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C ARTICLE III Redemption of Bonds• Optional and Mandatory Tender Section 3.01. Selection of Bonds to be Redeemed. The Registrar and Paying Agent shall select Bonds for redemption on the dates required by Sections 2.03 and 3.02 hereof by lot or in such other manner as the Registrar and Paying Agent in its discretion may deem proper; provided, however, that (i) if fewer than all of the Bonds are selected for redemption on any date, Credit Facility Bonds shall be selected for redemption prior to the selection of any other Bonds; (ii) the portion of any Bond to be redeemed shall be in a denomination authorized to be outstanding after the redemption date; and (iii) in selecting Bonds for redemption, the Registrar and Paying Agent shall treat each Bond as representing that number of Bonds that is obtained by dividing the principal amount of such Bond by the smallest denomination in which Bonds are authorized to be outstanding after the redemption date. The selection of Bonds to be redeemed shall be irrevocable, except that if the Borrower shall have elected to convert the interest rate borne by the Bonds from the Variable Rate to a Fixed Rate by establishing one or more Fixed Rate Periods and shall have directed the Registrar and Paying Agent to select Bonds for redemption from particular Sinking Fund Installments occurring during such Fixed Rate Periods and the Borrower shall thereafter rescind such election, the selection of such Bonds for redemption shall also be rescinded. Bonds shall have a notation of the selection of such Bonds for redemption endorsed thereon by the Registrar and Paying Agent on the earliest date after such selection on which such Bonds are presented to the Registrar and Paying Agent for purchase, endorsement, exchange or transfer. Section 3.02. Notice of Redemption. (a) Optional Redemption, Extraordinary Optional Redemption and Redemption upon Deposit of Net Proceeds. At the written direction of Authorized Officers of the Borrower and NHC made in accordance with Article VII of the Loan Agreement, the Registrar and Paying Agent shall, but, as long as a Credit Facility is in effect and the Credit Facility Provider has not wrongfully failed to honor a demand for funds made under the Credit Facility, only with the written consent of the Credit Facility Provider, given notice in the name of the Issuer of the redemption of Bonds in accordance with Section 6(a), 6(b) or 6(e) of the Bonds. Each such notice shall be given by the Registrar and Paying Agent within five Business Days of receipt of such direction from the Borrower and NHC, or such fewer number of days as shall be acceptable to the Registrar and Paying Agent. (b) Mandatory Sinking Fund Redemption. At least 30 days before each date on which a Sinking Fund Installment for the Bonds becomes due, the Registrar and Paying Agent shall give notice in the name of the Issuer of the redemption of Bonds in accordance with Section 6(c) of such Bonds. - 24 -