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REGULATORY AGREEMENT THIS REGULATORY AGREEMENT (including Exhibit A attached hereto), dated as of May 1, 2007, by and between GARDENS EAST LIMITED PARTNERSHIP, a Minnesota limited partnership, and its successors and assigns (the "Borrower") and. U.S. BANK NATIONAL ASSOCIATION, in St. Paul, Minnesota (the "Trustee") and THE CITY OF ROSEVILLE, MINNESOTA (the "City" or "Issuer"). WITNESSETH WHEREAS, pursuant to Minnesota Statutes, Chapters 462C and 462A, the City, will. issue its Multifamily Housing Revenue Bonds (Centennial Gardens Project), Series 2007 (the "Bonds") in the principal amount of $1.2,500,000 pursuant to an Indenture ofT'rust dated as of May 1, 2007 (the "Indenture"), between the City and Trustee; and WHEREAS, the Issuer will loan the proceeds of the Bonds to the Borrower pursuant to a Loan Agreement dated as of May 1, 2007 (the "Loan Agreement"), for costs incurred by the Borrower, to finance the acquisition and renovation by the Borrower of two 95-unit multifamily housing facilities located at 1420 Centennial Drive and 2825 North Pascal Street, which, together with the land on which it is located (the "Land", as described in Exhibit A attached hereto) are hereinafter referred to as the "Project"; and WHEREAS, the exclusion. of interest on the Bonds paid to the registered owners of the Bonds from gross income for purposes of federal income taxation is dependent upon the Project and the use of the proceeds of the Bonds complying with certain sections of the Internal Revenue Code of I986, as amended, and Treasury Regulations applicable thereto (collectively, the "Code") including, without limitation, Section 142(d}; and WHEREAS, compliance by the Project with the Code and the use of the proceeds of the Bonds is in large part within the control of the Borrower; and WHEREAS, the Borrower. shall, by entering into this Regulatory Agreement (this "Regulatory Agreement"), consent to be regulated by the Trustee and the City to assure compliance with the Code and to preserve the tax-exempt status of the Bonds under the Code: NOW, THEREFORE, in consideration of the mutual premises and covenants hereinafter set forth, and of other valuable consideration,. the Borrower, the City and Trustee agree as follows: Section I. Federal Tax Covenants Relating to the Proiect. The Borrower represents, warrants and covenants with respect to the Project that: (a) The Project will be acquired and constructed for the purpose of providing multifamily residential rental property, and the Project constitutes and. will constitute a qualified residential rental project, as such term is used in Section I42(a}(7) of the Code. 20~9975v1 1