultant agrees to perform the professional services and to deliver the work products as described in the Scope of Work Statement attached as Exhibit"A" hereto and incorporated herein by reference(the"Scope of Work Statement"). Such professional services and work products,as from time to time modified in accordance with Section 2.3 hereof,are collectively referred to as the "Consulting Services." Section 2.2 Consultant will determine the method,details and means of performing the Consulting Services. Consultant may,at Consultant's own expense,employ such assistance as it deems necessary to perform the Consulting Services required under this Agreement. Consultant shall conduct research and arrive at conclusions with respect to its rendition of information,advice, recommendation or counsel independent of the control and direction of Yorkville and MPI Central, other than normal contract monitoring. All computer software (including without limitation Grande Reserve Subdivision -MPI Central Page I Special Service Area Consulting Services March 17, 2004 financial models,compilations of formulas,and spreadsheet models),inventions,designs,programs, improvements,processes and methods(collectively,the'Proprietary Models")used or developed by Consultant in performing its work is proprietary and shall remain property owned solely by, or licensed by a third party to,Consultant. Yorkville and MPI Central acknowledge and agree that the consideration paid by MPI Central herein only entitles MPI Central and Yorkville to a license to use the hard copy or electronically-transmitted reports generated pursuant to the Consulting Services and that any Proprietary Model that Consultant uses to generate such reports is owned by, or is duly licensed from a third party to, Consultant and is not being provided to MPI Central or Yorkville hereunder. MPI Central and Yorkville acknowledge that Consultant may have used reports and analyses that Consultant authored for other clients as base works or templates for the reports and analyses prepared for Yorkville pursuant to this Agreement, and MPI Central and Yorkville acknowledge and agree that Consultant has the right to use the reports and analyses that it authors pursuant to this Agreement as base works or templates for reports and analyses that Consultant authors for Consultant's other clients, provided, however that Consultant shall not use any confidential information provided by MPI Central or Yorkviile iii �uuh future reports and analyses. MPI Central and Yorkville acknowledge and agree that Consultant has spent substantial time and effort in collecting and compiling data and information (the "Data Compilations") in connection with the Consulting Services and that such Data Compilations may be used by Consultant for its own purposes,including,without limitation,sale or distribution to third parties;provided,however,that Consultant will not sell or distribute any of MPI Central's or Yorkville's confidential information that may be contained in such Data Compilations,unless such confidential information is used only on an aggregated and anonymous basis. Section 2.3 Any proposed changes in the Consulting Services hereunder shall be submitted to the other parties hereto,and any such changes agreed to by the parties shall be reflected in an amendment to the Scope of Work Statement in accordance with Section 7.2 hereto. ARTICLE III COMPENSATION Section 3.1 MPI Central agrees to pay Consultant for its Consulting Services, in accordance with this Agreement, a professional fee computed according to the Professional Fee Schedule attached as Exhibit"B"hereto and incorporated herein by reference(the"Fee Schedule"). MPI Central acknowledges and agrees that portions of Consultant's professional fees and expenses were incurred by Consultant prior to the execution of this Agreement(the "Pre-Agreement Fees") and MPI Central agrees to pay such Pre-Agreement Fees in accordance with this Agreement. Section 3.2 MPI Central shall reimburse the Consultant for Consultant's reasonable expenses. Expenses shall include all actual expenditures made by Consultant in the performance of any Consulting Services undertaken pursuant to the Agreement, including, without limitation, the following expenditures: (a) Cost of clerical assistance @ $35.00 per hour, including typing, collation, printing and copying, plus copier and photography costs, including photographic reproduction of drawings and documents based upon Consultant's actual costs and not subject to any mark-ups. (b) Travel and transportation costs, including mileage for the use of personal Grande Reserve Subdivision -MPI Central Page 2 Special Service Area Consulting Services March 17, 2004 automobiles at the prevailing IRS standard rate,rental vehicles, lodging and regularly scheduled commercial airline coach ticket costs based upon Consultant's actual costs and not subject to any mark-ups. (c) Courier services,facsimile,and telephone expenses based upon Consultant's actual costs and not subject to any mark-ups. Section 3.3 As provided in the Fee Schedule,MPI Central shall pay the invoice of Consultant at the closing of the sale of each series of bonds for the MPI Central Special Service Area. Consultant shall use commercially reasonable efforts to forward the invoice to MPI Central seven (7) days before the date of each such bond closing. Such invoice shall contain the payment amount to be made by MPI Central to Consultant with respect to the bond closing. The payment shall be made on the date of the bond closing. Section 3.4 If the closing of the sale of the first series ofbonds for the MPI Centra? SSA does not occur prior to December 1,2004,Consultant shall present to MPI Central as promptly as practicable after such date an invoice covering Consulting Services and reimbursable expenses to date. Thereafter, on or about the first two weeks of each month during which Consulting Services are rendered hereunder, Consultant shall present to MPI Central an invoice covering the current Consulting Services performed and the reimbursable expenses incurred pursuant to this Agreement and exhibits thereto for the preceding month. Such invoices shall be paid by MPI Central within thirty(30)days of the date of each invoice. A 1.2%per month(or the maximum amount permitted by law if less than 1.2%) charge may be imposed against accounts which are not paid within thirty (30) days of the date of each invoice. Section 3.5 The maximum total professional fee amount set forth in the Fee Schedule may be increased, upon agreement of the parties, as a result of any expansion of the Consulting Services to be rendered hereunder pursuant to Section 2.3 or as provided in the Scope of Work Statement. Any such changes in the maximum total professional fee amount agreed to by the parties shall be reflected in an amendment to the Fee Schedule entered into in accordance with Section 7.2. Section 3.6 Records of Consultant's costs relating to (i) the Consulting Services performed under this Agreement and(ii)reimbursable expenses shall be kept and shall be available to Yorkville,MPI Central, or their authorized representative at reasonable intervals during normal business hours. ARTICLE IV OTHER OBLIGATIONS OF CONSULTANT Section 4.1 Consultant agrees to perform the Consulting Services in accordance with the Scope of Work Statement. Should any errors caused by the negligence of Consultant be found in such services or products,upon written notice to Consultant,Consultant shall correct them at no additional charge by revising the work products called for in the Scope of Work Statement to eliminate the errors. Section 4.2 Consultant will supply all tools and instrumentalities required to perform the Consulting Services under the Agreement. Grande Reserve Subdivision -MPI Central Page 3 Special Service Area Consulting Services March 17, 2004 Section 4.3 Neither this Agreement nor any duties or obligations under this Agreement may be assigned by Consultant without the prior written consent of Yorkville and NMI Central. However, Consultant may subcontract portions of the work to be performed hereunder to other persons provided Consultant notifies Yorkville and MPI Central of the name and address of said proposed subcontractor and Yorkville and MPI Central either consent or fail to respond to such notification within ten(10)business days of such notification with respect to the use of any particular proposed subcontractor. Section 4.4 In the performance of its Consulting Services hereunder,C ultant is, and shall be deemed to be for all purposes, an independent contractor (and not an agei,c, officer, employee or representative of Yorkville or MPI Central)under any and all laws,whether existing or future. Consultant is not authorized to make any representation,contract or commitment on behalf of Yorkville or MPI Central. ARTICLE V OTHER OBLIGATIONS OF YORKVILLE Section 5.1 Yorkville and MPI Central agree to comply with all reasonable requests of Consultant and provide access to all documents reasonably necessary to the performance of Consultant's duties under this Agreement with the exception of those documents which the Scope of Work Statement calls upon the Consultant to prepare. Section 5.2 Neither this Agreement nor any duties or obligations under this Agreement may be assigned by Yorkville or MPI Central without the prior written consent of Consultant. Section 5.3 Yorkville,MPI Central, other public agencies and landowners,other Consultants,and other professionals and parties dealing with Yorkville or MPI Central or involved in the subject development project referred to in the Scope of Work Statement (collectively, the "Furnishing Parties") will be furnishing to Consultant various data, reports, studies, computer printouts and other information and representations as to the facts involved in the project which NMI Central and Yorkville understand Consultant will be using and relying upon in preparing the reports, studies, computer printouts and other work product called for by the Scope of Work Statement. Consultant shall not be obligated to establish or verify the accuracy of the information furnished by or on behalf of the Furnishing Parties,nor shall Consultant be responsible for the impact or effect on its work products of the information furnished by or on behalf of the Furnishing Parties,in the event that such information is in error and therefore introduces error into Consultant's work products. Section 5.4 In the event that court appearances, testimony or depositions are required of Consultant in connection with the services rendered hereunder, MPI Central shall compensate Consultant at a rate of$250 per hour and shall reimburse Consultant for out-of-pocket expenses on a cost basis. ARTICLE VI TERMINATION OF AGREEMENT Section 6.1 Yorkville may terminate this Agreement upon thirty(30)days written notice to MPI Central and Consultant. MPI Central may terminate this Agreement upon thirty(30) Grande Reserve Subdivision -MPI Central Page 4 Special Service Area Consulting Services March 17, 2004 days written notice to Yorkville and Consultant. Consultant may terminate its obligations to perform Consulting Services under this Agreement upon thirty(30)days written notice to Yorkville and MPI Central. Section 6.2 Should Yorkville, MPI Central, or both Yorkville and MPI Central default in the performance of this Agreement or materially breach any of its provisions,Consultant may terminate this Agreement immediately, unless such material breach has been cured by the breaching party(ies) within ten (10) days following written notice of the material breach from Consultant; provided, however, that if Yorkville breaches this Agreement, MPI Central shall have the right,but not the obligation,to cure such breach on Yorkville's behalf,to the extent permitted by law. Should Consultant default in the performance of this Agreement or materially breach any of its provisions, Yorkville or MPI Central may terminate this Agreement immediately, unless such material breach has been cured within ten (10) days following written notice of the material breach from Yorkville or MPI Central. Section 6.3 If this Agreement is terminated for any reason,Consultant shall be paid for all Consulting Services rendered, in accordance with the Fee Schedule (not to exceed the maximum amount set forth in Article I of the Fee Schedule), and reimbursable expenses, in accordance with Section 3.2, incurred up to the effective date of termination of the Agreement. Section 6.4 The covenants contained in Sections 2.2,3.1,3.2,3.3,3.4,5.3,5.4,6.3, 6.4, and Article VII shall survive the termination of this Agreement. ARTICLE VII GENERAL PROVISIONS Section 7.1 Any notices to be given hereunder by any party to the others may be effected either by personal delivery in writing, by United States registered or certified mail,return receipt requested, postage prepaid, sent by a recognized overnight courier service, by facsimile or email. Notices shall be addressed to the parties at the addresses appearing below,but each party may change the address by written notice in accordance with the first sentence of this Section 7.1. Notices delivered personally will be deemed communicated as of actual receipt. Mailed notices will be deemed communicated as of three (3) business days after mailing. Notices sent by overnight courier shall be deemed communicated one (1) business day after depositing with such overnight courier service. Notices sent via facsimile will be deemed received on the date faxed(with receipt confirmed). Notices sent via email will be deemed received within one business day of when the email was sent, if no notice of failed delivery is received. If to United City of Yorkville With a copy to: Daniel Kramer Esq. Yorkville: 800 Game Farm Road 1107A Central Bridge Street Yorkville, IL 60560 Yorkville, IL 60560 Attention: Anton Graff Attention: Daniel Kramer Fax: (630) 553-7575 Fax: (630) 553-5764 Email: yrkadmnr201 @aol.com Email: dkramer @dankramerlaw.com Grande Reserve Subdivision -MPI Central Page 5 Special Service Area Consulting Services March 17, 2004 If to MPI MPI Central With a copy to: Moser Enterprises,Inc. Central: 6880 N.Frontage Road, Suite 100 50'Avenue Station Burr Ridge,IL 60527 300 East 5"'Avenue,Suite 430 Attention:Anthony Pasquinelli Naperville,IL 60563 Fax: (630)455-2591 Attention: Art Zwemke Email: asummers @pasquinelli.com Fax: (630)420-8930 Email: azwemke @moserenterprises.com John F.Philipchuck,Esq. Dommermuth, Brestal,Cobine&West, Ltd. 123 Water Street Naperville,IL 60566-0565 If to David Taussin_ and Assoc'--Ite, Tnc. With a copy to: Allen Ma±kins T Pc-k Gamble&Mallory Consultant: 1301 Dove Street, Suite 600 LLP Newport Beach,CA 92660 1900 Main Street,Fifth Floor Attention: Mitch Mosesman Irvine,CA 92614-7321 Fax (949) 955-1500 Attention: Dwight Armstrong Email: mitch @taussig.com Fax: (949) 553-8354 Section 7.2 This Agreement and exhibits hereto supersede any and all agreements, either oral or written, between the parties hereto with respect to the rendering of service by Consultant for Yorkville and contains all of the covenants and agreements between the parties with respect to the rendering of such services. Each party to this Agreement acknowledges that no representations,inducements,promises,or agreements,orally or otherwise,have been made by any party, or anyone acting on behalf of any party, which are not embodied herein, and that no other agreement, statement, or promise not contained in this Agreement shall be valid or binding. Any modification of this Agreement(including any exhibit hereto)will be effective if it is in writing and signed by the party against whom it is sought to be enforced. Any ambiguities herein shall not be construed against the drafter hereof. Section 7.3 If any provision in this Agreement is held by a court of competent jurisdiction to be invalid,void,or unenforceable,the remaining provisions will nevertheless continue in full force without being impaired or invalidated in any way. Section 7.4 Any controversy between the parties hereto involving the construction or application of any of the terms, covenants, or conditions of this Agreement will, on the written request of one party served on the other, be submitted to binding arbitration in accordance with the commercial rules and regulations of the American Arbitration Association. The arbitration shall take place in Chicago, Illinois, or such other location mutually agreed to by the parties. The arbitrator(s)shall be selected as follows:In the event that Yorkville,MPI Central, and Consultant agree on one arbitrator, the arbitration shall be conducted by such arbitrator. In the event Yorkville, MPI Central, and Consultant do not so agree, Yorkville, MPI Central, and Consultant shall each select an arbitrator. The arbitrators shall act by majority vote. The parties may propose arbitrators from JAMS, ADR, ARC or any independent arbitrator/neutral for dispute Grande Reserve Subdivision -MPI Central Page 6 Special Service Area Consulting Services March 17, 2004 resolution. The parties are not required to hire an American Arbitration Association arbitrator for resolution of a dispute hereunder. The decree or judgment of an award rendered by the arbitrator(s)may be entered in any court having jurisdiction thereof. Section 7.5 The prevailing party in any arbitration or legal action brought by one party against the other(s)and ari sing out of this Agreement shall be entitled,in addition to any other rights and remedies it may have, to reimbursement for its expenses, including court costs and reasonable attorneys'fees. The non-prevailing party(ies)shall be liable,to the extent allowable under law, for all fees and expenses of the arbitrator(s) and all costs of the arbitration. Section 7.6 This Agreement will be governed by and construed in accordance with the laws of the State of Illinois. Section 7.7 This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one (1) and the same instrument. This Agreement may be executed by electronic facsimile or similar means. Section 7.8 No provision hereof may be waived except by a written agreement signed by the waiving party. The waiver of any term or of any condition of this Agreement shall not be deemed to constitute the waiver of any other term or condition. Section 7.9 It is the parties'intention that there shall be no third party beneficiaries to this Agreement. Section 7.10 Exhibits "A" and "B" attached hereto are incorporated herein by this reference. IN WITNESS WHEREOF, this Agreement has been executed on the date and year first above written. "YORKVILLE" UNITED CITY OF YORKVILLE By: Name: Its: ,UAAe rz "MPI Central" MPI-2 WYORKV E NTRAL LLC By: Name Its: ANA .4 Grande Reserve Subdivision -MPI Central Page 7 Special Service Area Consulting Services March 17, 2004 "CONSULTANT" DAVID TAUSSIG & ASSOCIA INC. By- Id Taussig, Preside J:\PROPOSAL\U,LINOIS\Yorkville\Yorkville Agreement Grande Reserve Central.DOC Grande Reserve Subdivision -MPI Central Page 8 Special Service Area Consulting Services March 17, 2004 EXHIBIT A SPECIAL SERVICE AREA CONSULTING SERVICES SCOPE OF WORK STATEMENT Four Special Service Areas ("SSAs") are anticipated to be established for the Grande Reserve Subdivision located in the United City of Yorkville, County of Kendall, State of Illinois (the "Project"). The "MPI North SSA" is anticipated to include that portion of the Project generally located south of Galena Road and north of certain Commonwealth Edison Company and Burlington Northern Railroad Company property. The"MPI Central SSA"is anticipated to include that portion of the Project generally located south of certain Commonwealth Edison Company and Burlington Northern Railroad Company property and north of the intersection of Bristol Ridge Road and U.S. Route 34. The "MPI South SSA" is tic_rat i0 '?' lude ±hat portion of the Pro ert generally located southwest of Bristol Ridge Road. The "Grande Reserve SSA"is anticipated to include all of the Project. This Scope of Work Statement describes consulting services to be provided by Consultant to assist in the formation of the MPI Central SSA. 1. Background Research Consultant The Furnishing Parties shall provide to Consultant and Consultant will review,as necessary, Project concept plan(s) and/or preliminary plat(s) of subdivision; County parcel/property identification numbers (PIN) maps for the Project; property tax bills; development assumptions(i.e.,proposed land uses;gross and net acreage;residential product type,mix, and floor areas;estimated absorption/velocity rates; and estimated raw,finished, and improved property values);estimated public improvement costs(an engineer's opinion of probable cost for all public improvements will be required), construction schedule, and description; public improvement plans and/or drawings showing location of such improvements; and annexation, development, and recapture/reimbursement agreements. Consultant shall rely on such data provided by the Furnishing Parties and shall not be responsible for verifying its accuracy. 2. Public Facilities Eligibility Consultant will review improvements proposed to be financed and evaluate eligibility under the Special Service Area Act (the "Act"). Yorkville and MPI Central understand that bond counsel will make final determination on improvement eligibility under the Act and shall be solely responsible for interpretation of the Act. 3. SSA Bond Structure As requested, Consultant will assist with the sizing and structure of the bonds. Discussion topics may include level and increasing debt service,trade-offs between capitalized interest and bond-financed facilities, required reserve funds, and escrowed bond proceeds, if applicable. Grande Reserve Subdivision -MPI Central Page A.1 Special Service Area Consulting Services March 17, 2004 4. Special Tax Apportionment Formula Consultant will prepare the special tax apportionment methodology, subject to Yorkville policy, financing objectives as well as statutory requirements, and bond counsel approval. The apportionment methodology will require an examination of the use and benefit of the public improvements to be financed. Typically, industry standard measurers of facilities usage must support the desired apportionment formula. Consultant will also develop a prepayment formula permitting the full and/or partial prepayment of the special tax levy. A sample prepayment calculation will be prepared upon request. 5. SSA Pro Forma Consultant will prepare up to fifteen (15) SSA cash flow projections or"pro formas" for all proposed SSAs showing supportable bonded indebtedness, allocation of public improvement, estirrs;tcd annual administrative expenses, and maximum and projected special taxes. MPI Central understands that bonded indebtedness will be constrained by a number of factors including but not limited to bond interest rate and term,maximum special taxes, and the appraised value to the SSAs debt ratio (e.g., the value to lien ratio) of the Project. 6. Special Tax Roll and Method of Apportionment Report Consultant will prepare the special tax roll and method of apportionment report for each SSA (the "Special Tax Roll and Report "). The Special Tax Roll and Report will,as appropriate, contain a Project description; public facilities description, phasing, and cost estimate; narrative describing the basis for the public improvement cost allocation;explanation of the special tax formula and prepayment methodology (i.e., the procedure for determining the annual special tax and any prepayment amount, definitions for special tax property classifications, including property to be exempt from the levy, and maximum special tax levels); estimated bonded indebtedness and related issuance costs and incidental expenses. Consultant will prepare up to five (5) drafts of the Special Tax Roll rnd Repc.r<. 7. Bond Documents Consultant will assist the finance team, as appropriate, in the preparation, review, and comment on the limited offering memorandum,infrastructure agreement,trust indenture,and form of continuing disclosure;provided,however,that in no event shall any representations be made in such legal and bond documents that Consultant has made any certification with respect to certain sections of such documents unless the prior written consent of Consultant is obtained. Consultant may also comment on appraisal and market study as requested. 8. Meetings Consultant will attend up to ten(10)meetings to present and/or discuss its work products and the proposed formation of the SSAs and issuance of bonds. Grande Reserve Subdivision -MPI Central Page A.2 Special Service Area Consulting Services March 17, 2004 9. Disclosure of the Special Tax As requested, Consultant shall assist in the preparation of disclosure materials, including purchase contract riders, to be used by builders in the sale of homes and conduct an "SSA Workshop" to educate builder sales staff concerning the SSA. Grande Reserve Subdivision -MPI Central Page A.3 Special Service Area Consulting Services March 17, 2004 EXHIBIT B SPECIAL SERVICE AREA CONSULTING SERVICES PROFESSIONAL FEE SCHEDULE L PROFESSIONAL FEES Consultant's professional fees,excluding expenses,for Consulting Services set forth in the Scope of Work Statement pertaining to the establishment of the MPI Central SSA(the "SSA Establishment Fees")shall be$30,000. Consultant's professional fees,excluding expenses,for Consulting Services set forth in the Scope of Work Statement pertaining to the issuance of each series of bonds for the MPS Central SSA (the "SSA Bond Fees") shall be $15,000. In addition, Consultant shall be rein.'--ursed for expenses in accordance with Section 3.2 of this Agreement,not to exceed ten p::rc;ent (10.00%) of the sum of the applicable SSA Establishment Fees and SSA Bond Fees. II. GENERAL TERMS AND CONDITIONS MPI Central shall pay the SSA Establishment Fees for the MPI Central SSA, the applicable SSA Bond Fees, and Consultant's reimbursable expenses at the closing of the sale of the first series of bonds for the MPI Central SSA. SSA Bond Fees and the associated reimbursable expenses for each subsequent series of bonds shall be paid on the date of such bond closing. Consultant shall use commercially reasonable efforts to forward the invoice to MPI Central seven(7)days before the date of each bond closing. Such invoice shall contain the payment amount to be made by MPI Central to Consultant with respect to each SSA. The payment shall be made on the date of the bond closing. Notwithstanding the foregoing, if the closing of the sale of the first series of bonds for the MPI Central SSA does not occur prior to July 1, 2004, Consultant shall be remunerated for Consulting Services based on the hourly rates set forth ir.Table 1 below,plus expenses. Consultant shall present to MPI Central as promptly as practicable after July 1,2004 an invoice covering Consulting Services and reimbursable expenses to date. Thereafter,on or about the first two weeks of each month during which Consulting Services are rendered hereunder, Consultant shall present to MPI Central an invoice covering the current Consulting Services performed and the reimbursable expenses incurred pursuant to this Agreement and exhibits thereto for the preceding month. Such invoices (each, a "Monthly Invoice")shall be paid by MPI Central within thirty(30)days of the date of each invoice. A 1.2% per month (or the maximum amount permitted by law if less than 1.2%) charge may be imposed against accounts which are not paid within thirty(30)days of the date of each invoice. At the time of the closing of the sale of the first series of bonds for the MPI Central SSA, Consultant shall be paid the SSA Establishment Fees, the applicable SSA Bond Fees, and Consultant's reimbursable expenses less the amounts paid pursuant to the Monthly Invoices. Grande Reserve Subdivision -MPI Central Page B.I Special Service Area Consulting Services March 17, 2004 TABLE I CONSULTANT'S HOURLY RATES Principal $1851hour Vice President $175/hour Director $170/hour Manager $160/hour Senior Associate/Engineer $140/hour Associate I $120/hour Associate II $130/hour Analyst $105/hour Research Assistant $80/hour The hourly rates in Table 1 above apply for a twenty-four(24)-month period from execution of the Agreement and are subject to a cost-of-living and/or other appropriate increase every twelve (12) months thereafter.Consultant generally reviews its hourly rates annually and,if appropriate,adjusts them to reflect increases in seniority, experience, cost-of-living, and other relevant factors. Consultant shall notify Developers in advance of any such increase. III. LIMITATIONS The following limitations apply to the Professional Fee Schedule and/or the Scope of Work Statement: • The limitation of ten (10) meetings means Consultant shall not attend more than ten (10) meetings,collectively,for the MPI Central SSA and Grande Reserve SSA. Consultant will be remunerated on a time and materials basis for attendance at more than ten (10)meetings; • Consultant will prepare a consolidated SSA pro forma for the MPI Central SSA and Grande Reserve SSA. The limitation of fifteen (15) SSA pro formas means Consultant shall not prepare more than fifteen (15) such pro formas. Consultant will be remunerated on a time and materials basis for more than fifteen (15) such pro formas; • Consultant will be remunerated on a time and materials basis for preparation of more than five drafts of the Grande Reserve SSA's Special Tax Roll and Report; • Consulting services pertaining to the establishment of the MPI North SSA,MPI Central,and MPI South SSA shall be covered under separate agreements; • Consulting services pertaining to a second or subsequent series of bonds for the Grande Reserve SSA; • Consulting services pertaining to the billing and collection of the special tax shall be covered under separate agreements; • Analysis of an ad valorem based SSA shall be covered under separate agreement; and • Any additional tasks not defined in the Scope of Work Statement shall be charged at the hourly rates listed above. 1:\PROPOSALULLINO]S\Yorkville\Yorkvilie Agreement Grande Reserve.DOC Grande Reserve Subdivision -MPI North, Central, and South Page B.2 Special Service Area Consulting Services March 17, 2004 N EXHIBIT G AGREEMENT FOR ADMINISTRATIVE SERVICES THIS AGREEMENT is made and entered into this day of `2004 by and between the United City of Yorkville at 800 Game Farm Road,Yorkville,Illinois 60560,hereinafter called "Yorkville" or "Client," and David Taussig & Associates, Inc., at 1301 Dove Street, Suite 600, Newport Beach, CA 92660, hereinafter called "Consultant." The Client and the Consultant in consideration of the mutual promises and conditions herein contained agree as follows. ARTICLE I TERM OF CONTRACT Section 1.1 This agreement shall become effective on the date stated above and will continue in effect until terminated as provided in Article 6 below. ARTICLE II SERVICES TO BE PERFORMED BY CONSULTANT Section 2.1 Consultant agrees to perform the professional services for the Client and to deliver the work products to the Client as described in the Scope of Work statement attached as Exhibit"A"hereto. Such professional services and work products,as from time to time modified in accordance with Section 2.3 hereof, are collectively referred to as the "Administrative Services." Section 2.2 Consultant will determine the method,details and means of performing the Administrative Services.Consultant may,at Consultant's own expense,employ such assistance as it deems necessary to perform the Administrative Services required by Client under this Agreement. Consultant shall conduct research and arrive at conclusions with respect to its rendition of information, advice, recommendation or counsel independent of the control and direction of the Client,other than normal contract monitoring.All computer software(including without limitation financial models,compilations of formulas and spreadsheet models),inventions,designs,programs, improvements,processes and methods(collectively,the"Proprietary Models")used or developed by Consultant in performing its work is proprietary and shall remain property owned solely by, or licensed by a third party to Consultant. Client acknowledges and agrees that the consideration paid by Client herein only entitles Client to a license to use the hard copy or electronically transmitted reports generated pursuant to the Administrative Services and that any Proprietary Model that Consultant uses to generate such reports is owned by, or is duly licensed from a third party to Consultant and is not being provided to Client hereunder. Client acknowledges and agrees that Consultant has the right to use the reports and analyses that it authors pursuant to this Agreement as base works or templates for reports and analyses that Consultant authors for Consultant's other clients,provided,however,that Consultant shall not use any confidential information provided by Client in such future reports and analyses.Client acknowledges and agrees that Consultant has spent substantial time and effort in collection and compiling data and information (the "Data Compilations")in connection with the Administrative Services and that such Data Compilations may y be used by Consultant for its own purposes,including,without limitation,sale or'distribution to third parties; provided, however, that Consultant will not sell or distribute any of Client's confidential information that may be contained in such Data Compilations,unless such confidential information is used only on an aggregated and anonymous basis. Section 2.3 Any proposed changes in the Administrative Services hereunder shall be submitted to the other party hereto,and any such changes agreed to by the parties shall be reflected in an amendment to Exhibit "A" in accordance with Section 7.2 hereto. Section 2.4 Nothing in this Agreement shall give the Consultant possession of authority with respect to any Client decision beyond the rendition of information,advice,recommendation or counsel. ARTICLE ai: COMPENSATION Section 3.1 Client agrees to pay Consultant for its Administrative Services a professional fee computed according to the Fee Schedule attached as Exhibit "B" hereto. Section 3.2 On or about the first two weeks of each quarter, in accordance with the Fee Schedule,Consultant shall present to Client an invoice.Such invoices shall be paid by Client within thirty(30)days of the date of each invoice.A 1.2%charge may be imposed against accounts which are not paid within 30 days of the date of each invoice. Section 3.3 The maximum total fee amount set forth in Exhibit"B"may be increased as a result of any expansion of the Administrative Services to be rendered hereunder pursuant to Section 2.3 or as provided in Exhibit "A" hereto. Section 3.4 Records of the Consultant's costs relating to (i)the Administrative Services performed under this Agreement and(ii)reimbursable expenses shall be kept and be available to the Client or to Client's authojciz:d representative at reasonable intervals during normal business hours. ARTICLE IV OTBER OBLIGATIONS OF CONSULTANT Section 4.1 Consultant agrees to perform the Administrative Services in accordance with Exhibit "A." Should any errors caused by Consultant's negligence be found in such services or products,Consultant will correct them at no additional charge by revising the work products called for in Exhibit "A" to eliminate the errors. Consultant's contribution toward all obligations, losses, liabilities,damages, claims, attachments, executions, demands, actions and/or proceedings and all costs and expenses in connection therewith, including reasonable attorneys' fees, arising out of or connected with the performance of Consultant's Administrative Services under this Agreement, except as may arise from Consultant's willful misconduct or gross negligence, shall in no event exceed the amounts received by Consultant under this Agreement. Section 4.2 Consultant will supply all tools and instrumentalities required to perform the Administrative Services under the Agreement. Section 4.3 Neither this Agreement nor any duties or obligations under this Agreement may David Taussig&Associates,Inc. Page 2 United City of Yorkville SSA No.2004-104 October 13,2004 be assigned by Consultant without the prior written consent of Client. However, Consultant may subcontract portions of the work to be performed hereunder to other persons or concerns provided Consultant notifies Client of the name and address of said proposed subcontractor and Client either consents or fails to respond to notification with respect to the use of any particular proposed subcontractor. Section 4.4 In the performance of its Administrative Service hereunder,Consultant is,and shall be deemed to be for all purposes, an independent contractor (and not an agent, officer, employee or representative of Client)under any and all laws,whether existing or future.Consultant is not authorized to make any representation, contract or commitment on behalf of Client. ARTICLE V OTHER OBLIGATIONS OF CLIENT Section 5.1 Client agrees to comply with all reasonable requests of Consultant and provide access to all documents reasonably necessary to the performance of Consultant's duties under this Agreement with the exception of those documents which Exhibit "A" calls upon the Consultant to prepare. Section 5.2 Neither this Agreement nor any duties or obligations under this Agreement may be assigned by Client without the prior written consent of Consultant. Section 5.3 The Client, County of Kendall and other public agencies,property owners, consultants and other parties dealing with Client or involved in the subject special service areas referred to in Exhibit"A" will be furnishing to Consultant various data,reports, studies,computer printouts and other infonmation and representations as to the facts involved in the special service areas which Client understands Consultant will be using and relying upon in preparing the reports, studies,computer printouts and other work products called for by Exhibit"A."Consultant shall not be obligated to establish or verify the accuracy of the information furnished by or on behalf of Client, nor shall Consultant be responsible for the impact or effect on its work products of the infonma*.ion Tarnished by or on behalf of Client, in the event that such information is in error aru therefore introduces error into Consultant's work products. Section 5.4 In the event that court appearances,testimony or depositions are required of Consultant by Client in connection with the services rendered hereunder, Client shall compensate Consultant at a rate of$250 per hour and shall reimburse Consultant for out-of-pocket expenses on a cost basis. ARTICLE VI TERMINATION OF AGREEMENT Section 6.1 Either party may terminate or suspend this Agreement upon thirty days(30) written notice.Unless terminated as provided herein,this Agreement shall continue in force until the Administrative Services set forth in Exhibit"A" have been fully and completely performed and all proper invoices have been rendered and paid. Section 6.2 Should either party default in the performance of this Agreement or materially breach any of its provisions, the other party at its option may tenninate this Agreement by giving David Taussig&Associates,Inc. Page 3 United City of Yorkville SSA No. 2004-104 October 13,2004 written notification to the defaulting party. Such termination shall be effective upon receipt by the defaulting party,provided that the defaulting party shall be allowed ten(10)days in which to cure any default following receipt of notice of same. Section 6.3 The covenants contained in Sections 2.2, 3.1, 4.1, 5.3, 5.4, 6.3 and all of Article VII shall survive the termination of this Agreement. ARTICLE VII GENERAL PROVISIONS Section 7.1 Any notices to be given hereunder by either party to the other may be effected either by personal delivery in writing or by mail.Mailed notices shall be addressed to the parties at the addresses appearing in the introductory paragraph of this Agreement,but each party may change the address oy written notice in accordance with the firsi scmence of this Section 7.i. Notices delivered personally will be deemed commmunicated as of actual receipt. Mailed notices will be deemed communicated as of two (2) days after mailing. Section 7.2 This Agreement and exhibits hereto supersede any and all agreements,either oral or written,between the parties hereto with respect to the rendering of service by Consultant for Client and contains all of the covenants and agreements between the parties with respect to the rendering of such services. Each party to this Agreement acknowledges that no representations, inducements,promises,or agreements,orally or otherwise,have been made by any party,or anyone acting on behalf of any party, which are not embodied herein, and that no other agreement, statement,or promise not contained in this Agreement shall be valid or binding.Any modification of this Agreement(including any exhibit hereto)will be effective if it is in writing and signed by the party against whom it is sought to be enforced. Section 7.3 If any provision in this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remaining provisions will nevertheless continue in full force without being impaired or invalidated in any way. Section 7.4 Any controversy between the parties hereto involving the construction or application of any of the terms, covenants, or conditions of this Agreement will, on the written request of one party served on the other,be submitted to binding arbitration in accordance with the commercial rules and regulations of the American Arbitration Association.The arbitration shall take place in Chicago, Illinois, or such other location mutually agreed to by the parties. The arbitrator(s)shall be selected as follows:In the event that Consultant and Client agree on one arbitrator, the arbitration shall be conducted by such arbitrator. In the event Consultant and Client do not so agree,Consultant and Client shall each select an arbitrator and the two arbitrators so selected shall select the third arbitrator. If there is more than one arbitrator,the arbitrators shall act by majority vote. The decree or judgement of an award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The parties may propose arbitrators from JAMS, ADR, ARC or any independent arbitrator/neutral for dispute resolution.The parties are not required to hire a triple A arbitrator for resolution of a dispute hereunder. Section 7.5 The prevailing party in any arbitration or legal action brought by one party David Taussig&Associates,Inc. Page 4 United City of Yorkville SSA No. 2004-104 October 13,2004 against the other and arising out of this Agreement shall be entitled, in addition to any other rights and remedies it may have, to reimbursement for its expenses,including court costs and reasonable attorneys' fees. The non-prevailing party shall be liable, to the extent allowable under law, for all fees and expenses of the arbitrator(s) and all costs of the arbitration. Section 7.6 This Agreement will be governed by and construed in accordance with the laws of the State of Illinois. IN WITNESS WHEREOF, this Agreement has been executed on the date and year first above written. CLIENT: United City of Yorkville ✓O By: Date: l G CONSULTANT: David Taussig & Associates,Inc. By: David Taussig, President Date: J:\PROPOSAL\ADMJN\ILLINOIS\Yorkville\P.dmin Agreement SSA 2004-104.doc David Taussig&Associates,bic. Page 5 United City of Yorkville SSA No.2004-104 October 13,2004 Exhibit A - Scope of Work Please note that the Scope of Work statement is predicated on the assumption that the special taxes for Special Service Area No.2004-104(hereinafter called"SSA")will be billed and collected by the County of Kendall(the"County").The Scope of Work statement for the administration of the SSA is comprised of those services associated with the annual calculation and billing of the special taxes, review of bond funds and accounts, responses to taxpayer inquiries (i.e.,phone calls, prepayment requests, builder education/coordination), determination of arbitrage/rebate liability, and the reporting of certain information as set forth in the Indenture as follows: Task 1• Development Research and SSA Parcel Database This task involves gathering and organizing the information required to establish and maintain a parcel database necessary to extend,bill, and collect the special taxes,parsuant to the SSA Special Tax Roll and Report, and includes the following: 1.1 Subdivision Research: Coordinate with Yorkville and MPI (the "Master Developer") or merchant builders ("Builders") to obtain copies of all final plats. Identify recording date,property use,acreage,and the lot,block and unit numbers,as applicable, for each new parcel. 1.2 Permanent Index Numbers: Coordinate with County to determine valid Permanent Index Numbers ("PIN") for the coming year and obtain new cadastral maps. 1.3 Classification of Property: Assign each parcel to the appropriate special tax classification in accordance with the SSA Special Tax Roll and Report. 1.4 SSA Parcel Database: Establish and maintain parcel database for the SSA that will include all relevant PINs,property data, and special tax characteristics. Task 2• Special Tax Requirement Calculation and Special Tax Abatement This task involves calculating the amount of special tax to be abated for the SSA and includes the following subtasks: 2.1 Bond Funds Accountability Analysis:This task involves the review and analysis of account statements for the funds and accounts maintained by the trustee.Consultant will prepare a monthly report, which summarizes the activity for each fund and account and evaluates flow of funds for consistency with the Indenture or other controlling documents.When necessary,Consultant will communicate our findings with Yorkville or trustee. 2.2 Determine Annual Expenses: Identify the SSA's expenses including annual debt service, administrative expenses, and provision for delinquencies. 2.3 Year-End Reconciliation: Prepare year-end reconciliation to determine surplus funds,if any,in the bond funds and accounts,interest earnings,and other credits that may be applied to toward the abatement of the special tax. David Taussig&Associates,Inc. Page A.I United City of Yorkville SSA No. 2004-104 October 13,2004 2.4 Extension of Special Taxes:Extend the required special taxes to each PIN pursuant to the SSA Special Tax Roll and Report and determine the resulting amount to be abated, if any. Task 3• Report Preparation This task includes the preparation of an annual report for the SSA,which will generally contain the following: • Brief Development Summary • Flow of Funds Summary • Special Tax Collection,Tax Sale, and Foreclosure Status Bond Fund and Account Balance S»mmar�y • Special Tax Requirement Calculation • Current Equalized Assessed Value • Current Property Tax Rates • Current Equalized Assessed Value-to-Lien Ratio The contents of the annual report will satisfy the reporting requirements set forth in Section 8.6.ii of the Indenture. Task 4• Billing of the Special Tax This task involves coordination with and assistance to the County,as needed,to facilitate the billing of the special tax. The following subtasks are included: 4.1 Special Tax Roll:For the SSA,Consultant will prepare a special tax roll listing each PIN and the corresponding maximum special tax, special tax amount abated, and special tax amount to be billed. 4.2 Transmittal to County: The special tax rolls will be transmitted to the County in hard copy and/or electronic form as specified by the County, along with a certified copy of the abatement ordinances,to be provided to Consultant by Yorkville,in hard copy and electronic form as specified by the County. 4.3 Coordination with Assessor: As requested, Consultant will assist the applicable Township Assessor detennine the average public improvements allocable to properties in the SSA. Task 5• Assistance with Delinquent Special Taxes As needed, Consultant will assist in the monitoring of special tax receipts and collection of delinquent special taxes. The following subtasks are included: 5.1 Special Tax Receipts: Consultant will review the special tax distribution reports provided by the County to monitor and record the collection of special taxes. At Client's request,Consultant will arrange for the automatic wire transfer of special tax receipts to the trustee, provided the County and trustee can accommodate an Page A.2 David Taussig&Associates,Inc. October 13,2004 United City of Yorkville SSA No.2004-104 r electronic transfer of special taxes. Consultant will request and review the County's unpaid list to determine the payment status of each individual PIN. As needed, Consultant will record this data in a special tax payment database and prepare an annual delinquent special tax report for distribution to Yorkville,County,trustee,and other interested parties. 5.2 Demand Letters: this task entails the preparation and mailing of demand letters to the property owners that remain delinquent in the payment of special taxes after the County has conducted its tax sale (or such other date as specified in the Indenture). Consultant will prepare a draft demand letter for review and approval by Yorkville staff and counsel. After the form of the demand letter is approved, Consultant will print and mail the demand letters to property owners. 5.3 Coordination with Property Owners: Consultant will respond to telephone calls from property owners who have questions regarding the payment of the delinquent special taxes. 5.4 Foreclosure: This task involves assistance with the foreclosure of the special taxes that remain delinquent after the follow-up process. Consultant assumes that at this stage in the collection process Yorkville will retain legal counsel to pursue foreclosure. Therefore, our services will consist of the preparation of materials detailing the delinquent special taxes,penalties, and interest. Task 6• Special Tax Prepayments This task entails the calculation of prepayment amounts and coordination with the trustee and associated record keeping in the event any special tax is prepaid. This task includes the following subtasks: 6.1 Prepayment Calculation: Upon request, Consultant will calculate the amount needed to prepay the special tax pursuant to the prepayment formula as se►forth in. the SSA Special Tax Roll and Report. The prepayment information provided will identify the amount due, the deadline for payment, and direction regarding where payment is to be remitted. 6.2 Bond Redemption: This task involves analysis of the early redemption of bonds resulting from the prepayment of special taxes. Consultant will coordinate with the trustee to ensure the proper application of such funds and review the resulting revised debt service schedule. Task 7• Taxpaver Inquiries This task involves responding to telephone calls from prospective or current property owners or other interested parties who have questions regarding the SSA. This task includes brief written responses to property owners as necessary. In order to efficiently and effectively handle these property owner's requests, Consultant has a toll-free number for property owners who have questions. David Taussig&Associates,Inc. Page A.3 United City of Yorkville SSA A'o. 1004-104 October 13,2004 Task 8: Homeowner Disclosure This task involves the review of the Master Developer disclosure materials and periodic monitoring, as determined by Consultant, of information pertaining to the SSA provided by The Master Developer's and/or Builder's sales staff to prospective home buyers. Consultant may, at its discretion,pose as prospective buyer to evaluate Master Developer's and/or Builder's sales staff s knowledge of the SSA. Task 9• Arbitrage/Rebate Calculation This task encompasses those activities associated with computing the rebate liability of the bonds sold on behalf of the SSA. Page A.4 David Taussig&Associates,Inc. October l3,2004 United City of Yorkville SSA No.2004-104 Exhibit B — Fee Schedule PROFESSIONAL FEES Consultant's annual compensation for Tasks 1 through 8 of the Scope of Work statement is a fixed fee of$12,000 plus expenses, with an additional $1,000 for each parity bond issue. Consultant's compensation for Task 9 is $2,750 per bond issue for the initial annual calculation,and$2,250 per bond issue per year for subsequent years; note, additional fees will be incurred for transferred proceeds analysis, commingled funds analysis, final or five year report, or computation periods in excess of twelve months. GENERAL TERMS AND CONDITIONS The preceding annual professional fees shall be pilled in four equal installments, with invoices submitted by Consultant to Client on or about the first two weeks of each quarter. Such invoices shall be paid by Client within thirty (3)0) days of the date of each invoice. A 1.2% charge may be imposed against accounts that are not paid within 30 days of the date of each invoice. At Client's request, services in addition to those identified in the Scope of Work statement may be provided. Unless otherwise agreed to by Client and Consultant, any additional tasks assigned by Client shall be charged at the hourly rates listed below. TABLE 1 DAVID TAUSSiG&ASSOCIATES,INC.'S HOURLY FEE SCHEDULE President $175/Hour Vice President $165/1-lour Director $155/1-lour Manager $145/14our Senior Associate $130/Hour Associate $110/Hour Analyst $ 95/1-lour Research Assistant $ 70/Hour Such additional tasks may include,but are not be limited to,the following: • Manual billing of special taxes; • Administration of variable rate bonds; • Attendance,other than via telephone,at meetings with property owners or Yorkville staff to answer questions,review the levy,or resolve disputes regarding the calculation of the special tax; • Assistance with workshops, seminars, etc. concerning disclosure of the special tax; • Preparation and dissemination of continuing disclosure reports in accordance with Security and Exchange Commission Rule 15c2-12; and • Assumption of dissemination agent responsibilities for developer continuing disclosure reports, if any. David Taussig&Associates,Inc. Page United City of Yorkville SSA Ago. 2004-104 October 13,20000 4 The preceding lump sum professional fees and hourly rates apply for a 24 month period from execution of the Agreement and are subject to a cost-of-living and/or other appropriate increase every 12 months thereafter. Consultant generally reviews its professional fees and hourly rates annually and,if appropriate,adjusts them to reflect increases in seniority,experience,cost-of-living, and other relevant factors. Consultant shall notify Client in advance of any such increase. J:\PROPOSAL\ADMRNT\ILLINOIS\Yorkville\Admin Agreement SSA 2004-104.doc Page B.2 David Taussig&Associates,Inc. October 13,2004 United City of Yorkville SSA No.2004-104